In this article, you’ll discover how Nesquik inflates its margins through greenwashing. An eco-responsible product is sold for 48% more than its standard equivalent. Consumer psychology explains why this technique works so well.
Consumers are willing to pay more for eco-responsible packaging. Indeed, on supermarket shelves, eco-refills are often more expensive than the same product in conventional packaging. The proof is in the form of a hyper-popular product: Nesquik. Industrial constraints can explain this strange price difference, but also by consumer behavior itself. To initiate change and enable eco-refills to take over, changes in behavior are essential.
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While shopping a few weeks ago, I noticed an anomaly on the shelves. The eco-responsible version of an ultra-popular product (Nesquik) was more expensive than the normal version (see photo below).
On the left in the photo, the classic product is €5.19/kg. On the right, the refill with 86% less plastic, but 48% more expensive (8.45€/kg). Why such a pricing strategy? Is it a deliberate greenwashing strategy?
The marketing of “without”
Although I can’t say who, the brand or the distributor, decided to sell the eco-friendly refill 48% more expensive than the original product, it reminded me of what I wrote in 2022 after visiting SIAL, the world’s biggest food trade fair. We now must deal with “without” marketing, where removing certain ingredients justifies a higher price. Manufacturers have understood that consumers’ desire to “do good” alters their price sensitivity. And this naturally applies to eco-responsible packaging.
Why eco-refills are more expensive
The price of eco-refills naturally depends on the margins of various players in the value chain. But it’s also important to understand that certain constraints dictate the price. There are 2 main reasons why eco-refills are more expensive than traditional packaging:
- the need for a dedicated production line
- lower shelf rotation.
Regarding production, the lines used for hard packaging cannot be converted to accept soft packaging. A dedicated production line must, therefore, be set up, which cannot be fully automated. Refill filling is less well-industrialized, which inevitably results in additional costs. Subcontracting production is not a solution for keeping prices down either since the costs of an intermediary and additional operations add 3% to 5% to the invoice.
Another factor contributing to the higher cost of eco-refills is the issue of in-store product rotation. Customers tend to purchase fewer eco-refills, leading to a low turnover rate, especially during the initial launch period. This low turnover rate reduces competition and consequently, drives up the average price.
Customers are willing to pay more for eco-responsible packaging
Customers are willing to pay more for eco-responsible packaging
In research that I analyzed on this blog showed that consumers are prepared to pay 16% more on average for a product in eco-responsible packaging. The study was based on photos of fictitious products and in a laboratory. Therefore, a difference is expected from a real-life situation, but the results are unmistakable.
So, it’s hardly surprising that manufacturers are “taking advantage” of this trend to sell more expensive products that meet consumer demand for greater environmental respect. This is the very definition of greenwashing. But is it justifiable to charge 48% more for a product packaged in a plastic bag?
I understand that changing packaging materials altogether can cost more. But in the case of Nesquik, I find it difficult to justify such an increase by an industrial effort. From a marketing point of view, it would be interesting to study how consumers react to the sight of two opposing pieces of information: on the one hand, less plastic, and on the other, more expensive.
How to influence consumers in the right direction
Clearly, this pricing strategy is deliberate and relies on customers not reading labels. At least not the information on price per kilo. The stimulus is based on the price per unit, which is the advantage of refilling (since the quantity of product is lower).
The consumer must, therefore, be influenced to behave correctly. This is known as “nudge marketing.” Often, this nudge stems from a regulatory constraint, as it serves the interests of salespeople. Ecolabels could be the start of the answer. The European Green Claims Directive aims to combat greenwashing. For example, this has inspired the French government to introduce the official environmental equivalent of Nutri score in 2024. The calculation will be based on the PEF (Product Environmental Footprint) reference system for measuring the environmental impact of foodstuffs. The methodology will also be based on LCA, which makes it possible to quantify this impact throughout the production chain.
However, this official “eco-score” is insufficient to alert consumers to price differences. This is where the retailer has a role to play.
What role should retailers play?
Retailers have a real role to play in educating consumers. This role is not assumed today because retailers are financially interested in not educating consumers. But if, tomorrow, the most interesting products for the consumer were visually highlighted on the shelves, wouldn’t that change things?
You’ll agree that consumers already have all the tools they need to inform themselves and make intelligent choices. Applications such as PingPrice contribute to this education, but they require an effort before purchasing. However, as I’ve often said on this blog, human beings minimize effort, often leading them to be on “autopilot,” especially in supermarket aisles. It is, therefore, illusory to hope for a massive change in behavior in this way.
The only hope, therefore, lies in a “nudge” at the point of sale. This is possible since, in France, Leclerc supermarkets decided in September 2023 to combat shrinkflation by naming the products that practiced it in their stores. From July 2024, French supermarkets must inform consumers about brands that use shrinkflation. The government has passed a law to this effect.
Conclusion
Consumer biases are far too numerous to enable them to make conscious, informed judgments when making purchases. Brands know this and play on these biases to extract maximum value. This involves marketing techniques aimed at sending out stimuli to increase the perception of value.
More informative displays on the shelf can counter this, but this is not the priority of retailers, who are themselves dependent on the relationship with these same brands. There is, therefore, a latent conflict of interest that only a legal obligation, as in France for shrinkflation displays, could counter.
Posted in Marketing.