Sustainability, Authenticity and Social Responsibility in Consumer Purchasing Decisions

Green Business Conference San Francisco, CA November 2, 2005 Presented by: Gwynne Rogers The Natural Marketing Institute (NMI)

Presentation Data Source: NMI’s 2005 U.S. LOHAS Consumer Trends Research Study LOHAS = Lifestyles Of Health And Sustainability ™ An integrated consumer database which: ™ Measures the size of the LOHAS consumer group ™ Identifies LOHAS consumer attitudes ™ Explores environmentally conscious behavior ™ Measures the importance of corporate social responsibility ™ Determines consumer usage of LOHAS products and services, including renewable power and many other related topics ™ Research project methodology: ™ Annual tracking study, now in its fourth year ™ Sample Size: 2,000+ U.S. households each year ™ Nationally projectable U.S. adult population ™ Online methodology ™ Accurate at the 95% confidence level to +/- 2%

Source: The LOHAS Consumer Trends Database™ © The Natural Marketing Institute, 2005

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Preview – The LOHAS Lifestyle ™ LOHAS consumers represent a segment of the population, roughly 1 in 4 consumers, with strong environmental and social values, and who base many of their purchase decisions accordingly ™ For this segment, it’s all about lifestyle – they don’t just buy organic food or energy efficient appliances, they’re active in all LOHAS-related product categories ™ LOHAS consumers are attractive for a variety of reasons, including brand loyalty, influence over others, and price insensitivity ™ LOHAS consumers are incredibly demanding – products that are “green” are not enough; they need to feel, taste, and perform as well (or in many cases better) than their conventional counterparts

Source: The LOHAS Consumer Trends Database™ © The Natural Marketing Institute, 2005

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NMI’s 2005 Consumer Segmentation Model Identifies Four Distinct Segments in U.S. Pop (% general population U.S. adults…)

INDIFFERENTS 12%

LOHAS 23%

LOHAS = Almost 50xxx Million U.S. Adult Consumers

CENTRISTS 27%

NOMADICS 38% Source: The LOHAS Consumer Trends Database™ © The Natural Marketing Institute, 2005

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Summary Characteristics of The NMI Consumer Segmentation Model Segment

Size

Defining Characteristics

LOHAS

50 Million

Significantly affected by their concern for the health of their families, the sustainability of the planet, their personal development and the future of society.

NOMADICS

81 Million

Tend to move from place to place with regard to personal ideals, environmental platforms, and the overall relevance of sustainability.

CENTRISTS

58 Million

An assemblage who congregate toward the conservative end of the spectrum when it comes to dealing with health and sustainability.

INDIFFERENTS

26 Million

Caught up in the day-to-day events; care-free; not necessarily looking out for tomorrow.

Source: The LOHAS Consumer Trends Database™ © The Natural Marketing Institute, 2005

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Among LOHAS Consumers, 15 Million (7% of Total Population) Are “LOHAS Leaders” LOHAS Leaders are LOHAS consumers who also agree completely with: “When given the choice to buy a product or service, they will usually buy from companies whose values are most like their own,” and“I try to teach family/friends

about the benefits of purchasing environmentally friendly products.” INDIFFERENTS 12% LOHAS 16%

LOHAS Leaders 7%

CENTRISTS 27% NOMADICS 38%

Source: The LOHAS Consumer Trends Database™ © The Natural Marketing Institute, 2005

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General LOHAS Attitudes (% consumer segment stating they agree “completely” that they care about…)

95%

Protecting the environment

Use of renewable energy sources

Using products made from recycled materials

Socially responsible business

43%

LOHAS Non-LOHAS 92%

38%

81% 27%

80% 28%

Source: The LOHAS Consumer Trends Database™ © The Natural Marketing Institute, 2005

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“Sustainability:” Meaningful to Some, Confusing to Others (Q.7 - % consumer segment stating that to them, sustainability means…)

Balancing profit with concern about society and the environment.

41% 25%

They use environmentally responsible materials to make their products.

39% 19%

They make their products in an environmentally friendly way.

27%

I’ve heard of the term “sustainability,” but really don’t know what it means.

13%

It’s simply a marketing activity that has no real meaning or benefit.

