Analysis: Can firms sell off and not sell out?

Nestlé’s bid to buy the Linda McCartney food brand follows a string of ‘ethical’ firms selling up to big business. David Quainton asks if consumers care

There is plenty M&A activity at present to keep the business media buzzing. But when a brand with strong ethical credentials is snapped up by a multinational whose principles have been questioned, the clash of 'good versus evil' gives the story far wider appeal.

Ethical commentators have lambasted The Body Shop for 'selling out' to L'Oréal, and this month lamented the proposed sale of veggie food brand Linda McCartney's to oft-demonised Nestlé. Reports spoke of consumers' 'dismay', and recounted examples of how other companies founded on moral business practices have accepted the advances of big business.

The tone of most press coverage suggests The Body Shop and Linda McCartney's – owned by Heinz – should brace themselves for a fall in sales. However, some commentators point to previous buyouts  which have resulted in post-acquisition sales hikes (see box). It is therefore feasible that both the ethical image and commercial performance of The Body Shop and Linda McCartney's will remain undimmed.

Honest appraisal
Ethical Consumer magazine reporter Ruth Rosselson says it helps to communicate the argument for selling-up early in the process.

She cites the openness of Green & Black's CEO William Kendal, who oversaw the sale of the brand to Cadbury Schweppes in 2005.

Before the sale he admitted that customers would feel strongly, but argued that being able to sell organic chocolate to more people could only be a good thing.

The Times consumer editor Valerie Elliot says Green & Black's was fortunate – its sale coincided with a media focus on the health benefits of eating dark chocolate – but its PR strategy was nevertheless effective.

'Green & Black's in particular has managed to maintain its wholesome tag because it remains a separate entity to Cadbury,' she adds. 'It has its own PR firm and retains its branding.'
The company's agency, Phipps PR (whose co-founder Miranda Page Wood is married to Kendal) argues 'clear and confident messaging' is vital.

'Ultimately you must consider the response of target customers,' says Phipps director Debbie Feickert. 'Cadbury Schweppes has allowed [Kendal] to run Green & Black's as a standalone business.

This helped reduce red tape and we were able to provide spokespeople to answer concerns.'

For Ben & Jerry's, which was bought by Unilever in 2000, the strategy has been to keep the brand distinct from its multinational owner.

'I don't think many consumers are aware of the Unilever link,' says brand manager Philippa Marshall. 'It was written in the contract that we'd stay authentic to our heritage and keep the environmental angle of the business.'

In 2001, McDonald's spent £25m on a 33 per cent stake in sandwich chain Pret A Manger, prompting fears that the popular UK firm would be tainted. 'Strangely, sales increased,' reveals Pret commercial director Simon Hargraves. 'But there was a huge backlash and customers still write in saying they are amazed we did it.'

Pret set up a press office for only one week to handle media scrutiny around the sale, and still uses no proactive PR, in-house or agency. 'I maintain liaisons with certain journalists but they come to me,' says Hargraves. 'We're separate from McDonald's and there's no big brand spin. We've continued to grow. The proof is definitely in the pudding.'

The point Hargraves makes – that subtlety is the order of the day – is echoed by one national consumer journalist, who suggests it is best to keep quiet about such sales. 'Once it's gone through I [advise] focusing on your own business rather than on who owns you,' he says. 'The Body Shop has gone into [the L'Oréal deal] all guns blazing, and it might backfire.'

Loss of status?
The Body Shop founder Dame Anita Roddick told media that her firm would 'influence' L'Oréal's ethical policies. But Ethical Consumer's Rosselson says The Body Shop's brand value suffered as a result of the planned sale.

'There are alternatives out there, and making a big issue of L'Oréal only highlights the link in the minds of consumers who wouldn't otherwise care. People may go to Lush, or online stores such as Green People, instead.'

One effect of selling to a multinational is the attribution of subsequent crises to the link. This month Ben & Jerry's walked into trouble in the US when its new 'Black and Tan' ice cream apparently offended the Irish – the flavour appropriates the nickname of  notoriously violent British militia that operated in the early 1920s during Ireland's war of independence.

'I wonder whether this is a case of  success making things difficult,' says Marshall. 'The media will try and shoot you down, but they care more about [an issue] than do consumers, who are more realistic.'
The Times' Elliot, meanwhile says: 'Consumers have not bought into ethical brands as much as we think. Most shoppers do not purchase a brand because it's ethical – that's just a bonus.'

Should their sales go through, it seems The Body Shop and Linda McCartney's would do well to concentrate on their own work rather than that of their new parent companies.

Ben & Jerry's, for example, makes little of the fact that proceeds from its Phish Food line help fund a water pollution reduction project in Vermont. Instead, PR focuses on tastiness.

Marshall says Ben & Jerry's continued success post-sale is not due to its ethical practices, but because it makes products that consumers like.

She concludes: 'For our consumers it's Phish Food first, ethics second.'

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