Consumer staples retailers in emerging markets are thriving, despite sluggish economic conditions, with their stocks offering a compelling mix of defensive and offensive benefits that Fidelity Portfolio Manager John Dance finds highly appealing.
“In times of economic uncertainty, people often tighten discretionary spending, but they generally don't stop brushing their teeth or eating,” points out Dance, who helms Fidelity® Emerging Markets Fund (FEMKX).
He says this is where discount retailers of consumer staples goods really tend to shine. They sell everyday essentials—food, soap, toothpaste and the like—that people continue to buy regardless of prevailing economic conditions, adding that this inherently defensive nature makes them a relative safe harbor in turbulent times.
“But there’s more to these retailers than just their defensive prowess. Enter the offensive edge,” says Dance, “which has to do with what I call the ‘formalization of staples retail.’”
This powerful concept, he explains, stems from the fact that in many emerging markets, the manner in which people shop for goods continues to evolve, often shifting from smaller-format retailers—think traditional mom-and-pop stores—to larger and more-formal stores that offer a wider range of products at more competitive prices.
As an example, Dance cites Poland’s Dino Polska, a grocer that has performed well with its fast-growing chain of midsize supermarkets. Operating under the name Dino, these stores offer a wide range of food products and non-grocery items, including flowers, cleaning agents, sanitary articles, pet food and small household appliances, says Dance, who believes Dino represents a success story that is a testament to the power of the formalization trend.
Meanwhile, across the Atlantic in Mexico, two companies have caught Dance’s eye: Walmart de México and BBB Foods. The former, modeled after the successful Walmart format in the U.S., recently has carved out a significant market-share gain, according to Dance.
He also sees BBB Foods as a rising star. Based in Mexico City, the grocery retail chain serves low- and middle-income households. “In fact, since its initial public offering in February, the firm has been on an impressively rapid expansion spree, averaging a new store opening every 22 hours in 2024,” Dance notes.
Heading a bit farther south, he points to Raia Drogasil, a Brazilian drugstore chain that he believes epitomizes “formalization.”
“With a management team renowned for its strategic acumen and solid track record of growing profitably, Raia Drogasil has been on an acquisition splurge, expanding its footprint across new territories, all of which should help drive earnings growth,” Dance concludes.
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John Dance is a portfolio manager in the Equity division at Fidelity Investments.
In this role, Mr. Dance co-manages the Fidelity Emerging Markets Fund.
Prior to assuming his current responsibilities, Mr. Dance served as portfolio manager of the Fidelity Pacific Basin Fund from 2013 to 2019, the Fidelity and Fidelity Emerging Asia Funds from 2017 to 2019, and was co-sector leader of the combined Consumer Discretionary and Consumer Staples team. During this time, he was responsible for covering the international retail industry and for managing the consumer discretionary sub-portfolio of Fidelity International Equity Central Fund. Previously, Mr. Dance was a research analyst at Fidelity International Limited (FIL), where he covered the shipping and airlines industries within the Asia Ex-Japan region.
Before joining Fidelity in 2006, Mr. Dance worked as an analyst at Deutsche Asset Management in Sydney, Australia. He has been in the financial industry since 2004.
Mr. Dance earned his bachelor of commerce degree, with first class honors, in finance from The University of Sydney and his diploma of financial markets from the Securities Institute of Australia.