War Boycotts Haven't Hurt Companies' Bottom Lines — Yet

For all the bottles of French wine that have been dumped stateside and the McDonald’s that have been vandalized across the sea, some analysts say war-related boycotts aren’t likely to do significant, long-term damage to business.

"We have an incredibly short memory about what goes on in the political arena when it comes to purchasing products," said Marshal Cohen, a senior industry analyst for the NPD Group, a market research company. "We’re very forgiving."

Though French wine and cheese makers have reported losses here in the U.S. and American chains like McDonald’s (MCD) have taken a hit in Europe, a number of industry experts predict the boycotts spurred by the war in Iraq will be relatively fleeting.

"I don’t think these things last," said Roben Farzad, a staff writer for Smart Money magazine. "I suspect all this will die down as we get farther and farther away from the war."

In reality, most businesses won’t be able to gauge the full effects of the boycotts for a few months because of the time lag between orders and shipment arrivals.

"It’s too soon to tell," Cohen said. "We’re still in the production cycle stage."

There is no denying, however, that some businesses have been feeling the effects of anti-French sentiment in the States and of anti-American sentiment in Europe, the Middle East and parts of Asia.

Some French restaurants in the U.S. have closed or reported a noticeable dip in business. And a Wednesday article in The Washington Post reported that the top American importer of French wines, W.J. Deutsch & Sons Ltd., has seen a 10 percent slump in sales in the past 60 days equaling a loss of thousands of dollars in revenues.

The Federation of Wine Exporters planned a Thursday meeting to hash out ways to cope and France’s main business federation, the Movement of French Enterprises, made an atypical public announcement about the dilemma, according to the Post.

"You’re seeing French wine companies start to complain that their wine has really suffered in terms of U.S. sales," Farzad said. "It’s also stinging the other way around. McDonald’s has been having a really tough time in Europe and the Middle East because it’s looked on as an American imposition on values elsewhere. Ditto for Starbucks (SBUX)."

In fact, Cohen predicted, the boycotts aimed at American companies might wind up being more detrimental than those targeting French and other foreign imports. McDonald’s, for instance, has already been hurt by lower international sales — partly because of the anti-American sentiment in other countries over the war and partly because of more longstanding protests against globalization and capitalization.

Cohen forecast that other American brands like Levi and Nike (NKE) and ventures like Euro Disney might also feel the heat.

"We’ve seen more from the other side of the ocean affecting our businesses and products than we’re seeing here," he said.

But other imports and exports haven’t seen a major war-related dent in earnings.

Despite reports that restaurants in France, Germany, Indonesia and other countries were taking Coca-Cola off their menus, the Atlanta-based company said Wednesday that its revenues had not been significantly hurt by anti-Americanism overseas.

"We do not feel there has been a reportable impact from this issue on our results," said Coke (KO) President and CEO Steve Heyer in a conference call with analysts after first-quarter earnings were released.

It reported a 10 percent spike in first-quarter revenues — from $4.08 billion last year to $4.5 billion this year — and a jump in net profit from 8 cents a share last year to 34 cents a share this year.

Cohen doesn’t think Coca-Cola or other popular American brands will suffer a lasting or severe impact.

"We’re not going to see the decline of the American cigarette business, the decline of the Coca-Cola business," he said.

Likewise, the predominantly French bottled water industry hasn’t experienced any major loss in sales, either — and probably won’t.

"Perrier is still flying off the shelves," Farzad said. "When a product is really a quality product, Americans forget the whole boycott thing."

Ironically, some French-sounding American companies — like California jeans company Paris Blues, intimate apparel designer Lily of France and others — have felt the anti-French sentiment.

Bakery and cafe chain Au Bon Pain posted signs in some of its Manhattan restaurants declaring it was an American, not a French, enterprise. And French’s, the mustard company, became the butt of more than a few jokes when it circulated a press release March 18 titled "The Only Thing French About French’s Mustard is the Name!"

"Recently, there has been some confusion as to the origin of French’s mustard," the statement said. "For the record, French’s would like to say, there is nothing more American than French’s mustard."

Cohen and Farzad said that the problem with nation-directed boycotts is that they often end up being misguided, hurting American workers employed by the companies and farmers who supply them more than the economy of the targeted country.

"It’s really counterproductive," Farzad said.

But many consumers who have participated feel it’s the only thing they can do.

"People are using that as a vehicle of expression about the lack of unity among nations," Cohen said. "This is becoming one of the few ways for the public to voice their concern."

In any case, there are some things that will likely never be boycotted at all, whether or not they seem representative of the hated country of the month.

"High-schoolers would still rather French kiss each other," Farzad quipped. "You’re not going to freedom-kiss a girl under the bleachers."