The Cost-of-Living Paradox: Why Sustainability Stops Consumers Trading Down

The cost-of-living pressure on consumer spending is not a future scenario. In the 2023 US F&G benchmark, almost 7 in 10 respondents are actively switching food and grocery brands to save money. Of those, 65% are switching all or almost all, or a large number, of their products.

In this context, the assumption would be that sustainability, typically associated with premium positioning, becomes irrelevant as a purchase driver when price pressure is acute. The data does not support that assumption.

Sustainability is functioning as a retention signal for a meaningful segment of consumers: a reason they give for not trading down to a cheaper alternative, even under financial pressure.

Across all food and grocery departments, an average of 10.2% of consumers cite sustainability as a reason they did not trade down. In Baby Care, the figure reaches 1 in 5, the highest of any department measured. In Baby Care, Household, and Dairy and Eggs, sustainability is the second most important barrier to trading down for Millennials, behind only product quality.

The commercial translation is direct: for brands with strong sustainability perception in high-stakes categories, the ESG signal is doing retention work that price and quality positioning alone cannot do. A consumer who has chosen a baby care brand partly on sustainability grounds is harder to move with a price promotion from a competitor. The switching cost is not only financial, it is values-based.

This does not mean sustainability is more important than price for the majority of consumers. It is not. Price remains the primary barrier to trading down, with quality second. But the sustainability retention signal sits in third position in a cost-of-living environment where every percentage point of retention is commercially significant.

The data point to monitor: as inflation moderates and purchasing pressure eases, whether the consumers who stayed loyal during high-pressure conditions become stronger brand advocates as a function of the retained relationship.