Crain’s New York Business
December 16-21, 2009
As altruism fades, PeaceWorks focuses on cost, value; what price will consumers pay?
In recent years, companies have figured out clever ways to capitalize on consumers’ good will. Lines such as Ethos Water and (Red) apparel contribute profits to charity, appealing to shoppers’ consciences. But when money is tight, consumers tend to think of themselves first.
“Consumers in a tough economy are more self-serving,” says Laurie Demeritt, chief executive of the Hartman Group, a Bellevue, Wash.-based market research firm.
One socially responsible entrepreneur says he’ll beat the recession and maintain his company’s mission with marketing based not on the company’s good works, but on the value of its food products.
“We don’t rest on the laurels of our social mission to sell our products,” says Daniel Lubetzky, whose firm, Manhattan-based PeaceWorks Holdings, channels 5% of its profits into funding peace efforts in the Middle East. “Quality, taste and value are the drivers.”
PeaceWorks’ donations go toward its nonprofit foundation, which educates young leaders on both sides of the Israeli-Palestinian conflict and works to raise the profile of moderate voices. Some of its products are also made by people in conflict zones, such as a line of tapenades called Meditalia, produced in Israel with raw materials from Egypt and the West Bank.
Higher cost structure
Socially responsible companies’ missions give them higher cost structures than competitors face. They can’t cut costs or shift production as easily as other firms during a recession, which will make the coming year more difficult, experts warn.
“Social entrepreneurs will have a higher bar to hit in terms of quality and value,” says Jed Emerson, managing director of Uhuru Capital Management and an expert on social entrepreneurship.
Mr. Lubetzky says he’ll keep his company focused on health and taste. Its biggest seller is its KIND bars, which account for 90% of revenue. The bars come in six flavors, each a combination of almonds, Brazil nuts, walnuts or peanuts and dried fruits—all held together with honey. “That’s it,” says Mr. Lubetzky. “All ingredients you can see and pronounce.”
Food companies like his may be better protected from the recession than other socially responsible firms. Ms. Demeritt says the Hartman Group’s research shows that consumers are slow to make changes in food and beverage purchasing habits.
So far, the suggested retail of $1.99 for KIND bars isn’t scaring consumers away. Sales have grown steadily since their launch in 2003 and doubled last year. The bars are now sold in 20,000 outlets, including 7-11, GNC, Wal-Mart and Whole Foods, and are the fastest-growing health bar in the country in sales, according to consulting group Spins.
Mr. Lubetzky believes the economy is slowing his sales somewhat, but he is still planning for expansion. To manufacture more KIND bars for U.S. markets, he wants to purchase or partner with a U.S. factory in either Texas or Pennsylvania. Currently, KIND bars are made in Australia, and Mr. Lubetzky wants to continue producing there and sell into Australian and Asian markets.
A few obstacles
Some of Mr. Lubetzky’s nut and fruit suppliers have had trouble getting credit from banks, which has led to slowdowns in shipments. Some retailers have also been a week or two late in making payments to PeaceWorks. And in several cases, Mr. Lubetzky has had to reassure vendors’ creditors that American companies like his are stable. Meanwhile, the PeaceWorks Foundation is seeing donations slow, especially those from financial firms.
“It’s a challenge raising funds in an environment where people are hurting,” says Mr. Lubetzky.
AT A GLANCE
PEACEWORKS HOLDINGS
FOUNDER Daniel Lubetzky
YEAR FOUNDED 1994
ANNUAL REVENUES More than $10 million
PRODUCTS Meditalia tapenades; a line of sauces called Bali Spice, made by a women-owned cooperative near Jakarta, Indonesia; KIND fruit and nut bars
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