From MoneyWeek · Oct 30, 2026 · 2m

Consumer brands in bargain bin: How to invest

Consumer brands face value drops as investors seek bargains.

In brief

Consumer brands face value drops as investors seek bargains. Consumer brands like Diageo and Unilever have fallen in value due to inflation and debt, but investors see opportunities in their turnaround potential. Originally reported by MoneyWeek.

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Consumer brands once outperformed

Consumer brands MoneyWeek cover illustration

Consumer brands used to be dependable outperformers but have struggled in recent years.

Global brands generate sales outside UK

Their global consumer brands, including Johnnie Walker, Dove and Dettol, generate sales outside the UK.

Historic share price growth

Unilever's share price quadrupled, Diageo was up six times and Reckitt Benckiser by almost 11 times from 2000 to 2020.

Warren Buffett's See's Candies deal

Warren Buffett bought See's Candies for three times book value in the 1970s, teaching that brand value isn't recorded on the balance sheet.

Marketing costs expensed

Marketing costs for consumer brands, 12-18% of revenue, are expensed as incurred through the income statement.

Intangible assets on balance sheet

Acquired brands like Unilever's Horlicks, Knorr and Hellmann's are recorded as intangible assets on the balance sheet.

Diageo's Don Papa write-down

Diageo wrote down the value of the Don Papa brand by $287 million two years after buying it for £294 million.

Kraft Heinz write-down comparison

Kraft Heinz announced a $15.4 billion write-down of its best-known brands in 2019, dwarfing Diageo's write-down.

Consumer brands struggle with inflation

Consumer brands have struggled to keep pace with inflation despite high gross margins.

Supermarkets outperform

Supermarkets like Tesco and Sainsbury's have seen share prices rise due to inflation and low cost of goods sold.

K-shaped recovery impact

Middle-class workers have faced a severe wage squeeze relative to inflation, with many carrying more household debt.

Diageo's dividend cut

Diageo halved its dividend to give management more financial flexibility amid falling sales and a 26% drop in earnings per share.

Unilever's recovery signs

Unilever reported 4.8% underlying sales growth and trades on a P/E ratio of 16.9 times December 2027 forward earnings.

Diageo's turnaround strategy

Diageo's new CEO targets $1 billion in annual savings through cost cuts and a shift to value brands.

Investment case for Diageo

Diageo shares trade on a 13.3 times P/E based on June 2028 forward earnings, well below historic averages.

Consumer brands face challenges

Reckitt faces legal problems in the US over infant formula feed, with a $60 million award overturned in court.

The takeaway

Consumer brands like Diageo and Unilever have fallen in value due to inflation and debt, but investors see opportunities in their turnaround potential.

Read the original on MoneyWeek

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