Blue Rubicon Food For Thought Summer 2009

Food for Thought Summer 2009

MARTIN FEWELL DEPUTY EDITOR, CHANNEL 4 NEWS ALEX COLE TOBY NICOL GLOBAL CORPORATE AFFAIRS DIRECTOR, CADBURY

DIRECTOR OF COMMUNICATIONS, EASYJET

BLUE RUBICON, 6 MORE LONDON PLACE, LONDON SE1

Contents 4

MARTIN FEWELL

DEPUTY EDITOR, CHANNEL 4 NEWS

GLOBAL CORPORATE AFFAIRS DIRECTOR, CADBURY

TOBY Nicol DIRECTOR OF COMMUNICATIONS, EASYJET 14 ALEX COLE 12

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Are ethics a luxury for consumers in a downturn? | 3

Are ethics a luxury in a downturn?

Foreword This is a question we know is challenging boardrooms and marketing teams up and down the country. And the starting point is often “what can we stop doing?” Not because organisations or companies have seized on the recession as an opportunity to ditch ethics, but because tighter budgets need to work doubly hard to attract consumers’ more constrained wallets.

In spite of excited talk of recovery, the recession’s impact will be felt in the dynamics of business for some time to come. We’ll see change in where companies invest and in how brave they can be in the strategies they pursue.

The debate about ethics isn’t one that’s going to be short lived. Consumers’ trust in corporations has been undermined and confidence will take time to be rebuilt. For corporations, the ‘nice to haves’ have to go. But which are they?

Over the last few years, consumers of all ages reported behaving more ethically. However, this growth in ethical consumerism took place over a period of lower unemployment, low interest rates, soaring house prices and healthy retail conditions. Tighter lending standards and growing unemployment as a result of the global recession have changed the landscape. These are fundamental changes and consumer spending is under pressure. So will the growth in the sustainable consumer goods market slow?

There is no doubt consumers are going to be more careful about their spending and the rise in shoppers at Lidl and Aldi certainly supports this. But a downturn also prompts more reflection on what really matters and questions of trust. In tough times consumers often deepen their ties with ethical brands. Brands built upon value, authenticity and integrity hold even more currency when consumer confidence has been dented. They will seek value and values.

So can marketers afford to pursue a sustainable agenda when it appears that market for their products and services may be shrinking? Can they afford not to pursue that agenda, given the risks to their reputation? These are the questions we put to Cadbury’s Alex Cole, easyJet’s Toby Nicol, and Deputy Editor, Channel 4 News, Martin Fewell. You can read their responses in the following pages. It certainly proved a lively debate at our recent Food For Thought.

Fiona Joyce Partner

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Are ethics a luxury in a downturn?

MARTIN FEWELL DEPUTY EDITOR CHANNEL 4 NEWS

THE ACTIVE CITIZEN CONSUMER Now and then, the news does go quiet, and not just because it’s August.

Immediately after the general election in 2005, we hit one of those periods.

We knew we had the G8 at Gleneagles approaching, with the twin issues of debt relief and climate change at the top of the government’s agenda. Jon Snow went to Uganda to anchor the news for a week and tackle some of the pressing development issues. We decided to approach climate change in a different way.

We chose to run an interactive series challenging our audience on the part that individuals should play in dealing with climate change. The fundamentalist arguments over the science of global warming – man-made or natural – real or imagined – seemed to be passing. Attention was increasingly focusing on finding the right policies, with a balance of incentives and deterrents. The government was assumed to have the biggest role to play, with business not far behind. But little was being said at that stage about the responsibilities of the individual consumer or citizen, and their ability to alter their behaviour in ways that might mitigate the environmental consequences.

We called the series ‘Feeling the Heat’ and asked our viewers to email us with their views on how lifestyles could or should be altered. We had an excellent response, with people showing considerable desire to hear new ideas or simply get information about the carbon consequences of their everyday lifestyles.

We looked at the possibility of individual carbon accounts and at small-scale renewable energy solutions. I remember one piece that compared the carbon footprints of different families, which produced a counter-intuitive result when the ‘greener’ of the two households turned out to have a larger footprint because they lived out in the country and needed frequent use of a car.

Clearly, the active citizens amongst our viewers were ready to consider behavioural changes, sometimes at greater expense, in the interests of the environment. Of course, I would be the first to acknowledge that the Channel 4 News audience is not the same demographic as the UK population. Would that it were – if only because we’d have many more viewers! Nevertheless, there’s no question that this trend towards informed consumerism has become increasingly evident in the growth of the market for ethical goods.

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So just how ‘ethical’ are we?

