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Market failure for "green" household products


I received an interesting email this week from the Product Policy Institute’s Bill Sheehan quoting from two media articles on the lackluster market performance of eco-friendly products. Of course, an issue for consideration is that people can make their own effective and eco-friendly home cleaning products form vinegar and water, etc. for pennies on the dollar. (Recipes are available on many municipal waste management websites.)
Writes Sheehan, “What if ‘green’ products were the only choice, and legislation created a level playing field so that all producers had to meet minimum performance standards as a condition of sale? Here are two current articles – one from the New York Times the other from Resource Recycling — with evidence that voluntary initiatives are not working…”
New York Times
April 21, 2011
http://www.nytimes.com/2011/04/22/business/energy-environment/22green.html?ref=andrewmartin
As Consumers Cut Spending, ‘Green’ Products Lose Allure
By STEPHANIE CLIFFORD and ANDREW MARTIN
When Clorox introduced Green Works, its environment-friendly cleaning line, in 2008, it secured an endorsement from the Sierra Club, a nationwide introduction at Wal-Mart, and it vowed that the products would “move natural cleaning into the mainstream.”
Sales that year topped $100 million, and several other major consumer products companies came out with their own “green” cleaning supplies.
But America’s eco-consciousness, it turns out, is fickle. As recession gripped the country, the consumer’s love affair with green products, from recycled toilet paper to organic foods to hybrid cars, faded like a bad infatuation. While farmers’ markets and Prius sales are humming along now, household product makers like Clorox just can’t seem to persuade mainstream customers to buy green again.
Sales of Green Works have fallen to about $60 million a year, and those of other similar products from major brands like Arm & Hammer, Windex, Palmolive, Hefty and Scrubbing Bubbles are sputtering. “Every consumer says, ‘I want to help the environment, I’m looking for eco-friendly products,’ ” said David Donnan, a partner in the consumer products practice at the consulting firm A. T. Kearney. “But if it’s one or two pennies higher in price, they’re not going to buy it. There is a discrepancy between what people say and what they do.”
For instance, a 32-oz bottle of Clorox Green Works All-Purpose cleaner is $3.29 at Stop & Shop. A 32-ounce bottle of Fantastik cleaner, by contrast, costs $2.89.
Indeed, outside a Whole Foods Market in the Chicago suburb of Evanston, June Shellene, 60, said she did not buy green products as often as she did a few years ago.
“People are so freaked out by what is happening in the world,” she said, before loading her groceries into a Toyota Prius. Of green products, she said, “That’s something you buy and think about when things are going swimmingly.”
Sales in most consumer-products categories dropped off during the recession. But according to an analysis by Sanford C. Bernstein & Company, certain green products have fared worse.
“You see disproportionately negative impact from products like Green Works, out of the big blue-chip companies that have tried to layer a green offering on top of their conventional offering, and a relatively better performance from the niche players who remain independent,” said Stephen Powers, an analyst at Bernstein. Using data from the Nielsen company, Bernstein looked at sales for nearly 4,300 items in 22 categories, like cleaning spray, liquid soap, bathroom cleaners and detergents. It studied monthly sales from March 2006 to March 2011, the most recent data available. (Nielsen’s data includes mass market, grocery stores and drugstores but excludes Wal-Mart.)
Bernstein found that the market shares of green products generally were down from their peak — especially those offered by the big consumer-products companies. But the market share of the independent brands, like Method and Seventh Generation, is starting to increase relative to the shares of traditional brands’ green products in categories where they compete.
“In terms of the big players like Clorox, there’s no doubt that they’ve de-emphasized the brands relative to their early aspirations, and that’s reflective of what they are seeing from the consumer,” Mr. Powers said.
Green products are more expensive because the ingredients tend to cost more than their more conventional counterparts, and transportation costs are higher too because they are sold in smaller volumes than the big brands.
Green household products took off in the 1980s, with brands like Seventh Generation and Simple Green, which have gained a loyal following. As retailers like Whole Foods expanded in the 1990s, interest in the environment increased and competitors joined the fray.
Predicting that the market would continue to increase, mainstream manufacturers like S.C. Johnson, Clorox and Church & Dwight introduced eco-friendly versions of their products around 2008.
But after an initial lift, sales largely dropped off, and the introduction of products slowed during the recession.
The number of household cleaners with green claims introduced in 2008 was 144, up from 29 in 2007. By 2009 that had dropped to 105, according to Mintel, a research firm. Green dishwashing liquid followed a similar pattern, with 14 introductions in 2007, 85 in 2008, then 58 in 2009.
Some of the manufacturers pulled back on advertising, too.
Clorox spent more than $25 million advertising Green Works in both 2008 and 2009, but just $1.4 million in 2010, according to Kantar Media, which tracks advertising spending.
