Three guesses.The consumer staples sector absolutely trounced the S&P 500 during the GFC. But you're correct that brand loyalty fell off sharply during the Great Recession. I took a peek and in 2008 alone 52 percent of consumers either cut back on or totally abandoned the brands of their choice. Fascinating.
I wonder what made the consumer staples sector hold up so strongly.
1. Maybe the companies that consumers switched to for lower priced products also were in the consumer staples sector, so the profits stayed in that sector?
2. The big players can be quick to adjust their existing manufacturing to market pressures. In the case of toilet tissue, for example, they can move from 3-ply to 2-ply tissue, or they can reduce the number of sheets on a roll. They can then reduce the shelf price of the product, which keeps consumers buying their brand.
3. It takes time to ramp up new production. If you want to make and sell cheaper toilet tissue, for example, you need to set up (or expand) manufacturing capacity, supply chain, etc. By the time one does all this, perhaps the GFC was winding down and consumers stayed with the big brands. (FYI that I chose toilet tissue for this example as its tends to be manufactured locally in all countries. Shipping it long distances is uneconomical due to the large volume but low weight of the product. I used to work in that industry. Maybe some other consumer products fall into this same model.)
Statistics: Posted by Gaston — Sat Jan 27, 2024 9:14 am — Replies 141 — Views 15832