The Kentucky Derby Presented by Yum! Brands

Ok. Who watched the Kentucky Derby on Saturday? If you did, I trust that you were as appalled as I that the derby has now sold out. Literally. Its new official name is “the Kentucky Derby Presented by Yum! Brands.” Believe me, I couldn’t make this up. Nor could I conjure the seemingly endless stream of bad commercials sharing the good news that Yum! is the world’s largest restaurant company and parent to the likes of KFC and Taco Bell.

According to an article that appeared in the Wall Street Journal on Feb 1, 2006 (“Yum Brands, in Bid to Lift Profile, Hitches Name to Kentucky Derby” by Steven Gray), the objective was not to defile this sacred tradition, but to gain the attention of would-be investors. Really. David Novak, CEO of Yum! affirmed it in the WSJ article. The whole point was to attract individual investors. The article ended noting that it seemed like a good fit because Mr. Novak has attended the derby for 10 years, and Yum! typically entertains clients and employees at the event.

I cannot imagine a worse use of company funds. As CEO Mr. Novak has a fiduciary responsibility to shareholders, and this decision clearly demonstrates a serious lapse in judgment. I have no idea how much money this stunt cost the firm, but I can guess that it wasn’t even remotely cheap. And, I’m hard pressed to understand how increasing the individual investor holdings by 2-3% of total shares could even remotely be worth it.

If their Strategy was to increase individual investors, I would first ask why. What benefit is derived from increasing the individual investor base? The targeted increase wasn’t enough to substantially dilute institutional investor holdings. I just don’t get it. And, if I could be convinced that increasing the number of individual investors was a valid Strategy, my next thought would be to find a practical, cost effective way of doing that. Sponsoring the Kentucky Derby is neither.

It seems to me that the best way to attract investors of any type is to post attractive financial results month after month, year after year. P&G doesn’t have to worry that people will want to invest in Tide and can’t figure out how. I seriously doubt that’s a problem for Yum! either. Although, they could make the association more prominent on each brand website.

I cannot hide my disdain, partially because I hail from the fair Commonwealth of Kentucky. And, mostly because I can’t stand to see such poor business judgment.