Consumer awareness, demand for more information, and continued compression on margins are providing a platform for brand owners in the food and beverage industry to look at value and innovation through a different lens. This is where sustainable sourcing can help to differentiate your brand and bring additional value to your consumers while attracting new ones.
Janice Neitzel, CEO & Principal of Sustainable Solutions Group, recently hopped on a webinar with TraceGains and discussed how to attract Millennials to your brand with sustainable sourcing while examining widely-held myths, risks, and business opportunities surrounding sustainability.
According to Janice, as far back as 1989, a UK-based publisher made the term “ethical consumer” famous. To provide information to consumer groups, companies were given negative marks that were published in ratings tables based on categories such as inhumane treatment of animals, poor farming practices, over-packaging, all the way to how the product arrives at the store.
In more recent years, Bloomberg and Reuters have provided environmental, social, and governance ratings directly to screens of thousands of stock market traders, putting publicly traded brands’ fate in the hands of consumers. And in numerous reports and surveys, one factor keeps popping up among shoppers: They are looking for products that support local farmers, are from companies with good working conditions who pay workers fairly, and that limit pesticide and antibiotic usage in food.
Why does this matter? Millennials make up the largest generation and demographic right now, and will soon make up the largest spending demographic as well. This generation is very aware and is supportive of sustainable practices like those mentioned above. Additionally, they are not specifically loyal to a brand, like their parents and grandparents, but are, on the other hand, fiercely loyal to brands that meet their value equation.
Debunking Sustainability Myths
One of the biggest myths around sustainable sourcing is the idea that you’re going to have to spend big bucks. But the reality is, even though it might not drive down costs, a sustainable strategy does not need to have a complete sustainability team to start. Instead, you can take steps to help to strengthen your brand and help produce a sustainably-savvy Millennial customer base, which as mentioned above, will be highly loyal to brands that meet their value equation.
Risks and Responsibilities
These days, there are huge risks in being complacent when it comes to sustainable sourcing. For example, there is a new group of consumers described as the food evangelists that actively critique and recommend food brands and agriculture practices. These food evangelists are growing and are very active online. In fact, this group has more than doubled in the last two years and generate up to 1.7 billion conversations around food every week, which means these food evangelists are considered a mainstream segment now and it’s best to not ignore them.
Another risk involved with complacency in sustainable sourcing is when big food investment firms start to weigh factors that were once considered niche (pigs in crates, cage-free eggs, etc.) as risks for retailers and food ingredient manufacturers not jumping on the sustainability wagon.
There is also a risk to being naïve when it comes to sustainable sourcing. We’ve all heard about the issues and overuse of the word natural when it comes to labeling. With such a vague definitions of the word “natural” for labeling purposes with both the USDA and FDA, those involved in litigation practices are having a heyday with certain brands.
This runs the risk of having to stop the selling of certain products should the law prove you are using the term “natural” incorrectly. So why do brands keep using the term on packaging and descriptions? According to a recent Consumer Reports study, many shoppers indicated they would buy natural if it met their expectations, and many would even pay more for natural if it met their expectations. So when you are using the term natural or creating a natural brand, you want to make sure you’re understanding the expectations of your consumers first.
Another risk to consider is humane washing, which has come up in discussion recently regarding labeling. There are numerous lawsuits challenging the language around happy cows, humanely raised, and even the pictures/images of an idyllic farms on packaging and branding. Animal advocacy groups are mobilizing members and challenging animal welfare claims through campaigns and lawsuits. Are the animals being raised in a humane environment? Are they given growth hormones or antibiotics that might impact my health? Are animals being used in product safety testing?
These questions are all very important to consumers, and you want to make sure you understand their expectations when it comes to labels and claims.
Sustainable sourcing is newer in practice with uncharted territory, and the rules and regulations are still being developed. This doesn’t mean you should avoid sustainable sourcing. There are risks involved with being complacent and naïve, but the goal is to understand these risks, use fact-based wording, and seek certifications that are measurable and auditable.
As with the risks listed above, there are some challenges to consider as well. As Janice pointed out, the image of the stool (below) helps to demonstrate the importance and interconnectivity of each component to a sustainable sourcing strategy – your strategy won’t work if each leg is not holding its own weight.
When it comes to being approachable, you have to ask yourself, “What are we trying to answer?” Are you responding to current customer demands and competition? Do you have organizational support, both vertical and horizontal? What does your brand architecture look like? Is this something that fits in your current brand, or is it better positioned into a new brand? You want to make sure your goals are aligned and that you have a team that fully understands what these goals are.
