Blog

Doing Business Under the Wall Street Microscope

|by | 0 Comments | Blog

The long-awaited Uber IPO has made its debut on the New York Stock Exchange on the heels of its chief rival, Lyft, which went public in March but has struggled with investor skepticism since its entrance. Uber has moderated its valuation in the wake of Lyft’s performance and has been seeking to rehabilitate its image on its IPO roadshow.

The drama of the ridesharing IPOs is the latest Wall Street soap opera and evidence of the microscope under which public companies today operate. That microscope is a stark reality for the CPG industry, where 45 of the 50-largest companies in the industry are publicly traded.

In the era of 24/7 media coverage, fake news and Twitter whiplash, it is a challenging time to be a publicly traded company. Couple that with regulatory demands, responsibilities to shareholders and the ever-present threat of activist investors, it’s enough to make any company question if the opening bell should toll for them.

Twitter as a Market Mover

Elon Musk’s Twitter account is Wall Street’s yoyo. The Tesla CEO boasts 26 million followers and a penchant for moving markets within character limits. He nearly caused a riot when he tweeted last August that he had funding secured to take Tesla private. The SEC opened an investigation the next day, ultimately landing on a settlement that forced Musk to step down as Tesla’s chairman for three years, required public statements — tweets included — about the company to be screened by legal, and heaped $40 million in fines on both Musk and Tesla.

It doesn’t have to be the CEO or anyone officially involved with the company to cause a stir. On April 23, 2013, the Associated Press Twitter accounted tweeted, “Breaking: Two Explosions in the White House and Barack Obama is injured.” Though the tweet was quickly denounced as false and the result of a hack, it sent markets reeling. The Dow plunged and the S&P reportedly lost more than $136 billion in market cap. They were quick to recover, but evidence of the volatile nature of Wall Street.

It’s Tough to Play the Long Game on a Quarterly Basis

The playing field is different for public companies. Small utterances by C-suite leaders can lead to a near-instant change in stock price — for better or worse. In 2014, HomeAway CEO Brian Sharples hinted at more aggressive marketing tactics to compete with Airbnb. The company had only been public for three years, and Sharples may have been caught off-guard by the reaction. Within days, J.P. Morgan downgraded HomeAway’s stock; shareholders worried that the cost of a marketing campaign would eat into margins; and bankers that operate on a quarter-to-quarter schedule weren’t willing to be patient.

“Here’s the issue about being a public company: If you’re private, you just make a decision. You don’t have to tell anybody,” Sharples told Inc. “If you’re going to telegraph decisions, analysts need numbers to plug into their models.”

The stock ultimately recovered, and the marketing campaign won HomeAway a coveted CLIO award, but it was a bumpy ride to learn that playing the long game needs to be carefully messaged and throwing Wall Street for a loop has consequences.

Some companies have opted to retreat from the publicly-traded eye. Michael Dell famously took Dell Inc. private in 2013 to get out of the Wall Street spotlight. A year into his decision he shared in Wall Street Journal, “Privatization has unleashed the passion of our team members who have the freedom to focus first on innovating for customers in a way that was not always possible when striving to meet the quarterly demands of Wall Street.”

Dell is once again on the New York Stock Exchange, after five years away to innovate, but time away gave perspective that is undoubtedly serving the company now.

Innovation is Dead. Long Live Innovation.

There is an established belief that once a company goes public, innovation slows. Where an appetite for risk and an eye on long-term growth used to take center stage, the company’s focus shifts as it manages to quarterly earnings reports and accurate forecasting. While not true at many public companies, it’s reasonable that the myth gained traction. Kodak developed the world’s first digital camera but couldn’t get approval because of fear it would cut into its film business. Blockbuster failed to see the potential of an innovative startup called Netflix for fear of changing its business model and profitability.

Conagra is one bright spot when it comes to public company innovation. CEO Sean Connelly recently told CNBC’s Jim Cramer, “You have to innovate every single year and execute every single year.”

The company — home to iconic brands like Healthy Choice and Marie Callender’s and emerging brands like Angie’s BOOMCHICKAPOP and Udi’s — recently acquired Pinnacle Foods, and with it, the Birds Eye line that is allowing them to capitalize on the plant-based movement. It is also looking to personalized digital and social channels to reach new demographics. It has proven to be a smart strategy — Conagra stock is up more than 40% year to date.

“Brands are evergreen but only if you infuse them with modern attributes,” said Connelly. “Our focus is making sure these brands resonate with young consumers.”

Without a focus on innovation, short term success will be just that — short term. Although Dell has returned to being a public company, what Michael Dell shared during the company’s private hiatus rings true. “We need to find ways to get out of the destructive cycle of nearsighted decision-making and focus on a future that is far beyond the next quarter or fiscal year or election,” he wrote in Wall Street Journal. “In this fast-paced, uncertain time, one thing is certain: If we aren’t the ones inventing the future, someone else will be.”


In a conversation moderated by CNBC’s Lauren Hirsch at the GMA Leadership Forum, Kaumil Gajrawala and Caroline Levy, two veteran CPG sector analysts and Wall Street watchers, will share their views on the market, the challenges facing branded CPG stocks and the road ahead.

Through inspiring and insightful content, the GMA Leadership Forum elevates the industry by strengthening those who lead it. It will be held Aug. 14-16, at the Broadmoor in Colorado Springs, Colorado.

For more information, view the 2019 program agendaRegistration is open now.  

KEEP READING

Welcome to the new era of celebrity-backed brands

|by | 0 Comments | Blog

Fortune favors the bold and, increasingly, the many celebrities who’ve made the leap into the CPG industry. Famous names are moving from stardom to startup brands with startling success — and it’s time to take them seriously.

