The Economic Impact of Consumer Boycotts
In recent months the Israeli-Palestinian conflict has escalated due to increased direct military attacks between Israel and Hamas. The majority of my exposure to the situation has been through fellow college students and friends, all somewhat removed from the situation, but still extremely engaged in the secondary effects of the conflict from multiple American viewpoints. This is mostly from analyzing the responses and support or lack thereof from different companies, organizations or even their own universities. Popular corporations like McDonald’s and Starbucks have been scrutinized by consumers for speaking in support of or against either side. Consumers have taken their distaste for this even further by imploring others to boycott these and other brands. The boycotts are rather timely for Starbucks as the company is currently transitioning to its winter seasonal items from its fall ones, which include some of their most profitable drinks on record. Additionally, November 16th is their upcoming Red Cup Day, where customers can receive a free reusable red cup when they purchase any holiday beverage. This annual event is one of the most profitable days of the year for the company. Many pro-Palestinian consumers are calling for people to avoid buying from Starbucks on this day and going forward. This, in combination with various sects of the Starbucks Workers’ Union also striking on this day for better working conditions, may prove to be an actual wake up call to higher ups at Starbucks. However, the true way to measure the effectiveness will be through monitoring for an actual decline in Starbucks’ earnings in comparison to other years, as well as how their comments on the Israeli-Palestinian conflict end up affecting the company’s brand perception, customer loyalty and associated stock performance in the long term.
Consumer boycotts have a complex track record, usually involving various outside factors that result in them being effective or ineffective methods of protesting. The basis of consumer boycotting lies within the concept of ‘economic activism.’ By hurting a company financially, protestors aim to get the large corporations to actually make a behavioral change. People have been employing this tactic for decades with few notable cases actually proving to be successful. Months ago, Bud Light partnered with transgender influencer Dylan Mulvaney for an ad campaign that resulted in major backlash from consumers, celebrities and even government officials. Consumers’ dissatisfaction with the brand grew when Bud Light failed to stand by their actions and released a vague statement that barely addressed the major concerns. Many customers used social media to promote boycotting the beer which ended up causing significant short and long term financial losses for the company. Its parent company AB InBev reported that Bud Light saw an initial 10.5% decrease in U.S. demand, 14% decrease in sales to retailers and significant revenue losses in the months following the initial controversy. Another instance of consumer boycotting with much different outcomes was when consumers chose to boycott Goya Foods in 2020. This was the result of the CEO praising comments made by former president Donadl Trump that were harmful to the Latin American community, which happens to be a large part of the Hispanic-owned brand’s customer base. Goya actually saw a 22% increase in net sales throughout the boycott. Many analysts credit this to the multiple counter campaigns to the boycott as well as various other factors like the restaurant closures due to the pandemic and large parts of Goya’s traditional customer base being less involved in social media activism.
It’s clear that the potential of consumer boycotts has significantly evolved alongside the rise of social media and the growing trend of companies prioritizing their Corporate Social Responsibility (CSR) efforts. Social media allows people to deliver their messages to wider audiences more quickly and intensely than earlier media sources. When a staggering event occurs or a controversial comment is made, it can go viral in minutes getting the attention of thousands if not more. When others repost or share the viral topic, it is often accompanied by their own takes on this issue or furthermore a call to action for the viewers that follow. This phenomenon really took wind during 2020 and the growth of the Black Lives Matter (BLM) movement in response to the murder of George Floyd. At this time people used social media to call out their friends, employers, schools and companies to acknowledge the state of race relations in America at the time and to use their power and resources to actually help do something about it. Many companies saw long term financial repercussions based on their lack of support to the cause, while others were punished by consumers for supporting the movement altogether. Before the BLM movement exploded in the media, Nike was one of the first to capitalize on the virality of social justice controversies by partnering with Colin Kaepernick on an ad campaign in the midst of his ‘taking a knee’ controversy. While many NFL and Nike fans were furious, posting videos of them burning Nike products and more, the company actually saw significant online sales increases from those who approved of their support of Kaepernick’s actions.
It may be a while before we can come to a conclusion on the success of the Starbucks consumer boycott in support of Palestine, especially as there seems to be no end in sight to the actual conflict. However, it’s safe to say that more and more consumers are learning how to utilize their buying power in order to hold companies accountable. CSR is a growing asset to companies in a world where consumers go out of their way to celebrate brands that are measurably authentic, informed and aligned with their values and punish those who aren’t.
