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Monday, March 6, 2017

Strategic CSR - (Product)Red

I own a t-shirt with the logo "A t-shirt can change the world." It was produced by a partnership between the GAP and (Product)Red ( I was just thinking that I have not heard much from (Product)Red recently but, visiting their website, they claim the initiative (which is a series of products produced in partnership with name-brands, with a portion of the products going to support Red-related projects) has resulted in "$460 million dollars raised" and "90 million lives saved." My t-shirt contributed a very small amount to that total (and the broader project of 'changing the world'), but every time I wear it I question the validity of the claim.
While my heart wants to believe such altruism matters, the more I learn about economic theory and human psychology, the more it suggests to me that the market for such products is, at best, extremely limited. This is perhaps supported by the $460 million claim, which is not that much for an organization founded in 2006 (particularly given the high-profile publicity and support it enjoys). Moreover, there is research out there to suggest that self-styled social entrepreneurship companies such as TOMS are particularly inefficient ways to deliver social progress, and may even be harmful (see Strategic CSR – TOMS Shoes).
Nevertheless, the optimist in me is always open to be persuaded on this, which brings me to the article in the url below – a report on a new restaurant chain in LA that is using branches in wealthy neighborhoods to subsidize branches serving the same good quality food in poor neighborhoods:
"When a new restaurant called Everytable opens on Saturday in the poverty-stricken area of Los Angeles known as South L.A., a grab-and-go Jamaican jerk chicken bowl with coconut rice, beans, plantains and carrots will be the most expensive meal on the menu at $4.50. But this fall, when a second outpost of Everytable opens just two miles away in more affluent downtown Los Angeles, the same Jamaican jerk chicken bowl will cost $8.95. The big price difference represents an unusual experiment to address the persistent issue of limited food choices in poorer neighborhoods around the country. The higher prices at the downtown store are effectively meant to offset smaller profits at the other location, making the lower-priced restaurant more economically viable."
The challenge in what the entrepreneurs are attempting is revealed in their recoil at the mention of the word 'subsidy':
"Just don't call it a subsidy. 'We don't love the word subsidize because each store is designed to be individually profitable,' said Sam Polk, co-founder and chief executive of Everytable. Rather, he said he hopes customers in affluent neighborhoods will understand they are helping to underwrite sales of the same nutritious meals they are eating in neighborhoods where such food is typically unavailable because no one can afford it."
Not sure what the difference is between 'subsidize' and 'underwrite,' but perceptions are important I suppose. And the potential for success seems good here, given that the 'expensive' price is not really that expensive. A good quality lunch for $8.95 is very reasonable. In fact, whenever I see a price much cheaper than that, I suspect to be eating food that is compromised in some way. Since $8.95 doesn't feel expensive, most consumers will either not be aware or not mind that they are 'underwriting' the same meals for half the price elsewhere. Ultimately, however, I cannot escape the feeling that the success of the venture will have nothing to do with the altruistic business model, but whether consumers feel they are getting value for money for their $8.95 (and, for that matter, $4.50). And "value for money" means food that they want as well as food that is 'good' for them. If true, then the only difference between this new restaurant and any other restaurant is that the owner is willing to take lower profits. That is, of course, absolutely fine and completely up to him. Just call it what it is, capitalism, and stop pretending it is something else.
Take care
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Better Food, at a Bargain
By Stephanie Strom
July 28, 2016
The New York Times
Late Edition – Final