The Cooperative Bank – in its most recent annual report on ethical consumerism – put the value of the overall ethical spend at £35.5 billion in 2007. That was up 15% on the previous year.1 And then came the crunch and we’re asking the question, will this continue?

As a journalist observing the debate – not a retailer – I can see a dichotomy of views on this.

On the one hand, there’s the view that ethical behaviour will go the same way as Northern Rock and Newcastle United, relegated to the back of people’s minds as financial reality bites. Some evidence was detected pretty quickly last year, such as a fall in organic food sales. The Soil Association’s 2009 Organic Market Report said fewer organic goods sold in 2008, although high food prices meant the value of sales still increased slightly to just over £2 billion.2

1.(Source: Cooperative Bank – The Ethical Consumerism Report 2008 - http://www.ethicalconsumer.org/ portals/0/downloads/ethical%20consumer%20report.pdf) 2.(Source: Soil Association. http://www.soilassociation.org/marketreport)

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We also had the relative success of Aldi and Lidl, while premium food retailers struggled at times. The latter’s problems perhaps say more about the substitution of value goods for premium goods rather than a collapse in ethical shopping per se, but this trend has nevertheless fed a view that belt-tightening will produce radically changed behaviour.

On the other side of the argument, what one might describe as a New Puritanism has been evident, at least amongst some of the political classes.

This derives from a belief that the boom years bred a society based on greed, unethical behaviour and rampant individualism all of which has resulted in a decline in community and in social values. It’s a prescription for a more ethical approach from consumers, citizens and government, a view that the crash was caused by greed and the worst excesses of an irresponsible form of capitalism and that now is an era in which people will want to see much greater social responsibility and fairness.3 I’m not sure there’s any hard evidence yet to suggest consumers do want to build a new Jerusalem from the wreckage of our High Street banks. But the imminent austerity has prompted a new tone in public life, which may well have a continuing effect on expectations of business.

3.(Source: Ben Lucas, Director 2020 Public Services Trust, Is fairness back in fashion? April 2009)

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Unpicking ‘ethical’ consumption How much though will consumer habits be affected? I think we have to begin by unpicking the notion of the ‘ethical consumer’. Does all consumption labelled ethical genuinely spring from a desire to do the right thing rather than the selfish or self-interested? To what extent are other motivations in play?

The Cooperative Bank survey I mentioned earlier breaks down ethical consumption into the following five main categories4: Ethical food and drink – including Fairtrade, organic and free-range Green home expenditure – energy efficient appliances and small renewables Eco-travel and transport – including green cars and public transport Ethical personal products – such as cosmetics and eco-fashion Ethical finance – banking and investments I would query how much of the purchasing in these areas is driven by ethical motives. For example, the high cost of energy has had a significant impact on the markets for renewable energy and green cars. My neighbour’s new business – selling and installing domestic renewable energy generation – through air-source and ground-source heat pumps and biomass boilers, has taken off since last year’s oil-shock. But I wouldn’t say that many of his potential customers are motivated entirely by ethical considerations. They’re just responding rationally to higher oil prices that have dramatically reduced the time needed to get a return on installing a renewable energy supply.

Of course, there is an ethical core of consumers of green energy or green transport. I’d define this group as those prepared to pay more than they have to because they think it’s the right thing to do – not because they’re motivated by economic self-interest. Or indeed, people who choose not to do something at all; like driving. For this group, the only vaguely ethical car is made by Matchbox – and no flight is ethical unless the social benefit outweighs the environmental damage.

You can see the same contrasting motivations in food and drink. Yes, there is a core of ethical shoppers who will pay more because they think it’s right to buy Fairtrade or organic produce, or because they have concerns for animal welfare. The latter is clearly a particularly powerful dynamic - witness how Hugh Fearnley-Whittingstall’s campaign produced a big increase in demand for free-range chickens. And perhaps the new film about overfishing - The End of the Line - will have a similar effect.

But there’s also a strong motivation that leads shoppers to buy ethical because they associate it with higher quality, whether that means better tasting or healthier. Retailers have capitalised on this, selling ethical products as premium goods and probably making a higher margin. This profitability is bound to come under more pressure, but many shoppers will still pay a premium for ethical foods.

This overview suggests there are a variety of different motivations that lead people to ethical goods. These include the confluence of the ethical and economic that’s so evident in energy and transport, and the drive for quality that seems especially relevant in food and drink. That leaves the genuine ethical consumers who’ll pay more not for quality but for altruistic reasons, or who will accept a product with less utility – a slower car for example – because they believe it’s the right thing to do.

