How consumers are responding to sustainability

Sustainability is an area that the Australian wine sector cannot ignore. 

Sustainability encompasses the environmental, social and governance (ESG) aspects of production and business, and the rapidly changing international landscape means there is a significant market access risk over the medium- to long-term if the sector does not act to meet expectations.

Retailers and distributors are increasingly demanding compliance with sustainability policies and this is already impacting business decisions. For example, almost 90 per cent of wine exported to the UK is in bulk and packaged in market, while this is partially due to cost savings but its also in an effort to reduce the carbon footprint of transporting wine. 

Consumers are also increasingly motivated by sustainability in their purchase habits. This bulletin highlights some key insights into how consumers are responding to sustainability concerns. The insights are drawn from a range of recent research. And where possible, focusing on the wine category.

Sustainability is increasingly important to a majority of consumers

Sustainability is important to most consumers, mainly driven by environmental factors such as caring for the planet, climate change, and leaving the planet in a better state for future generations. 

Broader than the environmental sustainability, social responsibility is also an important driver as research from Sustainable Brands and Ipsos show that 79 per cent of US consumers agree that solving environmental issues will require solving social issues (and vice versa).

There is ample research to show the increasing importance of sustainability in the minds of consumers. For example, a recent NielsenIQ survey conducted for Hort Innovation reported that 69 per cent of consumers globally say sustainability is more important to them than it was two years ago. The proportion of Australian consumers who agree with that statement was lower at 58 per cent. 

When looking at the wine category specifically, regular wine drinkers also say that sustainability is important to them. Research from Wine Intelligence shows that 63 per cent of regular wine drinkers globally worry about climate change and try to minimise their personal impact. Wine Intelligence also reports that sustainability is important for at least two in every three wine consumers across five of the world’s biggest markets – the US, UK, Australia, Canada, and China. The highest prevalence was in China. In the UK and US, consumer interest has increased significantly in 2022 (see Figure 1). Furthermore, there has been an increase in the intent to purchase sustainably produced wines, from 25 per cent in 2021 to 34 per cent in 2022.

Research on the US market commissioned by Wine Australia from Wine Opinions also shows strong support for sustainably produced wines, with two-thirds of wine consumers in the US responding that they believe sustainable production is important in making purchase decisions. There are differences in the responses of those purchasing wine by price segment with those purchasing wines at US$20 or more per bottle rating sustainability more important than those purchasing at below US$20 per bottle.

Figure 1:  Proportion of regular wine drinkers with a high connection to sustainability

^{Source: Wine Intelligence}

Sustainability is more important to younger consumers

The Wine Opinions research also shows that sustainability was relatively more important to younger consumers in the US, with 72 per cent of 21- to 39 year-olds indicating sustainability is important compared to 67 per cent of 40 to 59 year-olds and 66 per cent of the over 60 year-olds. 

This is supported by research from Wine Intelligence that shows that Gen Z and Millenials are increasingly motivated by wine that is made with the planet in mind. Across the US, UK, Canada and Australia, more younger consumers have been seeking to purchase sustainably produced wines in comparison to older generations (see Figure 2). For example, in the UK and US, 18 per cent and 15 per cent of Millenials (25 to 39) respectively sought out to purchase sustainably produced wines in the six months to October 2022 compared to 7 per cent and 4 per cent for Boomers (55+).

Research in the US from Sustainable Brands and Ipsos also shows that more broadly, younger consumers are the frontrunners for sustainable action. They report that 57 per cent of Gen Z and Millenials are taking sustainable actions to behave in ways that protect the planet, its people, and its resources compared to 49 per cent for Gen X and 47 per cent for Boomers. Furthermore, the younger generations are leading where there is least action overall, such as embracing predominantly plant-based diets, choosing nature-friendly products and fostering resilient societies. 

Figure 2: Percentage of regular wine drinkers who have sought to purchase sustainably produced wines in the past six months

^{Source: Wine Intelligence}

While sustainability is important to consumers, it is not the main influence in purchase decisions

While safety took precedence over sustainability during the COVID-19 pandemic, sustainability remains high on the minds of consumers. Most consumers indicate they are trying to live more sustainably. For example, Nielsen IQ reports that 61 per cent of Australian consumers use reusable bags when shopping and 43 per cent try to buy products with easy to recycle packaging. 

However, while sustainability is increasingly influential, it is not the main driver in making decisions about purchasing a brand. The NielsenIQ research shows that globally sustainability ranks fifth behind price, safety and hygiene, healthier options and brand familiarity (see Figure 3). In Australia, sustainability ranks lower at sixth. 

Figure 3: Most important things when choosing a brand

^{Source: NielsenIQ}

Current cost of living pressures are impacting purchasing drivers. Euromonitor International reports that while saving is now taking precedence over sustainability in the current economic conditions, increased cost of living is creating a new sustainable behaviour. Consumers will continue switching to energy-saving products, eating at home, reducing appliance use and limiting travel. 

Increasingly sustainability and social responsibility positively influence consumers consideration for a product, and they are likely to choose the sustainable one over the traditional. Consumption patterns are less about purchasing and more about reduction to positively impact the planet.

For wine purchase decisions, sustainability ranks even lower. Associate Professor Armando Maria Corsi of the University of Adelaide reported at the 2023 IMW Symposium that in Australia and the US sustainability ranks tenth as a choice factor when purchasing a wine (see Figure 4). In both markets, the number one factor was in the consumer having tried and likes the wine before. Price is the number two factor in Australia but drops to four in the US.

