Memo: The Two Most Important Men in DTC Beef


Americans do not eat more beef than they used to. The average person ate about 60 pounds of it last year, roughly the same as in 1950 and nearly a third less than at the peak in the late 1970s. Chicken passed beef for good in 2010, and the country now eats close to 100 pounds of it a year against 60 of beef. By every measure of the plate, beef is a mature category that stopped growing half a century ago. And yet its price just set a record, ground beef is up 72% since 2020, the national herd is the smallest since 1951, and demand has not cracked. It is a staple people eat no more of than their grandparents did, now priced like a luxury and still moving off the shelf. That gap is the whole story, because the thing selling beef is no longer hunger. It is meaning, and someone is manufacturing it.

The herd is the smallest it has been since 1951, and demand still will not break. 

Ask who runs American beef and the honest answer is four companies. JBS, Cargill, Tyson, and National Beef control roughly 85% of processing, up from 36% in 1980. They are the chokepoint, and right now they are also losing money on the product, squeezed by the tightest cattle supply in three-quarters of a century. I wrote about this four-company concentration in 2022, the year Sysco sued them for price fixing; three years later they are the subject of a Department of Justice antitrust investigation. The packers move the tonnage but they have never owned the heart of the American beef consumer.

The two who do own it are the subject of an argument 2PM has been making since 2020, when I wrote that the line between media and commerce was dissolving: publishers would learn to sell, brands would learn to publish, and the advantage would settle on whoever fused audience and conversion into one operation. The example is more than a century old. Michelin sold more tires by publishing a guide that gave drivers a reason to wear them out, burnt rubber and a good dinner moving together.

Apply that to beef and the map redraws. The value sits at the two ends of the line. One end is the audience that creates demand. The other is the relationship that captures it and holds onto it. The middle, the feedlots and the packers and the eighteen-month commodity cycle, is turning into a pipe that carries other people’s value. One man holds each end, and the interesting thing about Taylor Sheridan and Mike Salguero is that they are arriving at the same place from opposite directions.

The timing makes both men matter more, not less. The USDA counted 86.2 million head on January 1, the fewest since 1951, and the beef cow herd that determines future supply sits at its lowest since 1961. Retail beef hit a record $9.64 a pound in April. Ground beef cleared $6.70, up about 72% since 2020, and ribeye is pushing $22. Through all of it, demand held; Americans are eating roughly 13% more beef than the country produces. A staple got 72% more expensive in five years and the consumer did not flinch, and when demand behaves like that, price is not the thing moving it. Meaning is. Someone is manufacturing the demand, and it is not the people raising the cattle.

Sheridan: the publisher who became a retailer

I wrote about Taylor Sheridan’s DTC gamble in December 2022, the week his fictional Duttons started arguing about beef margins on basic cable. The gamble paid off.

Yellowstone ran from 2018 to 2024 and routinely beat the four broadcast networks head to head. Its finale drew north of 11 million viewers in a single night, and the final-season premiere reached past 16 million across its airings. Stack the prequels, 1883 and 1923, on top of the rest of his slate and Sheridan is, by most measures, the most valuable creator working in television, a King Lear in a Stetson built at network scale.

He did not stop at filming the cattle business. He bought it. He holds Bosque Ranch in Texas, and in 2021 he led a group of investors to take the legendary Four Sixes off the market, a property whose divisions run to some 266,000 acres and rank among the better Angus operations in the country. He launched Four Sixes Ranch Brand beef, sold direct and sourced from the Sixes and a vetted network of ranches, and set 6666 sauces, seasonings, grills, and apparel beside it. There is a Four Sixes steakhouse on the floor of the Wynn Resort and Casino in Las Vegas. And recently, he stood in front of the National Cattlemen’s Beef Association and made the direct-to-consumer case to the cattlemen themselves.

The masterstroke is the part I flagged in 2022. In the final season, Sheridan wrote the DTC thesis straight into the script: Beth Dutton tells her father to stop selling the animal and start selling the cuts, to go vertical and reach the buyer directly, “because a live cow brings garbage money and a good steak brings thirty dollars.” Then the show pointed its audience at a real store selling real beef from his real ranch. It was native advertising at the scale of a broadcast network, and it cost him nothing. He does not buy ads; the show is the ad. He never argues that you should want beef, or the life that produces it. He makes you want both, by shooting the rancher’s life as the one worth having. This is the publisher-turned-retailer half of linear commerce, run further than anyone in or near Hollywood has managed.

The cruel irony is in the timing. Sheridan made the rancher aspirational at the exact moment the rancher is vanishing. The country lost roughly 17% of its cattle operations in five years, the median farmer is 58, and the herd is at a 75-year low. The story is running one way and the economics the other, and the gap between them, between how Americans feel about beef and what is happening to the people who raise it, is the prize. Sheridan holds it.

Salguero: the retailer who is becoming a better publisher

The other end of the line belongs to Mike Salguero, and he came at it from the opposite side.

