Peter Kofler gives a live coding demonstration of refactoring code to add a new requirement to an inventory management system. He first refactors the existing code to make it more readable and maintainable by removing duplication, splitting methods, and simplifying conditions. He then implements the new requirement that conjured items degrade in quality twice as fast by extracting a strategy pattern. The demonstration shows how refactoring first makes it possible to easily add new features to the code while preserving its behavior.