Figure 4: Relative importance of choice factors in wine purchases

^{Source: Thach, L.“New Survey Reveals How Consumers Select Wine: Taste Trumps Price”, Forbes, 6 September 2023 (accessed 14 November 2023)}  

Consumers don’t want to pay more for sustainable products

While sustainability is increasingly important to consumers, it doesn’t mean they want to pay more for sustainably produced products. Most believe it’s a brand/industry and governments responsibility to do the right thing and consumers should not bear the cost. For example, Kantar’s Global Issue Barometer 2022 reports that 84 per cent of people say governments are responsible for solving climate and environmental issues and 64 per cent saying it is the responsibility of companies. Also, the “say/do” divide is real – consumers really do care about the environment but that doesn’t mean they’ll pay more. If it costs more at the point of purchase, they may not follow through, especially in the cost-of-living crisis where we’ve seen purchase intent drop back in the past year or two.

Euromonitor International reports that less than 20 per cent of consumers were willing to pay more for household essentials with sustainable features in 2022. While 45 per cent of professionals said investing in sustainability initiatives is a strategic priority for their company in the next five years, 41 per cent said a lack of consumer willingness to pay more for sustainable products is the most significant challenge. 

NielsenIQ reports that cost is the biggest barrier to consumers embracing sustainable products. In the survey for Hort Innovation, just over 40 per cent of consumers in Australia and around the globe reported that sustainable options are too expensive. For wine, Wine Intelligence reports that globally, while 38 per cent of regular wine drinkers associate sustainable wine as being better for the environment, 27 per cent associate sustainable wines as being more expensive.

Kantar also reports that 68 per cent of people say that products that are better for the environment and society are more expensive. Many consumers are unwilling to pay a significant premium, especially give the soaring cost of living around the world. There is a level of frustration among consumers wanting to buy sustainable with 70 per cent agreeing that ‘Although I can’t afford to buy products that are better for the environment and society, that doesn’t mean that I am less concerned about these issues.’

However, for the wine category, the proportion of wine drinkers who say they are willing to pay more for sustainable wine is higher than that for general household essentials. Wine Intelligence reports that globally 44 per cent of regular wine drinkers are willing to pay more for a sustainable wine (see Figure 5). This varies by market, however, with Chinese regular wine drinkers by far the most willing to pay more for sustainable wine and Canadians the least willing. Australian regular wine drinkers match the global average.

Figure 5: Proportion of regular wine drinkers willing to pay more for sustainable wine

^{Source: Wine Intelligence}

Consumers do not believe the wine category (and beer and spirits) are doing enough to address sustainability concerns

Kantar’s Sustainability Index 2023 ranks 42 sectors across 33 countries by people’s perceptions of the degree to which they drive progress on environmental and social issues. The Index runs from +100 for driving the most positive change, to -100, for having the most negative impact on the world. Wine, along with beer and spirits, has an index of 7 which places it in the bottom 10 and just ahead of the oil and gas sector (see Figure 6). This means that people see wine, beer and spirits as not doing enough to address sustainability. Given the increasing importance of sustainability to consumers, the wine sector must do more to address this. 

Figure 6: Kantar Sustainability Sector Index 2023

^{Source: Kantar}

Consumers punish brands for greenwashing

As a result of the increasing importance consumers are placing on sustainability, more brands are making green marketing claims. This is also driving increased awareness of sustainability, particularly around the environment. The rise of greenwashing is a flow-on effect. 

Greenwashing involves making an unsubstantiated claim to deceive consumers into believing that a company’s products are environmentally friendly or have a greater positive environmental impact than they actually do. In addition, greenwashing may occur when a company attempts to emphasize sustainable aspects of a product to overshadow the company’s involvement in environmentally damaging practices. 

Brands indulging in greenwashing do so at considerable risk. Consumers are well-informed/educated and can easily identify greenwashing and will punish/call out a brand if it’s identified. It will ultimately undermine consumer confidence in the brand and erode demand for the product in question. Even more significant is that this ultimately undermines consumer confidence in the value of all green claims and erodes trust.

This is crucial as Mintel’s Global Consumer Trends 2024 reports that mistrust of brands’ environmental initiatives is growing. In the US, they report that 60 per cent of US consumers agree that many companies are just pretending to be sustainable and 52 per cent of German consumers say they don’t trust companies to be honest about their environmental impact.

Ultimately trust is the biggest factor weighing for or against a brand and consumers will hold brands accountable for not taking action to help the environment/consider climate change factors. It is also the biggest opportunity for brands to gain trust and provide reassurance through sustainability and ESG capabilities.

Through the annual Brand Health Study that Wine Australia engages Wine Intelligence to conduct, consumer perceptions of the Australian wine category’s sustainability credentials can be tracked across various markets since 2018. The results vary by market. Australian wine is seen to be most sustainably produced by regular wine drinkers in the Asia Pacific region and less in the UK and North America (see Figure 7). Chinese wine drinkers by far most strongly associate Australian wine with sustainability with Canadians perceptions the lowest.

Figure 7: Percentage of Australian wine drinkers who associate "Produces wine that is sustainable in that it is made in a way that is clean and green"

^{Source: Wine Intelligence Brand Health Study funded by Wine Australia}