Deutsche Bank's Elasticity Update

Deutsche Bank is out with its "Elasticity" update today and comments on the following markets: Packaged Food: Some Surprising Changes Categories where elasticity increased noticeably vs. 3 years ago include fresh bread, gum, chocolate, and yogurt. These observations tend to support our cautious view on Flowers

, Kraft

, and Hershey

while giving us one reason General Mills'

stock has underperformed. These companies are likely considering higher prices given cost inflation for wheat, sugar, cocoa and dairy. Meanwhile, one category with lower elasticity was spice & seasonings, supporting our positive outlook on McCormick

and its ability to efficiently pass on higher cost. Household & Personal Care: Up Is Down Surprisingly, household products, where private label has expanded and commodity driven price increases have been the highest, actually saw a decrease in elasticity since 2007. Personal care, where elasticities are lowest and purchases less frequent, actually saw the biggest percentage increase in elasticity, albeit at a much lower base. Still, the lower the elasticity the better, and P&G

and Colgate

have the most exposure to these categories, with Clorox

and Kimberly

, with falling elasticity, seeing the most volume pressure from pricing increases.