Consumer Alpha ETF Rides Inflation

’JOYY’ invests in companies people feel good about spending their money on and could maintain pricing power if inflation rises.

Reviewed by: Jessica Ferringer
Edited by: Jessica Ferringer

Andrea Ruggeri

Andrea Ruggeri is CEO of Infusive Asset Management, an investment manager with offices in London and New York. The firm manages one ETF, the Infusive Compounding Global Equities ETF (JOYY). The ETF was launched in December 2019 and has gathered $47 million in assets under management. In combination with the UCITS fund, the firm has exceeded $700 million in AUM. This strategy seeks long-term capital appreciation by tracking a market-cap-weighted index of consumption-related global companies that MSCI defines as a Consumer Alpha company. The following transcript has been edited for clarity and brevity. Who is Infusive Asset Management?

Andrea Ruggeri: Infusive Asset Management is an independent asset manager that was launched five years ago [in Europe] and is dedicated to managing one investment strategy which is [based on] Consumer Alpha. Consumer Alpha is the concept that successful consumer companies feed into the need for pleasure, joy and happiness of consumers. And the key dynamic of consumers spending money on certain goods and services is an exchange between pleasure and money.

I buy my cup of coffee because it gives me some sort of conscious pleasure. That’s an example of how I decide to spend my hard-earned money on some goods as opposed to others. This is what we call Consumer Alpha. And this is what Infusive has been set up to manage as an investment strategy five years ago. Could you give some examples of companies that have high levels of Consumer Alpha?

Ruggeri: Lindt is a great example, and from a brand point of view, ticks all the boxes. Chocolate is Swiss and Lindt is a Swiss company that has more than 150 years of history making chocolate, if not longer. They’ve got a spectacular ability to create products that appeal to the chocolate lover. They're very creative. The branding is first-class. When you buy a Lindt chocolate, you're buying a premium, stylish, almost luxury chocolate.

Yes, Swiss chocolate is known for being good chocolate. But if you strip down all of that, we’re not talking about super high-end, gourmet, almost Michelin star chocolate. It’s industrial chocolate, good quality—but very basic. The real peers of a company like Lindt would be other industrial chocolate companies.

However, because of their Swiss heritage, their spectacular branding, their creativity with recipes—Lindt has got chocolate with chili, with salted caramel, with all different types of fruit, crunchy, less crunchy, more crunchy, you name it. They end up charging a premium price compared to their peers. Think about a very basic chocolate bar in the States. I can think about it in the U.K., the average Cadbury chocolate is extremely low quality. People are happy to pay a premium price for Lindt over a Cadbury.

But ultimately, buying a super expensive chocolate bar, a Lindt bar in Europe costs the equivalent of not even $3. But you’ll put it on the table at the end of a dinner with friends, [and it] looks stylish and classy. And if you put 10 chocolate bars on the table, you can be sure that each one of your guests will find something they like. If we saw inflation go up dramatically, would these companies still have that same pricing power?

Ruggeri: Absolutely. I’ll share some numbers with you. We’re just a day or two away from releasing a research piece. We picked two or three companies, just as an example. We looked at the past 30 years, which includes some inflationary periods, less inflationary periods, recessions and expansions. You will see that these companies are keeping their gross margin pretty much unchanged across the 30-year period.

Whereas if we compare with non-Consumer Alpha competitors, or less successful competitors, you could see their gross margin being squeezed, and expanding again, and going down, going up. So the answer is yes, based on our analysis, we think that our Consumer Alpha companies can protect their gross margin, which is the best measure to extrapolate pricing power. And that is very stable across decades. How sticky is Consumer Alpha? Is it permanent or something that companies need to constantly be working to maintain?

Ruggeri: We think that Consumer Alpha tends to be sticky. That is the reason that if you look at our portfolio, a large percentage of companies you see in there are more than 100 years old. That tells you that when you have Consumer Alpha, you tend to nurture it and keep it. And it lasts decades, if not centuries.

The second part of the answer is that you need good management and good capital allocation to protect and nurture the Consumer Alpha content of a product. One other filter that we apply in our stock selection is capital allocation and good company management.

Ultimately, that means we pay a lot of attention to R&D, meaning the desire and the ability of companies to spend money on maintaining, upgrading, broadening and improving the product range, [and] advertising management;  as well as the ability to spend money on your brand, so that your brand remains attractive in the eyes of the final consumer.

In spite of all that, there is constantly an evolution in consumers’ behavior. Over time, there is the opportunity for new Consumer Alpha companies to emerge and succeed. Sometimes it’s a loss to someone else, a competitor that was the dominant player until then. Sometimes there's a whole new space.

But there is the ability of generating new products, new brands, with new Consumer Alpha content, which in turn could become permanent over time.

I can give you examples. On the concept of new ideas that generate Consumer Alpha from scratch, think about fast fashion. Think about H&M, think about Zara, and more recently, UNIQLO of Japan. There’s a whole new concept that was not existing before that feeds into a very clear mental space, into a specific wallet segment of the consumer that didn’t exist before.

Before all these companies existed, you had to make a choice: Either you were buying high-end luxury, or you were buying some nonbranded, maybe ultimately less appealing, and less stylish product.

With the emergence of H&M, Zara and UNIQLO, you can go out and buy replicas of the latest Prada Collection before Prada’s Collection actually hits the stores, at 1/10th of the price or less. Lower quality product? Probably. Am I going to wear it only a month or so, and then if it gets damaged, throw it away? Yes, of course.

Do you have a problem with spending 30 euros on a shirt that you wear three or four times, looks like super high-end fashion, and then you move on to something else? No, actually it’s fun. But if you spend $2,000 on a Prada coat, and you only wear it three times, and then you throw it away, it’s a bit more complicated. That’s a new Consumer Alpha idea that emerged in the ’90s and into the 2000s.

Another classic new Consumer Alpha idea is the whole digital consumption world, which didn’t exist before Amazon, Google, Apple and PayPal. And now it’s a large and growing segment of the consumption world that’s a whole new invention from scratch.


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On other ideas, less revolutionary, but clearly successful, think about coffee. The biggest coffee company in the world for decades or longer, has been Nestle. Then Starbucks comes along. Starbucks invents a whole new way of consuming coffee, becomes a brand in itself. Massive Consumer Alpha for the consumers. Coffee consumption, in itself, is a great Consumer Alpha space. But Starbucks developed a new product, or a new brand, ultimately, within the coffee segment. 

Jessica Ferringer can be reached at [email protected]

Jessica Ferringer, CFA, is a writer and analyst for She has 10 years of experience in investment research and due diligence, including helping to manage ETF portfolios. Jessica has a bachelor’s degree in economics from Lafayette College and an MBA from the University of Pittsburgh.