Big Brands Losing 'Responsible Consumption' Sales

Looks like consumers want more socially responsible products, and they want them now: These rapidly growing products accounted for two-thirds of all sales gains in grocery categories last year. And while most major marketers court the “responsible consumption” market at least halfheartedly, new research from the Boston Consulting Group shows that consumers still find niche brands such as Seventh Generation and Earth’s Best more trustworthy. 

The study finds that these “RC” sales hit $17 billion in the U.S. last year -- about 15% of the total $113 billion spent in the 20 product categories the consulting company measured. And BCG estimates the size of the total market at $120 billion, with sales increasing 9% per year, despite their higher prices. (On average, companies charge between 20 and 25% more than conventional products.) And in some categories, these products dominate, including the highest percentage of total sales in baby food (35%); cold cereal (33%); yogurt (29%) and snack bars (25%.)

But for major consumer brands, growth of products making organic or natural claims was just 1.3%, compared with 4.3% for private label and 12.5% for niche brands. “Most major brands have yet to recognize this opportunity and are ceding crucial market share to specialty brands such as Aveda and Simple Green, and retailer private labels such as Wal-Mart's Wild Oats,” the report says.

The report notes there are plenty of exceptions, with “A” level companies using such tactics as acquisition, like Unilever’s purchase of Ben & Jerry’s; starting new lines, such as Clorox's Green Works, a natural cleaning products line that now has half the sales of Clorox's main product lines, or even embracing product claims across the entire portfolio, in the way that Starbucks now uses only fair-trade certified coffee. 

But most larger companies choose not to compete at all -- and if they do, are viewed with consumer skepticism. “Missing out on the RC trend will jeopardize not just an ‘A’ brand’s future growth,” writes 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 list of RC-product claims has grown beyond simple claims of what is natural or organic, and now covers things like the inclusion of GMOs, social and fair-trade practices. But even long-established claims, such as organic, continue to drive growth. Partnering with outside organizations that can vouch for product claims continues to be one of the most effective ways to overcome consumer doubt.

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