Sustainable Enterprise Class

Clorox Bees, Cokewalla, and Tom’s of Colgate

Posted By Liz Paxton

Sustainable Enterprise is one of the custom core classes. Students must take 3 out of the 6 custom cores offered in Mods 3 and 4 of their first year. The class is very interesting and last class in particular got me thinking about the acquisitions of small, sustainable brands.

When the question came up in class about large corporations that buy small, sustainable companies, I had a quick reaction, “I don’t like it.” However, just after I voiced my opinion I began to question myself to justify my emotional reaction with business arguments. What does this type of acquisition mean for the larger parent corporation? Why should customers interested in sustainability feel good about the acquisition? What justification is there for negative customer reactions?

I went home for Easter and brought up the topic to my family and we had a great debate about it. I love that I am in a program that helps me to look at problems from so many different angles. Below is the analysis that came out of my brainstorming with myself and my family:

The Corporation’s Perspective: Acquiring a smaller sustainable company is a way for corporations to diversify, gain market share, and achieve growth. “Small brands with values messages can turn commodity products into premium products. All-natural personal care products represent a $3 billion market that’s growing 15% per year, according to Colgate.” [1] The acquisitions allow corporations to capitalize on synergies. Companies like Clorox, Coke, and Colgate have established relationships with both suppliers and distribution channels. Thus by adding products that leverage their relationships and marketing expertise, larger corporations can:

* Get more bang for their buck (Reduce costs per product)

* Increase volume sales through advertisement and by making products available in more locations/markets.

* Expand or contract the product line for optimal profits

Acquiring smaller sustainable companies is a smart move for corporations and as a result, “a vast number of (apparently) small brand name packaged products – including organic dairy products, chocolate, soup, vegetarian packaged foods, soy products, beverages, cereals, tea, soaps, and condiments – are owned, directly or through holding companies, by the likes of Coke, Pepsi-Cola, Dean Foods, Heinz, Kraft, Nestle, and General Mills.” [1]

The Customer’s Perspective (Pro): Optimistic consumers see the acquisitions as a way for corporations to embrace and incorporate sustainable practices and to spread them to more consumers. My parents pointed out, if McDonalds sees healthier subsidiaries like Boston Market are outperforming its fast food chains, McDonalds is likely to make its fast food more health conscious. [2] Corporations will also make sustainable products available to more people through their large distribution channels. Case in point, Tom’s of Maine is now available for purchase in Walmart, which owns 4,141 retail locations in the US and an additional 3,125 internationally [3] As an added benefit to consumers, corporations may also be able to capitalize on their economies of scale to reduce the retail prices while maintaining profit levels.

My father said, “consumers who do not support products owned by corporations, are condemning corporations to die rather than encouraging them to evolve.” [4] But the question is will Clorox be Burtified or is the reverse more likely? Sustainable products may be available to more people, but where will the corporations cut corners to make more money and appeal to the masses?

The Customer’s Perspective (Con): Many customers who buy “natural” products do so in order to align their purchases with their political, environmental, and social beliefs. They are horrified to find that their favorite products including: Ben and Jerry’s, Tom’s of Maine, Burt’s Bees, Odwalla, Kiehl’s, Horizon, Health Valley, Cascadian Farm, Celestial Seasonings, Naked Juice, Bearitos, TofuTown and countless others are owned by large corporations that they do not wish to patronize. [5] Also, customers fear that corporations will defame newly acquired products, thus double duping consumers by charging them a premium for products which no longer exhibit the same quality or level of corporate social responsibility. Finally, as green becomes increasingly mainstream, corporations are incentivized to greenwash and acquisitions of sustainable companies allow corporations to hide behind a socially and eco-friendly image which masks unsustainable practices.

In conclusion, consumers need to do their research be current about the brands that they support. Large and small brands alike sweep undesirable practices under rugs of PR and shiny advertising campaigns. A truly informed buyer will monitor the business practices of subsidiary and parent companies to make educated choices based on their own criteria for sustainability.

[1] http://www.organicconsumers.org/articles/article_8274.cfm

[2] Conversation with Byron Paxton and Tammy Wickert 3/22/08

[3] http://investor.walmartstores.com/phoenix.zhtml?c=112761&p=irol-irhome

[4] Conversation with Byron Paxton and Tammy Wickert 3/22/08

[5] http://www.organicconsumers.org/articles/article_8274.cfm