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INTRODUCTION
In this opening chapter, an introduction to the research discussed in this thesis is given. First, the
concepts of Corporate Social Responsibility and Customer Loyalty are introduced. Then, an
overview of the Swedish chocolate market is provided. Next, the research problem and the
purpose of this research are formulated. Finally, the relevance of the research, both scientifically
and practically, and the delimitations of the research will be outlined.
1.1 CORPORATE SOCIAL RESPONSIBILITY
Multinational corporations first introduced the term stakeholder in the late 1960’s. Stakeholders
were described as those who were in any way affected by the corporations’ activities. Soon
thereafter, the term “corporate social responsibility” came into common use. The goal of
corporate social responsibility (CSR) is to take responsibility for all the company’s actions and to
have a positive impact on its environment, communities, employees, consumers and all other
stakeholders (Freeman et al., 2010).
The European Commission (2011) defines CSR as “the responsibility of enterprises for their
impacts on society” (www11:6). More specifically, the responsibility of corporations includes the
integration of social, environmental and ethical issues as well as human rights and consumer
concerns, into their business operations and core strategy in close collaboration with their
stakeholders (www11). In research literature, CSR is defined as “a business organization’s
configuration of principles of social responsibility, processes of social responsiveness, and
policies, programs, and observable outcomes as they relate to the firm’s societal relationships”
(Wood, 1991:693). Thus, CSR is supposed to provide benefits for all stakeholder groups.
Consequently, stakeholders in their turn might develop positive behavior towards the company,
which can then result in benefits for the company.
Critics, such as the influential American economist Milton Friedman, argue that CSR distracts the
firm from playing its economic role in business and that firms do not have any responsibility
towards society as a whole. Furthermore, these critics state that the overall improvements in health, longevity and wealth in society are due to economic growth attributed to the free market.
In their opinion, the free market in that sense contributes to society by realizing this prosperity
and therefor does not have any other obligations in that matter. However, on the other side of the
spectrum the free market is viewed as inhibiting human freedom (e.g. through child labor) and as
the root cause of economic and cultural imperialism in many developing countries. CSR is also
seen as a way to attempt to be one step ahead of governmental interference, in order to avoid any
kind of legislative restrictions or reprimands. Additionally, CSR is regarded as being used merely
as a marketing tool, which introduces concerns about hypocrisy. As with many ethical issues, a
great amount of organizations operate in the broad space in between these extremes, and the topic
remains subject to continuous discussion (Friedman, 1970).
CSR has several functions and the activities can range from a strict stakeholder focus to charity
and volunteering efforts. From the firm’s perspective, CSR activities are primarily divided into
three categories; value creation, risk management and corporate philanthropy (Bhattacharya et
al., 2011). CSR functions as a self-regulated part of a business model that is recognized by the
International Organization for Standardization (ISO) and was published in ISO 26000 in 2010
(www18). Today, CSR is an important part of many corporations’ mission statement and serves
as a guide to what the firm stands for and how it aims to fulfill these aspirations. CSR is regarded
as an essential part of their business perspective on a strategic level. CSR policies are considered
to be crucial for ensuring long-term success and profits. Reducing risks and inefficiencies while
increasing potential benefits (such as improved brand reputation, employee commitment etc.) are
seen as the major drivers of these corporate advantages (Bhattacharya et al., 2011).
One of the most important stakeholder groups is the consumer, and as Creyer and Ross (1997)
confirmed; customers do indeed expect socially responsible behavior from companies. More
interestingly, customers are willing to reward this behavior. It is no surprise that a steadily
growing group of consumers pro-actively look for companies with ‘sustainable’ products and
production methods. This new type of consumer is subject to an increasing amount of research by
social and economic scientists, and characterized as ‘sophisticated’ and ‘environmentally and
socially conscious’ (Forster, 2007). A well-established research body that focuses on this new
consumer is LOHAS (Lifestyle of Health and Sustainability), which studies the behavior of the
socially conscious consumer worldwide. LOHAS consumers today (2012) make up for 20% of
the population globally. Despite the economic downturn that started in 2008 (and as of conducting this study has yet to show improvements), consumers are more active in the LOHAS
realm than ever before. LOHAS studies show an increase in the number of consumers steering
away from brands whose values they do not agree with, which shows that consumers are no
longer simply interested in the product, but look beyond the product to its producer, and what the
producer is doing to be a better corporate citizen (www22). This shift in consumer attitude
changes how companies have to manage their behavior and what it communicates to its
customers and potential customers. Hereby, consumers are able to exert more influence on
companies, a phenomenon also referred to as ‘voting with dollars’ (www9).