4.(Source: Cooperative Bank – The Ethical Consumerism Report 2008 - http://www.ethicalconsumer.org/ Portals/0/Downloads/ETHICAL%20CONSUMER%20REPORT.pdf)

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Don’t forget the politics There are powerful reasons to think that all the factors identified as driving ethical consumption will continue in a recession, but even this is not the full picture. There are other actors in this drama as well – government, for example. The biggest-selling car in Japan in the first quarter of 2009 was an ethical car, the Toyota Prius, with 110,000 sold. Some consumers may be ethically motivated, but actually the key factors are a tax exemption and a scrappage scheme. What this illustrates is the increasing significance of government intervention in encouraging positive ethical behaviour (in this case environmental).

Some of this intervention – such as the fuel duty escalator, or recent changes to Vehicle Excise Duty – has proved to be very unpopular with voters at times. So perhaps we’ll see more incentives and less punitive intervention in future.

Outside climate change, we’re seeing more attempts to influence diet – like the government’s Change 4 Life programme – to try to tackle the obesity problem.

Even the Conservative opposition, which frequently attacks nanny-statism, has been flirting with the fashionable political idea that it is the role of government to nudge people towards behaving better.

Let’s not forget the public finances too. There’ll be pressure for more sin taxes, such as air passenger duty, which are ostensibly targeted at unethical behaviour but may have more value to exchequers as revenue-raisers than behaviour-changers.

There’s another dimension to this question which looks at ethics and consumers in a broader sense. This is not the question of whether individual products as ethical, but whether the companies and businesses behind them are perceived to behave in a socially-responsible fashion. Can business afford to be less ethical? Should it believe that consumers, politicians and indeed the media won’t care as much about its behaviour in a recession?

I have already described as the New Puritanism, the view that the boom caused a glaring loss of social conscience with disastrous consequences. This desire for a new era of social responsibility is more evident on the egalitarian left, but there is an interesting parallel theme from David Cameron. He has embraced the principles of Corporate Social Responsibility (CSR), championed in the private sector by one of his key advisers Steve Hilton (who previously ran a CSR consultancy, Good Business).

This influence was much in evidence in Cameron’s early period as Conservative leader – remember the dog-sledging in the ice to affirm his green credentials, and the visits to Africa. This Conservatism with CSR has been used to decontaminate the Tory brand, and it has included attacks on business for socially irresponsible behaviour. Critics may argue we haven’t heard much about the environment from Cameron since then, for example, but his party’s opposition to a third runway at Heathrow was more important for business than any number of rhetorical flourishes.

Would Cameron suddenly discard this approach if the Conservatives won the next general election? I doubt it, for the same reason that Tony Blair made his “we were elected as New Labour, we govern as New Labour” comment in 1997.

Everyone will be looking out for evidence of a reversion to old Tory values, and I’d be surprised if Cameron chose to give them ammunition. It’s noteworthy too that the Shadow Chancellor, George Osborne is seeking to position the Conservatives as tougher on the banks than Labour. Right or left, the next government will have to contend with the powerful anti-bank, anti-greed, anti-bonus sentiment that’s developed as a consequence of the bust.

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A new era of accountability?

I expect many journalists feel a bit sore about our failure to expose the shifting sands on which the boom was built. As if that wasn’t bad enough, along came our MPs to reveal they’ve been claiming millions and millions of taxpayers’ pounds each year in ways that most of the public regard as dubious if not downright corrupt. Suddenly, any politician is suspect, just as anyone in business paid a bonus is assumed to be on a moral par with our failed bankers.

From our perspective as Channel 4 News journalists, we certainly believe our viewers, particularly those active citizens, are looking for a new era of accountability where business people and politicians are placed under much greater ethical scrutiny. I know that’s where we’ll be concentrating more of our investigative effort over the next months and years. There’s one comfort though for the less scrupulous. Such are the travails of the newspaper industry, there soon won’t be many investigative journalists left to scrutinise their activity.

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Are ethics a luxury in a downturn?

Toby Nicol Communications Director easyJet It is a rare commercial company that acts purely for charity. And it is a rare consumer that acts entirely selflessly – particularly during a recession.

Historically, a number of Quaker-founded companies have been more benevolent than most, either in terms of their charitable foundations or care for their workers at otherwise somewhat care-less times. But today it is difficult to think of too many companies with a prime emphasis on the philanthropic, rather than the bottom line.

The primary duty of a company is to its shareholders. To this end, an emphasis on environmental or ethical issues can be highly compatible with its primary duty – i.e. a company adopts a particular public stance on, say, the environment, because it knows it will play well with its consumers or it hopes to poach like-minded consumers from other companies. When done properly the relationship is symbiotic; when done badly it is akin to putting lipstick on a pig.

