Consumer staples are experiencing their strongest start to a year in at least 25 years. The sector has surged 6.6% year-to-date through late January, beating the S&P 500 by more than 500 basis points. This isn’t a temporary flight to safety—it’s the beginning of what appears to be a fundamental recovery after a brutal three-year drawdown.
Wells Fargo analysts emphasize that the 2023-2025 decline was “fundamentally driven” by identifiable headwinds: elevated input costs, shifting consumer behavior, and persistent volume pressure. Those forces are now reversing. Input cost inflation has moderated. Consumer spending patterns are stabilizing. Volume comparisons are easing. The bank notes that “rate of change seems better ahead” with valuations at relative lows, suggesting the move can sustain as long as improvement continues.
Within consumer staples, household and personal care stocks need clearer evidence of data improvement, but beverage names—particularly beer brands—are showing the most attractive recovery characteristics with sustained follow-through expected into summer. Three stocks represent different angles on the consumer staples comeback, each offering distinct catalysts beyond just sector rotation.
Procter & Gamble Company (PG) confirmed a technical bottom in early 2026 after trading at long-term lows near $140. Currently around $150, the stock has begun rebounding from support levels that represented worst-case-scenario pricing. The market had assumed perpetual tepid growth, but even modest growth is sufficient to sustain P&G’s financial health and dividend payments—a critical point for this Dividend King with nearly 70 years of consecutive increases.
P&G’s fiscal Q2 2026 results weren’t spectacular, but they revealed resilience that exceeded depressed expectations. Revenue grew 1% as expected, with a 1% volume decline offset by 1% pricing gains. Beauty and Healthcare segments stood out with 5% growth each, while most other divisions posted modest gains. The weak spot was Baby, Feminine, and Family Care, down 3% due to tough prior-year comparisons when pantry-loading ahead of potential port strikes inflated results.
Margin pressure led to a 2% decline in adjusted EPS to $1.88, but this beat expectations despite tepid top-line performance. More importantly, management reaffirmed full-year guidance with a $6.96 midpoint aligning with consensus—a signal that the business can navigate current conditions without deteriorating further. The company’s adjusted funds from operations comfortably cover the $3.22 forward dividend rate, supporting the 2.9% yield.
P&G’s cash flow enables share buybacks alongside dividends, creating additional leverage for investors. Q2 buybacks reduced share count by 1.4% for the year, and management expects to continue aggressive repurchases. The balance sheet shows increased cash and assets, 2% equity growth, and low leverage with long-term debt at just 0.5x equity.
At current levels around $150, P&G trades at 14 times trailing adjusted funds from operations—the low end of its historical valuation range. Analysts maintain a Moderate Buy consensus with price targets suggesting approximately 10% upside. Institutions own over 65% of shares and accumulated throughout 2025, extending that trend into early 2026. For buy-and-hold investors seeking quality with income, P&G offers an entry point near technical support with a Dividend King pedigree.
Constellation Brands Inc. (STZ) owns two of the most valuable beer brands in North America—Modelo and Corona—which together account for roughly 90% of total revenue. Currently trading around $162 after bottoming near $130 in November, the stock remains down 40% from its early-2024 peak, creating an opportunity to buy premium brands at distressed valuations.
The alcohol industry has faced persistent headwinds. A Gallup Poll showed just 54% of U.S. adults now regularly consume alcohol, a multi-decade low. Beer consumption declined across the industry, with Constellation’s beer revenue down 4% through the nine fiscal months ending in November. But when consumers do drink, they’re increasingly choosing premium brands over mass-market alternatives—exactly where Constellation is positioned.
Management has been tightening focus on higher-margin products. In June 2025, Constellation sold its Woodbridge, Meiomi, Robert Mondavi Private Selection, Cook’s, and SIMI wine brands to concentrate exclusively on premium segments. CEO Bill Newlands explained the company is focusing “on the higher-end that more closely aligns to consumer-led premiumization trends.” While these brands contributed modest revenue, exiting lower-end wine will remain a small drag through June 2026. After that point, the portfolio shift could drive disproportionate margin benefits.