1.2 CUSTOMER LOYALTY
It is a well-known fact that for companies, the costs of retaining existing customers are much
lower than those of attracting new ones. Customer retention and loyalty are thus key issues on the
management’s agenda. By creating and maintaining customer loyalty, a company develops a
long-term, mutually beneficial relationship with its customers (Pan et al., 2011). Loyalty is more
than just a matter of repeated purchases; it is about the personal belief the customer holds about a
brand or product (Oliver, 1999). In other literature, customer loyalty is defined as “the strength of
a customer’s dispositional attachment to a brand (or service) and his/her intent to rebuy the brand
(or repatronize the service) in the future” (Pan et al., 2011:151).
Primary antecedents of customer loyalty are customer satisfaction, customer trust and product
performance. Additional factors that influence customer loyalty are the perceived product/service
value, perceived customer benefits, customer personal sacrifice and customer personal situation
(Blackwell, 1999). Different views on the concept of customer loyalty exist and have resulted in a
segmented accumulation of research embodied in behavioral theory literature. A distinction is
primarily made between behavioral and emotional loyalty of customers towards a brand. The
difference is based on whether or not the consumer has an intrinsic motivation for his or her
loyalty; the presence or absence of an emotional relationship with the brand (Chaffey et al.,
2009).
Customer awareness of CSR activities of a company or brand has also shown to influence
purchase intentions, and purchase intentions has shown to influence customer retention and
1. INTRODUCTION 10
loyalty (Ali et al., 2010). So far, the effect of CSR on customer loyalty has been shown through
moderating and mediating effects via competitive positioning, brand identification and brand
advocacy (Du et al., 2007). CSR is expected to enhance loyalty (Pirsch et al., 2007). However,
Bhattacharyna & Sen (2004) argue that “loyalty is an outcome of the consumer-company
identification concept” (2004:19). It is important to consider that loyalty through consumercompany
identification is influenced by personal support of the CSR issue. Therefore, it is
supposed that only CSR initiatives that match the target consumers’ personal support can trigger
consumer-company identification and with that increase loyal behavior.
1.3 THE SWEDISH CHOCOLATE MARKET AND CORPORATE SOCIAL
RESPONSIBILITY
Similar to many other global industries, the chocolate industry has experienced a fluctuating
fortune during the recent years. The industry has managed to attain an erratic growth from the
beginning of the 20th century until year 2007, with an average annual growth rate of 3.2%.
Nevertheless, the chocolate industry went through hard times during the global financial crisis in
the years 2008-2009 and the global uncertainty at the global market place together with a steady
increase in cocoa bean prices resulted in a massive decline in consumer demand for chocolate
during this period (www16; www17). In January 2010, the cacao bean prices reversed to a lower
level and by the end of year 2011 the prices were announced to be the lowest in 32 months and
this as a result of bigger harvests than usual (www1; www7). Today, as the world market slowly
stabilizes, the demand is expected to soon reach its original level (www17).
In 2008/2009 Europeans alone consumed around 49% of the world's cocoa and on a world-wide
scale of average annual chocolate consumption per person, Sweden was ranked at the 11th place
consuming 6.6 kilos per person and year (www17). Some of the major actors on the Swedish
chocolate market are Kraft Foods (Marabou, Toblerone and Milka), Cloetta (Kexchoklad, Polly,
Center, Plopp, Tarragona and Sportlunch), Fazer (Geisha, Dumle, Karl Fazer, Marianne,
Kinapuffar), Nestlé (After Eight, Lion, Smarties and KitKat) and Lindt & Sprüngli (Lindt)
(www3). Despite the recent economic downturn and uncertainty about the future, the Swedish
chocolate market has recovered well. Kraft Foods has a bright view on the future, stating in a
press release from February 2012 that the chocolate industry is blooming and that they experienced a 10,5% growth of net revenues in 2011 (www19). Similar to Kraft Foods, Fazer is
positive regarding the future and did in the recent year increase their market share in Sweden as
well as enhanced their profitability (www14). On the other hand Cloetta expresses concern
regarding the fluctuating cacao prices in their annual report of 2011 (www3). Fluctuating cacao
prices is also mentioned in Fazer’s annual report from 2011 and both chocolate producers
perceive this as a big future challenge (www14; www3).
