Introduction
The line between consumer staples and consumer discretionary is drawn by what a company sells, not by the kind of store it runs. When S&P Dow Jones Indices and MSCI revised the Global Industry Classification Standard in March 2023, Target and Dollar General moved from consumer discretionary into consumer staples, because most of what they sell is food, household and personal care products. The same logic runs through how banks carve up consumer coverage: the useful question is always what drives demand and margins for the products in question.
This map lays out the sub-sectors a consumer and retail group covers, the metric that matters most in each, and where the group's edges meet other coverage teams. Each sub-sector has its own article later in the guide; the point here is to see how they fit together and why a banker cannot value them all the same way.
Two Ways to Draw the Map
Two classification systems shape how the sector is discussed. Public equity investors and index providers use GICS, which splits consumer companies into two sectors. Banks use their own coverage maps, organized around how deals actually happen.
- Consumer Staples
Companies that sell everyday necessities whose demand changes little with the economy: food, beverages, tobacco, household and personal care products, and the retailers and distributors that mainly sell them. Under GICS, the sector is organized into three industry groups: consumer staples distribution and retail; food, beverage and tobacco; and household and personal products.
The 2023 revision is a useful reminder that the boundary moves. According to the S&P Dow Jones Indices announcement, retailers earning most of their revenue or earnings from consumable staples moved to consumer staples, department stores and general merchandise stores merged into a new broadline retail sub-industry, and the separate internet retail category was discontinued so that online sellers are classified by the goods they sell.
- Consumer Discretionary
Companies selling nonessential goods and services whose demand rises and falls with income, employment and confidence: apparel, footwear, luxury, durables, autos, leisure, restaurants and most specialty retail. Discretionary companies tend to show sharper swings in sales and margins through the economic cycle than staples companies.
Banks slice the sector more finely. RBC Capital Markets, for example, lists ten consumer and retail sub-sectors, including food and beverage, household and personal care, restaurants and food service, softlines and apparel, specialty retailing and multi-unit consumer services. The weighting also shifts by region. In Europe, consumer teams spend a larger share of their time on luxury and global food and beverage groups, because the continent is home to many of the largest names in both, while US teams see more restaurant, specialty retail and sponsor-owned services work. In Asia, convenience store operators and family-controlled conglomerates feature heavily. Bank maps differ on the edges, especially gaming and leisure, but the core is consistent, as the article on how banks organize consumer and retail coverage shows.
The Map, Sub-Sector by Sub-Sector
The table below groups the sector the way this guide does, with the metric bankers reach for first in each part.
| Sub-sector | Examples | First metric bankers check | Demand profile |
|---|---|---|---|
| Packaged food and protein | Snacks, frozen, meat processors | Organic growth (price, mix, volume) | Staple, input-cost sensitive |
| Beverages, alcohol, tobacco | Soft drinks, beer, spirits, nicotine | Organic growth, depletions | Staple, premiumizing |
| Household, beauty, consumer health | Cleaning, personal care, OTC | Organic growth, advertising intensity | Staple, brand-driven |
| Pet | Pet food, supplies, vet clinics | Category growth, channel mix | Resilient, premiumizing |
| Apparel, footwear, luxury | Athletic brands, luxury houses | Wholesale vs DTC mix, gross margin | Discretionary, fashion risk |
| Durables and leisure products | Furniture, appliances, RVs, boats | Volume against the housing and credit cycle | Highly cyclical |
| Retail | Grocery, clubs, dollar, specialty, auto | Comparable sales, inventory turns | Mixed, format-specific |
| Restaurants and food service | Quick service, casual dining, distributors | Restaurant-level margin, unit growth | Mixed, traffic-driven |
| Multi-unit consumer services | Fitness, car wash, auto repair | Membership churn, new-unit returns | Recurring, roll-up driven |
| Gaming and leisure | Casinos, betting, cruise, theme parks | Hold, net yields, attendance | Discretionary, capital-intensive |
Staples brands
The staples brand owners sit at the top of the map. Packaged food, beverages and household products are mature categories where growth comes from price, mix and innovation more than from volume, which is why the largest companies, from Nestlé and Unilever to Procter & Gamble and Mars, buy faster-growing brands. Inside the block, the business models differ more than the label suggests:
- Protein producers live on the spread between animal and feed costs, not on brand pricing power.
