Startup To Scale

115. The Business Case for Sustainability

May 15, 2023 Foodbevy Season 1 Episode 115
115. The Business Case for Sustainability
Startup To Scale
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Startup To Scale
115. The Business Case for Sustainability
May 15, 2023 Season 1 Episode 115

Sustainability has made it into the business discourse and is starting to change how companies behave in the world. At the same time, the pandemic forced many companies to release single serve packaging that resulted in higher waste. How are brands supposed to balance sustainability with their business and consumer needs?

To answer this question I’ve invited on Sherry Frey, VP of Total Wellness at NIQ, to talk about the evolving business case for sustainability.

Startup to Scale is a podcast by Foodbevy, an online community to connect emerging food, beverage, and CPG founders to great resources and partners to grow their business. Visit us at to learn about becoming a member or an industry partner today.

Show Notes Transcript

Sustainability has made it into the business discourse and is starting to change how companies behave in the world. At the same time, the pandemic forced many companies to release single serve packaging that resulted in higher waste. How are brands supposed to balance sustainability with their business and consumer needs?

To answer this question I’ve invited on Sherry Frey, VP of Total Wellness at NIQ, to talk about the evolving business case for sustainability.

Startup to Scale is a podcast by Foodbevy, an online community to connect emerging food, beverage, and CPG founders to great resources and partners to grow their business. Visit us at to learn about becoming a member or an industry partner today.

NIQ Sherry

Jordan Buckner: [00:00:00] Sustainability has made its way into the business discourse, especially for the food and beverage industry, and it's starting to change how companies behave in the world. You know, at the same time, the pandemic has forced many companies to do things like release, single serve packaging that has also resulted in higher waste.

And a lot of brands are facing the challenge of wanting to use more sustainable packaging, but also seeing increased costs and supply chain challenges. So how are brands supposed to balance sustainability with their business and consumer needs? To answer this question, I've invited on Sherry Frey, the VP of Total Wellness at NIQ, to really talk about the evolving business case for sustainability.

Sherry, welcome. 

Sherry Frey: Hey, thanks, Jordan. Great to be here. 

Jordan Buckner: So, as I mentioned a lot of brands are starting out. They want to incorporate sustainable practices into their businesses but also don't really understand, you know, what consumers are actually looking for. They're willing to pay for things.

So I'd love to kind [00:01:00] of dive into this conversation based on your research and experience to get an understanding of what the landscape looks like for sustainability out here. 

Sherry Frey: That's a great, I mean, I, you know, and I think Jordan even just setting it up, you know, the word sustainability is, we're asking that word to do a lot, you know, when you, when you think about it.

And in fact, you know, we've found that in a lot of our research, you know, in terms of when we ask consumers what does sustainability mean when we talk to brands about what sustainability means, when we talk to retailers about what sustainability means, you know, it's very, really a really broad spectrum.

And, you know, I think, so just to kind of set a little bit of this stage of how we're looking at it here at, at Nielsen IQ We are really finding that, you know, it is about the environmental aspects, obviously, and we find that in the consumer research that we've done that can you consumers really tie it to, you know, pollution and protecting our natural resources.

But we're also, you know, with what we look at packaging, as you mentioned, is a very key part of that. And animal welfare is another key element of it. And then the kind of fourth element that [00:02:00] we look at. Is what we call social responsibility. And this is everything from, you know how people are treated along the supply chain to does the brand and the company support vulnerable groups, you know, kind of that full spectrum.

And so just to kind of set the stage that when we talk sustainability today, we're gonna be pretty broad in terms of what we're talking about. Some of the research, you know, , when we ask consumers, you know, What makes a brand sustainable? Always on the top in terms of awareness and in terms of importance is packaging, sustainable packaging.

It's the number one thing that we hear from consumers that they want brands to do more of, you know, less packaging, less plastic in the packaging, more sustainability overall. And in fact, it's the thing we also find from a consumer standpoint, when we ask them, what are you doing to live sustainably?

The top things they say are, oh, I'm trying to recycle. I'm trying to buy recyclable or refillable or compostable. So that one is definitely, you know, kind of in the front and center from the consumer [00:03:00] standpoint as well as, you know, as you mentioned from the brand standpoint. 

Jordan Buckner: And what is it about the sustainable packaging that matters to them?

 Is it things Like , every other packaging is like single use that they are looking specifically for like a compostable packaging that is like home compostable. Like what are some of the things that they're using to make that decision? Or is it really just kind of the kind of top level mentions of it on the packaging?