Within the chocolate industry, the term Corporate Social Responsibility (CSR) is hardly anything
new, but during recent years, more and more attention has been brought to it. All of the above
mentioned actors on the Swedish chocolate market (Kraft Foods, Cloetta, Fazer, Nestlé and Lindt
& Sprüngli) are actively involved in projects aiming at enhancing the working conditions on the
cacao fields and to stop child labor as well as ravaging of the rainforests.
Kraft Foods, the leading chocolate manufacturer in Sweden, is involved in various sustainability
projects and cooperates with many different organizations in order to help advance sustainable
cocoa farming. Among other achievements, the corporation took part in the establishment of the
International Cocoa Organization (ICI) and work closely together with the Rainforest Alliance,
an organization striving to help cacao farmers and farms to become more sustainable as well as to
make the children of cacao farmers to attend school instead of working on the fields (www20).
In order to urge on the development of sustainable cacao production, the Swedish chocolate
manufacturer Cloetta cooperates with various international institutions as well. As a member of
the organization World Cocoa Foundation (WCF), Cloetta is engaged in projects aiming at
supporting cacao farmers and their families. Moreover, Cloetta cooperates with Fairtrade, an
independent product certification label organization contributing to enhance working conditions
for cacao farmers and employees in developing countries (www2).
The Swiss food and nutrition company Nestlé contributes to the development of a sustainable
cocoa production through an initiative called “The cocoa plan”. Recently Nestlé decided to invest
868 million SEK over a period of 10 years in order to help cocoa farmers to achieve a more
profitable cocoa production. The money will be spent on plantation of cocoa trees, education,
research and cooperation with social institutions (www23). Nestlé also recently started
cooperation with Fair Labor Association (FLA), which is a collaborative effort of universities, civil society organizations and socially responsible companies dedicated to protect workers’
rights around the world (www13).
Similar to Kraft Foods, Cloetta and Nestlé, the Swiss chocolate manufacturer Lindt & Sprüngli is
also involved in various projects supporting the development of sustainable cocoa production.
Apart from investing money in order to track and abolish child labor at the cocoa fields, Lindt &
Sprüngli also pays a premium of US $60 on each ton of cocoa sourced from Ghana into a
foundation called SourceTrust.org which finances infrastructure, education and health projects in
the farmer villages in Ghana (www21).
PROBLEM DISCUSSION
Although the field of CSR in consumer behavior research is still relatively small, over the past
years there has been a growing interest in studying the links between CSR and marketing. Today,
consumers more than ever expect companies to engage in CSR activities (Creyer and Ross, 1997;
Foster, 2007). At the same time, managers increasingly see CSR as a marketing tool to help
create a competitive advantage (Pohle, 2008). Some research do suggest that corporate
management should apply CSR policies to marketing strategies, as this will have a positive effect
on corporate brand equity, customer equity, market share and corporate image (Bhattacharya,
Smith & Vogel, 2004). However, studies often produce opposing results.
This study intends to identify how CSR activities influence customer loyalty and thereby attempts
to increase the understanding of CSR activities as an emerging marketing tool. In order to study
this matter we chose to inquire consumers on the Swedish chocolate market. Governmental
regulations and customer involvement has made CSR an important strategic issue for firms in the
chocolate industry. With known issues such as human rights in the production of cacao,
consumer interest on the subject has also grown.
Even though Sweden, in general, has come far in the development and implementation of CSR
activities, there is still significant room for improvement regarding CSR within the chocolate
industry. Recently, child labor and unacceptable working conditions at the cocoa bean fields were
(again) brought to the surface, starting a fierce debate in Swedish society where strong critique was aimed at the companies owning the chocolate production plants (www12). In the beginning
of 2012, CNN presented a documentary investigating child labor at the Ivory Coast in West
Africa, a region known to be the world’s largest cacao producer. The documentary reveals that,
even if child labor since year 2001 is illegal, it still exists in a large scale. Only at the Ivory Coast
over 200 000 children are estimated to be illegally working in the cacao fields (www4).
In order to fight against and prevent child labor within the chocolate industry various
organizations and institutions have been established and International Cocoa Initiative (ICI) is
one of them. ICI actively works with eliminating the worst forms of child labor and forced labor
from cocoa farming and chocolate production (www15). Increased discussions and many
disclosures revealing the dark side of the chocolate industry has resulted in a higher awareness
among chocolate consumers, which subsequently has led to an intense responsibility pressure on
the chocolate companies.