August, 7 2023

Bud Light’s downfall marks a seismic shift in consumer behavior–and parent company AB InBev doesn’t seem to get it

Companies have become targets in U.S. culture wars and a systemic change has taken place in customer commentary and response. Bud Light has shown these controversies have legs and longevity and they aren’t the only company facing these issues. Richard Torrenzano addresses how business leaders have been pushed by loud internal or external groups to voice opinions on controversial issues and align themselves with social causes … and provides secrets to avoid a consumer apocalypse.

Since March Madness, Bud Light owned by Anheuser-Busch (AB) InBev has been plagued by the backlash against the beer brand’s marketing partnership with transgender influencer Dylan Mulvaney. Usually, boycotts and social media commentary lose steam after a few days. But Bud Light has picked a fight it cannot win­–and demonstrated it does not understand its customer base.

On Thursday, AB (the world’s largest brewer headquartered in Brussels) released its Q2 net profit, which showed mixed results. U.S. sales volumes and sales tanked–but operating profits ticked up and sales volumes in foreign markets grew.

Even though AB is spending approximately three times more on advertising and marketing compared to last year, U.S. retail store sales were down 26.1% from the previous year in the week ending Jul. 15 and 26.8 % in the week ending Jul. 22.

Marketing got Bud Light in this mess­–but advertising will not lead them out of it

Advertising is effective in influencing consumers to buy products–but it has limited power to change deeply held beliefs or opinions on core issues. As it turns out,  people do really have thoughts and values.

Actual shifts of public opinion on sensitive issues require grassroots movements and policy changes. Public trust and perception are shaped by a company’s track record and actions, which cannot be overcome through advertising. If Bud Light is trying to do that, it is not effective.

Many multi-million-dollar campaigns failed to achieve this desired impact: British Petroleum’s “Clean Energy” in the aftermath of Deepwater; McDonald’s “Healthy Options ”; Monsanto’s “Feeding the World” to promote GMOs; ExxonMobil’s “Energy and the Environment” and Coca-Cola’s “Anti-Obesity” campaign, among others.

AB is not the first company to tie itself in a pretzel with stakeholders, led astray by advertising and marketing. Some campaigns that imploded include: Balenciaga in 2022H&M in 2018, Dove in 2017, Pepsi in 2017, Nivea in 2017, Uber in 2017, and Bloomingdale’s in 2015, just to name a few. The list is long, but there are many similarities with Bud Light’s woes–and one key difference.

In the aforementioned cases, the ads were removed and management issued a clear apology. Not so much with Bud Light.

It took AB CEO Brendan Whitworth almost two weeks to issue a statement entitled Our Responsibility to America, with phrases like, “We never intended to be part of a discussion that divides people,” and, “We are in the business of bringing people together over a beer.”

That’s corporate gobbledygook that tries to appease all sides and achieves nothing. Customers recognized it–and Bud Light sales plummeted.

By not de-escalating, AB smashed a hornet’s nest with a stick. Hornets swarm and attack–and they chase anyone who runs away while they’re attacking. That is exactly how customers reacted to Bud Light. And thus, Bub Light’s troubles now have long tails.

AB is laying off hundreds of employees as it grapples with months of slumping Bud Light sales. The storm showed that AB executives don’t really care about social influence, marketing oversight, or communication with customers.

Distributors are resigned to painful Bud Light losses and giving up on luring back disaffected customers. After four months of hiring freezes and now layoffs, truck drivers are getting heckled and harassed. And in mid-June, Bud Light lost its title as America’s top-selling beer, to a Mexican rival Modelo.

As the boycott remains strong, retailers will begin reallocating their limited shelf space to other brands, which could further impact sales. Multiple advertising campaigns and discounts are not enough to resolve the underlying problem. In July, AB offered a $15 rebate on Bud Light. For comparison, a bag of broccoli or coffee was selling for the same price as a case of Bud Light. Yet, halfway through the all-important summer season, sales continued to decline.

Bud Light’s discounts paired with massive volume declines are unlikely to be accepted by investors. The longer a crisis goes on, with damage to sales and reputation, the higher the likelihood that a derivative or class action lawsuits will be filed against the directors and officers of a company for wrongful acts in managing the business, taking unnecessary risks with assets, and perhaps, insufficient oversight.

Florida Governor Ron DeSantis has called on his state’s administration board to explore legal action against AB as a stock devaluation resulting from boycotts affected Florida’s pension fund as it held approximately $50 million in AB. Other states or funds could follow suit and take similar action.

‘It takes 20 years to build a reputation and 5 minutes to ruin it. If you think about that, you’ll do things differently’ –Warren Buffett

It seems CEOs have relinquished authority over public positions to marketing staff and advertising agencies. They are tasked with selling products and pushing trendy social agendas–but may not be mindful of the intricacies of a corporation’s public posture or the expectations of all-important stakeholders.

For almost a decade, I led global public affairs for the New York Stock Exchange. Before launch, I presented all advertising,  public policy campaigns, and sponsorships to the management committee for review. Years later, as global public affairs leader for SmithKline Beecham based in London with company operations in more than 80 countries, I was consulted on anything remotely controversial, in any language.

Independent thinking is essential when staff consider controversial issues. Otherwise, it’s a parade of the same biased opinions waddling around in circles without considering diverse perspectives–all nodding in agreement due to our cultural distaste for confronting colleagues with different views. This forms an echo chamber of like-minded thinking with limited critical and essential analysis.

Furthermore, not all influencers are created equal. Some generate negative commentary. Companies always did thorough analysis before celebrity spokespeople were engaged, with morals clauses for the brand’s protection. This does not seem to be the case with thousands of online “influencers” in today’s digital arena.

Additionally, CEOs make for poor political pundits. In recent years, business leaders have been pushed by loud internal or external groups to voice opinions on controversial issues and align themselves with any and all social causes.

This approach may have run its course. Companies are becoming targets in the U.S. culture wars, and a seismic change has taken place in customer commentary and response. It has legs and longevity­–and it’s not just against Bud Light.

The C-suite is responsible for the success or failure of a company through strategic direction and management of assets. They must fully embrace their company’s public stance and guide its image with unwavering resolve. That’s why boards are elected­–and what CEOs are appointed to do.

In highly polarized times, no matter the cultural or political issue, broadly, 45% support you, 45% are against you, and about 10% are undecided. The harshness of the pushback depends on the gravity of the blunder, how poorly or soundly the company manages the crisis, and how undecided consumers lean.

Richard Torrenzano is the CEO of The Torrenzano Group, which helps organizations take control of how they are perceived. For nearly a decade, he was a member of the New York Stock Exchange Management (policy) and (executive) Committees. Richard is a sought-after expert and a leading commentator on financial markets, brands, crisis media, and reputation.

The opinions expressed in commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.

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September, 5 2023

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The incessant onslaught of news and promotional messages could be undermining trust and causing anxiety.