The boycott of Danish goods provides lessons in crisis management
The escalation of the boycott of Danish goods has been so dramatic few commentators are prepared to predict when business will return to normal. What is certain it is that the unique manner in which the protest has taken hold has led to marketers throughout the region to revisit their crisis management plans.
"The bedrock issue in this case is so far away from the physical brand that this is uncharted territory," says Tim Walmsley, regional managing director of Impact Porter Novelli. "Perceptions tend to be short term, there may be a more long term effect here."
While he says comparisons can be made with the boycott of certain US brands, and that brands have been known to claw their way back from these situations, he admits the factors here pose new challenges.
Arla Foods, the parent of Lurpak brand, has been hardest hit. It was reported to be losing $1.75 million per day in early February and has shelved plans for a $70m project for a dairy plant in Saudi Arabia endangering 800 jobs.
Lurpak had enjoyed a 70% market share in some Middle East markets, with Arla generating $320m of revenue from Saudi alone.
The dairy business, with daily purchases made by everyday consumers and plenty of alternative options, has become the easiest target for demonstrators. Misinformation has also impacted on suppliers. Sadafco, Saudi-owned since buying out its Danish co-founders in 1987, and Kuwait Danish Dairies, Kuwaiti-owned for 44 years, have both been impacted.
The pair have placed ads in newspapers to try and clarify the issue.
"I can't deny it has hurt us," says KDD's UAE sales manager Ashton D'Souza.
The company, popularly referred to as KDD, had previously played up its Danish credentials. D'Souza says it has been working with the Kuwaiti government talking to mosques and retailers. Several retailers have removed KDD product from their shelves despite knowing it to be non-Danish, he says.
"This thing started in the mosques and it is there that we need to communicate," he says. "I'm positive things will get better, but will take time."
Similarly, Nido milk, Kinder chocolate, or Anchor butter have also been included on flyers and emails calling for the boycott, despite being non-Danish. Nido is a product of the Swiss Nestl company, Kinder is owned by Italy's Ferrero-Rocher, and Anchor is from New Zealand.
By contrast, Danish businesses including Bang & Olufsen, Carlsberg and Maersk shipping, responsible for much of the Gulf's imports have yet, as GMR went to press, to be troubled.
Henrik Thomsen, sales manager for Carlsberg Middle East, says, as an alcohol business, the company has always trod carefully in the region.
"We've been talking to our partners, keeping business as usual, and getting product on shelves," he says.
"We have a small non-alcoholic business in Saudi, but there's nothing on the packaging to say it's made in Denmark. For the alcohol, not many of the protesters were our customers anyway."
Lego, Danish-owned but positioned as an international brand, said it had seen a minimum impact on sales in the first week of the crisis, but the number of retailers clearing shelves of stock was growing. Charlotte Simonsen, head of corporate communications at Lego, says the region represents only 1% of its global sales.
Despite the scale of the backlash, few Danish businesses contacted by GMR had a crisis management plan in place. Landmark, holder of the rights to Danish fashion retailer 4You, said it was due to discuss options as GMR went to press, fully three weeks after news of the boycott broke.
Walmsely at IPN says the first thing those affected need to do is establish "what is known and what is reported" and that the first casualty of a crisis "is common sense".
"Focus on the facts, they're easier to marshal," he says. "If you enter into speculation then you're entering the death zone.
"We'd advise the client to shut down media entry points. Shut down all uncertain messages, and open channels to people who can talk we need the bandwith to get across our view."
Arla Foods managing director Peder Tuborgh has been pushed to the fore as the company responded to events. He admits it will be very difficult for Arla to recover its position in the Middle East: "This will take years, but we want to see a dialogue that can solve the conflict and allow us to work towards re -establishing Arla's business and the good relations that we've enjoyed in the region over the past 30 years."
Arla's website has contained news updates on the boycott, and published details of the Danish government's donation of $38,000 to Red Sea ferry disaster fund. The company had planned to use Denmark's forthcoming football fixture with Saudi as a promotional tool. Those plans have been scaled down.
Walmsley says the boycott shows "crisis preparedness is as important as dealing with the crisis" and that companies need to asses the likelihood of risks and "get everyone facing in the right direction". He dismisses suggestions the PR industry will use events to push their crisis management skills.
"We're not in the business of ambulance chasing," he states. "We won't use this as a sales tool."
© Gulf Marketing Review 2006
