A Consumer Perspective on Sustainability

:
A look at LOHAS Consumers on both sides of the Atlantic Diane Ray & Gwynne Rogers Natural Marketing Institute

OVERVIEW

• • • • •

Where does sustainability fit in overall trends? Who are the consumers that care about sustainability? How are European and U.S. consumers similar and different? How is sustainability manifesting itself in new product launches? How do you use this to create & evaluate opportunities in USA & Europe?

© 2008, Natural Marketing Institute Source: LOHAS Consumer Trends Database™

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NMI’s Top Trends for 2008 1. The Dual Society 2. Generation Zzzzzz 3. STOP – I Want Off! 4. Dr. Me 5. The Culture of Sustainability 6. Golden Opportunities 7. The New Immunity 8. Giving is the New Taking

Trends directly related to Sustainability!

© 2008, Natural Marketing Institute Source: LOHAS Consumer Trends Database™

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Giving is the New Taking

• Volunteerism, activism and participation in the non-profit sector are growing rapidly as consumers discover the emotional rewards of giving, rather than taking. To meet the challenge, corporations are engaging in CSR 2.0 in order to maintain brand allegiance, retain their workforce, and manage their stakeholders, among other activities.

• Countertrend: Premiumization, the height of New Luxury, continues to evolve in strong contrast to a more values based, philanthropic culture. At times, premium brands are even co-opting ‘green values.’
© 2008, Natural Marketing Institute Source: LOHAS Consumer Trends Database™ 4

The General Population Is Socially Conscious
(% consumers who completely/somewhat agree..)

87% care about CHILDREN’S ISSUES such as child abuse and child labor

70% agree: “I care about social consciousness”

66% care about BUILDING A SENSE OF COMMUNITY WHERE THEY LIVE

83% care about PROTECTING WORKER’S RIGHTS

82% care about SUPPORTING MILITARY TROOPS

81% care about WOMEN’S ISSUES such as equal pay for equal work
© 2008, Natural Marketing Institute Source: LOHAS Consumer Trends Database™
Source: NMI’s 2007 LOHAS Trends Database™

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Activism Takes Other Forms, And Has Increased Year Over Year
(Numbers in parentheses indicate % change since 2005)

The General Population reports that they regularly do the following:
 30% boycott a brand or company that has practices they don’t like (+5.1%)
 21% encourage their elected officials to pass

laws to protect the environment (+5.7%)
 11% volunteer to clean up parks, trails and

neighborhoods (+2.7%)

© 2008, Natural Marketing Institute Source: LOHAS Consumer Trends Database™

Source: NMI’s 2007 LOHAS Trends Database™

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Financial Support of Organizations or Causes Is Important
(% consumers who donated money to an organization in the past year)

Two-thirds of the GP donated money to an organization or cause during the past year
% of GP donating
Civic-oriented groups (e.g., Salvation Army)

27% 23% 21% 18% 15% 12% 9% 8%

Did not donate, 37%

Medical research groups (e.g., American Cancer Society)

Donated money, 63%

Religious-based groups (e.g., Catholic Charities) Relief agencies (e.g., American Red Cross) Animal rights groups Children’s organizations Wildlife charities Political parties

© 2008, Natural Marketing Institute Source: LOHAS Consumer Trends Database™

Source: NMI’s 2007 LOHAS Trends Database™

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And Yet Premium Prevails Explosion of Green Luxury
(% consumers who completely/somewhat agree....)

Countertrend

I do not want to sacrifice anything when buying environmentally friendly products (38%)

When I want to treat myself, I buy myself something special (56%)

I would be more interested in environmentally-friendly products if they were from premium or specialty brands (22%)
© 2008, Natural Marketing Institute Source: LOHAS Consumer Trends Database™
Source: NMI’s 2007 LOHAS Trends Database™

