You would expect the leaders of multinational brands such as Chevron (NYSE: CVX) and Chick-fil-A to make decisions reflecting the amazing foresight and logical thinking that catapulted their businesses to their current valuations. Then weeks such as this take place that make your brain synapses fire off the thought "What was I thinking?" In moves paralleling the "so what?" decision by General Mills (NYSE: GIS) to make original Cheerios -- one of 12 varieties of the cereal -- free of ingredients produced by genetically modified organisms, Chevron and Chick-fil-A took the corporate bar for stupid to new heights. Netflix is now officially off the hook.
Sorry for blowing up your town -- have a pizza!
The tiny blue-collar town of Dilliner, Pa., located 50 miles south of Pittsburgh (where I live), was almost erased from the map on Feb. 11, when a natural gas well operated by Chevron exploded. OK, so the town was never in danger of being blown off of the map, but that doesn't change reality. A natural gas well exploded, ignited itself and an adjacent well for five days, and left one worker dead.
Chevron actually did a tremendous job to quickly quarantine the area and monitor the situation for safety personnel and workers, and it will soon move to cap the wells. That would have been a good place to leave the situation, but the company decided to reach out to the surrounding area.
And sodas (er, "pop", in Western Pennsylvania).
The multinational energy company purchased 100 gift certificates from Bobtown Pizza to hand out to residents as an apology for the disruption to their daily lives. (You can't make this stuff up.) As you can imagine, the gesture wasn't well received by everyone. What was Chevron thinking?
Breaking news: We're buying chickens in 2019
Consumer activism has reached new heights with the simultaneous rise of social media platforms and use of biotech crops, which a loud minority of consumers opposes. While using antibiotics to raise livestock and using the tools of biotechnology to create better products are two unique issues, both share a connection to the surge in consumer demands to the food industry in recent years.
Examples include Johnson & Johnson's removing of formaldehyde and 1,4-dioxane from its baby shampoo, Subway's removing of a preservative from its bread, and Kraft Foods' removing of two dyes from its foods. And of course, General Mills' offering of GMO-free Cheerios, although the move required little effort on the company's part, didn't change its stance on GMOs, and only makes up a small sliver of its product portfolio. It was only a matter of time before antibiotic-free meats made their way onto the list of demands.
As natural gas wells were ablaze in Dilliner, Chick-fil-A announced that it will serve only antibiotic-free chicken within the next five years:
We are collaborating with national and regional poultry suppliers to build a supply chain based on chickens raised with no antibiotics. We are asking suppliers to work with the USDA to verify that antibiotics are never administered from the hatchery to the processing plant.
What seems like a monumental step by Chick-fil-A is nothing more than a hyped press release that piggybacks on what the poultry market will resemble in 2019. You see, the U.S. Food and Drug Administration is already moving to finalize a voluntary program for animal pharmaceutical companies -- Zoetis, Elanco, Merial, Merck Animal Health, and the like -- to make the changes necessary for an antibiotic-free meat supply. From the initiative:
[A]nimal pharmaceutical companies can work with the agency to voluntarily remove growth enhancement and feed efficiency indications from the approved uses of their medically important antimicrobial drug products, and move the therapeutic uses of these products from over-the-counter (OTC) availability to marketing status requiring veterinary oversight.
Antibiotics are often added to animal feed to boost the growth of various livestock. However, antibiotics are not always used in chicken production, and many suppliers already offer antibiotic-free options. That, coupled with the new program from the FDA, means it's highly likely most major retail food outlets will be serving antibiotic-free chicken in the next five years. Why does Chick-fil-A get a press release?
Foolish bottom line
Chevron, Chick-fil-A, and General Mills understand that it's important to win the hearts and minds of consumers. The oil and gas industry doesn't face consumers directly, so perhaps that partially explains the swing-and-miss pizza and pop offering to the town of Dilliner, but it doesn't make the olive branch any more bearable. Meanwhile, Chick-fil-A and General Mills do interact directly with consumers, which explains their attempts to grab headlines whenever possible. Unfortunately, that doesn't make their desperation any less obvious.
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