He built the most trusted relationship with the modern beef consumer that exists, and he did it without a packing plant, a retail shelf, or a dollar of venture money. ButcherBox began in 2015 as a Kickstarter that raised $215,000 against a goal near $30,000. It has since grown past $600 million in annual revenue, profitable from its first sale, shipped to something like two million households, and never taken outside money. Salguero owns about three-quarters of it; his employees own close to a third. He turned a commodity into a subscription and a transaction into a relationship, and he taught a generation of buyers to ask where the animal came from. Oh, and by the way, ButcherBox’s retail distribution has begun to accelerate; it is now sold in Costco, Target stores, and a growing more.

That relationship is the asset, and inside it Salguero has found something no advertising budget can buy. His membership quietly includes hundreds of the most influential people in the country: athletes and founders, actors and broadcasters, military and intelligence operators, doctors who shape health policy, names from across the full width of American politics. None of them was paid, and none of them is an endorser. They bought the product and kept buying it, which is the one signal of quality money cannot purchase. A brand would normally spend years and a fortune to assemble a roster like that. It is already sitting in his customer file. The work now is the layer that activates it: an invitation-only tier with a concierge and first access for the members who matter most to the brand.

If companies like Good Ranchers sell to a political tribe, ButcherBox sells to a table full of asymmetrical ideals and opinions. His membership became the conduit. A company with that kind of relationship can carry its own message to market, which is the retailer becoming a publisher, built outward from the relationship the way Sheridan built inward from the audience.

He is aiming all of it at a thesis and a conviction. The thesis is that beef belongs at the center of American nutrition, arriving precisely as the GLP-1 era trains the country to treat food as something to minimize. The conviction came the hard way. Salguero used to distrust corporations, then decided the answer to bad corporate behavior was not to leave the system but to build something disciplined enough to win inside it. The problem was never capitalism; it was carelessness. Retail is extending the relationship now, through Target and Costco, then Whole Foods and Kroger and Publix, toward thousands of doors and a billion dollars in revenue. He has the one direct line into the American household, and he is turning that line into an amplified channel.

The convergence

Set the two against each other and the same shape appears. Sheridan built the audience and bolted commerce to it; Salguero built the commerce and is bolting the audience to it. Both are walking toward one position, the company that owns the story, the relationship, and the sale inside a single loop. That is linear commerce finished, and in beef, two men are most of the way to it from opposite starts.

The older name for the method is Bernaysian. A century ago Edward Bernays sold America a heavier breakfast by getting doctors to recommend it, and bacon and eggs became the national meal. He called the method propaganda before the word curdled, and meant by it the manufacture of demand through trust and narrative rather than the pitch. Sheridan manufactures the desire; Salguero manufactures the trust. Neither one sells beef the way the business sold it for a hundred years, by the pound and the case and the shelf. They sell meaning, and in a market where a staple costs 72% more than it did five years ago and the demand still holds, meaning is the only thing that explains the chart. Salguero, for whatever it is worth, built the company on “free bacon for life”, a move Bernays would have admired.

The question worth watching is not what the packers do or where the herd bottoms out. The next contest in beef is not the shelf, and it is not the box. It is the answer.

When a shopper asks an AI agent where to buy the best beef, the win goes to whoever can prove, in structured and verifiable detail, where the product came from, and that is an operations problem before it is a story problem – it is the problem Salguero has spent a decade solving. The two halves of this loop are not equally hard to hold. An audience can be rented or bought, and brands assemble one every day with a campaign and a checkbook. The operation underneath ButcherBox cannot be bought at any price. Salguero ships frozen protein to two million households on a cold chain that does not fail, keeps them on subscription, and turns a profit doing it, on revenue per employee most of his venture-funded peers never reach, without having raised a dollar to get there.

He has the grocery shelves opening at Target and Costco, and he already holds the verified provenance the agent will ask for. Sheridan can manufacture the wanting but he cannot build that, and wanting without the operation to capture it runs downhill to whoever has built one. Sheridan made America crave the culture of beef again through years of sustained propaganda. Salguero is the one who can put it on the porch, next month and the month after, at a scale and a margin no story can fake.

I believe that when the loop finally closes, it will close around the operator.

Opinion By Web Smith

Memo: The Tomahawk Tax and Sparkling Water Can

On aluminum, the war economy, and the consumer brands that will not survive the next five years. This essay is a feature post for the NATSEC @ 2PM briefing series.

I was in the Carolinas, earlier, when the conversation in a small meeting turned to aluminum, and not in the way it turns at a beverage conference. This was not packaging weight, sustainability narrative, or the standard pieties of the can. The room was a small one, a glass table and the kind of muted hospitality that signals money is in the process of being moved, and someone at the end of the table, defense-adjacent in the way that certain operators are now, laid out what they were modeling on a five to seven year horizon. The following was attributed and cleared accordingly.

The model was designed against a thinned smelter base, munitions replenishment, allied stockpiles, the per-unit aluminum content of a Tomahawk against a Patriot interceptor against a loitering munition flown out of a shipping container by a defense-technology startup that did not exist in 2019.

The horizon, a word repeated more than once, was five to seven years.

I have heard a lot of forecasts in commerce, and most of them are a performance of optimism for an audience that has already paid to hear them. This one was not. It was the math of a strategic input being absorbed by a buyer that does not negotiate, on a timeline long enough to matter and short enough to act on, and I have not stopped thinking about a twelve ounce can since.

The story has a shape, and the shape is older than the industry it threatens.

