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The best and worst of times for packaged foods?

The U.S. packaged foods and beverages industry tends to grow at an above-average pace during inflationary periods because consumers recognize that they need to spend more at the grocery store to feed themselves and their families. However, elasticity can get severe if consumers feel the pinch of challenging economic conditions. Consumers can reduce their spending by trading down to private label, cutting back on impulse purchases, eating more leftovers, and reducing waste.

Consumers often make even more significant sacrifices in recessionary economic conditions by shifting to meal options in cheaper food categories. For example, volume fell faster in 2008-09 owing to the recessionary conditions and consumers traded down to pasta, ground coffee, and canned vegetables.

We believe the 2011-12 cycle is a better analogy for how 2021-22 will play out than 2008-09, with pricing offsetting volume declines. The benefit of more robust economic conditions, wage inflation, and structurally higher work-at-home arrangements in 2022 should provide more volume support than in 2008. However, we could see a significant degree of price elasticity emerge in 2022 as consumers feel the pinch of declining disposable income, cutbacks in government stimulus programs, and food price inflation that rises even higher than in 2008.  

@Robert Moskow