Consumer behavior analytics company Circana recently published its ‘Innovation Pacesetters’ report, which analyzes product innovations in 2022 compared to 2021 across major European markets such as the UK, Germany, France, Spain, Italy, and the Netherlands. Despite an overall decline of 16% in product launches since 2021, sustainability has emerged as a normalized trend among the public.
The report highlighted that 68% of consumers actively notice products that are better for the environment, while 61% pay attention to products that benefit others. Several factors contribute to this shift in consumer behavior. Ananda Roy, Senior Vice President at Circana, noted that sustainability is deeply ingrained in the ethos of younger consumers, supported by stringent EU regulations that retailers and brand manufacturers must comply with. Additionally, there is a high level of awareness and education regarding the impact of commercial activities on the environment, communities, and individuals. The prevalence of sustainable products has also increased, making non-sustainable products stand out negatively in the market.
Interestingly, 60% of consumers perceive innovative companies as more sustainable. This perception has prompted manufacturers to emphasize their sustainability efforts through packaging, ingredient sourcing, the use of low-impact materials, and initiatives that support local communities. Manufacturers understand the importance of meeting consumer expectations, satisfying retailer demand, and justifying better value.
However, the credit for driving the sustainability trend belongs to retailers rather than consumers. Conforming to regulations plays a significant role in this regard. Retailers are actively reducing energy consumption and waste, meeting expectations from regulators and local communities, especially regarding single-use plastics and food waste. Moreover, retailers are preparing for compliance with the proposed Eco-design for Sustainable Products Regulation (ESPR), an EU initiative aimed at enhancing circularity, energy performance, and overall sustainability.
The report also touches on the declining growth of the alternative dairy sector. Alt-dairy sales witnessed a 5% growth in 2022, compared to 10.1% in 2021. The sector’s value increased by 11% in 2022, slightly lower than the 11.3% growth observed in 2021. Ananda Roy suggested that the alt-dairy category has reached a saturation point after years of double-digit growth. Factors contributing to this plateau include higher prices, the perception of ultra-processed foods as unhealthy, unsustainable practices related to high food miles and impact on local communities and the environment. Additionally, the upcoming European Commission’s regulation banning the use of the word ‘milk’ for alt-dairy products is expected to negatively impact demand.
Despite this decline, certain alt-dairy brands, such as Upfield, have managed to achieve substantial success. Upfield leveraged the plant-based trend and strategically targeted promotions during a period of rising butter prices. The brand’s sales increased from 12 million in 2021 to over 19 million in 2022. Factors contributing to Upfield’s success include the recognition of its legacy brand, reformulation of its product using rapeseed oil to reduce calories, stable pricing during a period of inflation, well-timed promotions, and strategic distribution.
In conclusion, sustainability has become a normalized trend in the food and beverage industry. Consumers actively seek products that are environmentally friendly and beneficial to others. Retailers play a crucial role in driving sustainability by conforming to regulations, reducing energy consumption and waste, and preparing for proposed regulations like the ESPR. The alternative dairy sector, while experiencing a decline in growth, has seen successful brands through strategic actions and differentiation. Overall, these trends reflect the changing consumer landscape and the evolving priorities of the food and beverage industry.