The Read From the Chart

The number, as of the most recent close on the London Metal Exchange, is roughly $3,385 per tonne. The chart on Trading Economics is a four-year line of memory: an all-time high of $4,103 in March of 2022 when Russia entered Ukraine and a different commodity scare ran through the global supply, a long drift through the back half of 2023, and a steep ascent through 2025 and into the first quarter of 2026 that has carried the price up 25.84 percent against the same week last year and up 9.14 percent against the prior month. The same model puts the twelve month forward at approximately $3,616 per tonne, which is to say within reach of the 2022 high.

Three forces are pulling on the chart, and they are not the kind of forces that resolve themselves through a single quarter of resupply.

The first is acute and geopolitical. In March, Iran struck targets across all six Gulf Cooperation Council states in what the United States and Israel have referred to as Operation Epic Fury, and the operational consequence for global aluminum has moved faster than the consumer press has reported. Qatar halted its joint refinery operation with Norsk Hydro, Bahrain’s Alba declared force majeure on all deliveries, and roughly ten percent of global primary supply now sits in a region operating under siege conditions, with LME and COMEX inventories already near record lows before the strike package was authorized. The market response was not panic. The market response was reprice, and the reprice has held.

The second force is structural. China, which produces approximately sixty percent of the world’s primary aluminum, has imposed an annual production cap of 45 million tonnes, a self-imposed ceiling designed to manage overcapacity and the carbon profile of its heavy industrial sector. Indonesia, which has been the consensus answer to the question of marginal capacity, is constrained by energy costs and by a regulatory regime that has made greenfield smelting more difficult rather than less. There is, in other words, no swing producer of consequence, and the absence of one is the condition the market is now pricing.

The third force is political and domestic. The fifty percent tariff on imported aluminum, including imports from Canada, which has been the largest source of beverage-grade can stock in North America for decades, passes through to packaging in the kind of penny increments that look modest on a slide and feel structural on a profit and loss statement. Zevia, which is publicly traded and therefore obligated to disclose what private competitors can keep quiet, has booked an incremental $5 million in 2026 aluminum costs attributable to tariffs alone. That is one mid-cap brand making one disclosure on one quarter, and the disclosure scales across a category that has been built on the assumption of cheap, abundant, recyclable, infinitely available aluminum.

The chart is telling operators something the salesforce cannot, and the operators in the Carolinas were listening to it.

A Reminder From 1941

The first time aluminum became geopolitics, it nearly cost the United States the war, and the history is worth a careful read because the architecture of the problem is more familiar than the trade press tends to remember.

In 1939, Germany was the world’s leading producer of primary aluminum, and the Reich had built that capacity through a combination of domestic investment and cartel agreements to which Alcoa, the American monopolist of the period, had been at least a tolerant participant. R. S. Reynolds, the foil entrepreneur, traveled to Europe in the same year, saw what he saw, and came home alarmed enough that he mortgaged his existing foil plants to fund new smelters in Listerhill, Alabama and Longview, Washington, because he could not move Washington fast enough to do it for him.

By the time of Pearl Harbor, the United States had a problem the records describe in plain language. Glenn L. Martin required roughly 16,000 pounds of aluminum to build a single medium bomber. President Roosevelt’s plan called for 50,000 aircraft per year. That math required 400,000 tonnes of capacity, and Alcoa had committed to 187,500. The Secretary of the Interior at the time, Harold Ickes, told the press, plainly, that if America lost the war it could thank the Aluminum Corporation of America.

What followed is the part of the story that the contemporary business histories tend to skip, and it is the part that matters most for the present analysis. The federal government did not negotiate with the monopoly; it built around it. The Defense Plant Corporation broke ground on three new smelters in the Pacific Northwest, the Bonneville Power Administration appropriated $2 billion to multiply the generating capacity of the Columbia River hydroelectric system by a factor of six, and one well-cited estimate credits Grand Coulee power alone with producing the aluminum in one-third of the American aircraft built over the course of the war. Reynolds, using a Norwegian process that Alcoa had refused to license under cartel discipline, added 450,000 tonnes of capacity inside U.S. borders during the war years, and Aluminium Limited added another 300,000 in Canada. By 1941, U.S. primary production had crossed one million tonnes for the first time in history, and by 1945 the Supreme Court had ruled that Alcoa had monopolized the American market and ordered its remedy.

The lesson, preserved in the institutional memory of the Office of the Secretary of Defense industrial base shop and in a small handful of business school case studies, is that aluminum is not a commodity in the way that wheat is a commodity. It is a strategic input, and when the country requires it, the country acquires it. The price you pay for a can is the residual of what the country did not need in a given quarter, and that residual is the variable that the operators in the Carolinas were attempting to model.

We are about to relearn the lesson, and the relearning is already underway.

The Replenishment

The Pentagon’s Munitions Acceleration Council, which is a body that did not exist three years ago, issued a memo at the end of April naming fourteen “critical” munitions for fast-tracked, multiyear procurement, and the list reads like the inventory of a campaign that has been spent down to the studs. Twelve of the fourteen are legacy systems: Patriot PAC-3, Standard Missile-3 Block IB at $896 million for fifty-two missiles and components, Standard Missile-6, Tomahawk in two variants, AMRAAM, JASSM, LRASM at $473 million split across the Air Force and the Navy, and THAAD. The remaining two are emerging systems: a low-cost containerized cruise missile program in which Anduril, CoAspire, Leidos, and Zone 5 will collectively produce more than 10,000 units beginning in 2027, and Castelion’s hypersonic Blackbeard, contracted under terms that require a minimum of 500 missiles per year once testing validates.

