Myths and realities of the “new” green economy

Myths and Realities of the “New“ Green Economy

Harvey Hartman

This article details new research showing that the majority of U.S. consumers have strong inclinations to buy earth-sustainable food products. Contrary to prevailing beliefs in the in- dustry, the market potential for these products is enormous-52 percent of consumers are willing to buy “green,” and nearly one-third (30 percent) can actually be considered as the core market for earth-sustainable food products. Yet these products currently represent only2 percent of all food sales. This immense gap can be eliminated by turning our focus from supply (an endless stream of new product introductions) to demand (the needs of the consumer). Doing so requires a clear understanding of the consumer and the dispelling of several myths that pervade the marketplace today.

Information in this article was taken from Phase I of The Hartman Report-Food and the Environment: AConsumer’s Perspective, which examines the consumer segments in much more detail with regard to attitudinal, demographic, and psychographic profiles. The report was commissioned, in part, by The Kellogg Foundation, The Food Alliance, and Cascadian Farm. Phase I1 of the research more closely examines those segments that represent the key target markets for these products, including information on the effects of advertising, public relations, and labels in communicatingenvironmentally sustainable product messages. Phase I l l will develop specific retail tactics that can be enective in delivering products and services to the most important segments. For information on obtaining a copy of the report, contact The Hartman Group at 206-451 -9094.

T h e key to developing the market for earth-sustainable products is not to treat it as a niche market inhabited only by the most strident environmental activists. Further, marketers cannot rely on a pre- sumed widespread concern for the environment as a means to increase sales of “green” products. The market for environmentally friendly food products does not exist as a separate world; these goods are produced, distributed, and sold along- side “mainstream” products. Therefore, they must be marketed with the mainstream consumer in mind.

The Hartman Group has spent 1996 conducting a nationwide study that ad- dresses these issues and the myths and realities of the marketplace. The Hartman Report-Food and the Environment: A Consumer’s Perspective paints a clear pic- ture of the reality of the market for earth- sustainable food products. It is the first effort to gather in-depth information about the consumer and his or her preferences in regard to environmental products. By fo- cusing on the consumer as the missing link, companies can take substantive steps to capture the consumer, hence closing the gap between attitudes and behavior.

CCC 1088-1913/96/06024709 0 1996 John Wiley & Sons, lnc ENVIRONMENTAL QUALITY MANAGEMENT /Winter 1996 / 41

Exhibit 1. Environmental Issues Do Not Translate into Specific Concerns

How food is grown affects the environment.

1 really do not worry too much about how food is grown.

Pesticides are an effective and safe way of protecting the food supply.

If w e want to maintain our current food supply, farmers must be able to use chemicals such as pesticides and fertilizers.

The important thing is to eat plenty of fruits and vegetables, not howthey're grown.

It is more important how produce is grown than its appearance.

I

Base: Total Respondents

63

27

13

25

34

29

Disagree (1,8791 96

6

38

46

33

32

30

MYTHS AND REALITIES OF THE MARKETPLACE

There are six myths of the marketplace that need to be addressed.

Myth #1: There is a small niche market which will be affected by environmental product improvement.

Reality: The market is made up of a diverse majority of consumers who buy environmental products for different reasons.

Tkaditionally, food and beverages produced with earth-sustainable/organic methods have been viewed as appealing to only those who make environmentalism a driving force in their lives. Although this group makes up a good portion of the present market for earth-sustainable food products,' they are by no means the only group showing a strong willingness to buy them. In fact, our most recent research shows at least 52 percentZ of food consumers are willing to buy green food products, and nearly one-quarter of all Americans are

very eager to purchase earth-sustainable food on their own terms. For most people, these terms do not necessarily have to relate to the environment. Hence, improving or increasing the vol- ume of environmental products will not result in increased sales.

Myth #2: Spreading environmental awareness will lead to increased environmental concern, behavior, and purchases.

Reality: Consumers appreciate environmental issues but do not translate them into specific concerns or purchase behavior.

The research strongly indicates that consumers' attitudes regarding the protection of the environment are growing stronger with each passing year. But we do not see much, i f any, behavioral change with regard to food (Exhibit 1). These apparent contradictions show that, in general, consumers are still in

the early stages of moving along the con- tinuum from awareness to adoption.

