Navigating 2026 Earnings Flexibility in Consumer Staples: Why Hershey and Colgate Outpace Procter & Gamble

The consumer staples sector in 2026 remains a battleground for earnings resilience amid persistent macroeconomic headwinds. While Procter & Gamble (PG) grapples with structural tariff pressures and elevated input costs, Hershey (HSY) and Colgate-Palmolive (CL) are leveraging cost tailwinds, strategic flexibility, and improved pricing dynamics to position themselves for stronger near-term upside. This analysis examines how HSY and CL's proactive cost management and favorable input trends create a compelling contrast to PG's uncertain momentum.

Procter & Gamble: A Tale of Persistent Tariff Headwinds

Procter & Gamble's fiscal 2026 outlook remains clouded by a $1 billion pre-tax tariff burden, driven by retaliatory measures from Canada and U.S. imports from China. Despite a modest 3% year-over-year sales increase in Q1 2026, the company's core EPS guidance of $6.83–$7.09 reflects a 5-point headwind from tariff-related costs. P&G has responded with mid-single-digit price hikes on a quarter of its U.S. products and a $3.8 billion shareholder return in Q1 alone. However, these measures are insufficient to offset the structural drag. Analysts note that P&G's reliance on pricing actions risks eroding consumer demand, particularly in discretionary categories like beauty and personal care.

While P&G's productivity initiatives and innovation-driven pricing aim to mitigate these challenges, its exposure to global supply chains and lack of near-term tariff relief leave its earnings visibility limited. For instance, the company's $2.7 billion in productivity offsets are partially offset by ongoing commodity cost headwinds, which remain elevated despite recent moderation. This contrasts sharply with the more favorable cost trajectories of HSY and CL.

Hershey: A Sweet Spot of Margin Recovery

Hershey's 2026 outlook is brightening as cocoa and sugar prices retreat from 2024 peaks, creating a significant tailwind. Cocoa prices have fallen nearly 50%, while sugar prices have dropped sharply from 2023 levels, enabling the company to anticipate margin recovery. These reductions, combined with $300 million in cost savings from price hikes and operational efficiencies, position HSY to offset earlier tariff-driven losses.

Despite a $170–$180 million annual tariff burden on imported cocoa, Hershey's strategic flexibility is evident. The company has implemented shrinkflation and selective price increases while signaling optimism about potential tariff exemptions under the Trump administration. Public statements from Commerce Secretary Howard Lutnick suggest cocoa-critical to Hershey's operations-may be exempted as a non-domestically producible resource. This potential relief, though not yet factored into 2025 guidance, could catalyze a re-rating of HSY's earnings power.

Colgate-Palmolive: Strategic Resilience in a Tariff-Driven Era

Colgate-Palmolive's 2026 strategy exemplifies proactive tariff mitigation. The company has invested $2 billion in U.S. supply chain upgrades since 2020, including expanding manufacturing capacity by 40% and shifting production away from high-cost regions. These efforts have reduced its exposure to China-linked tariffs, which added $200 million in 2025 costs. Colgate's productivity program has also driven mid-single-digit operating margin improvements in Q3 2025, offsetting raw material and packaging inflation.

Unlike P&G, Colgate is diversifying its cost management toolkit. The company is pursuing formula simplification, alternative sourcing, and domestic production shifts to buffer against retaliatory tariffs on Mexican-made toothpastes. Its $200–$300 million productivity initiatives over three years further underscore its commitment to long-term margin stability. Analysts highlight that Colgate's focus on high-margin brands and its $2.1 billion in shareholder returns since 2025 have bolstered investor confidence amid uncertainty.

Earnings Visibility and Cost Tailwinds: A Comparative Edge

The divergence in earnings visibility between HSY/CL and PG is stark. Hershey's falling input costs and potential tariff relief offer a clear path to margin expansion, while Colgate's supply chain resilience and productivity gains provide a buffer against inflation. In contrast, PG's $1 billion tariff hit and reliance on pricing actions create a more uncertain trajectory.

For example, Colgate's Q3 2025 gross profit margin decline of 170 bps was partially offset by cost savings and pricing, demonstrating its ability to adapt. Meanwhile, PG's core EPS growth is projected to lag by five percentage points due to ongoing tariff pressures. HSY's $300 million cost-cutting plan by 2026 further underscores its agility in navigating macroeconomic volatility.

Conclusion: Positioning for 2026 Outperformance

As 2026 unfolds, Hershey and Colgate-Palmolive are better positioned to capitalize on earnings flexibility and cost tailwinds. HSY's margin recovery from falling cocoa and sugar prices, coupled with potential tariff exemptions, offers a compelling upside. Colgate's strategic supply chain investments and productivity-driven margin expansion provide a durable competitive edge. In contrast, PG's structural tariff exposure and limited near-term relief leave its earnings trajectory clouded. For investors seeking resilience in a volatile consumer staples sector, HSY and CL present a more attractive risk-reward profile.