Sustainable products such as organic foods and specialty apparel typically lack economies of scale, which means companies are compelled to position them in the premium segment for upper-income consumers. The use of organic farming, energy-efficient technologies and fair trade sourcing usually puts a premium price on these products.
However, with large retailers such as Wal-Mart and Target embracing sustainability as a key driver of revenue growth, the perception about sustainable goods as “expensive products” is set to change. Both of these giant retailers are increasingly backing up sustainable products with their huge economies of scale and financial might to make them more affordable for the mass consumers.
Wal-Mart has announced a new line of organic foods, which will be sold under the “Wild Oats” label, at prices that will compete with conventionally grown products. This broad new line of sustainable products will include more than 100 items, and is aimed at achieving mass economies of scale in order to bring a major price shift in the organic foods industry.
Under this new organic food line of Wal-Mart, a six-ounce can of tomato paste will be sold for 58 cents, for instance, and a 32-ounce can of chicken broth will be sold for $1.98. These prices are about a third cheaper than existing national brands of organic food.
Target has also announced plans to roll out 120 new products under a new category label called “Made to Matter.” The company is working with 17 well-known brands, including ones that lead in terms of credibility in the sustainable products category, to source new and revised products that it can sell on an exclusive basis.
The upstream providers of food ingredients are also working on their part to adopt sustainable practices. P&G, one of the leading suppliers of edible oils, has recently announced that it will switch over to sustainable cultivation practices for palm oil.
Consumer demand for sustainable products is the most important driving force behind these changes. Target says that 97 percent of its customers buy some products that are natural, organic or sustainable in other ways, while Wal-Mart reports that 91 percent of its customers would consider such products if offered at affordable prices.
Source: US News
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