We all know the phrase, go woke, go broke. But as investors – or, if we refer, speculators – what matters is how true this is? We can all find the occasional example of any contention we wish to make – what matters is whether we’ve found a pattern. Patterns, by definition, are things that are repeating. Which means if that we have got one of those then we can predict the next thing – the repeat of the pattern.
Bud Light didn’t do well with Dylan
So, obviously, Anheuser Busch (NYSE: BUD) has an horrendous problem over Bud Light and that, umm, collaboration with Dylan Mulvaney. The FT gets it slightly wrong “AB InBev reveals cost of backlash against Bud Light” for it’s not really a backlash. It’s misreading the room. It has dropped Bud Light sales, enough that total North American sales are down by – for a mature beer business – an astonishing 10.5%. Not just Bud Light, right across the business. Add in inflation and that’s more like 20%.
Now, politically we can think of this as the managers of the business having socially approved elite opinions and the more proletarian customer base not sharing them. Well, OK. But that’s what I mean by reading the room. The management didn’t read the opinions of their customer base correctly. So, using those elite opinions to guide the business they’ve lost money for their shareholders. One reaction to which is that it’s actually the customer base that decides how things work out, not the management. Which is a good lesson to learn.
But diversity should be – should be – good for profits.
But there’s another. Which is that this whole drive to be inclusive has been backed by the insistence that it’s good for business. Diversity in the boardroom increases profits – new views get presented. Showing that the business values diversity means new customers – those diverse who now see they are thought of. Well, OK, that’s clearly true at some level of truth. Someone setting up a series of whites only lunch counters would not only be acting illegally they’d lose a fortune – something that wasn’t true a century back.
But we’re investors – or, if we prefer, speculators – so our interest is in what makes money not on social criticism. Sure, the Ghostbusters reboot with a female crew was a disaster but maybe that was just a bad movie? How did the Little Mermaid live action do? Outside China, perhaps, where we know they’re rather more racists than we’d find comfortable?
Costa Coffee and the trans vans
Or, think about the latest thing with Costa Coffee. The vans how have a transman with the mastectomy scars on them. Cost is owned by Coca Cola (NYSE: KO) and there’s probably a limit to how important a UK coffee business is to a US soda corporation. So, any boycott, if it ever happens, is likely to be of minimal impact. Even if it is – or even if it isn’t – misreading the room. The same might be true of Target and the tuck costumes for children. Something that could be considered in error but doesn’t actually influence the performance of the business as a whole.
Again, this isn’t to be the cultural critic – it’s to try to think about when these things break through and actually start to affect the numbers of the corporation. For, as above, the entire point is that these things should have a positive impact upon the numbers. But sometimes they don’t – see Bud Light.
So, how do we decide about woke and investment?
What we want, desire, is a simple metric to tell us when the plans go awry. Unfortunately, there isn’t one. Big business has been going woke these past couple of decades. It’s only when the management gets divorced from the desires of the customer base that it goes wrong. If they’d gone Dylan with Michelob then no one would have cared – that’s for the sort of dweeb who things beer in a cocktail bar can be sophisticated anyway. But Bud Light? The working man’s, pick up truck, beer? Too far.
It’s unlikely that the Costa deal will break through to Coke – it’s too remote. But this is something we’ve got to think about. If we’re bull, or holding for the long term, then is management getting too far ahead of the customers? And if we’re looking to trade then what are those cultural blowups that are happening out there which might then affect the customer base and so to the stock price?
Do note this is nothing, at all, to do with woke or not woke. It’s “more woke than the customers will put up with” and that’s always going to be a value judgement. But still one for us to monitor and trade.
