Natural & Ethical Consumers 2004

SUMMARY

Awareness of the ethical issues affecting food, drinks and personal care has been growing overthe last decade, and this awareness is now having a real impact on food, drinks and personal care.To target ethical consumers, manufacturers and retailers need to ensure that they respond to theirconcerns by modifying their practices, updating products and effectively communicating any changes.

Scope of this report

• Current and forecast numbers of natural and organic consumers by country.
• Value of the key natural and organic food, drinks and personal care product markets by country.
• Detailed insights into the ethical issues that consumers are most influenced by in theirpurchasing decisions and how they act on their convictions.
• Review of leading corporate social responsibility programs, labeling schemes and how theseeffectively attract ethical consumers.

Research and analysis highlights

Dutch and French consumers are the most willing to pay a premium for ethical products, with 67%and 60% respectively claiming that they would do so.

The number of loyal natural food, drinks and personal care users in Europe and the US ispredicted to increase from 89 million in 2004 to 173 million in 2009. In the US, the proportion ofloyal users will increase from 12% in 2004 to 24% by 2009, while the equivalent figures for Europeare 14% and 25%.

Overall 67% of consumers in the US and Europe claim to have boycotted a food, drinks or personalcare companys goods on ethical grounds. According the Co-ops index, UK companies lost US$2.7bn ofsales through consumer boycotts in 2003.

Key reasons to read this report

• Access comprehensive data on the opportunity that the growth of natural and organic consumersare creating.
• Understand how growing ethical concerns influence consumers purchasing behavior and how thiswill evolve over the next five years.
• Learn how to successfully target ethical consumers by effectively communicating to them how youare meeting their expectations.

