The fifth-floor restaurant at the Harvey Nichols store in London’s Knightsbridge is pulsating. Arriving guests run a strobing, shouting gauntlet of paparazzi. Inside, the scene is straight out of The Devil Wears Prada, or at least Sex and the City - improbably slim women clutching Cosmo cocktails and men with expensively distressed hair bearing champagne flutes. Actor Pierce Brosnan oozes through the crowd. The party leads the London Evening Standard’s social diary column the next day. It all seems a long way from Africa.
The gathering launched a small line of African-made clothing owned by Bono, the ubiquitous campaigning rock star, and his wife. Helping Africa is a longstanding Bono preoccupation, which is why he has recruited far bigger companies and brands than his own to the cause. Product Red, announced a year ago at the World Economic Forum at Davos, is seeking a commercial solution to the humanitarian disaster of Aids in Africa.
In its first year, Red has provided ammunition for both optimists and those sceptical that the rich can consume their way to a better world for the poor. But after a stuttering British start, Red’s US incarnation got off to a flyer. The first Red-donated money has started flowing to Africa - $5.25m has gone to Rwanda and $4m to Swaziland - to put HIV-positive Africans on antiretroviral drugs and to provide care for Aids orphans. The fund has put 800,000 people in the developing world as a whole on antiretroviral drugs and is aiming to at least double that this year.
Red works quite simply. Its trademark, a pair of red parentheses symbolising the embrace of solidarity, is licensed to “partner companies” which use it on specific products. In return, the partners donate some of the revenue or profits to the Geneva-based Global Fund to Fight Aids, Tuberculosis and Malaria - launched in 2002 to combat the diseases in the developing world - and pay a fee to Red itself to cover marketing and administration. Red is the colour of emergency and alarm; fitting for the humanitarian disaster of more than 2 million African deaths from Aids a year.
By last year’s launch, Red had agreed deals with Gap, Giorgio Armani, American Express, Converse (owned by Nike) and Motorola. Since then, it has added Apple, which launched a Red iPod Nano in October.
Red itself is a limited-liability company owned by Bono and Bobby Shriver, the chief executive. Shriver is a droll, drawling Californian from a family famous for its prominence in politics, business and the media. His uncle was President John F. Kennedy. His mother, Eunice Mary Kennedy Shriver, founded the Special Olympics. His sister, Maria, is a former NBC News presenter now married to Arnold Schwarzenegger, California’s governor. There is no better background for a conscience capitalist.
Red’s manifesto reflects Shriver’s guiding principle: “Red is not a charity. It is simply a business model. You buy the Red stuff. We buy the pills and distribute them... It’s easy. All you have to do is upgrade your choice.”
But Shriver says with disarming honesty that Red, like many start-ups, was “wildly undercapitalised and wildly understaffed”. It spent less than $1m advertising last year’s launch (which Shriver, carefully managing expectations, says was really only a launch of the Red idea, not the products). Even now, Red has only nine staff.
The donation agreements, which typically run for several years, are negotiated separately with each partner. American Express, for example, donates at least one per cent of the value consumers spend using its Red credit card. Gap hands over half the profits from its Red clothes. Red has to balance maximising company donations with allowing its partners enough profit to make it worthwhile. To prevent the brand being diluted, only one company of each type (clothing lines, cellphones, credit cards) is allowed to use the Red brand.
For all its fanfare, Red’s model of tying a good cause to a product, known in the business as “cause-related marketing”, is fairly familiar, though on a much larger scale. Unlike other ethical consumer brands and marks such as Fairtrade, the manufacture of the products is not a major concern. (Some of Gap’s Red T-shirts are made in Africa, but that is the company’s own choice.) The Global Fund receives the donations directly. Apart from arranging the deals with the companies, Red just provides and helps to market and direct the brand.
Matthew Freud, the well-connected British public-relations baron whose company has worked extensively on Red, says: “It is licensing nothing but a powerful idea. It is selling to brands the equity they can gain by becoming linked to the idea.”
The halo effect for a company involved in battling Aids would appear to make Red an easy sell. But Shriver says companies were slow to sign up. Apart from concern at being criticised for making money from Aids in Africa, businesses that rely on the value of their brands want to maintain control of them. In the same way that companies seeking celebrity endorsements risk damaging their brands if the celebrities misbehave, adopting a multi-company trademark such as Red exposes the partners to any bad publicity throughout the Red family.
