- This report focuses largely on the “Shopping and Leisure” section of Euromonitor International’s new Annual Study of global consumers, for which the fieldwork was carried out in August 2011 (see Appendix for methodology and specific questions analysed).
- The strategic analysis in this report enriches the survey results with extensive desk research and conjecture, further illustrated with Euromonitor International market data. (See Appendix again for market data definitions).
The importance of green descriptors
- Despite the recession, issues such as sustainability, health, world poverty, animal welfare and food safety have become increasingly important factors guiding shoppers’ purchasing decisions.
- Shoppers are more interested in the way their food is produced, especially in the face of the negative publicity surrounding modern, efficiency-driven production processes. As a result, retailers and manufacturers are quick to use green attributes as a point of differentiation.
- From beauty products to household goods and groceries, terms such as “natural”, “organic”, “locally sourced”, and “fair trade”, have begun to feature increasingly on labels and ingredient lists, and many consumers are willing to pay a premium for them.
- The survey revealed that while “quality” and “price” were still the overriding factors driving shoppers’ buying decisions, green descriptors are also now playing a greater role than ever before.
- Although the general “green/environmentally friendly” descriptor ranked highest among these, with 53% of respondents deeming it to be fairly important, all other factors were supported by at least 44% of respondents.
- The relatively affluent groups of Brazilian, Chinese and Indian consumers who took part in the survey were more concerned than those of any other country about environmental and ethical factors, while the Japanese showed the least interest in most descriptors.
- Although the survey is not representative of the total populations of Brazil, China and India, given the skew towards affluent, urban consumers, the findings were nevertheless indicative of a fledgling green movement among the middle classes.
- Globally, all the listed green attributes matter more to women than to men: for example, with 56% of female respondents considering the descriptor “green/environmentally friendly” to be important, versus just 49% of males.
- “Fair trade” was found to be important to more than half of shoppers (51%), despite the fact that domestic markets for fair trade products are as yet undeveloped in China, India and Brazil.
- The Fairtrade organisation, FLO, estimates that out-of-home and retail sales of Fairtrade products increased by 11% in 2010 to reach a value of US$5.5 billion, led by the UK and the US.
- Sustainability issues have come to the fore in recent years, and this is reflected in the fact that more than half (51%) of respondents felt strongly about the descriptor “sustainably produced.”
- Interest in sustainability may have been fuelled as a result of concerns over depleted fish stocks and environmental disasters such as the BP oil spill in the Gulf of Mexico and Japan’s nuclear disaster of 2011.
Chart 1 Global: “How important are the following factors/descriptors to you when considering purchasing a product or service?”
Source: Euromonitor International
Trust in label descriptors
- With consumers becoming increasingly demanding with regard to the origin, manufacturing methods and contents of the products they buy, product labels are playing an ever more important role in buying decisions and are the subject of ever more stringent regulations.
- However, the survey revealed that, despite the strong interest shown in green/ethical products, the share of respondents who trusted their labels ranged from just 29% for “free range” to 42% for “locally sourced”. Around half of respondents in each case felt neutral.
- German shoppers are the most cynical when it comes to claims about a product’s “natural” or “organic” credentials (only 17% and 24% of respondents, respectively, found them to be trustworthy, compared with over 45% of respondents in both Brazil and India).
- Japanese consumers were the least trusting regarding claims that a product is “free range” or “fair trade”, just 15% and 13%, respectively, had confidence in these labels.
- Both “free range” and “fair trade” labels were held in high regard by UK shoppers: 46% and 47% of respondents, respectively, deemed them to be trustworthy; while both French and German respondents (51% and 48%, respectively) had faith in “locally sourced” labels.
- Reasons behind the scepticism surrounding label descriptors may include confusion about the myriad of labels on offer, a lack of regulation, and fears over companies making false claims, for example by passing factory-farmed foods off as organic or free range.
- Brazil and India had the highest proportion of respondents who considered both “natural” and “organic” labels to be trustworthy, despite the fact that India has no clear regulatory structure in place for organic labelling.
Chart 2 Global: “How trustworthy do you consider the following descriptors when used to label products?”
Source: Euromonitor International
The definition of “natural” and “organic”
- The survey suggests that only around half of shoppers believe that “natural” and “organic” products are produced according to stringent regulations. This again reflects confusion about the various labels and highlights the need for uniform legislation.
- Japanese shoppers were least satisfied that “organic” products were strictly regulated (37%). In contrast, as many as 63% of French respondents agreed that this was the case.
- There is nevertheless a strong association in consumers’ minds between “natural” and “organic” products, with 46% of respondents defining natural as “also organic”, and 61% of respondents defining “organic” as “natural”.
- Most consumers do not expect organic products to be sourced locally (only 21% agreed with this definition). Indeed, the issue of “food miles” associated with organic foods has been a controversial issue among those promoting organic produce as environmentally friendly.
- Perhaps worryingly for organic producers, for whom healthfulness is a key selling point, fewer than half of respondents (47%) believed that organic products are healthier than non-organic ones. Only 34% of Japanese and 35% of UK respondents held this view.
- The generally positive attitude towards natural and organic products indicated in the survey is reflected in strong growth of naturally healthy (NH) and organic packaged food sales, as recorded in the Euromonitor International Health & Wellness database.
