Are green cleaning products subject to the laws of demand and supply?
But America’s eco-consciousness, it turns out, is fickle. As recession gripped the country, the consumer’s love affair with green products, from recycled toilet paper to organic foods to hybrid cars, faded like a bad infatuation. While farmers’ markets and Prius sales are humming along now, household product makers like Clorox just can’t seem to persuade mainstream customers to buy green again.
Sales of Green Works have fallen to about $60 million a year, and those of other similar products from major brands like Arm & Hammer, Windex, Palmolive, Hefty and Scrubbing Bubbles are sputtering. “Every consumer says, ‘I want to help the environment, I’m looking for eco-friendly products,’ ” said David Donnan, a partner in the consumer products practice at the consulting firm A. T. Kearney. “But if it’s one or two pennies higher in price, they’re not going to buy it. There is a discrepancy between what people say and what they do.”...
Sales have gone south, too. In the 12 months through March, sales of Nature’s Source Scrubbing Bubbles all-purpose cleaner have dropped 71 percent, to $589,614, according to the SymphonyIRI Group, which tracks sales at mass-market United States stores, excluding Wal-Mart. Nature’s Source Windex dropped 35 percent, to $1.8 million. Nature’s Source Scrubbing Bubbles tub and tile cleaner dropped 61 percent, and Nature’s Source toilet bowl cleaner dropped 78 percent.
And that was as prices on all of those items were reduced.
The recession officially ended in June 2009. According to the BEA [PDF], per capita disposable personal income increased by about 2.7% from the fourth quarter of 2009 to the fourth quarter of 2010. As income went up, demand for green cleaning products fell ("prices on all of those items were reduced"), suggesting that these are inferior goods. But that makes little sense. Is there a lag between income changes and changes in demand for green cleaning products? We know there is a lag between employment growth and income growth so maybe the demand for green products is more closely correlated with employment and income expectations.
Update: See this post on some of Matt Kahn's research.
Another update, this one from the blog formerly known as Green, Inc:
Similarly, sales of Seventh Generation rebounded to “solid double-digit growth” in 2010, after a relatively meager 2 percent gain in 2009, said John Replogle, chief executive.
Up above I didn't make a clear distinction between name brand products with green flavor and actual green companies with green products. Sales of green products from green companies has been increasing. These are the true normal goods. The income elasticity of Seventh Generation products is positive.
Note: Differences between what people say and what they do is called hypothetical bias. The cool thing is there are ways to mitigate and even eliminate the bias so that data from what people say they will do can be used to make more accurate forecasts.