What Is Brand Courage ?

Once in a while, CEOs face difficult choices where stakes run high.

And in many cases, it comes down to just this: How much of a financial sacrifice am I ready to take ( and push down the throat of my shareholders) in the current quarter or the current year, to protect, or enhance my brand?

Corporate life is filled with instances where executives have to face such dilemmas.

Last year's unprovoked invasion of Ukraine by Putin's regime triggered many such decisions, with the outcome not always geared towards the same conclusion.

Several global retail brands decided to withdraw from the Russian domestic market abruptly: Think Burberry for fashion luxury, the much-advertized withdrawal of Mac Donald's replaced by Вкусно – и точка, or the replacement of Starbucks by "Stars Coffee" (both performed at an alluring pace that can be only be made possible in Russia and with let's just say...unimaginative branding!) or Apple's closing its 70-people high-performing Russian subsidiary led by the brilliant Tatiana Akhmatova. Wherever you stand on the actual meaning and consequences of such decisions by these companies, and the actual risks these companies are taking, somehow, you must acknowledge that short-term profitability was not the key driver here.

Geo-political events are not the only opportunities given to CEO's to make a bald statement. Western consumers have been used to product recalls across many industries, especially when it comes to product issues related to health and safety (think Roundup or the litany of product recalls in the automotive industries we have grown accustomed to, or electrical appliances with electrocution hazards, Samsung Galaxy S self flammable batteries). These are real dangers, and there is no "decision" to make, faulty products MUST be recalled at once, it is a matter of compliance and regulations.

It becomes a lot more nuanced in other cases: Take Yeti, for example (NYSE: YETI). The Austin-based, outdoor brand of drinkware, coolers, and Softline products clicks at an impressive $1.6B revenue annually and still delivers an impressive double-digit growth with a mostly direct GTM strategy ( brick & mortar and online), has legitimate global ambitions (they are working on it!), has built a real brand niche for itself despite a stark competition, and manages to keep its margin upward from 55%. But it is really hard to imagine instances where a YETI product's malfunction would become a human or health hazard. Enter their last quarterly conference call, during which they announced that they had created accruals close to $130M for a voluntary recall on 3 product lines: A closing magnet misalignment could "harm" customers by being ingested, we are told. Let's recap: We are talking about coolers and backpacks magnets. These products are not toys that are potentially handled by toddlers. Yet, the brand decided to provision close to $130M in a single quarter (on a $450M quarterly revenue). That takes some guts. One of the analysts on the call was hinting at the fact that maybe, YETI might have overshot this a bit. But Matthew Reintjes stood his ground. It is a huge hit, for what seems to be mostly a non-lethal threat for customers and a non-lethal risk for YETI; Of course, we do not know the details, nor how YETI computed its accruals, we only know this is a voluntary product recall process/ YETI must have factored loss of revenue, inventory write-off and return logistic costs, yet you cannot expect 100% of the products to be returned. It is quite likely that a large fraction of contacted customers won't return their products at all. YETI is therefore showing operating loss this last quarter.

I think that such a decision in such circumstances is participating to build the brand's legend; It sends a powerful message to customers, internal staff, distribution channels, and investors that Yeti will defend its brand no matter what it takes. I also think it can be an opportunity to stand out from the competition with unparalleled customer care service. Kudos to Matt and his team.

Move 8,000 miles eastward and meet Auchan, a French chain of supermarkets (think Publix or H-E-B) that also keeps entertaining international ambitions despite some setbacks (in China). Auchan's holding Mulliez Group has invested for decades now in Central and Eastern Europe. Russia is the second largest country by number of Auchan supermarkets (large format) stores (after France) with almost 100 (135 in France). They also have a strong presence in Ukraine. But Russia is the star country at Auchan: It is not only big, but it is also growing! Other more recent Mulliez Group retailer investments in Russia include Leroy Merlin for DYI and Decathlon (sporting goods).?

Officially, Auchan finds it "unfair" to sack all its employees in Russia. (Keep in mind that a significant percentage of brands that used to be present in Russia before the war paid full-year salaries to their employees in 2022, some were re-trained, some were moved to other locations outside of Russia, all costs were fully supported by employers. Auchan could have done the same for a good portion of its white-collar staff.. but obviously, that's not the narrative chosen by Auchan).

No, Auchan was going to be the savior for the average Dima and Olga?(or more likely the average Moscovite, given the concentration of Auchan stores in and around Moscow!), the only efficient shield protecting them from inflation, of course. Auchan? A Hero figure! In France, Auchan was lagging behind all its competitors to collect humanitarian help for Ukraine. Were they afraid of undercutting their own sales there? The reality is that Auchan made a blatant miscalculation: they expected other non-Russian supermarket brands to leave the country en masse to rack significant market share gain... like an indirect war profiteer, building profit on the dead bodies of Ukrainians. No matter what Polish and Ukrainian Auchan customers could think of the brand, the real golden nugget was Russia, too bad for these "collateral damages"! Not only has Auchan been doing a poor job communicating during this period, but they have shown the worst capitalism can deliver: amoral, greed-driven, short-term gains and no empathy for its customers. That's not brand courage. that brand cowardness.