- Soft drink majors sell concentrate to bottlers that manufacture and distribute, so bottling territories are deal assets in their own right.
- Alcohol runs through the US three-tier system, which legally separates producers, distributors and retailers.
- Consumer health and pet behave like staples with their own twists: regulation for over-the-counter medicines, and an unusually loyal, premiumizing customer for pet food.
Discretionary brands and retailers
Discretionary brands depend on brand heat and channel choices: an athletic brand's mix of wholesale accounts and its own stores shapes its margins and its risk. Luxury sits at one extreme, dominated by multi-brand groups such as LVMH and Kering that price for scarcity, while durables makers of furniture, appliances and recreational vehicles sit at the other, selling big-ticket items whose demand follows housing turnover and consumer credit.
Retailers form their own large block, and the store format matters more than the label. The retail format map shows why a warehouse club, a dollar store and an off-price chain earn money in completely different ways even though all three are value retailers.
Restaurants, services and leisure
The last block is built unit by unit. Restaurant chains, gyms and car washes grow by opening locations, so unit economics decide their value, and many are owned by private equity firms running roll-up strategies. Franchising turns some of them into asset-light royalty businesses, explained in the article on the franchise model.
The block also includes the businesses that supply restaurants rather than run them: foodservice distributors such as Sysco and US Foods, and contract caterers such as Aramark and Compass that feed hospitals, schools and stadiums. Gaming and leisure operators share the unit logic but add heavy capital spending and complex lease and license structures, which is why some banks cover them in a separate team.
What Changes From One Sub-Sector to the Next
The table hides how far apart the sub-sectors sit on the dimensions that drive valuation and deal structure:
- Capital intensity: brand owners outsource much of their manufacturing or run efficient plants, while retailers, restaurants and casinos tie up capital in stores, fit-outs and properties.
- Lease burden: store-based businesses carry large lease obligations, which is why bankers look at lease-adjusted leverage and EBITDAR for retail, restaurants and casinos but rarely for a beverage company.
- Cyclicality: a toothpaste brand and a boat maker can both sit in a consumer group, yet one barely notices a recession and the other can lose a large share of its sales.
- Buyer universe: staples brands attract a short list of global strategic acquirers, while restaurant and services platforms trade mostly between private equity firms.
These differences explain why the guide gives each block its own section, and why the article on consumer valuation multiples works through the drivers sub-sector by sub-sector. A banker who values a franchisor like a restaurant operator, or a dollar store like a department store, will be wrong by a wide margin.
Where the Map Ends
Consumer coverage meets several other groups, and knowing the boundaries prevents duplicate work and missed mandates. The usual dividing lines are:
- Real estate covers the property side of retail, hotels and casinos, including landlords such as gaming REITs; the consumer group covers the operators.
- TMT covers marketplace platforms, consumer subscriptions and video games, while the consumer group covers brands and retailers selling through those platforms.
- FIG covers consumer lenders and card issuers; the consumer group covers retailers' co-brand card income.
- Healthcare covers pharma and animal health; the consumer group covers over-the-counter brands and consumer health companies once they sit outside pharma.
- Industrials covers packaging and building products, and natural resources covers fertilizers, crop inputs and agricultural merchants that supply food companies.
The two most frequent overlaps are worth seeing from the other side. The real estate guide's view of retail property after the e-commerce wave covers the landlords of the same stores consumer bankers analyze, and the TMT guide's e-commerce business models article explains the marketplace economics that brands and retailers sell into.
Edges still blur in practice. A spin-off of a pharma company's consumer health arm may be staffed by both healthcare and consumer bankers, and a casino sale-leaseback brings in the real estate team. The map is a guide to who leads, not a wall between teams, and the strongest consumer bankers know enough about each neighbouring group to bring in the right colleagues early.
