Rethinking Consumer Boycotts

Last September, executives from Arla Foods amba, the Danish dairy giant, probably paid scant attention to a series of caricatures of the prophet Muhammad in the Danish newspaper Morgenavisen Jyllands-Posten. Six months later, they learned a hard lesson about religion and commerce. Arla executives watched their annual sales in the Middle East not just drop from US$430 million, but virtually vanish. How did a company from Denmark, a country not exactly known for triggering international controversy, find itself at the center of a geopolitical, religious and commercial maelstrom? The answer extends beyond sales of Danish butter in Saudi Arabia. Based on our decade-long program of research studying global consumer boycotts, we offer five key lessons from these recent events.

First, when executives think about consumer protests, they focus mostly on company-specific boycotts triggered by a corporate policy or action, such as the use of sweatshop labor in developing countries. But, as Arla discovered, boycotts can also be touched off by broad geopolitical, religious or even historical tensions. In such societal boycotts, the company can be far removed from the root cause of the backlash (see “Different Kinds of Consumer Protests”).

Second, not all consumer protests are always boycotts. Consider, for example, certain new brands that have leveraged themselves as products of conscience to Muslim consumers, such as the United Arab Emiratesbased Mecca-Cola World FZCO’s Mecca Cola and the Iranian Zamzam Group’s ZamZamCola. The popularity of those brands is the result of a “buycott”: a type of protest that encourages the purchasing of certain products in support of a cause or practice (example: dolphin-friendly tuna).

Third, even in high-profile, company-specific boycotts, drops in sales — although sometimes substantial — are typically short-lived. In contrast, societal boycotts have the potential for greater long-term harm. Animosities and their effect on sales may persist, both because they often are rooted in deeply held beliefs and because there are fewer options for addressing the protest. Arla’s customers in the Middle East are slowly returning, but full recovery is anticipated to take years, if it happens at all.

Fourth, no company is safe from a societal boycott. Just ask Arla Foods. Even if a firm’s connections to a country or region are tenuous (or even nonexistent), it still can find itself the target of a protest. Nestlé SA, the world’s largest food marketer, faced this challenge in the furor over the Muhammad cartoons. The Swiss-based corporation placed ads in Saudi newspapers to counter a sharp drop in sales because of the misperception that the company was associated with Denmark. Even Muslim businesses have been victims. Kuwaiti-Danish Dairy Co. KCSC, a Kuwaiti-based and Muslim-owned company that has had no formal connection with any Danish partners for more than 20 years, has seen its sales drop 95% in Middle East markets outside Kuwait.

Fifth, societal boycotts require different tactics. Our research shows that, when animosities run high, traditional approaches for increasing sales (for example, price promotions) will have little effect. One obvious alternative is to downplay the “Made in . . .” aspect of a brand. A related practice is to reposition brands to appear as local products on store shelves. (The Procter & Gamble Company and Unilever Plc/Unilever NV have employed this tactic effectively in the Middle East.) More directly, companies can decouple their products from the source of the offense. For example, some Danish companies have shifted from labeling their products as “Made in Denmark” to “Made in the European Union.” Businesses can also form joint ventures with local firms to strengthen their ties to one geographic region while loosening their connections to another. In an alternate approach, corporations can publicly distance themselves from the incident in question. Denmark Trading Furniture, a furniture manufacturer and seller in the United Arab Emirates that is unaffiliated with Denmark, chose to change its company name explicitly stating that it was doing so in support of the protest against the Danish cartoons. Finally, organizations could choose to address the source of the animosity directly (but cautiously). This will be a long-term solution, at best. Arla, for example, purchased ads in the Middle East to reprint the Danish government’s explanation that respect for Islam and freedom of expression are both vital and indispensable elements of Danish society. But Arla executives anticipated that those ads were unlikely to either soothe consumer outrage or spark sales. The best they could hope for was a continued call for dialogue — a strategy that helped end the boycott of Arla’s brands in Denmark.