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October 8, 2021updated 16 Feb 2022 6:04am

ESG in Consumer Goods: Macroeconomic Trends

Fast-moving goods companies (FMCG) need to ensure health and safety for every stakeholder on a product journey.

By GlobalData Thematic Research

Listed below are the key macroeconomic trends impacting the ESG in consumer goods theme, as identified by GlobalData.

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What is the impact of China’s Zero-COVID lockdowns on economic activity, consumer goods and the foodservice industry?

While wanting to protect the country from being overwhelmed by Omicron, China’s adherence to a Zero-COVID policy is resulting in a significant economic downturn. COVID outbreaks in Shanghai, Beijing and many other Chinese cities will impact 2022’s economic growth as consumers and businesses experience rolling lockdowns, leading to a slowdown in domestic and international supply chains. China’s Zero-COVID policy is having a demonstrable impact on consumer-facing industries. Access GlobalData’s new whitepaper, China in 2022: the impact of China’s Zero-COVID lockdowns on economic activity, consumer goods and the foodservice industry, to examine the current situation in Shanghai and other cities in China, to better understand the worst-affected industry sectors, foodservice in particular, and to explore potential growth opportunities as China recovers. The white paper covers:
  • Which multinational companies have been affected?
  • What is the effect of lockdowns on foodservice?
  • What is the effect of lockdowns on Chinese ports?
  • Spotlight on Shanghai: what is the situation there?
  • How have Chinese consumers reacted?
  • How might the Chinese government react?
  • What are the potential growth opportunities?
by GlobalData
Enter your details here to receive your free Whitepaper.

The Covid-19 pandemic has disrupted operations of FMCG companies with consumers being concerned about health and safety, which has heightened hygiene standards and awareness.

Mergers and Acquisition (M&A)

Consumer goods companies are beginning to realise the importance of ESG, and many will improve their ESG image by acquiring sustainable companies in the future. Some companies are using M&A to diversity their plant-based product offering. Hormel Foods acquired plant-based snack brand Planters from Kraft Heinz for $3.4bn. The acquisition will broaden Hormel Food’s snack portfolio and appeal to vegan consumers.

Veganism and plant-based diets are a fast-growing consumer trend driven by ethical issues such as environmental impact and sustainability. FMCG companies that do not have a diverse plant-based product offering could acquire a company that does to avoid falling behind in this theme.

Covid-19

The impact of Covid-19 on ESG has been twofold from a social perspective. It has increased health and safety risks for staff members often working in restricted, crowded spaces, forcing companies to develop contingency plans to minimise risks. From a consumer preference standpoint, it increased demand for product safety and traceability, heightening the need to develop and effectively communicate stringent health and safety protocols.

Covid-19 also caused environmental concerns to drop down the agenda, with consumers favouring disposable packaging for hygiene purposes. It also meant company boards focused on controlling the damage caused by Covid-19 rather than concentrating on climate targets. Covid-19 will have a lasting effect on hygiene standards and health and safety. Post-Covid, companies will need to refocus their efforts on climate change plans.

Generation Hashtag

Generation Hashtag makes up around one-quarter of the world’s population, and its influence will only increase over the next decade as its members continue to enter the workforce. As a generation coming of age during recessions, fractured politics, and exposure to fake news, consumers in this cohort are understandably cynical or even distrustful of established institutions and corporations.

The consumption habits of this generation will reflect this, and they will hold brands accountable for their actions. Tokenistic efforts to take social and environmental responsibility will no longer suffice. Consumers will choose brands that wholeheartedly embrace corporate social responsibility (CSR), including ethical business practices and a commitment to sustainability, transparency, and philanthropy.

Ethical consumerism

Ethical consumerism is a growing trend that needs to be catered to by consumer goods companies. GlobalData’s Market Pulse Consumer Survey 2020 found that customers are more likely to pay a premium for sustainability-aligned causes, and 81% of customers would pay more for products supporting environmental protection. Green premiums, however, can exclude lower-income consumer groups, who are also concerned about sustainability. Bill Gates recommended investing in research and development (R&D) to reduce green premiums and create accessibility in his book How to Avoid a Climate Disaster.

Gates referenced Impossible Foods, a plant-based meat business that invested heavily in R&D to reduce product prices and expand market share. Impossible Foods went from having its products in 150 grocery stores to a presence in more than 15,000 within a year. Brands should recognise that sustainability measures drive consumers and reducing green premiums will result in increased market share and brand longevity.

This is an edited extract from the ESG in Consumer Goods – Thematic Research report produced by GlobalData Thematic Research.

Related Companies

Free Whitepaper
img

What is the impact of China’s Zero-COVID lockdowns on economic activity, consumer goods and the foodservice industry?

While wanting to protect the country from being overwhelmed by Omicron, China’s adherence to a Zero-COVID policy is resulting in a significant economic downturn. COVID outbreaks in Shanghai, Beijing and many other Chinese cities will impact 2022’s economic growth as consumers and businesses experience rolling lockdowns, leading to a slowdown in domestic and international supply chains. China’s Zero-COVID policy is having a demonstrable impact on consumer-facing industries. Access GlobalData’s new whitepaper, China in 2022: the impact of China’s Zero-COVID lockdowns on economic activity, consumer goods and the foodservice industry, to examine the current situation in Shanghai and other cities in China, to better understand the worst-affected industry sectors, foodservice in particular, and to explore potential growth opportunities as China recovers. The white paper covers:
  • Which multinational companies have been affected?
  • What is the effect of lockdowns on foodservice?
  • What is the effect of lockdowns on Chinese ports?
  • Spotlight on Shanghai: what is the situation there?
  • How have Chinese consumers reacted?
  • How might the Chinese government react?
  • What are the potential growth opportunities?
by GlobalData
Enter your details here to receive your free Whitepaper.

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