Analysis: Ben & Jerry's Unilever fight shows risks of ceding control
16/08/2022 06:00
By Richa Naidu and Ross Kerber
LONDON/BOSTON, Aug 16 (Reuters) - Ben & Jerry's legal battle
with Unilever ULVR.L sheds light on an issue affecting a
growing number of purpose-led brands: how to maintain their
identity after being bought by a major consumer company.
Multinational consumer groups have raced to snap up socially
conscious brands in recent years, seeking to tap into a surge in
demand among customers for ethical products, usually sold at a
premium.
Under Chief Executive Alan Jope, Unilever has added to a
portfolio of "purposeful" brands - from Paula's Choice skincare
products that shun animal testing to sustainably-made
supplements from SmartyPants and Nutrafol.
In 2000, the company scooped up Ben & Jerry's for $326
million with an unusual caveat: the Vermont-based ice cream
maker would retain its independent board of directors,
responsible for guiding its social and political identity.
Ben & Jerry's now believes that commitment to have been
breached, following a furore over its plan to stop selling ice
creams in the Israeli-occupied West Bank that eventually led
Unilever to strike a deal to sell the brand's Israeli business.
The maker of Chunky Monkey and Cherry Garcia ice creams sued
its parent company on July 5 to try to stop the sale. A ruling
is expected in the coming weeks.
"It's a wake-up call for the folks who do deals to be more
vigilant and ensure not only do the financials support a deal,
but the underlying potential future conflicts are free and
clear," said Mark Cohen, a professor at Columbia University
Business School.
Unilever declined to comment for this story. Ben & Jerry's
had no immediate comment.
Ben & Jerry's, now worth over 1 billion euros ($1 billion),
says the Israeli sale is against its values by allowing its
products to remain available in the West Bank.
The ice cream brand should have been aware that "Unilever
might see fit to put the Ben and Jerry's brand anywhere and
everywhere in the world," Cohen said.
On the other hand, Unilever should have understood Ben &
Jerry's founders "have taken a political stance on a variety of
issues, not the least of which being their objection to the
actions of the State of Israel," he added.
Unilever may have already learned the lesson. Home products
brand Seventh Generation, which it bought in 2016, created a
"social mission" board meant to keep the business focused on
causes such as diversity and generating less packaging waste.
But the messaging on the brand's website and Twitter feed
covers a narrower range of issues than that of Ben & Jerry's.
"Seventh Generation has a broad mission for environmental,
racial and social justice. Ben & Jerry's mission may be
broader," said Mindy Lubber, CEO of climate advocacy group Ceres
and a member of the Seventh Generation board until this year.
'CONSIDER WHAT YOU'RE GIVING UP'
Organic food company investor Gary Hirshberg, who co-founded
yogurt brand Stonyfield, now part of French dairy group
Lactalis, said entrepreneurs cannot rely on a publicly-traded
buyer to continue a social mission because the new owner's
executives will come and go. He called the Ben & Jerry's dispute
with Unilever "a classic difference in the cultures."
But he added a good way to protect a brand's mission was to
build it around a legal standard like having organic
ingredients, hard for a buyer to change.
Oregon Treasurer Tobias Read, who oversees state pension
fund investments worth about $100 billion including Unilever
shares, said the Ben & Jerry's dispute shows how socially-minded
businesses can have contrasting obligations once they become
part of a publicly-listed company.
"If you're a founder and you're considering being acquired,
you might want to consider what you're giving up," Read said.
Family-owned outdoor apparel and gear maker Patagonia values
having oversight over decision making.
"Many of our boldest moves have been enabled by our
independence," said Matthijs Visch, its general manager for
Europe, the Middle East and Africa.
"Today, the argument 'We can't do that because we have
shareholders' simply doesn't hold water."
Concerns that ethical principles could be compromised after
a buyout have held some companies back from agreeing deals.
British beauty brand Lush markets its bath 'bombs' and soaps
as vegetarian, cruelty free and handmade. The firm's staff hold
10% of its shares and have a say in how the business is run.
That independence will not be given up, no matter how
attractive an offer might be, said ethics director Hilary Jones.
"External capital would not find us an attractive partner,
and we would not relish having financial returns being the main
goal and restricting our choices, so we have deliberately
resisted taking outside investment," she said. "We love what we
do and we love to do it our way."
($1 = 0.9823 euros)
(Reporting by Richa Naidu and Ross Kerber; Additional reporting
by Doyinsola Oladipo and Jessica DiNapoli; Editing by Matt
Scuffham and Mark Potter)
((richa.naidu@tr.com; Follow me on Twitter https://twitter.com/Richa_Writes;
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