Market Focus: Consumer Packaged Goods — From Organic Goods to Sustainable Ones

What makes the flagship product from consumer-goods company Annie’s Homegrown stand out from its big-brand counterparts? The use of farm-fresh ingredients is certainly a plus for Annie’s macaroni-and-cheese product, as is a label prominently identifying the contents as “totally natural.” But Annie’s has a corporate backstory that, say, Kraft just can’t match.

Cofounded in 1989 by Annie Withey, an organic farmer (who also happened to be a mother of two), the company has since expanded its product line to include items such as snack crackers and gluten-free pastas. The success of Annie’s Homegrown underscores a larger trend in the consumer packaged goods (CPG) industry—an unmistakable shift toward organic products, green marketing, and sustainability efforts. (See our features this month for more on green strategy and marketing.)

Laurie Demeritt, the president and chief operating officer of consumer-research firm The Hartman Group, says that the acceleration of growth within CPG’s organic sector peaked in 2006, when 73 percent of United States consumers purchased organic goods. Since then, Demeritt says, growth has been steady, eventually reaching saturation. CPG vendors that want to stand out now need another card to play.  

“Organic is not really enough anymore—it’s the baseline of what you need,” Demeritt argues. “You have to do more to tell the rich emotional story behind it.” Withey’s readymade tale—how she created all-natural macaroni for her children—helps build emotional connections with consumers, Demeritt says. People feel as if they know this particular manufacturer—and they trust its brand and products as a result.

The Hartman Group classifies consumers and their organic purchasing behavior into three groups: Periphery, Midlevel, and Core. A few years ago the Core group delivered the majority of growth within the sector, according to Demeritt; now, the Midlevel rules the day. Midlevel consumers buy organic on a frequent or occasional basis; Core consumers do so on a daily basis and identify with organic products on a deeper level. In fact, Demeritt says, the organic market is now so mainstream that the Core is moving “beyond organic,” targeting sustainable manufacturing and ecocentric packaging. This trend, according to The Hartman Group, will soon impact the entire CPG industry. 

“The Core consumer is becoming somewhat skeptical of organic,” Demeritt says; the segment is now focused on the stories behind the products. They may be attracted to narratives similar to that of Annie’s Homegrown, or find fair-trade practices or local production appealing. And while Demeritt suggests the Midlevel segment is far less susceptible to organic skepticism, even those consumers are looking beyond organic labels and expressing curiosity about corporate behavior ranging from sustainability to the treatment of animals. 

So what’s driving this transition? Susan Viamari, Times & Trends editor with Information Resources, Inc. (IRI), and author of the report “Sustainability: CPG Marketing in a Green World,” says that a concern for health and wellness impacts green purchasing, and the corporate side sees financial as well as environmental benefits in sustainable packaging and marketing. 

Organic may have successfully entered the consumer lexicon, but Demeritt says sustainability is not yet a word consumers typically use. The word responsibility goes over better, she says, especially with companies that think “green” is at the top of consumers’ minds these days. “In actuality, that’s far along the pathway when it comes to consumers,” she says. “They first think about personal health, and then they think about social benefits, like how the companies treat their employees, animals, [and] workers in the plants.” 

For CPG clients inquiring after marketing strategies, The Hartman Group shies away from using the word natural, which is vague and often deceptive. Instead of simply slapping buzzwords onto labels, Demeritt urges companies to market organic efforts by specifically highlighting unique ingredients or ecofriendly practices. Even here, she says, romantic stories resonate: Snack-food maker Frito-Lay, for example, has started tracing the potatoes in its chips back through the supply chain to a particular place and producer.  

IRI’s Viamari contends that consumers no longer merely glance at nutritional data; instead, they examine packaging and evaluate a company’s ecocentric efforts. “One out of three consumers is looking for biodegradable packaging,” she says. “It really is top of mind for consumers today.” But packaging is not enough to make a product sustainable. Viamari predicts companies will soon echo the enterprisewide sustainability efforts introduced by megaretailer Wal-Mart. And businesses will jump once the economy improves, she says. 

In the meantime, Viamari says, there’s an education opportunity for marketers to help consumers understand the jargon around green marketing. In particular, marketers should help consumers answer the following questions: What is fair trade? What makes a product organic? What does sustainable really mean? And, most important, what does it mean for me? 

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