Most consumers are aware that food is grown in the environment, but the same people do not think about it much. There currently is not much linkage between food and the environment. While there is overwhelming acknowl- edgment that there is a relationship between how food is grown and the environment (63 percent), far fewer (38 percent) worry about how food is grown. Attitudes toward specifics of food production are even more muddled. Con- sumers have not progressed far in their willingness to trade immediate food supply issues for environmental ones. For example, while only 13 percent agree that pesticides offer safe and effective protection of the food supply, twice as many (25 percent) agree that chemical fertilizers and pesticides

48 / Winter 1996 / ENVIRONMENTAL QUALITY MANAGEMENT Harvey Hartman

must be used to maintain the food sup-

There is polarization with regard to the relative importance of how food is grown versus the importance of eating fruits and vegetables, or the importance of the appearance of produce. Nevertheless, there are indications that inroads are being made as rejection of chemical use in farming outweighs acceptance.

Ply.

An indication that consumers have not internalized environmental issues is the seeming contradiction between their agree- ment with environmental principles and their stated behavior (Exhibit 2). While, by a margin of 4 to 1 (55 versus 14 percent) consumers feel that hormones and antibiotics are unnecessary in meat and poultry production, they are twice as likely to say that they do not buy antibiotic- and hor- mone-free meat and poultry (36 versus 17 percent). A majority express concern about pesticide residue in food, but they do not seek out pesticide-free products. This behavior may be enhanced by consumers‘ unawareness of food options available to them and the lack of clearly understood options in the stores.

Environmental concern leading to specific purchase behavior is still in its in- fancy among most consumers. While interest and curiosity are developing, consumers do not yet take the initiative to learn more (Exhibit 3).

Although 38 percent say that they “try to stay informed about environmental issues,” only 15 percent say that they “regularly read books and magazines about the environment.” In contrast, twice as many (31 percent) “spend quite a bit of time learning about good nutrition habits,” an issue that has more immediate implications for consumers. A substantial number (37 percent) claim to have purchased at least some environmentally friendly products,

Exhibit 2. Environmental Behavior Has Not Followed Environmental Concerns

Base: Total Respondents Agree Disagree (1,879) (1,879) % %

I am concerned about the level of pesticide 53 15 residue found in food.

I look for food that is grown free from pesticides. 18 39

55 14 I feel that the use of growth hormones and antibiotics in meat and poultry production IS unnecessary.

I purchase meat and poultry that are free from 17 36 growth hormones and antibiotics.

Exhibit 3. Environmental Concern Does Not Mean Doing More

Base: Total Respondents Describes Me (1.8791

%

Does Not Describe Me

(1,879) %

I regularly make charitable contributions to environmental organizations.

I seek out environmentally friendly products.

I am a member of an environmental organization.

I am active in environmental activities in my community.

14

13

9

8

62

59

84

81

I frequently buy environmental magazines. 6 79

Top two points based on five-point scale.

but few specifically look for these types of products or become actively involved in environmental issues. Al- though at low levels, consumers are most likely to participate in activities that require the least investment of

Myths and Realities of the “New” Green Economy ENVIRONMENTAL QUALITY MANAGEMENT /Winter 1996 / 49

Exhibit 4. New-World Products Methodology: The Influences of Core Purchase Criteria and the Environment on Product Development and Marketing

Reduct Fmirallnulbl

* Water pmtecttm * Absence of pesticide

resdue 9 Use of nahral Ismher

hned used perticides I Sol conservatton

Lael 2 * Pactaging

Logstddekely * Cornpanis pmrlcurrent

enNmnmental inAlrhves

Rail DiMmlwk

Markebng Comuflcabon ' Mucttan

t CaeRrcRw Cmtu'

Taste

* Convemence k i l a b i l t y

'The hierarchy d mportance of thsse pmduct atnbites la&& thsyanl. abngwlmtheircorbmad mterpby, changesaccodngto consumer and pmductcatqwy Conwmen purchaseddfaent pmdueb ddferen~ Thusthere 1s a mndant defining and ntlrnng 01 !he pmduct atlnbute mu IFAM] In addhor, dependent on both m r n a l a n d ~ e m l l a c t o ~ PAM chsngesovertimewth thedynamics olthe market

their time (e.g., making donations to environmental organizations (14 percent) or seeking environmentally friendly products (13 percent)). The level of active participation in environmental organizations or causes, however, is in the single digits.

Myfh #3: The consumer will purchase products primarily because of environmental product attributes.

Reality: Earth-sustainable products do not drive purchases, but if producers develop products with added value, consumer purchasing behavior will change.

