Nike Inc.'s (NKE) shares dropped 3.2% on Tuesday to $79.60 per share after a bold move to wade into the political fray with its "Just Do It" campaign featuring Colin Kaepernick. But it's a master stroke in the long term aimed at winning over the hearts and mind of young, socially conscious consumers.
In an era when consumers, especially millennials, get behind brands that reflect their values, Nike faces increasing competition from brands like Adidas that market eco-friendly campaigns from recyclable materials that have preserve oceans.
"Most of the people that are on social media burning their Nikes are older, maybe 55 plus," Dennis Fagan, founder and partner at Fagan Associates, a financial advisory firm that manages a total of $222.8 million and 6,595 shares of Nike on behalf of clients told Real Money.
He explained that Nike's target audience are consumers under 35 years old, which the political move alongside Kaepernick holds more appeal for.
The move to target millennials might be a wise one, as millennial retail spending is due to rise to 30% of total retail expenditure in America by 2020, according to a Statista report. As the market continues to blossom, an alignment with the demographics values will be an important avenue to their wallets.
Issue like corporate governance, social responsibility and environmental impact matter much more to millennials than their parents and grandparents, according to a Schroders report from 2016.
Nike's competitors are also becoming increasingly socially and environmentally conscious in their marketing and reach tactics.
In fact, Nike's competitors were also vying to sign Colin Kaepernick, according to a report from Yahoo! Sports.
The outlet reported that "Adidas and Puma were among multiple brands that had conversations about potentially building around Kaepernick if Nike failed to renew his deal."
Nike's critics say the company is alienating consumers in non-metropolitan areas.
"You can't always pander just to the coasts," Fagan said.
It easy to see why the sports brands are competing for Kaepernick: he's been able to galvanize national conversation about race, and it does not hurt that he has 1.9 million followers on Twitter, 2.7 million followers on Instagram and has been named Ambassador of Conscience 2018 by Amnesty International.
And Kaepernick is receiving is all this recognition and engagement without even being affiliated with any team.
"While America bills itself as the land of the free, the receipts show that the U.S. has incarcerated approximately 2.2 million people, the largest prison population in the history of humankind," Kaepernick has said in a speech earlier this year.
Other brands like Pepsi (PEP) have tried to tap into this social conversation in an effort to appeal to young people, to mixed results. Back in 2017, Pepsi had to scrap its controversial ad with Kendall Jenner and was criticized heavily for trivializing Black Lives Matter movement.
In a 24/7 digital consumer culture where news breaks on Twitter and consumers dissect the companies' every move, it does not go without notice when the brands strike the wrong tone.
Kaepernick is different. His ability to connect with young consumers and his socially charged commentary are the kind of hedged risk that is Nike prepared to make. A risk that is backed by millions of followers and supporters across social media, offline and his growing clout as a voice for his generation.
- Kevin Curran contributed to this article
