TRENDS

Conservative Criticisms of LGBTQ+ Support Have Limited Effects on Brands

June is here, signaling long days, hot temperatures, and political controversy. With celebrations like Pride Month and Juneteenth, this month holds special significance in the US culture war. While some celebrate, others express differing opinions, sparking discussions in the business world.

Revisiting the culture war: Last year, American corporations faced backlash for supporting diverse groups, particularly the LGBTQ+ community. Companies like Target ($TGT), Disney ($DIS), and AB Inbev’s Budweiser ($BUD) faced boycotts and political criticism for their inclusive marketing efforts. The social pressure was intense — and the impacts were immediate.

• Last year, Target recorded its first profit decline in six years, AB InBev reportedly lost out on over $1B in sales, and Disney engaged in a political battle with Florida’s right-wing government.

• In response, companies adjusted their strategies — Target reduced its LGBTQ+ merchandise offerings, and the director of inclusion consultancy at Trans& reported a downturn in “funding and support of LGBTQ+ inclusion initiatives.”

The True Impact of Protests

Despite different responses, companies often emerge victorious in the culture war. Since last June, stocks of $TGT, $BUD, and $DIS have risen by 15%, 14%, and 13%, respectively — with minimal impact on sales.

• Other brands like Southwest ($LUV), North Face ($VFC), and Nike ($NKE) have also seen little impact.

• However, this year’s Pride Month has seen a reduction in diverse advertising, affecting the earnings of queer influencers, according to ModernRetail.

At odds with the future: According to AP, companies like Starbucks ($SBUX) and General Motors ($GM) will continue supporting Pride-related events this year — even as others appear to be pulling back. Budweiser’s attempt to cater to diverse audiences with its advertising backfired, offering a lesson for others: attempting to please everyone can ultimately lead to alienating everyone instead.

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LARGECAP RECAP

💸 Recap Time: S&P 500 Companies Deliver Strong First-Quarter Earnings

With 98% of the S&P 500 having reported their earnings, Wall Street is wrapping up the first quarter with optimism. Despite CEOs warning about consumer pullbacks, 78% of companies beat earnings expectations, a figure above both analysts’ predictions and historical averages.

• According to FactSet, the S&P 500 marked its 14th consecutive quarter of revenue growth, boasting the highest year-over-year (YoY) earnings growth rate since Q1 2022.

• Earnings rose by 5.9%, while blended revenues increased by 4.2% YoY, driven by strong performances in the communication services, financials, and information tech sectors.

All about expectations: Bucking negative economic data, analysts have raised their expectations for S&P 500 firms in the upcoming quarter. The optimism is fueled by rosier company forecasts, especially in the energy and materials sectors. Additionally, mentions of “recession” on company earnings calls have declined, with doomsday discussions at their lowest since Q1 2022.

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Markets & Economy

US job openings reach three-year low: In April, US job openings dropped by 296K to 8M, the lowest since Feb. 2021. This indicates the Fed’s higher interest rates are now weighing on the economy, even as inflation persists. [Read]

Surprise election outcome shocks India: Exit polls predicted Narendra Modi would extend his decade-long leadership, but instead, India’s leader and ruling party will enter its next term without a majority in parliament. [Read]

US Dollar at its strongest since 1985: Higher interest rates have helped push America’s currency to its highest level since the 1980s, an era marked by high inflation and economic turbulence. [Read]

Business & Wealth

401(k) plans disproportionately benefit the rich, says Vanguard: A new study by retirement giant Vanguard found that the US retirement system disproportionately favors wealthy Americans, with higher contributions and employer matches boosting their wealth. [Read]

Elon Musk’s X will allow adult content: Watch out, OnlyFans. Elon Musk’s X will now permit adult content on its platform, provided it’s clearly labeled. [Read]

New and used car sales are flattening: Despite falling vehicle prices, Bank of America reports that auto sales have stagnated due to rising interest rates and insurance costs deterring buyers. [Read]

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DIGIT OF THE DAY

Non-Alcoholic Beer Growth Surges 12x Faster Than Alcoholic Brews

The sober curious movement has a frontrunner — non-alcoholic beer. Since 2018, the global market for non-alcoholic beer has seen a robust annual growth rate of 3.6%, outpacing the sluggish 0.3% growth of alcoholic beer. This shift is driven by better quality, improved flavors, and changing drinking habits across generations.

• In 2023, non-alcoholic beer sales hit $13.2B, led by brands like Heineken 0.0, Japan’s Suntory All-Free, and AB InBev’s Brahma 0.0%. By 2028, sales are expected to reach $18.6B.

• According to GlobalData Plc, non-alcoholic beer (less than 0.5% alcohol) makes up only 31.4M hectoliters annually, far less than the 1.93B hectoliters of alcoholic beer sold.

Change is brewing: Young people are leading the charge in the US, with only 62% of adults aged 18 to 34 opting for alcoholic beverages, down from 72% in the early 2000s. Millennials and Gen Z strive to live healthier lifestyles and be more mindful of their consumption choices. With the Olympic Games approaching, AB InBev is betting on its campaign to boost the popularity of non-alcoholic beer.

While this shift indicates a bubbling preference for alternative beverages, non-alcoholic beer still has a long way to go to reach the volume of its boozy counterparts.

Read: Cannabis Daily Use in the US Climbs, Overtaking Alcohol with a 15x Increase Since 1992