The Curious Marriage of Socially Conscious Brands and Their Larger Corporate Counterparts

The Curious Marriage of Socially Conscious Brands and Their Larger Corporate Counterparts
Scott Lachut, PSFK Labs
  • 19 december 2008

Harvard Business School professors James E. Austin and Herman B. Leonard are co-authoring a paper titled ”Can the Virtuous Mouse and the Wealthy Elephant Live Happily Ever After?” that examines the acquisitions of smaller socially conscious brands by their larger corporate counterparts.  The goal of the report is to study why these mergers occur and how to manage them most effectively so that both companies benefit.  The study explores these issues from the perspective of three recent real world examples: Tom’s of Maine acquired by Colgate, Stonyfield Farm Yogurt purchased by Danone, and Ben & Jerry’s bought by Unilever. Though delicate in nature, when these partnerships are approached correctly, they can drive both profits and positive change.

These relationships work for socially conscious brands because they are able to apply the scaling capabilities of their larger peers – utilizing their distribution channels and investment capital to reach a wider market.  Additionally, these “virtuous mice” can take advantage of an organizational structure that would otherwise take them years to build.  Conversely, large brands are instantly granted social cache that can completely realign their companies’ underlying values in the eyes of the public, an image that can’t simply be bought with empty promises.  And though “wealthy elephants” might excel at the large-scale innovation of their products, giving weight to out-of-the-box thinking and new business practices in the context of their existing environments is not always easy to implement.

The biggest mistake that both parties can make is to assume that these acquisitions are the same as any other. Whereas, the normal process is to move to quickly assimilate a new company into the fold and immediately leverage synergies, these smaller iconic brands need to be allowed to preserve both their identity and autonomy so as not to viewed as “selling out” in the eyes of the public.  Furthermore, both brands can’t lose sight of their respective goals.

Though the mergers currently being examined are still in the early stages, the authors believe there is a great potential for future success.

For one thing, the number of social entrepreneurs developing new for-profit organizations with a social component is growing and is likely to continue to grow. Once their concept is worked out and proven, these organizations will naturally want to seek scale, both to capture the potential economic gains but also to maximize their social value. Their owners and initial investors will, just as naturally, want to find some appropriate exit point (or, at least, liquidity event). And, for a variety of reasons, being acquired (through a well-designed acquisition agreement!) may be the preferred form of both scale and exit or liquidity.

Large companies will continue to seek out ways to enter into the emerging market segments that place a premium on the social dimensions that accompany the inherent attractiveness of the innovative products. The social entrepreneurs have mobilized a social technology that is very difficult for the big companies to replicate, so acquisition is an efficient route into these new segments and business approaches.

HBS Working Knowledge: The Surprisingly Successful Marriages of Multinationals and Social Brands

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