In the hypercompetitive consumer packaged goods (CPG) space, a great product isn't enough — you need a mission. Many consumers embrace food and beverage brands, especially those in the natural and organic sector, that advocate for positive change, and they’ll often pay a premium for products committed to creating a meaningful impact.
Purpose-led branding can have business advantages such as boosting brand reputation, facilitating employee retention, and increasing revenues. Maintaining commitment to the mission in the face of obstacles and adversity is where many purpose-led brands struggle and can fail.
Explore strategies for maintaining commitment during adversity as well as how leveraging environmental, social, and governance (ESG) initiatives and other operational solutions can help preserve brand integrity, protect consumer trust, and promote business success.
Principles with profits
Clearly stating a vision and commitment to values and beliefs that create a positive impact is at the heart of a purpose-led brand. Though a variety of terms — mission-based, purpose-driven, sustainable — are used to describe these brands, and subtle nuances in their approaches exist, the goal is to address a specific environmental or social problem and foster positive change.
Mission-led brands are guided by a definitive object that goes beyond profit maximization. They’re often inspired by the personal passions of their founders, a core dedication to a cause or goal, or a desire to mitigate environmental damage and social inequities. Ideally, they’re directed by principles and standards that inform policies, practices, interactions, and business decisions.
Values and principles are numerous and broad, but generally involve environmental sustainability, animal welfare, and social responsibility. ESG initiatives also impact how a company is managed and governed, including factors like:
Board composition and diversity
Ethical conduct
Responsible corporate behavior
Fair compensation practices
Personal sustainable economic and social development
In the food and beverage industry, many values fall into intersecting categories, with overlapping impacts. For example, personal health is a driving force in the food and beverage space.
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Many health-focused, purpose-led brands are born from personal experience, for example, parents whose children suffer from food allergies, or founders confronted with a serious health diagnosis.
Wellness and other virtues frequently intertwine — evident in the proliferation of plant-based products or organic goods that support not only health but also animal welfare, environmental sustainability, and food system democracy.
Sustainability continues to lead the list of values influencing consumer buying decisions. Surveys show 78% of U.S. shoppers say a sustainable lifestyle is important to them, and over 60% said they’d pay more for a product with sustainable packaging.
Responding to consumer demands, businesses are assuming a leadership position on minimizing environmental impact and addressing climate change, with efforts ranging from regenerative agriculture and zero-waste manufacturing facilities to greener packaging solutions, water-management strategies, and sustainable ingredient sourcing.
Consumers also care about animals; almost 60% say they gravitate toward brands with certified humane, free-range, and hormone-free claims. Purpose-led brands also direct efforts toward protecting endangered species and marine life.
Social values center on human rights and equity; how a brand interacts with employees, suppliers, customers, and communities. The social dimension incorporates policies and practices designed to improve individual lives, including:
Fair labor
Farmers’ economic security
Discrimination or exploitation in operations and supply chains
Employee health and safety
Diversity and inclusion
Fair compensation
Contributions to local communities
Purpose-led organizations often support their stated principles through philanthropic activities, like:
A percentage of sales donated to global missions focused on hunger relief or protecting endangered species
Grants to fund not-for-profits working for environmental sustainability
Grassroots efforts aimed at creating urban farms in underserved communities
Doing good is good for business
Having a clearly defined purpose offers a compelling selling point that can differentiate your brand. Connecting with a core group of shoppers who share your values can enhance customer loyalty. Federal, state, and local tax credits designed to drive innovation and sustainability efforts reward businesses for responsible behavior.
Purpose-led brands also can attract impact investors, boosting funding opportunities and potential partnerships. Studies show values-oriented businesses enjoy increased sales. A 2020 McKinsey survey found products making ESG claims saw significantly higher revenue growth compared with those making no such claims, and another study suggests purpose-led brands saw 10 times greater growth than traditional brands.
While no single product claim outperformed all others, consider these statistics:
Brands claiming a carbon-zero footprint grew 8.5% more than those without.
Brands using prevalent claims, like being environmentally sustainable, experienced higher growth than those that don’t.
Brands with LGBT ownership or certified by the National LGBTQ Chamber of Commerce (NGLCC) grew 36%.
Brands with a Certified B-Corporation label grew 11%.
Additionally, a combination of attributes appears to enhance growth. In one report, products displaying multiple ESG-related claims grew twice as fast as products making a single claim.