Unsurprisingly, some of the first companies to sign up have deep expertise in linking their brands with good causes. American Express has long issued “affinity cards” with donations linked to particular worthy projects. Over 20 years ago, American Express issued a card to raise money to restore the Statue of Liberty. A permanent American Express team spread across several countries looks for new partners. John Hayes, American Express’s chief marketing officer, worked with Bono and Shriver for two years before Red was started and American Express launched its Red credit card, initially only available in the UK. “We asked a lot of questions and did a lot of homework prior to the launch,” he says. “They did a very thorough job to ensure that all the participants had the right approach.”
Art Peck, executive vice-president for corporate strategy and business development at Gap, says Bono made initial contact with Paul Pressler, Gap’s chief executive, in July 2005. By November, when Bono’s band U2 were playing near Gap’s headquarters in the San Francisco Bay Area, the project had progressed far enough - including getting the Global Fund on board and fleshing out a marketing vision.
Gap had already done what Peck calls “event commitment” projects - one-off campaigns in areas such as breast-cancer awareness. It also had long experience of the ethical consumption movement, having spent many years skirmishing and engaging with anti-sweatshop campaigners. But relying on a variety of other companies and making a long-term commitment to building a sub-brand such as Red was a step into the unknown. “We are committed to that; we believe our partners are committed to that; certainly the people at Red are,” Peck said. “But that takes continued resources, energy and commitment. And you don’t control the whole thing. You worry about those things.”
Gap has other worries as well. Rumours have been swirling of a major restructuring - either a sale of the entire chain or a spin-off of one of its divisions - following disappointing Christmas sales in the US.
Red reduced the risk of cross-company contamination by retaining a veto over all Red-linked advertising and by frequent consultation among the partners. The partners themselves, alert to the accusation that they are profiteering from African misery, have promised not to make higher margins on Red than on their normal products, relying instead on higher volume and free marketing from the publicity surrounding the brand to compensate for the donations they make.
Apple’s Red iPod sells at the same price as its standard product. Some Red products are more expensive. Gap’s cheapest Red product in the US is a T-shirt that retails at $28 (about ₤15) compared with $14.50 (about ₤7.50) for its “classic-T” - but that, the company says, reflects the extra costs of producing limited-edition products with higher design standards. The American Express card promises no annual fee for life, and its interest rates are competitive with other UK credit cards, although it saves lives rather than accumulating Airmiles. Any surplus Bono and Shriver make from Red will go to the Global Fund.
Still, risks to reputations can come from anywhere, even from the Bono brand. He was one of Time magazine’s “people of the year” in 2005 and was awarded an honorary British knighthood last month, but a curmudgeonly mood of Bono-fatigue has set in among some pundits, fuelled by a more general sense of cynicism about celebrity campaigning. Shriver says that the first instinct of the British press in particular is to pounce on the tiniest hint of sanctimony or hypocrisy. There were plenty of voices, including those of Irish politicians, accusing Bono and the rest of U2 of double standards when they last year moved their music publishing operations to the Netherlands to reduce tax liability.
Bono himself professes little concern. “I don’t mind taking some flak,” he says. “A few cuts and bruises can look good on a face.” He has, in fact, soft-pedalled his involvement in Red recently, saying the brand is strong enough on its own. “It’s any kind of sainthood tag that makes me nervous. I much prefer a `tough in business’ tag,” he says.
Yet the business of Red had a stuttering start in the UK. American Express started briskly and got a lot of media coverage. But months after last January’s launch, Gap still had only a limited range, which (at least in the men’s section of my local store) was piled on a low shelf with no display of the Red trademark. Around the same time, in Selfridges, London’s iconic department store, a single pair of Red baseball boots, again with no display of the logo, sat anonymously in the middle of the Converse section.
Shriver said that Red’s own research on attitudes showed some British consumers were suspicious of the companies making money off the brand: “People feel the companies need Red more than Red needs the companies,” he said. “[They were] questioning whether the companies were doing enough to have earned this.”
US consumers, Shriver says, were much less sceptical. By the time Red was launched in the US in October last year, Red and the brands had raised their game and begun to exploit the potential of the trademark more vigorously. The idea is that, because Red brings several companies’ brands together in a broader campaign infused with idealism, the buzz around Red and the buzz around its partners ought to be able to feed off each other.
