For years, brand managers have groused that while consumers say they intend to buy sustainable products, in a store they don’t actually purchase them.
NYU Stern’s Center for Sustainable Business just completed extensive research into U.S. consumers’ actual purchasing of consumer packaged goods, or CPG, using data contributed by IRI, and found that 50% of CPG growth from 2013 to 2018 came from sustainability-marketed products. Products with a sustainability claim on the packaging accounted for 16.6% of the market in 2018, up from 14.3% in 2013, and delivered nearly $114 billion in sales, up 29% from 2013. Products marketed as sustainable grew 5.6 times faster than those that were not.
What do these findings mean for corporate managers and investors?
Consumers are voting with their dollars — against unsustainable brands. The legacy companies that will thrive are those that accept this shift and are willing to pivot, such as PepsiCo and Unilever. CPGs that are not making the pivot will lose — Kraft Heinz, whose investors have encouraged a cost-cutting approach that is backfiring, is a case in point. Given the evidence that consumer tastes are changing, an attitude of “Why mess with a recipe that has worked well over the last 40 years?” is the wrong one to take.
Some of the necessary transformation can be accomplished by reinventing legacy products, as Unilever has shown with its “sustainable living” brands, now delivering 70% of its turnover growth.
Corporate leadership should no longer give brand managers a pass when they claim that there is no demand for sustainable products. And investors should support companies in making the investments needed for the pivot.
(Tensie Whelan is a professor at NYU Stern School of Business and founding director of the NYU Stern Center for Sustainable Business, where Randi Kronthal-Sacco is a senior scholar.)