Sustainable products took more market share last year: report

Dive Brief:

Despite high inflation, sustainability-marketed products took more market share in 2022 and now comprise 17.3% of purchases compared to conventionally marketed products, according to a new report from Circana and the New York University Stern Center for Sustainable Business. That’s up 0.3% from 2021.
The five-year compound annual growth rate for the category is 9.48%, almost double that of conventionally marketed goods, which has a growth rate for the same period of 4.98%.
Sustainability-marketed products remain pricier, with a 27.6% price premium compared to conventionally marketed goods. That number is relatively unchanged from 2021’s report, when the price premium was 28%. At that time, the companies said the price difference had decreased by 11.8 percentage points since 2018.

Dive Insight:

Though the price premium on sustainability-marketed products is starting to decrease, some of the decline this past year was due to price increases at conventional brands as they weathered inflation. Some lower-priced conventional products also added sustainable features, though.

“This year’s results definitively show that sustainable products survived inflation,” Randi Kronthal-Sacco, senior scholar at the NYU Stern Center for Sustainable Business, said in a statement. “In a clear nod to changing consumer preferences, we are encouraged to see that several large legacy brands have also begun to adopt sustainable benefits in their product lineup.”

While prices remain higher, some consumers are willing to pay more for the products that suit their values. A Shopify survey released in November found that 40% of shoppers would pay more for eco-friendly items during the holiday shopping season, and 43% were more willing to buy from brands with sustainability practices such as low-waste business operations and carbon-neutral shipping.

Loyalty to brands has particularly shifted among younger consumers. According to a Unilever survey, three-fourths of respondents said that social media content influenced them to adopt more sustainable behaviors.

While NYU and Circana found that spending on sustainability-marketed products continued despite high prices last year, research suggests consumers were pulling back in other areas. An August Morning Consult survey found that 85% of respondents had shifted their shopping habits to account for inflation. Per the survey results, 79% said they looked for discounts, and 77% had reduced their shopping overall.