Gross Margin Whipsaw (300 bps+) as Input Costs +18.6% since Mid-Feb (+1.5% w/w, +7.9% y/y) PG-, EPC-. Isolated Tailwinds: HSY+, LW+, MDLZ+, Center Plate (ex-beef) +

By Jonathan Feeney and David Schick and David Katzman and Jack Hermann Published on May 29, 2026 PDF

The Optimal Advisory Cost Factor rose this week (+1.5% w/w, +7.9% y/y) as energy and packaging costs drive higher on Iran uncertainty. Some tailwinds remain including softs, sweeteners, and proteins. We think it means 3 things:

CPG companies face more outlook pressure, especially volume challenged mid-year reporters (e.g. GIS, CPB).
Within CPG, protein (HRL, JBS) offers the best fundamentals — including volume outlook & cost tailwinds.
Select restaurants & foodservice suppliers (LW, MKC) without a traffic/volume problem are well positioned to use low visibility cost relief to drive comp/units.

Cost tailwinds to watch: Meats/Proteins down -26.7% y/y, Softs/Sweeteners –26.5% y/y, HSY -25.2% y/y, LW –11.5% y/y, MDLZ -4.6% y/y. See Fig 1.

Cost headwinds to watch: Packaging +25.8% y/y, Energy/Freight +21.9% y/y, PG +23.8% y/y, CLX +22.5% y/y, EPC +22.2% y/y. See Fig 1.

Higher energy costs & shipping risk are implicitly an immediate tax on everything: Within COGS, they drive the cost of packaging (esp. aluminum), inbound & outbound freight as well as farm level costs (diesel, fertilizer) that are key to plantings, supply & future food inputs. Within SG&A, they drive delivery costs. They also threaten revenue with more consumer budget constraints. We monitor weekly performance of key equity indices and macro indicators. See Fig 11.

Cost Factor -0.1% w/w, +7.2% y/y (vs. prior week -0.1% w/w & 7.2% y/y). Notable commodity moves include Bunker Fuel +84% ytd; Diesel +58% ytd.

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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