Sustainability sells in the US consumer market - The McKinsey Podcast Recap
Podcast: The McKinsey Podcast
Published: 2023-06-29
Duration: 1530
Guests: Vineet Doshi, Sherry Fry, Steve Noble
What Happened
A joint study by McKinsey and Nielsen IQ reveals U.S. consumers are increasingly purchasing products labeled as good for the planet or society. This trend spans across numerous consumer packaged goods (CPG) categories, and the data indicates that consumers are backing up their claims with their wallets.
Vineet Doshi, Sherry Fry, and Steve Noble discuss the findings from five years of sales data covering 600,000 SKUs across 32 CPG categories. They highlight that many categories show positive growth for products with sustainability claims, even for private label brands which were not initially expected to lead this growth.
Sherry Fry explains her role as Vice President of Total Wellness at Nielsen IQ, emphasizing the convergence of personal health, planetary health, and social responsibility in consumer behavior. This convergence was accelerated by the pandemic, and Fry's observations are supported by the study's findings.
Steve Noble shares that business leaders are particularly interested in the specific ESG claims that correlate with higher sales in particular categories. There's a broad interest across different stakeholders, including CPG companies and retailers, in understanding these insights for strategic advantage.
The study found that price premiums for sustainability claims range across categories, with some products like personal care having higher premiums than others like center store grocery. Despite economic concerns, the data suggests that these premiums do not deter consumer spending on sustainability.
One key finding is that companies investing in multiple ESG pillars, such as environmental stewardship and animal welfare, tend to see double the growth compared to those focusing on a single aspect. The report encourages companies to integrate sustainability into their core business strategies to capture long-term consumer loyalty.
Key Insights
- The McKinsey and Nielsen IQ study shows that consumer spending on products with sustainability claims has increased across various CPG categories. This trend is evident in both branded and private label products, with private labels showing unexpected growth in this area.
- Price premiums for products with sustainability claims vary by category, with personal care products often commanding higher premiums than grocery items. Despite these premiums, consumer spending on sustainable products remains robust, even amid economic uncertainties.
- Companies that engage with multiple sustainability pillars, such as environmental and social claims, see twice the growth compared to those focusing on a single aspect. This suggests that broader ESG integration can lead to greater market success.
- Business leaders are using the report's insights to identify which specific ESG claims drive sales in different categories. This information is valuable for strategic planning, as it highlights opportunities for differentiation and collaboration in the market.