The 2026 spending bill funds the list at $6.3 billion, which is $1.9 billion above the administration’s original request, with multiyear procurement authority running through fiscal year 2032. Another $500 million is appropriated for solid rocket motor industrial base expansion, workforce development, and supplier qualification. An additional $2 billion was added to the $25 billion reconciliation tranche allocated last summer. The total U.S. defense budget for 2026 is approaching $1 trillion, which is approximately 39 percent higher than 2021, and NATO defense expenditure is now estimated at $1.4 trillion. None of these numbers, on their own, are surprising to anyone who has been watching the geopolitical situation since 2022. The interaction of these numbers with a strategic input that the market has just repriced by roughly twenty-five percent year over year is a different conversation, and it is the conversation that the consumer category is not yet having.

A Tomahawk uses aluminum. A Patriot interceptor uses aluminum. A loitering munition is, in structural terms, a lightweight aluminum airframe wrapped around a warhead, an electronics package, and a battery. Every drone in the autonomous fleet that the defense-technology investor class has been funding requires aluminum, and the new low-cost containerized cruise missile program has been deliberately designed for affordable mass, which is the contracting term of art for thousands of units per year of an airframe whose cost basis is structurally a function of aluminum, electronics, and propellant.

Mark Cancian at CSIS has placed the production timeline at three to four years before output meets demand, and until then, allied procurement runs behind U.S. requirements rather than alongside them. The Gulf states want their air defenses replenished, Ukraine still wants Patriots, Japan wants Tomahawks, and Europe is mobilizing its own production base under the European Defence Fund. The aluminum coming out of a Bahrain smelter under siege conditions is not coming to a beverage can factory first, and it is not coming second either.

Where the New Money Has Gone

The second leg of the squeeze is capital, and the magnitude of the reallocation has not been adequately metabolized by the consumer commerce press.

Venture capital deployed approximately $49.1 billion into defense technology in 2025, which is nearly double the $27.2 billion deployed in 2024 and the largest annual figure that PitchBook has recorded. U.S. equity funding in the sector tripled to $14.2 billion, with American startups capturing the lion’s share of the global pool. Manufacturing-focused defense investment, which is the unsexy capex layer where smelting capacity and forging lines and CNC throughput live, rose to $4.7 billion across 39 deals, up from $2.6 billion across 24 deals the prior year. Defense-technology exits hit a record $54.4 billion, more than triple the $18.2 billion of 2024, and most of the exit volume cleared through acquisitions rather than public offerings.

The headline rounds are familiar to anyone who has been reading the NATSEC @ 2PM briefings over the past eighteen months. Anduril raised $2.5 billion in June at a $30.5 billion valuation. Saronic raised $600 million for uncrewed maritime systems. Helsing raised $694 million in Germany. Hadrian, the defense-manufacturing startup, took $260 million from Founders Fund and Lux Capital. Castelion, which most consumers have never heard of, has just signed a Pentagon agreement that obligates a minimum 500-missile annual production rate. The pattern is consistent, the capital is patient, and the policy environment is catching up to the capital rather than the other way around.

The argument that 2PM has been making across the Drop Economy essay and the dual-use thread that preceded it is the argument that matters here. The same Silicon Valley funds that wrote consumer brand checks in 2021 are writing defense manufacturing checks in 2025, and the operator talent that built growth-stage consumer brands is being recruited into defense operations and ground-truth manufacturing roles. Capital is finite, attention is finite, and operator bandwidth is finite. The reallocation is already complete in the rooms that matter, even if the trade press has not finished reporting it.

The downstream consequence for the consumer category is straightforward. When a tier-one venture fund leads a $260 million Series C in a defense manufacturer at a clearing multiple, the same fund’s limited partners reset their expectations across the rest of the portfolio. Premium consumer brands with thin margins, soft moats, narrative-led positioning, and no defensible distribution are no longer the asset class. They are the cautionary tale told at the limited partner meeting, and the well-funded brands have already absorbed this and adjusted their internal messaging accordingly. The brands that have not absorbed it are still printing pitch decks that assume a 2021 capital environment.

The Math of the Can

It is worth running the numbers cleanly, with every operator anonymized, because the math is unambiguous and the math is where the conversation should be moving.

A twelve-ounce aluminum can, sold in volume to a beverage brand under a long-form supply agreement, has historically priced somewhere between 10 and 13 cents for the empty can itself, with sleek and slim formats running slightly higher and standard formats slightly lower. Add fill, label, contents, freight, and slotting, and the fully loaded cost of goods on a single unit lands somewhere between 25 and 35 cents, depending on the brand’s scale and the terms of its co-packing relationships. Packaging, taken together across aluminum, glass, and plastic, accounts for roughly one-third of total raw material cost in beverage manufacturing, and aluminum is the largest single line within packaging for a sparkling water brand built on the slim can format.

