|By Marketwired .||
|June 12, 2014 12:01 AM EDT||
AMSTERDAM, THE NETHERLANDS -- (Marketwired) -- 06/12/14 -- What was once a niche has now become mainstream. Ever since "green" products arose in the 1970s, they've been dismissed by grocery executives as too expensive or low quality to interest most buyers. But a new report from The Boston Consulting Group, When Social Responsibility Leads to Growth: An Imperative for Consumer Companies to Go Green, suggests it's time for a reevaluation.
"Responsible consumption" (RC) products now account for at least 15 percent of all grocery sales -- or a $400 billion global market. Three-quarters of consumers in the most developed countries say they buy RC products at least occasionally. In the otherwise stagnant grocery sector, two-thirds of total growth in recent years has come from RC products.
Even with a price premium that remains higher than conventional offerings, sales of RC products are growing because quality has improved and concerns about chemicals have increased. The report lays out the most RC-product claims now available -- labels that address organic, natural, social, and fair-trade criteria. Even long-established claims, such as organic, continue to expand into new product categories and drive substantial growth.
Most of this growth, however, has gone to RC specialty brands such as Seventh Generation and retailer private labels such as Carrefour Bio. For major consumer brands -- referred to in the report as A brands -- growth of products making organic or natural claims was just 1.3 percent, compared with 4.3 percent for private label and 12.5 percent for specialty. The research suggests that many A brands have either ignored the trend or offered unconvincing product extensions that have failed to win consumer trust.
"Missing out on the RC trend will jeopardize not just an A brand's future growth," said Marty Smits, a BCG partner and coauthor of the report. "It might also undermine existing brand loyalty as consumers begin to see RC criteria as part of grocery quality in general."
The Opportunity for Conventional Brands
Smits and his coauthors argue that A brand manufacturers can succeed with RC products. After all, these companies start with substantial distribution advantages. "But they need outside certification of their claims if they're going to convince wary consumers," said Dan Wald, a BCG partner and coauthor of the report.
They can do that with a new brand, as Clorox did with Green Works, or by acquiring an existing specialty brand, as Unilever did with Ben & Jerry's. A more ambitious but also successful approach involves embracing an RC claim across the entire portfolio, as Starbucks has done with fair-trade coffee.
The greatest opportunity for manufacturers of A brands is in categories with high expectations for quality, such as coffee. Conventional A brands are still gaining some growth here, and adding a certified RC claim would allow them to capture a higher price premium as well.
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