Knowing consumer purchasing is heavily influenced by a company’s ideals and beliefs, values-oriented businesses are increasing. The number of new purpose-led CPG companies more than doubled between 2019 and 2020, and an estimated 35% of all new start-ups espouse an ESG mission. Meanwhile, 46% of large food and beverage brands say they prioritize working with ESG-compliant suppliers.
With the influx of ESG brands, shoppers are sensitive to greenwashing, or purpose-washing, and skeptical of empty or misleading label claims. Labeling and third-party certifications demonstrates to your consumers your brand’s commitment to its stated values. Certifications also often boost sales; products with non-GMO, organic, fair trade and animal welfare certifications saw double-digit growth in 2020.
Shoppers will often pay more for brands that support their ideals and beliefs. A 2021 survey suggested 73% of consumers will spend significantly more on a product that ensured farmers and producers were paid a fair price, with the majority stating they’d pay extra for products with animal welfare standards. In another study, over 80% of shoppers said they’d pay as much as 30% more for values-led brands, and 10% said they’d pay 50% more.
ESG factors also shape investors’ decisions and can add value in potential mergers and acquisitions. A 2022 survey found that 37% of private equity respondents declined potential transactions because of ESG concerns, while another report stated 93% of limited partners said they’d dismiss an investment if it presented ESG challenges.
Common challenges for values-led brands
While purpose-led brands enjoy distinct advantages, they also face significant obstacles that hamper sales and impede growth. For example, there’s frequently a disconnect between consumers’ stated desires and their actual purchasing behavior.
In a joint study by McKinsey & Company and NielsenIQ, many CPG executives said they struggle to generate ample demand — and sufficient sales — for purpose-led products causing the product to ultimately fail.
Common challenges for purpose-led brands include the following.
Not knowing your reason for being
In a highly competitive marketplace with a rapidly expanding number of purpose-led products, understanding the brand’s fundamental mission is critical for brand differentiation.
Many companies fail to focus on their key differentiator amid multiple, overlapping causes and values. Without a clear definition, brand differentiation suffers, and the product is overshadowed by its competitors.
Misreading the audience
In the complex arena of purpose-led companies, intersecting values — like wellness, environmental, sustainability, and animal welfare — can lead to an inaccurate interpretation of the brand’s core customer base, which can result in unfocused brand messaging and negatively impact sales.
Inconsistent communication
Without a deep understanding of overarching brand goals and the nuances of the audience, it’s difficult to create consistent brand messaging and communication across all marketing platforms, like social media, websites, and emails.
Inconsistent messaging across all platforms, can erode brand recognition, jeopardize brand credibility, and ultimately impacts sales.
Internal misalignment
Inconsistent communication and confusion around brand purpose frequently impacts the company’s internal culture and values, especially as your business expands.
Failure to adequately communicate and reinforce your brand’s mission and values from the top down can significantly impact your company’s growth and direction.
Higher operational costs
In addition to ingredient sourcing, the inherently higher costs associated with purpose-led brands — from sustainable packaging to certifications — can impede growth and profitability.
Costly manufacturing practices like energy-efficient protocols or waste-reduction initiatives often require significant financial resources and dedicated efforts to acquire funding.
Supply chain issues
Purpose-led brands using ethical suppliers or sustainable ingredients are especially vulnerable to changing economic and geopolitical conditions and cost fluctuations.
Ingredient shortages or delays can lead to cutting corners, diluting the brand’s mission, and eroding consumer trust.
Product quality and consistency
A brand’s stated purpose won’t promote customer loyalty for long if the product itself is inferior.
Ingredient restrictions can affect flavor, texture, sensory appeal — and repeat sales. Supply chain issues that necessitate ingredient substitutions may threaten product consistency. Higher costs for specialty ingredients and manufacturing processes are often further barriers to success.
Shifting regulatory issues
Managing regulatory compliance is often challenging for any food and beverage company. The stakes can be higher for purpose-led, mission-oriented brands, as increased focus on ESG is expected to draw more scrutiny from government agencies, lawmakers, consumer advocacy groups to watchdogs.
A shortage of core competencies
Successful brands depend on proven fundamental business practices, ranging from marketing to financial management.
Some values-oriented founders may have limited professional experience, while the brand purpose can distract from primary business needs. Without a clear business model that consistently generates revenues and strong gross margins, any company will struggle to survive — no matter how admirable its goals.