A premium sparkling water brand sells to a major grocery account at somewhere between 55 and 75 cents per unit at wholesale, with co-packer and distributor margin layered in. Direct-to-consumer pricing on a 24-pack runs between $30 and $48, which is $1.25 to $2.00 per unit on the retail face, with freight and last-mile fulfillment absorbing most of the apparent premium. Gross margins at wholesale run between 35 and 50 percent on a good quarter, and at DTC between 50 and 65 percent on the contribution line before customer acquisition cost.

A 25 percent rise in aluminum, holding all other inputs equal, adds roughly 3 cents to the cost of a single can. On a 65-cent wholesale unit, that is four to five percentage points of gross margin compression. If aluminum tracks the Trading Economics twelve-month forward and adds another seven percent on top of where the chart already sits, the compression deepens to five to seven points by the middle of 2027, which on a brand operating at a 38 percent wholesale margin amounts to approximately fifteen percent of gross profit erased before a single dollar of customer acquisition spend has been deployed.

For omnichannel sparkling water, which is to say the brands selling 24-packs into apartment doorsteps in coastal metropolitan markets, the compression is structurally worse rather than better. Freight is itself aluminum-adjacent in the sense that trucking, fuel, and corrugated packaging all carry their own inflation profiles, and the DTC consumer base is the segment most willing to trade down at the moment that price moves on the digital shelf. Premium DTC sparkling water as a category has never had pricing power in the way that Poppi or a small handful of cult-coded competitors have had pricing power. It has had narrative power, and narrative power compresses faster than COGS does when the underlying input is no longer underwriting the deck.

Three Anonymized Archetypes

Brand A is well-capitalized, holds national distribution, has dominant shelf presence at scale, and has hedged aluminum forward through structured supply agreements with its can converter. The brand has the volume to negotiate sleeve pricing on cans, the operator depth to manage co-packer leverage actively, and the marketing efficiency to absorb a one to two point gross margin hit through promotional rationalization rather than retail price. Brand A will look fine on the next earnings call and the call after that, and Brand A will quietly acquire one or two distressed competitors in 2027 at multiples that look like opportunism in retrospect.

Brand B is mid-tier, venture-funded, operating somewhere between $40 million and $80 million in revenue, with premium DTC and natural channel presence. Brand B has four to six months of can inventory on the books and a co-packer contract that resets in the third quarter. The brand’s pitch deck has, for the last two raises, shown a path to 65 percent contribution margin at scale, and the deck does not survive contact with aluminum at $3,600 per tonne. The next raise will be a flat or down round if it happens at all, or a strategic sale to a category platform, or, in the most common case, a tightening exercise that ends in a retrenchment from DTC and a return to wholesale at lower velocity and tighter terms. Some of these brands will not raise at all, and some will burn down to a sale that the press release will describe in flattering terms even when the deal terms are not.

Brand C is indie, founder-led, operating between $3 million and $11 million in revenue, premium-positioned without institutional capital. The math at Brand C is the cleanest and the most brutal. Without scale leverage on can pricing, without hedging, and without a Series B war chest, Brand C either pivots to a higher-margin product extension, which is to say powders, concentrates, functional ingredients, or formats other than the slim aluminum can, or it does not exist in any commercially meaningful form by 2028. The brands at this tier that exercise fiscal discipline will pivot, and the brands that have been operating on aesthetic alone will not. The acquisitions at this tier will be few, and they will not be flattering. Strategic buyers do not pay premium multiples for compressed-margin businesses in categories they already understand, and the exits, where they happen, will be classified as talent-and-IP acquisitions rather than as category roll-ups.

Who Survives the Next Five Years

The survival profile of the category, looking out across the procurement window the Pentagon has now made explicit through 2032, is legible enough to plan against, and the planning is the point of this essay.

The brands that survive will share four characteristics, and the characteristics compound on each other in the way that brand defensibility compounds across the moats that 2PM has been mapping for the better part of a decade.

The first characteristic is structural cost advantage, which means scale, vertical integration, or proprietary formulation that allows the brand to move at least part of its volume out of pure aluminum dependency. The energy drink houses that already own their can supply contracts qualify, the functional beverage brands building in formats other than the standard twelve-ounce slim sleeve qualify, and the hybrid-format players who can shift between can, glass, bottle, and powder without rebuilding the line qualify.

The second characteristic is real pricing power, which is less common than the founder decks claim and which has very little to do with the price the brand currently charges. Real pricing power means that the consumer will not trade down if the brand raises retail by ten percent, and the test for pricing power is the cultural meaning, ritual context, or flavor specificity that a competitor cannot replicate. Most premium sparkling water does not pass the test. The category has taste, which is a substitute for pricing power until the substitute becomes too expensive to maintain.

The third characteristic is distribution moat, which is rare and getting rarer as retailers consolidate their own private-label sparkling water programs to capture exactly the contribution margin that a national brand can no longer hold. The brands that own the cold case, the route, the cooler placement, or a category captaincy at a grocery banner are the brands that will be permitted to absorb input inflation without losing shelf, and the brands that depend on shelf rental are not.

The fourth characteristic, which 2PM has been arguing across the Universal Commerce Protocol work in January and across the Drop Economy work in April, is the editorial and retrieval layer that the AI age now requires. The brand that controls the vocabulary that the answer engines use to describe a category will own that category through the procurement window, and the control is built through editorial discipline, narrative density, and community signal rather than through performance marketing spend. Palantir is a defense and data company that has built a Shopify storefront operating as an investor relations channel that happens to accept Apple Pay, and the brand has earned more cultural coverage in eighteen months than most CPG operators earn in a decade.