TABLE OF CONTENTS

CHAPTER 1 EXECUTIVE SUMMARY

Introduction

The future decoded

A growing number of consumers actively participate in ethical activities

People are also increasingly willing to pay a premium for ethical goods

Ethical concerns drive uptake of natural and organic products

Ethical consumerism goes beyond simply choosing more ethical brand

Ethical consumers are turning to alternative food distribution channels

Action points

CHAPTER 2 THE FUTURE DECODED

Introduction

Consumers are increasingly acting on their ethical beliefs

The proportion of consumers acting ethically is growing

American, Dutch and Swedish consumers are the most ethical

Spain, Italy and France show the strongest growth in ethical behavior

Consumers are increasingly likely to pay more for ethical goods

Varying preparedness to pay for ethical goods reveals cultural differences

More consumers are turning to natural and organic products

Definitions of natural and organic products

The number of consumers of natural products is rapidly growing

The proportion of loyal users is increasing

Definition of loyal and occasional users

The value of natural and fresh food and drink sales is rising

Natural and fresh food and drink is driven by the meat sector

Growth in organics will remain healthy

Consumers are turning to natural and ethical personal care

There are two definitions of natural personal care

Both natural and ethical personal care are growing

Natural personal care is a very rapidly growing sector

Ethical personal care benefits from the growth in naturals

Ethical issues matter most to food and drinks

Most consumers find ethics most relevant to food and drinks

The food and drinks industry is linked to a very wide range of ethical concerns

Fewer consumers attach importance to ethics in personal care

The problem of testing cosmetics on animals has mostly been eliminated

There are, however, growing environmental concerns relating to cosmetics

Many consumers wish to - and do - act on their convictions

Over two-thirds of consumers have boycotted a CPG company

Many consumers consider that their choice of product is a political act

Belief in non-traditional political action amongst consumers is growing

Environmental concerns have the most influence on consumers

Ethical consumers dislike excessive packaging

Environmental concerns are closely linked to food safety

European consumers continue to reject Genetically Modified (GM) products

Social concerns also feature highly in consumers priorities

Unfair international trade is a main concern of ethical consumers

Consumers are turning to alternative distribution channels

Case study: UK and US farmers markets

Farmers markets are mutually beneficial for producers and consumers

Consumers are partly driven by disillusionment with supermarkets

Farmers markets are also growing in popularity in the US

Time-poor ethical consumers often turn to deliveries

Organic delivery companies are expanding their offering

Delivery companies offer convenient ethical shopping but are expensive

Natural personal care consumers have different motivations

What consumers want from natural personal care

Credibility of natural personal care

Conclusions

Ethical concerns increasingly guide consumers choices

CPG players must not dismiss ethical consumerism as a fad

Regaining consumers trust is key

CHAPTER 3 ACTION POINTS

Introduction

Make the distinctive properties of natural products clear

Promote natural personal care products as being healthy

Use natural positioning to develop a unique proposition

Be clear about the ethical and natural properties of products

Make verifiable claims about natural products

There is no legal definition of what constitutes a natural product

A lack of clarity misleads consumers and destroys trust

Ensure that claims can be substantiated

Make sure your natural ingredients are ethically sourced

Case study: The Body Shop Community Trade program

Encourage retailers to develop a market feel

Consumers enjoy shopping in markets

Case study: Cocos Fresh Food Markets

Capitalize on latent demand

Use reliable labeling schemes to build trust

Avoid confusing consumers with a proliferation of labels: the French example

Labeling schemes should not just denote a minimum standard

Adopt effective yet honest communications strategies

CSR pays no dividends if consumers dont know about it

Show consumers that your CSR activities are not just PR

CSR initiatives aligned with consumers concerns can reap rewards

CSR creates goodwill amongst employees as well as consumers

Many employees are not aware that their company has a CSR program

Most senior executives believe that their CSR efforts are effective

People wish to work for ethically responsible companies

Engage in cross-industry ethical agreements

Case study: the Common Code for the Coffee Community

Coffee producers and workers are the immediate beneficiaries

Retailers have shown that ethical commitments pay dividends

The CCCC is not necessarily a permanent solution, but it is a first step

Help to educate consumers about food production

Rectify consumer misconceptions

An interest in production methods and health go hand in hand

CHAPTER 4 APPENDIX

Supplementary data

Definitions

Research methodology

Relevant links

How to contact experts in your industry

List of Tables

• Table 1: Consumer survey: "Please rate the extent to which you have bought more or lessethical or socially-responsible goods and services in the past year."
• Table 2: Percentage and total number of natural (including organic) food and drink consumers byusage status, Europe and US, 2004-2009
• Table 3: Value of natural (including organic) food and drink markets by key product markets,Europe and US, 2004-2009
• Table 4: Value of organic food and drink markets by key product markets, Europe and US,2004-2009
• Table 5: Naturals % share of overall personal care market, 1999-2009
• Table 6: Total value of natural personal care market, 1999-2009 (?bn and US$bn)
• Table 7: Ethical personal care market value, 2004-2009
• Table 8: Consumer survey: "for which type of product do you think that ethicalconsiderations are most important?" (% respondents)
• Table 9: Structure of the European organic food retail market, 2002
• Table 10: Motivators for the use of natural personal care products (% survey respondents citing)
• Table 11: Barriers to use of natural personal care products by non-users (% survey respondentsciting)
• Table 12: Percentage and total number of organic food and drink consumers by usage status,Europe and US, 2004-2009
• Table 13: Consumer survey: "With regards to food and drinks, how aware are you of thefollowing issues and how much do they influence your purchasing behavior?"
• Table 30: Definitions used in this report

List of Figures

• Figure 1: Ethical consumer behavior by country, 2000-2005
• Figure 2: Willingness to pay more for ethical products by country, 2000-2005
• Figure 3: Defining natural personal care
• Figure 4: Consumer survey: "For which type of product do you think that ethicalconsiderations are most important?" (% respondents)
• Figure 5: Consumer survey: main reason for boycotting a food, drinks or personal caremanufacturers products
• Figure 6: Consumer survey: "With regard to food and drinks, how aware are you of thefollowing issues and how much do they influence your purchasing behavior?"
• Figure 7: Rates of household waste recycling by country, Europe, 2003
• Figure 8: French food certification schemes: consumers are often confused by what they actuallyindicate
• Figure 9: The EUs food labels guarantee provenance and production methods but not quality
• Figure 10: Consumer survey: "Which of these ethical commitments would most improve yourdisposition towards buying a particular companys food, drink or personal products?"