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NEWS FLASH: June 4, 2008
• A strict new environmental law that was fought by soap industry officials may be the best thing that's ever happened to Palmolive's dishwasher detergent. • By the end of the month, Palmolive Eco liquid detergent will dominate store shelves because it beat all major producers to market with a product that complies with a July 1 restriction sharply limiting the use of phosphates in detergents. • "They're taking the step to make their product more environmentally friendly," said Rick Eichstaedt, a local attorney active in efforts to improve water quality in the Spokane River. "They should be applauded for doing that." • Still, the ban, which industry officials say is the strictest in the nation, will eliminate low-cost options and the most popular detergent brands. Gone from Spokane County shelves will be Cascade, Electrasol and Sun Light until those brands come up with products that comply with the law. Distributors say they haven't been given an indication when those products will return.
© 2008, Natural Marketing Institute Source: LOHAS Consumer Trends Database™ 9

CHALLENGE

• Since causes, donations, activism and corporate social responsibility all play a role in consumers’ decision to buy or boycott – where are your strengths? Vulnerabilities? Where will your company and your products fit? What space will you carve out for yourself? • Since both the trend/countertrend are occurring (giving and premiumization) there is a lot of open space within which to align your products/brand. The challenge is to select the right space!

© 2008, Natural Marketing Institute Source: LOHAS Consumer Trends Database™

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NMI’s Top Trends for 2008 1. The Dual Society 2. Generation Zzzzzz 3. STOP – I Want Off! 4. Dr. Me 5. The Culture of Sustainability 6. Golden Opportunities 7. The New Immunity 8. Giving is the New Taking

Trends directly related to Sustainability!

© 2008, Natural Marketing Institute Source: LOHAS Consumer Trends Database™

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The Culture of Sustainability
• It’s not a matter of whether we will run out of natural resources – it’s a matter of when. Sustainability will become the most significant social movement of our time. It will permeate every aspect of consumers’ lifestyles, business infrastructures, and other societal constituencies.

• Countertrend: Consumers are overwhelmed with many sustainability initiatives, with significant ‘green washing’ fall-out expected as consumers learn to discern its true meaning (and impact).
© 2008, Natural Marketing Institute Source: LOHAS Consumer Trends Database™ 12

Sustainability Takes Root

► 60% of Americans state they are becoming increasingly concerned about protecting the environment and the ecological problems in the U.S. ► And 43% of Americans state they are actually doing something new with regard to protecting the environment ► Almost 50% of Americans state that the U.S. government should spend more time and money on U.S. environmental issues rather than troops in Iraq ► 47% of Americans believe they can personally affect global warming

© 2008, Natural Marketing Institute Source: LOHAS Consumer Trends Database™

Source: HBI Omnibus, October 2007

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LOHAS Consumers (as defined) Serve as Market Predictors

New LOHAS Products
•Organic pet food •Green dry cleaning •Natural toys •Sustainable Furniture •Carbon offsets •Green banking •Organic clothing •Many others…

Mainstreaming
Awareness Trial Adoption Loyalty Influence
•Energy-efficient appliances •Organic food/beverages •Air purifiers

LOHAS

NATURALITES CONVENTIONALS DRIFTERS

© 2008, Natural Marketing Institute Source: LOHAS Consumer Trends Database™

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CHALLENGE

• How to best connect with LOHAS consumers as they tend to be early adopters AND influencers? SO….. Who are the LOHAS consumers really? How can we better understand their motivations, behavior, influence?

© 2008, Natural Marketing Institute Source: LOHAS Consumer Trends Database™

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Data Source: NMI’s LOHAS Consumer Trends Database™
• Database is the only consumer research to identify LOHAS consumer attitudes, behavior, and product/ service usage patterns across sustainability, corporate social responsibility, environmentalism, social issues, and much more United States • Currently 6 years of U.S. data: 2002 – 2007 inclusive • Annual quantitative research among 2,000+ general population adults • Nationally projectable to adult 18+ population; margin of error +/- 2% Europe • 1st annual European study in 2007 conducted in partnership with Porter Novelli • Approximately 2,000 households in each in the following countries: Belgium, France, Germany, Italy, the Netherlands, Portugal, Spain, UK • Nationally projectable to adult 18+ population in each country; margin of error +/- 2%
© 2008, Natural Marketing Institute Source: LOHAS Consumer Trends Database™ 16

