Increasingly, German consumers are making choices based on their environmental views. And retailers are realizing they have to focus on sustainability in their supply chains to win shoppers’ trust.
Discount grocer Lidl released its first sustainability report this week and it sets ambitious goals, such as removing toxic chemicals from its textile production by 2020 and eventually making all of its white-label meat GMO free. New stores will have electronic car charging stations, and Lidl aims to reduce salt and sugar content in its house-brand products by 20 percent by 2025.
Lidl’s biggest competitor, Aldi Nord and Süd, released its first sustainability report in 2016. But better late than never. “Sustainability, transparency and ethics are more important to young consumers than the generation before,” says Boris Planer, a chief economist at consultant PlanetRetail. And since they’re having children later, enjoying higher incomes as singles or couples, their purchasing power is impressive.
The green trend is visible with almost all discount retailers, hoping to attract discerning consumers. Penny, the discount arm of grocery giant Rewe, introduced an organic line in hopes of getting farmers to make the switch, paying them premium prices even before they meet all “bio” requirements. Another discounter, Netto, which belongs to Edeka, started selling beef this week packed in vacuum-sealed fiberboard to reduce the amount of plastic needed.
Increasing their organic offerings is distracting discount grocers from their usual price wars. Consumers are willing to shell out more for sustainable groceries — on average 64 percent more, per market researcher GfK. The Research Institute of Organic Agriculture (FiBL) estimates Germans each spent €25 annually on organic products in 2000 but that rose to more than €116 in 2016. In that time, organic products’ share of the grocery market grew from 1.4 percent to 5.1 percent.
In all, Germans are spending almost €10 billion on organic groceries annually, of which GfK estimates the discounters account for more than €1 billion.
Florian Kolf leads a team of reporters covering the retail, consumer goods, luxury and fashion markets. To contact the author: kolf@handelsblatt.com