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Passport Ethical Labels – Key Findings

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Passport Ethical Labels is our brand new database created in response to the growing movement towards social responsibility and sustainability. The rise of social media, in particular, has created a need for FMCG companies to engage on a deeper emotional level with the most essential stakeholder of them all: the end consumer. Making the ethical choice allows shoppers to fill up their shopping baskets with a clean conscience. Ethical Labels is designed to quantify the sales of packaged food and beverage products centred around three main platforms: People/Values, Environment/Sustainability and Animal Welfare. Currently, our in-depth research covers 26 markets.

Social media changes the playing field every hour of every day

Courtesy of Facebook, Twitter, Blogger et. al, today’s consumers are confronted with the unsettling consequences of their day-to-day consumption habits. The shocking revelation that their daily chocolate treat may translate into thousands of acres of Indonesian rainforest being burnt to the ground sits uneasily on their conscience. On a daily basis, they are confronted with animal rights activists’ uploads of disturbing images from the bowels of slaughter houses, chicken sheds and pig farms, which can never be unseen. Meanwhile, on internet forums, worried parents are busy discussing how best to avoid any potentially nefarious food additives. The days of blissful ignorance, when the only thing that counted was getting the best deal on the desired product, are long gone.

Luckily for the industry, consumers do not actually want to stop consuming. Nor do they want to sacrifice convenience. All they really want is to feel good – or at least a bit less guilty - about their purchases.

UK emerges as run-away leader in Animal Welfare labels

Our freshly released data shows that the global market for ethical labels on packaged foods, soft drinks and hot drinks (excluding private label) amounted to a formidable US$793.8 billion in 2015. It will probably not come as a surprise that three quarters of this are accounted for by environment/sustainability-related labels, most of which (97%) pertain to recycling – arguably the longest-standing environmentally-friendly practice aimed at conserving resources and making everyday consumption less wasteful.

Ethically Labelled Packaged Food, Soft and Hot Drinks retail value sales (top ten countries)

ethically labeled food produce and soft drinks retail value

As one would expect, owing to its standing as the world’s largest country market for packaged foods, the US leads in ethical label sales, claiming 27% of the global total in 2015.

Behind the US and Japan, China has established itself as the third-ranking market for Ethical Labels. In both the US and China, it is the Peoples/Values category that is biggest, followed by Environment/Sustainability. What is noteworthy, though, is the negligible penetration of Animal Welfare labels in China - the category amounted to a mere US$133 million in 2015. In the US, by contrast, packaged foods and beverage donning Animal Welfare labels accrued value sales of US$4.7 billion – 10% of the global total.

It is the UK, however, which trumps the US by a factor of six, amassing a total of US$30.1 billion. The high prevalence of vegetarian/vegan labelling is largely responsible for this.

Besides the fact that vegetarian eating has long been quite popular in the UK, it is also the UK’s considerable ethnic and religious diversity, which is fuelling the trend for vegan/vegetarian labelling. Consumers adhering to halal or kosher diets, for instance, commonly prefer to stick to vegetarian/vegan options when purchasing packaged foods, just to be on the safe side.

Incidentally, it is three confectionery and snack food companies, which lead the segment in the UK: Mondelez International with an 11% market share, Mars (9%) and PepsiCo (7%).

Vegan product labelling, in particular, may be the one to watch in the future, as an increasing number of companies go about broadening their consumer appeal by staying away from employing animal ingredients whenever feasible. The rising demand for vegetarian and vegan proteins, which is a sub-trend within the high protein trend, indicates where things are moving right now.

Another intriguing insight that can be gleaned from the Animal Welfare labels section of our new data is that Western Europe has a firm lead in Grass Fed/Pasture Raised labelled products, accounting for almost 90% of the global US$1 billion market. The Netherlands is by far the biggest market, followed by Italy, while the US trails far behind with a paltry US$26 million. This would suggest that US consumers are still far more comfortable with their rather more “industrialised” approach to animal husbandry than are their European counterparts.

Nestlé leads clean label

Clean label is one of the trends that is most strongly driven by consumers. Shoppers have grown increasingly suspicious of anything “chemical” sounding on their food labels. As a result, there are now a number of formerly common ingredients, which can sell a product through their absence.

No Artificial Preservatives emerges as the most common label claim with US$75 billion worth of product sales globally. North America is the most monosodium-glutamate-averse region, claiming 56% of global sales of products labelled as MSG-free, while Asia Pacific sports the highest GMO-free product sales.

On a global level, Nestlé takes the lead in Clean Label products with an 8% value share, followed fairly closely by PepsiCo, Coca-Cola and Unilever.

clean label category breakdown

Know where the growth is before making a decision

Ethical labels forecast baseline is derived from packaged food, soft and hot drinks systems. Growth is determined by the predicted increase/decrease in value sales across these categories, not by predicting the spread of these labels onto new products. The exception to the rule is when explicit corporate social responsibility commitments are made by major food and drinks companies to include ethical labels on new brands within their portfolio or commit to sustainably sourcing commodities. In these cases, baseline growth will be overwritten, taking these commitments into account. For an overall snapshot of our methodology please consult image below.

In terms of overall global growth for ethically labelled packaged food and drink categories, Euromonitor International predicts a moderate 10% increase over the 2015-2020 forecast period. This perhaps rather cautious-seeming estimate harbours numerous pockets of appreciable dynamism.

For example, From Sustainable/Renewable Sources-labelled products are set to enjoy global growth of 48%, primarily driven by the Asia Pacific region, which is expected to generate a handsome double-digit CAGR of 12% for the category over the forecast period.

In Latin America, Rainforest Alliance certified products should deliver an impressive 145% value sales increase over the forecast period. Not only is the region home to several emerging consumer markets, but the fate of the rainforest is a concern very close to home for Latin American consumers.

As for North America, it is Responsible Forestry labels that are expected to make the greatest strides. Retail value sales bearing the FSC (Forest Stewardship Council) label, for example, are tipped to double, reaching a succulent US$2.3 billion in 2020.

In Poland, the only Eastern European country researched, the Charity/Sponsorship segment is predicted to experience the most dynamic growth.

The upshot is that in the modern packaged food and beverage market, products that do not bear some kind of ethical label are dying out fast. In consumers’ eyes, a company needs to legitimise profitmaking by investing a part of it in “the common good”, rather than exploiting the environment and the people solely to generate maximum returns for investors.

Ethical affiliations are rapidly becoming an integral part of brand and company image, but deciding on what route to go down, or even which label combinations to choose (since multiple ethical labels are becoming the new norm), can create a big headache for companies. And this is where Passport Ethical Labels comes in - by providing a novel and unique set of data, accompanied by up-to-date analysis, we intend to shed some more light on these turbid waters and help companies in their decision making.

[Ethical Labels Methodology]

Ethical Labels Methodology

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