SEA ISLAND, GA. — Snack producers face myriad labor, supply chain and financial hurdles over the next couple of years, but the industry is expected to weather this turbulence better than other industries and the overall economy, noted Brian Beaulieu, chief executive officer and chief economist at ITR Economics during SNAC International’s Executive Leadership Forum (ELF).
Mr. Beaulieu explained that the snack industry will avoid deep declines in sales and likely experience “flat periods” of little or no growth if the economy slides into a recession in 2023 or 2024.
That’s because snack producers don’t sell products like exercise bikes and household furniture that consumers purchased heavily in recent years and don’t need to replace for the foreseeable future.
“You only need so many Pelotons in your home,” Mr. Beaulieu said. “You don’t replace your lanai furniture every year. You don’t need to replace your household furniture every year so we pulled all of that demand forward in those durable goods. The good news is you don’t sell durable goods. You sell very nondurable goods. Munch, crunch, gone. Give me another bag.”
The economic outlook from Mr. Beaulieu was less optimistic than his previous speaking engagements during the annual ELF event, which is being held Sept. 11-13 in Sea Island, Ga.
While high inflation is easing, he said, snack producers need to prepare for an environment where it will remain stubbornly above historic norms for the foreseeable future. The good news, if it can be called that, is a slowing economy also means an easing of recent supply chain issues in many markets.
“We’re going to see more inflation in our lives during the next 10 years than we’ve seen over the last 30 years,” he said.
Snack producers are going to have to turn to the history books to learn how to run their companies during an era of sustained rising prices.
“You just have to manage differently through these periods,” he said.
Complicating the macroeconomic picture is a Federal Reserve focused on increasing interest rates to tamper inflation along with the geopolitical environment that could lead to a resurgence in skyrocketing energy prices along with a persistently stubborn labor market that Mr. Beaulieu doesn’t expect to improve anytime soon.
“The labor shortage that we are confronted with is not going away. It will get slightly better, but it is not going away,” he observed.
Higher interest rates shouldn’t dissuade snack companies borrowing to invest in labor-saving automation.
“All of this inflation means higher and higher and higher interest rates,” Mr. Beaulieu said. “So if you’re going to be investing in your business — maybe automating, adding new technology or new processes — this is the time to borrow the money to do that.”
He further suggested that snack producers work incessantly on being leaders in their markets.
“Focus on being the best in your space, the most efficient in your space, the most satisfying in your space, so you can maximize share,” Mr. Beaulieu said. “That’s how you’re going to beat these tumultuous conditions that I’ve been talking about.”