For those sectors of business that are always going to get hit really hard when the economy goes down, and bounce back really quickly whenever the economy goes up again, inflation can be a crisis moment for them. While weathering an inflationary period is often the go to plan for these sectors, sometimes persistent inflation just goes on for too long and can’t be waited out.
When that happens, it can cause a lot of problems for these sectors of the economy, but it can also lead to new changes where these sectors begin to adapt to what they are going through.
Breweries Are Adapting With New Tools
For example, breweries are often hit hard by inflation as alcohol is often expensive enough without inflation raising the price even more. But while the consumers only see the price changes at the bar, those who make beer and other drinks see the inflation much sooner as they try to purchase ingredients and equipment.
The cost of making beer goes up just as much as the cost of buying it does, and for many companies this means they need to make a change in order to retain value and keep the doors open.
One of the biggest changes that breweries make is to cut down on expensive operating models that just cost too much, and move towards leaner brewery reporting and analytics systems. For example, tools such as getollie.com are very effective at tracking inventory and managing the data and numbers of the business, while also being cheaper than its competitors.
Persistent Inflation Pushes The Extra Cost On The Consumer And Can Hurt Big Brands
Many big brands that have to raise their prices in order to stay in business can find their relevance dropping, because smaller brands that have fewer costs for operation and overhead can swoop in to fill the void. If a big company is just too expensive for their asking price, countless smaller companies come in to make the same product and they have the ability to make it cheaper for the consumer.
Even if inflation levels off and prices begin to return to normal, many companies will find that they have to work to regain the customers that they lost, and that can be very hard to recover from. Customer loyalty is a fickle thing after all!
Consumer Discretionary Sectors Need To Work To Remain Relevant
A massive weakness of the consumer discretionary sector is their weakness to the economy. Not just in terms of inflation and other effects that are outside of their control, but also to how these things are affecting the consumer. Because these sectors are severely affected by the oldest economic law in the book: The law of supply and demand.
When prices go up, consumers spend much less on non essential items, and that means that they aren’t buying what these sectors are selling. Demand drops sharply, while supply might not drop as much or might even increase, leading to a lot of product simply sitting there in warehouses because no one is going to buy it.
This will force these services to start offering essential goods that still need to be bought despite the high inflation. Whether certain industries can make that switch is often left up in the air until it becomes unavoidable.
Persistent inflation harms everyone involved in business, but it harms the consumer discretionary sector most of all, and when inflation sticks around for longer than it is welcome, these businesses need to move fast in order to adapt and survive both during and post inflation.