Ashley Pittard

Head of Global Equities

How Pendal’s investment manager saw opportunity among unloved global consumer stocks

Amazon brings threats as well as opportunities if you know where to look says Ashley Pittard, Pendal Group’s head of global equities


AMAZON’S $US13.7 billion acquisition of upmarket grocer Wholefoods a few years ago put big pressure on consumer goods stocks.

At the time, investors thought Amazon would disrupt the US retail landscape – and stocks such as Colgate-Palmolive, P&G, Kraft, Heinz and Kellogg’s came under pressure.

Some investors questioned whether consumer staples companies had been earning greater-than-normal profits and would come under severe pressure to reduce prices as the Amazon phenomenon took hold.

“The stockmarket de-rated these businesses because they were concerned Amazon would commoditise food exactly like they did with books and all the other products they’d gone into over time,” said Ashley Pittard, who heads up global equities at asset management group Pendal.

>> For more information on Pendal’s global equities capabilities click here

But not all consumer stocks were in the same boat after Amazon’s move.

Mr Pittard believed brands that had a strong affinity with consumers were likely to retain considerable bargaining power when it came to pricing negotiations with Amazon and other major distributors.

In the wake of the Amazon-Wholefoods deal, Mr Pittard saw a number of opportunities.

“We look for crown jewel assets that are out of favour – those where the stock price has been flat for a number of years or are down 30 to 50 per cent near term.

“Here we focused on Colgate-Palmolive and Procter & Gamble.”

Consumer were stocks sold down in the wake of Amazon’s move on Whole Foods

Colgate – a global household name in oral health – and P&G – makers of a wide range of iconic brands in home and personal care products – had the highest market shares and the highest return on capital, Mr Pittard said.

“Colgate’s market shares range between 40 and 80 per cent. When you have that type of market share, you have pricing power.

“You can innovate, setting you apart from other market players.”

Premium positioning drives price

Colgate has been able to attract higher margins by enhancing flagship products in relatively minor ways such as incorporating elements of nature, sustainable sourcing or adding vitamins or supplements.

“Remember as a kid you cleaned your teeth with white toothpaste – now look at the range of toothpaste,” said Mr Pittard.

“It’s white, it’s coloured, it’s got mints in it, it’s got natural products, it’s for sensitive teeth…”

“And the difference in price is from about $1 all the way up to $14.”

As an investment, Colgate stood out for a number of reasons, Mr Pittard said:

– The stock had been de-rated and had gone sideways for five years
– Management was focused on reducing costs and generating a good dividend yield
– Longer term there was pricing power and room to innovate because of a large market share

Hear more from Ashley Pittard on finding value in consumer stocks


Disrupting the distribution, not the brand

“When you look back at what people were buying on Amazon, it was the exact same type of well-known brands they were buying at the shop,” Mr Pittard said.

“The only difference was, it was the convenience of using the Amazon delivery.”

“So yes, Amazon are disrupting the space – but they’re not disrupting the brand, they’re disrupting the distribution.”


For more information on Pendal’s global equities capabilities click here




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