Nestle and Facebook: flashmob fail?

Nestle and Facebook: flashmob fail?

Summary: Much is being made of the Nestle PR debacle. All perfectly understandable.

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Much is being made of the Nestle PR debacle. All perfectly understandable. References to the bombing of Nestle's Facebook presence are already being hailed as a social media case study in the making. Again, understandable. But...is it making any difference to Nestle? Tom Raftery of Greenmonk reckons it is:

Now, in any social media forum (or any forum for that matter), threatening people with censorship is definitely not a way to win friends or influence people. And predictably this threat inflamed an already upset audience. The censorship threat went viral and Nestlé’s reputation went into freefall.

The end result, as you can see at the top of this post, Nestlé’s stock price fell too.

This was eminently preventable.

And it is a clear demonstration of the need to be fully aware of all the potential risks in your supply chain.

If Nestlé was utterly transparent and ethical in its business practices, then it couldn’t have been ambushed by Greenpeace.

If Nestlé had ensured that its supply chain was completely free of controversy it would have avoided the pr storm, the reputational damage and the financial losses from loss of sales and the fall in its share price.

I have a great deal of respect for Tom's commitment to sustainability and corporate social responsibility. He doesn't just talk it, he lives it. That has to be admired.

But if you want to ascribe cause and effect then you've got to do a bit more than conflate one thing with another. Especially if you're pushing an agenda as transparently as Greenmonk does. The financial markets don't work that way. So let's examine the facts.

Check the events on the right of the Google Finance image (above.) Nestle announced TWO days ago that it is changing its palm oil supplier as a direct result of Greenpeace campaigning. Barely a blip on the chart.

The Facebook social media debacle occurred over the last day and is still rumbling on. Yes, the share price dropped. But was it so spectacular? Check the next chart which takes a one month snapshot:

There have been far more violent moves in Nestle's share price on other news that is wholly unrelated to anything connected with CSR issues.

Fact is that despite the claims and hysterical noise around the company, Nestle is trading close to a 52 week high. Does that mean the Facebook event had a demonstrable impact? Perhaps but it did not lead to a rout on the company's shares. Tom's analysis takes a snapshot at (what I assume was) 10.30am CET. At the time I took the first pic above, there had been no real change in Nestle's share price. That's much later in the day. And if you take a full one day snapshot it can be seen that after the initial fall, Nestle's share price slowly recovered. What can we deduce?

Campaigners and agenda setters always want to ascribe cause and effect. It's understandable because it fits with what they want to say. That doesn't necessarily mean it is correct. The more pertinent question is whether Nestle's actions around the Facebook issue will have a permanent effect on its share price. Today's evidence would suggest no but in truth we cannot know or predict that without treading into some very dangerous territory.

More to the point, would a change in the way Nestle manages its social media outreach make any difference? While the brand pundits will have you believe that today at least, Nestle has not played its cards terribly well, I'd equally argue that the financial markets don't give two hoots. Only if they see reported drops in sales and/or news that link Nestle to adverse comment in places like Reuters and Bloomberg are they likely to pay any attention.

Despite tech media's obsession with Facebook and Twitter, I'd also argue that these are not yet on the radar of those who evaluate corporate worth. Even the World Wildlife Fund Palm Oil Scorecard for 2009, (PDF) which ranks Nestle as 'middling' doesn't seem to have had that much impact.

I don't doubt that corporate social responsibility is important. Sustainability is something that we should all consider carefully. Software companies want to sell solutions that 'help' in improving CSR ratings. I'd caution buyers to think twice. Campaigning organizations like Greenpeace, which triggered Nestle's change of heart, are far more likely to impact corporate actions than the agendas of sustainability groups or flashmobs turning up on Facebook. At least for now. But there are other issues.

The way Tom describes the Nestle issue ascribes direct cause and effect to risk issues that I do not see in share price movement. More to the point, by arguing for complete freedom of controversy in the supply chain, he is setting an impossible bar for any company with the implied requirement for reporting and process flows designed to staunch these problems. I've yet to be convinced there is any management on the planet let alone software capable of meeting Tom's standards. That does not take away the aspirational nature of Tom's observations but it doesn't help to solve the problems he identifies.

Of course that could all change on the opening of trading next Monday morning.

Topics: Social Enterprise, CXO

Dennis Howlett

About Dennis Howlett

Dennis Howlett is a 40 year veteran in enterprise IT, working with companies large and small across many industries. He endeavors to inform buyers in a no-nonsense manner and spares no vendor that comes under his microscope.

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7 comments
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  • Message has been deleted.

    xinyue4444144
  • Message has been deleted.

    shoptrade43
  • Are they selling any less chocolate?

    This stock market thing is interesting - but I wonder
    sometimes how much it really reflects the success or
    failure of a business. After all, Nestle is in the
    business of selling various products. Do they sell
    less chocolate simply because their stocks are down?

    Sometimes I think there's a big disconnect between a
    company's stock and how much product the business is
    selling.

    Why have these things called stocks anyways? If your
    primary business is selling candy, why put such a big
    hunk of business into buying and selling this abstract
    (and quite fickle) thing called a "stock?"

    I never really quite understood the purpose of the
    stock market.
    CobraA1
  • Message has been deleted.

    xinyue58847
  • Message has been deleted.

    xinyue58847
  • good idea about facebook

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  • good idea about facebook

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