There is now significant consumer interest in ethical brands. The big retailers have realized this and 2006 looks set to be a groundbreaking year for marketing new products. By Poulomi Saha and Tobias Webb
When Nestlé, long a bête-noire of campaign groups, launched its Fairtrade certified Partners' Blend coffee last October, it received mixed responses from the world of corporate social responsibility.
While the entry of one of the world's biggest coffee makers into a market it had previously neglected was welcomed, some NGOs were skeptical about Nestlé's move into ethical products. The company has not been known as a leader in social responsibility over the last 20 years, and many activist groups remain hostile to its very name.
Similarly, earlier in 2005, when Kraft Foods introduced their Kenco Sustainable Development coffee brand, the move sparked a debate over the company's preference for Rainforest Alliance certification over the harder to achieve Fairtrade mark.
But the more important trend here, which has been ignored by many, was the acceptance by the two big multinationals of the growth of ethically branded products. Neither wanted to sit back and watch any more.
In the past, many companies have been wary of launching ethical brands, concerned that such moves would raise questions about their other brands that were not marketed on ethical credentials.
The glare of the (often unfair) NGO/media spotlight, in which many large companies have found themselves in the last ten to 15 years, has also played a large part in preventing more corporate brand heads from being raised over the ethical product parapet.
Another barrier to entry of ethical products has been providing easy-to-understand labeling for customers about supply chain issues. Good labor practices are hard to badge in a sound bite manner.
On top of this, few large companies have felt confident enough, until recently, about having sufficiently minimized labor and environmental problems in their large and increasingly diversified supply chains, to begin to make ethical claims about their products.
At many a corporate citizenship conference in the last few years, conversations have focused on which major brand might be brave enough to launch ethically-branded products first. And then, of course, have to endure even greater NGO and media scrutiny of supply chain conditions they cannot wholly control.
However, the success of other smaller brands that have effectively promoted their ethical values in recent years has persuaded larger companies to sit up and take notice of what many are calling changing market trends and consumer tastes.
A Trend Gathers Pace
So while Nestlé and Kraft launched their ethical coffee brands last year, confectionery giant Cadbury Schweppes bought Green & Black's, a niche but fast growing UK-based organic and fair trade chocolate firm. This was a move that added further impetus to the ethical products market.
The growth in corporate ethical product offerings and acquisitions is perhaps not surprising. The Fairtrade market within the UK, for instance, has been growing exponentially. It recorded a 51% growth over 2003 figures to reach the £140 million mark in 2004, while total UK retail sales grew by just 4.6% in the same period.
In the pharmaceuticals sector R&D spend is increasingly on buying smaller, risk-taking companies who innovatively create new products. Similarly, in cases like Green and Black's, it is easier to let smaller companies become sustainable and then buy them out.
Increasingly, though, mainstream brands are becoming more innovative as their confidence grows in their ethical supply chain management activities. Marks & Spencer's recent announcement of a new ethically labeled product line may now be the first of many.
A reinvigorated M&S has become the first major UK retailer to introduce clothing made from 100% Fairtrade cotton, which is in its stores this month. Fairtrade cotton made its fist, low-key, appearance in the UK late last year via small, specialized retailers.
"Launching Fairtrade cotton builds on our innovative work in areas such as sustainable fishing, reducing fats, salt and additives in our food and banning harmful chemicals from children’s clothing," said Stuart Rose, Marks & Spencer chief executive, when announcing the launch in February.
M&S is now running a major advertising campaign in 420 of its stores across the UK, telling consumers about how its products are sourced and made. The "Look behind the label" campaign has various catchy facts about M&S products splashed across its stores: "We’re committed to reducing salt faster than you can say 'sodium chloride’" or "Our ready meals lack a certain something. Hydrogenated fats."
It is a highly significant move by a major UK retailer. In a low margin industry, many of the big players have been slow to focus on ethical supply chain issues and hesitant to try and tap into growth in the ethical consumer market.
