Adding ethical value

by Allison Gibeson
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While interest in ethically produced and sourced foods is increasing, consumers are not necessarily willing to pay a price premium for the products, said Lynn Dornblaser, director of CPG Trend Insight at Mintel, Chicago.

“Companies are always looking for ways to stay attached to the consumers who buy their products,” Ms. Dornblaser said. “One of the ways to do that … is to have products that are ethically responsible, whether it’s good for the environment or fair treatment of animals or fair treatment of humans.”

To this end, the Great Atlantic & Pacific Tea Co., Montvale, N.J., recently introduced its Mid-Atlantic Country Farms line of locally raised chicken, turkey and beef products, while Austin, Texas-based Whole Foods Market announced the fresh beef, pork and chicken sold in its meat departments are now certified under a 5-Step Animal Welfare Rating system, a program of the Global Animal Partnership that includes provisions on how the animals are raised. In addition, Niman Ranch, Alameda, Calif., operates with the motto “Raised with Care,” and the company promotes its ethical animal practices.

Even though interest is increasing for such products in the United States, the demand is much more established in Europe. Ms. Dornblaser said part of the reason is because the U.S. consumer has a poor understanding of where the food supply comes from. But she said she sees this changing with the movement toward eating more local foods. With the trend comes an increased use of third-party certification logos, which she said many companies are using as they seek to lend credibility to their claims.

This summer the Humane Society of the U.S. and the United Egg Producers announced an agreement to work together for new legislation for all 280 million hens in U.S. egg production. The proposed legislation would require conventional cages to be replaced with a new housing system that provides double the amount of space currently allotted, require all egg-laying hens to be provided with environments that will allow them to express natural behaviors, prohibit withholding of water or feed for molting to extend the laying cycle, prohibit excessive ammonia levels in hen houses and make provisions for labeling products clearly based on how the animals are raised.

Ms. Dornblaser said con-sumers don’t truly understand what free-range and cage-free mean. She said consumers often visualize animals roaming free around on a small farm when they hear these terms, and that’s not accurate. Overall, consumers are skeptical about what the terms actually mean.

Ms. Dornblaser said Mintel polled consumers and asked if they would like and would be willing to pay slightly more for products with a reduced environmental impact, and only 18% responded yes. She said when consumers were asked if a product having a reduced environmental impact is important to them, at least 50% of consumers said yes — they just change their minds when it comes to paying a premium for it.

Ms. Dornblaser said the Coca-Cola PlantBottle made by Coca-Cola Co., Atlanta, is a good example of a successful ethical product that doesn’t come at a price premium. In addition, all Cadbury chocolate bars in the United Kingdom are Fair Trade, and she said she wouldn’t be surprised if this eventually happens in the United States.

“As the market gets in-creasingly competitive and as companies are looking for more ways to differentiate themselves from their competitors, I wouldn’t be surprised if environmental concerns aren’t one area many companies look at to help gain and retain shoppers,” Ms. Dornblaser said.

According to Technomic, Chicago, restaurants also are looking to offer ethical menu items with McCormick & Schmick’s offering Fresh Catch Friday, Chipotle offering naturally raised beef and chicken, Macaroni Grill offering free-raised veal and Culver’s offering Midwest-raised beef.

Both Ms. Dornblaser and Ron Paul, president and chief executive officer of Technomic, said kosher designations also convey ideas of ethical treatment of animals to consumers whether or not this is actually the case.

Of all ethical claims in retail products, environmentally friend-ly packaging is the top claim with 2,894 such product introductions in 2010, up from 1,454 in 2009, according to Mintel’s Global New Products Database. Ms. Dornblaser said the increase in packaging claims mainly is due to companies marketing products better as opposed to major changes being made. There were 447 environmentally friendly new product claims in 2010, up from 262 in 2009.

In the future, consumers may be willing to pay more for these products, she said.

“Consumers are becoming much more aware of the wider world around them, and that helps them then find these issues important and justify an additional expense,” Ms. Dornblaser said.

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