15 Businesses and Industries that Make Money During Recession

The 15 businesses and industries that make money during recession are among those that are either part of the non-cyclical sector, which means that they always make money due to the fact that people require the products and services provided by these industries no matter what the economic situation is, or they represent products and services that are more in demand during periods of downturn.

Naturally, the economy moves in cycles. There are periods of growth and periods of recession. While most businesses are thriving when the economy is growing, when recession comes, things get tough. However, like it is during war, when there are companies that enjoy strong growth, during recession some businesses also register higher profits.

The last recession is still fresh in our memories, as many industries were hit hard between 2009 and 2010 and most businesses struggled, with many large companies either going bankrupt or getting very close and requiring substantial aid from governments to survive.

What the recession also showed is the importance, or lack thereof, of what consumers consider non-essential products, which saw substantial drops in sales. It’s well-known that the recession led to a drop in the construction sector, which in turn led to a decline in other tangible industries. According to Sageworks data presented by CNBC, the building materials industry saw a decline in sales of 3.28%, while lumber and other construction materials wholesalers’ revenue declined by 3.07% between 2009 and 2010. Cement and concrete manufacturers registered a drop in sales of 1.67%. The sales of furniture and home furnishing stores fell by 0.54% and 3.27%, respectively.

Among other businesses, sellers of RVs, boats, motorcycles and other vehicles (excluding cars) saw their sales plummet by 2.59% as consumers shied away from expensive purchases. Office supplies stores also took a hit, although their sales inched down by just 0.40%, as other businesses and consumers decided to save on costs.

On the other hand, there are businesses and industries that make money during recession. For example, as consumers decided to cut back some expenses by eating less often at expensive restaurants, fast food chains saw more sales. For example, McDonald’s Corporation (NYSE:MCD) saw its sales at stores open at least 13 months increase by 4.6% in August 2010, as the company based its recession business model on low prices.

In addition, even though people’s income drops during recession there are products and services that people require notwithstanding their income. Food, electricity, and water are just a few items that are non-cyclical and see their sales relatively unchanged. Stocks of companies that are involved in non-cyclical businesses are lagging behind others during periods of economic growth, but they tend to do very well during periods of economic decline as businesses such as these 11 Recession-proof Businesses You Can Start Now make money during recessions.

With this in mind, we have compiled a list of 15 businesses and industries that make money during recession. In addition to the usual non-cyclical businesses, there are also businesses that provide products and services that serve as replacements for more expensive alternatives. The list begins on the next page.

Discount Retailers

When people make less money or lose their income altogether, they look for ways to cut their expenses and since they can’t cut the cost of rent or other fixed costs, they look to reduce the costs of groceries and other items. Here is where discount retailers like Wal-Mart Stores Inc (NYSE:WMT) come in the spotlight, as they offer people the most value for the least money.

Alcohol & Tobacco Industries

Next in line on the list of businesses and industries that make money during recession are the alcohol and tobacco industries. Alcohol and tobacco are part of what is also known as the “sin industries”. As people are looking for comforts, but can’t afford to spend a lot of money, they turn to cheaper alternatives like a glass of wine, or a pack of cigarettes, which can help relieve the stress of not having money.

Grocery Stores

No matter the level of income, households still need to buy food. They might not be able to spend as much on groceries as they do during periods of economic growth, but they still don’t withhold on weekly trips to the supermarket. In addition, as people have less income they are most likely to cut back on trips to restaurants and ordering takeout and instead prepare meals at home.

Fast Food Industry

As consumers are scaling down their expenses and reducing the cost of their food choices during recessions, they are more likely to turn their attention towards fast food, as it offers the most important thing, nutrition, for the least money. During the last financial crisis, McDonald’s Corporation (NYSE:MCD) saw its sales rise as the fast food chain focused on lower prices, with its Dollar Menu, and expanded its menu. In the UK, some fast food chains expanded their presence in the largest cities and some people also opened small restaurants and fast food shops after they lost their jobs.

