On the most basic level, there are two steps to selling anything: You create a product and then you persuade people to buy it. If you have a better product or a lower price, your strategy is straightforward. More likely, you are seeking to differentiate your product from near-identical competitive products. That’s where branding steps in. It usually takes a long time to build effective brand loyalty, but you can destroy a successful brand in a few days.
Two relatively recent examples.
1. A boycott of Bud Light, the top beer brand in the US, began in April 2023 in response to a social media promotion that proved to be unacceptable to a significant percentage of Bud Light’s traditional patrons. In the following month, Bud Light’s sales fell between 11 and 26% and the parent company stock, AB InBev, fell 20%.
2. More recently, Elon Musk’s political activities have proven to be unacceptable to a significant number of Tesla owners, potential purchasers and others. Demand has softened, demonstrations have accelerated and the stock has been under pressure.
Investors should be aware that actions, that may be deemed to be political, and/or that have the appearance of supporting an agenda, by companies and their senior executives can be an added risk.
All comments and suggestions are welcome.
Walter J. Kirchberger, CFA