Simply putting a product on the shelf and calling it green is not sufficient induce- ment to purchase for most consumers. People are much more likely to buy a product if they perceive some sort of added value in that product. Added value (actual or perceived) comes in many forms and relates to what consumers consider their core purchase criteria. Furthermore, these perceptions vary from consumer to con- s u m e ~ . ~ For some, the added value of organic food will come in the form of its perceived enhanced nutritional benefits. For others, it is a matter of quality, taste, or better packaging, availability, or convenience. Whatever the case, for 93 percent of U.S. consumers, the environment does not play an integral role in purchases. In- stead, it is part of a complex web of decision-making factors that vary depending on the type of consumer. This is the most important piece of information that companies must take into consideration when marketing earth-sustainable products. Exhibit 4 is a model of how the above factors come into play in the development and marketing of earth-sustainable products.

The relative unimportance of environmental considerations to consumers when shopping is exhibited in their expressed reasons for choosing outlets. The low inci- dence of shopping in health food stores is not surprising in that the availability of organic or environmentally friendly products is not a prime consideration in choosing where one shops for groceries. Rather, the main considerations are convenience, quality, cleanliness, and price.

The convenience issue is a key factor working against organic products. Fifty percent of all consumers agree that "if I want to purchase natural and organic products, I have to go to stores where I usually do not shop." This suggests that it will be important to further expand distribution of organic and earth-sustainable products into supermarkets in order to overcome the current inaccessibility barrier to purchase.

50 / Winter 1996 / ENVIRONMENTALQUALITY MANAGEMENT Harvey Hartman

The importance of convenient store location (15 percent) carries four times the combined weight of the availability of environmentally friendly products ( 3 percent) and organic products (1 percent) in the decision of where to shop for groceries. Quality outweighs organic considerations by nearly as big a margin, as does almost every other factor that contributes to the consumer’s decision as to where to shop. This is further evidence that the environmental attributes of products cannot stand alone as a means of influencing the mainstream consumer.

Myth #4: The consumer will or will not pay a premium for a product depending on environmental improvements to the product.

Reality: Consumers are resistant to paying more when products are identified as “organic” or as being more “environmentally friendly.” They are much more accepting of products that have direct meaning to their lives.

While consumers readily express interest in earth-sustainable products (71 percent), most balk at spending more for these products (Exhibit 5) . For example, positive interest drops to 46 percent when a 10-percent premium is imposed. The greatest fall is noted among those who say they are “very interested,” which declines from 25 percent of consumers to only 8 percent, suggesting that, currently, the core fran- chise is small. Another indication of the strength of resistance to paying a premium for earth-sustainable grocery products is that the decline in positive interest is off- set by an increase in negative, not neutral, attitudes. After a premium is introduced, those who are disinterested increase from 9 to 33 percent. This is not unexpected given consumers’ lack of in-depth knowledge about environmental issues. It is further evidence that “earth sustainability” by itself is not a product attribute that will drive purchases.

Value is not implicit in vague terms like “earth sustainability” and “organic.”

Myths and Realities of the ”New” Green Economy

What do these terms mean? How do they affect food production? Why is this important? These are just a handful of questions that, left unanswered, will cause consumers to simply dismiss most products claim- ing to be environmentally friendly. Our research shows that when terms like “organic” are linked to specific product en- hancement, consumers are more likely to pay a premium for these products. For example, over one-third of consumers say they would pay a premium for foods that are free from pesticides and additives. When asked about paying a premium for organically grown foods, however, consumers overwhelmingly reject the idea. This suggests that consumers do not have a clear definition of “organic” or may have negative perceptions about the term which need to be addressed. There is greater opportunity when positioning focuses on a specific end benefit, rather than “organic” and more general benefits.

Myth #5: The consumer ranks all environmental initiatives as equally important.

Reality: Consumers relate best to the most tangible and personally relevant environmental issues.

Exhibit 5. Interest in Earth-Sustainable Grocery Products

Base: Total Respondents Price Unspecified 10% Premium

% % (1.a79) (1,879)

VerylSomewhat Interested 71

Very interested 25

Somewhat interested 46

Neither Interested Nor Disinterested 21

9

Not very interested 6

Not at all interested 3

Not Very/Not At All Interested

46

a

38

21

33

22

1 1

__ -

ENVIRONMENTAL OUALITY MANAGEMENT /Winter 1996 / 51

Given the average consumer’s lack of sophistication with regard to earth sustainability and the farming techniques (and terms that go with it), it is not surprising that there are big differences among people’s rankings of environmental issues. Although the vast majority of Americans may rank “environmental protection” as very important, far fewer give the same ranking to various initiatives that will achieve this end (e.g., protecting against soil erosion and loss of fertility).

