Starbucks, tax avoidance and the art of ethics and brand positioning
One of the most interesting recent stories from a brand management point of view is the current furore regarding tax avoidance.
Three companies in particular have been singled out for attention, Google, Amazon and Starbucks. Senior management from all three companies last week had to face a very public grilling from the Public Accounts Committee over the amount of tax they paid. To put some numbers behind this Starbucks had UK sales of �398m but paid zero corporation tax. Google had sales of �395m and paid �6m tax and Amazon had sales of �3.3bn paying �1.8m tax.
You may well be shaking your coffee cups right now but all of this is perfectly legal, via the loopholes in our tax system. International companies can move profits around between territory bases. For example Google’s European headquarters is based in the Republic of Ireland with its advertising team and so it pays its main tax requirements there.
This situation has highlighted a real competitive advantage global companies have. Andy Street, managing director of John Lewis stated in an interview last week regarding Amazon “There is less money to invest if you are giving 27pc of your profits to the Exchequer.”
“Clearly, if you are domiciled in a tax haven you’ve got much more [money]. They [Amazon] will out invest and ultimately out trade us. And that means there will not be a tax base in the UK.” Strong stuff but all true.
I have slightly more sympathy for Starbucks and Amazon on this than I do Google. Amazon does employ over 2,250 people in the UK and uses UK companies in its fulfilment chain. Likewise Starbucks employs more than 8,500 people in the UK and plan to grow this by another 5,000 based on outlet launches. Google, with no physical product, employs considerably less. But for me the most interesting side of this once again is the impact on brand positioning.
Compared with Google and Amazon, Starbucks has positioned itself around being a fair community focussed business. Starbucks has responded to all of this by posting defences to its actions to its blog with posts by its UK MD, Its CFO and also Howard Schultz its worldwide chairman, president and CEO.
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If you look at the comments against these statements many use the words “responsibility” and “community”, words used in Starbucks own mission statement. It has used these as a core part of its brand positioning and its customers in part have bought into this. Many of the posts are from customers so upset by this perceived change in ethics that they say they will not purchase again.
There is a big difference between a few people upset enough to post comments on a blog to actually losing customers, and so sales, on a large scale but I suspect its brand image has been tainted, probably more so than Google, because of its choice of brand positioning. This is not a column about the rights and wrongs of this as you are capable of making your own minds up. However if your brand and brand following is based on certain ethics, the lesson is you better make sure your business follows them from top to bottom in all areas. I look forward to seeing Starbuck next brand marketing and PR activities with interest.
Tim Youngman is head of digital marketing for Archant follow him on twiiter @timyoungman