BLI: What the market has stopped seeing

June 17, 2026

Cincinnati, 1837. A year of financial panic in the United States. Two immigrants—an English candlemaker and an Irish soap maker—find themselves by chance in the same city, married to two sisters, and go into business together on the advice of a pragmatic father-in-law.

Then came the Civil War: the Union Army needed soap and candles in industrial quantities, and Procter & Gamble landed the contracts. Demobilised soldiers returned home with P&G products in their luggage. In Ohio, Massachusetts, Illinois, and across the country, they continued to buy the same soap.

Procter & Gamble hadn’t conquered a market; it had conquered a ritual, established simultaneously in millions of households through the logistics of war. Forty years later, a worker would forget to stop the soap machine during his break. The excess air produced a soap that floated; customers asked for more: Ivory Soap is still in production today, its formula virtually unchanged.

Consumer staples stocks constitute one of the oldest sectors and are traditionally more heavily represented in the portfolios of quality-focused investors. Yet under the same label, very distinct sectors coexist: food and beverages, household and personal care products, and food and over-the-counter (OTC) pharmaceutical distribution.

Their profit drivers, geographic exposures, and competitive dynamics often have nothing in common. Yet one fundamental characteristic unites them: their products are part of consumers’ daily lives and are often used without them even realising it.

These are rituals repeated thousands of times a year, across all economic cycles, tied to habits, memories, and moments of the day that are non-negotiable. The taste of morning coffee, the aroma of childhood yogurt, toothpaste—these are all sensory touchstones that consumers won’t give up, even during a recession. No one has ever sacrificed their Colgate toothpaste on the altar of economic survival.

This structural consistency is precisely what has always attracted so-called “quality” investors to this sector: predictable revenues, highly stable market shares over time, robust cash flow generation, and earnings visibility that allows for a trajectory of growing dividends over several decades.

But beyond growth, it is longevity—the ambition to endure and remain indispensable—that distinguishes the best consumer staples companies. This feature, which could be described as resilient, has enabled them to weather recessions, crises, and wars while remaining, even today, dominant and profitable.

Since 2022, however, the sector has been going through a difficult period: rising interest rates, dominance of tech stocks, structural issues regarding alcohol consumption and food... The market has distanced itself. The opportunity, therefore, does not lie in discovering uncharted territory: it lies in taking a fresh look at a sector that the market believes it knows but has, in fact, stopped seeing.

I. Several Years of Headwinds

For several years now, headwinds have been mounting, alongside the structural shifts affecting global consumption. As early as 2022, the sharp rise in interest rates automatically penalised the sector; a considerable portion of the sector’s stock value indeed relies on cash flows materialising far into the future.

In 2024 and 2025, the stock market dominance of tech stocks and the Magnificent 7 concentrated capital flows within a narrow segment of the market, leaving so-called defensive stocks in the shadows.

The rise of GLP-1 drugs has added to the structural risks facing food companies, while declining alcohol consumption among younger generations, changes in distribution channels, and the rise of private-label brands are undermining players whose offerings struggle to stand out.

These pressures are not, however, uniform. In an environment where alcohol consumption among 18- to 34-year-olds has fallen by 14% over the past decade, some players have been able to anticipate this trend by, for example, investing in premiumisation and non-alcoholic beverages—a segment that grew by nearly 30% annually in the United States between 2019 and 2024 (IWSR, 2025), while volumes of traditional alcohol were declining. The current headwinds are therefore an obstacle but also highlight which companies have truly built and maintained their competitive advantage (moat), and which were complacent without nurturing it.

This is precisely where the difficulty lies: these headwinds are overlapping, and it is not yet possible to clearly distinguish which are structural and which are cyclical. Is the GLP-1 risk for food companies a permanent shock to demand or a disruption that the strongest brands will be able to weather, just as they have overcome other shifts in consumer behaviour? Does the decline in alcohol consumption among younger generations reflect a lasting cultural shift or a temporary cycle?

This uncertainty is evident even in the governance of major conglomerates: Nestlé and Unilever, in particular, have each replaced their CEOs in the past two years, proof that even the companies best positioned to understand their own markets do not agree on the strategic response to adopt.

Thus, the sector, which had traded at a 15–20% premium to the MSCI World Index throughout the 2010s, is now trading at a significant discount, and this reversal has intensified further in 2025–2026, bringing the sector to its lowest relative valuation level in nearly twenty-five years—and to its lowest weighting in the global index since the start of the century. Objectively, this valuation level presents a rare entry opportunity, but the discount alone is not enough: it is a necessary condition, but not a sufficient one.

The market sees these headwinds; that is undeniable. What it no longer sees is the value of endurance.

II. The Power of the Invisible

A lack of innovation is often cited to explain a sector’s underperformance. Yet, in our view, this reasoning confuses what fuels the market narrative (disruption, novelty, explosive growth) with what truly underpins a lasting competitive advantage: the ability to remain rooted in habits, through cycles, without succumbing to the pressure to reinvent oneself every decade.

This tension between the frenzy of change and the enduring nature of customs finds a striking echo in Greek mythology. Nassim Nicholas Taleb uses the figure of Antaeus to illustrate this dynamic: the giant’s strength lay in his direct contact with the earth; Hercules defeated him only by lifting him up, cutting him off from his source. A company can be battered by interest rates, cycles, or trends, but it will recover as long as the rituals that sustain it remain. The real threat is not recession, but the obsolescence of these rituals.

