All cries over spilt milk

An unwitting victim of the satirical cartoon rows, Arla Foods is losing £1m a day in sales and proves how vulnerable brands can be. Yet, it could not have anticipated the event nor has it been able to respond as other high-profile boycott targets have in the past. By Robert Lester

Thousands of Muslims have taken to the streets to protest against the publication of cartoons depicting the Prophet Muhammad in a Danish newspaper; and millions more have opted to vote with their wallets. The boycott of Danish products in the Middle East has already cost dairy giant Arla Foods more than £50m and should act as a reminder to companies of how vulnerable brands can be to events beyond their control.

The offending cartoons were first published in Denmark’s biggest newspaper Jyllands Posten in September, but have since been reproduced in countries including France, Germany, Italy and Spain. The resulting furore is described as the worst cultural clash between Islamic religious beliefs and western freedom of expression since Salman Rushdie’s Satanic Verses in 1989 – and it is costing Arla £1m a day. The Middle East is a £300m-a-year territory for the company, but in some markets sales have dropped to zero.

Islam forbids hand-drawn pictures of people or animals to prevent idol worship. Any picture of the Prophet would have been considered blasphemous, but Muslims feel the caricatures are insulting and offensive in their own right. One shows the Prophet wearing a turban shaped like a bomb, and another has him telling suicide bombers as they arrive in paradise/ “Sorry, we have run out of virgins.”

Militant Islamic group Hizb ut-Tahrir Britain is calling on global Muslim leaders to sever diplomatic and economic relations with European countries that continue to publish the cartoons. Iran has already begun a trade embargo with Denmark.

The right to vote with your wallet

Muslim Association of Britain spokesman Harris Bokhari says: “We live in a democratic society and have the right to choose what we buy. International companies have an influence over governments and the media, and can also influence global politics. They have to understand that if they’re going to cause offence, then we’re not going to buy their products.”

Bokhari believes the boycott will spread to products made in other countries and predicts Germany will be next after several newspapers defended their right to publish the cartoons. Conservative newspaper Frankfurter Allgemeine Zeitung stated last week: “Religious fundamentalists who do not respect the difference between satire and blasphemy have a problem not only with Denmark, but with the entire western world.”

Other Danish companies targeted include Lego and pharmaceuticals company Novo Nordisk. One retail chain has removed Lego products from its stores in the United Arab Emirates, Qatar and Kuwait, but a spokeswoman for the company says it has been hit “relatively mildly so far”.

However, Arla could be counting the cost of the boycott for years to come. The company, which owns Lurpak butter, one of the best-known dairy brands in the Middle East, has tried to explain that it has been “innocently caught in the middle”, taking out full-page ads in Saudi Arabian newspapers to outline the official Danish line on Islam. But a spokesman says this has not helped, adding: “We have built our business in the Middle East for 40 years, and within five }days it is all in ruins.”

A spokeswoman for Arla Foods UK says the company is monitoring the situation in this country but, as yet, it has nothing to report.

Arla is not the first international company to face a boycott, but its circumstances are exceptional, says Mary Rayner, a writer and researcher at Ethical Consumer (EC), which describes itself as “a UK alternative consumer organisation looking at the social and environmental records of companies behind brand names”.

Boycott as a force of change

“Normally, the purpose of a boycott is to force companies to change their actions, but this is different,” Rayner says. “Arla has no real links to this newspaper so, in a sense, boycotting it is not logical. It is very difficult for Arla to respond because there is no link between it and this situation.”

EC compiles a list of the most boycotted brands. Nestle occupies the top spot (see table). The Swiss company has faced action from consumers since 1977 over objections to its marketing of formula milk in the developing world. It became involved in the cartoon controversy following a minor drop in sales and ran an ad in a Saudi Arabian newspaper telling consumers that two of its products in the region are not of Danish origin.

Coca-Cola, meanwhile, has been the target of campaigners in India, who claim the company is responsible for creating severe water shortages and pollution. There are signs that the boycott is working, with the state government of Kerala announcing recently that it will challenge Coke’s right to extract water from common groundwater resources.

Coke sales dropped 14 per cent in India in the last quarter of 2005. The company has faced increased competition in recent years with the roll-out of a number of alternative colas targeting Muslims. The most widely known is Mecca Cola, launched in 2002, although Qibla Cola, which went on sale in the UK a year later, ceased trading in September.

Other high-profile brands that have suffered boycotts include Shell and McDonald’s. The fast-food chain is particularly unpopular in France but has also had problems in the Middle East because of US foreign policy. Two of McDonald’s six franchises in Jordan have closed due to lack of business, and the company’s sales have fallen by 65 per cent in Oman.

Rayner says companies can often avoid boycotts by anticipating social trends. But a reduction in a company’s sales of between two and five per cent is usually needed to force change, and few boycotts ever achieve that kind of impact.

Honesty and transparency

Interbrand chief operating officer John Allert believes honesty is the best policy, but admits Arla has been unlucky. “Brands need to engage with consumers in an honest, transparent way,” he says. “But that becomes more difficult when the tarnish comes as a result of actions you can’t control. Arla needs to maintain transparency, but must do it while keeping a low profile. At times like these, people look for scapegoats.”

Allert believes the Danish national brand, rather than the companies being boycotted, will suffer long-term damage. He adds: “I don’t think the damage to brands like Lurpak is likely to be sustained because it dominates the market. People are sophisticated enough to know the difference between a brand they consume daily and the behaviour of one small part of a country.”

Arla will have to work hard to repair the damage it has unwittingly sustained in the Middle East. The episode is a warning to brands that their fortunes are not always in their own hands.