The following is adapted from the book "The Purpose Economy: How Your Desire for Impact, Personal Growth, and Community is Changing the World."
It wasn't long ago that the sustainable consumer products market was mostly operating on the fringes of society. In those early days, the market was more a movement supported by a tiny portion of the population — innovators shopping at and running small health food stores. These stores smelled like vitamins, and the organic produce sold on their shelves looked sickly. It required dedication to shop in them.
It wasn't until the 1980s, with the introduction of visionary brands like The Body Shop, Whole Foods Market and Ben & Jerry's, that we started to see early adopters enter the market. Unlike the early days of the sustainable products movement, these new brands found success largely by making their products more appealing to the early adopters, people who cared about health and sustainability but also wanted products that worked well and provided satisfaction.
These companies offered great products, but at a higher cost. For early adopters who tend to be more affluent and image-conscious, the type of people we see wandering the aisles of Whole Foods Market, this worked. By 2012, Whole Foods Markets had 340 stores and 2,400 natural and organic products on their shelves, selling over $12 billion and employing nearly 75,000 people. They had come a long way from the health food stores before them.
But even with 340 stores, Whole Foods Market only serves a small part of the overall market. There are 37,053 supermarkets in the United States selling $602 billion in goods per year. That means that roughly one in a hundred supermarkets is a Whole Foods Market, so they comprise only 2 percent of the market share by revenue.
The impact of Whole Foods Market, however, is much greater than its size. Similar to Tesla, despite a small market share, it has changed the overall market. It has cultivated the early adopters and turned them into tastemakers that are making the early majority pay attention. As of 2013, 63 percent of Americans reported buying organic foods, and 40 percent planned to increase their purchases of organic in the coming year. The early majority has entered the market, but their needs are different than those of longstanding Whole Foods Market customers. They need lower costs and easier access to sustainable and healthy food.
By selling to early adopters, Whole Foods Market created enough demand to support hundreds of suppliers. Prior to its rise, many organic and sustainable products simply didn't have a retail channel to generate enough sales to survive. Many local family farms and niche packaged food brands couldn't last. Whole Foods Market created enough sales to float these businesses and to inspire many new ones. Once stable, these businesses could begin the harder push into other retail outlets.
More major supermarket chains now have organic products to appeal to the emerging market. By 2010, large supermarkets sold 54 percent of organic food. While this is leaps and bounds from where the market was 10 years ago, the selection is still limited in most stores. This remains a barrier for the early majority, who report that despite their desire to buy more organics, they often can't find them in the stores where they shop.
There is a fundamental chicken and egg riddle in moving to sustainable products in supermarkets. Even if the largest retailers wanted to move to more responsible products, in most cases, they wouldn't have the suppliers necessary to stock their shelves in the volume they require. Most of the Whole Foods Market suppliers simply don't have the infrastructure to meet the needs of millions more buyers.
Out of the ecosystem of suppliers that Whole Foods Market nurtures, some of the brands take off and are able to go mainstream, to cross the chasm into the early majority market and be able to scale to meet the needs of large retailers. Seth Goldman's Honest Tea is one of the early examples of a product that made this jump.
Honest Tea was founded in 1998 to provide healthier (and later organic) iced tea products to the market. It was initially sold through Fresh Fields, later acquired by Whole Foods Market. Their first shipment to the stores was for 15,000 bottles. The product quickly took off, and sales through Whole Foods were booming. It caught the attention of the king of sugary beverages, the Coca-Cola Company, who made a major investment in the company in 2008 to help it move into the larger markets. Honest Tea was even President Obama's preferred drink and was being stocked at the White House.
By 2011, what Honest Tea found, however, was that building and managing the distribution and production necessary to fill the shelves of major retailers and reach the majority of Americans was a daunting task. It required a different kind of company, where marketing, distribution and production were its core competencies. That same year, Honest Tea was acquired by Coke, which enabled the Honest Tea brand to sit on top of the same marketing, production and distribution systems of Coca-Cola. Whole Foods had incubated a product that had crossed over into the majority.
This is the story of how sustainable and healthy foods move through the adoption curve. More companies will follow the path of Whole Foods and Honest Tea and find ways to distribute their products by partnering with large platforms, who can bring their products to the masses. Some of these platforms may also begin to create their own new products to meet this market need.
As the brands go mainstream, it's too easy to lose sight of the fact that they are about more than just profits. They are key players in what I call the "purpose economy," which is where markets meet our individual desire for purpose. They are creating meaningful impact in service of people and the planet with more human-centered markets.
These early pioneers that have gone mainstream are now attracting the human and financial capital needed to build and grow markets in the purpose economy.
Photo of local produce section via Whole Foods