My friend Shannon was recently drawn into a Starbucks (Nasdaq: SBUX ) by a sidewalk chalkboard advertising a Farmer's Market Salad. When she asked whether it was really from a local farmers' market (as many people would assume), the employees told her it wasn't -- but that it was "delicious," which Starbucks' corporate management had instructed them to put on the sign.
In short, Starbucks merely named its salad to capitalize on the consumer trend toward buying locally made products and services. That brand of misrepresentation -- called "local-washing" -- is a major risk for companies angling to attract a progressive and affluent consumer base, especially as consumers become more interested in sustainable practices.
As opposed to Red Delicious from the red planet?
The Baltimore Sun recently exposed grocers who falsely advertised "local" produce, such as a Safeway (NYSE: SWY ) , whose apples actually came from Chile and New Zealand, and Wegmans signs proclaiming "home-grown" produce that included veggies from the Netherlands, Peru, and Canada.
The Cleveland Scene pointed out the prevalence of "local" advertising that's co-opting the local movement, as employed by large, nation- or worldwide companies such as HSBC (NYSE: HBC ) and Winn-Dixie. Even Unilever's (NYSE: UL ) Hellman's Mayonnaise is trying to capitalize on the theme of being "local," and Barnes & Noble has proclaimed that "all bookselling is local." (So, uh, take that, Amazon.com (Nasdaq: AMZN ) !)
True, a company that plops a store in your neighborhood could technically be called "local." It does employ people in your community, and you don't drive far to get to it. But such businesses simply aren't what people truly mean when they talk about locally grown, locally produced, or locally owned goods and businesses.
Fortunately, while some companies would rather play the game than make real changes, others are following a genuine consumer trend.
Wal-Mart Stores (NYSE: WMT ) announced last year that it was carrying more produce from local farmers, suggesting that this emerging movement might continue to gain momentum. Whole Foods Market (Nasdaq: WFMI ) has spearheaded many programs over the years to promote regional goods, including hosting farmer's markets, carrying locally grown produce, and swinging small, low-interest loans to local farmers and suppliers.
Locally grown goodwill
From an investing point of view, why does this matter? On the positive side, if consumers are taking local goods seriously, so will companies -- and by extension, so should investors. On the negative side, much like "greenwashing" efforts, which make companies falsely appear more eco-friendly, local-washing could infuriate the same customers companies are desperately trying to draw.
I suspect that if even a handful of few consumers realize that a company's not being authentic, they'll quickly let their friends know. Corporations need honest marketing to keep their customers loyal, especially when social networks and Internet research make it easier than ever for shoppers to expose duplicity.
If big companies plan to keep talking the talk with regard to local goods, they need to start walking the walk. It's undeniably difficult for large corporations to source local products, but I believe that a true sense of innovation and creativity could make it happen, at least for some goods and services.
Words matter. More importantly, so does their meaning. Years ago, Starbucks' Howard Schultz complained about the chain losing its soul. A "farmer's market" salad that really came from local farmers might help the company get at least a little piece of it back.
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