Is NZ’s Consumer Staples Sector Well-placed Amidst Tough Macro-Economic Environment - 2 Stocks to Consider

Company Overview:

Foley Wines Limited (NZX: FWL) is an integrated wine company producing table wines with the marketing and sales of premium wines in New Zealand and various export markets. Delegat Group Limited (NZX: DGL) is a New Zealand-based wine company. The company invests in wineries and vineyards in the prime grape- growing regions of Australia and New Zealand.

Kalkine’s Sector Report covers the Key Financial Metrics, Risks, Outlook, Technical Analysis along with the Valuation, Target Price, and Recommendation on the stock.

1. Sector Landscape and Outlook

As per Stats NZ, NZ’s GDP witnessed a rise of 0.8% during the quarter ended March 202, after the 0.5% rise in the December 2024 quarter. Notably, there was an increase in activity in the March 2025 quarter throughout all 3 high-level industry groups, such as primary industries, goods-producing industries, and services industries. Stats NZ stated that 9 of the 16 industries increased, while the largest rises were witnessed in business services and manufacturing.

The increase in manufacturing was led by higher production of machinery and equipment. However, the largest decreases were encountered in arts and recreation services, and information, media, and telecommunications. GDP per capita increased by 0.5% during the March 2025 quarter. The household consumption expenditure witnessed a rise of 1.4% this quarter. The expenditure on services, durables, and non-durables increased.

Exhibit 1: Gross Domestic Product (Quarterly and Annual Growth Rates, Chain-volume)

Data Source: This work is based on/includes Stats NZ’s data which are licensed by Stats NZ for reuse under the Creative Commons Attribution 4.0 International Licence; Chart Created by Kalkine Group

Food Prices Rose 4.4% Annually

As per Stats NZ, food prices rose 4.4% in the 12 months to May 2025. This was following the 3.7% increase in the 12 months ended April 2025. The higher prices for the grocery food group as well as the meat, poultry, and fish group made the most contribution to the annual rise in food prices, up 5.2% and 5.4%, respectively. Notably, all the 5 food groups witnessed an annual price increase in May. The price rise for the grocery food group was because of increased prices for milk, butter, and cheese.

Notably, the rise in the meat, poultry, and fish group was due to increased prices for beef steak and beef mince, up by 18.6% and 13.0%, respectively. The food prices rose 0.5% in May 2025, after the 0.8% increase in April 2025. The increased prices for the fruit and vegetables group as well as the meat, poultry, and fish group resulted in an increase in food prices for May 2025, up by 3.6% and 1.7%, respectively.

Exhibit 2: Food Prices (Annual % Change)

Data Source: This work is based on/includes Stats NZ’s data which are licensed by Stats NZ for reuse under the Creative Commons Attribution 4.0 International Licence; Chart Created by Kalkine Group

Export Prices Supported by Rising Dairy Prices

As per Stats NZ, export prices witnessed a rise of 7.1% in the March 2025 quarter, which was led by dairy prices. The export prices are increasing since March 2024 and are 17% higher than they were a year ago. The prices for dairy products (NZ’s top export commodity) increased 10%, led by 13% rise in milk powder prices as compared to the December 2024 quarter. The rise in dairy prices was shared throughout all the major dairy categories.

Notably, the export prices for butter have also witnessed an increase. Butter prices are now 38% higher as compared to the March 2024 quarter.

Key Risks and Challenges:

RBNZ, in its release dated 28 May 2025, stated that the recent developments in the international economy can reduce the global economic growth. Notably, tariffs as well as higher policy uncertainty overseas can moderate NZ’s economic recovery as well as reduce the medium-term inflation pressures. As per the Committee, in addition to the direct effect of increased tariffs, higher policy uncertainty in the international economy can impact the global investment and consumption. 

Exhibit 3. Key Risks in Consumer Staples Sector:

Source: Analysis by Kalkine Group

Outlook:

As per RBNZ, higher export commodity prices as well as reduced interest rates have been supporting the overall economic activity in the broader NZ economy. The Committee mentioned that the full economic effects of cuts since the month of August 2024 are yet to be fully realised. The annual CPI inflation is expected to increase to 2.7% in Q3 FY 2025 and then return to near the 2% target midpoint from 2026. The near-term rise in headline inflation consists of increased food and electricity price inflation. Also, non-tradables inflation is projected to decline, consistent with spare productive capacity in the economy. 

