How 5 food and beverage companies are preparing for a recession

Economists have recently warned a recession could be on the horizon.

Bloomberg Economics predicts there is a 38% risk of one occurring during the next year. Some have even argued the U.S. economy is already in a recession.

Recessions are defined by Forbes Advisor as periods of economic decline caused by negative GDP, rising unemployment and lower consumer spending. They can last months or years, based on history.

After dealing with more than two tumultuous years of a pandemic and global supply crises, food and beverage companies have been looking at what a recession could mean for their businesses. While some are optimistic about their prospects, it’s unclear whether many CPG companies are equipped for what may come.

Here’s what five CPGs said recently about a recession and how they are preparing for it:

General Mills’ at-home focus

In the company’s most recent quarterly earnings call, General Mills Chairman and CEO Jeff Harmening said its portfolio has the potential to remain steady in the face of a recession. During the Great Recession in 2008 at-home eating increased, which helped the company’s cereal brands, he said.

“I think as consumers become more concerned about their economic reality, the first thing they tend to do is eat more at home and less away from home,” Harmening said. “We’ve seen restaurant traffic year-over-year, in the last couple of months, has gone down a little bit, and eating at home has gone up.”

Harmening also said consumers are getting “nervous” now, but are still spending money. Because of this, he said, demand for General Mills’ products has been relatively unchanged, regardless of price.

Jon Nudi, president of General Mills’ North American retail operations, added that in past economic downturns, the company has sold more products across its categories, increasing by a percent or two in total volume. In those times, “second and third tier brands” have lost market share to private label companies, he said.


Mondelez International

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Permission granted by Mondelez International


Mondelēz International: Snacking is essential

When an analyst asked Mondelēz International Chairman and CEO Dirk Van de Put if it should be concerned about the company’s performance during a recession at a Deutsche Bank conference last month, he responded by saying that “our categories do quite well” during downturns.

Van de Put noted comfort and kid-targeted foods — including Oreo and Chips Ahoy cookies and Cadbury chocolate — are generally not negatively affected during a recession. Consumers still count those items as a priority in those situations.

Van de Put said consumers are not currently changing the amount of the company’s snacks they purchase, but he is not certain that will continue. He mentioned Oreo, which he said is one of the most popular brands with millennials and Gen Z, as an example of an item from Mondelēz’s portfolio that has sustained consumer momentum.

While core consumers with an attachment to its brands may be more willing to keep buying them, Mondelēz is focused on retaining consumers who are looking to cut costs. Van de Put said the company must be “clever” in how it approaches pricing.

“What I do know is that we are doing everything that’s in our power to prepare for, potentially, a consumer that reacts,” Van de Put said. “But the underlying trends: Consumers are snacking more, indulgence is on the rise, consumers are very attached to our brands, which sometimes plays an emotional role.”


Constellation Brands, Modelo

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Retrieved from Constellation Brands.


Constellation Brands is confident about beer

Constellation Brands President and CEO Bill Newlands said in the company’s most recent quarterly earnings call he felt confident about its sales during the last quarter. He believes consumer demand will continue, despite a potential recession.

When asked by an analyst how the business is positioned if consumer spending becomes weaker, Newlands responded that seven out of 10 shoppers who purchase beer planned that purchase in advance. And, he said, Constellation’s buy rate — how much consumers are spending on its products, multiplied by the number of trips they make to the store — is up compared to pre-pandemic levels.

“It speaks very well to our business,” Newlands said. “It actually accelerated in [the last quarter] for beer versus the prior three months.”