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Can Arla beat the boycott?

By Chris Mercer , 24-Mar-2006

As Arla Foods begins on the long road to recovery in its Middle East dairy markets, DairyReporter.com delves into the nature of consumer boycotts and the effects they may have.

Arla will this Sunday place full-page adverts in 25 Arab newspapers in an attempt to woo consumers, following a boycott on Danish products across the Middle East.

The adverts will emphasise Arla's 40-year history in the region and re-iterate that the cartoons of the prophet Muhammad, which sparked the boycott, were nothing to do with the company.

 

Many Muslims were incensed after local media reports showed the 12 cartoons, one of which depicted Muhammad in a bomb-shaped headdress, originally published by Danish newspaper Jyllands-Posten.

 

Arla, based jointly in Denmark and Sweden, was caught out after purposefully associating popular brands like Lurpak butter with Denmark. The group is now set to lose at least €53m of its €429m annual sales in the Middle East this year.

 

Sunday's advertisements show the group has decided to take a pro-active approach in beating down the boycott. But will it work?

 

Analysis

 

Arla's pro-active strategy is interesting, according to consumer behaviour expert Dr David Marshall, because it shows how seriously the group views the problem. Its other choice was to keep quiet and hope the problem went away.

 

The risk for Arla is that "by addressing it head on and directly they are also raising the issue again", said Marshall, of the University of Edinburgh, in an interview with DairyReporter.com.

 

The sustainability of the boycott, however, will depend on consumers' commitment.

 

Marshall said religious unity in the Middle East served as a good network for collective action and could help prolong the boycott. "If you touch on particular sensibilities it clearly gives greater justification for boycotting products."

 

An example of this is that the UK's best-selling daily newspaper, The Sun, has never properly recovered sales in Liverpool, following anger in the city at the paper's coverage of the 1989 Hillsborough football disaster, in which 96 Liverpool fans died.

 

Consumers, however, can find it hard to kick habits, said Marshall. "It will depend on whether people are prepared to sacrifice products. Is there anything else available in the market?"

 

Certain Arla brands, such as Lurpak butter and Puck cheese, enjoyed huge popularity in the Middle East. And, some supermarkets in the Middle East have already announced they would again stock Arla's dairy brands because they lacked enough supplies to offer alternatives.

 

The danger for Arla is the boycott may last long enough for both domestic and international competitors to up production and grab its market share.

 

The Nestlé Perspective

 

Nestlé is one food company that knows more than most about boycotts, having been subjected to various ethical campaigns over the last 25 years.

 

"In our experience, boycotts on brands are less than useless," said François Xavier-Perroud, Nestlé's lead spokesperson, to DairyReporter.com.

 

He said Nestlé had quadrupled sales and tripled profits since boycotts against it began.

 

"I believe consumers have a great amount of power. Even a well-established, competitive company like ours never knows whether a product launch is going to be successful or not."

 

Perroud said consumers made decisions based on "the best deal for me at this time", and that Arla should wait and see how the situation in the Middle East looks in a few weeks.

 

He expressed doubts over politically motivated boycotts, but agreed Nestlé's position was different from Arla's because "for a large number of our customers, Nestlé does not really carry a strong national identity".

 

Perroud added Nestlé's Swiss credentials were of "no great significance" to a large number consumers, and the group's localised production facilities had helped to make it "part of the local landscape" in several regions.

 

David Marshall said this is what puts Nestlé in greater control of its fate.

 

Since the boycott against it is fuelled by ethical concerns and not the group's national identity, Nestlé may directly combat protests by changing its practices or introducing new ethical policies.

 

Arla, however, has no such power because it has been judged guilty by association. This, together with the strong unity that religion lends to the Middle East boycott, has made the dairy group's position more precarious.

 

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