Category Archives: recession

Recession is here. Good-bye, Zima.


Today MillerCoors announced it was ending production of the clear malt beverage Zima. We have no data to prove it but this seems one more sign of the economic sorting mechanism removing superfluous products during a recession.

Zima launched in 1993 after test marketing in Nashville and two other cities, and sales peaked a year later with 1.2 million barrels sold. It broke ground as a unique malt beverage at a time when most wine coolers still contained wine (a footnote, wine coolers soon also switched to malt ingredients after an increase in U.S. excise tax on wine in the early 1990s squeezed margins) and fared better among women than men.

Seems as times darken, U.S. consumers turn traditional in their drinking. In early 2007 U.S. wine sales were expected to top the world by 2010; Americans have slowed that growth a bit as they adjust to higher bottle prices resulting from the weak dollar, but U.S. winemakers say the overall growth trend continues. No more fancy clear bottles, please; just pour it like grandma did in the glass. Via Sara_MC.

Recession is here. So why are sex sales up?


Call it a new form of cocooning. With financial markets in the tank, most retailers face a pinch this holiday season — but sellers of intimate-related goods are finding, well, a good time.

In New Zealand, Wendy Lee, director of the sex gear retail chain Dvice, says sales are up about 20% this year with consumers moving to more expensive, big-ticket items (whatever those might be). In England, sales of Durex condoms are up 22%, making us wonder whether Brits are cuddling in fear or just trying to avoid the high cost of children. And sales of lacy things remain strong in the U.S., with a Forbes analyst noting Victoria’s Secret should be immune to the spending declines afflicting other clothing retailers. Lace, it seems, does well no matter how cold the weather.

The only dark cloud on the intimacy front is Hugh Hefner may be laying off bunnies at the Playboy mansion. The UK Telegraph wrote, “Hefner has been advised to cut back on staff … to cope during the global economic turmoil.” Apparently when faced with reality, consumers want to do more than just read about it.

Competing when the economy throws cold water


Ever wonder why official statistics on inflation are so low, about 4%, while your actual cost of living seems to go up much faster each year? Harper’s Magazine casts a little cold water on reality this month by exposing the fact that official U.S. government statistics on inflation and unemployment have been toyed with for years.

We thought of this this morning driving past a diesel pump in Danbury, Conn., where some poor soul had just poured $100 of fuel into her tank at $4.50 a gallon. U.S. “core inflation” stats do not include energy costs, housing, or food — you know, the major categories that eat up most of your monthly paycheck. If your outlay for home heating oil or air conditioning or groceries jumps to $1,500 a month, it won’t count in how the Feds follow inflation.

John Williams, an economist over at ShadowStats.com, watches these numbers games carefully and notes the real annual inflation rate is about 11%, if you toss in the cost of your mortgage, bread and milk. Unfortunately, there really is no way out of our math fakery, because a lot of things we consumers want — loans, jobs, low taxes — are tied to phony numbers. If federal stats say inflation is low, banks can lend money at lower interest rates, and your boss can hire more people because she doesn’t have to boost salaries as much every year. If unemployment rates are low, the cost of labor seems cheap, thus buoying stocks on Wall Street.

Your job and 401k depend on the fact that official economic stats are an illusion.

Marketers need to take heed, now, because even with fuzzy math inflation is edging up. High energy costs will eventually impact the prices of your goods (like farmers facing reduced demand for dairy due to $4 a gallon milk). One basic strategy is to decommoditize your offering. Rather than focus on price claims, rethink how you present value.

When customers get squeezed, they will make choices based on what provides the most return for their limited purchasing resources. You can’t control their resources, and you can’t stop the rising tide of out-of-whack prices — but you can increase your perceived value.

Update: Pallavi Gogoi at BusinessWeek gives scary examples of price creep in food, where American consumers spend one-seventh of their incomes. The cost of eggs is up 38% year over year. Flour +26%. Fryer chicken +23%. Cheddar cheese +27%. White bread +19%.