How has food and beverage fared during periods of economic downturn?

While the pandemic brought unprecedented challenges, there are insights from previous periods of economic uncertainty that can help the industry prepare for a recession.

The US is bracing for a recession. And while there is no way to guarantee if or when this will hit, forecasters say there is a 61% chance of an economic slide later this year.

For many in the food and beverage industry that are still recovering from, or just regained stability after, the pandemic, the thought of another hit to their businesses is daunting, to say the least.

However, unlike the pandemic, there is precedent for a recession–and insights we can leverage about how the industry fares during periods of economic downturn:

Food and beverage are a staple.

Unlike other goods and services, like travel or luxury purchases, people will always need to eat. But, while that may help the food and beverage industry fare better than others during a recession, the way that people purchase their food is likely to shift.

Even as consumers navigated rising inflation in the last few years, 76% of grocery shoppers changed the way they buy food, and nearly half of consumers feel that they can’t afford their previous lifestyle. However, the shape those changes take may not be easy to predict. For example, during the Great Recession, there was an increase in both abstinence from alcohol as well as frequent binging.

And while it is all but guaranteed that a recession would bring losses to certain sectors–like restaurants and luxury ingredients–it could also create new opportunities for innovation. For example, during the pandemic, online grocery sales jumped 103% in 2020, compared to the previous year.

Big brands will face less impact.

Unfortunately, economic slumps always bring greater challenges for smaller and independent brands.

For example, in 2011, as the US continued to recover from the Great Recession, Americans ate out 60.6 billion times–down from 62.7 billion in 2008. Of the 2.1 billion visits lost, 2 billion would have been to independent establishments. That same year, visits to chain restaurants rose 1% while meals at standalone businesses decreased 4%.

Based on their experiences during the pandemic, some of the nation’s largest food and beverage companies have already revealed their strategies should a recession hit, which include focusing on at-home dining, introducing value-sized packaging, and relying on product loyalty.

Some foods are recession proof.

Food and drinks that are already cheap and convenient are less likely to be impacted should a recession hit.

And while many of the more accessible options–think fast food–are associated with poorer diet quality, there are healthy products that have also done well in a bad economy. For example, in 2008 Chiquita Brands International declared that its bananas, which sold for an average of $.30, were recession resistant based on its sales trends that year.

However, unlike other fiscally turbulent periods, we are currently living at the height of influencer marketing, lifestyle brands, and social media–three factors that can significantly sway product and brand loyalty. I will be very interested to see if this has any impact in helping niche, and more expensive, businesses weather the economic storm.

New food trends may emerge.

Creativity is often the product of necessity–and it is no surprise that lasting food trends have been born out of periods of economic uncertainty.

Take milk, for example, which first gained prominence during the Great Depression because it was seen as a versatile and “complete food.” Today, it is so common in American homes that adding it to one’s grocery cart is almost an afterthought.

Similarly, during the pandemic, at-home meal kits became very popular as consumers avoided both grocery stores and restaurants. Now, 49% of consumers between 18 and 34 have incorporated meal kits into their weekly grocery routine. And while it is too soon to tell its staying power, the US meal kit market was valued at $6.9 billion in 2021, and is projected to reach $10 billion by 2024.

To me, one of the most interesting things about the food and beverage industry is that it is based on an inherent balance. If the grocery slumps it is likely because consumers are spending more at restaurants, and so on. So, while some sectors will be hit harder by a recession, the industry at-large could see minimal impact.

However, that balance also connects us. So, the more that we can do to innovate and support our individual businesses and markets during a recession, the better the chance we can make it through.

Danilo Diazgranados is an independent investor in the global food and wine, financial services, real estate, and the hospitality sectors.