Happy Tariff Day, Restaurants & CPG Helped By Input Tailwinds, Grocers Face Disinflation. Soybeans & Meats Have Most IEEPA Risk, Inputs +0.8% w/w, -9.0% y/y. Friday Cost Factor

By Jonathan Feeney and David Schick and David Katzman and Jack Hermann Published on January 9, 2026 PDF

Optimal Advisory Cost Factor – After a w/w drop in many measured commodities last week, the Optimal Cost Factor increased this week (+0.8%) but is near a 52 week low. TLDR — lower Input costs do a few things:

Give a measurable H1 EPS tailwind to otherwise challenged CPG companies relative to planning period (early fall) expectations.
Enhance center store grocery demand through lower perishables spend (e.g. milk, meat, eggs), where input costs pass through directly.
Challenge H1 2026 grocery comp both in perishables and stoking “surgical” price cuts (e.g. private label) as they chase competitive traffic.

Also note: The Supreme Court may release one or more ruling today related to the legality of the International Emergency Economic Powers Act (IEEPA) which authorized many new U.S. tariffs imposed in 2025. Since most Cost Factor inputs are bulk, transferable and/or discretely carved out last fall, tariff risk to the Cost Factor is muted. We believe that soybeans & meats have the most medium-term impact, probably upside, if the tariff regime eases further.

Cost Factor +0.8% w/w, -9.0% y/y (vs. prior week -2.9% w/w & -7.5% y/y). Tailwinds in energy input costs outweigh any increases in freight costs this week. Egg prices are falling y/y lapping Avian flu, supporting lower protein costs. See Figs 1-8. Energy cost declines in recent months from Natural Gas (-19.5% m/m, -14.8% y/y), Diesel (-5.1% m/m, -2.4% y/y), and Bunker Fuel (-2.6% m/m, -28.2% y/y) See Fig 3.

Cost tailwinds to watch: Dairy -2.5% w/w & down -24.3% w/w. Meats/Proteins down -33.3% y/y, HSY -28.4% y/y, MDLZ -18.7% y/y, wing restaurants -16.8% y/y. See Fig 1.

Commodity Inflections to watch. Trucking Freight continues to be one of the largest cost tailwinds for staples companies this year. Freight cost bounced +15.5% w/w & +30.7% m/m while still down -35.9% y/y. Natural Gas peaked in early December on data center electricity demand, but are now down -19.5% m/m & -14.8% y/y. See Fig 4.

Cost headwinds to watch: Softs/Sweeteners (+2.4% w/w, despite down -16.5% y/y), CPB (+1.6% y/y), CELH (+1.5% y/y). See Fig 1.In this weekly note, we identify spot input costs’ putative impact on the U.S. fast moving consumer goods (FMCG) value chain, most measurably impacting staples, staples retailers, restaurants & food service. Optimal’s proprietary cost factor weights ticker & sector specific cost trends using a proprietary formula based on 32 trackable spot cost inputs – 23 of which are updated as of last night, the other 9 are latest available.

Figure 1: Weekly Cost Factor Summary

Sources: Optimal Advisory Proprietary Analysis, Bloomberg, FRED, USDA, BEA

Figure 2: Weekly Cost Factor Margin Context

Sources: Optimal Advisory Proprietary Analysis, Bloomberg, FRED, USDA, BEA

Figure 3: Weekly Input Commodity Performance by Group

Sources: Optimal Advisory Proprietary Analysis, Bloomberg, FRED, USDA, BEA

Figure 4: Biggest Input Cost Movers y/y

Sources: Optimal Advisory Proprietary Analysis, Bloomberg, FRED, USDA, BEA

Figure 5: Food Sector Cost Factor

Sources: Optimal Advisory Proprietary Analysis, Bloomberg, FRED, USDA, BEA

Figure 6: Beverage Sector Cost Factor

Sources: Optimal Advisory Proprietary Analysis, Bloomberg, FRED, USDA, BEA

Figure 7: HPC Sector Cost Factor

Sources: Optimal Advisory Proprietary Analysis, Bloomberg, FRED, USDA, BEA

Figure 8: Restaurant Level Cost Factor

Sources: Optimal Advisory Proprietary Analysis, Bloomberg, FRED, USDA, BEA

Figure 9: Restaurant Employment Cost Index

Sources: Optimal Advisory Proprietary Analysis, Bloomberg, FRED, USDA, BEA

Figure 10: Staples Sector Theme Box

Figure 11: Market Sector Performance

Sources: Optimal Advisory Proprietary Analysis, Bloomberg

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