Ethical Claim Potential Index Identifies Top Market
In July 2021 I published an attempt to quantify per country the potential for using ethical labels to enhance business results. Combining the digital share of shelf with ethical labels in packaged food, the 2021 results of Euromonitor’s Lifestyle Survey and the updated Environmental Sustainability Index scores I put together an index to identify the markets with the most potential for companies to communicate sustainability. Sweden, with reasonably engaged consumers (as shown in survey results), a fair share of ethical labels and excellent availability of renewable electricity to companies (at least in the north of the country) secured the pole position, with runners-up Denmark and Czech Republic. What is surprising is that in Sweden, several sources point to sales of food with ethical labels seeing slower growth than the total grocery market in 2020, and growth of organic produce has also seen a significant slowdown in recent years.
Why, then, do Swedish food companies care about sustainability?
Despite the weakening response from the market, Polarbröd, a key player in bread, still holds sustainability to be a core value. The Polarbröd 2021 Sustainability Report mentions “co-workers” 92 times, versus “consumers” only 21 times. It seems, therefore, that its reason for being self-sufficient on wind power generated electricity or investing in electric transport is primarily to be an attractive employer rather than to benefit sales. In trying to understand then why this remains a key priority, apart from, arguably, the convictions of the owners, it is important to note that many Swedish consumers hold sustainability to be a self-evident priority, personally and collectively. Cutting back on sustainability commitments would likely harm consumer perception of the brand and company significantly.
Globally, ethical labels grows quickly from a low base
Outside of the well-established organic label, ethical labels is the fastest growing claim group in terms of digital share of shelf and something of a white space to explore in food. Organic is the leading ethical claim in packaged food but building and profiting from a sustainability platform requires a holistic approach.
Source: Euromonitor International Product Claims and Positioning
Major food multinationals have a significant focus on launching products in more sustainable packaging, in collaboration with packaging companies. Applying innovative packaging types to existing products appears to be low hanging fruit for brands as it activates the expertise of packaging specialists and brings the synergy of a strong brand. However, some changes in packaging may of course require investment in new machinery, making it less attainable.
Consumers in developing markets are looking to sustainable products
While the digital share of shelf for ethical labels is larger in developed markets, survey results show that consumers in many developing and emerging markets are keen to live sustainably and buy sustainably produced food, regardless of income or education level. As such, there seems to be demand for ethically labelled products across several price bands.
Source: Voice of the Consumer: Lifestyles Survery, 2020 n=26,321, 2021 n=26222
Through globalisation in general and use of social media in particular, attitudes to high profile issues like plastic pollution and climate change are becoming more similar globally, and ethically positioned companies in developing and emerging markets are eager to adapt the best solutions used in developed countries to local context.
Innovative and holistic ethical branding approaches are not out of reach to food companies in developing and emerging markets. The Brazillian brand A Tal Da Castanha (plant-based dairy) is a good example of this. Taking on a holistic sustainability approach in markets lacking sustainably-produced products is a strategy fully aligned with the drivers of globalisation.
COVID-19 has changed consumer priorities
Interestingly, the COVID-19 pandemic has changed consumer priorities with regards to sustainability, which prior to this was used interchangeably as a synonym for environmentalism. Consumers are paying more attention to how companies treat employees and interact with the community in which they are based. They are also claiming to be increasingly willing to “vote with their wallet” for the companies they think are doing the best.
Source: Voice of the Consumer: Lifestyles Survey, 2020 n=26,321; 2021 n=26,222
However, the social issues that directly affect employees and the pride they take in their employer are also HR matters and if the leaders in sustainability, Polarbröd, are right, this is the new incentive for investing in continuous improvements to the sustainability of business in food. Therefore, ethical labels are likely to maintain importance in food even while consumers have other product features top of mind.
You can read more about the potential for ethical labels in packaged food in Where to Play and How to Win? Mapping the Opportunity of Sustainability in Packaged Food.