by Steven Visscher, Mawer Investment Management
My parents insisted that our family eat dinner together each night. Seven of us in a tiny kitchen, fighting for elbow space and the biggest pork chop. But Sunday nights were different. Walt Disney was on. So my parents allowed us to have dinner in front of the TV. As the years passed, my older siblings lost interest in Disney cartoons. They were more interested in Star Wars and superheroes. I soon copied them. Mickey Mouse was just for kids.
I started to reminisce about those Sunday night dinners after seeing the latest press release from Disney ā they had acquired Lucasfilm, giving Disney licensing rights to Star Wars. Mickey Mouse and Darth Vader were now on the same team. This made me laugh about how fickle we can be as consumers. One minute Mickey Mouse is the rage. The next minute it was Star Wars. Then suddenly wizards and vampires. This unpredictable change in consumer preferences isnāt just limited to the entertainment industry. We often see the same behaviour in clothing and apparel, electronics, health and beauty products, or food and beverages.
Investing in these sectors can deliver incredible returns if you strike the right chord with consumers, but also excessive losses if you miss the mark. History is littered with companies that were a hit with consumers one minute, and then shunned the next. Krispy Kreme Doughnuts and Crocs shoes come to mind.
Does this mean Mawer avoids these sectors for fear of changing consumer tastes? Not entirely. We think some companies have done well in mitigating this risk. For example, Procter & Gamble will often market multiple brands in the same product line. So if consumers start to turn sour on Tide detergent, Procter & Gamble might have Gain or Cheer detergent on the same shelf. It seems that Disney may be following a similar strategy. If one movie or character falls out of favour, hopefully another will surge in popularity.
We donāt own Disney at the moment, but I think it will be interesting to see if a wider array of characters can help them stay relevant with consumers. I might even tune in to Disney at the dinner table again.
Steven Visscher
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