10% 13%

Don’t know - I’ve never heard of the term “sustainability.“

LOHAS Non-LOHAS

17%

22%

12% 23%

Indicates significant difference Source: The LOHAS Consumer Trends Database™ © The Natural Marketing Institute, 2005

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Appeal of Socially Responsible Business and Values (% consumer segment stating they agree “completely” with the following…)

80%

74%

80%

I care about socially responsible business

70% 60%

56%

56%

50% 40% 29%

30% 20%

9%

10% 0%

2003

2005

LOHAS Consumers

2003

28%

I will usually buy products from companies whose values are most like my own

10%

2005

Non-LOHAS Consumers

* Indicates significant difference Source: The LOHAS Consumer Trends Database™ © The Natural Marketing Institute, 2005

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Good Corporate Citizenship Moves LOHAS Consumers to Purchase (Q. 11 - % consumer segment stating they agree completely with “Knowing that a company is mindful of their impact on the environment and society…”)

68% LOHAS Non-LOHAS

52%

19%

15% 8%

…makes me more likely to buy their products and services

…makes me more likely to buy their stock

7%

…does not change what I do

All differences are significant Source: The LOHAS Consumer Trends Database™ © The Natural Marketing Institute, 2005

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Comparison of Usage of Environmentally Friendly Products Between LOHAS and NonLOHAS Consumers (Q.25, 37, 52, 62, 80, 84 - % consumer segment stating they have purchased or currently own the following) 92% 78% 70%

68%

LOHAS Non-LOHAS 65% 61% 53%

51%

48%

43% 36% 28% 15%

16%

Organic Clothing

Organic Foods/Beverages

Compact Fluorescent Lightbulbs

Natural Household Cleaning Products

Natural Foods/Beverages

Natural/Organic Personal Care

Recycled Paper Goods

Water Saving Devices

Energy Efficient Appliances/Electronics

5%

10% 6%

2%

Source: The LOHAS Consumer Trends Database™ © The Natural Marketing Institute, 2005

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6% 2% Renewable Power

20%

21%

SR Mutual Fund

24%

Sheets or Towels Made With Organic Cotton

30%

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It’s Black & White: Drivers to LOHAS Consumer Purchases (Q. - % consumer stating that the following are important attributes for the respective products)

Food & Beverage LOHAS

Personal Care

Non-LOHAS 72%

67% 50%

46%

37% 12%

USDA Certified Organic

35%

14%

12%

8% Fair Trade Certified

35%

30%

Locally Grown

Biodegradable

Not tested on animals

USDA Certified Organic

Electronics and Appliances 72% 50%

58% 38%

33% 9%

ENERGY STAR Qualified

Conserves water

Contains recycled content

Source: The LOHAS Consumer Trends Database™ © The Natural Marketing Institute, 2005

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Barriers to Environmentally-Friendly Purchasing Among LOHAS and Non-LOHAS Consumers (Q. 15 - % consumer segment stating that the following limits their purchase of environmentally friendly products)

LOHAS Consumers

Non-LOHAS Consumers

They are too expensive: 48%

They are too expensive: 58%*

I don’t know enough about them: 30%

I don’t know enough about them: 42%

I am not sure they are actually any better for the environment: 35%

I am not sure they are actually any better for the environment: 38%

They are not available at the stores/other places I shop: 43%*

They are not available at the stores/other places I shop: 27%

I don’t know of alternatives that are environmentally friendly: 28%*

I don’t know of alternatives that are environmentally friendly: 24%

They do not work as well as the products I usually buy: 15%

They do not work as well as the products I usually buy: 18%

* Indicates significant difference Source: The LOHAS Consumer Trends Database™ © The Natural Marketing Institute, 2005

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Non-Consumptive Activities: LOHAS Consumers Act and Speak Out (Q. 18 - % consumer segment stating that they do the following do the following daily, weekly, or monthly) LOHAS

Non-LOHAS

Propensity to Act (Index of LOHAS: Non-LOHAS)

Donate money to an environmental group

25%

7%

357%

Encourage my elected officials to pass laws to protect the environment

33%

10%

330%

Take your own bag to the grocery store

32%

12%

267%

Volunteer to clean up parks, trails, and neighborhoods

16%

6%

267%

Boycott a brand or company that has practices I don’t like

45%

19%

237%

Boycott a store that has practices I don’t like

40%

19%

211%

Compost kitchen scraps and garden waste

39%

21%

186%

Participating in household hazardous waste collection day

33%

18%

183%

Walk or ride your bike instead of drive a vehicle

37%

22%

168%

Carpool

24%

15%

160%

Take public transportation (bus, train, etc.)

