More and more consumers are balancing their buying decisions with their social, environmental and political convictions. This began with the Millennials, but the baton has definitely been passed on to  other generations. Material possessions are no longer the ultimate goal. Today’s consumers prefer to spend in a more measured, sustainable, and responsible way. 

In our Julius Baer Global Wealth & Lifestyle Report 2020, we took a closer look at conscious consumption and interviewed entrepreneurs and thought leaders, from chefs to wellness experts. We then asked Nicolas de Skowronski, Head Wealth Management Solutions at Julius Baer, to highlight some of the key insights from the report.

Why did  this year’s report focus on conscious consumption?
Nicolas de Skowronski: We strongly believe that this relatively new approach to spending is here to stay and therefore merited a more detailed analysis. Every day we see a new example of how this powerful consumer group forces companies to review their supply chains, adapt their products, and innovate to stay in business. Thus, understanding changing consumer preferences is key to assessing investment opportunities and risks.

Did you identify any regional differences among consumers?
One might assume that only the wealthiest consumers can afford the luxury of a conscience, but this is not the case. This trend is here to stay for all consumers. As our report showed, consumers in Latin America and Asia are more inclined to choose a product based on its sustainability credentials. This is likely driven by their first-hand experience with man-made negative impacts of economic growth. 

Are there any generational differences?
Millennials are clearly at the forefront of this development, but we also see this trend emerging among younger generations, as seen with the climate protests. They are also influenced by social media and of course, one could say that the ‘Greta effect’ is also at play here.

Can you  provide an example of this youth effect?
In the fourth quarter of 2019, Burger King announced that they would remove plastic toys from children’s meal boxes in the UK, prompted by two British sisters aged 9 and 7 who collected half a million signatures requesting that fast food restaurants stop including plastic toys in children’s meal boxes.

How are companies addressing this change in consumer attitudes to spending?
Companies are addressing this change in very different ways – there is a big push towards better environmental, social, and governance considerations. 81% of the companies we spoke to for our report said that sustainability is more important to their business than it was five years ago and an even higher percentage (85%) expect it to be even more important in another five years.

So the awareness is there. But how is this translated into action?
Many companies are reacting to the conscious consumer by adapting their supply chains, production process or existing products. We see that across the board: the car industry, for instance, is moving away from diesel and combustion engines to electric/hybrid technology; fast food restaurants like McDonald’s and Burger King experiment with alternatives to meat based products; and the Swedish clothing retailer H&M has decided to use only sustainable cotton. Generally, consumer demand triggers many innovations.

Any examples?
Take the Swedish-Finnish manufacturer Stora Enso, which developed renewable and reusable material made from wood to replace plastic. Or the Dutch science company DSM, which has developed “clean cow” enzymes that can be added to cattle feed to regulate methane production.

Who benefits from the conscious consumer?
We all benefit from this trend – the planet, yourself, myself, our children. From a business perspective, companies that can credibly demonstrate that they act in a responsible and sustainable manner will thrive. First movers to serve new consumer needs will also benefit. One example is ‘Beyond Meat’, the first publicly traded company fully focused on plant-based meat alternatives.

How can investors profit from this trend?
Currently, many companies have started to respond to the conscious consumer trend, but not many pure-play companies are available and not all new business models will prove successful. We therefore prefer diversified and actively managed exposure, either focused on the Millennial consumer or on capturing companies that show positive development in their environmental, social, and governance behaviour.