Products that are identified chiefly as green, organic, or locally produced have sometimes risked falling into what one might call the LOHAS Trap. To the extent that LOHAS, an acronym for Lifestyles of Health and Sustainability, is regarded as a relatively affluent, well-educated market segment, products that are aimed at that segment are likely to remain “alternatives.” In that case, for most consumers, the default choice will be the “mainstream” product, e.g. Palmolive, rather than Seventh Generation. A company such as Seventh Generation may earn a profit by charging a premium to those affluent consumers who are especially concerned about the environmental impact of detergents. However, environmental progress will be limited if the offerings of such companies continue to be premium niche products, while more harmful products constitute the more affordable mainstream.

This week, two articles were published that suggest this situation may be changing, and the increasing cost of oil may be driving the change.

According to an article in the Wall Street Journal this week entitled Green Products Gain From New Price Equation, many products that are made using environmentally responsible methods are becoming more competitive because they do not rely on large inputs of petroleum. One example from the article is Eco-Products, which produces compostable dinnerware. Because its products are not made from petroleum, Eco-Products has not faced the price increases that have plagued its competitors, whose products are oil-based. Eco-Products expects its sales to rise dramatically this year to $50 million, from $11 million last year.

Another example is TerraCycle, a company that is expanding well beyond its origins producing fertilizer from worm castings. TerraCycle has long emphasized re-use and recycling, employing discarded plastic bottles as containers for its fertilizer products, for example. Now, it is also making school supplies such as backpacks and pencil cases from old juice pouches and other waste materials. According to its CEO, Tom Szaky, this practice is proving to be an advantage:

“We make a product out of garbage so our raw-materials prices aren’t going up. Many other raw materials are linked to petroleum products, so everyone else’s costs are going up.”

TerraCycle expects its sales to nearly double from this year to next year as a result of growing environmental awareness combined with its cost advantage.

As the founder and CEO of New Leaf Paper notes in the same article, rising prices for many products tend to prompt consumers to re-evaluate their alternatives. This is obvious to us when we see more people taking mass transit in the face of higher gas prices. It can also lead to more people choosing products made from recycled materials after the rising cost of raw materials pushed up the prices of familiar products that are made less sustainably.

A second article provides an example of a new local organic food business that is finding that rising oil prices are helping it to compete against very large-scale organic competitors based 3,000 miles away. A Booming Business in ‘Low-Mileage’ Lettuce tells the story of Locally Known, which was recently launched in Maine “to address the need for significant access to local and regionally grown produce in the northeast.” Locally Known primarily grows organic salad greens in Maine for sale to food stores and restaurants in that region, although it has ambitious plans to form a larger cooperative of farmers. As a result of record high fuel costs, its organic greens are more affordable than those shipped from California, despite any economics of scale that its much larger competitors may have. Similar to the case of TerraCycle, Locally Known is poised to benefit from the growing appreciation for local, fresh food as well as the fact that rising transportation costs make it a more affordable choice.

We are still a long way from paying the full cost of oil. Even so, given the progress that many companies are achieving today through products that reduce dependence on oil, it is now possible to see a way out of the LOHAS trap as more green and local offerings become the mainstream.

Evan

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