The coronavirus has put the world on pause. That has been devastating for many businesses, as social distancing, closures, and a lack of consumer demand have caused sales to plummet for many companies.
Some companies hit hard by this downturn simply won't survive. A number of beleaguered retailers, for example, were in major trouble even before the pandemic hit, and a wave of bankruptcies has already rolled through, with a few big brands completely dissolving.
There are, however, some companies that were very strong before the virus closed down the United States. Those brands — including two major players — should come roaring back when this situation resolves itself.
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Before anyone had ever heard of the coronavirus, Walt Disney (NYSE:DIS) and Starbucks (NASDAQ:SBUX) were flying high. Both had separated themselves from the competition in their spaces, and their futures looked bright.
The pandemic forced these two industry leaders to make major changes. Disney was the harder hit of the two: Movie theaters shut down, theme parks were closed, and the ad market dried up as companies stopped spending.
Starbucks wasn't hit as hard, as it already had drive-throughs at many of its stores and it had made a major investment in delivery. That helped it keep roughly 70% of its U.S. sales volume — an impressive achievement, but still a major drop. The coffee chain has been able to find a way to operate, but its core identity as a “third place” (meaning not work or home) has been temporarily sidelined.
Both of these companies need to be able to welcome customers back in order to return to normal. Starbucks has arguably adapted better to the current reality, but Disney has made some smart choices as well. Utilizing its film distribution rights for the Broadway musical Hamilton to release the show this July on Disney+ rather than in theaters in 2021, for example, likely added millions, if not tens of millions, of new subscribers to that streaming service.
Disney and Starbucks are slowly making their way back. The coffee company has been cautious when it comes to reopening its U.S. dining rooms, but it has reopened to normal business in much of China. That will eventually happen in its home market too. The same will be true for Disney, which will tentatively begin to reopen its Florida theme parks beginning July 11.
Disney and Starbucks will thrive
This won't be a quick recovery for either company, but Walt Disney and Starbucks will both eventually be stronger from this experience. The coffee chain has added millions of customers to its digital rewards program and has sped up the adoption of delivery. It has also evolved into a more agile company that will be able to serve in-store and on-the-go customers better.
Walt Disney has a more painful path back, as much of its business relies on people gathering together in close proximity. That may not happen for a while, which will delay the company's comeback. Theme parks opening with limited capacities will cut losses, but not add significant profit. Movie theaters opening under similar rules probably won't make traditional film releases a smart idea.
Eventually, however, the coronavirus pandemic will pass. That will leave Disney with a healthy pipeline of films ready to be released and a theme park division ready to meet pent-up demand. Even in a struggling economy, there will be demand for blockbuster films and family vacations.
And there will certainly still be demand for being in a third place (a Starbucks marketing strategy). Disney and Starbucks still have long roads to travel on their way to recovery, but if you take a long-term view, both companies should be in stronger positions five years from now than they were pre-pandemic.
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