Firms feel pain of people power

By Robert Plummer
BBC News business reporter

Arla's products are no longer welcome in the Middle East

The backlash throughout the Muslim world against a series of Danish cartoons caricaturing the Prophet Muhammad is having a severe impact on at least one prominent business in Denmark.

Arla Foods, one of Europe's biggest dairy companies, normally sells products worth $480m (£272m) a year to the Middle East.

But a boycott of Danish firms across the region has reduced the company's sales there to zero in a matter of days.

Arla says it has been caught up in "a game that we have no part in", forcing it to send home 170 employees until demand picks up again.

We have built up our business in the Middle East countries for 40 years, and have had production in Saudi Arabia for 20 years, and then within five days or so this is all in ruins Arla spokesman Louis Honore Boycott costs Arla £1m a day

As this incident shows, consumers really do have the power to bring businesses to their knees once their wrath has been aroused. But Arla is not a typical target of this kind of boycott.

"Arla has been very, very unlucky and its situation is very unusual," says John Band, senior analyst at market research group Datamonitor.

"These campaigns are normally targeted against companies because of something they've done, not because they're in the same country as a newspaper."

Anti-apartheid

There is certainly no lack of examples of consumers banding together to exert commercial pressure on companies whose business practices are deemed unethical in some respect.

In 1986, British bank Barclays gave up its position as the market leader in South Africa and pulled out of the country following an anti-apartheid boycott campaign that saw its share of the UK student market plummet.

Shark's fins caused tensions for Disney in 2005

Swiss-based multinational Nestle has faced action from consumers around the world since 1977 over objections to its marketing of formula milk to the developing world.

More recently, entertainment giant Disney withdrew plans to serve shark's fin soup at its new Hong Kong theme park after environmental activists threatened to shun its products.

Pressure

Ethical Consumer, which describes itself as "the UK's only alternative consumer organisation", provides a list of current boycotts affecting British consumers.

The group even provides a Top 10 of the most popular boycotts, headed by campaigns against Nestle, McDonalds and Shell.

"Boycotts offer campaign groups - or individuals - the chance to exert pressure for change and can be particularly appropriate when governments are unwilling or unable to introduce reforms," Ethical Consumer says.

The group acknowledges that sometimes, as in the case of Arla, a company can find itself the subject of a boycott simply because it is big and vulnerable.

France's wine industry suffered because of French nuclear tests

"French wine producers were targeted in this way by groups opposing the French government's nuclear tests in the Pacific," it points out.

And Denmark's neighbour Norway's decision to resume commercial whale hunting during the 1990s sparked boycotts and actions against international Norwegian firms.

But Ethical Consumer says firms can usually avoid such campaigns by anticipating social trends and keeping up with competitors.

"A responsible company should be able to achieve this by being aware of the consequences of its decisions, not just financially, but for people, the environment and animals," it says.

John Band of Datamonitor agrees.

"Probably the major impact that consumer boycotts have is in the boycotts that don't happen," he says.

"Companies will act very much ahead of any possible issues arising, rather than waiting for protest leaders to start complaining."

Limited effect

So how easy is it to stage a successful boycott?

Mr Band reckons it is easier to make the headlines than it is to harm a company's business, pointing out that the long-running campaign against Nestle has not really affected the popularity of its products.

"A high media profile boycott might have a limited effect on sales," he says. "Some people might boycott Nescafe, but it's unlikely that they'll boycott the products that are not directly Nestle-branded, such as Kit Kat - they're just not connected in people's minds."

Such actions are less of a problem for mass-market companies, since any boycott against them will rarely be big enough to have a significant impact, he argues.

Ralph Nader says fairly small sales reductions will make firms reform

Ethical Consumer, quoting veteran US consumers' champion Ralph Nader, says a reduction in a company's sales of between 2% and 5% is sufficient to force it to change, although few campaigns ever achieve anything like that kind of impact.

Interestingly, however, the more sensitive a company is to ethical issues, the more vulnerable it is to external pressure.

Mr Band cites the example of US campaigns against the use of child labour in the clothing industry.

Protesters avoided targeting big firms like Wal-Mart, because their customers were considered less politically aware. Instead, they focused on Gap, whose middle-class, higher-income customers were more likely to be concerned about social issues.

"There is room to make money by appealing to ethical consumers," he says. "If you're appealing to a particular group, it's vital not to alienate them. But the number of people swayed by a campaign is likely to be very small."