And while Red is a business proposition, its association with good causes means it can still get free publicity. Oprah Winfrey, the reigning empress of talk shows and a huge brand in her own right, invited Bono on to her television show to launch Red in the US in October. Winfrey and Bono went shopping together at Gap, Apple, Motorola and Armani stores on Michigan Avenue in Chicago and were mobbed. Apple lit up its Fifth Avenue store in New York in red to launch the iPod. Red’s page on MySpace already boasts around 600,000 “friends”.
Partner companies could experiment. Gap bought advertising throughout an entire edition of The New Yorker, the magazine for America’s intelligentsia. But because it eschewed the TV ads it uses for its normal marketing, the campaign cost no more to run than its usual spend. Peck says: “It is the buzz. It is the choice of the books that we put our ads in. It is obviously the people that were in those ads [Steven Spielberg, Chris Rock, Penelope Cruz and a horde of other celebrities]. It is the big opening on Fifth Avenue where they basically had to close the street down. It was the Michigan Avenue and Oprah thing. It is a different buzz.”
So who are the Red customers? Gap’s initial anecdotal impression is that the customers are typical of its usual, quite broad, clientele. “Teens and late-40s women [are] shopping at the same table,” Peck says. The latter may be a specific Oprah effect: other companies say their Red customers appear to be younger than average. Giorgio Armani has put the Red products out under the Emporio Armani brand, a cheaper range for younger buyers. In an e-mail exchange, Armani said that Emporio Armani’s customer base of 25- to 45-year-olds “mirrors the profile that Product Red has identified as being most likely to be motivated by the idea of matching desire and virtue”.
The number of shoppers prepared to make purchase decisions based on association with good causes appears to be growing - and the phenomenon is not confined to the young. American Express undertakes regular phone surveys in the UK, that show there are 1.9 million “conscience consumers”, defined as those who are prepared to use their buying power to achieve wider social or environmental change. It estimates that number will grow to 4 million by 2009. Intriguingly, conscience consumers are only marginally younger than the national average. “It looks as much of a mindset as a demographic,” Hayes said. And because it is a growing one, “if we don’t go and salute those people with a product meeting their needs, someone else probably will.”
American Express will not give figures for individual cards, but Hayes said that the majority of cardholders of the Red credit card were new to the company, not existing customers adding or swapping a card. American Express looks a near-perfect fit with Red. Its cards are already defined by colour - green, gold, platinum, black - and the Red version adds a new twist, defining its holders by identity rather than wealth. My own Red American Express card has evoked curiosity from all over - maitre d’s at City of London brasseries, concierges at hotels in Beijing and Geneva and inquisitive friends and colleagues.
The companies involved are cagey about precise sales numbers. But American Express seems pleased with its UK product and Gap’s Peck says he was “blown away” by the sales in the US. He gets a couple of e-mails a week from Shriver telling him that Red products have sold out in this or that Gap store Shriver has wandered into. Gap, Peck says, is planning to relaunch in the UK with a much bigger range this spring.
Stephen Cheliotis of Superbrands, which publishes an annual “branding bible”, says that Red is a “fantastic idea with huge potential”. Cheliotis reckons that combining two brands can make marketing three times more effective, when the brands fit together, as the Red partners do. “I think these companies have done very well to get in at the beginning,” he says.
Red is now in negotiations with dozens of other businesses, including global car companies. But Shriver says that many corporate executives still remain cautious, and it will be a couple of years before Red’s success can properly be judged. “Quite a few companies said no and are still saying: `Nice launch but it won’t be sustainable,’” he says. “We’re going to have to go through each category, it seems to me, and find some courageous company and then prove it and then they’ll go, `OK, you proved it now in cosmetics, but you haven’t proved it in computers.’ And then we’ll prove it in computers and then they will go, `OK, you’ve proved it in cosmetics and computers but you haven’t proved it in chewing gum.’ At some point people are going to say `OK, you proved it, it worked.’ I don’t know what that point is but we’re not there yet.”
Partner companies also need to be big enough to be worth Red’s while. “I’ve had to focus on the larger companies because the amount of money they could give the fund is so much larger,” Shriver said. “You see these little $100m sales companies wanting to do truly clever things and you just don’t have time to go through all that with them.”
This hard-nosed emphasis on extracting cash from big business raises some concerns in the established ethical-trading world. Ian Bretman, deputy director of the Fairtrade Foundation in the UK, says he welcomes Red and does not think it will divert money away from Fairtrade products. He is, in fact, surprised by how few partner companies Red has.
