Key indicators of the non-alcoholic beverage industry

The non-alcoholic beverage industry falls under the consumer staples category (XLP), which is non-cyclical in nature compared to the consumer discretionary sector. In this part of the series, we’ll look at the factors that impact the growth of the non-alcoholic beverage industry.

The Bureau of Economic Analysis (or BEA) releases the personal income and outlays monthly reports that indicate changes in individuals’ personal incomes, savings, and expenditures.

US consumption spending accounts for over two-thirds of the country’s gross domestic product (or GDP). The US real personal consumption expenditure for non-durable goods measures consumer spending on non-durable goods, such as food and beverages, on an inflation-adjusted basis.

Consumption expenditure depends on disposable income, which is measured as personal income less personal current taxes. People tend to spend more with a rise in their disposable income. Increase in consumer confidence also increases consumption expenditure. In the US, the Conference Board and the University of Michigan each provide monthly reports on the consumer confidence index, which indicates the degree of optimism about the state of the economy as reflected in consumer spending and saving activities.

According to market-intelligence firm Euromonitor International, consumer-expenditure growth in emerging markets has surpassed that in developed markets every year since 2000, and is expected to continue doing so.

A favorable trend in consumer spending on non-durable goods is a positive indicator for the non-alcoholic beverage industry. It’s also good for the performance of exchange-traded funds (or ETFs) that invest in the consumer staple sector. The Consumer Staples Select Sector SPDR ETF (XLP) has holdings in the major soft drink companies like The Coca-Cola Company (KO), PepsiCo, Inc. (PEP), Dr. Pepper Snapple Group, Inc. (DPS), and Monster Beverage Corporation (MNST).