My six-year old son has got into football in a big way. He collects football cards of all the premier league players and clubs, but hasn’t yet decided which team to support. Yesterday, expressing shock that one of his favourite players had moved to another team, I explained to him all about transfers. “Dad,” he said “who would you support if all the players moved from one team to another?”
The question was really interesting – not just for followers of football – but for consumers too. Who are you really loyal to, and why? In football, most fans remain loyal to the team or “the brand” regardless of who ends up playing for them or where they play. As a consumer, we also grow loyal to brands. Primarily we’re attracted because of the products a company makes and the values that they hold, but over time we just get stuck on their brand. So what happens when a company gets sold – the brand stays the same – but the values of the company change?
One of the first major acquisitions was the homely ice-cream brand Ben & Jerry’s, which Unilever bought in 2000. Some eyebrows were raised when Green & Blacks were taken over by Cadbury’s in 2005. But there were gasps when Cadbury’s were subsequently taken over by international food giant, Kraft. Since then there have been many other takeovers of organic and natural food companies by large multinationals.
All of this corporate activity probably made the super-aware consumers a little bit uncomfortable, but the products stayed the same, so it didn’t really change consumer behaviour. Brand loyalty stayed intact in the face of the change of ownership and it looked, cosmetically, like the values were intact too. That was until November last year, when California held a referendum on Genetically Modified Food Labelling.
In the lead up to the election, organic and natural food companies were trying their best to lobby for a change in food labelling law that mandated GM food to be labelled. It seemed like a reasonable proposal in a country where the vast majority of corn and soy is genetically engineered, and where many consumers are very concerned about what is going into their food. The early polls indicated widespread public support. It seemed like a foregone conclusion that the Yes vote would pass. Then the opposition turned up.
The multinational agribusinesses piled huge resources into a negative advertising campaign pushing against GM food to be labelled. They outspent the food labelling supporters by more than 10 to 1. But what consumers hadn’t forecast was that many of the organic brands that they were buying were actually owned by the multinationals who were trying to block GM food labelling. Consumers were understandably confused. It was like a classic tale of David versus Goliath gone wrong – Goliath had paid off David!
The language used in all of these debates often deliberately plays upon our loyalty to brands and the mental images we conjure up about where our food comes from. While senior figures from politicians to ‘reformed’ environmentalists are calling for farmers to get behind GM technology, the aspect of corporate control is generally ignored. The GM business model is one where farmers are not in control, the agribusinesses are. Farmers who ‘get behind the technology’ are effectively those who have surrendered to corporate control and eschewed their entrepreneurship and stewardship roles.
When we stay loyal to a brand, we think we are fundamentally buying into a set of values. It’s a mark of trust in an underlying philosophy. When those brands get swallowed up by bigger companies with a very different set of values, who want to buy into the profits, then the proposition has to be reviewed.
That is not to say that all takeovers are bad, and simply being large does not necessarily define a set of values. That would be too simplistic. It can be taken as a sign of success for organic food and it might have a positive impact on the sustainability of the acquirers. But too often, the motives are more about profitability than mission.
In the case of California, many active consumers who had been motivated to change their buying habits in favour of sustainable products had been duped. It’s too early to say whether the backlash against those brands has a lasting impact but it does raise the issue about what a company or a brand really is.
When it comes to sticking to your values, it’s not so easy. Independent owners do not have a huge range of options in funding the growth of their businesses. Having built up a great business and seeing a growing market, they generally need additional capital. And that’s where it becomes difficult for the original founder or entrepreneur. The choice comes down to selling out to a larger company, venture capital, listing or just staying put. Listing is very rarely an option for mid sized companies, venture capital is exit driven and generally leads to a trade sale to a larger company down the line. So it becomes a straight choice – sell out or risk stifling growth by staying put. If we are to have the companies that we want in the future, we’re going to need some new alternatives.
One approach is to look at new forms of ownership. Triodos Bank has been pioneering new ways of raising finance for businesses driven by ethical values. For Cafédirect, which was originally set up and owned by a partnership of charities, they structured a customer share issue which brought in 5,000 Cafédirect customers to co-own the company alongside the founders. They also created a small portion of the equity for the benefit of the producer cooperatives they work with in developing countries. Consumer cooperatives could play a role in the future – ensuring that the values of the company are in line with what the consumers were buying into in the first place.
Triodos Bank is also creating a fund that would buy into the values driven sustainable consumer product companies, to protect their ethos and to help them grow. The difference being that there would be no need to exit – they would stay involved as a responsible owner. And the intention is for the fund to be owned in the long term by the consumers of these companies. It’s a nice closed loop system that seeks to bring about the kind of sustainable economy that most sustainable consumers want: trusted brands, co-owned by consumers that support what they stand for.
Back to my son’s question about football – if clubs were owned by the their communities or supporters, then surely it would become much easier to trust and support the values of your club – no matter who the players were.
Sign up to our Newsletter
Stay up to date with the latest SFT views and news