But he argues that Red’s advertising could do more to educate people about the role of poverty in spreading Aids. An American Express poster campaign on the London Underground featuring a Masai warrior with Gisele, the Brazilian supermodel, looked rather trivialising, he says. “It looks to me like a missed opportunity to deepen the message.”
Others, from the less glamorous end of the ethical-consumption movement are much more dismissive. A week before Christmas I sought out London’s annual “fair-trade fair” (confusingly unconnected with the Fairtrade mark), this year crammed into a stuffy basement at the Methodist Central Hall in Westminster.
The merchandise on the 60 or so stalls leaned towards the handmade and the ethnic, sometimes laced with strands of leftish politics: bright silk scarves hand-woven in Laos; bead necklaces threaded by widows in Sri Lanka; cold-pressed organic olive oil made by Palestinian farmers on the West Bank. (I bought some. It was excellent, but at ₤7 for 750ml, not cheap.) The London fair - there are others around the country - attracts about 3,000 visitors each year.
The inspiring spirit behind the fair, which has run each year for two decades, is Benny Dembitzer, whose natural ebullience is little dimmed by the exhausting process of organising it. Wearing trainers and a fleece top, Dembitzer looks more like the development activists who revere him than the economics tutor he once was at Trinity College, Cambridge.
He says his epiphany came while working in Ethiopia in the late 1960s. Like Red, he believes in helping developing countries through business. But he insists that the best way to do this is what he started doing himself - connecting African producers with western consumers. “If I was selling things, the people who made it could eat,” he says. “I am not a candidate for sainthood, but when I sold ₤10,000 of [African] carpets to a mate in Oxford, it earned 37,000 days’ usual income for the people that made them.”
Dembitzer became dimly aware of Red when The Independent, the leftish newspaper he reads, turned an entire edition red last May and had Bono guest-edit it for a day. But Dembitzer can’t quite see why the world needs another ethical-consumption project. “There are enough very good initiatives out there already,” he says. “We should try to get more money to more people through existing channels.”
It is hard, though, to scale up such an operation. Dembitzer says there are another 250 potential stallholders, but vetting each for ethical standards takes time and effort. And the Global Fund that receives Red’s donations says it needs business contributions on a massive scale. Richard Feachem, the fund’s Geneva-based director, is urbane, trim and articulate, his manner and appearance closer to a management consultant than a British academic, his former incarnation. With a distinguished background in both public health and international development, he shepherded the fund through its first few years.
The fund overcame initial objections that it would merely duplicate aid efforts - though more recently its reputation suffered when its governing board, split between rich and poor country directors, could not agree on a successor to Feachem. (It is still looking.) It has nonetheless become the main international channel through which the rich world pushes resources to combat HIV-Aids, and receives about $3bn a year in donor support, overwhelmingly from governments.
At times, Feachem says he felt more like the fund’s travelling mendicant than its chief executive, constantly touring the capitals of the rich world to cajole, inspire or shame ministers, officials and parliaments into stumping up more contributions. Initial hopes that the private sector would contribute substantial amounts did not materialise. As Feachem says, a fund disbursing billions of dollars with grant programmes that last five years needs donor contributions to be both large and predictable - and not simply diverted from other aid organisations.
“Companies dipping into their corporate philanthropy funds for donations are all very well, but next year they may decide to give the money to something else,” Feachem says. “We need flows to be sustainable.” The hundreds of thousands of people in the developing world taking antiretrovirals paid for through the fund need to continue taking them indefinitely. “This is a commitment until death,” Feachem says.
Contributions to the Global Fund are put into a common pot, rather than earmarked for particular projects, in order to prevent the complexity and bureaucracy of tracking particular donations that bedevil many other aid agencies. But Red felt it needed to show concrete examples of its donations being used, and the fund has allowed it to present the Rwanda and Swaziland projects as being a direct result of Red donations.
Feachem says he hopes that in a couple of years Red will be contributing “a few hundred million” dollars a year to the fund - not earth-shattering, but not negligible. And, as Feachem points out, consumers buying Red products could increase pressure on politicians to raise official donations.
Does it mean the fund taking risks, and the partner companies taking risks with their brands and reputations? “We are not in this business to be risk-averse,” Feachem says. “Anyone who gets into trying to prevent Aids in Africa has to take some risks.”