The stock trades at just 14 times fiscal 2026 projected per-share earnings of $11.61—cheaper than most consumer staples peers despite owning category-leading brands. The forward dividend yield of 2.5% is also competitive within the sector. Valuation compression has been severe, but the recent rally from November lows suggests accumulation is beginning.
Warren Buffett’s Berkshire Hathaway took notice. Berkshire purchased 5.6 million shares in late 2024 when the stock appeared to be in freefall, then more than doubled that position during the first three quarters of 2025 before the current recovery began. While Buffett stepped down as Berkshire’s CEO at the end of 2025, his influence on the portfolio was evident, and taking a position while the stock was declining signals conviction in the turnaround thesis.
Wells Fargo specifically highlighted beer names—particularly Constellation and Anheuser-Busch InBev—as the most attractive recovery trades within beverages, expecting sustained follow-through into summer. For investors believing premium beer brands can weather industrywide consumption declines and willing to buy during cyclical weakness, Constellation offers quality assets at trough valuations.
United Natural Foods Inc. (UNFI) represents a different recovery angle—an operational turnaround driven by automation and AI rather than just cyclical improvement. Currently trading around $36 after rallying from the low $30s, UNFI is North America’s leading distributor of natural, organic, and specialty food products with over $31 billion in annual revenue.
The company has been unprofitable, reporting a $118 million net loss in fiscal 2025 and continuing with a $4 million loss in fiscal Q1 2026. But that Q1 loss improved dramatically from the prior year’s $21 million loss, and the trajectory matters more than the absolute figures. UNFI is investing heavily in supply chain automation that should drive structural margin improvement over the next 12-24 months.
The cornerstone of this transformation is Relex, an AI-based supply chain platform optimizing procurement, demand forecasting, and waste reduction. As of Q1 fiscal 2026, Relex had been deployed across roughly half of UNFI’s distribution network, with full implementation targeted by fiscal year-end. Management noted early benefits are already emerging including stronger inventory effectiveness and customer fill rates trending above fiscal 2024 and 2025 levels.
UNFI is pairing Relex with targeted infrastructure investments. In Q1, the company ramped operations at its new automated natural products distribution center in Sarasota, Florida—a facility purpose-built to support high regional demand through faster, more efficient throughput. These initiatives are translating into measurable productivity gains. Throughput (cases moved per hour) increased more than 2% year-over-year and nearly 10% compared to the same period in fiscal 2024.
Automation is being scaled alongside UNFI’s Lean Daily Management program, now active across 34 distribution centers. Together, these initiatives are improving safety, quality, delivery, and cost metrics. These effectiveness actions contributed to a 20-basis-point year-over-year improvement in gross margin in Q1, along with reduced operating expenses as a percentage of sales. By combining AI-driven analytics with automated facilities and standardized operating discipline, UNFI is working to build a more resilient supply chain that removes structural costs while supporting scalable margins.
The company is also reducing debt, with its net leverage ratio dropping to 3.2x in fiscal Q1 as it targets a more reasonable 2.5x by the end of fiscal 2026. Insider activity provides another positive signal—Board member James Pappas acquired 17,000 shares in early January for approximately $573,000, marking the first open-market purchase in over three years. The acquisition represented 8.4% of his total reported holdings, suggesting renewed conviction in the turnaround.
At current levels, UNFI trades at a fraction of its revenue given the $2.1 billion market cap against $31.75 billion in trailing twelve-month sales. The valuation reflects skepticism about profitability improvements, but if automation investments drive the expected margin expansion, the stock offers significant operating leverage to improved execution.
Wells Fargo’s observation that “rate of change seems better ahead” applies particularly well to UNFI. The company isn’t dependent on consumer behavior shifts or commodity cost deflation—it’s engineering operational improvements that should drive results regardless of external conditions. For investors comfortable with turnaround risk and believing management can execute the automation roadmap, UNFI offers a recovery play with catalyst visibility over the next 12 months.