Cultural Differences Affect Consumer Research Data

• In a cross-cultural survey, respondents can not be compared directly: – Construct – whether concepts have the same meaning in different countries (e.g., brand loyalty, opinion leadership) – Functional - whether a given concept or behavior serves the same role or function in different countries – Metric – how respondents use rating scales; driven by response style: • Social Desirability - tendency for respondents to give answers that are socially desirable or acceptable • Extreme Response Style - tendency for respondents to use only the extreme response categories of a scale • Acquiescence - respondents tending to agree with whatever is presented to them – Linguistic - the development of equivalent language in the survey

© 2008, Natural Marketing Institute

Source: Bloomerce Source: LOHAS Consumer Trends Database™

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Impact on European LOHAS Survey

• Portuguese, Spanish, and Italian responses are generally high across the board • Dutch, German, and UK responses are generally muted • Consequently, cross-country comparisons need to be made with some caution, and with an understanding of the cultural biases that respondents bring with them to the survey – There is not a quantitative way to adjust for cultural differences in the 8 countries surveyed

© 2008, Natural Marketing Institute Source: LOHAS Consumer Trends Database™

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Introduction to the LOHAS Segments (Lifestyles of Health and Sustainability)
(% of U.S. general population adults…)

LOHAS 19% Not on radar UNCONCERNED 17% Environmental stewards

CONVENTIONALS 19% Cautious actors DRIFTERS 25% Good intentions; trend-oriented
© 2008, Natural Marketing Institute Source: LOHAS Consumer Trends Database™ 19

NATURALITES 19% Health motivated

The LOHAS Consumer
LOHAS 19%

A trend predictor Personal health + planetary health Values driven Price insensitive High influence on others Highest green buyers Information junkies Eco-lifestyle CSR seekers (and boycotters)

40 million consumers (US)

© 2008, Natural Marketing Institute Source: LOHAS Consumer Trends Database™

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NATURALITES

NATURALITES 19%

Driven by personal health and wellness High purchase of ecoconsumables Healthy lifestyle Want to do more for the environment Credible CSR affects loyalty Attractive target for many

40 million consumers (US)

© 2008, Natural Marketing Institute Source: LOHAS Consumer Trends Database™

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DRIFTERS

DRIFTERS 25%

Attitudinally predisposed to green, but behaviors not deeplyrooted Driven more by trends Limited sense of eco-immediacy Price sensitive More likely to be eco-concerned, but only if it affects them Lower green buyers, but like to be “seen” in Whole Foods

45 million consumers (US)

© 2008, Natural Marketing Institute Source: LOHAS Consumer Trends Database™

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CONVENTIONALS

CONVENTIONALS 19%

Rooted in practicality “Municipal” behaviors, including recycling and energy conservation Driven more by cost savings, rather than environment Eco-benefits are secondary

40 million consumers(US)

© 2008, Natural Marketing Institute Source: LOHAS Consumer Trends Database™

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European LOHAS Segment Sizes Compared to US
(% of population…)

Belgium • Highest LOHAS – 24%

18%

17% 19%

Portugal High LOHAS – 21%

22%

France Highest NATURL’S – 27% Low LOHAS– 15%

18%

25%

UK Low LOHAS – 15%

24%

19%

18% Europe

19% U.S.

Spain High LOHAS – 20%

UNCONCERNEDS CONVENTIONALS DRIFTERS NATURALITES LOHAS
© 2008, Natural Marketing Institute Source: LOHAS Consumer Trends Database™ 24

Correlation Variations in LOHAS Segment Membership Across Countries U.K. France Germany Italy Spain
•Willingness to pay 20% more for products which are made in an environmentally-friendly and sustainable way •Importance of personal care being earth-friendly •I will choose those products and services that are environmentally friendly •Importance of foods/beverages organically grown •I try to teach family and friends about the benefits of purchasing environmentally-friendly products •Importance of personal care products being earth-friendly •I will choose those products and services that are environmentally friendly •I try to teach family and friends about the benefits of purchasing environmentally-friendly products •I would like to learn about how I can become more involved in protecting the environment •I try to teach family and friends about the benefits of purchasing environmentally-friendly products
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© 2008, Natural Marketing Institute Source: LOHAS Consumer Trends Database™

