How recession changed the green marketplace

What are the consequences of the evaporation of wealth - or even the perception of the evaporation of wealth?

Here's one.

"In the last few years, Canadians who artificially had a little bit more wealth, or a feeling of wealth, were emotionally very willing to pay a premium for green products," says Joe Manget, senior partner and managing director with The Boston Consulting Group in Toronto.

But that has changed. "The reality is that in this economic environment people aren't willing to pay a premium - and I think they're right," he notes.

In a report released today, The Boston Consulting Group reveals that while Canadians place a high level of importance on going green in their purchasing decisions - in fact, green has gone mainstream - they are far less keen to open their wallets.

While 35 per cent of Canadians "mainly" or "often" include environmentally friendly products in their purchases, that number grows to 82 per cent when Canadians who "sometimes" look for those products are included. However, only 18 per cent say they accept a higher price point for green products, and 78 per cent say they are unwilling to pay the top-up price that is often attached to the green option.

Additionally, the consulting group found that consumers report widespread confusion about the green options they are presented with, making it all the more pressing for companies to accentuate the green benefits of their product while at the same time applying downward pressure on pricing.

"I firmly believe we're not going to pay more for products just because they're green," Mr. Manget says. "There has to be some longer-term economic reason to buy a green product."

The green rubric covers five product segments: food and beverage; skin care; energy using products; clothing; and disposables (cleaning products, garbage bags). Each category offers a broad range in consumer attitudes: while fresh meat, for example, ranks highly with consumers who see the product's green credentials as a sign of higher quality, bottled water has sunk to the bottom of the category.

"If somebody can prove to me there's a benefit to organic fresh meat or fruit or vegetables, then I'm still willing to pay a premium," Mr. Manget continues. "People are still willing to say, 'Yeah, these products are better for me and better for my family and I'll trade up in those categories.' "

The premium is shrinking, however, with the arrival of such powerhouses as Wal-Mart Stores Inc. into the category. Call it green treasure hunting.

As for bottled water, Mr. Manget calls that a no-brainer. "If someone tries to sell me organic bottle water I'm going to call BS on that one."

On the non-grocery side, the areas where consumers say they plan to cut back the least are energy efficient appliances and baby care. "The Canadian consumer is actually quite smart about this," he says. "Energy efficient appliances have had a much higher take-up than in the U.S."

Consumers are factoring in energy savings to determine whether what appears to be a price premium today is actually a long-term price discount.

A 20-per-cent premium on an energy saving refrigerator? "That's actually okay," says Mr. Manget. "The companies at risk are the ones where the value proposition just doesn't add up."

A $50 bottle of shampoo? "That would be okay if I only had to wash my hair once a year and I didn't have to use water."

Catherine Roche, managing director in Boston Consulting's Dusseldorf office, says similar sentiments are echoed in the EU countries, which have been in the greening game longer. Seventy-five per cent of respondents said they are not prepared to pay more for environmentally friendly options.

"This notion around whether consumers are willing to pay more for green is clearly something that's under pressure in the downturn," she says. Ms. Roche believes that some of this sentiment is supply-led. "More and more retailers are doing a good job of showing consumers that it doesn't necessarily have to cost more in order to offer green alternatives."

There are, she adds, some minor regional disparities of note: In Italy and Germany, consumers say they're most willing to value green in the fresh food category; in the U.K., consumers look for green strongly in the appliance category.

Mr. Manget says it's a good thing that emotion is leaving the green marketplace. "We're starting to see it become more rational in this economy," he says. "The reality is, people are starting to wake up. They don't have to be green for the sake of being green. Green is actually quite sustainable. ... The companies at risk are the ones where the value for the consumer isn't there."

METHODOLOGY

Research by The Boston Consulting Group is from a survey, completed in March, 2009, and conducted online among 1,100 Canadians, age 18 or older, who do the bulk of the shopping for their households. Global surveys, with matching questions, methodology and time frame, were done in 12 other countries. Canadian comparisons are to a previous survey completed in December, 2008.

How consumers feel about 'green' products

Importance of "green"

Look for and mainly purchase them: 6%

Look for and often purchase them: 29%

Sometimes look for and purchase them: 46%

Rarely look for and purchase them: 15%

Never look for and purchase them: 3%

Willingness to pay

Accept they should cost more, and am willing to pay a premium: 18%

Accept they should cost more, but not willing to pay a premium: 20%

Think they should cost the same, but willing to opt for green products: 58%

Not interested in green products: 4%