The trend: Consumers want to buy sustainable products, such as Patagonia’s merchandise made from recycled materials and organic foods. And they’re willing to spend an additional 10% (or more) on those items, per a survey conducted by First Insight and the Baker Retailing Center at the Wharton School of the University of Pennsylvania.
- Younger consumers are driving the trend, as 75% of Gen Z said sustainability is more important to them than brand.
- Growing interest in sustainability helped propel US organic sales 12.4% in 2020 and another 2.3% in 2021, according to the Organic Trade Association’s Organic Industry Survey.
- It is also helping attract investors’ funding. For example, recycled cotton fiber company Recover, which works with retailers such as Primark, Inditex, and Lands’ End, recently announced a $100 million funding round.
Storm clouds ahead: Sustainable and organic sales growth will likely slow as inflation leads consumers to pull back their spending and eats into their savings.
- 69% of US consumers say changes in the inflation rate have affected them negatively, per a June Economist/YouGov poll.
- US consumer sentiment in early June hit its lowest point on record as consumers’ assessments of their personal financial situation plummeted, according to the University of Michigan’s preliminary June sentiment index.
- Meanwhile, a cascade of challenges, including the war in Ukraine, are driving up organic and sustainable raw material costs.
- At the same time, consumers' desire to shop more sustainably has decreased as they focus on value, per Morning Consult.
A shift in spending: The challenging environment is driving consumers to adjust their spending habits.
- Consumers are “actively looking for ways to save,” said Kroger CEO Rodney McMullen during the retailer’s earnings call.
- 24% of consumers are substituting similar, less expensive foods and 12% are buying fewer organic items and products to cut costs, per a survey conducted by The Feedback Group.
- That dovetails with an April First Insight survey that found 30% of US adults are cutting back on organic/premium foods due to rising costs.