Watch stocks you care about
The single, easiest way to keep track of all the stocks that matter...
Your own personalized stock watchlist!
It's a 100% FREE Motley Fool service...
The trickle has become a torrent. Companies that previously fell over themselves to be part of the Paula Deen cooking empire are scrambling for the exits after she admitted to uttering a single racial pejorative more than 30 years ago.
What started with the Food Network not renewing her TV show contract has now turned into a complete rout, with major corporations including Wal-Mart (NYSE: WMT ) , Target, Home Depot, and Novo Nordisk (NYSE: NVO ) all dropping their association with her.
Companies, of course, want to protect their image, and being associated with racism would do them no good. They understand they won't be harmed for cutting their ties, whether the charge is true or not, because consumers won't stop using their products or shopping at the stores because of it. But if they stay and it comes out that the epithets were more pervasive than we've been told, they'll feel the taint of the charge as well.
Yet in the wake of the brouhaha, it seems the companies may have misjudged what the public feels about this "scandal." Preorders for Deen's new cookbook have surged to the top of the best-sellers list at Amazon.com and her annual cruise aboard Royal Caribbean's Mariner of the Seas ship reports a response so overwhelming that an extra departure next year has been added (Deen does not have a relationship with the cruise line; it's booked through a travel agency).
Now, I'm not much of a fan of Ms. Deen's cooking style (though I did make a red snapper recipe of hers the other day that wasn't bad) but it seems a bit over the top for companies to be turning the cooking queen into a pariah. After all, Paula Deen has embraced Michelle Obama and has been embraced by Oprah Winfrey, the Revs. Jesse Jackson and Al Sharpton, and actress Stacey Dash. She brought the Neely cooking team to the Food Network and created lots of employment opportunities for black men and women. Hardly seems the way a racist would cook up a plot.
Yet it's also not much different from how corporations handled the contretemps associated with Tiger Woods' infidelity. Although Nike was willing to stand by the golfing great through his marital problems, Accenture ran away, as did AT&T, PepsiCo's Gatorade, and watchmaker Tag Heuer.
Even so, companies are willing to turn a blind eye when it suits them to some of the baser elements of society, such as Reebok trying to give its sneakers "street cred" by signing on rapper Rick Ross, only to be shocked -- shocked! -- when his lyrics embodied the misogyny the whole genre is infamous for.
There is a price companies do pay for dropping a celebrity endorser, and Advertising Age notes that Wal-Mart's indoor living division, where product lines are heavily tilted in Deen's direction, was one of the few bright spots in the retailer's last quarter, posting positive comps last month. Novo Nordisk also enjoyed a 35% increase in revenues to nearly $500 million on its diabetes drug Victoza last quarter, presumably partly as a result of its association with Deen, who became a spokeswoman for the drug after she was diagnosed with type 2 diabetes.
Some estimates suggest Deen generated nearly $100 million a year across her portfolio of TV shows, books, and cookware, and Forbes ranked her as the fourth-highest-earning celebrity chef in 2012.
But as we've seen time and again, as long as companies choose to develop relationships with celebrities who live in the public eye, we're going to have these recurring scandals, manufactured or not. Whereas some companies like Nike go out of their way to court controversy, others are thrust into the spotlight. And then there are those like Paula Deen's partners, who make themselves part of the story by feeding the frenzy that surrounds it.
They just shouldn't be shocked when it happens to them again next time.
The retail space is in the midst of the biggest paradigm shift since mail order took off at the turn of last century. Only those most forward-looking and capable companies will survive, and they'll handsomely reward those investors who understand the landscape. You can read about the 3 Companies Ready to Rule Retail in The Motley Fool's special report. Uncovering these top picks is free today; just click here to read more.