Ropes & Gray’s Inaugural Consumer Brands Summit

Thank you to all of our clients and friends (new and old) who joined us last month for our first annual Consumer Brands Summit. Held September 19 at The Whitby Hotel in New York, the event examined key trends and developments in the consumer brands and retail industry. For those that joined us, we’ve compiled key takeaways for your reference. And for those that couldn’t make it this time, we hope to see you next year.

The main panel, moderated by Ropes & Gray partners Erica Han and Craig Marcus, offered the insights of prominent industry experts:

• Yen Chu, Chief Legal Officer, Tailored Brands
• Akiko Okuma, General Counsel, Vince
• David Shiffman, Co-Head of Consumer Retail, Solomon Partners

Panelists examined market conditions, business trends, legal developments and practical strategies for addressing challenges in the consumer brands industry. The conversation identified a number of issues facing consumer brands and their investors including: increases in consumer protection legislation since the pandemic, balancing the need to protect consumers and their data with the business (and consumer) benefits of hyper-personalization through artificial intelligence, and the emergence of brand management companies and IP monetization transactions.

Following the main panel, roundtable breakout sessions with additional moderators and panelists provided a deeper dive into the key topics of trends in M&A, social media and influencers, and ESG and data privacy. Topics covered during these interactive sessions included:

Trends in M&A

• After reaching sky-high valuations during the pandemic, many direct-to-consumer brands are seeing valuations moderate as investors shift back to “basics” in the form of a focus on bigger brands with longer track records and existing market penetration.
• More realistic valuation expectations are creating opportunities for companies with proven brands/products.
• Regulatory environment and market forces (e.g., Amazon) are leading to more creative and bespoke deal structures, and away from traditional M&A.
• Limited exit opportunities are steering private equity investors away from investments in traditional retailers.

Social Media and Influencers

• Companies must assess their own overall risk tolerance before deciding how to implement compliance with the recently updated FTC Endorsement Guides.
• The updated FTC Endorsement Guides make compliance significantly more burdensome, including an obligation to monitor influencers rather than simply relying on contractual protections. As a result, companies must decide which compliance efforts to prioritize while also striving to achieve their marketing objectives.
• There is a need for better training of influencers and marketing departments in order to mitigate risk to both companies and their influencers.
• Understanding that consumer engagement is key to a brand’s success, companies should ensure they are mindful of the legal implications of such activities – even “liking” a consumer’s social media post can bring potential liability to a company for unsubstantiated advertising claims.
• Trends in social media content development can simultaneously expand commercial opportunities and increase legal risks. Internal policies should be updated to address issues such as: use of music in videos, “stitch” and “reaction” videos, contests hosted on social media platforms, and AI-generated content.

ESG and Data Privacy

• Consumer brand companies are particularly affected by corporate social responsibility (CSR) legislation given their retail-facing client base. These include laws related to climate change, human rights, forced labor, deforestation, greenwashing, circularity, and a wave of CSR legislation related to the fashion industry.
• While companies may differing views on the relative significance of CSR compliance within the organization, panelists agreed that for the effort to succeed, the CSR compliance team must receive appropriate resources and must communicate with relevant knowledge partners across the business (e.g., HR, procurement, design, marketing).
• Many brands continue to grapple with concerns over forced labor in the production of their products, particularly where there is limited visibility into a product’s supply chain. One way that companies are attempting to manage this risk is by focusing diligence efforts, at least preliminarily, on high-risk suppliers. Several factors could cause a supplier to be deemed a high risk, including the product or service provided, the location of its operations, the existence or absence of certain policies and procedures, and its track record of compliance with those policies and procedures.

To learn more about Ropes & Gray’s work related to consumer brands, please visit our Retail & Consumer Brands page or reach out to your usual Ropes & Gray attorney contact.