The U.S. agriculture industry accounts for an estimated 10.5% of all U.S. greenhouse gas emissions, according to the U.S. Department of Agriculture. But while improving the sustainability of large-scale agriculture has long been a focus for many growers, manufacturers and retailers/distributors, consumer awareness, engagement and willingness to pay for sustainable products are growing rapidly. This growth has potential market implications for both upstream agriculture and food companies — and their investors.
That’s according to a recent survey conducted by L.E.K. Consulting, which explored changing consumer views around sustainability and the related choices that consumers are making with their wallets.
Some 30% of U.S. consumers surveyed said that sustainability is “an integral part of my identity” or “a core value to me,” up from just 21% three years prior. And an additional 36% of consumers said that “Sustainability is important to me, and it is increasingly influencing some aspects of my daily life,” a rise of 4 percentage points from three years ago. The results were largely the same across demographic groups; Gen Z, Millennials, Gen X and Baby Boomers all exhibited similar levels of engagement around sustainability with their survey answers (see Figure 1).
U.S. consumers are spending roughly 20% of their food and beverage purchases on sustainable products, on average. But consumer perceptions of what sustainability means in food production vary widely. Just over 15% of consumers rate “food and diet” as the aspect of daily life where they think sustainable choices should be prioritized, behind both waste and recycling (32%) and home energy usage (24%).
That said, the likelihood that consumers will switch brands or products due to sustainability, environmental concerns or ethical considerations is relatively high, at approximately 54%. Younger and wealthier consumers skew even higher, at more than 60%.
Consumers’ perceptions of sustainability primarily come from product packaging, news/media sources and scientific journals. Still, in light of factors such as incomplete information and limited choice, consumers perceive choosing sustainable options around food and diet as requiring relatively greater effort compared to other areas.
Perhaps most importantly, more than half of U.S. consumers say they are willing to pay some form of premium for sustainably produced goods — and when it comes to food products, that premium is anywhere from 30% to 40%, on average.
While consumers can sometimes exaggerate their willingness to commit to — and pay for — sustainable options, our survey makes clear that not only is sustainability important to them, but they also want more sustainable food choices, complete with authentic sustainability stories and the data to back them up. In light of that broad appeal, there are significant opportunities for food and beverage companies, retailers and upstream ingredient manufacturers to emphasize sustainability in their products and in their messaging.
In the meantime, consumers have varying perceptions of what makes food sustainable. This presents an opportunity for upstream food and agriculture companies to provide better definitions, higher standards and increased transparency that will help consumers make better-informed choices.
Indeed, the opportunity that sustainably produced food presents is not limited to consumer packaged goods brands, but also exists for grocery retailers, foodservice companies, and many of the upstream suppliers and producers on which they rely. It also, of course, extends to their investors.
Sustainability is becoming increasingly important in all facets of modern life. And as our latest sustainability-focused survey clearly shows, when it comes to their food, consumers are willing to pay for it.