16 Jan 12

Ethical products improving sales in the recession

by Colin Mills, Econometrician

It would be difficult to find too many people that weren’t either affected or aware of the economic issues that are challenging the UK.

Government statistics show that unemployment from July-September 2011 was at a high of 8.3% (National Statistics 2011). Unsurprisingly it has followed that retail sales fell by 0.7% in November (excluding spending on fuel) vs. October (BBC News).

Despite 3 years of negative economic perceptions, there have been some positive stories emerging.  An update on ethical brands showed that in 2010 goods branded as “sustainable” experienced an increase in sales of 8.8% to £46.8bn in 2010. This is compared with a much smaller 0.4% increase in consumer spending over the same period. In 2011 initial figures suggest we have seen another increase that exceeds those of other sectors.

Examples of this performance can be found everywhere, Fairtrade products and eco-friendly power generating methods both experienced an increase in sales by 36% and 386% respectively.

Major brands have picked up on this and acted accordingly, Cadbury has secured Fairtrade recognition for its Dairy Milk bars, others including Kit Kat and Tate & Lyle have followed.

Overall, ethical food and drink sales increased 5.1%, with sustainable fish witnessing one of the biggest increases of 16.3%.

So why are we seeing this pattern? Often “ethical” goods are perceived as more expensive and therefore an increase in sales during economic hardship is the last thing one would expect.

It may be some time before we fully understand why this is happening, but I believe there are some reasons that consumer’s core values are shifting.

Very few people would deny they have cut back since the financial crisis in 2008. Financial considerations have forced consumers to take a more forward thinking approach to their lives and finances. This is where I believe ethical/ sustainable goods have become more attractive, consumers are considering their future more and as a result of a more forward thinking approach they are investing more in the future. Investing in the future doesn’t have to stop at savings, buying sustainable goods is also an investment in the future.

Secondly, some could argue, myself included, that there is added welfare to be gained from feeling good about a sustainable purchase. This added welfare represents better value for money which will be factored into any purchase decisions.

This is a trend that I expect to see continue as consumer health and environmental concerns increase, and despite spare change being at a premium consumers appear to be showing us that sustainable goods are ultimately worth it.