Winter Blast Drives Huge Gas Move. Lower Inputs Drive Relief to MDLZ, HSY, Restaurants, Food broadly, Hurt Grocery Comp Outlook. Inputs +5.9% w/w, -11.2% y/y. Friday Cost Factor
Optimal Advisory Cost Factor – Cost Factor up this week as critical energy input prices moving higher in prep for winter weather. The Optimal Cost Factor up this week (+5.9%) but remains down sharply (-11.2%) y/y.
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. See Fig 2.
- Help restaurant margins and/or provide fuel for traffic driving spend like larger protein portions and in app promotions.
- Challenge H1 2026 grocery comp both in perishables (cf. ACI guide last week) and stoking “select” price cuts (e.g. private label) as they chase traffic.
- Enhance center store grocery wallet through lower perishables spend (e.g. milk, meat, eggs), where input costs pass through directly.
Cost tailwinds to watch: Meats/Proteins down -35.2% y/y, HSY -32.1% y/y, LW -24.7% y/y, Wing restaurants -19.6% y/y. See Fig 1.
Cost headwinds to watch: Energy/Freight (+26.4% w/w, -11.9% y/y), CPB +1.2% y/y, CELH +1.2% y/y. See Fig 1.
HPC exposed to Likely Transient, Extreme Energy Spike: CHD +17.5% w/w, CLX +16.8% w/w, EPC +12.4% w/w. While few energy & packaging related inputs are bought on spot, it’s unexpected (and likely transient) pressure.
HSY and MDLZ leaders in gross EBIT impact of lower input costs. Commodity tailwinds continuing this week for Cocoa exposed companies, Cocoa down another -10.0% w/w, now down -61.5% y/y. (See Fig 2.)
Meats/Protein tailwinds continue to benefit the food service industry with better center-plate margin opportunities. Lower poultry prices and easier compares especially beneficial for Wing Restaurants and Upscale Fast Casual. See Fig 8.
Cost Factor +5.9% w/w, -11.2% y/y (vs. prior week -2.0% w/w & -10.9% y/y). Spot energy inputs drastically higher this week (notable Natural Gas +61% w/w, and up +75% in the 3 days ending 1/22) on huge winter storms approaching. Natural gas is the primary heating source for more than 40% of US households, the largest energy cost of CPG factories (esp. food) & a critical packaging input.
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