Largest Cross-Continental Differences are Evident in NATURALITES and CONVENTIONALS
Attitude Axis

U.S. Total Europe Total LOHAS NATURALITES DRIFTERS CONVENTIONALS UNCONCERNEDS

Passionate Concern

Action Axis

Inaction

Committed Advocacy

© 2008, Natural Marketing Institute Source: LOHAS Consumer Trends Database™

Opposed or Uncaring

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Major Differences Between the U.S. and Europe U.S. Europe
Twice as likely 36% more likely 35% more likely

Buy “green” products (average across numerous categories) Motivated to buy products with certificate/seal indicating product is environmentally-friendly Influence friends/family

25% more likely

Willing to pay 20% more for ecofriendly products Recycle paper products

25% more likely 25% more likely
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Aside from making money, it is most important for companies to be sensitive to their environmental impact
© 2008, Natural Marketing Institute Source: LOHAS Consumer Trends Database™

Similarities Between US and Europe
U.S. Europe

58% 51% 52% 34% 13%

Environmental-friendliness of companies - increases purchase likelihood Interest in learning more about how to protect the environment Interest in government funding for energy efficient products Purchase compact fluorescent light bulbs Belief that, after profitability, it is most important for companies to support the communities in which they work
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58% 55% 54% 34% 15%

© 2008, Natural Marketing Institute Source: LOHAS Consumer Trends Database™

Within Europe, Individual Country Populations are also Dynamic
United Kingdom • Particularly reluctant to pay a premium for environmentally-friendly products • Less likely to use natural/organic personal care and natural feminine hygiene products Spain • Find it more important for companies to support the communities in which they work • Unlikely to use natural garden products, CFLs, and renewable power Italy • The most willing to spend 20% more for green products • The most likely to own a hybrid and CFLs France • Second only to Belgium in usage of natural lawn & garden products • Second to Portugal in the number of consumers who’ve changed their behavior to minimize their impact on global warming • The least likely to use vegetarian foods, and foods with a specific health claim • The least likely to belong to a fitness center/gym
© 2008, Natural Marketing Institute Source: LOHAS Consumer Trends Database™ 29

Italians Least Price Sensitive for LOHAS; UK and Germany Most
(Q. 3gg, 53a -% General Population by country agreeing completely/somewhat with…)

“I am willing to pay 20% more for products which are made in an environmentally friendly and sustainable way”
41% 29% 22% 14% UK Spain France 16% Germany Italy

“Organic foods are worth paying an extra 20% for”
26% 17% UK Spain 15% France 20% Germany Italy 33%

© 2008, Natural Marketing Institute Source: LOHAS Consumer Trends Database™

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LOHAS Consumers Most Motivated by Certification
(Q. 3ll-% NMI segments indicating they agree strongly/moderately with the statement “A seal or certification mark indicating a product is environmentally-friendly increases the likelihood I will buy it”)

GP

45%

11%

LOHAS (A)

58%BCDE

26%BCDE

NATURALITES (B)

53%CDE

10% CDE

DRIFTERS (C)

38%E

7%E

CONVENTIONALS(D)

47%CE

8%E

UNCONCERNEDS(E)

28%

3%

Moderately agree
© 2008, Natural Marketing Institute Source: LOHAS Consumer Trends Database™

Strongly agree
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Fair-trade Certified Products

The Inca Inchi Night Cream displays the Max Havelaar logo that guarantees that Fair Trade ingredients have been used. The product is also Cosmebio and Ecocert certified, which guarantees that the product is formulated with at least 95% natural ingredients, mainly obtained from organic agriculture, that the production methods respect health and the environment, and that the product was not tested on animals.

Traidcraft has extended its range to include Fair Trade Tissues. All paper is 100% recycled and retails at a competitive price.