The infrastructure that made it possible is the same infrastructure that powers any merchant on the platform. The lesson is not that a sparkling water brand should sell defense merch, and the lesson is not that a sparkling water brand should pivot to drone parts. The lesson is that editorial control of the answer engine layer compounds across exactly the kind of category compression cycle the next five years will deliver, and the brands that build the layer now will be the brands that the AI describes to a future customer who has not yet typed the question.

The Verdict

Is the squeeze coming. Yes, on the procurement schedule the Pentagon has already published, with the capital flows the venture data has already confirmed, and against the chart that is sitting on Trading Economics for anyone who cares to look. About the timing, yes. About the magnitude, yes. About the structural nature of the move rather than a cyclical one, yes on every count that the data supports.

About the consumer category response, partially. The well-funded brands will be fine, in the way that well-funded brands tend to be fine in a compression cycle, and the brands operating with some semblance of fiscal responsibility will pivot to higher-margin formats and survive in a smaller, more profitable, less narratively exciting form than the decks of 2021 promised. There will be a number of survivors. There will be very few acquisitions, and the acquisitions that occur will not be flattering on the terms the press releases will describe. The remainder of the category, which is to say the brands that have been operating on aesthetic alone in the absence of pricing power, distribution moat, cost advantage, or editorial discipline, will return capital gracefully or they will not.

The conversation in the Carolinas did not end with a resolution, in the way that the most useful conversations tend not to. Someone refilled a glass, someone made a joke about the price of a Patriot interceptor, and the room broke up into the smaller conversations that follow the formal agenda. I drove back to the hotel thinking about aluminum, about the country, about the five to seven year window the room had been modeling, and about how few of the brands at the table when I started this work will be at the table when the procurement cycle clears.

A strategic input is going to war again, in the way that strategic inputs have done before, and the brands that prepare for it now will exist in 2030 in a recognizable form. The brands that wait for the chart to confirm the trend will discover, as every operator who has ever sold a hard good through a hot input eventually discovers, that the chart is not weather, the chart is geology, and the time to plan against geology is before the geology reaches the shelf.

वेब स्मिथ द्वारा शोध और लेखन

Reporting reflects aluminum spot pricing and forecasts as of the most recent close on the London Metal Exchange via Trading Economics; Pentagon Munitions Acceleration Council disclosures and FY2026 appropriations; PitchBook, CB Insights, and Crunchbase defense-technology venture data for 2025; SIPRI global defense expenditure data; CSIS analysis on munitions surge production; and historical accounts from the U.S. wartime aluminum buildup of 1939 through 1945, including the Defense Plant Corporation program and the antitrust resolution of the Alcoa monopoly.

Deep Dive: Is Chip Wilson Right?

On brand harvesting, the lululemon proxy fight, and the rebuild the AI age requires. Chip Wilson’s April 29 letter to lululemon shareholders is the most coherent statement of his case to date.

The campaign that preceded it has produced trucks parked outside the Vancouver headquarters, a full-page Wall Street Journal advertisement, a website called CreativityFirstlulu.com, and a string of SEC filings that reads at times like a founder working out his grievances in public. The letter is the document that earns a sustained read. The argument is that the lululemon board has spent five years engaged in what Wilson calls brand harvesting, that the harvest has cost shareholders roughly seventeen billion dollars over five years, and that the recent appointment of Heidi O’Neill from Nike is further evidence that the directors do not understand the business they oversee. Wilson is not running for the seat himself. He has nominated Marc Maurer, Laura Gentile, and Eric Hirshberg, and he is asking shareholders for three votes on the GOLD card at the 2026 Annual Meeting.

The question worth answering is whether he is right.

Mostly yes, partly no, and the answer matters more than the verdict because the diagnosis Wilson is offering is incomplete in a way that will determine whether his nominees, if elected, can actually fix what they have been hired to fix. The harvest is real and the governance pattern is rotten.

The prescription is a 2014 prescription, and the work that lululemon needs done is a 2026 problem.

Wilson is right about the harvest, and the harvest has been visible in the data for some time. 2PM readers have followed this argument across the last decade, and the previous September annual report on athleisure described lululemon as a scale incumbent managing North American softness with a varsity-tennis lifestyle pivot and real execution risk on refresh cadence (see 2PM Annual Report: Athleisure 2025). That is the polite version of what Wilson is now screaming through the proxy filings. The Disney collaboration is the clearest single example of brand-eroding short-termism in recent retail history, and Wilson rightly anchors his letter to the Jefferies analyst note from November 2024 that flagged the partnership as inexplicable on brand grounds. A mass-market collaboration with mass-market intellectual property is not a strategy for a premium-positioned brand. It is the opposite of one.

