Economic conditions suffered badly due to the Covid pandemic. But, the pandemic spawned recession differs markedly from what generally happens in other recessions. This is the case even for the great recession of 2008, which shares a commonality with the Covid recession in that both downturns were quite severe.

Nonetheless, a major difference between these two recessions involves the trends that were unfolding and the types of businesses that were adversely impacted by the weak economic conditions. Many small businesses, such as restaurants, have fared poorly during this pandemic spawned recession. Yet, other businesses actually performed much better during the Covid recession than in the great recession of 2008.

Procter & Gamble is an interesting example of a company doring quite well during the recent Covid recession. According to the January 21, 2021 Wall Street Journal article “P&G Gets Shoppers to Pay Up” by Sharon Terlep, “Procter & Gamble Co. sales surged in the most recent quarter”. The article points out that this is occurring “as more affluent households fare better in this recession than those with lower income and cleaning and hygiene take on a higher priority across all segments of society during the coronavirus pandemic.” The article reports that “spending on food and household products considered either premium or super premium rose more than spending on mainstream, value oriented and private label products, according to data from market research firm IRI.”

Procter & Gamble is not the only major consumer goods company to fare quite well during the pandemic. For example, Mondelez International Inc., “the Chicago based maker of Oreos and Triscuits, said Thursday that comparable sales rose 3.2% annually in the fourth quarter”, according to the January 29, 2021 Wall Street Journal article “Mondelez Says Its Snacks Gained Share During Pandemic” by Annie Gasparro. The article reports that “shoppers bought more of its snacks while they spent time at home during the pandemic.”

I’ll point out that Procter & Gamble’s strong performance during the Covid recession is in marked contrast to the challenges the company experienced with the severe 2008 recession. The vast difference in the company’s fate from one major recession to the next was greatly influenced by the trends mentioned above—trends not in place during the great recession of 2008.

Unlike its more recent favorable results, Procter & Gamble’s performance suffered during the 2008 recession. That recession was very severe, leaving many consumers in dire financial straits. This negatively impacted the sales of Procter & Gamble’s products, which were premium brands. A branding strategy like Procter & Gamble’s has a strong brand imagery component. By the very definition of the kind of branding that P&G did, consumers would be expected to pay more for those branded products because consumers perceived those products as premium. And, consumers may very well have continued to perceive P&G’s products as worth a premium during the 2008 recession.

However, regardless of any premium perceptions of P&G’s products, the 2008 recession was so severe that dire financial circumstances compelled many consumers not to purchase premium products. Despite premium perceptions of the brands, when times are so tough that there’s no money, many consumer were unable to pay more for high end brands. Thus, when bleak financial circumstances get in the way, sales of premium brands like those offered by Procter & Gamble can suffer. When this happens, the very concept of brand building is, in a way, shattered by the extremely dire economic conditions.

This can be hard on brand oriented companies like Procter & Gamble. So, Procter & Gamble took steps to improve its performance. These steps included spinoffs of some of its brands. Spinoffs were popular with many companies a while back, although spinoffs don’t necessarily improve performance.

Nonetheless, like the 2008 recession, the recent pandemic spawned economic downturn was also severe. And, some consumers who were hit hard by the downturn may struggle just to get food. As in 2008, these hard up consumers are generally not going to be in the market for high end brands. But, this time around, the trends mentioned in the Wall Street Journal article are buoying sales of premium products like many of the brands offered by Procter & Gamble. Procter & Gamble benefitted because the pandemic fueled demand for its cleaning products and affluent work at home consumers were able to pay for premium brands.

Thus, the Covid recession’s effect on a company like Procter and Gamble is very different than the effect of the great recession of 2008. Furthermore, the pandemic’s stay at home directives fueled purchases of Mondelez made snacks. So, conditions were quite different in the pandemic spawned recession, bucking the thinking that recessions always favor demand for discounted or value based products. In other words, not all recessions are created equal.