October 13, 2008

How to behave in this economy?

A prominent kosher food manufacturer asked my opinion about investing in several new products for the upcoming Passover holiday. One of his managers opined that people would not be looking to buy new gourmet items with their higher price tags in this economic environment. Even if matters improve in the next six months, the manufacturer noted, the decision would have to be made now, especially since Kosherfest (November 11-12) would be the logical place to introduce the new products. I strongly urged him to go forward with his plans since the evidence is that while the food industry takes some hits, it basically remains sound.

Yes, people have to eat, but in a recession shoppers are far more selective in their purchases. At Passover, the market expands significantly with many Jews who do not buy kosher year-round. They include many wealthier shoppers and also middle class shoppers who for Passover will dig a bit deeper to buy new and different products. In addition, experts say that cutting back could give an edge to competitors and create idle time for growth when many companies rely on new products for their growth.

I also have a hard time understanding purveyors and others who cut back on their advertising and attendance at trade shows just because of a sluggish economy. The way I see things, these are lost opportunities that cannot be recouped for an industry that at best may be off by 3-4%, certainly nothing like the losses in the stock market. Many large retailers understand that and are just as aggressive in bad times as they are in good times. The mega companies will not retreat from the Super Bowl just because there are hard times out there. It is still an opportunity to reach large numbers of their customers and to maintain the status of the brand.

I got a kick from the response of a friend in the food industry to my question of how he was doing. “Doing? he asked. “How good can I be doing with all the money I lost in the last two weeks?”
“Your food business is doing that poorly?” I retorted.
"No,” he answered. “I’m actually making more money in my business than in the past 3 years.”
He finally blurted out what I had been waiting to hear, “The money I lost was from some of my non-food investments.” Too bad, I couldn’t be his investment advisor as well.