This is an abridged translation of the interview with journalist Simon Brunfaut that appeared in L'Echo of 14 October 2022.
The picture is by Kristof Vadino.
The prospect of a recession is becoming increasingly clear. What do you think its impact will be on business?
The recession will affect most consumers and therefore also the brands. For companies and their brands, which have themselves been hit hard by rising energy prices, an unprecedented situation arises: they no longer only compete with other companies and brands in their own sector. They are now all in competition with the energy sector. So we are witnessing a struggle of all against one. With so far only one 'winner': the energy sector. The emergence of own brands (private label) will accelerate further. This race "to the bottom" is likely to worsen the financial position of many companies.
We have the impression that we are entering a pattern of permanent crises in which the return to normality no longer exists. What do you think is the specificity of the current crisis?
Although similar patterns run through crises and recessions, each crisis and recession has its own uniqueness. During the covid crisis of 2020, hoarding behaviour was observed among consumers and shops were struggling with delivery problems. During the financial crisis of 2008, the big banks were on the brink of collapse and people were afraid of losing their savings in the event of bankruptcy. With the oil crisis of 1973, the oil tap was turned off and "white products" appeared in supermarkets. The current crisis has many similarities with the events of half a century ago: a war that culminates in an energy crisis that results in a downward spiral of inflation and recession.
What are the opportunities for companies in times of economic downturn?
Companies that have a "war chest" will weather the crisis much better than others. In their case, opportunities will arise to acquire other brands. Another observation is that the strongest brands that continue to provide relevant and sustainable value to their customers will survive and even become stronger in this recession, as we have seen in the past. Now more than ever is the time to invest in your brand.
Should we expect a radical change in consumption patterns? How can companies prepare for this?
Consumer confidence has reached an all-time low. The main feature of this crisis is that the energy bill swallows up an increasing share of the family budget each month at the expense of other needs and expenses. The question therefore arises whether it makes sense to continue to invest in marketing campaigns. Contrary to what one might think, historical research on major recessions over the past 100 years shows that companies that invested more in advertising during a recession saw their sales, market share and profits increase during and after a recession.
Faced with the crisis, are our companies falling short of responding quickly? What do you think are the priority actions?
You have to find the right balance between adapting in the short term and staying true to your DNA, in the long term. You have to adapt, not necessarily in terms of lower prices, but mainly by investing in the close relationship with your customers. Companies will therefore have to be able to maintain their original strategy. If we position ourselves as "premium", we must, for example, remain so. Colruyt and Ryanair, on the other hand, which have a "low cost" positioning, cannot let go of this principle, even if the costs are rising. On the other hand, as some companies did during the covid crisis, it will sometimes be necessary to think of employees first before thinking about shareholders.
Is this the crisis too much for some companies?
Yes, for some companies this is a crisis too many. The figures already show it: the number of bankruptcies is increasing. As I said, we can compare this moment with the crisis of the 70s, but perhaps also with the crisis of the end of the 20s.
How to prepare for future crises? What profile do you think they'll have?
We are entering an era in which crises will follow each other and even accelerate. We are living at a turning point in history. The future will be polarizing and frightening. Events have never been so interconnected. You have to think long-term and act in the short term. And above all, business leaders – and their brands – need to take the lead and inspire confidence, both in the company and in society at large. It is a new leadership that will appear: the exemplary guide.
Does the family business have better weapons to deal with crises?
Yes, probably, because these are companies that usually fight to the end to be able to continue to exist. Jef Colruyt's ultimate goal, for example, is the legacy and sustainability of his company. In addition, family businesses have experienced many crises in the past, including even world wars. In these companies, this crisis experience is passed on from generation to generation. This is a fundamental difference from non-family businesses, where managers typically stay no longer than five or six years. The family form of the company promotes a better handling of resilience.