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Sustainable Ingredients

CapsCanada
 
K2VITAL®
Food Shopping Food Shopping

How CPG brands are reacting to increased consumer demand for ingredients with a story.

From once only appealing to a niche environmentally conscious consumer, sustainability has moved beyond being a “trend” to a point of differentiation and a clear unique selling point. We are on the cusp of reaching a tipping point where it is mainstreaming rapidly. It is no longer a “nice to have” for global brands and ingredient manufacturers. It has now, put simply, become a license to operate.

Whether its concern regarding climate change, global population growth and the impact this is likely to have on food security, or responsible production of agricultural raw materials with the expectation that companies source responsibly and ethically while being mindful of the impacts on the earth’s natural resources. These all feed into the increasing consumer demand for greater ingredient transparency so that they can make environmentally and ethically informed purchasing decisions.

The failure of food businesses to engage with consumers on sustainability has the potential to pose a severe risk to business continuity. Over the last number of years, many prominent consumer packaged goods (CPG) companies and brands have and continue to drastically diversify their portfolios in response to consumer sentiment regarding sustainability. Several recent deals in the U.S. highlight the mainstreaming of once niche categories. Coca-Cola acquiring Honest Tea in 2015 enabled them to bolster their portfolio by adding a socially responsible, health-oriented brand that carried both an organic and fair trade label that resonated with consumers. More recently the backing of plant protein producer Beyond Meat and lab-grown meat startup Memphis Meats by Tyson Foods demonstrates that “Big Food” is coming to accept that sustainability has and will continue to disrupt markets. Unless established CPG companies and brands continue to stay ahead of the curve, they face the risk of being left behind.

It is no longer acceptable to blatantly disregard the present threat to the earth’s planetary boundaries. In other instances, not only have companies reacted, but many have been proactive and taken the baton to lead from the front. If we look to the U.S. government’s decision to renege on the Paris Climate Accord in 2017, it was corporate America that responded with a resounding “we’re still in.” Large corporations with significant purchasing power and supply chain influence, such as Walmart, are now leading from the front in demanding more from their suppliers, greater transparency, challenging environmental stewardship commitments and a firm commitment from their supply chain partners to operate in a socially responsible way.

The reward for doing so is that consumers now more than ever want to buy from companies and brands that are environmentally responsible and strive for fair and equitable practice within the supply chain in which they operate. Many companies in recent years have responded by publicly embracing sustainability and holding themselves to account for the impacts of their operations on the environment and society. Failure to do so could potentially lead to a lack of consumer trust and a consequential decline in sales.

Brands That Demonstrate a Commitment to Sustainability Outperform Those That Don’t

Within the U.S., consumer interest in sustainable products is on the rise. According to data from Nielsen, 64 percent of U.S. households buy sustainable products, which is an increase of 4 percent over last year. This supports the claim from Unilever earlier this year that for the fourth consecutive year its “sustainable living” brands have outperformed the remainder of its portfolio. In 2017, these brands with a strong sustainability backstory delivered 70 percent of its turnover growth and grew 46 percent faster than the rest of the business.

Consumers now more than ever expect the private sector to assume responsibility for their impact on the environment and society. Showing leadership on sustainability is a business imperative. Companies that fail to respond could run the risk of being singled out by activists who wish to make an example of them, and with the proliferation of social media, this type of modern activism can be hugely detrimental to businesses within a very short space of time. Furthermore, failing to acknowledge the growth of sustainable brands could render current household brands irrelevant as they get left behind by the emerging brands that are built around purpose and have positioned sustainability front and center.

Communicating Brand Sustainability/Certification and On-pack Labeling

Brands are increasingly seeking to capitalize on their investment in sustainability. There are several tried and tested mechanisms, however, the most prominent is on-pack labelling. According to Euromonitor, the total market for sustainable food and beverage products in the U.S. in 2017 that carried an ethical label on-pack relating to people, environment and animal welfare was estimated to be worth approximately $262.5 billion (U.S.) in 2017, rising to $267.4 billion in 2018.

Despite the apparent growth of brands carrying an eco-label in the U.S., there have been criticisms in recent years that the proliferation of “eco-labels” on supermarket shelves has served to do the opposite of what they were intended to do in educating the consumer, but rather they are now causing consumer confusion. Granted there was a place in time when consumers required mobilization to act on sustainability, however as the consumer is now more informed through alternate information channels including largely social media, consumer trust in the eco-label alone within the U.S. is low. This can in some part be attributed to the lack of regulation to back up sustainability claims. Sustainability is a broad and complex topic and label claims such as “natural” and “grass fed” have largely been left to the subjectivity of the manufacturer, with no universal definition having been endorsed. It is for this reason that in Nielsen’s 2017 global sustainability survey only 15 percent of Americans trusted “all natural” claims. It is therefore vitally important that brands determine those labels that carry the most credence with the consumer.