In the summer of 2007 when the environmental debate was at its strongest in the UK, companies rushed to greenwash themselves and their products for the simple reason that they felt it was what their consumers wanted. People started worrying about their carbon footprint; politicians and political parties jumped on the bandwagon (witness the Tory logo rebranding). Economic times were different – we all got fat, dumb and happy at the end of the credit boom; the kids were in private school, the two cars were in the drive, the farmhouse in Tuscany was just around the corner and in this post-materialist world we clearly needed something to worry about.

Aviation, despite only accounting for about 2% of global CO2 emissions, became the poster boy for climate change – an easy target for lazy editors and picture desks looking for a decent picture for the front page splash. The Bishop of London caused an outcry by proclaiming that “flying is a symptom of sin”, thus lumping it into the same category as sloth, lust, gluttony et al. Even the Conservatives – yes, the Conservatives – thought it sensible to float a policy that rationed everyone to a single short-haul flight each year.

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Everyone was very worried. Or were they? Despite the numbers of surveys indicating that demand for flying was about to plummet for environmental reasons, 2007 was a bumper year for airlines. Demand failed to plummet because people said one thing to the pollsters but did another. Consumers in their droves demanded the right to offset the carbon on their flights, but less than 5% of customers of the best in its class (easyJet) opted to offset.

The debate, it turned out, was principally media driven. And that was in the good times.

Today, the environmental debate hasn’t disappeared, but media attention has moved elsewhere since the Northern Rock debacle fired the starting gun on the credit crisis, now global recession. Everywhere, consumers seem more concerned about meeting the mortgage payments than the fate of the polar bear. Sales of carbon-offsetting products have slowed to a trickle. In other sectors, highly unethical illegal downloading of music and video is at an all time high, supermarkets stopped charging for carrier bags and hastily removed air freighted stickers from fresh produce (because they finally woke up to the fact that growing strawberries out of season under glass in the UK uses more CO2 than flying it in the belly of a passenger plane).

It would appear that ethics matter a great deal to some people and to some sections of the press – but that concern is far from universal in the good times and frankly a luxury in a recession. Balancing the family finances and frugally managing our money reigns supreme; caution is the new excess. And that’s why the recent debate about MPs’ expenses reflects the zeitgeist. If we are watching every penny of our money then our elected servants had better watch out if they are not.

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Are ethics a luxury in a downturn?

Alex Cole Global Corporate Affairs Director Cadbury Talking to ordinary consumers about ethical issues is in Cadbury’s DNA. Two hundred years ago, the Cadbury family set out to market hot chocolate as an alternative to alcohol, priced within the reach of the common man and with a guarantee of purity in an age when adulteration with brick dust and other bulking agents was commonplace. That desire for mass appeal is still at the heart of our CSR agenda and sits behind our approach to Fairtrade communications. In becoming the first mainstream confectionery brand to go Fairtrade, we’re not aiming at traditional Fairtrade consumers. Quite the contrary, we’re working with Fairtrade to try to create a tipping point that makes ethics something for everyone. And this is why we think we can help ensure values don’t get overtaken by value during an economic downturn.

But it’s not as simple as it looks and we’re learning a lot about how different consumers think along the way…

It can be very easy, if you work in CSR, to claim that sales would rocket if only the marketing team would get out and tell consumers about all the ethical things your company is doing. But of course it’s not true (otherwise everyone would be doing it). I’ve sat in enough consumer research groups to know that one person’s ethics are another person’s nannying and that for most consumers taste is king (or put another way, if you crave a Creme Egg or a Crunchie, CSR is probably the last thing on your mind).

But it also seems crazy for companies like Cadbury with a strong tradition of doing the right thing to confine their ethics to the corporate sphere and not try to engage consumers on the subject; in fact, surely we’ve got a responsibility to use the power of our brands to take ethics to the masses?

The question is, who and how?

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Who? We spotted three groupings – or consumer segments – across a spectrum of opinion. It ranges from those who care very deeply about ethical issues (we called these the ‘Ethical Elite’); to those who can actually be turned off by CSR initiatives (we called them ‘Antis’). And right in the centre, are the vast majority - those who are open to ethics but only on their terms (the Feelgoodfactors).

How? These groups are different not just in terms of what they believe, but also how you should communicate with them. They respond to different kinds of communication styles and messages.

1. Ethical Elites

are willing to pay, not just financially, but also in terms of time and inconvenience to get an ethical option. They’ll go to a special shop, look for a special shelf, buy a special brand, taste something that they’re not familiar with, and pay a special price for it. In fact, this is all part of what they see as the role of an ethical consumer, to the extent that if a product doesn’t require this then they might doubt whether it is good enough!

