The rise of boycotts presents a risk conundrum for consumer brands

Such is the prevalence of calls for consumer boycotts nowadays, it would be difficult to get through a normal day without using or buying at least one brand that has fuelled the anger of social media activists.

But some boycotts leave a more lasting imprint than others. Last week McDonald’s announced it will buy back all its Israeli restaurants, after sales were harmed by a consumer boycott over its perceived support for Israel in its war with Hamas.

The boycott began after its Israeli franchise donated thousands of free meals to Israeli soldiers and posted about it on social media, soon after the Hamas attacks on Israel and the initial military response in October.

In January the company said it has suffered a “meaningful” impact as a result. Protests extended beyond the Middle East to Malaysia, Indonesia and France.

McDonald’s is not alone in suffering a backlash over Gaza. Other companies perceived to have taken a pro-Israel stance or with financial ties to the country have also been singled out. Starbucks was targeted after it sued its workers’ union over a post about the conflict showing solidarity with Palestine. Likewise Disney after pledging humanitarian support to Israel.

Both McDonald’s and Starbucks have suggested that disinformation or rumours around their position have fuelled the protests, and stressed their non-political nature and openness to all. Indeed, McDonald’s Egyptian franchise has underlined its Egyptian ownership and pledged around $650,000 in aid to Gaza.

But the episode raises wider issues about the increasing prevalence of consumer boycotts, accelerated by the omnipresence of social media. On the Israel-Hamas war alone, a quick scan of one consumer website reveals long lists of businesses it wants consumers to boycott – including Airbnb for “offering rentals in illegal Israeli settlements built on stolen Palestinian land”; Amazon for providing “cloud technology to the Israeli government and military”; and Barclays for investing in “arms companies supplying Israel with weapons and military technology”.

But companies also face the wrath of such websites for anything from broadcasting Crufts to drilling for gas or selling tickets to captive wildlife attractions.

Many brands have also faced backlashes over their ethical stances on political or contentious issues, with mixed financial impacts. Nike suffered protests and boycotts over its 2018 advert with racial-justice advocate Colin Kaepernick, but soon recorded a spike in sales as other shoppers endorsed its stance. But brewer Anheuser-Busch InBev may have lost as much as $1.4bn in sales because of the backlash of its Bud Light brand over a partnership with transgender influencer Dylan Mulvaney, according to recent reports.

Academic studies suggest that most boycotts have minimal financial impact on brands, and in some cases have boosted sales. But negative impacts can’t always be easily measured on a spreadsheet, and can take a longer time to feed through. Whether a boycott is justified or not, it can negatively impact a company’s reputation in the long-term, make it less appealing to work for, and put off investors.

So should brands be silent and adopt a more cautious stance on high-risk issues, in the face of increasing levels of consumer activism?

In the case of McDonald’s, they hadn’t even taken a stance. In hindsight it is all-too-easy to say the alarm bells should have rung over the decisions taken by their Israeli franchisee. But their franchise model - employed by many of the biggest convenience food and hotel brands in the world – decentralises some decisions and makes central risk management more challenging. With such models, crystal-clear policies and training on what franchisees can and can’t pledge and express support for are critical.

In many other boycott cases, where the issue stems from a company’s open support for social or political issues, they have clear choices.

Of course, businesses should consider in advance the potential financial fallout of any backlash. Companies whose products are easily replaced by a competitor’s – such as McDonald’s or Bud Light – are more at risk of consumers holding their ground on a boycott for a longer period of time. Highly visible brands, such as cars or clothing, are also more at risk of consumer avoidance compared to products that stay in the kitchen cupboard.

More fundamentally, businesses must decide if their position is truly important to the company, its employees and its customers. If the cause or issue reflects a genuine core value that they are happy to support publicly, and that they consistently uphold through their actions as well as their words, great. Such a stance can build employee trust; improve staff attraction, retention and productivity; and improve external reputation.

If, however, their words are empty and their promises hollow, in the event of facing criticism they will find it much more difficult to come out of the storm intact.

For those companies that do face a consumer boycott, take comfort in this. The voices shouting the most will almost certainly be those who are against you, but that doesn’t necessarily make them the loudest. Companies that maintain a consistent, well-considered and principled stand for something often – if not always - find support from a quieter majority that will serve them well in the long-term.