Notwithstanding the consumer skepticism concerning on-pack ecolabels, ingredient-driven interest in sustainability is growing rapidly. The 2017 Kerry proprietary research report “Beyond the Label: The Clean Food Revolution” found that clean label is multi-dimensional for consumers and it is the combination of ingredients, nutrition and sustainability that equates to trust in a product. Through further analysis of consumer responses, Kerry derived that consumers are particularly interested in sustainability claims such as organic and non-GMO (genetically modified organism), as well as ingredients that are ethically produced and overall focus on environmental impact including reductions in waste and packaging. This focus toward ingredient-driven growth within the market is increasing, however the emphasis on “no-no” lists and consumers seeking to determine what ingredients don’t feature, detracts from the clean label attributes or sustainability backstory that might be there on those that are present.

Brand Philosophy Communicated Through Marketing

Given the ambiguity and confusion concerning on-pack sustainability labeling, many CPG companies are now channeling marketing efforts into integrated marketing campaigns to educate customers about the efforts they are making and what their sustainability claims actually mean. The backstory is becoming vitally important—consumers no longer are motivated solely by price but more so want to know the backstory of the food they are purchasing. Manufacturers must determine the values they want their brand their brand to stand for and the stories that will resonate with their target consumer.

Given the broad nature of sustainability, there is no one size fits all approach. Consumers are motivated to varying degrees by certain sustainability messages and this is largely dependent on their own moral standing. However, through research such as Kerry’s “Beyond the Label,” we can decipher what resonates at a given point in time, and this goes some way in shaping both the sustainability focus and consumer proposition of food businesses. The resulting story can then be elevated using social media and other digital platforms to deliver a more tailored message direct to the consumer.

What Defined a Sustainable Ingredient?

Both Kerry’s “Beyond the Label” Clean Label research and Nielsen’s Product Insider determined that consumers are interested primarily in traceability, sustainable agriculture and social responsibility. Ingredients with a story are becoming increasingly important, with the social and environmental impact of agriculture now under more scrutiny than ever. Take palm oil as an example, a crop that is highly contentious if produced unsustainably, and linked to mass deforestation and consistent campaigning by environmental NGOs (non-governmental organization). Yet when produced sustainably, palm oil is one of the most versatile, efficient and highest yielding oil crops available.

Through the Roundtable on Sustainable Palm Oil (RSPO) the industry is seeking to unite voluntarily on addressing the negative social and environmental impacts of the palm oil sector. The agri-food industry is seeking to push the agenda of the RSPO further and Kerry, for example, collaborates with supply chain partners with a firm focus on the environmental impacts—however the economic and social benefits for palm producing regions and families can often be overlooked. Kerry works toward solutions that can support sustainable production and prevent further deforestation. As part of these efforts, the company is undertaking a smallholder program in collaboration with partners at each level of the palm oil supply chain.

The goal of the program is to support smallholders with less than 50 hectares of land to improve their yields, thereby increasing production without the need for additional land and helping to improve the livelihoods of farm families. Smallholder programs similar to this are being implemented across Kerry’s raw material categories, as they are valuable in that they allow the organization to go deeper into the supply chain, understand the regional and local challenges and provide support to those who need it most.

Sustainability is a Shared Responsibility

It is ingredient sourcing impact projects such as these that resonate with brands and consumers. The corporate sustainability reporting template is well worn at this stage; while the information is broadly welcomed by investors, it is rarely targeted at the consumer. The challenge is that when a business communicates the positive progress they’ve made, there is often external attention diverted to the lesser efforts made on other aspects of their business or accusations of greenwashing can be heard.

In this age of consumerism, it is no longer sufficient to claim to be transparent—food and beverage brands must communicate the demonstrable impact they are having within their supply chains. However, it is no longer sufficient to place all the responsibility on the producer, as without a consumer demand there would be no need. Consumers must also foot some of the responsibility for the challenges facing our planet and support the ongoing collaborative efforts of the private sector, government and NGOs in addressing these issues. NIE

Ryan George, Regional Sustainability Communications Manager (Kerry North America), completed his studies at Queens University Belfast, Trinity College Dublin and the University College of Dublin, Ireland. Most recently graduating in 2017 with a first-class honors master’s degree in food business sustainability, with a specific focus on the business case for sustainability within the agri-food sector. He is a member of Kerry’s marketing team in North America and is responsible for managing internal and external engagement on Kerry’s ‘Towards 2020’ sustainability strategy and supporting Kerry’s internal and external sustainability communications.

Albion Minerals®
 
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