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July 13, 2017

Does sustainability sell in the UK?

Consumer concern has long been a reason for food companies to take sustainability seriously. But what is the relationship between consumers and food sustainability in the UK?

Consumer concern has long been an important reason for food companies to take sustainability seriously, not only for reasons of reputational protection but increasingly for the value strong sustainability credentials can bring to a brand. In the first of a series of articles looking at the market pull for more sustainable food, Ben Cooper looks at the relationship between consumers and food sustainability in the UK, and asks whether sustainability sells.

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Numerous reasons are given by those setting out the “business case” for sustainability, such as improving efficiency, de-risking and future-proofing businesses, preserving licence to operate and reputational enhancement.

However, none is more compelling than another oft-cited factor – consumer concern. And, while heightened public concern can equate to reputational damage when companies get it wrong, the focus is steadily shifting to the value sustainability credentials can add to a brand when companies get it right.

In a recent interview with just-food, Danone CEO Emmanuel Faber says for early adopters “environmental sustainability is a clear factor of choice for a brand”, and sees this mindset filtering through to the mainstream. 

Personal health definitely “sells”, Faber, the CEO of the company behind the Activia yogurt brand adds, but, in common with others, he notes strong parallels between rising demand for healthier food and the growing importance attached to sustainability. “There is now a growing link in the mind of the consumer between the health of the planet and his or her own health. And this is where, I think, most of the sustainability topics are going to flow in the consumer’s choice for a brand.”

Faber is one of a growing number of food company CEOs advocating even greater commitment to sustainability within their sector. However, looking at the big picture can lead zealots to amplify reality, and as Faber’s remarks coincide with the launch of Danone’s new company ‘signature’ – One Planet. One Health – a little evangelical hyperbole would be understandable.

So, what is the reality? How much value do higher ethical and sustainability standards add to brands?  And to what degree are the buying habits and sensibilities of environmentally and ethically conscious consumers being adopted in the mainstream market?  In short, does sustainability sell?

Sustainable food in the UK

In the UK, the trends Faber and others have pointed to are discernible. Rising consumer demand for sustainably sourced products, labelled as such, is having a positive impact on food sustainability in the UK.

A database recently launched by research provider Euromonitor International provides a useful measure of the market for more sustainable food in the UK.

According to Euromonitor’s Passport Ethical Labels database, which tracks the value of ethical labels across numerous markets including the UK, value sales of food products bearing such labels will reach US$51.51bn in 2017, compared with $50.68bn in 2015.

The market as defined by Euromonitor is made up of three subcategories, People/Values, Animal Welfare and Environment/Sustainability. In 2016, Euromonitor estimates the three subcategories totalled $29.31bn, $29.93bn and $32.87bn respectively. They do not sum to the total as many products will fall into more than one category. All are forecast to grow over the next few years, with the strongest growth expected from the Environment/Sustainability sector which is tipped to reach $37.96bn by 2020.

The UK ranks fifth in terms of absolute market size behind the US, Japan, China and Brazil, but is still the largest market for ethically labelled foods on a per capita basis.

“In the UK, more sustainable food is where market growth is,” says Matt Loose, senior director at sustainable business consultants SustainAbility. “It’s creating stronger brands and consumer connection. It’s building more efficient operations and saving costs.”

Adding sustainability to the mix

A clear example of products with enhanced sustainability criteria outstripping mainstream growth can be seen in the dairy sector. Having launched an organic milk brand in the UK earlier this year, European dairy giant Arla Foods recently took the decision to rename the brand Arla Organic Free Range Milk. The organic milk category in the UK may only represent around 6% of the market but Stuart Ibberson, marketing director for Arla’s UK business, points out it is growing by 4% a year, while the core milk market is shrinking by about 1% a year.

While Ibberson says Arla Organic Free Range Milk is aimed at consumers looking for products with enhanced standards on animal welfare and sustainability, he believes the growth in organic milk shows numbers of such consumers are increasing.

Ibberson says sustainability has played a bigger part in his work over the last few years but emphasises that, while sustainability credentials may feature more prominently in the marketing mix than they once did, a product still has to “deliver against the key drivers of the category”. Sustainability adds a further dimension. “It isn’t as important as price or quality yet, but it’s an increasing aspect,” he says.

Growing interest in more sustainable food in the UK has prompted Arla to make more of its status as a farmer-owned cooperative, which sets it apart from other major food companies.

“It is only really in the last couple of years where we have really ramped up our communication around being a farmer-owned cooperative,” Ibberson says. “We carry our ‘Farmer Owned’ mark across all our branded products to try and promote that as much as we can because we absolutely see there being value in that for consumers.”

The new free-range claim does not signify a change in the product itself which, as organic-certified, already qualified as free range. However, the move is relevant with regard to the benefits of stressing sustainability.

While the free-range designation may seem almost tautologous to the experienced organic consumer, for those who may be less familiar with the market for higher welfare or sustainably sourced products, the extra identifier brings useful additional information and potentially adds value to the brand.

