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Jul 1, 2009 10:45 pm US/Central
Good Question: Is Any Industry Recession-Proof?
MINNEAPOLIS (WCCO) ―
Historically, there were industries that were considered to be unaffected by bad economic times. But this economy is testing that theory. Is there any such thing as a recession-proof business anymore?
"I don't know that any industry is recession-proof," said John Leinenkugel, one of the brother's involved in Chippewa Falls, Wisconsin Leinenkugel's Brewing Company.
But beer is one of the sectors in this economy that is doing well.
According to the Beer Institute, a trade group, beer sales are up 1 percent compared to this period last year. Craft brewing was up nearly 6 percent in 2008. Leinenkugel's prefers to position itself as "recession-resistant," according to the company.
"We've seen our sales go up. We're growing," said Leinenkugel, pointing to a 30 percent increase in volume over the last several years.
"Beer is the affordable luxury," he said.
Jim Surdyk, owner of Surdyk's liquor store in Minneapolis, reports seeing that phenomenon across product lines.
"People are still buying top shelf liquor across the board," said Surdyk.
He said he's seeing sales of small craft beers doing well, as people still want to treat themselves, instead of going out to restaurants. According to Surdyk, wine sales are also going strong.
"What we're seeing is those wine and spirits folks coming back to beer. Even those import drinkers coming back to a local, craft beer," said Leinenkugel.
Other sectors of the economy are also doing well. Fast food companies like McDonald's are seeing an increase in traffic and revenue. McDonald's has reported same-store sales increases of 5 percent in May 2009 as compared to May 2008.
The movies are also doing well, which follows historical patterns of people going to see movies during a bad economy.
Box office receipts are up 12 percent from last year and up 23 percent as compared to 2005, according to Box Office Mojo, a movie tracking Web site.
Historically, gambling was considered a recession-proof business, with people still wanting to take a chance on a big payoff. But don't bet on it this time.
Las Vegas casinos have reported 16 months in a row of declining revenues. Minnesota's casino association estimates a 5 percent drop here.
Health care also used to be considered recession-proof because people always get sick. However, when people don't have jobs, they don't have insurance and they don't go to the doctor.
Even if a patient is insured, more patients are dealing with high deductibles and co-pays. At Fairview Health Services in the Twin Cities, uncompensated care at Fairview grew 47 percent from 2005 to 2008.
"The healthcare industry is not recession-proof," said Fairview Health Services spokesperson Jennifer Amundson.
At Fairview, they're seeing more patients avoiding trips to the doctor.
"We are concerned people are delaying care, hoping health issues will clear up. Sometimes they do, but sometimes the patient gets sicker, which can lead to even higher bills," said Amundson.
Amundson said Fairview's operating revenue fell by more than 50 percent last year. In 2008, net operating income was $20.8 million compared to $48.3 million the previous year.
However, consumer goods companies like General Mills, based in Golden Valley, Minn., are weathering the storm quite well. General Mills just reported it doubled its profits in the fourth quarter, largely because of strong performance by products like Cheerios and Totino's Pizza Rolls.
(© MMIX, CBS Broadcasting Inc. All Rights Reserved.)
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