We have already seen how spending habits are changing. But how can brands use affordable, high-quality products to leverage the value-action gap and give shoppers a reason to buy?
As we have already stated Eco Actives still make up 18% of the population and spend $376 billion annually on FMCG products, making them both sizeable in population terms and significant spenders.
They have shown themselves to be open to innovative formats – from leading the early adoption of refills, to continuing to champion start-ups and local brands with planet and people positive messaging. This makes them an exciting group to pitch new concepts and brands to; and many of the sectors they disproportionately support, such as plant-based products, have seen great growth.
Within every market we see strong representation for smaller brands, BCorps and independent start-ups, demonstrating that Eco Actives can be adventurous and open to new brands when seeking green benefits.
We found last year that the brands most strongly appealing to Eco Actives showed the strongest growth. But the landscape has become more challenging for some of the larger brands who have previously performed well with Eco Actives. Now, as new entrants join the space, shoppers are no longer convinced by the value equation these larger brands offer in the context of tightening budgets. This can provide us with some watchouts, as well as inspiration for our future growth strategies.
In Great Britain, the top 20 performing brands amongst Eco Actives come at a cost, with an average price premium in their category of 175 index compared to the average. Our analysis has found that FMCG brands with price points more than 10% above the average in their category see market share decline, indicating that the premium market is a challenging arena to play in.
Another reason for tougher sales for leading sustainable brands is increased competition. Dairy alternative producer Alpro, for example, saw strong growth last year. But this year growth has stalled, and sales are declining. The level of competition within dairy alternatives has expanded significantly with Tesco online (the largest online FMCG retailer in GB) stocking over different products from nearly 20 brands. This extra choice has helped the category grow from 62.1% penetration in 2021 to 65.6% in 2022, meaning two thirds of British shoppers are now buying dairy alternatives every year.
But dairy alternatives aren’t the only arena in which competition is booming. In a similar vein, brands such as Ecover and Method which helped create and develop the Eco cleaning sector in GB must now contend with a huge range of smaller brands and even Private Label Eco lines.
This shows that the sustainability sector in FMCG is a vibrant space full of new brands and an area where retailers are willing to take a chance with stocking smaller start-ups to expanding their offer in this area. The next wave of innovation needs to look at affordability and products that save money.
What sustainability concerns are impacting Eco Active purchasing?
Motivators for people to become more conscious in their consumption habits are diverse.
Local food is popular with shoppers across the world, with 44% of the global population frequently choosing products marketed as locally sourced or produced.
Across different continents, we see varying levels of engagement with 41% in Europe, 42% in Latin America and rising to 63% in Asia. When we ask what is driving this, respondents say that their primary motivation is to support local farmers and fishermen (62% highlighting), and this was especially high in Europe (72%). The next highest reason was for better quality taste (54%), and this was the most important point for Asian buyers.
Local brands resonate well with Eco Actives and they tend to over index with this audience segment. An interesting case is the Spanish brand Ecocesta, which has reached 6.1% penetration (and 10.6% with Eco Actives) and is growing at 22% in value year on year. With the slogan ‘Democratising organic food’ it has a mission to make locally sourced food available and affordable for a wide audience.
The second most significant purchase consideration is natural products. Personal care items (cosmetics and hygiene products etc.) and home care products (laundry detergents and cleaning products etc.) branded as containing natural ingredients are an overwhelmingly popular arena for Eco Actives to assert their buying preferences.
Globally, around one third of shoppers choose natural personal and home care products, but this rises to over half (56% for personal care, 54% for home care) for Eco Actives. France and Mainland China have the strongest affinity with natural products with >40% choosing this option frequently for both homecare and personal care in France, and >50% in Mainland China.
But what does this mean for brands? And how do other shoppers feel about greener home and personal care products?
The Health/ Environment formula
We have seen how there is real appetite amongst shoppers for more sustainable options. Natural and Eco homecare is well-established across Europe and is establishing itself more in Latin America in recent years, and natural personal care products are also a staple across the world. Natura is a key brand that over indexes with Eco Actives in multiple Latin American markets and in Mainland China one of the standout brands was Darlie which is positioned around its use of traditional herbal ingredients.
Amongst people who frequently buy natural products, health benefits, environmental impact and taste or quality are the most common reasons to purchase. And nearly half (46%) of shoppers choosing these products cite both health benefits and environmental impact as motivators. Whether developing new products to meet these two considerations, or re-positioning existing products, the potential for brands to grow their revenue and market share is clear.
However, the real sweet spot is if businesses can capitalise on the combination of environmentally sustainable products that provide tangible health benefits and that are also considered to do the job better than a non-natural brand.
The reality is that most brands are not doing this now, with only 19% of those that choose natural products saying that they ‘do a better job’ than less sustainable options. This rises to 38% for natural personal care. Eco Actives are more likely to think that natural personal care is better quality with 46% selecting this. Asian shoppers also show a high affinity for natural ingredients (62% of those choosing frequently think its better quality).
The importance of combining health, environment and quality is not just a key point for beauty and homecare. One brand seeing strong growth in France is the tea brand Clipper. It is bought by 9.5% of French shoppers and 13.1% of Eco Actives and is growing 12.5% year on year in value.
Clipper’s slogan is ‘Natural, Fair and Delicious’, and its fully recyclable or compostable packaging means it ticks many of the boxes for sustainable shoppers.
Polarised by plant-based products
Shoppers across the world are turning to plant-based products, with 18% of the global population frequently choosing meat and dairy substitutes. And the emerging interest in the sector is seen by growing sales figures across Mainland China, The Netherlands, Peru, Spain, and The Philippines. But how do brand strategies differ across these markets in encouraging shoppers to choose sustainable, plant-based alternatives?
