Posted: December 09, 2009
Rundles wrap-up: Merry rehabBy Jeff Rundles
Although I didn't know it at the time, when I was a kid I got a great education in economics from my best friend's father. This man - a great guy - was, among other things, a beer distributor, selling some of the most iconic brands of the day to bars and liquor stores throughout southern Michigan.
My friend and I began working at his warehouse for spending-money at quite a young age - 10 or 11 - by washing trucks, sweeping up and the like. I was too young then to know about recessions, but my hometown being a factory town, I learned a lot about economic hardship during the frequent labor disputes that shut the factories down and kept a ton of people out of work.
During these periods the stores would be hurting, the service sector dried up, doctor visits plummeted, and on and on; everybody was crying the economic blues. Except my friend's father. Beer sales went up as high as, well, as high as all of those out-of-work factory workers hanging out in the bars without anything else to do. Beer, it dawned on me, is a counter-cyclical commodity.
As I got older I thought a lot about going into the beer business - Lord knows I invested a ton in it - because it seemed so solid: great sales in normal economic times and even a boost when the chips are down. It has long been noted that the beer business is recession-proof, but not this time. The giants in the business, Molson Coors, Anheuser-Busch and many others, are reporting unprecedented drops in beer volume sold - down something like 2.9 percent worldwide. Industry insiders have changed their perspective to "recession-resistant."
I was looking at beer-sales numbers as part of my research into consumer confidence and current economic conditions, looking for a bright side. This being the Christmas season, my intent was to get a handle on whether it would be a merry Christmas in the retail world. I'm afraid my research would indicate that, alas, it won't be.
very consumer confidence survey I could find - University of Michigan, Investor's Business Daily and others - show the confidence level low, in the "pessimistic" category. However, signs of a rebound in consumer spending - which, they point out, don't always track consumer confidence - may be on the upswing, which, apparently, makes a few people bullish. Not me.
I read all kinds of economic reports in the last few weeks, and I was relatively horrified to discover that 70 percent of the U.S. economy is based on consumer spending. In other words, the way out of this recession is spending. I'm no economist, but it seems to me that robust spending was exactly how we got into this mess in the first place.
That got me thinking about the beer analogy. Economically speaking, we went on a binge of epic proportions, and have been suffering the mother of all economic hangovers this year, and yet the remedy appears to be bingeing once again.
I would hate to have to explain this kind of logic to my college-aged children and their friends, because I am sure that even in a stupor they could use it as an explanation for outlandish behavior. Come to think of it, our economic binge at large brought on a concomitant concern for binge drinking on college campuses. And, of course, a huge increase in the number of college students majoring in business and economics.
Who knew that MBA stood for More Beer After all?
I think it would do us all some good to limit spending this year and, economically speaking, sober up before our next shopping spree. In some of the reports I read it was noted that while spending is down, personal savings in the U.S. is up 5 percent. I think that is good news - not for the short-term, like most business thinking, but in the long run.
Think of this Christmas as Economic Rehab.
Jeff Rundles is a former editor of ColoradoBiz and a regular columnist. Email him at email@example.com.