© 2008, Natural Marketing Institute Source: LOHAS Consumer Trends Database™ Source Mintel’s Global New Product Database

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European Consumers Evangelize LOHAS-oriented purchasing
(Q. 32a-% NMI segments agreeing completely/somewhat with “I try to teach family and friends about the benefits of purchasing environmentally-friendly products”)

Total LOHAS

34% 46% 71% 79% 34% 48% 27% 33% 22% 49% 16% 17% Europe US
European CONVENTIONALS are much more likely to educate others about environmentally-friendly purchasing than US CONVENTIONALS

NATURALITES DRIFTERS CONVENTIONALS

UNCONCERNED

© 2008, Natural Marketing Institute Source: LOHAS Consumer Trends Database™

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Consumers in European Countries Report Changing Behavior
(Q. 3kk-% total country consumers indicating level of agreement with “I have personally changed my behavior to minimize my effect on global warming”)
Agree completely/somewhat Disagree completely/somewhat 42%

68% 51% 52% 43% 31% 58%

French consumers are most likely to report behavior change in response to global warming
9%

11% 22% 17% 17% 18% 27%

US

Total Europe

UK

Spain

France

Germany

Italy

© 2008, Natural Marketing Institute Source: LOHAS Consumer Trends Database™

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CHALLENGE

• Consumers are interested in the topic of sustainability – they believe it affects them, their families, the future • Consumers are willing to take action • Some Consumers are willing to pay “more” for products that help/don’t hurt the environment • Certifications/Authenticity is important – don’t #@% me! What can you, your products, your brands, be doing to create real actions, supported/endorsed by real agencies, to make a real difference?
© 2008, Natural Marketing Institute Source: LOHAS Consumer Trends Database™ 35

Consumers Expect Companies to Show Socially Responsible Behavior
(Q. 8)

NMI segments indicating it is very important for companies to be socially responsible)

(Q. 3ee) NMI segments indicating it knowing that a company is mindful of its impact on the environment an society makes them more likely to buy its product
58%

52% 76% BCDE 59% CDE 40% E 48% CE 32% Total EU DRIFTERS LOHAS CONVENTIONALS NATURALITES UNCONCERNEDS
33%

86%BCDE 63%CDE 49%E 59%CE

Higher in Italy, France
© 2008, Natural Marketing Institute Source: LOHAS Consumer Trends Database™ 36

Local, Small is Favored by Certain Consumers

37% 39% It is more important to buy local than buy organic 37% 39%C 60% 53% 35% When a product says that it is organic, I am more likely to believe a small company than a large corporation 42% 51% 48% 45% 48%

US General Population EU General Population LOHAS (A) NATURALITES (B) U.K. (F) France (G)

© 2008, Natural Marketing Institute Source: LOHAS Consumer Trends Database™

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CSR Starts with Taking Care of Employees
(Q. 10 - % consumers in each country indicating that besides making money for shareholders, which of the following is most important for a company to focus on...) Taking

57%

59%

61%

63%

care of its employees

46%

44%

33% 26% 22% 15% 17% 15% 19% 20% 10% 22% 19%

Being sensitive to its environmental impact Supporting the communities it works in

8%

GP

UK

Spain

France Germany

Italy
38

© 2008, Natural Marketing Institute Source: LOHAS Consumer Trends Database™

New Products are Changing Rapidly………….

New Products w/recycle or recyclable claims (12 mos) New Products w/recycle or recyclable claims (6 mos) New Products w/local or locally sourced claims (12 mos) New Products using Carbon Footprint specific claims

EU 892 652 148 12

USA 555 393 89 2

© 2008, Natural Marketing Institute Source: LOHAS Consumer Trends Database™ Source Mintel’s Global New Product Database

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Recycled Materials/Recyclable

Pringles Light Original Fat Free Potato Crisps are now available with a newly designed label that highlights that the product is light and fat free. The product contains 50% fewer calories than regular potato chips and is made with olestra. This product retails in a 6 1/2-oz. pack. The pack is made with 50% recycled materials of which 15% is postconsumer material.

Method Lil' Bowl Blu Toilet Bowl Cleaner is available in an Eucalyptus Mint scent. This non-toxic toilet bowl cleaner is naturally derived and biodegradable for happy pipes and a happy planet. The cleaner uses the natural power of lactic acid to dissolve grime, rust, calcium deposits and ring-around-therim. It is easy to use and people friendly. This product has not been tested on animals and is available in a 24-fl. oz. bottle. The bottle is made with 25% recycled plastic.

