Income elasticity analysis reveals that adidas, Nike, LVMH and Groupe Danone have higher Coronavirus (COVID-19) risk exposure among select FMCG companies, while Kraft Heinz and Kimberly-Clark, which are less dependent on discretionary spending, appear to be less exposed.
Unlike the 2008-2009 Global Financial Crisis, which started in sub-prime financial loans and spread to other sectors, the impact of COVID-19 is harder to ascertain as there are not many indicators to explain company performance. Income elasticities, which measure category volume sales change relative to GDP change, appear to be a good measure of company risk in this scenario, showing a high correlation with the recent stock market performance.