As per Situation and Outlook for Primary Industries (June 2025), the dairy export revenue is projected to rise 16% to a record $27.0 Bn during the year ended 30 June 2025. This is expected to be helped by increased global dairy prices. This is driven by strengthening of global demand as well as weakening of global supply, mainly decreased milk production in China.

Apart from the sector-specific factors, an analysis on 2 NZX-listed companies is provided. This report covers their insights, outlook, performance and potential as expected to be delivered in the near to medium term.

1. Foley Wines Limited (Recommendation: Hold, Potential Upside: Low Double-Digit) (M-Cap: NZD 44.04 Mn)

Business Description:

Foley Wines Limited (NZX: FWL) is an integrated wine company producing table wines with the marketing and sales of premium wines in New Zealand and various export markets.

Outlook:

FWL announced that it has completed its harvest for 2025 vintage. The harvest totalled 8,638 tonnes throughout the Grove Mill and Vavasour wineries in Marlborough, Te Kairanga and Martinborough Vineyard wineries in Martinborough and Mt Difficulty winery in Central Otago. This reflects a rise of 35% on previous year’s harvest of 6,404 tonnes as well as an increase of 6% on the 2023 harvest of 8,137 tonnes. Notably, the company established robust routes to market for the branded products.

Technical Overview:

FWL Daily Technical Chart, Data Source: REFINITIV

Technical Commentary

On the daily chart, FWL’s stock is forming a symmetrical triangle pattern, indicating that the current sideways trend may continue in the near term. The 14-period RSI is hovering near the midpoint, which further supports this outlook. The stock is trading between its recent high and low, which may act as resistance and support levels, respectively. A key support level is located at NZD 0.62, while a critical resistance level is positioned at NZD 0.73.

Stock Recommendation

The stock price as on the close of 25^th June 2025 was NZD 0.67 per share. The stock did not trade on 26^th June 2025. Considering the facts above, a ‘Hold’ recommendation on the stock has been provided at the closing market price of NZD 0.67 per share, down by 1.47% as on 25 June 2025.

2. Delegat Group Limited (Recommendation: Buy, Potential Upside: Low Double-Digit) (M-Cap: NZD 404.5 Mn, Annual Dividend Yield: 6.95%)

Business Description:

Delegat Group Limited (NZX: DGL) is a New Zealand-based wine company.

Outlook:

DGL is expecting global case sales of 3,182,000 cases for FY 2025, reflecting a fall of 5% from the previous guidance and 12% down on last year. The Oyster Bay brand is holding a leadership position in the US market, and it possesses a robust network of US distributors. They have been working closely with the Group in order to navigate the current uncertainty.

Technical Overview:

DGL Daily Technical Chart, Data Source: REFINITIV

Technical Commentary

On the daily chart, while experiencing a downtrend, DGL’s stock prices are forming a trading range characterized by lower lows and higher highs, suggesting that the sideways period in the stock might continue to persist in the near future. Moreover, the momentum oscillator RSI (14-period) is approaching its overbought territory, anticipating a potential reversal and adding further evidence to the mentioned recommendation. Prices are trading above both 21-day and 50-day SMAs, which might function as sentimental resistance levels for the stock; in contrast, the 2024 low may act as a support. A significant support level for the stock is positioned at NZD 3.76, while critical resistance level is located at NZD 4.16.

Fundamental Valuation:

P/E Based Relative Valuation

Stock Recommendation

The stock price as on the close of 25^th June 2025 was NZD 4.00 per share. The stock did not trade on 26^th June 2025. Considering the facts above, a ‘Buy’ recommendation on the stock has been provided at the closing market price of NZD 4.0 per share as on 25^th June 2025.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is June 25, 2025. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4:  Annual Dividend Yield is on a Trailing Twelve Month (TTM¹) basis and are subject to change based on factors such as company performance, stock price changes, etc.

Note 5: Kalkine reports are prepared based on the stock prices captured either from REFINITIV or Trading View. Typically, REFINITIV or Trading View may reflect stock prices with a delay which could be a lag of 25-30 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.