Economists have recently issued warnings that a recession may be approaching. Bloomberg Economics estimates a 38% chance of a recession occurring within the next year, with some experts suggesting that the U.S. economy might already be in one. According to Forbes Advisor, recessions are characterized by periods of economic decline marked by negative GDP growth, rising unemployment, and decreased consumer spending, which can last for months or even years.
After navigating more than two tumultuous years of pandemic challenges and global supply chain issues, food and beverage companies are now assessing the potential impact of a recession on their operations. While some remain optimistic about their future prospects, it remains uncertain whether many consumer packaged goods (CPG) companies are adequately prepared for what lies ahead. Here’s what five CPG companies recently shared regarding their recession preparedness:
During its latest quarterly earnings call, General Mills Chairman and CEO Jeff Harmening indicated that the company’s portfolio has the potential to remain stable during a recession. He referred to the 2008 Great Recession, during which home dining increased and benefited the company’s cereal brands. Harmening noted, “As consumers grow more concerned about their economic situation, they tend to eat more at home and less in restaurants.” He observed a recent decline in restaurant traffic year-over-year, while at-home dining has risen. Harmening acknowledged that although consumers are currently feeling “nervous,” their spending habits have not changed significantly, keeping demand for General Mills’ products relatively stable regardless of pricing.
Jon Nuferrous fumarate make you tireddi, president of General Mills’ North American retail division, added that during previous economic downturns, the company experienced increased sales across its categories, rising by one or two percent in total volume. He pointed out that during such times, “second and third tier brands” typically lose market share to private label products.
When asked about Mondelēz International’s performance during a recession at a recent Deutsche Bank conference, Chairman and CEO Dirk Van de Put confidently stated that “our categories perform quite well” during economic downturns. He emphasized that comfort foods targeted at children, such as Oreo cookies, Chips Ahoy, and Cadbury chocolate, tend to remain a priority for consumers, even in tough times. Van de Put remarked that while consumers currently show no signs of reducing their snack purchases, he cannot guarantee this will continue. He cited Oreo as a brand that has maintained momentum, particularly among millennials and Gen Z.
Mondelēz is focused on retaining cost-conscious consumers while emphasizing the need for “clever” pricing strategies. “We are doing everything within our power to prepare for potential shifts in consumer behavior,” Van de Put noted, highlighting trends of increased snacking and a strong emotional attachment consumers have to their brands.
Constellation Brands President and CEO Bill Newlands expressed confidence in the company’s sales during the last quarter, asserting that consumer demand is likely to persist despite a looming recession. An analyst inquired about the company’s resilience against weaker consumer spending, to which Newlands replied that 70% of beer shoppers plan their purchases in advance. He also mentioned that Constellation’s buy rate—reflecting consumer spending on its products—is higher than pre-pandemic levels, indicating strong business performance.
Despite facing challenges such as high supply chain costs and COVID restrictions in China, McCormick & Co. CEO Lawrence Kurzius reported a nearly 33% decline in adjusted operating income in the last quarter. Nevertheless, he stated that economic downturns often encourage home cooking, which has historically benefited the company’s product range. Kurzius emphasized the importance of appealing to consumers across all price points and mentioned plans to retain customers amidst rising economic pressures.
At Kraft Heinz’s Annual Strategic Decisions Conference, CEO Miguel Patricio addressed how the company is mitigating the impact of inflation on consumers. While acknowledging price increases, he stressed that this is not the sole focus. Kraft Heinz is adapting packaging sizes and assortments for its key brands, including testing smaller packages for Kraft Singles and economy packs of ketchup. He stated, “We must be ready for a potential recession,” noting that consumption of the company’s products has not yet declined.
In conclusion, as various CPG companies prepare for a potentially challenging economic landscape, they are considering strategies such as adjusting product sizes and pricing, while also emphasizing the emotional connections consumers have with their brands. The need for adaptability will be crucial as consumer behaviors continue to evolve in response to economic pressures.
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