With countless economists predicting a U.S. recession next year, Chris Kirby has become proactive.
Kirby, the CEO of hummus brand Ithaca, feels it’s important right now for business leaders to take steps to drive efficiency by simplifying what they do, how they do it, and why.
Among the key steps to brace for a recession, Kirby also said it’s important to communicate with customers, to “let them have a say in the process by understanding their current and future needs, so you can stay ahead of the curve.”
Yankel Polak, head chef at ButcherBox, said that when a recession looms it’s helpful to dial back your offerings. In foodservice, that means reducing the size and scope of menus, for example.
“Recessionary behavior means that people will certainly spend more time cooking at home,” Polak told The Food Institute, “which is a perfect opportunity for manufacturers and chefs alike to branch out into virtual education and in-home cooking events—really meeting the customers where they are.”
While it almost goes without saying, it’s nevertheless a valuable reminder: business leaders must carefully budget. Felicia Loo of SFPM Consulting said forecasting for 2023 is imperative so that businesses can consider what’s “a worst-case scenario for a recession.” Rick Williams, business partner, operations, with JPG Resources, agrees that strong forecasting is key with a recession apparently on the horizon.
“If brands anticipate a drop in demand, then [they should] ensure that their inventory management strategy reflects that,” Williams said. “Shoring up inventory can help avoid the costly mistake of excess inventory during times of low demand.”
Meanwhile, Loo also instructs business leaders to negotiate for supply and contracts for necessary ingredients for the year ahead, which could allow supply and margin control.
Gary Freeman, director of corporate development with Midas Foods International, said many businesses are working hard to decrease food costs, as restaurant guest visits decreased by 3% in recent months.
“We’re experiencing increased requests to provide ingredient options that decrease costs for prepared soups, sauces, dressings, gravies, dips and other items, without significantly increasing labor needs,” Freeman said. “It’s a tall order.
“We’re currently converting mac-and-cheese, alfredo and hollandaise sauces for several chains,” the Midas Foods executive added. “Two of the chains have requested scratch formulas because they cannot afford the labor time, training, or recipe inconsistencies anymore. Another chain is projecting savings of 25 to 50 percent by switching from RTU to our dry blend formulas mixed with water.”
In general, with the economy in an ominous position, many leaders will opt to limit discretionary spending. It is, after all, the prudent play.
“It’s more likely brands will experience slow or no growth in a recession,” JPG’s Williams said. “To help mitigate the impact, food manufacturers should reduce discretionary spending and focus on value-based opportunities and innovations, like shifting toward value-based distribution channels.”