Monday Marketing Memo

Does the Ethical Policy Paradigm Present a New Model For Food & Beverage Marketing and Retailing in the Coming Post-Organic Era?

Two new studies, one a major survery conducted by the market research firm Business Insight and the other a three month-long survey being conducted by UK retailer the Co-operative Supermarket Group, are bringing the concepts of "Ethical" food and beverage marketing and retailing to the front and center of the industries internationally.

Some Background

Ethical food and beverage marketing refers to a collection of practices expressed via a philosophy of what "good" food and beverage marketing is. These practices include the use of sustainable farming practices, Fair Trade agricultural systems, green packaging, nutritional and environmental certification, local food product sourcing/marketing and a few other concepts which when are taken as a whole make what is being referred to as ethical practices in the food and drink sector. These practices are premised on an ethical philosophy that embraces environmentalism, social justice issues, healthy foods and sustainable principles, in farming, food and drink manufacturing and marketing throughout the supply chain.

Ethical retailing is part and parcel of ethical marketing. They are sisters joined at the hip if you will. Its focus is on selected "ethical" food, beverage and related products (from these ethical growers and marketers) as a retailers product mix. The concept also involves all the behaviors and practices a retailer conducts in its day-to-day retail operations. These include environmental, economic (employee relations for example), store building and operating (green) procedures and a few other concepts which make up both ethical marketing and retailing. Not only is it a group of practices but a retailing ethic as well.

The Ethical Product Marketing Study

According to the study by Business Insight, the "ethical consumer market" is increasingly moving from its beginnings as a niche area catered to by a few specialized food and beverage brands, towards the mass market mainstream. As examples the study sights the fact that food certification and other ethical product labels are now an everyday feature of products sold across Europe and North America, popularized by greater consumer awareness and wider distribution.

The study also suggests the ethical model is growing in the areas of organic brands (becoming mainstream), more Fair Trade brands on the market (including by major packaged goods companies), a growing trend to use sustainable and recyclable packaging, the growing popularity of the grow and buy local movement (food miles) and the consumer rejection of GMO-grown foods and the use of additives in food and beverage products.

The report says the growing adoption of these ethical practices, not only by smaller and medium sized food and drink companies but by large multinational packaged goods corporations, is evidence of a growing movement towards such an ethical food and beverage ethic on the behalf of increasing numbers of consumers internationally.

Ethical Retailing: The Co-op Survey

The survey by the UK's Co-operative Supermarket Group, the largest Co-op retailing group in the world, is an attempt to aggregate the opinion of its members on the issue of ethical food and drink retailing in its stores. The Co-operative group has millions of members and operates 2,700 retail food stores in the UK.

The Co-op mailed survey questionnaires to one million its members on September 3 of this month. Shoppers also will be able to fill out the questionnaires which will be available in-store. Survey questions include food and beverage product, retail and related issues such as food quality, diet, health, animal welfare, community retailing, ethical product sourcing, climate change, green packaging and recycling.

You can read and review the Co-operative Supermarket Group's Ethical Food Policy questionnaire here. Also learn more about the co-ops various retail and other businesses here.

As part of this member-survey the Co-operative group is consulting its members in order to find out what is most important to them in terms of what kind of retailer the co-op becomes. They plan on using the survey data when tabulated as part of a process to create a new retail philosophy for the Co-op. The retailer makes it clear they aren't going to adopt all the recommendations ad-hoc but rather use the member input as part of a multi-level review process. The supermarket operator already is one of the leading "ethical" retailers in the world with extensive green, health and nutrition and related policies and programs.

Paul Monaghan, the Co-ops head of ethics, is leading the research project. He says "the consultation (with members) will be extensive. It will be a very interesting social experiment. the balloting will last for three months and the results will be known next year."

The results of the survey and how the Co-op implements them in its process should be interesting to watch. The retailer is an international leader in terms of how retailers should address ethical and environmental issues. For example, it was the first major retail chain to champion the Fair Trade label and programs when it merchandised the Fair Trade brand Cafe'direct coffee in all its stores in 1992. The Co-op also was the first major retailer to stock Fair Trade bananas in its store's produce departments in 2000. Since then major retailers throughout the world have merchandised Fair Trade coffees, chocolates, fresh produce and other food and beverage items, and it's becoming more common among mass market supermarket chains to offer a selection of Fair Trade items in various categories.

The Co-op also is a leader in using renewable energy in its stores. Its been far ahead of nearly every other retailer in the world in this area. Currently about 75-85% of all 2,700 Co-op stores are powered by a combination of renewable wind and hydroelectric power as opposed to fossil fuels.

