Selling in the Agora or Connecting Online - Consumer Products Companies Adapt to Growing Demand for Sustainable ProductsSelling in the Agora or Connecting Online - Consumer Products Companies Adapt to Growing Demand for Sustainable Products

G&A's Sustainability Highlights (6.10.2021)
Jun 21, 2021 11:55 AM ET
Newsletter

Selling “at retail,” both direct to consumers and through business partners to consumers in both digital and physical spaces, is a rapidly changing (every day!) area of the economy.

Think of the upheavals in the once-staid and steady consumer retail marketplace in recent years. Tiny Amazon came to life in summer 1994 in Washington State founded by a former Wall Streeter, Jeff Bezos. The first products offered were books (with human editors writing summaries!). By 2020, the company had reached annual revenues of US$386 billion (up $38% over 2019) with net profits of US$21 billion (up 84% over 2019) – with an amazing array of products moving to consumers.

Amazon was the “go-to” retailer for many people in the sheltering-in-place days of the Covid pandemic. Need “it”? Chances are Amazon’s “got it” as the company’s inventory of products and methods of delivery have been dramatically expanding. And disrupting many other retailing organizations.

The largest U.S.-headquartered, “location-based” as well as remote order retail organization selling direct to consumers is Walmart, with 11,443 stores, 404 distribution centers and 2021 fiscal year sales of $559 billion worldwide. Consider that Walmart is the largest retailer on the globe including being the #2 digital retail marketer. All this from small beginnings as storefront stores in Arkansas founded by Sam Walton and family in 1962. By 1967, there were 24 stores with a healthy $12 million in annual sales.

Walmart is also a business disrupter for many other retailing organizations and for companies in the middle all along the value chain from farm-to-factory-to-shelf and table. But there are other disrupters as well in the digital retail marketing space – top web-based retailers today include Apple (at #3, just passed by Walmart), Dell, Best Buy, Home Depot, Target, Wayfair, Kroger, and Staples.

In 2020, the U.S. Dept. of Commerce estimated that retail sales topped $4 trillion in the United States. While e-commerce grew by 44% to become $1-in-$5 of all retail sales, “in-store” sales still dominated the retail space. There are more than one million retail establishments across the breadth of the U.S., and even the 50 top retailers with online presence operate stores (a hybrid model).

Fixed-space retailing is still very popular with consumers - “wandering the Agora” has been a favorite pastime for many of us since the classical times in ancient Greece and down through the ages. The Athens agora was an important city and just part of the agora of settlements in Greece; this was the center of economic activity and the consumer marketplace for goods…as well as for sharing ideas. Today’s huge malls are a sort of equivalent but minus the philosophers holding forth.

What about large consumer products companies selling to consumers in domestic and global marketplaces, mostly through value chain partners ranging from Walmart and Amazon to supermarket chains? How are these companies managing their way through the embrace of sustainable products by a growing number of consumers? We have selected three firms to look at this week who are leaders in terms of their corporate ESG profile: Kellogg’s, Colgate-Palmolive, and PepsiCo. Some top lines for you:

Kellogg’s is partnering with 440,000 farmers in 29 countries to promote climate, social and financial resiliency (this is the “Kellogg’s Origin” program). The company’s Kashi subsidiary began to partner with local growers (wheat, corn, rice, sorghum) to help transition from traditional farming to organic farming. The food manufacturer/marketers’ programs are outlined in the story from Baking Business (see link below).

Colgate-Palmolive is reporting on its corporate sustainability journey with updates on its “purpose” progress – re-imagining a healthier future for all people, their pets, and our planet. News: 99 percent of Colgate-Palmolive products launched in 2020 have improved sustainability profiles – that should be attractive to this large company’s customers.

PepsiCo is a large multinational enterprise marketing beverages and snacks around the world. The company is coming out in support of the idea of better “environmental labelling,” as the European Union considers as part of its “Farm-to-Fork” strategy a sustainable food labelling framework. PepsiCo is generally on board, says its director of environmental policy, Gloria Gabellini, with the idea that consumers have the right to expect transparency from the producers.

And so – for consumer purchases in the digital space or taking place in a fixed location (the venerable physical storefront) – consumer products companies are recognizing the shift underway with many more buyers seeking “sustainable” products (especially for consumables). These food, beverage, personal products, and related products are disrupting their own businesses to remake the model.

Think of retailing – including wandering the Agora of the 21st Century – as an ever-changing economic activity. Free-range chicken for dinner tonight, anyone? Even farming practices considered “old” or traditional are coming back into vogue for consumers.

This is just the introduction of G&A's Sustainability Highlights newsletter this week. Click here to view the full issue.