Of various agricultural initiatives posed to consumers, the most leveragable ones are those that most directly relate to consumers’ everyday lives-pollution of the water supply and pesticide residues on food. Together, the two water pollution issues-pesticide seepage and pesticide runoff-are ranked most important by four in ten (41 percent) respondents. In contrast, only half as many (19 percent) rank one of the three soil-related issues (soil erosion, soil destruction, or loss of soil fertility) as the most important agriculture concern. Secondarily, issues relating to ingestion of pesticides are important. These concerns include the implications of pesticide residues on food for human consumption, as well as the potential for pesticides to poi- son wildlife. This is not surprising in that consumers are still in the initial phases of discovering and internalizing environmentalism and lack the knowledge base to link ideas such as maintenance of soil productivity to personal benefit or added value in a product.

Consumers relate to simple things with which they are already familiar. Farming methods whose benefits are most tangible to the consumer have the greatest potential to impact grocery selection.

Consumers relate to simple things wjth

which they are already familiar.

Nearly six in ten (59 percent) assigned a high importance rating to “water protection,” corroborating the pesticide seepage and runoff issues described above. Additionally, almost half (47 percent)

gave a top importance rating (based on a five-point scale) to the absence of pesticide residues on food. All other farming issues, whose benefits to the consumer are less direct, clustered together with a high importance rating from about one-third.

Given consumers’ limited knowledge about environmental issues, it is difficult for them to make the linkage between various farming techniques and a personal benefit. This suggests that considerable education in fundamental environmental issues will be necessary before specific farming techniques that primarily affect continued agricultural productivity will be compelling inducements to purchase.

Myth #6: As far as environmental products are concerned, there are two types of consumers: those who buy green and those who do not.

Reality: The market for earth-sustainable products is not monolithic: it is growing and is more diverse than it appears.

There is not just a single market for green products. There are actually several. Our study has identified six consumer segments (Exhibit 6)-two range from ambiva- lent and hostile toward earth-sustainable products (48 percent of those surveyed), three are open, willing, and in some cases eager to buy such products (45 percent), and one goes out of its way to buy them (7 percent). This segmentation indicates both opportunities and challenges in expanding earth-sustainable products beyond their core base to a broader market.

The True Naturals: formerly married, female, highly educated, lower and upper income. Although the smallest segment (7 percent), they are the core purchasers for organic and earth-sustainable products. Not only do these consumers hold the strongest views on environmental issues, but also they demonstrate the greatest commitment to their ideals. In this regard, they are unrelenting and it appears that environmentalism is a driving force in their lives.

52 / Winter 1996 / ENVIRONMENTAL QUALITY MANAGEMENT Harvey Hartman

The true naturals are the only segment that is currently a regular consumer of organic products. Their interest in organics is a function of their concern for both the environment as well as the nutritional well-being of themselves and their children. Given this commitment, it is not surprising that they are the only segment that is willing and actively paying a premium for organic and earth-sustainable products.

Their interest in environmental products is not limited to food issues. These consumers are concerned about packaging and reuse of resources and are willing to take a stand-they refuse to buy over-packaged products.

Demographically, this group might be described as “graying children of the 60s.” They tend to be somewhat older than the population, are highly educated, and employed in managerial/professional/executive occupations. Nevertheless, they are overrepresented in the lower-income group (under $25,00O/year), although pro- portionately represented among higher- income groups ($50,000+). They are more likely to live in single-member households (particularly women living alone) and to be formerly married.

The New Green Mainstream: heartbeat of America, interested in environment, lack opportunity, need a “reason.” The greatest opportunity for market expansion of organic and earth-sustainable products is among the newgreen mainstream. This group displays growing curiosity and openness to environmentalism and represents a sizable 23 percent of the population.

The newgreen mainstream’s environmental attitudes are second only to the true naturals. This segment expresses particu- lar concern about the impact of chemical pesticides and fertilizers on the food supply but remains resistant to paying a premium for environmentally sound products. Despite their growing interest in environmental issues, these consumers do not consider themselves to be particularly knowledgeable, nor are they actively seeking information.

Exhibit 6. Six Consumer Segments

30%

25%

20%

15%

10%

5%

0% True New Green Affluent Young Ovewhelmed Unconcerned

Naturals Mainstream Healers Recyclers

Nevertheless, some behavioral impact of the new green mainstream’s growing interest in environmentalism is evident in that the consumers in this segment are more likely than average to have purchased an earth-sustainable product or vis- ited a health food store/supermarket in the past month. However, availability remains a barrier to increased purchasing of organic products.

With the exception of their heightened interest in environmental issues, the new green mainstream tends to mirror the total population. The only differences in their psychographic profile relate to social and environmental consciousness, as well as a tendency to stand up for what they believe in. Similarly, with the exception of being slightly underrepresented among the younger age group (under 35), their demo- graphics do not differ from the population as a whole.

The Affluent Healers: well-educated, upscale, well-being focused, family and goal oriented. The affluent healers are high-income. They are better educated.

