Ingredient producers face market volatility and potential cost increases from tariffs, impacting consumer goods companies.

From Morningstar: 2025-04-08 05:20:00

Ingredient producer shares initially remained stable after the tariff news on April 2 but dropped by mid- to high-single digits on April 7 due to market volatility. Despite limited direct impact, companies may face higher costs for imported raw materials, leading to price hikes for consumers and potential reduced consumption in discretionary categories.

Certain ingredients like patchouli, jasmine, and vanilla, commonly used in flavors and fragrances, cannot be sourced at scale within the US and would be subject to tariffs. This could result in increased costs passed on to customers, affecting consumer packaged-goods companies and potentially leading to lower consumption or a shift to lower-priced alternatives.

Maintaining fair value estimates for ingredient companies, the long-term impact of tariffs remains uncertain, with potential short-term challenges expected. Companies like DSM-Firmenich, Symrise, and Croda, with limited sales exposure to North America, are seen as attractive investments. Others like Givaudan and Novonesis have higher exposure and are not considered good investments at present.



Read more at Morningstar: Ingredient Producers: Swept Up in Market Correction…