VDC Overview

Industry Performance Overview: The soft drink industry in 2025 experienced varied outcomes, with some companies thriving due to strong brand recognition and innovation, while others faced challenges like margin compression and declining demand.

Top Performers: The best-performing soft drink stocks included Celsius Holdings (+62.5% YTD), Embotelladora Andina S.A. (+53.2% YTD), and Monster Beverage (+45.1% YTD), highlighting significant gains among select companies.

Struggling Companies: Conversely, companies like Primo Brands Corporation (-47.7% YTD) and National Beverage (-24.3% YTD) faced substantial losses, illustrating the competitive pressures in the market.

Market Dynamics: The performance of soft drink companies was influenced by market dynamics, shifting consumer preferences, and input cost pressures, leading to a mixed outlook for the sector as the year concluded.

Food Retail Industry Performance: The food retail sector has shown a wide range of results in 2025, with some companies thriving while others struggle due to changing consumer behaviors and cost pressures.

Challenges Faced: Despite being traditionally seen as a stable market, food retailers are dealing with price-sensitive consumers, margin management, and the need for operational efficiency.

Top Performers: The best-performing U.S. food retail stocks year-to-date include Casey’s General Stores (+41.0%) and Village Super Market (+18.9%), while several others like Sprouts Farmers Market and Grocery Outlet Holding have seen significant declines.

Market Dynamics: Scale advantages, private-label growth, and selective pricing power have enabled certain food retailers to outperform their peers amid a challenging market environment.

Comparison of VDC and FSTA: The Vanguard Consumer Staples ETF (VDC) and Fidelity MSCI Consumer Staples Index ETF (FSTA) both target the U.S. consumer staples sector, showing nearly identical performance and yields, but VDC has a significantly larger assets under management (AUM) and a longer track record.

Expense Ratios and Holdings: While FSTA is slightly more affordable with a marginally higher expense ratio, both funds have identical dividend yields and focus on similar top holdings, including Walmart, Costco, and Procter & Gamble.

Fund Longevity and Liquidity: VDC, established in 2004, has a longer operational history compared to FSTA, which started in 2013, and both funds maintain high liquidity with substantial AUM figures.

Investment Appeal: Despite their similarities, VDC's longer track record and larger AUM may attract certain investors, while both funds are considered solid options for those seeking defensive equity exposure in the consumer staples sector.

Consumer Behavior Shift: Consumers are increasingly seeking bargains and favoring retailers like Walmart that offer low prices, especially during economic uncertainty.

Vanguard Consumer Staples ETF: This ETF includes major companies in the consumer staples sector, such as Walmart, Costco, and Procter & Gamble, and is designed to provide a diversified investment in essential goods.

Investment Strategy: Investing in the Vanguard Consumer Staples ETF can be a conservative approach to add safety to a portfolio, particularly during market volatility, but it should not be the sole investment focus.

Market Performance: The ETF has historically outperformed during tough market conditions, making it an attractive option for investors looking to hedge against potential recessions.

Expense Ratios and Dividend Yields: XLP has a lower expense ratio and higher dividend yield compared to VDC, making it more appealing for cost- and income-focused investors.

Performance Comparison: While VDC outperformed XLP in five-year total returns, both funds experienced similar maximum drawdowns, indicating comparable risk levels.

Portfolio Composition: XLP is more concentrated with 36 stocks focused on consumer defensive companies, whereas VDC has a broader portfolio of 105 holdings, including a small allocation to consumer cyclical stocks.

Investment Considerations: Investors must weigh the benefits of VDC's diversification against XLP's lower fees and higher yield when choosing between the two funds.

Short Interest Trends: In November, short interest increased for 30 out of 37 consumer staple stocks, with the overall average short interest slightly dropping to 3.06% from 2.67% the previous month.

Performance Comparison: The consumer staples sector ETF (XLP) experienced a marginal loss of 0.50% year-to-date, contrasting with a 17.1% gain in the broader S&P 500 ETF (SPY).

Most and Least Shorted Stocks: The Campbell's Company and Brown-Forman were among the most shorted stocks, while Procter & Gamble and Coca-Cola had the lowest short interest in the consumer staples sector.

Industry Insights: Distillers and Vintners had the highest average short interest at 12.16%, while the Soft Drinks and Non-Alcoholic Beverages segment recorded the lowest short interest at 1.49%.