Sherry Frey: So, you know, I mean at a bare, bare minimum recyclable, right? Like that is, and in fact, you know, that's one of those claims that we see as really well penetrated across the store across all categories. But at that bare minimum, you know, consumers are looking for recyclable. But you know, frankly, it's really confusing.

I actually just moved cities a a few years ago. And I was shocked between two different municipalities. What's recyclable and what's not recyclable. And you know, I think that the consumers are beginning to really have this awareness that. They don't always know if they're doing it. And there's, you know, there's even terms like wish cycling where they kind of like put it in the [00:04:00] recycling and hope that it's recyclable.

But you know, there's a lot of different nuances of packaging, you know, in terms of how the film is done on the front, et cetera. And I think that that's causing, you know, maybe some consternation from a consumer standpoint. So they want brands to have recyclable, I think there's a little bit of.

You know, worry about the fact that they, are hearing stats that, you know, they're maybe not , recycling or things aren't being recycled or things are being messed up in the batch. And so we are starting to see more, you know, more brands making claims around compostable and biodegradable and definitely consumers, you know, and part of it, you know, I think we're all seeing this, right?

You see all of these. Terrible images of plastic in the oceans and, you know, plastic in other countries and, you know, consumers are, are really starting to kind of say, Hey, we have a responsibility here, not just for the planet, but frankly there's a social responsibility mm-hmm. Of putting our garbage in someone else's backyard.

Jordan Buckner: Yeah, I think that's so true have you seen the disconnect in terms of what makes a brand sustainable from like [00:05:00] what consumers or what companies believe they should be doing and what consumers believe that, companies should be doing? 

Sherry Frey: You know, maybe a little bit and, and it, it, I don't know if it's a disconnect or an evolution and part of it is, you know, I think everyone.

What Align is aligned on packaging. And I know, and especially for many of the listeners on this podcast, that's one of the toughest, you know, that's one of the toughest challenges from a cost standpoint, from a sourcing standpoint. But I, so I think there's, you know, there's general alignment around the, the packaging component, but then I think it does get, you know, because we've got this broad view of it's everything from.

How the product is sourced and how it's manufactured and how people are treated along the supply chain. And it means so many different things, even how it's transported. There's differing levels of awareness from a consumer perspective. And I think, you know, there's differing levels of ability to execute from a brand perspective.

You know, some of these things are. Easy you know, minimal. And we see them, you know, pretty much consistent across categories where brands [00:06:00] are doing it. And then we see some that are, you know, these are major investments for brands to make even if they might not be mean as much to the consumer.

Jordan Buckner: Yeah. you know it's interesting because. I saw a brand recently, they were launching in retail and it was a new product that people weren't really aware of, and they came out with a single serve version where it was like a stick pack and. There's a consumer demand, I think, and the retailer demand for the stick packs.

But I think the founder also felt, I don't know if it was what emotion they felt but that they needed to compensate for the packaging that they were adding. And so they have a partnership with a company that reduces their overall kind of environmental footprint by purchasing like credits essentially to offset the waste that they're putting out there.

Is this something that you see Resonating with consumers where they're kinda looking for a trade off or there's not really a clear understanding from the consumer side of like that relationship. 

Sherry Frey: You know, I will say that we're starting to see more claims [00:07:00] around carbon footprint, water footprint, you know, definitely more and more brands are talking about that on package.

So that is a positive because that's putting that in front of the consumer in terms of understanding and that frankly, Jordan has been, And one of the things that we've found is part of the consumer perspective has been when I know better, I do better. Right? And so what this is brought to my attention, I will choose to do better.

And so the fact that so many more brands are bringing a variety of claims, To the forefront for consumers, it is giving them that chance to say, Hey, I'm gonna buy my values, you know, I'm gonna execute my values. I do care. I didn't really realize, or I'm becoming more familiar with the carbon situation.

So I wanna buy these products that support that. I think there's also the reality of, I think we're gonna anticipate this to be increasing the fines against greenwashing. And I think from a consumer perspective, you've got some packages that are saying, no carbon, but consumers are thinking, well how do you do that?

Right? And there's a kind of a. Question mark around [00:08:00] is, buying credits, really the way, I was telling you I'm about to jump on a plane this afternoon and I was recently getting on a flight and they were talking about, you know, we're gonna be carbon neutral by X and you're just like, well, okay how?

Right. So the positive, yes, consumers are aware, they're interested, I think they're going to become more and more savvy on what's your, how. On how you're doing that. And for some, they may say, we'd rather you were doing. Process and production related things before just buying down credits.