Similarly, S.C. Johnson introduced Nature’s Source in 2009. That year, it spent $15.4 million advertising the products, more eco-friendly versions of its brands like Windex and Scrubbing Bubbles.
In 2010, spending to advertise the line fell to zero, according to Kantar.
Sales have gone south, too. In the 12 months through March, sales of Nature’s Source Scrubbing Bubbles all-purpose cleaner have dropped 71 percent, to $589,614, according to the SymphonyIRI Group, which tracks sales at mass-market United States stores, excluding Wal-Mart. Nature’s Source Windex dropped 35 percent, to $1.8 million. Nature’s Source Scrubbing Bubbles tub and tile cleaner dropped 61 percent, and Nature’s Source toilet bowl cleaner dropped 78 percent.
And that was as prices on all of those items were reduced.
Officials at S.C. Johnson did not return calls seeking comment. At Church & Dwight, its Arm & Hammer Essentials multisurface cleaner, glass cleaner and laundry detergent are no longer being produced for the United States market, less than three years after they were introduced.
“Arm & Hammer Essentials cleaners may have been ahead of their time,” said the chief marketing officer, Bruce Fleming, in an e-mail. Its concentrated cleaners, for instance, were sold with an empty spray bottle, and consumers had to add their own water to make the cleaning sprays.
“We haven’t given up on launching innovative, earth-friendly products, we’ve just taken a step back to think about how and when consumers will be ready,” he said.
Heidi Dorosin, vice president for marketing for the cleaning division of Clorox, said Green Works’ sales had been battered by the recession and inconsistent pricing. The company has lowered its prices and made them more consistent, she said.
Sales held up at smaller, and more expensive, brands like Method and Seventh Generation, Mr. Powers suggested, because those customers tended to be more affluent and more wedded to environmental causes. Both companies say they had double-digit growth in 2010 after a flat year in 2009.
Back in Evanston, shoppers reflected the changing dynamics of the green marketplace. A handful said they continued to buy green products religiously while many others said the cost was prohibitive. Sarah Pooler, 55, said she did not normally buy green products but would pick them up if they were on sale.
“Bottom line, if it’s green and it’s a good deal, I’ll buy it,” said Ms. Pooler, outside a Jewel-Osco store.
Resource Recycling
<a href="http://resource-recycling.com/node/1152“>http://resource-recycling.com/node/1152
Survey: most green marketing misses the mainstream
By Jake Thomas
A new study finds most efforts to motivate consumers to green their behavior are falling flat, and another finds that just under half of shoppers are inclined to buy items made from recycled materials, but most won’t put it in the recycling bin when they are done with it.
A study by OglivyEarth suggests that most marketing aimed at encouraging consumers to make greener choices is not only not working, but is hardening perceptions that such concerns are for the rich and individuals belonging to a fringe cultural stereotype. The study found that 82 percent of Americans “have good green intentions.”
However, only 16 percent actually walk their talk. The report refers to this segment of the population as “Super Greens.” The authors of the study dub the middle 66 percent, which is concerned about the environment, but won’t take action, the “Middle Green.”
The study argues that this breakdown could be a big problem for many large companies that are staking their futures on offering greener products and services, and makes a number of suggestions aimed at helping reach the “Middle Green.” It recommends that marketers “restrain the urge to make going green feel cool or different and make it normal,” citing concerns from consumers that making environmentally-conscious decisions are for “rich elitist snobs” or “crunchy granola hippies” and not “everyday Americans.”
It also encourages marketers to highlight the practical benefits of green choices, while making them more affordable. Additionally, the report’s authors encourage companies to “bribe shamelessly,” pointing specifically to Recyclebank’s rewards program.
Another survey by Perception Research Services also paints a discouraging picture of American consumer behavior, showing that only 38 percent of shoppers feel that they should be responsible for recycling packaging, down from 42 percent in 2009.
Additionally, the survey found that 36 percent of consumers expected environmentally-friendly packaging to cost more, with 51 percent expressing a willingness to pay for it and 69 percent saying that it shouldn’t cost more.
Interestingly, while only 28 percent of respondents said they like to choose more environmentally-friendly packaging, only 48 percent thought manufacturers should produce more of it and nearly a third thought the government should impose more environmental standards for packaging.
Additionally, shoppers reported that seeing a “made from recycled materials” claim on a product makes them more interested in buying it, but only 17 percent said they check to see if a package is recyclable before heading to the checkout stand. However, only one-third report that they generally do not recycle packaging.
“It’s becoming clear that while consumers may voice concern for the environment, most appear unwilling — at the moment — to make any major sacrifices to make a difference. They’d rather rely on manufacturers to provide products and packaging that they can feel good about, without changing their behavior, giving up performance, or paying more,” said Jonathan Asher, senior vice president of PRS in a prepared statement.


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