The economy dominates most of the conversations I have in both my personal and professional relationships. As we know, these are not the best of times: we all have watched our 401Ks, IRA’s and portfolios diminish in value. The gas crisis has affected society in ways I never imagined that it could, both fiscally and psychologically.
Here’s what I can tell about what the impact of this economic crisis has been on the beverage marketplace:
I talk with dozens of marketers on a daily basis. That is one of the aspects I love most of my job. I am privileged to have such passionate friends that help to drive this industry. Their creativity has brought beverages to great heights and will lead us to products that will benefit our society. Yet, now they are in a struggle just to survive as capital is scarce. When funds are available, it is on onerous terms. Marketers have to take their eyes off the marketing end to deal with the monetary issues that enable them to live another day. It is sad commentary that they must wear their financial hats first, rather than be the innovators that they set out to be. Frequently, in times of financial crisis, the marketing budget is the first thing to go. I think that’s penny wise and pound foolish. You need to keep selling products, guys, no matter how squeezed profit margins are. And to do that, you need to keep marketing those products.
Yes, ingredient and packaging costs have soared, eating into the profit margins of co-packers and marketers alike. The cost of transportation has had the greatest impact on the way we market and deliver our products. The extra burden on the delivery of goods, via each system, be it DSD, warehouse or hybrid, has eroded the beverage marketer’s ability to make money, certainly, but it is inadvisable right now to pass on these costs to the retailers as they are struggling to make money with their margins being squeezed. Of course, everyone is afraid to pass on these costs to the consumer. They are suffering enough trying to pay their mortgages, put gas in the tank and food on the table. The headlines every day banner the crisis of confidence in our economy. It is not a time to raise prices to the populace. So, collectively, everyone in the chain must take it on the chin for the forseeable future. That way, when things all turn for the good, they will for all of us.
One of my favorite credos that I live by is “this too will pass.” We’ve gone through these cycles before and we will emerge from this malaise, hopefully, sooner than later. Right now it is essential for all sides of the beverage equation to share in the pain until the turnaround occurs.