You want to make sure that your sustainable sourcing strategy is believable. Millennials are very informed, savvy, and skeptical. The Internet has armed Millennials with tons of tools to better educate themselves and validate information being communicated to them, so you want to make sure you avoid green washing or humane washing. Whatever you put on the package, you want to ensure it’s fact-based and can be verified.
You need to make sure your strategy it doable and ensure key stakeholders understand their roles. Take the steps necessary to ensure that all types of people are involved in the process and explore the supply chain for ingredient availability. Consider the regulatory and legislative requirements and make sure to meet with packaging and design suppliers to help navigate the packaging dos and don’ts. You want to educate yourself on the best way to communicate the brand and benefits.
There are many opportunities for companies within sustainability, but we’re mainly going to focus on the business opportunities your company might have. One of the main opportunities with sustainability comes with the chance to expand your Millennial reach by 200 million in equal buying power, which is why Millennials are the retail industry’s most sought after audience. And as Millennials move from their parent’s home, they are quickly becoming the most important grocery shopping demographic today.
Some of the things these Millennials care about that you can also look at within your supply chain are reducing your carbon footprint, reducing packaging, and eliminating waste from suppliers, all of which are fantastic business opportunities.
Crawl, Walk, Run
So now that we’ve looked at the risks and opportunities, what do you need to do to get started if you haven’t done so already? Janice points to her “Crawl, Walk, Run” strategy and directs people to start “crawling” by looking at some of the quick wins available to you. How can use current resources with minimal investment and no change to your current manufacturers?
The U.S., at only 5% of the world’s population, makes up to 27% of the world’s waste. So one way to start crawling is by including recycle instruction on packaging. This way you can stay relevant to current customers, while also appealing to sustainably-savvy Millennials. You may already do this, but you want to look at it from a customer’s point of view and make it as clear and as understandable as possible. Additionally, you can support local recycling collection efforts, work with your manufacturers to divert overrun, short code, or damaged products, and give to organizations that feed the hungry.
Additional quick wins can include requesting audit results from any manufacturer of animal protein used within your products, or actively seeking supplier diversity. This can be a part of your socially responsible sustainability sourcing platform.
This is where you can create the and factor. How can you use sustainability to create the and factor for your brand? Maybe you have omega-3 eggs and you can make them cage-free. Maybe you can have antibiotic-free meat and have the animals be grass-fed.
Use a natural/organic brand to test out new sustainable products:
- Fair Trade Coffee
- Rainforest Alliance Certified Paper Products
- Cage Free Eggs
- Replace palm oil or use sustainable palm oil
- Source Fair Trade cocoa ingredient
- Reduce Chemicals of Concern
If you’re worried about the cost of including sustainably sourced ingredients, you have to remember that consumers are willing to pay more for products that meet their value equation.
At this point in the “walk” phase, you want to make sure that the positions of your brand’s strategy are known to your suppliers. Sometimes with sustainably sourced ingredients, there can be a lack of availability, which means you might not be able to put a policy in place for what you’d like to source, but you can have positions to let your suppliers know that you will buy these sustainably sourced ingredients whenever they are available. So let your suppliers know that you will source these ingredients if they need to fill a demand.
Repeat, repeat, then scale. For the run phase of the cycle, Janice uses packaging as an example.
In the crawl stage, you’re looking at including recycling information on your packaging. In the walk stage, you’re partnering with packing manufacturers to reduce the amount of packaging used, and now in the run stage, you’re identifying what the packaging is made of and finding ways to make the material itself more sustainable.
Additionally, once you’re in this phase of the cycle, you can start creating your animal protein specifications and animal welfare requirements, and this is where you want to start looking at certifications.
Potential certifications to look at include:
- Certified Humane
- USDA Organic
- Animal Welfare Approved
- American Humane Certified
- American Grassfed
- Global Animal Partnership
Communication is key when it comes to getting the message out about your sustainable practices. For example, you can use multiple communication formats from in-store point of purchase to your brand’s website to social media channels where your potential customers hang out. Additionally, your packaging should effectively communicate your sustainability strategy in a clear and easily digestible format.
As mentioned above, your strategy doesn’t need to have large amounts of cash to get started. As long as you’re taking steps in the sustainable direction, consumers will pick up on that and reward your efforts with brand loyalty.
Food manufacturers have an interesting challenge ahead, but also a great opportunity. The ones that will ultimately gain popularity among Millennials will be those that are willing to innovate while staying authentic. When it comes down to it, Millennials will do the research, read the labels, and uncover the truth.
Looking for more information regarding Millennial shoppers? Read Millennials Are Changing the Food Industry: What This Means for Food Manufacturers
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