“Consumers in the UK are aware of free range as a term in eggs but what we found with research was that it wasn’t a term they fully understood from a milk perspective,” Ibberson tells just-food. “But recently activity around free range and dairy cows has created a better understanding of that term [in dairy] and that was why we were keen to communicate that organic also has those free-range credentials.”

The health and wellness parallel

Unpicking why people buy organic food has proved an inexact science to say the least but the general conclusion tends to be consumers are often drawn to organic for reasons relating both to personal health and environmental consciousness. As Emmanuel Faber’s remarks and Danone’s new company ‘signature’ underline, the same appears true for rising consumer interest in ethical and sustainable criteria generally.

“When we look at sustainable food [in the UK], some of the most critical changes we need to make are to reduce food waste, improve health and nutrition, and reduce meat consumption,” Loose says. “These areas all relate directly to core product and marketing decisions, including portioning, on-pack labelling and communication, and ingredient selection. We’re seeing encouraging signs that companies are reacting to these trends, with the pace of growth in non-meat proteins a great example. These more sustainable products might not be marketed on the basis of sustainability, but are more nutritious, better quality or more tasty than others on the market.”

A product that perhaps epitomises this indefinable connection between health and environmental motivations is the Wessanen-owned Whole Earth peanut butter brand, now the best-selling peanut butter in the UK.

While Whole Earth’s name underlines the brand’s sustainability cues, Gill Green, marketing director of the Netherlands-based Wessanen’s UK business, emphasises the importance of better-for-you attributes in taking the brand to its market leadership position. “We’re seen as being more natural and ethical than other peanut butter brands for sure, and we are, but our big sell always has been it’s no added sugar,” Green says. “The trend against sugar has really helped Whole Earth and has been one of its biggest drivers in gaining bigger consumer appeal.”

While the lack of added sugar appears key to Whole Earth’s success, there are other product attributes, such as being a rich source of non-animal protein and healthy oils and low GI, that add further to peanut butter’s appeal from a health and wellness standpoint. 

The degree to which its environmental and ethical positioning helps support the good-for-you message is hard to tell but, as Green points out, both sets of attributes will resonate with the same consumers.

“It’s a different motivation but it probably is the same person because they’re more considered in their choices,” Green says. “They don’t go for the most obvious. They go for the brands that they can associate with more easily and more readily, for whatever reason that is. If you tick more than one of their boxes you’re probably going to be their favourite rather than a choice ‘I sometimes make’.”

The trajectory of the brand in itself suggests a convergence of motivating factors is behind the brand’s success. Having been on the market for 50 years, Whole Earth only replaced Sun-Pat, rather ironically owned by natural and organic products specialist Hain Celestial, last year. Whole Earth Peanut Butter has doubled its household penetration in the last 18 months, Green adds, and is now Wessanen’s biggest selling product in the UK by retail value.

Local and fresh

Another related trend of significant relevance is the growing importance consumers attach to provenance and authenticity. In particular, heightened consumer interest in food sustainability in the UK is reflected in increasing demand for locally sourced products.  Consumers are choosing local brands, Faber says, “because they see local as a way to reclaim food sovereignty and control over the health and the environmental sustainability of the brands that they use”.

In order to buy more locally, consumers are also increasingly thinking more seasonally when it comes to fresh food, and retailers are responding, according to Joanna Parman, the retail insights lead at the UK and Ireland arm of research giant Nielsen.

“Everyone is trying to think more and more local and that in the sustainability world is becoming the bit that a lot of people are shouting about,” Parman says. “So, given fresh is the area of the store that everyone is fighting over because that drives basket spend, we’ve got more and more communication around ‘it’s British, it’s local’. People are thinking more seasonally about fruit and vegetables, and that’s starting to come into the consciousness too.” Parman expects the trend towards buying local could receive a further boost from Brexit.

UK grocer The Co-op has announced it aims to double its number of local suppliers. Simon Dryell, ranging manager at the retailer, says the innovation, traditions, quality and passion inherent in local products make them “prized and much sought after” by consumers. “We are delighted to give them pride of place in our stores. We know that food provenance really matters to our customers,” Dryell says.  Grocers like The Co-op and Waitrose have been in the vanguard of meeting heightened consumer demand for more sustainable foods and are now taking a lead on local sourcing, as buying local is increasingly seen by consumers as a proxy for food sustainability in the UK.

While UK food retailers won plaudits for their leadership in the area of sustainably and ethically certified foods, the recent decision by Sainsbury’s to launch its own “Fairly Traded” pilot programme for its own-label tea, which might eventually replace Fairtrade certification in many food products, is seen by some observers as a retrograde step.

Considered consumerism

What unites the growing demand for products with higher ethical, environmental or animal welfare standards, for healthier products or for more locally sourced foods, is the consumer. The trends all speak to the growth in considered and well-informed consumerism that is beginning to define the current age, and the key demographic in this regard is Millennials.

Research published in June by global marketing and communications specialists Edelman underlines the trend towards values-led consumerism and again shows Millennials to be the key demographic in this context.

According to the 2017 Edelman Earned Brand study, 50% of consumers across 14 countries surveyed, including the UK, consider themselves to be “belief-driven buyers” though the remaining 50% “rarely buy on belief or punish a brand if it takes a stand on a controversial issue”. The survey found the percentage of consumers buying according to their beliefs to be higher than the global average among Millennials (60%), Gen Zers (53%) and Gen Xers (51%), but lower among Baby Boomers (37%).

