Sunday, 20 September 2009

Slick Marketing Pitch: Companies Push Palm-Oil-Free Products

Slick Marketing Pitch: Companies Push Palm-Oil-Free Products

Helen Coster, 09.18.09, 5:40 PM ET

Lush, purveyor of handmade bath, hair and body products, last month used its 105 U.S. store windows to publicize its product–and a cause. Signs read “Wash your hands of palm oil!” next to cardboard cutouts of somber-faced orangutans.

The Dorset, U.K.-based retailer even invited passersby to dip their hands in green paint and make palm leaf hand prints on its windows. Inside the stores, shoppers were told how palm oil producers–most of Lush’s bigger competitors among them–are destroying forests and habitats for endangered species, like the orangutan. They were also invited to sample Lush’s new palm oil-free soap, made from sunflower oil, rapeseed and coconut oil. It retails for $5.95 per quarter-pound.

Green-minded consumers and environmental groups are pressuring companies to stop using palm oil, an ingredient found in thousands of cleaning products, cosmetics and food, including chocolate and margarine. Palm oil is produced from the fruit of the oil palm tree, which yields more oil per hectare than many other vegetable commodities. To meet global demand for palm oil, its producers are clear-cutting forests to make way for plantations in Indonesia and Malaysia, where most of the world’s palm oil originates. Critics say the companies that use much of the 43 million tons of palm oil produced last year are contributing to deforestation, which releases greenhouse gases into the environment, drains carbon-trapping peat swamps and destroys orangutan habitats.

Where there’s a cause, there is a marketing opportunity. Companies including Lush, The Body Shop, Cadbury and Unilever are trying to educate consumers about palm oil so they can push their own “palm oil-free” or “sustainable” palm oil, produced on land that wasn’t cleared of trees, even if they aren’t selling these products just yet.

Seventh Generation, the Burlington, Vt., maker of environmentally friendly cleaning, home care and body care products, hopes its promise to switch to sustainable palm oil by 2012 will keep critics at bay. Until then, the company, which uses 2,000 metric tons of palm kernel oil a year, is buying credits to cover its use. The company is paying sustainable producers a premium for oil that Seventh Generation isn’t yet using. “We’re talking about a $10 to $15 premium per metric ton, which comes down to a few cents on every item,” says Chris Miller, an executive in Seventh Generation’s “corporate consciousness” department. “It’s not a huge cut in margin. We think it will be the cost of being in this category.”

Seventh Generation is already trying to use the effort to bolster its green brand image: It’s teaming up with Whole Foods and the Rainforest Action Network to host an educational event about the negative environmental impact of palm oil. The group is sponsoring a panel discussion aimed at eco-shoppers in Boston next week.

It isn’t easy being green. Companies that vow to give up traditional palm oil face challenges. For one, to be considered “sustainable,” every provider in the palm oil supply chain needs to be certified–and that’s a challenge for big companies. U.K. supermarket chain Sainsbury’s has said it will stop using regular palm oil in its private-label products by 2014. But Fiona Wheatley, Sainsbury’s manager of brand integrity and sustainable research, says it is tricky–and often impossible–to trace palm oil down the supply chain to the actual grower. The company, which buys its palm oil in bulk from Malaysia, will have to pay 15% more for sustainable palm oil. Wheatley says it will absorb the cost rather than mark up the price of its products. It recently launched a line of fish fingers made with sustainable palm oil, which it promotes on the packaging.

Another challenge is identifying all the palm oil in products. “Christmas cake might have a palm-oil derivative in the icing,” Wheatley says. “The fruit may be coated in palm oil. It may be in the cake itself to make it moist.”

The movement toward sustainable palm oil began in 2004, when the palm oil industry, along with NGOs such as the World Wildlife Fund and companies that included Unilever, Kellogg, and Johnson & Johnson created the Roundtable for Sustainable Palm Oil. The RSPO created a rudimentary certification system for sustainable palm oil; among other criteria, new palm oil plantations can’t be established on primary rainforest or land with high conservation values. Sourcing sustainable palm oil, which today costs 15% more than its conventional counterpart, can be a hassle. In some cases, companies need to create an entirely new supply chain.

For now, some companies that are pledging to stop using regular palm oil may be making promises they can’t keep. Big marketers, such as Unilever, which has said it will use only sustainable palm oil by 2015, may not be able to get enough of it to meet their demands, says Rolf Skar, a senior forest campaigner at Greenpeace.

And using sustainable palm oil may not be enough for some critics. A British charity recently took aim at The Body Shop, which since 2007 has sourced sustainable palm oil from Colombia. The aid group says the company’s Colombian supplier evicted peasant families from land in order to build a new plantation there. The Body Shop says it’s seeking to resolve the case in court and through community outreach. Meanwhile, in August, Cadbury New Zealand reverted back to a cocoa butter-only formula after consumers blasted the company for switching to sustainable palm oil. Consumers flooded the company with complaints and protesters started a Facebook group called “Take Palm Oil out of Cadbury chocolate bars!” (now “Anti Palm Oil Community”) which today has 3,855 members. Even the Auckland Zoo stopped selling Cadbury chocolates in protest.

Cadbury is, of course, trumpeting the change in the announcement. It also prominently mentions the switch on its Web site, where the home page features chocolate-flecked green yards and hills.