|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.
About The Boston Consulting Group
The Boston Consulting Group (BCG) is a global management consulting firm and the world's leading advisor on business strategy. We partner with clients from the private, public, and not-for-profit sectors in all regions to identify their highest-value opportunities, address their most critical challenges, and transform their enterprises. Our customized approach combines deep insight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable competitive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 81 offices in 45 countries. For more information, please visit bcg.com.
Bcgperspectives.com features the latest thinking from BCG experts as well as from CEOs, academics, and other leaders. It covers issues at the top of senior management's agenda. It also provides unprecedented access to BCG's extensive archive of thought leadership stretching back 50 years to the days of Bruce Henderson, the firm's founder and one of the architects of modern management consulting. All of our content -- including videos, podcasts, commentaries, and reports -- can be accessed by PC, mobile, iPad, Facebook, Twitter and LinkedIn.
About BCG's Center for Consumer and Customer Insight
The Boston Consulting Group's Center for Consumer and Customer Insight (CCCI) applies a unique, integrated approach that combines quantitative and qualitative consumer research with a deep understanding of business strategy and competitive dynamics. The center works closely with BCG's various practices to translate its insights into actionable strategies that lead to tangible economic impact for our clients. In the course of its work, the center has amassed a rich set of proprietary data on consumers from around the world, in both emerging and developed markets. The CCCI is sponsored by BCG's Marketing and Sales and Global Advantage practices. For more information, please visit www.bcg.com/expertise_impact/capabilities/center_consumer_customer_insight.
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Growth is not optional. It disproportionately drives shareholder returns, and it attracts and motivates talent. But achieving value-creating growth, while possible in any industry, is rarely easy. BCG's Winning with Growth initiative brings together leading experts on corporate strategy, innovation, globalization, M&A, business model innovation, marketing and sales, and organization to help clients chart their unique paths to value-creating growth. This publication is a product of that collaboration.
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