Supply Chain Disruptions: Boycotts

Concept

A supply chain disruption is an unexpected interruption in the flow of goods or services. Supply chain disruptions can be caused by demand volatility, transportation issues, supplier issues, talent shortages, political instability, pandemics, and various other reasons. For each of these categories, there are several specific types of causes. For example, demand volatility can be caused by seasonal demand variations, competitor actions, etc.

A source of demand volatility is through consumer boycotting. One can easily predict the effects a boycott would have on the targeted company: loss of revenue, tarnishing of corporate reputation, and erosion of customer loyalty. With the latter, the customer will consider using competing goods and services. The practical consequence of this is that if the customer happens to like the competitor better, that customer is potentially lost forever to the boycotted company. These are the immediate effects of a boycott. What are the consequences to the targeted company’s supply chain?

Research into the effects of boycotts on supply chain logistics crosses many academic lines including marketing, politics, and business management. A quick scholarly literature review on the effects of boycotts on supply chains frequently also include the effects of sanctions. These published texts tend to focus on multinational supply chains and evaluate the boycotts and sanctions through the criteria of DEI, ESG, corporate social advocacy, circular supply chains, and sustainability using the attendant leftist political philosophy. The overall thrust of this research is: "first world company boycotted - third world hardest hit."

A typical example of the effects of sanctions and boycotts is the research by Shalpegin and Kumar (2023). They do not supply concrete definitions of “sanctions” and “boycotts”, though they do differentiate them by stating that sanctions are mandated by authorities (governments, multinational organizations, or NGOs) whereas boycotts are implemented voluntarily. It is interesting to note that they do not consider the consequences to the boycotted company and its “local” supply chain but instead focus on the consequences to offshore suppliers that participate in the company's supply chain.

Shalpegin and Kumar (2023, pp. 3-5) state that suppliers are impacted through direct relationship with the targeted company (meaning that suppliers may also be boycotted or sanctioned). In addition, the suppliers may be unable to access foreign markets or certain forms of technology, as the supplier relied on the targeted company for access. Finally, there may be logistics failures for the supplier in the forms of bottlenecks and reduced capacity (See discussion in Quigg (2022, pp. 59-77)). These are the ways sanctions and boycotts travel among supply chain members, “jeopardizing the principles of diversity, equity, and inclusion in supply chains.” (Shalpegin & Kumar, 2023, p. 1).

One of the solutions to the problems (real or imaginary) that Shalpegin and Kumar (2023, p. 5) identify is to shorten the supply chains, i.e., to use local sourcing. Local sourcing is not a complete solution, however. The ultimate form of local sourcing, nationalism, will obviously impact multinational enterprises (MNEs). Charpin (2021, p. 4) finds that “nationalism could engender supply chain disruptions via discriminatory practices toward all foreign MNEs and how national animosity may generate additional risks for the MNEs of nations in conflict with one another.” Charpin (2021, p. 8) is apparently comfortable with the concept of corporate nationality, but notes that this option is not legally supported. The solution Charpin (2021, p. 8) proposes is for MNEs to relocate their supply chain activities from offshore locations to home country locations. This activity protects a company from sanctions but still leaves them open to boycotts.

How damaging are boycotts to companies? King (2017) holds that “[w]hile boycotts rarely hurt revenues, they can threaten a company’s reputation, especially by generating negative media coverage.” Meanwhile, there seems to be no uniform agreement on the average duration of consumer boycotts. Levesque & Nam (2019) note that a boycott of Nestle lasted for seven years, while a boycott of Star-Kist lasted “almost no time at all.” Lasarov, Hoffman, and Orth (2023) also do not predict the duration of consumer boycotts, but they do note that during what they call the “heat-up phase” of a boycott, there is a sharp decrease of interest after two weeks. King (2017) notes that “we can’t pay attention to any single controversy for very long.” King recommended that “targeted companies might do better to simply “wait it out” rather than taking action in response to a boycott that might be in the news one day and out the next.”

Combining these two lines of research, one can conclude that boycotts – regardless of duration – have a minor negative impact on corporate revenue, and that “waiting it out” is a viable strategy. Thus, the consequences to the targeted company’s supply chain are negligible. Is this really the case?

Applications and Examples

With this as background, we examine two recent examples of boycotts. These boycotts show that “customer satisfaction” is more complicated than presented in Quigg (2022, pp. 103 – 110).

The first case we consider is the 2020 boycott of Goya, a large Latin food brand with markets in North America and Europe. Goya CEO and co-owner Robert Unanue praised President Donald Trump’s Hispanic Prosperity Initiative in July of 2020. Several Latino politicians and artists, most notably Alexandria Ocasio-Cortez and Julian Castro, called for a boycott of the brand. Almost immediately a counter-boycott or “buycott” was started by supporters of Trump and Goya. At the end of 2020, Unanue sarcastically named Ocasio-Cortez as “employee of the month,” claiming that the boycott/buycott expanded Goya’s customer base resulting in a sales spike and prompted the opening of a new food production facility in Texas to meet increased demand.