The financial evidence is consistent with Wilson’s framing. Eight consecutive quarters of flat or declining same-store sales in the Americas. A 65.9% loss in shareholder value over a less than two-year period. A peer median underperformance of 19.5% on a one-year basis and 63.6% on a three-year basis. Approximately $17 billion in value evaporated over five years. The numbers are Wilson’s, the source is FactSet, and the trajectory is undeniable. Active bottoms category data from Circana, cited in the September athleisure report, shows the broader denominator slipping by roughly twelve percent year over year, which means lululemon is not merely underperforming a healthy category; it is underperforming a softening one. Markdowns at the brand have reached levels that retail analysts now describe as harmful to its premium positioning. Outlet inventory is too plentiful. The promotional credit card discounts that Wilson cites are the kind of mechanism that any premium brand operator should recognize as the late stage of harvest rather than as a marketing program.

There is a longer 2PM argument behind this, and it predates the proxy fight by years. In No. 290: On DTC Brand Defensibility, the position was that two things could be true at once. Stodgy old brands are run by career executives who do not understand agility or innovation. And most direct-to-consumer brands fail because they are run by former management consultants and recent MBA grads who do not value the powers of brand, relationship, and community. Wilson is now applying the second half of that thesis to a company old enough to have inherited the first half, and the diagnosis fits. The board he is describing has the texture of a private equity governance committee imported into a creative business that does not respond to private equity governance discipline. The pattern is real, and shareholders should treat the diagnosis seriously even if they find Wilson’s delivery uncomfortable.

The Governance Pattern Is Rotten

Wilson’s structural critique is also accurate. A staggered board with overlapping Advent International relationships across four directors and the chairs of two-thirds of the committees is not independent oversight; it is a club. The Lead Director and the independent Chair both share a network with the same private equity firm. The Corporate Responsibility, Sustainability and Governance Committee was led by an Advent managing partner for nine years. Recent director refreshment has, by Wilson’s count and consistent with the company’s own proxy disclosures, prioritized financial and operational pedigree over creative leadership, technical apparel expertise, and premium brand management. The result has been a fourth consecutive failed CEO succession and a board that the market has told plainly, through a fifteen percent drop in the five days following the O’Neill announcement, that it does not trust to pick the next operator.

Wilson’s broader observation that technocratic MBAs have taken control of a creative business and that the business has suffered is not new. It is not even new at lululemon. What is new is that he has paired the observation with a specific governance proposal: declassify the board, refresh through three independent nominees with brand and creative expertise, and create a Brand Product Committee modeled on the structure that has helped Amer Sports outperform the S&P 500 by approximately 89 percent since its 2024 IPO. Maurer was Co-CEO of On Holding during a period when the company nearly quadrupled its revenue. Gentile built espnW into a multi-media business and led ESPN to its position as the most trusted brand in sports media. Hirshberg ran Activision Publishing through a period in which the stock rose roughly 500 percent. None of these are weak nominees. All three would be welcome additions to almost any consumer board.

So far, the case is a strong one. Wilson is right that the harvest happened. He is right that the governance is structurally incapable of stopping it. He is right that the next CEO needs creative and brand support on the board that is not currently present, and he is right that the timing of the O’Neill announcement, before the proxy contest is resolved, was an act of board self-protection that prioritized the directors’ personal positions over the shareholders’ interests. The proxy contest, judged on its narrowest grounds, deserves shareholder support.

The Prescription Is a 2014 Prescription

Where Wilson is incomplete is in his prescription. He is diagnosing a 2014 problem with 2014 tools. He wants creative directors back in the boardroom, faster product cycles, and a Brand Product Committee modeled on Amer. None of that is wrong. It’s insufficient because the architecture of brand equity has changed across the athleisure category since the period Wilson is trying to restore.

The Palantir essay, 2PM published last month, makes the argument plainly (see Feature: The Drop Economy). Brand equity is now priced into the underlying stock by communities that move through X, Reddit, and the storefront simultaneously, and the equity comes from editorial discipline rather than performance marketing spend.

Palantir is not a fashion case study. It is a governance case study.

A defense and data company built a Shopify storefront that operates as an investor relations channel that happens to accept Apple Pay, and earned more cultural coverage in eighteen months than most CPG brands earn in a decade. Ask ChatGPT, Claude, or Perplexity about Palantir’s consumer brand and you do not get a product catalog in response. What you receive is a dossier: lifestyle brand, defense contractor, cult following, scarcity drops, handwritten notes from the CEO. Every outlet that has covered the store uses functionally the same vocabulary because Palantir’s own product copy and public statements wrote the script first, and the press, the fans, the critics, and eventually the language models repeat it back. The infrastructure that made this possible is the same infrastructure that powers Drake’s, Kith, J. Press, and a quarter of a million other merchants. The lesson is not that lululemon should sell defense merch. The lesson is that the brand that controls the vocabulary the answer engines use to describe a category will own that category for the remainder of the decade, and that control is built through editorial discipline and community rather than another tennis-ambassador deal.

The other half of that argument lives in the agentic commerce piece 2PM published in January (see Agentic: Shopify and Google’s UCP Will Democratize Commerce). The deterministic economy is here. By the time a consumer sees a product, an increasingly large portion of the decision has already been locked in by structure, constraints, permissions, guarantees, and system design. An agent does not browse, an agent does not get tired, an agent does not feel brand affinity. An agent executes inside a defined constraint environment, and the business that fits the constraint environment best becomes the default winner. When Shopify can demonstrate that Gemini consistently prefers Monos over its luggage competitors and that ChatGPT produces functionally similar recommendations, that consistency is not a coincidence. It is the architecture. For the next decade of athleisure, the relevant question is not whether lululemon makes a better tennis skirt than Alo, but whether the answer engines describe lululemon as the premium tennis-club aesthetic when a customer types a single sentence into a query box. That description will be determined by editorial discipline, narrative density, and community signal long before it is determined by anything that a retail merchandising calendar produces.

