RISMEDIA, October 20, 2009—(MCT)—In a recession, it seems, people eat more tortillas and stop buying flowers for their sweethearts. It’s not actually that simple, but tortilla makers landed on a recently released top-10 list of best performing privately held companies, and florists landed in the bottom 10.
Sageworks Inc., a Raleigh, N.C.-based firm compiled the sales data which tracks industry sales but keeps company names anonymous. The firm looked at 12 months of sales from September 2008 through August 2009—while the country was mired in a recession.
The rankings reflect a variety of factors, experts say. Florists landed toward the bottom due to people cutting back on unnecessary extras. Tortillas ranked near the top because consumption is rising as shoppers save money by buying more food at the grocery store, among other reasons.
Every recession is different, but one thing they have in common is that people will cut back spending on luxuries and continue to spend on necessities, said Jeff Michael, an economist with the University of the Pacific in Stockton. Industries that suffer tend to sell or make such big-ticket items as cars or anything that needs to be financed, such as houses, he said. But companies that make necessities tend to do well, Michael said—and some, such as food, are even recession-proof. Tortillas have moved into the mainstream for consumers, said Helen Chavez-Hansen, owner and president of La Tapatia Tortilleria Inc. of Fresno. “Tortillas are now at the point where they are regarded as a staple product,” she said. Her company’s tortillas are distributed in schools, on grocery store shelves and for such dishes as quesadillas at Claim Jumper and the Elephant Bar Restaurant. Dorothy Cruz, president of Clovis-based Mi Rancho, said the recession has caused more people to buy tortillas because they’re inexpensive and portable enough to include in brown-bag lunches.
Grocery products of all kinds have seen increased sales as people eat out less, Chavez-Hansen said. Indeed, “other food manufacturing” topped tortillas on the Sageworks ranking, with a sales increase of 15%. Industry observers agree that tortilla consumption has grown, though reliable numbers are hard to come by, said Jim Kabbani, executive director of the Tortilla Industry Association in McLean, VA. Kabbani noted another reason for the increased tortilla sales: Earlier this year some tortillas were included in the U.S. Department of Agriculture’s WIC program, which provides vouchers for healthy food for low-income women and children. But much of the increase has nothing to do with demand. The cost of ingredients used in making tortillas went up, and some manufacturers passed the cost along to consumers.
Chavez-Hansen estimates that roughly half of the 14% sales increase for tortilla manufacturing and bakeries is attributable to rising cost of such ingredients as wheat and corn. Those commodities, particularly corn, skyrocketed last year.
La Tapatia raised its wholesale prices four times over the last two years, though ingredient prices are dropping now, Chavez-Hansen said.
Other food-related industries also landed at the top of the list, including grain farming and farm products. Food is a necessity and related industries do well comparatively because shoppers can’t cut back on it like they can on luxuries, said Ephraim Leibtag, an economist with the U.S. Department of Agriculture’s Economic Research Service.
Most of the other top 10 performers are tied in some way to changes in the economy. Oil and gas extraction are on the list because of what happened last summer when crude oil reached record highs. That in turn spurred an uptick in the oil exploration and extraction field in the following months, Michael said.
Meanwhile, florists are suffering as people scale back on luxuries. Bob Azzaro, owner of San Francisco Floral in Fresno said customers have drastically cut back on the “just because” orders that aren’t tied to birthdays or anniversaries. In past years, he would get phone calls saying, “Hey Bob, send a $50 arrangement to my wife. She’s having a bad day.” He doesn’t get those calls anymore, he said. And sales are down about 20%. Azzaro said flowers are a luxury and he understands why people are cutting back: “If you have to buy food for your family or flowers, what are you going to buy?”
Florists are suffering from the same pullback in spending as other industries on the worst-performing list, Michael said. The purchases in other industries may be bigger—a car or furniture—but they represent purchases that can be delayed during recessions, he said.
Many of the industries are related to the housing crisis, with any industry related to home sales or building seeing plunging sales. But it’s not all bad news, even among those at the bottom of the list.
A turnaround may already be in the works for florists, said Larry Yamada. Sales picked up slightly in August and September. He expects they’ll pick up even more when the weather cools enough to put racks of flowers on the sidewalk, which drives impulse buys, he said.
(c) 2009, The Fresno Bee (Fresno, Calif.).
Distributed by McClatchy-Tribune Information Services.