Last year, German food retailer Penny conducted a bold sustainability experiment by testing how consumers respond to an attempt at incorporating externalities into product pricing. I blogged about this last year but as a quick summary – Penny selected a handful of basic grocery items for “wahren Kosten” (“real” or “true” pricing) for one week in 2023. These “real costs” include impacts such as climate change, obesity, child labor and plastic pollution that don’t have actual costs at the company or product level. An article (in German) discussing the results of the experiment was published last January – here are the high points:
“Sales figures for a total of eight out of nine products fell, in some cases sharply. For example, conventional mozzarella, which increased in price by 74 percent during the campaign, was purchased 43 percent less. Sales of organic mozzarella, whose price increased by 49 percent, also fell by 29 percent. Only one vegan product, for which the price premium was minimal, saw little change in sales figures.
85 percent of people who stopped using the products after the price increase said that the products were too expensive for them. 46 percent said that environmental aspects were not important to them. 30 percent did not understand the campaign.
Among the small group of people who bought the products despite the price increase, 93 percent said that they always buy these products. 90 percent said that sustainability was important to them…
Penny announced that they did not want to repeat this experiment.”
There has been meaningful tension between product sustainability, pricing and demand for decades. Predictions and surveys have indicated consumers are willing to make sustainability a key buying criterion, but ex post data demonstrates a different reality. It isn’t quite the same with industrial or B2B purchasing because sustainability gains usually translate into cost savings, not pricing premiums; therefore companies can both reduce costs while making sustainability/ESG progress. Lots to think about when considering product sustainability, pricing strategy and demand/revenue prognostications.
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