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Social enterprises use morality to attract investors

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Some companies sell their products by appealing to the conscience of consumers. They boost sales by promoting the fact that the product is eco-friendly, for example, or that the small-scale producers in developing nations who supply the product get a fair deal. These companies are called social enterprises. But many of them are now easing up on the moralizing marketing, at least to customers. They’re using the moral dimension to draw in investors instead.

Take Runa Tea. It’s a new brand of tea that comes from the guayusa leaf in the Amazon jungle in Ecuador. When someone buys a bottle, part of the profits go to social programs for indigenous family farmers there.

New Yorker Drew Pham recently bought a bottle of the tea at his local supermarket:

“Am I gonna buy it because it’s cool?” he asked. “Because social awareness is cool? Or am I gonna buy it because I feel bad?”

In fact, he bought it because he heard it was sweet.

Runa’s co-founder, 25-year-old Tyler Gage, applauds that. His business plan aims to turn over part ownership to farmers and raise their tiny incomes but he’s NOT banking on a marketing edge from the moral-high ground.

“Even telling that story about farmers or social innovation actually limits our ability to sell product, in a certain way,” Gage says.

He adds that some mainstream storeowners tend to think he’s selling an inferior product if his sales pitch sounds like a grant application and uses terms like “social innovation” and “small farmer cooperative development.”

But he does use such terms to attract key investors, including the socialist government of Ecuador. Jaime Calle directs the government’s Creecuador program. It invested half a million dollars in Runa’s Ecuadorian operations. That’s about 5 percent of the company’s net worth. Eventually, the government will sell its stake to the farmers.  It’s unusual for a socialist government to be financing a Brooklyn startup business.

It’s not important if it’s communist, socialist, or capitalist, the final objective is the development of the people,” says Calle.

People like Ecuadorian farmer Mauricio Grife. Grife can sell his leaves to Runa and says he will buy shares in the enterprise as soon as he gets the chance.

“I hope this initiative lasts forever. Lasts, and brings more support for us,” Grife says. He is putting in more guayusa plants on his  farm in Northeast Ecuador. Grife’s family of five earns about $1,200 a year selling a mix of citrus fruits, cocoa, and banana. Selling guayusa to Runa could increase his income by 10 or maybe 20 percent — if the tea catches on with people here in the U.S.

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