Marketing

Spending with their hearts

The argument for a sustainable supply chain has taken different forms over the years. Initially, the need to protect natural resources fell in the corporate social responsibility department. As climate change started to affect crop outputs, roasters woke up to the fact that ensuring sustainability wasn’t just about the “feel good” factor. Protecting the environment all of a sudden became an important part of securing their supplies of quality coffee. If these factors weren’t enough to shake companies into taking action, a new shift in consumer spending is about to be a major wake up call. “We’re seeing an increase in broader groups wanting to spend in alignment with their values,” says Tensie Whelan, President of one of the world’s most recognised certification schemes, the Rainforest Alliance. “These people don’t see themselves as environmentalists or social activists, but they care about the community and want to spend responsibly.” It turns out that showing customers a company cares about the environment might now be an essential selling point. Whelan says that although consumers won’t necessarily spend more on what they see as a product aligned with their values, when faced with the choice between two products as parity price, they will chose the latter. This trend was captured in the now much cited book Spend Shift by John Gerzema and Michael D’Antonio. Published in 2011, the book draws upon 17 years worth of quarterly data gather by international marketing and communications company Young & Rubican. The BrandAssset Valuator looks at what people prize in the material sense, and how that changes over time. For a business, the data produces valuable insights into what motivates consumer spending.  The conclusions show how modern events have shifted consumer spending significantly in recent times. In the United States, the authors state how the “Great Recession”, that started in the US 2007 following the sub prime mortgage crisis, brought a spotlight onto the instability of a consumerist ideal of an ever-growing economy. “Americans generally resisted the urge to grab torches and pitchforks and go looking for the bad guys,” the authors wrote. “Perhaps this is because we were aware, on some level, of the way almost every one of us had played a role in the debacle and could accept a measure of responsibility.” The authors argue that the US population is now more aware of how their spending can influence corporations and the government. As a result, they have shifted their spending habits as a way to take action. “They realise that how they spend their money is a form of power, and they are using it to communicate their values and reward those companies that truly reflect them whether they are pro-environment, anti-bailout, or concerned about some other issue,” the authors write. The book says that in the US, around half of the population is spending in line with their values. Whelan says that this trend is not isolated to the US, but can indeed be seen around the world. On average, she says at least 10 per cent of consumers becoming more aware of the social issues around the products they purchase. In Europe, the trend in consumer spending is so strong that Rome’s La Sapienza University, with support from Nestlé Italia, put together a tool that enables food producers, growers, processors and marketeers to better understand how people feel about a particular product. The tool maps out consumers perceptions on the environmental and economic impact of food, or food products, and the process to create it. Three years in the making the Food Reputation Map has collected and analysed the perceptions of almost 5000 Italian consumers. This trend towards more conscious spending has been good news for brands like RA. The organisation has seen the amount of coffee sold with an RA label jump 20 per cent in 2013, selling around 167,000 metric tonnes of green coffee equivalent. This was out of a total 342,000 metric tonnes of coffee produced under the scheme. Whelan explains the shortfall in that a lot of RA coffee is sold without the seal, from companies like Starbucks. Although the US coffee giant supports the sustainable production methods that RA implements, the company prefers to label the coffee under its own certification scheme. Whelan says she’s not overly concerned, as long as major players like Starbucks are purchasing RA Certified coffee. “Although it’s nice to have the coffee sold under the RA label, the most important thing is market access for our farmers,” she says.    Customers who care about where their coffee comes from have found a good fit with the RA brand. The simplified message of protecting rainforests is one consumers can easily grasp, however Whelan points out that RA certification is much more. “RA promotes a sustainable farm management program that helps farmers,” she says. “We help with financial, people and environmental and people managements, while also helping to increase productivity and yields.” From the roaster’s perspective, she points out that the RA label is not just more marketable, but makes RA farmers less risky as suppliers. With this increased consumer awareness of where their coffee comes from, RA certification provides some protection against public relations disasters.  “It’s about the avoidance of reputational risk. No company wants to find out that there is deforestation taking place in its supply chain,” she says. Whelan points out that that the learned values of the management team can have a major impact on a company’s practices. Although the early sparks of the conservation movement can be traced back to the 19th Century, awareness of deforestation and links to climate change began to peak in 2006 with the release of Al Gore’s Academy Award winning documentary, An Inconvenient Truth. The generation, now hitting their mid-30s, that grew up with concerns of climate change on the table are now in management positions. “People who are running these coffee companies are people who grew up with environmental protection in the conversation,” says Whelan. So it would seem that from management to consumption, the pressure to ensure a responsible supply chain is now coming from every end. With this, Whelan has high hopes for the future of RA. Currently, around 5.2 per cent of the world’s coffee is certified RA, compared to 10 per cent for cocoa and 12 per cent for tea. “We challenge the coffee industry to help us get to 10 per cent,” says Whelan.

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