Will Multinationals’ Sustainable Brand Buying Spree Continue?

by | Sep 28, 2016

seventh-generationUnilever’s purchase of sustainable household products manufacturer Seventh Generation is the latest “green” or sustainable brand acquisitions, a trend that analysts expect to continue as multinationals look to increase their sustainable product offerings and meet their own internal environmental goals.

In July, SC Johnson purchased the plant-based home and personal care products brand Babyganics. Unilever already owns Ben & Jerry’s, another socially conscious B-corporation well known for its environmental efforts, and is rumored to be in acquisition talks with Jessica Alba’s Honest Company.

B-corps are companies certified by a nonprofit called B Lab to meet certain standards of social and environmental performance and transparency.

“We are continuing to see large multinational corporations drive the commercialization of sustainable products across all aspects of the consumer packaged goods industry,” Lux Research’s Victor Oh, who leads the firm’s bio-based materials and chemicals research team, told Environmental Leader.

While some companies like Unilever are taking a mergers and acquisitions approach — like Unilever buying Seventh Generation — others like Procter & Gamble are taking a more direct route through internal research and development, Oh said, pointing to P&G’s new Tide purclean biobased detergent.

“This trend will only continue as multinational corporations look to organic or bio-based products as key enablers for fulfilling internal sustainability road maps,” Oh said. “For example, we see large companies like Procter & Gamble, Unilever, Ikea, Adidas and CJ CheilJedang take internal initiatives to phase out petroleum-derived plastics in areas like consumer products and packaging. Multinationals are also preparing for a future generation of consumers that are starting to select brands based on how the products were made and where the material were sourced from.”

While Unilever and Seventh Generation did not disclose terms of the deal, Unilever said the cleaning product company posted sales of more than $200 million last year and has seen double-digit compounded annual growth over the last 10 years.

“Adding Seventh Generation to Unilever’s portfolio of purpose-driven brands like Ben & Jerry’s and Dove demonstrates our continued commitment to the Unilever Sustainable Living Plan,” said Kees Kruythoff, president of Unilever North America, in a statement.

Unilever’s Sustainable Living Plan is the company’s blueprint for sustainable business. One of the goals is by 2020 to halve the environmental footprint of the making and use of Unilever’s products.

These “sustainable brands” are big business for Unilever, which has said about half of the company’s growth last year came from its sustainable living brands, which grew 30 percent faster than the rest of Unilever’s business.

The company defines sustainable living brands as those that “integrate sustainability into both their purpose and products” such as improving health, wellbeing or nutrition, reducing environmental impacts or using sustainably sourced ingredients. These include Unilever’s five biggest brands: Knorr, Dove, Dirt is Good, Lipton and Hellmann’s.

These sustainable brands are also what consumers want.

A Nielsen survey recently found 40 percent of global consumers want environmentally friendly benefits from their cleaning products, and 36 percent said they don’t want harsh chemicals, according to a Fortune report.

Also, according to a recent market report by the Natural Marketing Institute, US consumer awareness and consumer attitudes toward sustainable, or “green,” brands are at an all-time high, with 63 percent increasing their purchasing of green products. The report also found the percentage of consumers who prefer to purchase products that are sustainably manufactured has also increased to 59 percent, an 8 percent increase from 2009.

Research and consulting company Organic Monitor also predicts the trend of green acquisitions will continue as multinationals look to enter fast-growing sustainable product industries and achieve their own sustainability targets of reducing environmental and health impacts — goals that purchasing “green expertise” can help them achieve.

The research firm says L’Oreal was the first to make major acquisitions when it bought The Body Shop and Sanoflore in 2006. By buying “green expertise,” L’Oreal subsequently developed natural and organic lines for some of its popular brands.

But there are challenges to companies seeking to buy or develop their own bio-based products and brands, Oh said. “The biggest challenge in the bio-based industry is integration of strategic partners along the entire value chain, starting from feedstock source to end-consumer product Whether multinationals acquire brands or develop products through internal R&D, all companies will need to seamlessly implement open collaboration and innovation.

“The truly smart corporations will look for acquiring or developing brands that offer sustainable products with the same, if not improved, performance quality that also have a bio-based or organic component. Simply buying “green” brands without focus on performance will only lead to dead-ends with consumers and a backwards step away from sustainability.”

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