© 2008, Natural Marketing Institute Source: LOHAS Consumer Trends Database™ Source Mintel’s Global New Product Database

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Natural Dermo-Care Cream Company Elaÿs

Elaÿs (Crème Naturelle Dermo-Soin) Natural Dermo-Care Cream is designed to repair, moisturise and fortify hands, feet and nails. This regenerative treatment is formulated with champagne (moisturising, antioxidant, anti-microbial, antiageing), certified organic shea butter, grape seed oil, luffa cylindrica, borage oil, glycerine, organic natural vine leaf extract, white nettle extract, and vitamin E. The company does not test its product on animals, it is said to be committed to sustainable development and all packaging and components are recyclable or have been made from recycled materials and use vegetablebased ink. Formulations are free from parabens, silicones, petrochemicals derivative, PEG, phenoxyethanol, SLS or colourants. Elaÿs is a member of the "1% for the Planet" association and as in so doing will give 1% of its turnover to finance environmental or ecological projects.The product was on display at In-Cosmetics, Amsterdam, April 15-17 2008.

© 2008, Natural Marketing Institute Source: LOHAS Consumer Trends Database™ Source Mintel’s Global New Product Database

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Mini Hoki Fishcakes Company Sainsbury's
Sainsbury's Kid's Mini Hoki Fishcakes are made of MSC New Zealand Hoki mixed fillets with Rösti potato and béchamel sauce, coated in light and crispy Signature breadcrumb. This product is claimed to be nutritionally balanced and designed especially for children 4-8 years old, making it a convenient and tasty way to eat healthily. This freezable product contains no artificial colours, flavourings, preservatives or sweeteners. It is claimed to come from a fishery which meets the Marine Stewardship Council's environmental standard for a well managed and sustainable fishery. The Signature breadcrumb is made using Country Ground Flour, milled in Linconshire from locally sourced wheat. The product retails in a 200g pack.
© 2008, Natural Marketing Institute Source: LOHAS Consumer Trends Database™ Source Mintel’s Global New Product Database 42

Handy Gurugu Hand Cream Company Lush

Lush Handy Gurugu Hand Cream is described as a fabulous, easily absorbed hand cream made with rose water, six natural oils and butters, and luxuriously soothing essential oils. When sourcing the rich shea butters, the creative buying team traveled for 15 hours on a rickety bus along potholed roads to find villages where it is handmade by the local women. Handy Gurugu makes a big difference to the skin and a huge difference to the villagers who make the shea butter. The fresh, handmade hand cream is available in a 3.5-oz. tub.

© 2008, Natural Marketing Institute Source: LOHAS Consumer Trends Database™ Source Mintel’s Global New Product Database

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100% Pure Fruit Smoothie Company Ambiente

Fruit Factory 100% Pure Fruit Smoothie is targeted specifically at the teenage and young adult market. The product is not from concentrate, and the packaging is carbon footprint friendly. This preservatives-free product is available in the following variants: Mango, Orange & Passion Fruit; Pineapple, Banana & Coconut; Strawberry & Banana. This product was on display at the Food & Drink Expo 2008, in Birmingham.

© 2008, Natural Marketing Institute Source: LOHAS Consumer Trends Database™ Source Mintel’s Global New Product Database

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Chenin Blanc Chardonnay Wine Company Arniston Bay
Arniston Bay Chenin Blanc Chardonnay Wine comprises a 1.5L decanting pouch of South African white wine. It is said to have an 80% lower carbon footprint and 90% less waste and landfill than glass. This product is available in a convenient on-the-go pack, which equates to two 750ml bottles.

© 2008, Natural Marketing Institute Source: LOHAS Consumer Trends Database™ Source Mintel’s Global New Product Database

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Marketing LOHAS in Europe: A “To Do” List
• • • • • • Do recognize the differences across countries Do recognize the potential value of each segment Do include the role of outside endorsements Do utilize LOHAS consumers as your grass-roots evangelizers Do appreciate the value that CSR can have on consumer behavior Do align consumer values with corporate actions

• Do NOT assume price insensitivity for green Most importantly, • DO evaluate the opportunity to grow your brand globally

© 2008, Natural Marketing Institute Source: LOHAS Consumer Trends Database™

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