“There is no question that that generation (Millennials) behaves differently, and has different attitudes and expectations of brands than older generations,” says Tonia Ries, senior vice president and executive director of Edelman Square, the Edelman group’s intellectual property unit.

Millennials may be without question the key demographic but this trend is by no means focused on one age bracket, or on only highly motivated consumers. It is significant because of the influence more motivated consumerism is having on the mainstream, and the widespread expectation that awareness of sustainability issues and ethically-motivated purchasing will become a more important feature of the wider consumer market over time.  “It’s becoming increasingly relevant to all consumers,” Ibberson says, suggesting the European horsemeat scandal in 2013, in which markets including the UK became embroiled, acted as a “wake up call” for consumers and a catalyst for increased consumer scrutiny of where their food comes from and how it is produced. “I think it’s there for everybody, to varying degrees, but it’s absolutely there.”

Interestingly, the Edelman study showed the UK to be by no means among the markets where belief-driven consumerism is strongest. In fact, Edelman found the percentage of belief-driven consumers in the UK to be 37%, ranking it third-lowest of the 14 countries. While the UK had the same percentage as Germany, it was well below the US (48%), France (50%) and a number of emerging markets such as Singapore (53%), Brazil (56%), India (65%) and China (73%).

Connecting with consumers

As part of the Earned Brand work, the Edelman Brand Relationship Index aims to measure the overall strength of the relationship consumers feel with their favourite brand. This research found the strength of relationship consumers feel with food brands to be on a par with the average across all sectors.

Ries believes the research points to untapped potential for food brands to engage with consumers further on the many issues of public concern related to food production. “I think there is an untapped opportunity. I don’t think there’s any question,” Ries says. “And I think that untapped opportunity exists across categories, and I would not disagree that out of all of the categories, food has one of the highest opportunities to get it wrong and get it right.”

The influence of digital media on a brand’s communication with consumers and the consumers’ ability to find out more about brands can hardly be overstated.

However, even though brand companies are using social media extensively, not least in communicating about sustainability issues, Ries suggests brands have not fully adjusted to the less controllable two-way relationship with consumers the digital revolution has brought about. “It feels scary to brands because marketers are used to being in control and having everything be perfect,” Ries says. “And you have to have the courage to give up control, and you have to have the courage that you’re stepping into and participating in a conversation, not delivering a message.”

Looking ahead

Euromonitor International forecasts the total market for ethically and environmentally labelled food in the UK will grow between 2017 and 2020, but only by just over 4%. Given the growing interest in sustainable food in the UK, and particularly the mounting public concern over the impact of climate change, this may appear modest but there are other dynamics in play.

The period of stellar growth in ethical and environmental labelling schemes, such as Fairtrade, may have passed. Far stronger growth would have been observed in some of these schemes during the previous five to ten years.

In the long term, as sustainable practices become further embedded in the food system, and higher standards become the norm, it follows there may be less need for overt signalling to consumers, certainly by way of external labelling schemes. Eventually, food companies will prefer not to rely on kite marks to validate their sustainability values. Partnership with and endorsement by third parties will remain critical but companies will want their brand name to speak for the sustainability of their products.

The recent moves by Mondelez International and Sainsbury’s away from Fairtrade arguably speak to this trend. However, notwithstanding those recent developments, this is likely to be a relatively long-term evolution.

In the short and medium term, increasing awareness about sustainability among a broadening range of consumers will continue to fuel demand for more sustainable food in the UK, and communicating sustainability credentials at a brand level will therefore continue to grow in importance in the marketing mix.

This augurs well for further progress on food sustainability in the UK, according to Matt Loose. “We see the strengthening markets for products with a stronger sustainability story as great news,” Loose says. “It means that the business case for companies to improve performance will become stronger and stronger.”

Sustainability being a value add in a brand’s marketing fits squarely with the people-profit-planet paradigm. 

As a means of boosting sales, increasing market share and building brand loyalty, it ties in with the imperative for economic sustainability – the profit pillar in the sustainability trinity – as much as it does the people or planet elements.

Just like maximising resources or ensuring the long-term viability of supply chains, meeting consumer demand for sustainably produced food – and as required providing information to consumers about the practices behind the brand – is simply good for business. 

Related Companies

Free Report
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What are the key consumer trends driving FMCG in 2022?

The consumer landscape has permanently changed since the COVID-19 pandemic began, prompting trends to emerge or accelerate, causing subsequent macro-economic shifts. In order to stay relevant, Consumer Packaged Goods companies must stay abreast of these developments. It is here that GlobalData can offer valuable assistance. Download GlobalData’s Trendsights: Trends to Watch in 2022 report to:
  • Gain insight into the 12 most important trends across the FMCG value chain
  • See the consumer survey data that underpins these insights
  • Learn what early-movers are already doing in terms of NPD and product marketing
Take a look at this report to give yourself the best standing in this developing market.
by GlobalData
Enter your details here to receive your free Report.

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