Tuesday, March 28, 2006

Why Tom's of Maine's selling out is a good thing

Recently big conventional companies have been acquiring smaller progressive, green, fair trade and socially responsible companies. An article in USA today business covers the trend:
Consumers have shown they are willing to pay a premium for "natural" products from values-oriented companies that make them feel good, and big marketers want a piece of the profitable trend.
Colgate on Tuesday became the second multinational corporation in a week to buy a small company with a social responsibility message. It bought 84% of Tom's of Maine, the all-natural personal care brand based in Kennebunk, Maine, for $100 million.
Friday, French cosmetics giant L'Oreal bought London-based retailer The Body Shop, a personal care chain known for its avoidance of animal testing and its support for human and animal rights causes.
Is this good for consumers who care about socially responsible issues?

Reasons why it is bad:
*being in big corporate systems will corrupt leaders of green companies and dilute their values
*due to cost controls imposed by bigger companies, product quality might suffer
*companies will try to create "synergies" and "leverage assets" and do other things corporations' consultants tell them do in fancy powerpoints. The result will be less operating independence for SRI companies like Tom's if Maine.

All those arguments are important but the creeping in of corporate "cost streamlining" goes both ways. Most of the extra money people spend to get fair trade coffee doesn't go to farmers. Most of it disappears to the various middle-men and some of it never materializes due to the inefficiency in the fair trade firms. Products can be cheaper for consumers and more profitable for farmers and other workers who help produce the goods.
Bigger companies are often better at conducting focused research to figure out what consumers really want. This will lead to green/fair trade products that better track consumer demand.

Though not without risks, these acquisitions could lead to better distribution of cheaper goods that better meet our needs and those of the workers who make them.
Selling to big companies might literally be "selling-out" but i am not sure its figuratively "selling-out".


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