Ben & Jerry’s vs Unilever: how a star acquisition became a legal nightmare

More than a year later, the Ben & Jerry’s vs Unilever conflict continues to rage. The fight between a ‘purpose-led’ parent company and a brand with an even louder voice shows the limits of corporate ethics….

One day in May last year, hundreds of people marching through the picturesque city of Burlington, Vermont, stopped to shout outside the Ben & Jerry’s Scoop Shop. “The only word they were screaming was ‘shame’,” says Wafic Faour, a veteran campaigner with local group Vermonters for Justice in Palestine.

The rally was to commemorate a distant event: the displacement of hundreds of thousands of Palestinians during the 1948 creation of the state of Israel, known to Palestinians as the Nakba, or “catastrophe”.

To Faour, the march marked a turning point in a campaign to address one of the world’s most long-lasting conflicts via the state of Vermont’s most famous company.

Two months later, Ben & Jerry’s announced it intended to end its franchise deal in Israel at the end of 2022 as a means of stopping its product being sold in occupied Palestinian territories, which Faour’s campaign had argued made the ice-cream maker complicit in an occupation deemed illegal under international law.

But the announcement placed the brand at odds with its parent company, Unilever — and with the government of Israel, which threatened Unilever with “severe consequences”.

Opponents, including Israel’s economics minister, filmed themselves throwing tubs of Ben & Jerry’s in the bin. Jewish groups accused Ben & Jerry’s and Unilever of singling out Israel for criticism. More than a year later, the conflict continues to rage.

Ben & Jerry’s independent board has taken Unilever to court over an attempt to continue Israeli sales. At the end of September, it expanded its legal action to target Unilever in London as well as its US subsidiary.

Unilever has until the start of November to respond to the latest accusations in court, while the dispute could taint the tenure of Unilever’s next chief executive, after Alan Jope announced he would retire next year.

Pro-Israel demonstrators protest outside a Ben & Jerry’s store in New York after the company announced it intended to end its franchise deal in Israel to stop its product being sold in occupied Palestinian territories

The fight pitches a multinational that has long emphasised its commitment to ethics and sustainability against a subsidiary with an even louder voice. It also raises questions about the limits of corporate ethics as companies come under pressure to take stands on sensitive public issues from climate change to Black Lives Matter.

Others to have fallen foul of the increasingly febrile atmosphere include Disney, whose initial decision not to take a stand on Florida’s so-called Don’t Say Gay bill was reversed after outrage from employees.

H&M and Nike faced a backlash in China last year after expressing concern over reports of forced labour in the Xinjiang region. But Joanne Ciulla, director of the Institute for Ethical Leadership at Rutgers business school, says this case is unusual in one respect:

“You rarely have ethical company against ethical company, disagreeing on what’s ethical . . . companies do have to pick their battles and it sounds like this is a battle [Unilever] don’t want to fight.”

Searching for euphoria

Ben & Jerry’s was founded in 1978 in a renovated gas station in Burlington, Vermont, a state with a strong history of liberal activism. Founders Ben Cohen and Jerry Greenfield came of age during the 1960s, part of “a diaspora of baby boomers who converged on Burlington in search of euphoria”, according to Brad Edmondson’s history of the company, Ice Cream Social. The long-haired pair slept in their scoop shop during their first summer of operation, testing out ice-creams with chunks of candy, nuts, cookies and other foods thrown into the mix.

The resulting concoctions were lumpy, eccentric and hugely popular: sales ballooned from less than $1mn in 1982 to more than $58mn seven years later. By 1989 sales had ballooned to more than $58mn.

As the company grew, it developed a three-part mission, encompassing ice-cream, sustainable economic growth and social improvements. It campaigned on issues as wide ranging as climate change and bovine growth hormone. In 1988 it began selling “Peace Pops” as part of a bid to divert 1 per cent of the US defence budget to cultural and economic exchanges with the Soviet Union.

In the late 1990s, amid consolidation in the ice-cream sector, and with Ben & Jerry’s share price languishing, its board opted to pursue a sale, despite scepticism from the founders. In 2000, Ben & Jerry’s was sold to Unilever for $326mn.

Additional reading: Ben & Jerry’s sues Unilever over sale of Israeli business

Ben & Jerry’s has filed a lawsuit against its parent company, Unilever, to block the sale of its Israeli business to a local franchisee. This whole saga has provoked much sound and fury, for and against….

At the time Cohen said he would have preferred the brand to remain independent, but quoted the Grateful Dead song “Scarlet Begonias”: “Once in a while you get shown the light in the strangest of places if you look at it right.”

Central to his support was a deal to put in place an independent board to protect the brand’s social mission and integrity. Despite owning the group and choosing its chief executive, Unilever would select only a minority of directors, with the independent board members nominating their own successors.

“It’s a really unusual agreement. Most companies when they sell out, they sell out in every sense,” says marketing consultant Peter Field. One other Unilever brand, Seventh Generation, has its own social mission board, but without the same independence.

Ben & Jerry’s was one of the last Unilever brands to add the group’s logo to its packaging. But with access to the consumer goods group’s vast global distribution network, the brand expanded fast, becoming one of Unilever’s largest.

Euromonitor projects it will bring in $2.2bn of sales this year, accounting for 2.6 per cent of the global ice-cream market — up from 1.4 per cent in 2013.

“We held it up in business school as one of the great acquisitions,” says Mark Ritson, a former marketing professor who has taught at the London Business School and MIT’s Sloan School of Management.

Ben & Jerry’s Israeli presence long predates the sale to Unilever. When Jeff Furman, a board member for four decades, helped negotiate the company’s 1987 licence with the Israeli entrepreneur Avi Zinger, he had no suspicion the deal would one day place the brand at the centre of a political storm.

“I didn’t have any real inkling or understanding of the struggles [of Palestinians] at the time,” Furman says. That changed when, in 2012, he visited Israel and the Palestinian territories. “I would describe this as a life-changing experience . . . what I saw there was just shocking to me,” Furman says. “I felt a strong responsibility as a Jewish person.”

Profit or purpose

As Ben & Jerry’s grew, the climate in business was also changing. The old orthodoxy, Milton Friedman’s idea that “the social responsibility of a business is to increase its profits”, was going out of fashion — at least in theory.

One of the loudest advocates of the new “purpose-driven” method of managing companies and brands was Paul Polman, chief executive of Unilever from 2009 to 2019. Polman sought not only to ride the wave of corporate do-gooding, but to lead it. Setting ambitious green targets for Unilever, he argued that brands and companies with a clear purpose would ultimately fare better financially.

The view ignited a fierce debate, but it chimed with broader trends. Environmental, social and governance investing was on the rise, expanding to become the fastest-growing segment of the asset management industry.

After Polman quit Unilever in 2018, his successor, Jope, took up the cause in his turn. Jope set out plans to “dispose of brands that we feel are not able to stand for something more important than just making your hair shiny, your skin soft, your clothes whiter or your food tastier”.

Yet in Donald Trump’s America, with culture wars raging, companies that had adopted broad and sometimes vague notions of purpose found themselves the target of campaigns with a sharper edge…..

Financial Times: Read the full story here

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