Will inflation fears cancel out demand for sustainable food and beverage products?

By Oliver Morrison

- Last updated on GMT

A survey of 3000 UK consumers suggests lower prices are more important to promote sustainability than more choice or green labelling. Image: Getty/Dougal Waters
A survey of 3000 UK consumers suggests lower prices are more important to promote sustainability than more choice or green labelling. Image: Getty/Dougal Waters

Related tags Igd Kantar Inflation

With COP26 in full swing, consumer demand for so-called ‘green’ food and beverage products is reportedly on the up. But how does that sit in an environment of rising inflation? Not well, according to industry observers.

Most consumers care about sustainability but are often unable or unwilling to pay more for ‘greener’ alternatives, according to the latest research from Asda.

The supermarket polled 3000 consumers ahead of the COP26 conference in Glasgow​ to understand what lifestyle changes they were prepared to make to reduce their carbon footprint and ultimately help the UK reach its net-zero carbon target by 2050.

More than half (55%) said they would be prepared to make significant lifestyle changes to reduce their carbon footprint. But price remains the single biggest obstacle preventing them from adding sustainable alternatives to their food shopping basket.

When asked what would help them shop more sustainably 76% of respondents suggested lower prices, 56% said greater choice, while 45% said logos telling them what is sustainable would be useful. To underline the importance of making sustainable options affordable, 50% of consumers said they would not be prepared to pay a premium for greener everyday items such as milk and bread.

The findings suggest that greater collaboration is needed between suppliers, manufacturers and retailers to remove the price barrier preventing shoppers from purchasing sustainable products, the supermarket said. Asda’s ‘Greener at Asda Price Promise’, for example, introduced last October, means loose, compact, concentrated or unwrapped alternatives are the same price or less than packed alternatives.

Susan Thomas, Senior Director of Commercial Sustainability at Asda, said: “Our research shows that consumers from all backgrounds care about sustainability, but many cannot afford to buy greener products when they shop. We believe that nobody should be price out of making sustainable choices and our Greener at Asda Price promise aims to remove price as a barrier to purchase. The onus is on supermarkets, retailers and the industry as a whole to work collaboratively to make greener products more affordable. Consumers can also play their part too by embracing greener choices as investment will increase in line with shopper demand.”

Sustainability vs affordability

How likely are shoppers to embrace greener choices at a time of fears about inflation? Grocery prices are rising, with grocery price inflation hitting its highest rate -- 2.1% in the UK -- since August 2020, according to the latest Kantar data.

Kantar Head of Retail and Consumer Insight Fraser McKevitt warned rising inflation is likely to dampen demand for ‘greener’ alternatives. History tells us that once food inflation is above 3% people make active choices to tighten the purse strings, he said. They look to buy more on promotion, from cheaper stores and choose own label over private brands.  

“If inflation continues to ramp up as everyone expects it to at the end of the year and into next, there’s going to be much more of a focus on price,” ​McKevitt told us. “Clearly there are a lot more inflationary pressures in the economy – that’s got to feed through to the shelves at some point.”

While consumers say they have the best of intentions, “only a small number of people are prepared to pay more​,” he noted.

“In our studies we tend to see a third of people are pretty environmentally conscious and actively want something done about it. But having said that about two thirds of people say it’s really difficult because they can’t afford and don’t want to buy more expensive products. That’s the biggest barrier to people acting in a more sustainable way: 59% of people tell us it’s just too expensive.”

McKevitt agreed the onus is now on brands and retailers to make it cheaper and easier for people to shop in an environmentally friendly way.

Household incomes set to effectively stall over the next two years

Data from IGD also suggest inflationary pressures may well impact demand for sustainable food and beverage products. IGD’s latest Shopper Confidence Index has dropped to its second lowest level ever recorded after falling for five out of the last six months. Shoppers are increasingly fearing food price inflation and focusing more on saving money, it noted. IGD Director of Global Insight Simon Wainwright warned: “This further decline in confidence comes at a time when the Office for Budget Responsibility predicts that growth of household incomes, after taking account of inflation, will effectively stall over the next two years.”

Concurrently, according to IGD’s latest findings – the result of a survey of 1500 consumers in the UK – 58% of shoppers are willing to change their eating habits to be healthier and more sustainable, up from 57% in 2020. However, IGD Nutrition & Scientific Affairs Manager Hannah Skeggs recently told FoodNavigator’s Climate Smart Food event​​ that cost continues to remain a ‘huge barrier’ to change. “Thirty-seven percent told us they perceive healthy, sustainable eating to be more expensive,”​ she said.

What’s more, while IGD research indicates there is a ‘significant’ appetite from consumers to be both healthier and more sustainable, just 1% of Brits currently follow something close to the UK government’s dietary guidelines to help consumers achieve a ‘healthy, balanced’ diet.

That being the case, with lower prices the key for consumers to shop sustainably, the outlook for spending on sustainable products does not auger well for the short term at least.

Green has moved mainstream 

However, IGD added that much sustainable food is now mainstream, and these foods are not necessarily more expensive than standard foods. "We’re seeing a huge amount of work from industry to try and address this,"​ said Michael Freedman, Senior Shopper Insight Manager, IGD. "For example, over many years, both retailers and suppliers have worked hard to make mass-market products more sustainable and ethical. For example, Sainsbury’s sells only Fairtrade bananas, Co-op only sells UK-source meats and Cadbury’s sources 100% sustainable cocoa."

He gave more examples: The Coop, for instance, has pledged its meat alternative products will be no more expensive than their meat counterparts. Tesco’s Plant Chef range is also designed to offer easy to prepare, affordable plant-based swaps of traditional family favourite dishes. Sainsbury’s currently has a campaign to encourage shoppers to bulk up meals with lentils and reduce their meat consumption.

Freedman added: "IGD's ShopperVista data shows that the desire and aspiration for healthier and more ethical food is a trend that has been growing over the long-term. Previous periods of economic pressure, for example the credit crunch and recession in 2008 did not see shoppers abandoning this desire and there is no reason to expect they will do this now." 

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