In Spain, where nearly 19% of the population choose plant-based products, shoppers’ sustainability considerations focus on positive health implications and animal welfare concerns. Barcelona-based B-corp, Heura, is a prime example of this, with the brand reaching 2.9% market penetration. Heura’s meat alternatives place emphasis on the brand’s Mediterranean heritage and its commitment to creating healthy, easy-to-cook plant-based products.
Cost is another significant consideration in consumers choosing meat alternatives, with good quality plant-based products often coming at a premium. But in The Philippines, shoppers say that plant-based meals are not only tastier but also more affordable. Veega, an emerging brand in this market, has found success by tailoring products to the Filipino palate and manufacturing the products locally.
This presents a lucrative opportunity for brands to diversify product ranges to meet this demand – great tasting, reasonably-priced plant-based products. But while demand is growing, there is also significant pushback against meat alternatives. In contrast to all other sustainability concerns, plant-based alternatives also have the highest percentage (29%) of people globally stating they do not plan to buy these products.
Countries with strong meat industries have presented a particular resistance to these sustainable alternatives, with rejection levels of 61% in France and 50% in Chile. With more investment in meat products, there are fewer options available on the supermarket shelf for shoppers in these countries to try. Amongst those that choose plant-based products, only 20% actually say they make tastier meals so the unwillingness to sacrifice taste for health or the environment is likely to be another factor.
To tap into this appetite and unlock revenue, brands must consider how they position their products as seen to be tastier than traditional meat products.
Rather than asking shoppers to compromise on lower-quality, more expensive alternatives, successful brands such as Heura and Veega are meeting consumer desires to have more choice of products that are perceived as tastier and can be bought at cheaper prices. But how else can brands do more in helping consumers make greener choices?
Making sustainable choices easy, rewarding, and meaningful
Encouraging shoppers to choose sustainable products requires investment by brands to make these choices easy, rewarding, and meaningful.
Refillable products are a key case study for understanding the importance of removing access barriers to sustainable choices. In GB, 49% of people occasionally choose to use refills, meaning there is significant desire amongst shoppers to try a more sustainable option. But those who frequently use refills only make up 18% of the population.
Finding refillable brands can prove a challenge as shoppers will often need to buy online from a specialist retailer, or choose a larger, more well-stocked store. If buying refills is not easy, shoppers will not be inclined to choose them. This is evident in household cleaning refills in GB where only 2.5% of the population are purchasing refills. While this figure is up from 2.4% in 2021, it is clear that growth is flattening in this space.
There are also significant price discrepancies between refills and more traditional products. Taking liquid soaps as an example, while the price per-litre is often lower for refills than traditional products, brands are using deep price promotion on smaller quantities to make it more economic to stock up on multiples.
To truly change consumer behaviour, brands must ensure greener choices gives shoppers a sense of reward. Currently, recyclable PET containers are often swapped with non-recyclable soft plastic for refills and even with other recyclable formats shoppers only save 20-75% of plastic compared to recycling traditional products. Convincing shoppers to frequently purchase refills relies on creating a tangible reward in terms of a significant plastic reduction that has a positive environmental impact.
This is also an area we could see rapid change as new formulas emerge. One brand growing fast using a refill format is Godreij Protekt Mr Magic from India grew from 8.2% to 9.4% penetration in 2022 despite the Hand & Body wash category declining post-Covid.
We also see plastic free refill brands with competitive price points starting to pop up in Latin America such as YVY in Brazil who make homecare products in a capsule format. Many are currently using a straight-to-shopper subscription model which enables brands to reach their audience directly and bypass retailer gatekeepers. We can expect to see more of these brands on shelves in the future where they could be taking share from more traditional cleaning brands.
Evolving environmental concerns
As outlined earlier, after local and natural ingredients, packaging and plastic use are also significant purchase considerations, with 25% of shoppers choosing refillable products over single-use plastic, and 23% choosing products made from recycled plastics.
And we see that packaging made from recycled materials is becoming more mainstream with 73% of people claiming to occasionally buy products with recycled packaging.
Bottled water is one market where we see sustainable packaging labelled prominently. In the US the most common benefit shoppers looked for was ‘recyclable plastic’ with 46% actively seeking this on labels. Bottles ‘made-from recycled plastic’ was a close second with 40% of shoppers keeping an eye out for this benefit.
In previous years we saw a larger gap between the two needs, showing an increased need for a more circular supply chain is becoming more widespread among shoppers.
The carbon consideration
Carbon Neutral is another emerging area for sustainable brands. This year 11% of people frequently bought products with reduced carbon footprint labels (a similar level to last year), with Eco Actives 5x more likely to buy these products than Eco Dismissers.
Eco Actives in the US were the most engaged in this area with 42% frequently looking for Carbon Neutral products. One brand performing well in this space with Eco Actives, and the market overall, was vegan food brand Cauldron from GB who are growing 4% year on year. They brand products with ‘Carbon Neutral’ claims on their packaging – a helpful tool to stand out from other meat alternatives in an increasingly competitive market.
So, why are we not seeing faster growth in this space considering climate change is the most common environmental concern? Availability and education. Only 25% of shoppers have ever seen ‘Carbon Neutral’ products on the supermarket shelves. In Brazil, this figure reaches 67%.
Typically, brands claim carbon neutrality through a combination of reducing energy in their production and carbon offsetting. But the transparency of how offsetting schemes work are often unclear and shoppers cannot know how effective the scheme is. While there are a number of industry-wide labelling schemes in development right now, carbon neutral claims are still relatively unseen in FMCG, and adopting them could help set your brand apart with Eco Actives (if you can back the claims up, of course.)
