Are mergers and acquisitions a route to scale for innovative companies that want to reach the mainstream without losing their edge? Anna Simpson meets Philip Malmberg, CEO of Ecover and its new acquisition, Method.
When the board of Ecover asked its former Finance Director, Philip Malmberg, to come back and run the show as Chief Executive, it had two things in mind. The first was growth: to make Ecover a big brand in the sustainability space, with no apologies for its humble beginnings as a niche ethical cleaning products company based in Belgium.
And the second? Culture. After all, it was shared values that brought the right people together to make Ecover what it is today. They had a vision of healthy lifestyles within healthy ecosystems that drove the brand's development across Europe. Keeping this vision fresh is a challenge - but it's one the board sees as crucial to the company's development, particularly as it takes on new directions.
Which is very much the plan. The board is eyeing up other industries - with pilots underway in clean water technology, new concepts for retail, and sustainable homes. And it's also probing new markets, beginning with the US...
Cue Philip Malmberg. After he left Ecover, 13 years ago, he worked for G4S, the security services multinational. It was perhaps a different kettle of fish in values, but its aspiration at the time was also international expansion. Malmberg worked in many roles in India, Dubai, the US and the UK, and met the man he now calls his greatest source of inspiration: his former boss, David Hudson MBE.
In 1989, Hudson moved to Delhi to establish G4S India, and spent 25 years there, winning the V. V. Giri Centenary Award in 1995 and the Shiromani Award in 1997 for creating employment opportunities for the less privileged. He had created over 200,000 jobs. Malmberg met him in 2000, and worked with him for ten years before Ecover asked him back.
"The remarkable thing about this man", he recalls, "was how intently he listened to the people around him. Whenever I spoke to him, however complex my concerns at the time, he would always see to the heart of the matter and respond with a succinct and extremely helpful piece of advice." Malmberg sees the ability to listen as a 'make or break' skill for business, especially when you're working in new cultural contexts.
"The insights you gain mean a lot from an economic perspective", he says. "The better you understand the culture, the better you can assess the opportunities to leverage your business. When I was in India I wasn't thinking of Ecover - I had other goals and was absorbing the culture. But, looking back, the perspectives I gained help me think through my priorities now. I can see more clearly where the gaps lie in our current business."
When Malmberg joined Ecover the obvious gap in the business was North America. But how to move into that market wasn't clear.
"There are so many new competitors in this space", explains Malmberg. "Even the conventional brands are jumping in with semi-green products. The whole arena has changed so rapidly around us that it's difficult to stay ahead of the game, unless you have particular skills."
This was when Ecover started to look into acquisitions, and, as soon as it did, the US brand Method stood out as a possible solution. It's worth saying a few words about Method. It made its first sale at Mollie Stone's grocery store in Burlingame, California, in 2001. On the shelves were four sprays, created with the aim of "revolutionizing the cleaning world with stylish, eco-friendly products made with non-toxic ingredients that clean like heck and smell like heaven". This is perhaps all you need to know: it's a company as serious about its sassy image as it is about cleaning.
"The acquisition of Method brings us much more than just a brand", says Malmberg. "It brings another way of thinking - a complementary skill set. And, at the same time, it has brought the skill that's necessary to stay in sustainable business."
But hadn't Ecover already nailed the 'sustainable business' side of the game? Yes and no, says Malmberg:
"The only real way forward, to inspire change, is to bring in more and more consumers, making sure they buy our products - and our type of product. We can't keep prodding our existing core group. The two brands sit very well next to each other because they are relevant and attractive to different types of consumer. The good thing is, there are a lot of overlaps. We're both built on a strong belief around sustainability - but they express it in a trendy, stylish, young, dynamic way - whereas we've been more the serious brand in the game."
There aren't many examples of companies coming together in this way. Look at the history of ethical brands, and you often find the same story, in which the nifty newcomer gets gobbled up the incumbent giant. The Body Shop by L'Oréal, Innocent Drinks by The Coca-Cola Company, Green & Blacks by Kraft... Did you ever hear of a merger that was really a meeting of minds?
By 'tying the knot' with us, they could be sure the brand would be maintained
"I sincerely hope we are a leading example of the potential for brands with shared values to grow by joining forces", says Malmberg. "That's why the board at Method preferred the offer Ecover made to many other propositions. By 'tying the knot' with us (in their words!) they could be sure the brand would be maintained and the people would be treated in a decent and responsible way. That's why they are also very committed to this merger: they can see it could make us a green, dynamic, visionary champion."
So what's next for these 'newlyweds', which now represent the largest green cleaning company in the world?
Malmberg's ambition makes me sit up. He wants to move from the niche to the mainstream, and for this to work, he wants consumers to change their whole way of thinking. He's talking about a cultural shift far beyond the walls of his company.
"As a business you can't do this alone, but there's a big difference between consumers today, compared to 30 years ago. The current generation is much more environmentally aware. With them, we can skip the education part!"
In years to come, Malmberg believes, this new generation will have a holistic view of their resources, their water use, their role in the community, and so on. "That's why this whole partnership thing is so crucial", he says. "As Ecover, we can try to do a lot, but if the consumers aren't on board, it just won't happen."
And how will they come on board?
"The niche will expand, that's the first thing", explains Malmberg. "But sustainability will also become more interesting for more mainstream businesses."
Ecover and Method have a part to play too, of course - in their different ways. Malmberg wants to use the contrasting cultures of the two brands to promote common themes, namely water resources and behaviour change. As a start, Ecover recently sponsored the Blue Mile, a public race staged in the UK to protect marine and freshwater environments, through a partnership with WWF.
"We went in for this in a big way and had a lot of fun!", says Malmberg - but it was just the start, he asserts. "We really needed to reinvent ourselves, get more creative. We, as leaders, have to give the example - but a new culture takes time to build."
Green Futures is the leading magazine on environmental solutions and sustainable futures. Founded by Jonathon Porritt in 1996, it is published by Forum for the Future.