Shoppers Embrace Ethical Products

U.S. shoppers are letting their conscience be their guide, according to recent Packaged Facts research. The consumer market research company found that sales in the ethical products market—defined as those that meet ethical standards such as eco-friendly or organic—are poised to reach $38 billion by the close of 2009, totaling an 8.7 percent year-over-year increase from 2008.

A majority of the projected growth (74.3 percent) can be attributed to sales increases in the ethical food and beverages sectors, which saw its portion of the ethical product market increase slightly from its 2005 share of 73.5. Non-food product sales made up the remaining 25.7 percent of sales for the year.

Susan Porjes, analyst of the report, noted that the information demonstrates how ethical considerations are becoming much more important to consumers. She attributed the increases to successful industry marketing tactics.

"Marketers are positioning more things along ethical lines," said Porjes. "They are letting consumers know when the products are ethical. They are using more descriptors such as organic, locally-grown, fair trade, cage-free, humane, and sustainable, and they’re putting that right up front."

Consumers are also choosing to buy their ethical products at "ethical" retailers. National natural food chains, such as Whole Foods and Trader Joe’s, brought in 45 percent of the total ethical product dollar sales, while traditional grocery and mass merchandisers accounted for 35 percent. Other retail segments—including bookstores, home improvement outlets and farmer’s markets—totaled 14 percent. Health and beauty care specialty stores and spas held the least market share at 6 percent.

The ethical product market has seen a significant number of ethical products launched in 2009 to date. Organic launches were most popular (923 products), followed by natural foods (707 products). Both categories topped 2008 ethical product launches with 1,452 and 1,000 products respectively. Vegan (160 products), no pesticides (133 products) and fair trade (73 products) categories, which ranked last in 2008, remained at the bottom of the scale. Last year, 160 vegan products, 133 no pesticides products and 107 fair trade products were launched.

Overall, the ethical products category is expected to continue high single-digit growth through 2011, according to Packaged Facts’ projections. Additionally, the market is predicted to resume pre-recession double-digit growth after 2011 and increase 63 percent by 2014, with sales of $62 billion. Non-foods are expected to grow at a faster pace (80 percent) than foods (57 percent), but their lag in market share should remain (28 percent).

But such growth could mean a more challenging future for non-ethical consumer packaged goods that are competing for shelf space, according to Marc Dietz, CMO of DemandTec.

"Some leading branded manufacturers will lead the way with product innovation and some will face competition from small new brands or from retail private brands, similar to what we saw recently with low-carb products. The key for any manufacturer or retailer of ethical products is to understand and predict consumer demand, for different consumer segments, as market changes develop," Dietz said.