Consumer testing bodies fight to stay influential

FT.com

January 13, 2014 4:35 pm

By Rose Jacobs

Judgment call: when asked whom they trust, Germans say family, friends and Stiftung Warentest, which tests products from cars to phones

In a country passionate about chocolate and proud of its domestic brands, the news for Ritter Sport last November was not good. The confectioner, whose square chocolate bars are familiar internationally, had received a grade of “defective” from Germany’s consumer-product testing agency, Stiftung Warentest.

One month before Christmas – and just days ahead of Saint Nicholas Day, when German parents stuff their children’s shoes with sweets – the agency took issue with Ritter Sport’s top-selling hazelnut bars, claiming that they were not made with “all natural ingredients”, as the company had claimed.

Ritter Sport, which is based near Stuttgart, responded quickly and fiercely, starting legal action that resulted in a court victory yesterday, when a judge ruled that Stiftung Warentest must stop making the claims.

The foodmaker’s willingness to go to court was understandable. Polls have shown that, when asked whom they trust, Germans answer: family, friends and the Stiftung Warentest. The Church comes fourth and the government some way after. “We’re an institution,” says Hubertus Primus, the testing body’s chief executive.

He believes Stiftung Warentest plays an important role for German industry because its criticisms prompt manufacturers to improve their products and its praise helps sell them. Top marks are usually prominently displayed on packaging, and indubitably boost domestic sales. As for international sales, “Made in Germany” still means a lot, and Mr Primus puts the country’s export success down in part to the vigorous testing processes at home that ensure high standards.

However, life is not as straightforward as it used to be for the influential German institution, even without the Ritter Sport dispute. Like its counterparts in other countries – such as Consumer Reports in the US and the UK’s Which? – Stiftung Warentest is having to adjust to the digital age. Having been founded on revenue streams from publishing, such consumer champions must now contend with changes to their business models brought about by the internet.

Though few such organisations accept advertisements, sparing them the transition to digital ads, they have all had to cope with proliferating online competition, whether in the form of for-profit price-comparison sites such as the UK’s Moneysupermarket.com, or simply online forums. For those that receive state funding – about 10 per cent of Stiftung Warentest’s approximately €50m an­nual budget comes from the public purse, for instance – that source has also dwindled.

New style, same values: a US consumer champion evolves

“Naked man rescued from washing machine is a helpful reminder that appliances are not toys”; “Snow traps 500 Amtrak passengers on trains overnight – so how were the toilets?”; “The cheesepocalypse is nigh: Velveeta warns of coming shortages”.

You would not find these headlines on the somewhat staid website for Consumer Reports . But that was the appeal of Consumerist, a blog founded by Gawker Media in 2005 and bought by Consumer Reports’ publisher, Consumers Union, three years later.

“They had this really robust audience that we wanted to expose to our work,” says Consumer Reports’ Jennifer Shecter. Despite their different styles, the two organisations had similar values, she says. Consumerist’s 2m-3m unique visitors a month have remained steady since its purchase, and are now sometimes directed to Consumer Reports’ content.

While Consumerist does not undertake product testing itself, it has served as a gadfly to corporate America, breaking stories such as Facebook’s 2009 changes to its terms of service, which gave the social network rights – indefinitely and without limit – to the material that users uploaded to the site.

Traditional media outlets followed the scoop, and Facebook backed down after the public outcry.

“It’s a really critical time for consumer organisations,” says Richard Lloyd, executive director of Which? and former head of Consumer International, an umbrella group with 240 members in 120 countries.

The internet has also complicated the task of adding new, younger subscribers to an audience that tends to be skewed towards people in their fifties and sixties. Mr Primus and Mr Lloyd see the big life changes – buying a house, a car, having a child – as the moment to lure them in, and that has tended to work with Generation X. But whether Millennials – teenagers and twenty-somethings – will bite in the same way is unclear, given their proclivity for social media, where instant access to friends’ and acquaintances’ opinions could undermine even the most respected institution’s considered, objective judgment.

“Now, a mom on Twitter talking about her experience with her car seat is our competition,” says Jennifer Shecter, Consumer Reports’ associate director of external relations.

The organisations are scrambling to respond.

Stiftung Warentest has opened up its reports to comments and found that readers are eager to participate. Consumer Reports is active on Facebook and Twitter. Which? is adapting its sites for mobile access. It appears to be working: for each org­anisation, subscriptions – when measured across channels – are stable or growing.

Organisations are not only looking ahead online. Which? has moved into one-on-one advice – which members get for a reduced price – on mortgages and law. And it is starting to act as a check on more than private industry, by training its sights on public services too. Its university comparison site has had 1m visits in the 10 months since its launch, and primary healthcare and elderly care facilities are set to be the next targets.

Ms Shecter says one particular area of growth could prove very attractive for a younger audience: food safety. During a fundraising event for Consumer Reports’ anti-arsenic campaign, a young woman told her: “If I knew you were doing all this amazing food work, I’d happily pay for a subscription just to fund that.”

Today, testing takes up about a 10th of Consumer Reports’ approximately $250m annual budget. But Ms Shecter still sees it as core to the mission. “Products are safer than they used to be – your microwave is not leaching radiation, your TV is not blowing up. But the world is getting far more complicated, and we’re pretty much the only people out there spending $250,000 on a food test, buying 350 chickens and really testing them.”

Stiftung Warentest has a different approach to Consumer Reports – upon which it is modelled – and Which? The German body, unlike its peers, leaves consumer advocacy to a separate organisation. Mr Primus believes this helps maintain independence, whereas both Consumer Reports and Which? prize the dual role they play.

That it has remained focused on testing may say something about Germany’s business culture too, reflecting how, in the German-speaking world, cold hard facts tend to trump spin. The dispute with Ritter Sport, however, has shown its judgments are not always accepted.

Stiftung Warentest claimed there was a mismatch between the company’s claim of “all natural ingredients” in the hazelnut bars and the presence of piperonal, a substance that provides a vanilla aroma. While piperonal can be produced naturally, its testers argued that to do so would be prohibitively expensive, and they therefore believed Ritter Sport had used the chemically derived version.

Before its court victory yesterday, Ritter Sport had declined a proposed out-of-court settlement. It says the testing was faulty: “Every consumer should be able to rely on a fair and clear testing method. This has ob­viously not happened in our case, since Stiftung Warentest used a testing method which cannot distinguish between natural and synthetic aroma.” Stiftung Warentest is appealing the ruling, saying it stands by its research.