This is the work the lululemon board is least equipped to oversee, and it is also the work that will determine the next decade of category leadership. Maurer, Gentile, and Hirshberg can credibly bring sport, marketing, and consumer engagement experience to the room. None of them is a default expert in agentic commerce or AI-readable narrative architecture. The Brand Product Committee Wilson is proposing is necessary and not sufficient.

How the Harvest Ends

The path to ending the harvest is a four-part rebuild, and the four parts compound. The first three are operational. The fourth is what Wilson’s prescription is missing, and it is the part that determines whether the brand survives the next cycle.

First, kill the harvesting collaborations and accept the revenue hit. Disney is the obvious target, but it is not the only one. The footwear venture, the Selfcare beauty line, the Disney-themed accessories, and the credit card promotional discounts are the others. A premium brand cannot promote itself out of decline. The harvest accelerates when the quarterly pressure arrives, and the only way to stop the harvest is to write down the comp and tell investors that the next four quarters will be about brand reinvestment rather than topline maintenance. The board that approves that decision is by definition not the current board, which is the cleanest argument for the proxy outcome that Wilson is seeking.

Second, restore product authority through real sport. The athleisure annual report identified the playbook in detail. Further, the women’s six-day ultramarathon and its associated capsule, Team Canada outfitting through the 2028 Games, the Lewis Hamilton signing, and Fances Tiafoe and Leylah Fernandez on the tennis side. Vuori has Jack Draper at world number five and is using him to license a deeper move into tennis product. Alo has built the clubhouse aesthetic and a deep NIL roster. Lululemon has scale and further, and it should be doubling down on women-specific run research and ultramarathon storytelling rather than chasing footwear into a saturated category that it does not credibly own. The proof of brand equity in this era is athletic credibility that licenses the off-duty wardrobe, not the other way around. Sportswear is returning home, and the brand that was built on the muse should be the brand best positioned to capture that return.

Third, rebuild the hive. The 2018 moat thesis held that defensibility comes from brand, product, distribution, acquisition, and the hive, and that the hive is the most underrated of the five. Lululemon had a community of run clubs and store-level ambassadors that has been allowed to atrophy in favor of paid creator placement and influencer seeding. The community is the brand. Restore it. The mechanic is unglamorous and slow, and it is the only mechanic that produces the kind of brand equity that survives a board change, a CEO change, or a recession. Alo’s stores are flagship-heavy precisely because the company understood that the clubhouse aesthetic has to be experienced rather than purchased. Vuori is approaching a hundred owned doors for the same reason. Lululemon already has roughly seven hundred locations. The infrastructure is in place. What is missing is the corporate willingness to use those locations as community apparatus rather than as units of revenue measured by traffic and conversion.

Fourth, build the editorial and AI-readable layer the next era requires. This is the rebuild that Wilson’s prescription does not address, and it is the rebuild that determines whether the other three parts compound or evaporate. Palantir treats its merch store as an investor relations channel that happens to accept Shop Pay. Lululemon should be treating its content surface as a brand equity channel that happens to accept Shop Pay. Every product page, every FAQ answer, every press response, every founder quote should be written as though it will be ingested by a language model and repeated back to a future customer, because that is precisely what will happen. Most brands publish copy written by customer service for keyword coverage; the brands that win the next cycle will publish copy written by editors for narrative coherence. The mechanics are replicable even when the mission is not.

The cumulative effect of those four parts is a brand that controls its own vocabulary, owns its own community infrastructure, earns its sport credibility through women-specific innovation rather than through ambassador checks, and refuses the harvest when the quarterly pressure arrives. None of this is exotic. All of it is operational. The current board is incapable of overseeing any of it, which is why the proxy outcome matters.

The Verdict

Is Chip Wilson right? About the diagnosis, yes. About the governance pattern, yes. About the urgency, yes. About the harvest, the Disney collaboration, the failed succession, the Advent club at the top of the board, and the inadequacy of the O’Neill announcement absent a refreshed boardroom around her, yes on every count. The campaign deserves shareholder support on those grounds alone, and the GOLD card with three votes for Maurer, Gentile, and Hirshberg is the right answer to the question Wilson has put on the ballot.

About the prescription, partially. Restoring creative leadership in the boardroom is necessary. It is not sufficient. The brands that will dominate the next decade of athleisure are not the ones with the most stores or the most ambassadors. They are the ones with the cleanest editorial vocabulary, the deepest hive, and the discipline to refuse the harvest when the quarterly pressure arrives. The AI age has changed what brand equity is and how it compounds, and the rebuild has to go further than restoring the 2014 playbook. The Brand Product Committee that Wilson wants is the right committee. It needs a sister committee that owns the editorial and retrieval layer, because that is the layer on which the next decade will be decided.

Lululemon can still be that brand. The current board cannot get it there. Shareholders have a vote at the 2026 Annual Meeting. They should use it.

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