- Globally, sales of NH products grew in value by 42% in current terms to reach US$241.5 billion in 2010, while the smaller market for organic packaged food and drink experienced growth of 51% to total US$27.1 billion.
What shoppers are willing to pay more for
- A desire to maintain good health, especially in the light of ageing populations, may explain the fact that more than half (52%) of respondents declared themselves willing to pay more for “natural” products, despite a certain amount of mistrust and confusion regarding product labels.
- Respondents in the emerging markets of China, India and Brazil in particular showed a strong willingness to pay more for “natural” products. This was also the attribute that Japanese respondents were most willing to pay a premium for (46%).
- Undoubtedly influenced by increasing reports about poor living and working conditions in third world countries and a desire to offer a fair price to producers, as many as 43% of respondents globally said they would pay more for “fair trade” products.
- Separate research shows that awareness of fair trade has increased significantly since some of the major players have made sourcing commitments to the Fairtrade movement, including Cadbury Dairy Milk and Green & Black’s, Nestlé’s Kit Kat and Ben & Jerry’s.
- Despite the Fairtrade organisation, FLO, not operating in the emerging markets of Brazil, China and India, respondents in these markets revealed themselves as most willing to pay a premium for “fair trade” products, indicating strong growth potential in these markets.
- Some 47% of respondents globally declared themselves willing to pay more for a product that is “locally sourced.” Reports suggest that many consumers feel loyalty to local producers, and are keen to put money back into their local economies, which has been a major factor in the recent growth of farmers’ markets.
- As a result of media coverage and national celebrities exposing “cruel” practices, animal welfare issues have also become increasingly important. This may have prompted 46% of respondents to say that they were ready to pay a premium for “free range” products.
- UK and German shoppers are particularly strong advocates of free range products, with more than half of respondents in these markets (52% and 51%, respectively) saying they would pay more for such products.
- Carbon footprinting is still in its early stages of development, but more than a third (35%) of respondents agreed that they would pay more for products claiming to be “carbon neutral”. Among developed markets, this percentage was particularly high in Japan, at 42%.
Chart 3 Global: “I am willing to pay more for a product that is _”
Source: Euromonitor International
The impact of dietary restrictions
- The survey results suggested that a significant proportion of green shoppers are non meat-eaters, or that those who do not eat meat are more frequent buyers of green products.
- Unsurprisingly, given the strong Hindu population, 75% of Indian respondents were found to be non meat-eating (16% were pescetarian and 11% eschewed red meat only); the highest percentage among all countries.
- The importance of all the listed green/ethical descriptors was found to be much higher among non meat-eaters than among those eating meat.
- The percentage of non meat-eating respondents who deemed green factors to be important ranged from 57% for “supports local communities” to 68% for “green/environmentally friendly”.
- The gap was particularly large with regard to organic products, with as many as 62% of non meat-eating respondents considering “organic” to be important, compared to just 44% of all respondents.
- The economic situation is not expected to improve dramatically in the foreseeable future, which will continue to have a negative impact on the environmental/ethical goods affected by the trends in this report.
- Nevertheless, there will remain a core group of ethical or health-conscious consumers that will continue to spend a premium on products that are locally produced, organic, fair trade, free range or carbon neutral.
- At the same time, all consumers will become more aware of environmental issues such as climate change, sustainability, animal welfare and world poverty, and will increasingly be compelled to “do their bit” to help improve the situation and ensure a better future for their children.
- The spread of the internet, and in particular social networking, will make it easier for NGOs and grassroots groups to spread environmental messages. They will continue to enlist the support of ethically-minded and influential celebrities such as Hollywood stars and TV chefs.
- In an always-connected society, shoppers in developing countries, especially China, where food scandals are prevalent, will be better informed about health and safety issues with regard to both food and other consumer goods, and determined not to compromise on quality.
- Awareness about the harmful effects of environmental disasters such as oil spills and nuclear accidents will increase demand for sustainable products, as consumers become more concerned about food provenance and the need to protect local communities.
- Although most of the green concepts covered in the survey report, such as fair trade, organic and free range foods and carbon footprinting, are still underdeveloped in the emerging markets, the huge interest from respondents illustrates significant potential for growth as incomes rise.
- One of the key lessons learned from the survey results is that manufacturers and governments need to work towards harmonising and clarifying green labels, in order to reduce confusion in the minds of shoppers and allow them to distinguish bona fide claims from fraudulent ones.
- The forecast period is likely to see an increase in demand for free range products as consumers become increasingly aware of animal welfare issues. Nevertheless, the market will be restricted by the need to supply the world’s ever growing population with affordably priced meat.
- A more likely scenario will be that conditions for intensively farmed animals will continue to see legislative improvements as a result of public pressure, such as the EU’s Welfare of Laying Hens Directive, which came into force on 1 January 2012.
- The key to growth in fair trade sales is the education of consumers and the expansion of fair trade categories to include new areas, such as cosmetics and toiletries. This will be possible with the growing engagement of major consumer brands and large retailers.
- Consumers of the future will favour 3-dimensional brands that show social and ethical responsibility, provided these also balance quality and value. Brands that can combine green aspects with affordability and convenience will be the most successful going forward.