Myths and Realities of the ‘New’ Green Economy ENVIRONMENTAL DUALITY MANAGEMENT /Winter 1996 / 53

Young recyciers tend to espouse

environmental concern, yet their

behavior is somewhat mixed.

They are managerial. They are more con- servative. If you would pick the leaders in the United States, many of them would be in this segment. They are not just healers, they are influencers. Whatever they do, they do well. They have large disposable incomes, and they are willing to pay pre- miums for value. These are the people who, if they start leading the charge, will have a lot of people following them.

Even though they represent only 12 percent of the population, they have a tre- mendous amount of disposable income. They are a much greater opportunity in terms of buying power.

They are not now concerned about the environment. They would like to help the environment and see it as an important concern, but it is not among their top concerns. They are interested and sincere, but they are cynical about the hype surround- ing many environmental initiatives. They are sophisticated and educated enough to understand the difference between spin and real change. They want real change.

Nutrition and health are much more important to this segment. If they perceive added nutritional value associated with earth sustainability, they will be more in- clined to purchase earth-sustainable products. This segment is driven by personal well-being, which they link to nutrition and exercise, but not to environmental issues.

Affluent healers tend to be women and are less likely to be under 35 years of age. They are the most upscale segment, in that they are highly educated, have high income, and tend to be employed in managerial/professional/executive occupations. Affluent healers are most likely to live in large urban/suburban markets and in the Pacific time zone.

Young Recyclers: never married, reject paying a premium. They are 10 percent of the population, and compose a secondary target for environmentally sound products. This group focuses on broad environmental issues, largely related to recycling. They are less involved with issues specifically

relating to the food supply, and conse- quently have limited interest in organic or earth-sustainable foods.

Young recyclers tend to espouse environmental concern, yet their behavior is somewhat mixed. They claim to seek products made with recycled materials and prudently packaged. But they are not steadfast in this regard in that they are no more likely than the total population either to refuse to buy products that are over- packaged or to have bought recently or to express interest in buying an earth-sustainable product.

Similarly, their attitudes and behavior toward food and nutrition are still in for- mation. While stating concern about nutrition, they have not necessarily modified their diet and prefer cooking foods that require little preparation.

The Unconcerned and Overwhelmed: apathetic, reject that chemicals harm the environment, not optimistic, economically “just getting by.” A significant segment of Americans do not care about the environment or about the food they eat. The unconcerned (18 percent) are generally apathetic and reject the idea that chemicals harm the environment. The overwhelmed (30 percent) are too concerned about personal economic survival to worry much about survival of the environment. These two groups not only do not care about chemicals in the foods they eat or other environmental issues, but also are even skeptical that alternative farming methods are a viable option. The unconcerned and overwhelmed do not represent opportunities for earth-sustainable products at this time.

CONCLUSIONS The research shows that, when it

comes to buying behavior, the environment lies outside the chief concerns and core purchase criteria of most consumers. This has caused marketers to become dis- missive of the earth-sustainable market. This perception is inaccurate and short-

W / Winter 1996 / ENVIRONMENTAL DUALITY MANAGEMENT Harvey Hartman

sighted. The discrepancy between attitudes and behavior is as much an indica- tor of latent potential as it is of hyperbole. Instead of waiting for consumer education and resulting buying behavior to catch up with green products, marketers must repo- sition these products to match the core purchase criteria of today’s consumer. If quality of a product is the consumer’s main concern, marketers need to emphasize the environmental attributes most attributed to quality; currently these are related to water and absence of pesticides. If consumers demand convenience, marketers must increase the distribution of earth-sustainable products. Most important, marketers must realize that, though consumers differ widely in their education, attitudes, and purchase criteria, most are within reach. Consumers are the missing link, and they, more than any other player in the current

Myths and Realities of the ”New’ Green Economy

environmental drama, will be the engine driving the changes that can help heal an ailing mother earth.

NOTES The Hartman Report identifies this segment as the “true naturals,” who make up 7 percent of today’s food market. This 52 percent majority is made up of four very diverse consumer segments. See Exhibit 6. The final section of this article discusses the most important purchase criteria of the six consumer segments.

~ ~ ~~~

Harvey Hartman is President of The Hartman Group, an environmental marketing consulting firm in Bellevue, Washington. Bridging business and the environment, The Hartman Group has assisted Fortune 500 companies in understanding environmental issues and consumers. He is a regular contributor to national business and environmental publications and delivers professional and academic lectures about the green market

ENVIRONMENTAL OUALITY MANAGEMENT /Winter 1996 / 55

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Myths and realities of the “new” green economy