Celebrity brands are nothing new (think George Foreman Grills and Trump Steaks, to name a few) but their ability to compete in the CPG space is. The market landscape is shifting, yielding hypercompetitive share to celebrities with a dream and the money and fans to back it up, and it’s a phenomenon that’s here to stay.

Forbes just named Kylie Jenner the world’s youngest self-made billionaire. Her three-year-old company — Kylie Cosmetics, famous for its lipstick and liner duos — is valued at more than $900 million. With just seven full-time staff and little overhead, Jenner does much of the company’s heavy lifting on Instagram, converting influence into income by advertising to her 128 million followers on the platform. On the launch of her products in Ulta beauty stores last November, Jenner told Forbes, “I popped up at a few stores, I did my usual social media — I did what I usually do, and it just worked.” The launch bumped sales to $54.5 million in six weeks.

Welcome to the new era of celebrity-backed brands, where stars aren’t just endorsing products, they’re taking a seat at the board room table. They are bringing an inspired, informed approach to consumer brands — informed by years of building their personal brands.

The success stories are growing in number:

  • Actress Jennifer Garner joined Once Upon a Farm, maker of organic food cups and pouches for kids, as its chief brand officer in 2017. The company is serious about growth, bringing in CEO John Foraker, the former CEO of Annie’s, and recently receiving a $20 million Series B investment.
  • Actress Jessica Alba’s Honest Company was founded on the star’s desire to provide simply labeled, transparently sourced home and baby products. Seven years later, the brand represents more than 100 consumer goods sold in more than 17,000 stores in America.
  • Sean Cane, former Honest Company president, has now moved on to become co-CEO of Hello Bello, another organic baby-care startup founded by celebrity couple Kristen Bell and Dax Shepard. The duo says they launched the company to make organic and plant-based products affordable choices for parents. The brand rolled out in Walmart stores last week.

These brands aren’t flashes in the pan. This surprisingly effective combination of cause-inspired, dedicated stars and enough venture capital and fan following can be a perfect ingredient list for star-studded brand success.

Look no further than Foodstirs as the proof point for cooking up recipes that work. Sarah Michelle Gellar, the 90s scream queen known for her roles in Buffy the Vampire Slayer and I Know What You Did Last Summer, launched the premium baking mix brand in 2015. Gellar approached the venture with the aim of disrupting the existing status quo.

“When we started to research the category, we saw that it was a seven-billion-dollar category that was being dominated by these older brands that had an 80 percent market share,” Gellar told Forbes. “We thought that was interesting because as a consumer we know what people are looking for. We decided to take the leap and try it.”

The products have now been sold in more than 15,000 stores nationwide.

The evolution of the celebrity brand has brought hands-on business leaders who are doing far more than slapping their name on a label. As Gellar told CNBC anchors of her involvement in Foodstirs, “I think it goes to show that I’m not just the face of a brand.”

How will this new era of celebrity brand success shake up the CPG market? Join the debate at GMA’s Leadership Forum, Aug. 14-16 in Colorado Springs, where we’ll feature top celebrities who’ll explore how they’re fueling upstart brands and what fame means for consumer loyalty.

Stay tuned for our celebrity reveal at gmaleadershipforum.com.



The GMA Leadership Forum will be held Aug. 14-16, at the Broadmoor in Colorado Springs, Colorado.

For more information, view the 2019 program agendaRegistration is open now.

KEEP READING

Reimagining the Leadership Forum: By Manufacturers, For Manufacturers

|by | 0 Comments | Blog

 

This year’s Leadership Forum marks a major shift at GMA. We are committed to doing things differently so we can connect and develop CPG leaders and empower industry growth.

We are an important, impactful industry and we deserve a conference that speaks directly to us.

This year’s “By Manufacturers, For Manufacturers” is more than a tagline. It’s a promise to create an event that is authentic to CPG — our challenges, our opportunities, our future. It’s a chance to come together to solve problems, to stretch our thinking until our brains hurt, and to be not just ready for the future, but ahead of it. Through inspiring and insightful content, we will elevate the industry by strengthening those who lead it.

For us, this is much more than a conference. It is evidence of the reimagined organization that GMA is becoming. We’re looking at what’s now, what’s new and what’s next in the CPG world, with a bias for content that will:

  • Embrace new voices. We’re not content to hear ourselves talk. This year’s agenda includes an honest exchange with our critics to ask them, point blank, if they could change one thing about our industry, what would it be? Understanding the opposing narratives will help us find a better way forward. We’ll also explore how celebrity names are fueling upstart brands and how fame affects consumer loyalty.
  • Redefine consumer relationships. From serious questions about the changing relationship between consumers and brands in the era of income inequality and wage stagnation to sooner-than-you-think technologies that threaten to limit your access to the consumer, we’ll dig into market-shaping trends.
  • Grow as a force for good. We are a purpose-driven industry, working to create a more sustainable, socially conscious world every day. Together, we’ll discuss the balance between activism and authenticity in brand messaging, and how packaging speaks volumes about your product before it’s even opened.

We guarantee you will leave with practical, forward-looking insights that empower you, your company and the broader industry to grow. When the 2020 Leadership Forum opens, it’s our goal to have you bragging to your colleagues that you were there in 2019 when everything changed.

We’ll see you in Colorado Springs.



The GMA Leadership Forum will be held Aug. 14-16, at the Broadmoor in Colorado Springs, Colorado.

For more information, view the 2019 program agenda. Registration is open now.  

KEEP READING