Home Care, Tissue, and Hygiene Industry Interview Series with Jeffrey M. Phillips

Euromonitor International is pleased to present the first interview in our Home Care, Tissue & Hygiene discussion series highlighting the impact of the green trend on both industries. Zaena Miller, Euromonitor Research Analyst, held the initial conversation with Jeff Phillips – Seventh Generation Executive Vice-President of Operations, Sourcing and Product R&D.

EUROMONITOR: How would you define the term ‘green’ and what is your attitude towards eco-labelling?

SEVENTH GENERATION: Green for Seventh Generation entails the use of natural and renewable raw materials as opposed to synthetic chemicals and fragrances and petroleum-based materials. This applies to both the product and packaging. For paper products, green means 100% recycled. For pulp products, pulp is FSC-certified.

All are whitened without the use of chlorine-containing chemicals. Yet by our own definitions, we are not totally green. We balance authenticity, efficacy and cost as we continue to push towards utilising only natural and renewable raw materials. Becoming truly green while being competitive is not easy. We transparently identify where we fall short on our own aspirations and publish the results of our greening efforts in our annual Corporate Responsibility Report.

Our attitude towards eco-labelling is that we will not compromise our own higher standards by using an eco-label. We believe that consumers want third-party certification but have little recognition of eco-labels other than those put forth by governments like the USDA organic standard. We continue to monitor all eco-labels to ensure that we meet or exceed commonly accepted standards.

We will continue to assess consumer feedback and industry trends to determine whether we should alter our current position in the future.

EUROMONITOR: Do you consider higher pricing to be a significant hurdle to the further development of the green market? Are consumers prepared to spend more on environmentally-friendly products?

SEVENTH GENERATION: Consumer research has always indicated that the consumer is willing to pay more for green products. It is true that some will pay more. Yet I believe that green products will continue to represent a niche market until the premium is reduced or eliminated.

Some of the premium today is represented by retailers taking higher margins on green products. The problem is not related to lack of scale or to unique higher cost ingredients alone. I do believe that the premium will be reduced in the future as continued growth will level the playing field.

Products such as eco washing up liquid offer an entry price point for consumers as it is much cheaper than eco washing powder, for example. In addition, there is less fear that eco washing up liquid will adversely affect the quality of dishes compared to consumer fear of an unknown washing powder having a negative effect on clothing.

There is always the issue of whether consumers are willing to compromise on the quality of a product. However, ingredients companies have been working hard to improve the efficacy of natural ingredients and also bring down costs.

Now more consumers feel that they do not need to compromise on the quality of a green product as a result of the improvement in ingredients. The majority of consumers are most concerned about pricing, with efficacy lagging behind.

EUROMONITOR: How has the higher price affected sales of sustainable home care and personal hygiene products, especially during the recession?

SEVENTH GENERATION: All higher-price home care and personal hygiene products were adversely affected during the recession as consumers used less or traded down to lower price offerings. However, consumers also traded down from non-green products to cheaper equivalents.

The success of green products has spawned the creation of green private labels that benefited during the recession. Yet, while the historically significant growth rates tempered for green products during the recession, they still continued to grow, as evidenced by the dynamic rate for all green segments in the last year.

EUROMONITOR: What do you think of large manufacturers’ attempts to appear green by launching new eco product ranges? Will these companies drive the growth of eco products in future or will consumers remain loyal to small niche companies?

SEVENTH GENERATION: We believe it is a good thing for our big FMCG competitors to choose to offer consumers natural and safe ingredients in their household products. We would prefer that they make their current products green rather than try to sell green products as a line extension.

Some companies have extended into the eco arena with nappies and tissue products but we are not convinced they are 100% committed to green issues as the products only contain a small percentage of organic cotton or recycled pulp and still use chemicals such as chlorine for whitening. Therefore, they are not helpful in furthering the movement to truly green products.

The early evidence is that much of the growth from their new green products came from their own conventional products rather than from truly green companies.
On the other hand, the advertising and promotion of the big FMCG companies has clearly created greater awareness of green products in the mass market.

This has resulted in companies like Seventh Generation stepping up their own efforts. Studies have shown that there is a very high degree of loyalty amongst core consumers to true green brands.

EUROMONITOR: What has been the recent focus area in terms of innovation for Seventh Generation?

SEVENTH GENERATION: In 2010 we have focused on introducing a Natural Disinfectant Hard Surface Cleaner and Cleaning Wipes, registered with the EPA ( US Environmental Protection Agency). The EPA carried out tests to ensure that the product had the same germ-killing properties as its chemical-based alternatives. Value sales at Seventh Generation have seen a steep increase over last year which drove up the share of the entire segment of green household cleaners.

EUROMONITOR: How is the market for sustainable products, especially those within home care and personal hygiene products, performing in the US and Canada specifically? Do you see Seventh Generation expanding internationally in the short or long term and why?

SEVENTH GENERATION: Green products are growing in North America and are performing particularly well through the American mass merchandiser Target, which offers the most competitive prices for the green category.

Green products have also fared well in
Our major international expansion in the short term will be to increase our presence in Canada. There still remains so much opportunity in the US to expand distribution and create consumer awareness for the brand and we do not have the human or financial resources to expand outside of North America in the short term. We know there is a great opportunity but it will have to wait.

EUROMONITOR: What level of growth do you envisage for green products in the long and the short term?

SEVENTH GENERATION: Green products will continue to grow faster than the overall market and therefore continue to increase share. Using our definition of green, we would expect double-digit growth to continue for the foreseeable future.

In the longer term, I believe as the world deals with issues of water, energy, non-renewable resources, human health and planetary health, products will generally become greener and green will become more competitive.

As we currently externalise so many costs to produce and consume products, the real costs to society are not fully embedded in the cost we pay for products. Government regulation and consumer education will change the way we think about these issues and will change the way we shop and consume in the future.