Oil-Driven Input Costs Threaten Consumer Staples Margins

Margins for consumer staples companies may compress faster than expected as consumers trade down to store brands. This pressure stems from a surge in oil-based input costs, which rose 33.9% in a single month. Tallow prices, a key ingredient in personal care products, are up 40% year over year. These cost increases are the result of oil prices surging above $100 per barrel following U.S. and Israeli strikes on Iran that began on Feb. 28. Jet fuel prices have surged nearly 88% since late February. In response to these input cost pressures, TD Cowen downgraded Colgate-Palmolive from a Buy to Hold rating and cut price targets from $96 to $85.