London, 16 Oct - World stock markets may have plunged, economies are slowing and bankers have lost their jobs, but consumers' appetite for Cadbury chocolate, a Peroni beer or Johnnie Walker whisky is undiminished for now at least.
As three of Europe's biggest food and drink groups reported resilient trading in the July-September quarter, analysts say that slower global growth will eventually hit these traditionally defensive sector pushing investors toward the biggest and safest bets.
"It's like looking in a rear view mirror, the July to September quarter looked not that bad but it is where we go over the next 12 months that is the key," said analyst David Liston at Barclays Wealth.
Confectionery giant Cadbury and two of the world's biggest drinks companies SABMiller and Diageo have all given investors plenty to chew over as they try to navigate a path through the current financial crisis.
All three were cautious in trading updates this week as they were the first in the European consumer goods sector to release figures for July-September trading.
Cadbury warned of bigger cost rises in 2009 than 2008 due to high cocoa and energy costs, SABMiller said the financial crisis makes its prospects "increasingly uncertain" while Diageo added "challenging economic" trends have affected its business.
Citi drinks industry analyst Philip Morrisey points out that with conditions set to get much tougher the defensive attractions of food and drinks stock will come under scrutiny.
He says Diageo shares have outperformed the broader market by 30 percent this year and other consumer stocks such as British American Tobacco by 37 percent and the world's biggest food group Nestle by 35 percent.
"Over the next twelve months though, the risk is that this defensiveness in a late cycle business is tested by poor economic conditions," said Morrisey.
Diageo shares trade on 13 times June 2009 earnings, a sizeable premium to arch-rival Pernod Ricard on 11.1, which has been depressed by the high debt the French group took on to buy Absolut vodka earlier this year.
The British Smirnoff vodka and Johnnie Walker group, held its operating profit forecast growth at 7-9 percent for the year to June 2009 even though July-September sales slowed to 6 percent from the previous year's 8 percent growth.
Miller Lite and Peroni brewer SABMiller reported a recovery in beer volumes in the July-September quarter as they rose 1 percent after a 1.6 percent fall in the previous three months.
But a warning of slower global growth, weak demand and volatile currencies prompted the group to say its prospect for the rest of the year were increasingly uncertain.
Analysts say SABMiller shares which trade on 11.1 times March 2009 forecasts look vulnerable compared to rival InBev on 10.7 times and Heineken on 11.1 for 2008. The valuation on Cadbury's shares at 14.8 times 2009 forecast earnings also looks hefty compared to Danone's 14.3 and Nestle's 13.4, and Barclay's Liston believes the confectionery stock has further to fall.
Cadbury said revenue growth slowed in its third-quarter to 6 percent bringing its nine-month running figure to 7 percent. However, it is still on track to hit the top of its medium-term 4-6 percent growth target this year as Chief Executive Todd Stitzer emphasised the resilience of confectionery sales.
Analyst Warren Ackerman at Dresdner Kleinwort describes Cadbury's third-quarter as "good but not great" and was concerned over the impact that higher prices -- needed to offset high input costs -- would have on volumes, and market share losses in its important U.S. chewing gum market.