M&S says it has launched this campaign because of concerns that customers were not fully aware of the company’s ethical commitments. "We haven’t told our stories properly in the past," M&S told Ethical Corporation.
Timberland, too, has recently launched a new footwear packaging initiative that will work as a "nutritional label", telling consumers about the community and environmental impacts of the company’s shoes.
"This packaging and labelling initiative should make our industry more transparent and give consumers the information they need to make smart buying decisions," said Jeffrey Schwartz, Timberland CEO, at its launch in January.
These moves by major retailers will no doubt increase the amount of communication between corporate marketers, with their superior budgets, and corporate social responsibility departments.
This is key, since the effectiveness of ethical product marketing also depends on the campaign being exciting for consumers as well as rigorous in terms of its linkage to core company values, says Dean Sanders, founder of GoodBrand & Co, a social marketing consultancy.
The Other Route
While M&S and Timberland have chosen to re-engage with their consumers through innovative communication models, some others have found an alternative way of breaking into the ethics market.
American Express, Gap, Giorgio Armani and Nike-owned Converse joined up with Irish rock star Bono to launch Product Red at the World Economic Forum in Davos this year.
Through this project, selected products from these brands will bear the Product Red logo, proceeds from which will then go towards the Global Fund to Fight Aids, Tuberculosis and Malaria.
Some critics argue that this kind of philanthropic cause-related marketing is very different from the business-focused ethical performance marketing of M&S’s new initiative. But Bobby Shriver, CEO of Product Red, says the businesses involved in this initiative are both value- and values-driven.
“This is a long-term initiative designed for sustainability. [Product] Red partners expect they will broaden their own customer base and increase loyalty in a manner that delivers a sustainable revenue stream to both the company and the Global Fund,” he says.
Don’t Forget the Basics
But, cautions Craig Smith, senior fellow in marketing and ethics at London Business School, companies certainly have to compete on all fronts if they want to entice the ethical consumer. “Foremost,” he says, “consumers are concerned about quality.”
Rob Harrison, editor of Ethical Consumer magazine seconds Smith’s view. He cites the example of Fairtrade coffee brand Cafédirect that was unable to appeal to a broad section of consumers, based solely on ethics, for a long time. That was, until it decided to market itself as a “premium coffee” brand. Today Cafédirect is one of the top five coffee brands in the UK.
Ethics-related marketing could be the “deal breaker” for companies in the future in terms of how they begin to differentiate themselves from the competition, predicts Helen Edwards, author of “Creating Passion Brands”.
This view is not a new one. In a 2002 interview branding supremo Wally Olins, creator of the Orange mobile phone brand, described ethical products as “the last great commodity differentiator” for large companies already competing equally on cost and quality.
In 2006, there are likely to be more announcements following on from M&S, Timberland and Product Red. Last year’s coffee product launches and the recent public focus on solutions to the global challenges of debt, trade, aid and development, have all set the ball rolling.
The Make Poverty History campaign, Live8 music concerts and the G8 summit in Gleneagles were seen as instrumental in increasing consumer awareness about issues such as global poverty and health.
Tragedies like the Asian tsunami of December 2004, the hurricane menace in the US and the Kashmir earthquake in October last year have led to unprecedented levels of public aid to pouring in to NGOs.
“There is a critical mass of interest [in global issues]. Earlier, ethical consumerism was a risk issue. Now it is an opportunity issue,” says Harrison.
Experts also point to the emergence of new small brands, like Green & Black’s and Ben & Jerry’s, that appeal to consumers’ ethical mindsets as evidence of more ethically minded entrepreneurs springing up worldwide.
“The business case is getting stronger” for larger brands to take the reputational risk of producing ethically labeled products under the NGO and media spotlight, concludes Craig Smith of London Business School.
The evidence appears to be proving him right.
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This article has been reprinted courtesy of Ethical Corporation magazine. It first appeared in the March 2006 issue of that publication.
