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Soup To Nuts Podcast

Soup-To-Nuts Podcast: The rise of ‘ethical claims’ and their marketing potential across categories

By Elizabeth Crawford

Last updated on 22-Jul-2016 at 13:43 GMT2016-07-22T13:43:57Z

The rise of ‘ethical claims’ and their marketing potential
The rise of ‘ethical claims’ and their marketing potential
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Consumer demand for products and companies that “do good” – such as donate a percentage of sales to a non-profit, follow environmentally friendly practices or meet religious needs – continues to rise and in doing so illustrates that doing good is not only good for the community and company moral, but it also is good for business. 

In fact, it is extremely good for business.

New research from Euromonitor shows that consumers spent nearly $217.5 billion in retail value sales in the US on products making ethical label claims in 2015. Worldwide, this number reached upwards to more than $794 billion in retail value sales in 2015.

This data complements earlier research from 2008 that found almost eight out of 10 consumers said they would switch brands to one that is associated with a good cause, provided the price and quality were equal.

To find out what exactly these findings mean for the food and beverage sector, FoodNavigator-USA caught up with Alan Rownan, an ethical labels analyst with Euromonitor, for this episode of Soup-To-Nuts podcast. He outlines what claims resonate with consumers, their sales potential and in which categories ethical labels show the most potential.

Corporate social responsibility is top priority

In the past, ethical claim and transparency into the environmental and community impact of making products might have been secondary to a company’s financial results, but “food and beverage companies can’t really sweep a bad CSR [corporate social responsibility] profile under the carpet any more. And they are making every attempt to highlight to consumers that they are ethical brands and that they are ethical companies,” Rownan said of the current ethical claims landscape.

He further explained that in 2015, food and drinks making at least one ethical claim accounted for 45% of value sales in the US, which is not to say that the ethical claims were the ultimate determining factor in sales of these product, “but there is no doubt that it is a growing concern with consumers.”

Using Euromonitor’s new Ethical Labels database, which launched May 23 and which tracks ethical labels on physical packaging in 26 countries, Rownan noted that “not all ethical labels are created equally … in terms of prominence on packaging, added value to consumers and their impact on sales.”

He explained that the efficacy of an ethical claim on a product label will depend on who the consumer is and the extent to which the claim really sets the product apart from competitors in the same category. For example, claims about no artificial colors on carbonated water will not be as effective as the same claim on confections because consumers do not expect artificial colors in carbonated water.

Likewise, claims about no artificial sweeteners or flavors will not resonate as well in the coffee and tea categories as claims about Fair Trade or forest protection, Rownan said.

Kosher claims breakout in the US

With that context, Rownan said Kosher claims were among the most surprisingly successful claims in the US and one of largest contributors to the sale of products in the US with ethical labels.

“The US Kosher label market was worth $118 billion, and that is 18 times the size of the Israel market,” Rownan said, adding, “that is too big to be ignored.”

In particular, demand for Kosher label products in 2015 reached around $13 billion in the sweet and savory snack segment, $12 billion in the dairy segment and $11 billion in the biscuits and snack bread segment, he said.  

Vegan claims trending up

Vegetarian and vegan claims are another set of increasingly popular claims, which were associated with $37 billion in sales in the UK in 2015, Rownan said. He also predicts more companies will pounce on this opportunity and food and beverage products making vegan claims will increase 5% globally by 2020.

Within the vegan segment, nondairy milk alternatives are thriving – accounting for 66% of all packaged food labeled as vegan globally, he added.

Other ethical label claims to which consumers are responding well including all natural claims, which were on products worth $25 billion in sales in 2015, and claims related to recycling, which were on products worth $114 billion in sales in the same period, according to Euromonitor.

Location of claims matters

Ethical claims on product packages have the most influence, especially on the front of the package and including certification seals, Rownan said, adding manufacturers should not make consumers work to find this information.

“Obviously, there is only so much real estate on the physical packaging,” Rownan acknowledged. With this in mind, he said more companies are using URLs or Smart Label codes to direct consumers to websites for more information on ethical claims and the products in general.

He added: “It will be interesting to see the roll of the Internet in addressing consumer concerns, whether it is by social media platforms, e-commerce product descriptions that generally allow larger word counts than perhaps physical packaging or alternative methods.”

The future of ethical labels

Looking forward, Rownan says consumer interest in ethical labels will continue to rise – making them a key component of successful sales and marketing campaigns.

In particular, Rownan says, he expects to see labels grow in popularity that relate to religion, the environment or sustainability, and clean and natural ingredients.

The only potential hitch he sees in the future with ethical labels is if legislation “eventually catches up with these labels where they eventually become mandatory at some point or at least some of them do.”

He explained that much of ethical label claims’ value to consumers remains with the fact that they currently exceed legal expectations and requirements.

Still, even if legislation does catch up with ethical labeling, Rownan said, “I imagine that it might just lead to a next stage of ethical labeling. I think there will always be value derived from being good and being a good company.”

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