December 27, 2020
In the late 70’s and early 80’s social activism ran high in Portugal. I have early memories of adults declaring they wouldn’t buy from company A or company B because it conflicted with this or that value / belief. Since then, that type of attitude has been rare. This started to change over the past few years. Gen Z and Millenials have shown a high propensity to voice their values publicly, call for company boycotts on social media and change their shopping behavior in response to perceived misalignment in values. This trend seems to be growing and shows no sign of receding. Currently the vast majority of Gen Z shoppers state thet they take brand values into consideration on their shopping decisions (see figure).
Sources: Wunderman Thompson, WPP
Consumers take at least two benefits when purchasing from brands whose values align with theirs:
- Purpose – happiness to know their actions are contributing to push forward an agenda aligned with their beliefs
- Community – enhanced sense of belonging with people and organizations that think like them.
While it is possible to build businesses that use values as a moat, we have found it hard to handicap how sustainable these advantages are over long periods of time. That said, there are investment opportunities in businesses that provide tools for companies and organizations to measure their alignment. There is also an opportunity with companies that measure the health of the social media and advertising of each brand. The biggest consideration for all businesses is to make sure they have the internal capabilities to manage the risk of potentially ending on the wrong side of a public narrative. Companies to have tools and an action plan to recover if that were ever to happen. This is an added risk that we at Somar monitor closely in all our investments.