While Argentina may be doomed to ignore the lessons of history and again plunge into recession or even economic free fall, investors are not obliged to follow blindly. For investors focused on the consumer products segment, previous crises offer ample clues to how consumers may behave in future crisis. Understanding these clues will be critical to crafting an effective strategy for mitigating risk and capturing opportunity in the consumer space should Argentina again march over the precipice.
Frontier Strategy Group works primarily with large multinationals operating and expanding in emerging markets. In an effort to inform strategy for clients with exposure to the consumer segment in Argentina, Frontier Strategy Group shared insights gleaned from experts and leading executives who weathered the past two crises in the country, namely the hyperinflation of the 1980s and the 2001 debt default and ensuing chaos. While the macroeconomic imbalances that precipitated those crises are different than those driving the country towards recession now, the conditions they produced for the average Argentine consumer could be similar: loss of purchasing power, evaporation of savings, inflation, shortages of goods, and unemployment.
Faced with these conditions in past crises, Argentine consumers responded with dramatic purchasing changes, as well as lifestyle alterations, and increased reliance on community. Practically speaking, this meant consumers reduced consumption of food and non-food consumer staples, substituted regular brands for cheaper alternatives, switched to cheaper transportation options, and were forced to prioritize between food and non-food consumer staples and other essentials such as medicines. Some significant lifestyle observed were consumers moving back from big cities to rural areas, home production of food, selling belongings, living off savings, and sharing housing and resources with many more members of family and community.
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