Brands 'not trusted' yet to deliver on socially responsible products
Brand leaders are at risk of losing one-third of their customers over the next few years if they don't align their product portfolios more closely with responsible consumption.
Researchers have analysed point-of-sale data across different retail chains out in the US, including grocery, convenience, department, and wholesale-club stores.
It found that ethically and enviromentally sourced products accounted for 15% of total sales within these chains, with sales growing 9% annually in the past three years - making up 70% of total growth.
Most of this growth however is going not to the major product brands, but to specialty brands and to both specialty and conventional retailers. The study found that leading manufacturers either have weak, or nonexistent, offerings in this area.
It also highlighted that while global brands bring major scale and distribution advantages to the table, consumers are less likely to trust them when it comes to responsibly sourced products. Part of these reason might be down to the fact that there is rising consumer skepticism about these claims made by these larger companies.
"Many consumers have only minimal understanding of [these] claims and their relevance," the report states. "Our interactions with consumers have led us to conclude that most find these claims to be fairly interchangeable, and the labels boil down to a general 'does no harm'. But the proliferation of claims has consumers confused."
It adds: "This confusion is combined with low trust in the companies selling the products. After higher prices, lack of trust is the main reason why otherwise sympathetic consumers do not buy [such] products more often. This is particularly true in Germany, Japan, Italy, and the Netherlands, while it is less of an issue in the US and the UK."
According to the study, in the segments of organic and natural product claims, brand leaders are growing at only 1.3% annually, while private labels are reaching 4.3% and specialty brands 12.5%.
It notes that any lack of involvement will be costly. "Our research suggests that if [major] brands don't come forward with credible offerings in this area, one-third of their existing consumers will switch to [responsibly sourced] private labels or specialty brands."
The study suggests that brand leaders need to build consumer trust around this agenda - for instance, by acquiring a specialty brand and granting it considerable autonomy or developing a socially reponsible brand internally that can be externally validated.
"A few have gone a step further in following the lead of specialty brands. They have fully embraced specific responsible claims and adopted them across their portfolios. Doing so turns the claim into a new category standard or a major contributor to [brand] overall differentiation," the report notes.
"So far, we've seen this mainly with fair-trade coffee, especially with Starbucks worldwide. Embracing the fair-trade claim has enriched Starbucks's own value propositions, The company has also raised the bar - and the cost of doing business - for smaller competitors and conventional private labels."
The study was carried out jointly by the Boston Consulting Group and market research company Information Resources.