Analysis: Ben & Jerry’s Unilever fight shows the risks of ceding control

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Ben & Jerry’s, a Unilever brand, is displayed at a store in Manhattan, New York, U.S., March 24, 2022. REUTERS/Andrew Kelly/File Photo

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LONDON/BOSTON, Aug 16 (Reuters) – The legal battle between Ben & Jerry’s and Unilever (ULVR.L) highlights an issue affecting a growing number of purpose-driven brands: how to maintain their identity after being taken over by a big consumer business.

Multinational consumer groups have rushed to acquire socially responsible brands in recent years, seeking to capitalize on growing customer demand for ethical products, which are usually sold at a premium.

Under Chief Executive Alan Jope, Unilever has added to a portfolio of “useful” brands – from Paula’s Choice skincare products that avoid animal testing to sustainably made supplements from SmartyPants and Nutrafol.

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In 2000, the company bought Ben & Jerry’s for $326 million with an unusual caveat: the Vermont-based ice cream maker would retain its independent board of directors, charged with guiding its social and political identity.

Ben & Jerry’s now believes that commitment has been breached, following an outcry over its plans to stop selling ice cream in the Israeli-occupied West Bank, which ultimately led Unilever to strike a deal to sell the business. Israeli brands.

The maker of Chunky Monkey and Cherry Garcia ice cream sued its parent company on July 5 to try to stop the sale. A decision is expected in the coming weeks.

“It’s a wake-up call for people making deals to be more vigilant and ensure not only that finances support a deal, but that potential underlying 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 more than one billion euros ($1 billion), says the Israeli sale goes against its values ​​by allowing its products to remain available in the West Bank.

The ice cream brand should have known that “Unilever may see fit to bring the Ben and Jerry’s brand anywhere and everywhere in the world,” Cohen said.

On the other hand, Unilever should have understood that the founders of Ben & Jerry’s “took a political position on a variety of issues, not the least of which is their objection to the actions of the State of Israel”, said he added.

Unilever may already have learned the lesson. Home goods brand Seventh Generation, which it acquired in 2016, created a “social mission” board to keep the business focused on causes such as diversity and producing less waste. packaging.

But messaging on the brand’s website and Twitter feed covers a narrower range of issues than 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 board member of Seventh. Generation until this year.

“THINK ABOUT WHAT YOU ARE GIVING UP”

Organic food company investor Gary Hirshberg, who co-founded Stonyfield yoghurt brand, now part of French dairy group Lactalis, said entrepreneurs can’t rely on a publicly listed buyer to pursue a mission social, as the leaders of the new owner come and go. He called the dispute between Ben & Jerry’s and Unilever a “classic difference in cultures”.

But he added that a good way to protect a brand’s mission is to build it around a legal standard like having organic ingredients, which is hard for a buyer to change.

Oregon Treasurer Tobias Read, who oversees state pension fund investments worth about $100 billion, including Unilever stock, said the Ben & Jerry’s dispute shows how social purpose enterprises can have contrasting obligations once they become part of a publicly traded company.

“If you’re a founder and you’re considering being acquired, you might want to think about what you’re giving up,” Read said.

Family-owned outdoor apparel and equipment manufacturer Patagonia places great importance on oversight in decision-making.

“Many of our boldest initiatives have been made possible by our independence,” said Matthijs Visch, its managing director for Europe, the Middle East and Africa.

“Today, the argument ‘We can’t do this because we have shareholders’ just doesn’t hold water.”

Fear that ethical principles could be compromised after a takeover has prevented some companies from making deals.

British beauty brand Lush markets its vegetarian, cruelty-free, handmade bath bombs and soaps. The staff of the company owns 10% of its shares and has a say in the management of the company.

That independence won’t be given up, no matter how attractive an offer is, said Hilary Jones, chief ethics officer.

“External capital wouldn’t find us an attractive partner, and we wouldn’t like financial returns to be the primary focus and restrict our choices, so we deliberately resisted outside investment,” she said. . “We love what we do and we love doing it our way.”

($1 = 0.9823 euros)

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Reporting by Richa Naidu and Ross Kerber; Additional reporting by Doyinsola Oladipo and Jessica DiNapoli; Editing by Matt Scuffham and Mark Potter

Our standards: The Thomson Reuters Trust Principles.

Richa Naidu

Thomson Reuters

London-based journalist covering retail and consumer goods, analyzing trends including supply chain coverage, advertising strategies, corporate governance, sustainability, policy and regulation. Has previously written about US-based retailers, major financial institutions and covered the Tokyo 2020 Olympics.

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