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Barclays Flags Consumer Ingredients as a Key Buying Opportunity in Europe
Introduction
In a note dated August 28, 2025, Barclays announced that the European consumer ingredients sector is showing signs of a significant investment opportunity. This comes amid a backdrop of modest earnings downgrades and sharp valuation adjustments, making the sector potentially attractive for long-term investors.
What’s Happening in the Sector?
1. Valuation Compression
• Share prices in this sector have slipped by an average of 8% since July, a much steeper decline than the 1% earnings estimate downgrade for 2025.
• This has narrowed the sector’s premium to global consumer staples from a historical average of 35%, now down to roughly 10%.
2. Room for Upside
• Barclays suggests that the derating may be overdone, providing potential for reversal. In a favorable scenario, the sector may rebound in Q4 2025 and into 2026, making now an opportune moment to enter.
3. Selected Favored Names
• Barclays highlights DSM-Firmenich, Kerry Group, and Novonesis (CSE:NSISb) as preferred picks within the sector.
4. Structural Tailwinds
• The optimism is rooted in resilient underlying drivers: these companies benefit from exposure to fast-growing FMCG clients, maintain strong pricing power thanks to low-cost-in-use formulations, and are positioned to weather short-term cyclical softness.
• Other headwinds like sunscreen destocking, weak pet food demand, and ordering delays in Asia-Pacific are seen as temporary—and likely to ease.
5. Remaining Risks
• Structural pressures—including increased pricing pressure in beauty care, fragrances, and pet nutrition, plus potential competition from AI-enabled in-house R&D by large customers—pose challenges.
• Regulatory developments around processed foods and slower packaged-food demand could also weigh on long-term growth.
Conclusion
Barclays views the European consumer ingredients sector as an intriguing tactical buying opportunity, driven by a sharp valuation reset and the potential for sequential recovery in topline growth. While near-term risks remain, the structural advantages and undervaluation paint a compelling picture—especially for investors focused on cyclicals and relative value.
Attached is a news article regarding Barclays seeing a opportunity in the buying sector
Attached is a News article regarding Barclays seeing a buying opportunity in the European sector
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