The LOHAS Marketplace
The LOHAS Marketplace: $209 Billion Strong (And Growing)
Actions in the LOHAS marketplace have never been greater. Many companies are entering with new, innovative green products and services, thus opening the door for consumers (and customers) to find their own shade of green, match their values to their purchase behavior, and feel better about protecting the planet.
The LOHAS marketplace is expansive and composed of a myriad of products and services ranging from organic foods to hybrid cars to green building. As industry members, many readers are likely aware of the steep growth trajectory these industries are on. While individual market size numbers are available for some industries, it is also important to measure the entire LOHAS marketplace size. As the LOHAS concept is truly a lifestyle concept, focusing on just one industry leads to a myopic view of a dynamic marketplace.
This article presents summary results of a large-scale, collaborative effort between NMI and Silvercliffe Media (referred to as “the Team”) and provides a synopsis of the size of the LOHAS marketplace based on U.S. consumer expenditures in 2005. It is an outgrowth of the work originally done by Natural Business Communications, which started the LOHAS Journal, in 2002.
The Team made several changes to the 2002 research scope, the most significant of which is the analysis focusing exclusively on consumer products and services (no business-to-business sales, the largest sector in the earlier research, are included). Secondly, the selection of categories is driven primarily by consumers’ evolving attitudes and behaviors surrounding values-based purchasing. Consequently, there are product categories previously considered part of the LOHAS marketplace that have now sufficiently mainstreamed outside the scope of this endeavor. Examples of such categories include air purifiers, bottled water and humidifiers.
For purposes of this analysis, the LOHAS marketplace divides into the following sectors:
1. Personal Health
2. Green Building
4. Natural Lifestyles
5. Alternative Transportation
6. Alternative Energy
7. Socially Responsible Investing
Combined, the value is an impressive $209 billion. Notably, the numbers represent all U.S. consumers’ purchases of LOHAS goods and services, not just those made by the LOHAS Consumer segment.
The result of a six-month research project, the data are culled from a wide variety of primary and secondary sources. In virtually all cases, data for 2005 were used. Where only older data were available, conservative growth rates were based on published information. The sources of this information range from industry groups to the U.S. government to other credible secondary sources.
Exploring Each Sector
Personal Health, a broad category that encompasses natural and organic foods, dietary supplements, natural and organic personal care products, integrative healthcare, and mind/body/spirit products and services comprises more than half of all LOHAS marketplace sales, for a total market value of $118 billion. Its size indicates its position as the cornerstone of this marketplace: Most consumers enter the LOHAS marketplace through a “consumable” product, simply because such products are readily available and their cost is relatively low (compared to durable goods, such as a hybrid vehicle). Furthermore, these products have been in-market many years and consequently have high consumer awareness and familiarity.
The largest categories within this sector are:
1. Natural and organic foods, contributing just over 20 percent of this sector’s value. Purchases are split almost evenly between organic and natural foods and beverages, with a relatively small increment coming from foodservice. The fact that organic sales eclipsed natural sales is a major milestone for the organic industry, and given growth rates, organic sales is likely to far surpass natural product sales in the next few years.
2. Dietary supplements are the second largest category, contributing approximately 10 percent of the total LOHAS market value.
3. Natural and organic personal care products; integrative, complementary and alternative medicine therapies; and mind/body/spirit products and services (containing health clubs, fitness equipment, yoga, self-improvement products and services, natural/organic spas, and magazine, book, video tape, and DVD sales and rentals) round out this category, with a combined value of $72 billion.
Green Building is the second largest sector, and contributed nearly $50 billion to the LOHAS consumer marketplace. Its size is driven primarily by purchases of Energy Star certified homes, which is more than half of the sector’s value. Sales of other types of green homes, Energy Star certified appliances, flooring, solar panels, and recycled decking were also included in this sector. Sales of Energy Star certified appliances, approximately $14 billion, were the largest of these.
Eco-tourism sales, a particularly on-trend travel option in today’s market, amounted to $24 billion in 2005. These types of trips are growing as much as 34 percent per year, and there are significant opportunities to capitalize on this trend and broaden travel to include an array of experiences from spa services to canopy walks to cultural experiences. Many consumers continue to seek a sense of meaning from their purchases, and eco-tourism is in a unique position to deliver this benefit in multiple dimensions.
Natural Lifestyles, a sector that includes indoor and outdoor furnishings, social change philanthropy, and apparel, represented $10.6 billion in sales, or nearly 5 percent of the LOHAS marketplace. The largest sales came from recycled paper products, contributing nearly half of the sector’s value, followed distantly by natural and organic gardening (approximately $2.3 billion). CFLs (Compact Fluorescent Light Bulbs) are also included in this sector. In 2005, their sales were less than $300 million. However, merchandising activities by retailers such as Wal-Mart and Home Depot have significantly grown this category. The number of consumers purchasing CFLs has grown 17 percent annually since 2003. Many other products included in this sector, such as natural cleaning products, organic flowers, and natural pet products, were relatively niche products in 2005. While many of these products have been in-market for many years, new brands such as Method, Pet Promise, and Greenworks are revitalizing these market sectors; time will tell if these brands are strong enough to make a significant contribution to the total LOHAS market size.
Alternative Transportation, the fifth sector, includes sales of hybrid cars, car-sharing programs, and biodiesel fuel. At $5.8 billion, sales of hybrids contributed 95 percent of this sector’s value. With the proliferation of hybrid gas/electric engines, alternative fuels, car sharing, and other green types of green cars (such as components made of recycled content), this sector also shows significant potential to be a larger player in the overall LOHAS marketplace.
Alternative and Renewable Power sales to consumers equaled $380 million. The commercial market for renewable power appears to hold considerable potential, and consumer momentum continues to build. Barriers in understanding, perception and benefits, as well as perceived complications in switching to renewables will need to be overcome for consumers to embrace renewable power.
Finally, total consumer funds under socially responsible investment management in 2005 were $215 billion. Nearly five of every six of these dollars is invested in a socially screened mutual fund. Separate accounts, managed on a custom basis for an individual, is the second most common type of investment but is relatively small: $17 billion. Banks, credit unions and loan funds complete the sector, with $29 billion under management in 2005. The value of these investments is not included in the total market size, because of fluctuating volume based on market performance and their being investments rather than sales. That said, they are clearly part of the LOHAS lifestyle and marketplace.
As products rooted in the LOHAS lifestyle become more appealing to mainstream consumers, all of these sectors appear poised for above-average growth rates. Understanding the specific drivers that make a LOHAS product appeal to a mainstream consumer will be critical to realizing this success. Simultaneously, the ever-demanding LOHAS consumer will be looking for new and innovative green products that provide them with the feeling that they are truly leaders in the marketplace. Consequently, we continue to believe the marketplace holds abundant opportunities and deserving of additional investment and attention.
Additional detailed information on the LOHAS marketplace size is available in NMI’s report series, Understanding the LOHAS Market™. For details, please visit NMI Solutions.