When big business bites
http://business.guardian.co.uk/story/0,,1792511,00.html
When big business bites
Can niche firms keep their fans when snapped up by the multinationals?
Fiona Walsh
Thursday June 8, 2006
The Guardian
You start the day with a refreshing shower - taking care to conserve water, of course - but still enjoying the aroma of Body Shop's satsuma shower gel. A quick brush with Tom's of Maine toothpaste, then it's a pot of Rachel's Organic vanilla yogurt for breakfast. For lunch, grab a sandwich at Pret A Manger, followed by a mini-tub of Ben & Jerry's ice cream. In need of an afternoon sugar rush? Then a treat-sized bar of Green & Black's organic chocolate should do the trick.
So far, so ethical - or is it? From Body Shop to Green & Black's, smaller companies known for their ethical principles and counter-culture approach are being taken over by multinationals keen to establish credentials in the booming ethical market.
Body Shop has just become part of the French cosmetics giant L'Oréal; Tom's of Maine fell to Colgate-Palmolive last month; Wales-based Rachel's Organic is a subsidiary of the American conglomerate Dean Foods, which has come under fire in the US over its industrial-scale organic dairies and factory-farm milk production.
Pret A Manger is one-third owned by McDonald's; Ben & Jerry's has been under Unilever's ownership for six years and Green & Black's belongs to Cadbury-Schweppes, the world's biggest confectionery company.
For consumers, those multinational names don't have quite the same ethical ring to them, although many shoppers remain unaware of the ultimate ownership of some of their favourite brands. For those who are, does the change of ownership really matter? And can a smaller company built on a different set of values really operate comfortably within a global corporation?
At Ben & Jerry's in the US, the relationship with Unilever remains an uneasy one. Ben & Jerry's most recent social audit highlighted a "disappointing" lack of social initiatives at the company and poor morale among employees. It questioned whether the company was "simply a Unilever marketing operation using the brand's reputation for social responsibility to promote sales."
That charge is vehemently denied by Helen Jones, who has run Ben & Jerry's in the UK for 11 years. "We are fully supported by Unilever and we've doubled our charitable donations under them," she says. But, clearly, there are tensions within the larger Ben & Jerry's operation.
Battering
At Body Shop, despite a chorus of protest at Dame Anita Roddick's decision to sell out to L'Oréal, the company says sales have not been affected by the deal. But its ethical reputation has certainly taken a battering, as have all niche players taken over by multinationals.
Ethical Consumer magazine runs an online shoppers guide, at www.ethiscore.org, which rates companies and their products on their ethical credentials. Body Shop's rating has plunged from 11 out of 20 to just 2.5 since the L'Oréal deal and the magazine has urged a boycott of its products in protest not only at the French cosmetics group's ownership, but also its links with Nestlé, which owns 26% of L'Oréal. Nestlé has faced boycott campaigns over issues from animal testing to the marketing of baby milk substitutes.
Last month's takeover of Tom's of Maine by Colgate-Palmolive sent its ethical rating tumbling from 16 to just 5, as it paid the penalty for Colgate-Palmolive's rock-bottom rating on environmental reporting and animal testing.
Best-known for its toothpaste, Tom's of Maine started more than 30 years ago making phosphate-free washing powder. Like Anita Roddick, who has made repeated jibes at companies such as L'Oréal over the years, Tom's of Maine founder Tom Chappell has in the past been critical of major brands such as Colgate and their use of artificial additives.
But, like other founders who have handed over their businesses, he was convinced by assurances from the new owners that it would continue to operate as an independent entity and its principles would remain intact.
Those assurances have held firm at the organic chocolate maker Green & Black's, according to Mark Palmer, its marketing director. Its sales had rocketed from £4m to £40m in the past five years, but financial support from Cadbury, which took over last year, will help it make a big push into the US this year.
"We've just had the first anniversary of the takeover and the amazing thing is that nothing has changed at all," Mr Palmer says. "In one sense, it was a bit of an anticlimax because absolutely nothing happened.".
He accepts that customers were suspicious, but says: "Cadbury's understands that Green & Black's is a special case. And they are astute enough to realise that you don't pile in and mess about with credentials like that."
Like most of the niche businesses bought by multinationals, Green & Black's is run as an entirely separate operation within the Cadbury empire. "It's a case of how they can help us, not telling us what to do," Mr Palmer says.
One advantage of Cadbury's coffers is that Green & Black's is now pursuing international expansion, something Mr Palmer admits the company "has always been a little scared of."
It exports just 10% of its turnover, but has just set up a US subsidiary in Connecticut and is in the process of hiring a team out there. "We're not being put into the situation where we're managed by Cadbury in the States," Mr Palmer says. "But it's up to us to be a bit grown-up about it too. We are independent - and we're also fortunate that we can call on Cadbury's expertise and experience."
Mr Palmer accepts there is scepticism when big companies move in on niche brands. But, he says, "it's worked for Green & Black's."
He adds: "You can be fiercely independent and not have any funds to grow. But does that help the cocoa growers in Belize?"
As to whether Green & Black's is less ethical under Cadbury, that depends on the individual consumer, says Ruth Rosselson of Ethical Consumer magazine. Many consumers simply don't know who owns their favourite brands, and others don't care: "It really depends on what your reasons for buying ethical are," she says. "If you mind where the money ultimately goes, then giving it to a company that tests on animals or uses child labour is a contradiction. If you're just looking at the product, then ownership doesn't really matter."
Swallowed
Ms Rosselson believes there will be longer-term damage to brands swallowed by multinationals, despite the hopes of entrepreneurs like Dame Anita that they will be able to force changes within the larger organisations.
"The real 'deep green' consumer does feel betrayed," she says. "We hear the big optimistic speeches from people like Craig Sams [founder of Green & Black's] and Anita Roddick about the influence they can wield on the new owners, but it hasn't happened yet. Ben & Jerry's was bought up in 2000 and Unilever hasn't suddenly gone organic."
Dr Tim Lang, Professor of Food Policy at City University, also urges caution. "There's no doubt it's a win for the big company because they are buying a ready-made package of values and history of trust." But, he says, there will always be "a tension and contradiction" between the small ethical firms and their multinational masters. "The former owners argue that they can change from within. In the short term, that may well be the case but over the longer term values get dissipated and weakened.
"My own argument with the ethical trading world - of which I am a supporter - is that it is pursuing a risky strategy. Everything is dependent on how the relationship with the movement is retained by these companies. And if Fair Trade, animal welfare or the ethical movement do their homework, they will make sure customers are reminded who owns these companies. "For big business, the key is how careful they are with the values they have bought. For the movement that gave birth to those values, eternal vigilance is required."
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