But that's maybe a little bit of a hypothesis of as consumers get more savvy. 

Jordan Buckner: Yeah, no, I think that's a really good point. Cuz you know, there's kind of like a black hole a little bit. And I can tell you that even brands that I've talked with, they'll maybe like buy credits from a company, but they don't actually follow up to see how exactly they're implemented.

They just rely on like a. Report maybe that's even automated sometimes from those companies. And there's not as much traceability to say, like, this is the true, like, impact of what we were able to make. 

Sherry Frey: Yeah. Yep. Exactly. 

Jordan Buckner: The I think the big question a lot of founders are asking themselves as well is, [00:09:00] are consumers willing to pay for the additional costs from the more expensive, say, like recyclable or compostable packaging?

Sherry Frey: Well, let me kind of just answer that more broadly, you know, and so We did some research with McKinsey and Company because, , you always hear consumer research says consumers care about sustainability and they'll pay more and they'll buy more and they want it. But, you know, like, will they really?

And so , we did some work with McKinsey where we took a look at five years of data, you know, grocery source sales data. And we basically analyzed every, I mean, it was, it was a massive undertaking, you know, every item in the store. , for Five years. And we did find that the products that have E S G or sustainability related claims did better over the last five years.

So they grew more. So they're definitely first and foremost like that. We did find there is a business case for sustainability. But then when we looked at, you know, can you charge more? Is there a price premium opportunity? We didn't really find that to be consistent. What we found was there are [00:10:00] claims if you are differentiated kind of with that claim, you've got a window of time where you can have , a level of a price premium.

But that window closes quickly as more and more, you know, really that's what we're finding is more and more, you know, of, of kind of a category shifts very quickly. And so things like packaging, you know We don't necessarily see that. Although I would say that I think there's opportunities to do more to communicate to consumers why packaging is more expensive.

You know, why a certain type of packaging is being used, and that adds, you know, even the transparency, if that adds X percent. To the cost, but we think it's important for the environment. We haven't as much seen brands talking that way, you know, like directly addressing it head on.

The other thing I would say that we found, you know when we ask consumers, you know, do, of course they're all saying like they care more about sustainability, but. It is still below price. You know, price is important. Trusted brand is important, efficacy is important, you know, the value. All of [00:11:00] those things, 

Jordan Buckner: taste and flavor.

Sherry Frey: Exactly right. And then, you know, and then about five or six is sustainability. And when we ask them, you know, what do you want brands to do? You know, the number one thing they want is they want it to be price parity. Right? Like they don't wanna. Have to pay more. Right now we're finding that in many cases they are, and there is that willingness.

But in general their feedback is , they'd like it to be where everything actually was sustainable. And maybe it wasn't even a differentiator between the 


Jordan Buckner: You know what's interesting? I was talking with the founder a little while back and they mentioned that, you know, sustainability is definitely like really important.

It is with everything with your company though, if you don't have the margins to actually stay in business, then you won't be able to make an impact regardless. Right? You can have the most sustainable product, but if no one buys it and you can't gain consumer adoption, then your business will disappear.

And so they had a comment that, you know, businesses are focused on. What matters at the core to consumers and why they're buying you [00:12:00] and focus on that. And then when you get to a scale and a point where you can start implementing some of these changes and get much larger negotiating power and supplier discounts and volume discounts, then look at how you can incorporate those kind of into your products so that you can still maintain that long-term success.

Sherry Frey: I think that's a really valid perspective. You know, I think that for many small brands, you know, oftentimes there is this, you know, Passion. Right. And, you know, from early and emerging brands and this kind of mission, you know, a lot of the results that we saw in the work we did with McKenzie, it was smaller and emerging brands that were driving a lot of the growth.

But oftentimes there is this kind of desire to do it all right from the beginning. And the reality is that's almost impossible for many small brands just because exactly as you said, you know, sourcing issues. And you know, I believe there's a lot of Leeway from a consumer perspective to show them your path and your journey and be transparent and say, here's what's most important for us today.

But , I think I would applaud brands that actually do share that with consumers of, yeah, here's where we're going and we'd love when [00:13:00] we get to this point, we'd love to be doing this. You know, like this is our long-term mission, but as a small brand, we can't do it all on day one.

There. I believe that there's so much You know, I don't even say forgiveness, but almost. Interest from consumers to support small brands. And in fact, we did some research last year , at N I Q where we looked at, you know, big brands versus small brands, and we found that there was just a lot of affinity mm-hmm.

