The cost of living crisis has significantly impacted consumer priorities.
More than half of households (57%) now say they’re having to spend less on essentials in order to manage rising bills across food, fuel and energy. That makes price the most important consideration for many shoppers browsing stores.
But though they have less cash to spend, that doesn’t mean their concerns around climate change, social impact and ethical business practices have completely fallen by the wayside.
In fact, 78% of consumers say that sustainability remains important to them, according to NielsenIQ.
And that means, despite ongoing uncertainty, food and drink businesses need to continue to focus on environmental and social impact.
Prioritising ESG performance
Any corporate social responsibility (CSR) or environmental, social and governance (ESG) strategy needs to be developed with a solid understanding of the impact of the cost of living crisis on their consumers, of course.
Though there are some signs of stabilisation in the global economic outlook, a high percentage of low to medium-income earners continue to bear the brunt of rising household bills. This has dampened consumer confidence and willingness to spend, with many now firmly focused on price and promotions, and willing to trade down from their favourite brands to private label alternatives if it means saving cash.
This same challenging economic climate has put significant pressure on food and drink businesses. Amid rising costs for ingredients, transport and labour, many have been forced to reduce investments, press pause on innovation pipelines and reduce marketing spend. Even then, they’ve been forced to pass on a proportion of price rises to their end consumers, further amplifying the pressures their shoppers face.
The benefits of investing in sustainability
It can feel counterintuitive against this backdrop to invest in sustainable solutions. But the reality is doing so can provide businesses with greater brand loyalty, healthier margins and savings in their supply chain.
For one, not only do consumers continue to care about environmental impact, they remain willing to spend more on those food and drink businesses that reflect these values.
Over the past five years, products making ESG-related claims accounted for 56% of all brand growth, with products making eco-claims averaging 28% cumulative growth, versus 20% for products that made no such claims, say McKinsey.
Sustainability and ESG performance should therefore be viewed as an invaluable way to drive growth and recover market share despite uncertainty.
The power of a strong overall value proposition
Remember though that while many consumers will prioritise brands that have a strong track record on their ESG performance, the cost of living crisis means they’ll do so while looking for a strong overall value proposition at the same time. Food and drink business should bear this in mind when mapping out sustainable solutions.
For example, ensure any marketing or communications around the environmental impact of a product share both the benefits for the planet, and the benefits for the consumer. Do ethical business practices mean a higher quality product? Do better animal welfare standards contribute to a healthier protein? Or does buying a product allow a consumer to directly benefit their local community?
The long-term gains
Sustainable solutions aren’t only a source of competitive advantage with consumers either. They can also provide long-term ways to improve the resilience of global supply chains and build in greater efficiencies and therefore savings for food and drink businesses. An upside that is never more important than in a challenging economic climate.
Consider how local sourcing can both reduce carbon footprint and cut shipping costs, for example. Or how longer energy consumption in factories can both slash bills and reduce environmental impact.
There are numerous reasons, in other words, why food and drink businesses should continue to prioritise their ESG performance and sustainability, despite ongoing uncertainty. Not only does it retain existing customers and attract new ones, but it can improve margins, drive growth and create supply chains more resilient to future shocks. All which is critical as businesses – and their consumers - navigate the current crisis.
Read part 4 in our Cost of Goods series: Balancing budget cuts and food safety management: strategies for manufacturers, retailers and service providers here.