Today’s consumer wants to know it all. From ingredients to production practices, manufacturers are now pressured to reveal all their food manufacturing methods to their customers. However, the food companies that took on this challenge have been reaping the rewards during the past year, according to Nielsen. The market research organization claims that product transparency practices are driving sales in the fast-moving consumer goods (FMCG) market.
Nielsen’s report, titled “It’s Clear: Transparency is Driving FMCG Growth,” highlighted three key attributes that consumers are seeking transparency in: sustainability, processing claims (organic, natural) and ingredients. Food companies that incorporated these attributes into their product packaging have been experiencing significant sales growth.
According to the report, 64 percent of US households buy sustainable products, which is a four percent increase from 2017. Top cities that have demonstrated significant interest in sustainability include Boston, Hartford, New York and Denver. The highest sales growth (14 percent) comes from food products with sustainable farming claims and the second highest growth (eight percent) is from products with social responsibility claims. Additionally, items with sustainable resource management claims experienced a sales growth of six percent and sales of sustainable seafood went up by three percent.
Nielsen claims that the majority of sustainable shoppers look for products online. About 67 percent of health-focused and environmentally-friendly consumers were found to be more digitally engaged than the average US consumer. Out of these sustainable shoppers, 22 percent were more likely to use a handheld device to shop, 12 percent were more likely to use a handheld device in-store and 11 percent prefer shopping online over in-store.
Not all shoppers are sustainability-focused, however, Nielsen finds that 68 percent of Americans find importance in environmental sustainability. In fact, 67 percent plan on prioritizing healthy and sustainable food purchases this year and 48 percent plan on changing their food eating habits to reduce their environmental impact.
With all this attention on sustainability and the environment, it’s easy to see why major food companies have been reinventing their food manufacturing processes to reduce their environmental impact. Nestlé, being one of the largest CPG companies in the world, joined this trend in spring. The company plans on using 100 percent recyclable or reusable packaging by 2025. A similar packaging initiative was launched by McDonald’s earlier this year when they announced their plans to use sustainable packaging for all their products by 2025.
However, with the sustainability trend growing and evolving rapidly in the food space, recyclable plastic packaging might not be enough in the near future. The environmental group, A Plastic Planet, sparked the interest of eco-friendly consumers in spring when they made headlines for their involvement in introducing the world’s first plastic-free grocery store aisle. The group also recently introduced a plastic-free Trust Mark logo for food manufacturers that use plastic-free packaging. As this logo becomes more popular in the food industry, manufacturers might have to ditch plastic use altogether in order to attract eco-friendly consumers.
Modern consumers are a lot more inquisitive than previous generations and when they are armed with the power of the internet, it’s really difficult to withhold information from them. This is why they are aware of the environmental impact of food production techniques and the negative side effects of preservatives and pesticides. This information drives 67 percent of American consumers to want to know everything about the food products they consume. In fact, 46 percent of US shoppers claim that information on food packaging has a direct impact on their purchasing decisions.
According to Nielsen’s research, key production claims such as “organic,” “natural” and “free from” have been catching a lot of consumer attention. These production practices have caused double-digit organic sales growth in their categories during the last five years. This trend is why organic products are no longer exclusive to specialty and premier stores. In fact, Nielsen claims that this expansion caused premier grocery stores to lose a 3.4 percent share in organic product sales over the past two years, which makes warehouse/club stores such as Costco the leading suppliers of organic products.
Although sustainability and natural/organic claims are important to consumers, the ingredients list plays a significant role in the purchasing decisions of consumers. When shoppers see a product that they are unfamiliar with, they instinctively look at its ingredients list to see if there are any unappealing ingredients in the product, regardless of any on-package claims and logos. Nielsen said that this occurs because consumers believe that claims such as “all-natural” have no official regulation to back them. This means that stamping an all-natural logo on a product might attract a consumer to its packaging, however, the ingredients are what will influence them to purchase it.
In fact, it was recently found that many consumers do not believe in food companies that claim that their products are “all-natural.” According to Nielsen’s 2017 global sustainability survey, 18 percent of consumers never trust “all-natural” marketing claims and 67 percent said that they sometimes trust them. Only 15 percent of US consumers said that they completely trust such claims. However, FDA-backed product claims such as “low sodium,” “heart healthy” and “low sugar” are trusted by the majority of consumers.
This means that food manufacturers must be honest with their “all-natural” claims and avoid using unfamiliar or chemical ingredients.
With about half of US consumers saying that packaging claims affect their purchasing decisions in-store, food companies should look into implementing these three key marketing claims. However, they should keep in mind that consumers are armed with information and false claims would likely lead to defamation and lawsuits.