Research by Liaukonytė et al (2022) pegged the sales spike at 22% overall, with an increase of 56.4% in Republican counties and no decrease in Democrat counties. In addition, there was no sales decrease among Goya’s core customer base. The sales spike dissipated within three weeks. Liaukonytė et al (2022) provide no information on the effects of the buycott on Goya’s supply chain, unfortunately.

The second boycott we consider is the 2023 boycott of Bud Light, which was caused by two events. The first event was the widespread recognition of comments by Alissa Heinerscheid, Bud Light’s vice president of marketing, stating the need to “evolve and elevate” the brand to be inclusive, stating that existing marketing was “fratty and [used] out-of-touch humor.”

The second event was the decision to use “trans-influencer” Dylan Mulvaney as a representative of this brave new inclusive world. At the time, Mulvaney was participating in a self-promotion campaign called “365 Days of Girlhood” which of course did not sit well with conservatives as well as members of the “LGB without the TQ” and “trans-exclusionary radical feminists” groups.

The resulting backlash was a boycott of Bud Light products (but not all AMBev products). Three months after the boycott began, Bud Light sales had decreased 28% compared to the same time in previous years. Analysis by Liaukonytė et al (2024) (the same researchers who investigated the Goya boycott) found that sales decreased 32% in Republican counties and 22% in Democrat counties.

Bud Light went silent on the issue, and the boycott continued. In the summer of 2023, the Human Rights Campaign excoriated Anheuser-Busch (Bud Light’s owner) stating that:

In this moment, it is absolutely critical for Anheuser-Busch to stand in solidarity with Dylan and the trans community. However, when faced with anti-LGBTQ+ and transphobic criticism, Anheuser-Busch’s actions demonstrate a profound lack of fortitude in upholding its values of diversity, equity, and inclusion.

This started a secondary boycott that may have resulted in the above-noted sales decrease in Democrat counties.

According to Liaukonytė et al (2024), sales of Bud Light were persistently down for at least eight months, with sales down by 32% in Q4 2023. Heinerscheid and other members of the marketing team left the company, though the exact dates and details of their departures have not been made public.

Liaukonytė et al (2024) did consider the effects this boycott had on Bud Light’s supply chain, stating that the ongoing decline resulted in:

retailers and distributors reducing shelf space for Bud Light, illustrating how boycotts can lead to a negative feedback loop. What started as a consumer-led boycott generated downstream adjustments from retailers and distributors. These supply-side adjustments hurt the brand’s visibility and further exacerbated the negative impact on Bud Light’s performance.

These two examples – the Goya boycott/buycott and the Bud Light boycott – fly in the face of the “conventional wisdom” on boycotts: they need not be the short-term affairs, the effects on company profits is not always negative and negligible, and it is not always best to “wait it out”.

 

References

Charpin, R. (2022). “The resurgence of nationalism and its implications for supply chain risk management.” International Journal of Physical Distribution & Logistics Management. 5(1), 4-28. https:// 10.1108/IJPDLM-01-2021-0019

King, B. (2017). “Do Boycotts Work?” Northwestern Institute for Policy Research. Retrieved 12 September 2024 from https://www.ipr.northwestern.edu/news/2017/king-corporate-boycotts.html

Lasarov, W., Hoffmann, S., & Orth, U. (2023). Vanishing Boycott Impetus: Why and How Consumer Participation in a Boycott Decreases Over Time. Journal of Business Ethics 182(4), 1129–1154. https://doi.org/10.1007/s10551-021-04997-9

Levesque, A. & Nam, J. (2019). “The Effect of Consumer Boycotting on the Stock Market.” https://digitalcommons.pace.edu/honorscollege_theses

Liaukonytė, J., Tuchman, A. & Zhu, X. (2022, August 11). “Spilling the Beans on Political Consumerism: Do Social Media Boycotts and Buycotts Translate to Real Sales Impact?” Marketing Science 42(1), 11-25. https://doi.org/10.1287/mksc.2022.1386

Liaukonytė, J., Tuchman, A. & Zhu, X. (2024, March 20). “Lessons from the Bud Light Boycott, One Year Later.” Harvard Business Review. Retrieved 12 September 2024 from https://hbr.org/2024/03/lessons-from-the-bud-light-boycott-one-year-later

Quigg, B. (2022). Supply Chain Management (1st ed). McGraw-Hill Create. https://bookshelf.vitalsource.com/books/9781307866025

Shalpegin, T. & Kimar, A. (2023). "Undiversity, inequity, and exclusion in supply chains: The unintended fallout of economic sanctions and consumer boycotts." Production and Operations Management, 00, 1–7. https://doi.org/10.1111/poms.14001