The Ethical Policy as Models

The ethical policy paradigm is a way or model of lumping a variety of environmental, social, economic, agricultural, marketing and retailing principles together into a coherent whole. Today we are seeing numerous components or principles of this ethical paradigm being implements across food retail format channels. In the supermarket sector numerous chains such as Safeway Stores, Kroger, Publix, Wegmans and more are adopting many of these principals, especially the green or environmental elements of the ethical retailing policy. The same is true for many mass merchandisers such as Wal-Mart, Target, Macy's Department Stores and more. The natural foods channel (Whole Foods as the leader) is doing the same. Even the C-store channel is getting on-board.

In the food and beverage manufacturing and marketing sector the same is occurring. Food and drink producers are creating green standards for packaging, introducing more all-natural and organic foods, and paying closer attention to Fair Trade, sustainable growing practices and the like. Health and nutrition and the marketing of it is becoming nearly ubiquitous among food and beverage manufacturers of all sizes, especially those who are creating new products that allow for the telling (and labeling) of a positive health and nutrition marketing story.

The Developing Ethical Policy Paradigm

How do we see the ethical product marketing and retailing paradigm developing, especially as it relates to natural and specialty foods manufacturer's, marketers and retailers?

We see food retailers in general continuing to aggressively adopt numerous principles of the ethical policy whole for their stores on a regional and neighborhood basis. We also see more progressive food retailers--supernatural grocers,supermarkets and mass merchandisers like Whole Foods, Safeway Stores, Publix, Wegmans, Supervalu, Kroger, Raley's in California, Wal-Mart and some others--move further towards adopting a more corporate ethical retailing philosophy and policy. We're seeing this currently in the case of Wal-Mart, Whole Foods, Safeway, Publix, Wegmans and a few others.

We aren't suggesting food retailers will adopt an ethical retailing policy on the order that the Co-op Supermarket group is considering or even one like many "orthodox" natural foods stores currently have. These retailers--and to a lesser degree Whole Foods--have placed restrictions on the types of food and beverage products they will sell in their stores all together. For example, restricting foods and drinks that contain artificial coloring or food additives. These product ingredient restrictions fit these types of retailers philosophies and marketing niches which is well and good.

However, supermarkets and mass merchandisers' stock in trade is product variety and assortment and that isn't going to change--and it shouldn't. But that won't stop these retailers from further adopting a more comprehensive ethical retailing policy, focusing on areas like environmental or green practices and other principles of the overall ethical paradigm being crafted by the Co-operative Supermarket Group. We currently see an example of this in the UK where both Tesco and Marks & Spencer for example are crafting comprehensive ethical retailing corporate philosophies and practices but basing them on their own respective needs and niches as retailers.

The 'Post-Organic Era and Ethical Policies

In the title of this piece we ask: Does the ethical policy paradigm present a new model for food & beverage marketing and retailing in the coming post-organic era? Quite a mouth full. By this we mean a couple things. First, in terms of a post-organic world we don't mean to suggest in the least that retailing is nearing an end to the marketing and sales of organic products. Quit to the contrary--we're just seeing the beginning of what will eventually become a near norm.--widespread multi-format and channels organic products retailing.

Rather we use the phrase "post-organic" to mean we are coming to an end (because of the growing popularity of organics) of an era in which food manufacturers, marketers and retailers can continue to use organic foods as a major or primary marketing niche. We believe there are many years left for this niche to be effective. But with the mass-marketing and retail format explosion we're seeing in organics merchandising we're beginning to see a massification of the category which over time will result in it being less affective as a primary market niche. After all, today you can buy a decent selection of organic food products not only in natural foods stores and supermarkets but also in mass merchandisers, drug stores, dollar stores, food boutiques, farmers markets, online and more.

So this coming "post-organic" era merely means that food marketers and retailers need to look for more in terms of having a specialty/natural niche in the market. Additionally tomorrow's "post organic" era consumer also will be looking for more. And what we believe they will be looking for are manufacturers and retailers who have ethical type policies and can tell a story of who they are as a food manufacturing or retailing company based on their comprehensive ethical policy.

No one policy need be the same, although they will likely have similar elements. But we believe those progressive manufacturers and retailers who get out in front of this development--like many who already are--will reap the benefits as consumers continue to change and develop. Let's not forget it wasn't too many years ago when if you told a group of supermarket executives and food manufacturing CEO's they would soon need to be producing and selling a large selection of organic products, creating biodegradable and recyclable food packaging, selling reusable grocery bags, putting solar panels on their store roofs or distribution warehouses and other similar developments, most of them would have laughed at you. Not only aren't they laughing today, they're rushing and competing to see who can be the greenest food manufacturing and retailing company in the respe4ctive industries.

The future development and path to ethical product marketing and retailing policies will be varied and proceed at different paces depending on the region of the world and on a particular country's economic system, social composition and politics. The pace also will, like most developments, tend to lag a bit behind consumer demand for such policies as these type of initiatives require much thought and investment. However, we believe it's a real development, the empirical beginnings of which we've discussed above. Ethical policies also provide opportunities for committed and savvy food manufacturers, marketers and retailers who can get it right for their customers and other stakeholders.