Key Trends Affecting NZ’s Consumer Staples Sector Amidst Global Tensions - 2 Stocks to Consider

Company Overview:

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. Fonterra Co-operative Group Limited (NZX: FCG) is a dairy co-operative, owned and supplied by ~9,000 farming families in Aotearoa, 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, Aotearoa NZ’s consumers price index (CPI) rose 2.7% in the 12 months ended June 2025 quarter. Even though the annual inflation rate rose from the March 2025 quarter, it is within the RBNZ’s target band of 1% - 3%. The largest upwards contributor to the annual inflation rate was local authority rates as well as payments, which were up by 12.2%. Rates contributed 13% of the 2.7% annual increase.

On the other hand, Petrol, which was down by 8.0% in the 12 months ended June 2025, mitigated the increase in rates. Overall, the CPI witnessed a rise of 0.5% in the June 2025 quarter as compared to the March 2025 quarter. Notably, petrol, which was down 4.8%, offset the quarterly increase. However, electricity, which was up 4.9%, also contributed to the quarterly rise (i.e., 25% contribution to the 0.5% increase).  

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

Funding Patterns in NZ Primary Industry

Situation and Outlook for Primary Industries (SOPI) June 2025 highlighted that Budget 2025 has confirmed ~$5 billion in ongoing baseline funding over the upcoming 4 years for the Ministry for Primary Industries to support farmers, growers, foresters as well as fishers lift productivity, strengthen communities, and fuel returns. This also includes the new $246 million Primary Sector Growth fund to co-invest in projects which can fuel on-farm productivity and resilience.

The key priority is to make sure that food and fibre sector remains globally competitive. Therefore, there is a commitment of $400 million over the upcoming 4 years to accelerate the development and uptake of emissions-reducing tools and technologies.

Dairy Forecasts

As per SOPI June 2025, with respect to Dairy, the export volumes are expected to increase in line with an anticipated 2.2% rise in milk production for the 2024/25 season as a result of favourable weather conditions, easing cost pressures, as well as strong farmgate milk price. The increased global dairy prices could result in an increase in the all-company average farmgate milk price. This increased milk price along with the static farm expenses can lead to an increase in farm profitability for this season.\

Exhibit 2: Dairy Export Revenue  

Data Source: This work is based on/includes MPI data which is licensed by Ministry for Primary Industries (MPI) for reuse under the Creative Commons Attribution 4.0 International Licence; Chart Created by Kalkine Group.

Key Risks and Challenges:

As per SOPI, the outlook for Dairy sector is uncertain over the medium to long-term amidst higher downside risks because of the trade policy uncertainty. Notably, the long-term effects of the US tariff policies on global dairy prices are uncertain. However, some regions could benefit from shifts in trade patterns. Overall, the global dairy prices could witness higher volatility because of disrupted trade flows as well as changing consumer behaviours.

Exhibit 3. Key Risks in Consumer Staples Sector:

Source: Analysis by Kalkine Group

Outlook:

As per SOPI June 2025, the global dairy market in 2025/26 is anticipated to be characterised by slightly constrained supply growth as well as stable demand in critical regions, helping the prices. That being said, the outlook is uncertain over the medium to long-term amidst increased downside risks because of the trade policy uncertainty. The anticipated robust lift in dairy export revenue is due to the weak export earnings in 2023/24 and is expected to be the highest on record.

Over the medium term, a rise in global prices from 2024/25 levels as well as a slight rise in milk production can result in further growth in export revenue to $27.8 billion for 2025/26. Since demand is expected to strengthen in 2026/27 and global supply is projected to remain constrained, dairy export revenue can further increase by 2% to $28.3 billion in that year. Also, as per SOPI June 2025, Apple and pear exports for the year ended 31 December 2025 are expected to surpass $1 billion milestone, aided by increases in export volume and average export price.

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) Delegat Group Limited (Recommendation: Buy, Potential Upside: Low Double-Digit) (M-Cap: NZD $406.5 Mn, Annual Dividend Yield: 6.91%)

Business Description:

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

Outlook:

The Oyster Bay brand has been holding a leadership position in the broader US market and possesses a robust network of US distributors who have been working with the Group to navigate the current uncertainty. DGL would continue to engage with its distributors to confirm forward trading plans. At the time of releasing the results for 6 months to 31 December 2024, DGL stated that it is well-placed to finance its current operations and future capital investment in both NZ and Australia.

Fundamental Valuation:

P/E Based Relative Valuation

Technical Overview:

DGL Daily Technical Chart, Data Source: REFINITIV

Technical Commentary

While undergoing a downtrend, DGL’s stock prices broke above its previous and have entered a trading range which might continue lengthen in the near term. Moreover, the momentum oscillator RSI (14-period) is trading near its midpoint, providing further support to the previous observation. Price is trading between its previous peak and trough, which might function as resistance and support levels for the stock, respectively. A major support level is identified at NZD 3.61, while a critical resistance level is positioned at NZD 4.40.

Stock Recommendation

Considering the facts above, a ‘Buy’ recommendation on the stock has been provided at the closing market price of NZD 4.02 per share, down by 0.25% as on 24 July 2025.

2) Fonterra Co-operative Group Limited (Recommendation: Hold, Potential Upside: Low Double-Digit) (M-Cap: NZD 7.6 Bn, Annual Dividend Yield: 14.92%)

Business Description:

Fonterra Co-operative Group Limited is a New Zealand-based dairy co-operative company.

Outlook:

FCG released global dairy update for June 2025. While there was an increase in NZ, US and EU monthly production, the Australia monthly production decreased. NZ milk production rose 8.3% in May as compared to the same period of the previous year. The Co-op narrowed its year-end earnings range to 65 cps -75 cps, at the upper end of the guidance which was provided in March of 55 cps - 75 cps.

Technical Overview:

FCG Daily Technical Chart, Data Source: REFINITIV

Technical Commentary

While undergoing an uptrend, FCG’s stock prices are forming a trading range characterized by a symmetrical triangle pattern, suggesting that the current sideways period in the stock might continue to persist in the near future. Moreover, if the stock manages to break above the pattern’s upper boundary, it might get more momentum to gain further. Price is trading between its previous peak and trough, which might function as resistance and support levels for the stock, respectively. A major support level is identified at NZD 4.68, while a critical resistance level is positioned at NZD 4.85.

Stock Recommendation

Considering the facts above, a ‘Hold’ recommendation on the stock has been provided at the closing market price of NZD 4.73 per share, down by 0.21% as on 24 July 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 July 24, 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.