This group cares passionately about ethical issues but they are challenging to communicate with and can be suspicious of corporations. They want a lot of information – and love facts, statistics and independent scrutiny. They’ve got lots of questions and they are not satisfied with the information brands give them. They want to hear it from someone else they respect – whether an official organisation or a renegade blogger. This group is also the traditional heartland of Fairtrade. They are already convinced it’s a good idea and try their best to support it whenever they can, across all kinds of product ranges.

2. Antis

sit at the polar opposite of the spectrum. They see this kind of stuff as completely irrelevant to them and are happy for this to remain the case. They’re cynical about – some might say hardened against - the issues, sometimes to the point of being against CSR. They don’t want to know about it and they certainly won’t pay more for it. Quite simply, they don’t want do-gooders preaching to them, and want to be left alone to enjoy their chocolate in peace (and at the lowest price). So you need to take care that any communication to other more interested consumers doesn’t alienate them.

3. Feelgoodfactors are by far the biggest group of all and are right in the middle of this spectrum. They are the mass mainstream and Cadbury’s heartland. They can be interested in ethical issues, but only to a limited extent and on certain terms. Ethics don’t beat convenience and value – and they certainly don’t trump taste. They want their favourite chocolate, with easy ethics. However, they are increasingly looking for more from life. They want to feel good about their brand choices, without too much personal sacrifice. So they want brands to take the lead and sort things out for them.

The way to communicate with them is also revealing. They engage more emotionally and much more personally. They don’t want facts and figures or complex judgements by expert groups. They don’t want to have to swallow a CSR dictionary in order to understand what it’s all about. They want simple stories about real people that make them feel good, from brands they love and trust. Like Cadbury.

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Understanding these groups, really helps you understand why so many companies develop niche ethical offers, at a premium price. These can attract the ‘Ethical Elites’ (and their extra cash) without ever needing to worry about alienating the ‘Antis’. It also explains why much of the communication about CSR reaches only a small proportion of the population and passes so many of us by.

We felt that the time was right for ethical consumerism aimed squarely at the mainstream. So with the certification of Cadbury Dairy Milk as Fairtrade we’re not targeting the ‘Ethical Elites’ - who are actually already pretty well served by established Fairtrade brands, like Green & Blacks and Divine – but instead trying to reach what the Cadbury family started by calling the ‘common man’ (or in my case, woman).

Underneath the communications is a pretty weighty and complex business initiative. Back in 2008 we set up the Cadbury Cocoa Partnership in conjunction with the United Nations Development Programme and other development organisations, such as the Ghanaian government, and farmers themselves. This is a ground-breaking initiative which aims to secure the economic, social and environmental sustainability of cocoa farmers and is now active across 100 Ghanaian communities. As you can imagine, it’s a detailed and time-consuming agenda, one that the average chocolate lover has neither the time nor attention span to get to grips with, and which few people will ever hear about.

The move to Fairtrade takes that work to the next level. As well as being a serious undertaking that benefits thousands of farmers on the ground it provides mainstream consumers with an easy ethical choice: their favourite brand, with the same taste, and same price but with added ethics. And for the Fairtrade movement in consumer terms it means a 20-25% increase in Fairtrade sales and a real tipping point, with millions of consumers becoming supporters of Fairtrade.

So far the consumer response reflects our consumer segmentation. We haven’t yet had time to see the response in store, because at the time of writing, the bars are only just hitting the shelves, but I’ve loved seeing the posts online on our blog. Hardcore ethical consumers are probing us on the detail, asking, ‘why is it only Cadbury Dairy Milk?’ and, ‘will you also be using Fairtrade sugar?’*.

Meanwhile most consumers said ‘well done’ and even ‘thanks for making my favourite chocolate Fairtrade’. But had two burning questions: ‘will it taste different?’ and, ‘will it cost more?’ (Answer, no and no).

So as we move to communicate this, we are keeping those mainstream consumers front of mind. We will be connecting the average Cadbury consumer to a new positive, ethical vibe. So from the brand that brought you the famous drumming gorilla and crazy eyebrow dancing kids, please expect the unexpected… *Answer: What we’re doing so far is already going to triple the amount of Fairtrade cocoa coming out of Ghana – and that’s just by making Cadbury Dairy Milk Fairtrade in UK and Ireland. We’re now working on other brands (and other markets) and have already announced our hot chocolate’s going Fairtrade too. And yes, the sugar is Fairtrade as well as the cocoa.

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