19%

12%

158%

Recycle paper (e.g., newspaper)

84%

64%

131%

Recycle cans, bottles, jars, etc.

85%

72%

118%

Control thermostat to conserve energy

95%

83%

114%

All differences are significant Source: The LOHAS Consumer Trends Database™ © The Natural Marketing Institute, 2005

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Summary Observations ™ For “green” or socially-oriented companies, LOHAS consumers are your target: ™ They are driven by your products’ attributes ™ They are less price sensitive ™ They are the earliest adopters of new and innovative products ™ They try to influence others to purchase products ™ Getting LOHAS consumers’ buy-in requires: ™ Meeting both green and conventional product expectations ™ Being good corporate citizens ™ Providing substantive and credible information on all parts of your product and business ™ The good news is that LOHAS product marketplaces are growing faster than conventional counterparts ™ There is room for your business out there

Æ Seize the opportunity! Source: The LOHAS Consumer Trends Database™ © The Natural Marketing Institute, 2005

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The Natural Marketing Institute 272 Ruth Road Harleysville, PA 19438 Gwynne Rogers Strategic Marketing Consultant phone: 215-513-7300, ext. 227 fax: 215-513-1713

[email protected] www.NMIsolutions.com All materials herein are © 2005 by The Natural Marketing Institute. All rights reserved. Reproduction, publication (internal and/or external), transmission, or other use of any of the within materials, including but not limited to graphics, data, and/or text, for any commercial or noncommercial purposes, is strictly prohibited without the prior express written permission of The Natural Marketing Institute. Source: The LOHAS Consumer Trends Database™ © The Natural Marketing Institute, 2005

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NMI Corporate Summary

NMI is a strategic consulting, market research, and business development company specializing in the health and wellness marketplace. Our dynamic capabilities focus on the well-being of people and products, and the environmentally and socially responsible sustainability of the planet. Since 1990, NMI has used its expertise to assist a wide range of clients across many industries. NMI principals have over sixty years combined experience in the industry, including corporate management, international consulting, new business start-ups, product concept ideation, strategic business plan development, consumer packaged goods marketing, and market research management.

Source: The LOHAS Consumer Trends Database™ © The Natural Marketing Institute, 2005

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The LCTD Summary Content & Scope

™ 50 LOHAS-related attitudinal measures/consumer intensity variables ™ 16 LOHAS psychographic drivers/consumer behavior predictors ™ Product usage patterns (across 75+ product categories) ™ Over 160 brand users identified and measured ™ Sources of influence (36 magazines, 17 other specific media venues) ™ Membership across multiple organizations ™ Shopping patterns across 30 specific stores/other sources ™ Lifestyle measures ™ Complete demographics ™ Product/service category usage, importance of specific product attributes, usage of specific brands, sources of influence across each of 9 specific LOHAS sectors ™ General population proprietary NMI consumer segmentation model utilized

Source: The LOHAS Consumer Trends Database™ © The Natural Marketing Institute, 2005

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The LOHAS Consumer Trends Database™ (LCTD) Has Three Main Client Uses

Published Reports: • 3 Sector-Specific Reports

Subscription Opportunities: Customized Analysis:

• Proprietary Content

•Food & Beverage

• Target Identification

• Interaction Across Core Database

•Personal Care

• User Profile Analysis

• Customized Analysis & Report

•Transportation

• Product Driver/Attribute Analysis

• 2006 Subscriptions Now Available

• Corporate Social Responsibility Report

• Communications Strategy

• 40+ Pages Each

• Corporate Social/Environmental Strategy

• Hard Copy & Electronic Versions

• 1000’s of Others… Source: The LOHAS Consumer Trends Database™ © The Natural Marketing Institute, 2005

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Use Prohibited All materials herein are © 2005 by The Natural Marketing Institute. All rights reserved. Reproduction, publication (internal and/or external), transmission, or other use of any of the within materials, including but not limited to graphics, data, and/or text, for any commercial or noncommercial purposes, is strictly prohibited without the prior express written permission of The Natural Marketing Institute.

Copyright Attribution Notice If written permission for use of any portion of the within materials shall have been granted by The Natural Marketing Institute, and if any portion of the said materials provided by The Natural Marketing Institute shall thereafter be published in any form at any time to any third party, the following notice must be prominently included in any and every such publication: Source: The LOHAS Consumer Trends Database © The Natural Marketing Institute, 2005

Source: The LOHAS Consumer Trends Database™ © The Natural Marketing Institute, 2005

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