It is precisely this need for grounding that shapes our investment philosophy. Tony Deden, founder of Edelweiss Holdings, has formalised this pursuit of resilience around three pillars: scarcity, permanence, and independence. Like him, we favour models designed to endure rather than to impress; entities that are not captive to a single supplier, a passing fad, or a political decision.

This resilience does not reflect a lack of agility, but rather the depth of their roots. It is this quiet strength, this “invisible power,” that defines success, and Givaudan is, in our view, a perfect illustration of it.

Givaudan, founded in 1895 and based in Vernier near Geneva, is the discreet architect of your perfume, the flavour of your potato chips, and your favourite drink. A global leader in fragrances and flavours operating in over 100 countries, the company falls outside the typical scope of consumer staples investors—the stock is classified under materials under the GICS classification—yet is inextricably linked to the sector.

Givaudan operates more like a royalty business: a recurring stream of revenue on every unit sold, without bearing the risk of branding or distribution. Behind the apparent simplicity of everyday products lies considerable industrial and scientific complexity—global agricultural supply chains, chemical formulation, and country-specific health regulations.

Even with the exact formula in hand, experts tell us that a competitor cannot replicate the result: the true competitive moat lies in Givaudan’s perfumers and flavourists, a know-how that cannot be transferred.

The risk for its clients is therefore to imperceptibly alter what the consumer recognises without realising it, and this cost of reformulation is a significant barrier to exit, cementing business relationships over several decades. That is the power of the invisible.

III. The Test of Time

The dividend argument is often reduced to the notion of yield. This misses the key factor: the role of the dividend as a signal to the market. A company capable of increasing its payout every year for several decades—through recessions, wars, and technological shifts—demonstrates a robustness that few accounting metrics capture as well.

The reason is structural: these companies generate high levels of free cash flow with limited reinvestment needs, allowing them to pay substantial dividends and grow them year after year—regardless of the economic cycle.

A few milestones suffice to gauge the scale of this commitment. L’Oréal has never cut its dividend in six decades. PepsiCo has increased it every year since 1972. Union Pacific, the largest freight rail network in the United States, has paid a dividend without interruption since 1900.

Colgate has paid a dividend without interruption since 1895, weathering two world wars, two oil crises, the fall of the Berlin Wall, the dot-com bubble, the Great Financial Crisis, and a global pandemic. We have certainly seen less reliable commitments!

These are not mere anecdotes: they are a practical demonstration of the sustainability of these models. For the patient investor, the compounding effect is substantial: a company increasing its dividend by 7% annually sees it grow tenfold over thirty years.

This return becomes one of the most powerful arguments for holding a position beyond short-term valuation fluctuations. Moreover, during periods of inflation, a growing dividend provides real protection for purchasing power.

Over the past twenty-five years, the S&P Dividend Aristocrats Index has delivered a total return comparable to that of the Nasdaq, with significantly lower volatility; it was only with the post-2022 tech rally that the comparison shifted. The discipline of shareholder remuneration remains one of the most reliable indicators of a model’s robustness.

IV. Selectivity, Structure, Resilience

Treating Consumer Staples as a uniform category obscures the reality of the companies it encompasses. Grouping a global leader in cosmetics, a brewer highly active in emerging markets, and a manufacturer of oral hygiene products under a single banner is more a matter of administrative convenience than economic logic. It is precisely because we have never invested in “the sector” but in individual companies, chosen for their intrinsic qualities, that our exposure reflects a conviction, not a default allocation.

This selectivity is all the more necessary as emerging markets—historical growth drivers for the sector—are themselves going through very divergent cycles: China is slowing down under the weight of its real estate market and cautious consumers, while India is emerging as one of the most promising growth engines.

Our interest in this sector also fits into a broader framework: portfolio construction, with the goal of building a portfolio whose overall resilience exceeds the sum of its parts. Consumer staples stocks do not follow the same cycles as technology, financial, or industrial stocks. This decorrelation is a portfolio-building tool, not merely a sector bet.

Finally, the sector possesses a fundamental attribute that is often overlooked during periods of market euphoria: its ability to withstand periods of stress. This is not merely a matter of decorrelation. It is a structural attribute, rooted in the very nature of the products. Demand for products integrated into daily routines erodes only slightly during recessions, and cash flows remain predictable and robust. The sector faces a lower risk of disruption. And in a world of accelerating disruption, stability becomes more valuable.

During the three major market shocks of the past twenty-five years, the sector has consistently limited its decline to about half that of the market as a whole, with a significantly shorter recovery period. This asymmetry—participating in part of the upside and absorbing only a fraction of the downside—does not pay off in good times, but it makes all the difference in difficult periods.

Conclusion

The market is currently paying a premium for the future it thinks it can imagine—artificial intelligence, technological disruption, new platforms. At the same time, it is discounting the future that is already guaranteed: tomorrow morning, eight billion people will wake up and repeat the same rituals as today. Companies that benefit from these rituals do not need to grow quickly. They need to endure.

This durability comes at a price, and that price is now one of the lowest it has been in a quarter-century. Not because companies have changed, but because the market has looked the other way. For the investor who thinks long-term, this is precisely where the opportunity lies: not in the discovery of uncharted territory, but in the patient return to what has proven its strength over the long term and has been overshadowed by the tech decade.