UK households are heading into autumn with energy bills on track for a three year high, and that pressure is reshaping everyday spending. When more income goes on gas and electricity, stable cash flows and dependable demand can become more valuable qualities in a stock portfolio. This article looks at three UK consumer staples and value grocer stocks from our screener that appear well placed in light of the latest energy bill squeeze.
The stocks covered below are just a sample from this idea, and the full screen surfaced 11 more UK consumer staples and value grocer companies with equally compelling narratives that are not included in the article. If you want to identify and analyze your own shortlist of potential beneficiaries of the energy bill squeeze, head straight to the UK Consumer Staples & Value Grocers Benefiting from Energy-Bill Squeeze screener
British American Tobacco (LSE:BATS)
Overview: British American Tobacco is a global tobacco and nicotine group that sells cigarettes, vapour, heated tobacco and oral nicotine products under brands such as Dunhill, Lucky Strike, Newport, Camel Snus, Vuse, glo and Velo, with products distributed through retail outlets worldwide. In the context of rising UK household energy bills, it fits the resilient consumer staples theme because tobacco demand tends to be less sensitive to pressure on disposable incomes.
Operations: British American Tobacco generates most of its revenue from the United States at £11.8b, followed by the Americas and Europe at £9.4b and Asia-Pacific, Middle East and Africa at £4.6b.
Market Cap: £89.2b
British American Tobacco offers exposure to a large, cash-generative staple that can hold up when higher energy bills squeeze consumer budgets. At the same time, it is expanding its range of reduced-risk products such as vapour, heated tobacco and modern oral nicotine. Analysts highlight factors such as cash generation, cost efficiency programmes and a sizeable buyback programme as supporting earnings resilience, while regulation and litigation remain important risks to monitor. High leverage and an uneven dividend track record mean the income profile carries risk; however, the combination of global scale, diversification across newer nicotine formats and management’s focus on debt reduction and capital allocation keeps British American Tobacco in view for investors seeking defensive exposure with a value tilt.
British American Tobacco’s cash generation and newer nicotine formats could be masking a more complex story for income seekers. Review the 4 key rewards and 2 important warning signs before the next twist in this staple’s risk reward trade off emerges.
Coca-Cola HBC (LSE:CCH)
Overview: Coca-Cola HBC is a large bottler that produces, sells and distributes Coca-Cola and other non-alcoholic drinks across Central and Eastern Europe, parts of Western Europe, Nigeria and other markets, supplying supermarkets, convenience stores, cafés, restaurants, vending and online channels. As households contend with higher energy bills, its focus on affordable, everyday beverages gives it a direct link to spending that many consumers tend to protect even when cutting back elsewhere.
Operations: Coca-Cola HBC generates all of its €12.2b in revenue from the sale and distribution of primarily non-alcoholic ready to drink beverages.
Market Cap: £16.8b
Coca-Cola HBC provides exposure to everyday drinks that consumers reach for whether they are shopping a weekly supermarket basket or opting for a low-ticket treat, which aligns with a theme of resilient staples during an energy bill squeeze. Analysts highlight execution in emerging markets, a broader portfolio that now includes energy drinks and premium spirits, and earnings that have risen alongside higher revenue. However, some brokers view the stock as only modestly exciting following a share price rally. At the same time, high debt, exposure to volatile markets such as Nigeria and rising input costs including energy and sugar contribute to the risk profile. That combination of dependable demand, active pricing and promotions, and a more leveraged balance sheet is what makes the deeper Coca-Cola HBC story worth a closer look.
Coca-Cola HBC’s earnings story and broader drinks portfolio often get the spotlight, yet its balance sheet and cash profile could be the real hinge for future returns. Before you decide how it fits into your portfolio, review the Coca-Cola HBC financial health report
Imperial Brands (LSE:IMB)
Overview: Imperial Brands is a global tobacco group that sells cigarettes, rolling tobacco and next generation products such as vapour, heated tobacco and oral nicotine under brands like Davidoff, Gauloises and Rizla, supported by a large distribution arm. In the context of rising UK energy bills, its products are effectively non discretionary for many users, which is why it appears in this consumer staples and value screener.
Operations: Imperial Brands generates most of its revenue from Tobacco & NGP in Europe at £11.97b, Tobacco & NGP in AAACE at £5.72b and Tobacco & NGP in the Americas at £3.57b, alongside £11.84b from its Distribution arm and a group elimination of £0.82b.
Market Cap: £19.14b
Imperial Brands may be of interest to investors who want a defensive line in the budget squeeze from higher energy bills, and who also focus on value and capital returns. The company is leaning on strong pricing, a five year plan to lift market share in priority territories and growing next generation products. It is also shrinking its share count through sizeable buybacks and is targeting £10b of cash returns over five years. At the same time, high leverage, revenue expected to decline and an uneven dividend history mean the income story carries risks. With cost cuts underway and analysts still debating its fair value, the key issue is whether Imperial Brands remains a disciplined cash generator or something more fragile beneath the surface.
Imperial Brands’ cash returns plan and buybacks could be masking a bigger shift in how this tobacco group creates value. Read the full narrative for Imperial Brands to see what that might mean for the next phase of its story
Curious About Alternative Stock Paths?
Fresh ideas move fast. Some breakouts are already gathering momentum while others are still under the radar for now. Do not get caught watching from the sidelines. Consider taking action that fits your own objectives and risk tolerance.
- Target steadier compounding by scanning a curated list of solid balance sheet and fundamentals (19 results) that could help you sidestep fragile businesses before sentiment drops away.
- Hunt for income workhorses with a vetted 6 dividend fortresses that may keep paying out even when markets lose momentum and yield hunters start flying in.
- Explore the next potential infrastructure theme with a focused 38 power grid technology and infrastructure stocks before capital enters the space and changes the most attractive entry points.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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