For consumers to find emerging brands to support emerging brands, to be along with them, in kind of their life, you know? And so I think, it's oftentimes that thing where. Perfect. Gets in the way of actually progress can be more endearing. 

Jordan Buckner: Exactly I love that. And I think you're right because.

I think the shift kind of started at the beginning of the pandemic where like consumers were looking to build like relationships with the products that they were buying and the people behind them. And so these founder led brands really saw like a huge boost and you saw founders talking directly to their consumers, Verizon.

Things like TikTok being able to do that. And I think. [00:14:00] You're right, like sharing the honest truth behind the business and like the why we do things or why not get so much respect from consumers. And probably also like, builds that loyalty where they're like , a founder answered my question, like maybe I was wondering why their product wasn't recyclable, but then they explained it to me, so now I'm aware and I appreciate them doing so versus not talking to me at all, or just giving a blanket statement.

Sherry Frey: You know, one of the things that I love too is I feel like we've had this interesting dynamic when you think about marketing, where we've got this like influencer culture and now there's a de influencer culture going on. But I believe that founders have an amazing opportunity to be influencers and to build relationships.

With consumers that, because we ultimately, right, we like to work with people that we like, we like to buy from people that we like. And we've just seen some amazing examples of founders who have, you know, also had really honest conversations with consumers around like, Hey, this is why we do this.

Or when there's a credit, some [00:15:00] crazy backlashes addressing things head on. And I think, you know, there's such a level of respect from consumers to see founders do that. 

Jordan Buckner: Sherry, the other thing I was curious about, have we seen a rise in social responsibility kind of claims in products? I know there's the whole, like there's animal welfare.

There are things like, you know, fair trade that , were big. Are there any other claims around kind of the human impact around products that are coming out? 

Sherry Frey: Yes. So that's kind of one of the interesting things. I mean, we're seeing things like ethical being just claimed, unpack or responsibly sourced.

You know, fair Trade is one of those we look at. We put B Corp actually in our social responsibility. You know, we've kind of, it can go at a lot of different places, but we have it there. That's one that we see a lot of growth in. And then the other piece that, you know, under what we measure for social responsibility, we also look at.

Minority owned. Mm-hmm. LGBTQ owned, you know veteran owned, you know, all of those aspects, [00:16:00] and those are women owned is another one. You know, those are areas that we're seeing more products, you know, make the claim on package and growth. Then, you know, we've seen about a, I think it's about a 30% growth of products that have , socially responsible claims.

Jordan Buckner: I love that. I'm excited about the growth in that as well. It's something that I'm a big advocate for. A lot of our listeners know as well, but I have another company called good Food Brands. Right now we're actually rebranding to Joyful Co. But we source. It's a, gifting company and we source all of our products from brands who are women and minority-owned, and use that as a chance to highlight the stories of the small businesses often who we're showcasing.

And we've seen a big uptick in terms of really just supporting people from underrepresented groups and making sure that those products are making out into the world. 

Sherry Frey: Oh, that is fantastic. I love that. 

Jordan Buckner: So I'm looking forward to more just awareness and even things like certifications around, like how products are made and [00:17:00] who they're being sourced from.

Cause I think there's a lot of benefit in that. Transparency. 

Sherry Frey: I do too. 

Jordan Buckner: To wrap up just real quick, are there any other areas of sustainability that you think are going to grow in the next few years? 

Sherry Frey: You know, the one that I think is kind of an interesting one. You know, we did a little bit of social listening to consumers on.

We're like, when you think about wellness and altruism, like what are they talking about? And one of the pieces that came up, Jordan, and I think maybe , I'm especially, you know, attuned to it right now, just thinking about everything with the Farm Bill is kind of this idea of healthy eating for everyone and democratizing wellness.

And I think that that has become, you know, it's more than just, you know, thinking about vulnerable groups or the supply chain. But this idea that and I think it really started to percolate, it probably was percolating before the pandemic. I think it, you know, accelerated during the pandemic. But this idea that it's not just about me and my family, right?

 It's not fair that there are people that can't afford food. And I think we all saw that, you know, it was really hard to [00:18:00] ignore the haves and the have nots and the dis income disparities in this country. And we continue to see that split, you know, that divide deepening. And so I think that this conversation around.

Democratizing wellness or nutrition for everyone, I think will be something that is going to continue to be kind of pulled. And from a consumer perspective, I frankly think it's an interesting opportunity for brands to lean into, 

Jordan Buckner: I think so as well, especially in this next chapter, what the natural products industry becomes.

Sherry, thanks so much for being on today. 

Sherry Frey: Yeah, great. It was great to be here.