Candy

It may come as a surprise, but during recessions (and tough times in general) people go for candy. In 2008, Cadbury saw its profits surge by 30%, boosted by higher sales of its leading brands, such as Dairy Milk chocolate, which saw an increase of 11%. Swiss chocolate makers also saw record sales of around 185,000 tons in 2008. Therefore, Candy is also among the businesses and industries that make money during recession.

Beauty Products & Services

Beauty products and services are also among the businesses that make money during recession. People use cosmetics and other beauty products every day and sometimes even several times a day. A financial crisis doesn’t change things much, as people don’t think that having less money is an excuse to look bad. In this way, the beauty products & services industry flourishes during recessions. In fact, there is even a “Lipstick Index” that was coined by Leonard Lauder, former chairman of Estee Lauder Companies Inc (NYSE:EL). Lauder believes that sales of lipstick, which is a relatively cheap product, are correlated to the economic situation, as women choose to spend $20 on a new lipstick instead of paying much more for clothes or other products.

Healthcare Providers

The economy can be more or less healthy, but people get sick all the time, so they need to visit doctors, be hospitalized, and to buy drugs. The healthcare sector is growing strong, as new technology allows the development of new drugs and equipment. And if healthcare is not enough, funeral services is also an industry that performs well in recessions as it deals with something inevitable.

Utilities

Utilities represent a classic example of a non-cyclical industry. Water, gas, and electricity are a few of the things that a household or a business needs to run, no matter the state the economy is in. However, utilities are capital-intensive as they require a lot of infrastructure investments, so they also depend on the interest rate environment.

Movie Theaters

It may be surprising, but when the economy is in tatters, movie ticket sales go up. People are upset because they can’t afford to spend money on things that make them feel good. On the other hand, a $10 movie ticket seems like a great way to get out of the house and immerse oneself in another reality. In 2009, gross box office sales reached $1 billion in January, which was the best January figure in history. For example, Imax Corp (USA) (NYSE:IMAX)‘s stock surged by over 200% between 2007 and 2009.

Financial Advisors

Also in the list of the 15 businesses and industries that make money during recession are financial advisors. When the economy is growing, the stock market is doing well and it’s not difficult to identify stocks or other instruments to invest in. However, during recessions, people want to at least to preserve the value of their savings and other assets. This is why financial advisors see more work coming their way during recessions.

Accounting Services

American author Margaret Mitchell said: “Death, taxes and childbirth! There’s never any convenient time for any of them.” Whether the economy is growing or declining, both individuals and businesses need to pay taxes. However, during recessions, every dollar saved counts, which is why people try to make sure that they take advantage of every tax benefit. That’s why individuals and small businesses need a good accountant to understand their expenditures and income.

Home Maintenance

The construction business plummeted during the last recession as fewer people could afford to buy a new house. On the other hand, home maintenance stores had more business, as people opted to refurbish their places either in order to sell them or to repair deficiencies. During recessions, more people will choose DIY products and will repair items in their homes instead of replacing/upgrading them.

Auto Repair and Maintenance

Other businesses and industries that make money during recession are related to auto repair and maintenance. Same as with houses, during recessions, people are less likely to buy a brand new car. However, people still need wheels to get around, which is why they go to auto repair and maintenance shops instead of taking out a big loan to get a new car.

Equipment Repair and Renovation

Businesses struggle as well during recessions as they have fewer sales, less income and less money to invest in replacing equipment. That’s why companies that are engaged in equipment repair and renovation see more sales during recessions as businesses are looking to cut costs.

Home Staging Businesses

During recessions, selling a house can be a life-saver, but it’s also a very difficult thing to do, as fewer people can afford to buy a house or are even looking to buy. Home staging experts specialize in interior design and know how to boost a house’s appeal and make it attractive to buyers by emphasizing its strengths and minimizing the effect of its weaknesses. Moreover, as housing prices plummet during recessions, giving a house a better look is what can help make the house more competitive and slightly increase its value.

These are the 15 businesses and industries that make money during recession. There may be others, but these are the classic examples. Even though the economy is growing now, the trends can reverse any time, so it’s important to keep these businesses and industries in mind either as potential investments that can generate stable returns or as ideas to launch a small business.

Disclosure: None