Ethos Water is a bottled water company owned by Starbucks. Their water is sold at Starbucks and other retail locations. For every bottle sold, Ethos donates five cents to a fund that provides clean water to children in developing nations. Because of this mission, Ethos considers itself an "ethical brand." I posted last week on Ethos and what one of their founders calls "The Economy of Integrity."
The lack of clean drinking water is a major global problem, so I was happy to support Ethos. Over the weekend I went to Starbucks and bought a bottle of their water. It cost $1.80. This got me thinking about Ethos, "ethical brands" and doing too well by doing good.
Ethos Water is a premium brand and priced higher than most of its competition. For example, San Pellegrino water was available at Starbucks $1.60, and regular bottled water costing 80 cents was on sale next door. The main reason Ethos is able to price higher is its "ethical branding". They ask consumers to pay a premium price in exchange for helping kids in developing countries get access to clean drinking water.
In theory the premium pricing provides the money that goes to help the children. While I couldn't find any financial data on Ethos on Starbuck's website (more on this later), it struck me that Ethos is likely quite profitable. In addition to charging a substantial premium for their product, their key brand building and marketing expenses are promoting their positioning of "buy water, help children." In other words, ethical branding is their key marketing program and their donation is one of their major marketing expenses. And at 5 cents per bottle, it's not an overly expensive marketing program. Especially since the ethical branding allows Ethos to premium price.
So from the outside it looks like Ethos is an extremely profitable water company donating a very modest amount of money - in my case less than 3% of what I paid - to help kids in need of clean water. Added to this, bottled water is not particularly good for the environment.
So where does this leave me? In interviews Ethos execs make the point that its not just the money that is important. The Ethos brand "allows people to understand the world water crisis and feel as if they are connected to the solution." This is a good thing. I also think socially responsible companies that do well and make a profit by doing good should be both supported and rewarded. I consider Starbucks to be a pretty socially responsible firm.
As I sat in Starbucks, I realized my issue with Ethos is they may be doing too well financially relative to the good they are doing. They also may be doing too well relative to their positioning. Ethos positions itself as a mission based social service organization, and their website makes them look like a non-profit. I have a hard time reconciling this positioning with their pricing and my back of the napkin calculations of their profitability.
I could be wrong about their financials. Maybe they don't make any money. Maybe they spend all their profits on water programs for kids. However since they don't appear to be transparent about their finances, I don't know. This seems odd, since transparency is something they push as being very important.
I really liked Ethos when I first read about them. But social entrepreneurship is tricky, and to me they may have stepped over the line with their pricing, positioning and profitability - at least based on the information I currently have.
I definitely want to support ethical brands and I would like give Ethos the benefit of the doubt. But for now, my bottom line is their bottom line looks way too good.