The CQ: When Climate Becomes an Economic (Not a Feel-Good) Decision
Gas prices and rising temps bring into cost savings into focus for climate tech adoption.
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How Climate Innovators Can Spark Mainstream Adoption
When I bought a Tesla Model 3 in early 2021, gas prices were significantly lower than they are today ($3.24 vs $6.11). Even though the Tesla checkout experience calculated my expected gas savings, I struggled to fully appreciate the value of the savings relative to my ongoing expenses. The real reason I chose to buy a Tesla is because I longed for additional actions I could take to reduce my carbon footprint. Today, the calculation for consumers is meaningfully different.
Last week, AAA reported that 25% of Americans plan for their next car purchase to be an electric vehicle (EV). Of those Americans planning to purchase an EV, 77% stated that the desire to save on fuel costs is the primary driver of their intention. This is a powerful insight, and not only because electrified and battery-electric vehicles accounted for 10.3% and 3.2% of the market in 2021, respectively. With inflation reaching 9.1% in June, and gas prices increasing 11.2% month-over-month and 60% year-over-year, consumers now see EVs as an economic decision rather than a climate decision. Whereas early-adopters of EVs were more inclined to see climate as the primary driver of their purchase intent—EV car prices were higher, gas prices were lower—mainstream adoption reliably and powerfully depends on the purchase decision tying to a clear near-term and economic benefit: wallet relief.
The interest in solar panels stands out as a relevant wallet-relief example that’s ahead of EV adoption cycle: 27% of homeowners have solar panels or shingles, or are in the process of getting them. Of those homeowners, 91% cite the desire to lower their electric bill as the reason they decided to go solar. Of those homeowners that aren’t electing for solar now, 67% are interested in getting it in the future. The increasing interest in solar aligns with a 64% decrease in solar panel costs, a 72% decrease in solar energy costs (below gas and coal costs, as of 2018), and remains timely with the backdrop of the 2021 Texas energy crisis in mind.
Likewise, the heat wave in Europe, with record-breaking temperatures in the UK this week, has brought into focus how people will cool their homes; 95% of households do not have air conditioning. However, unlike solar panels and EVs, climate-friendly heat pumps—that may be the more effective solution for the environment and energy supply—are prohibitively expensive and can cost up to $10,000 to buy and install.
The shifting consumer preference also connects to how public brands and companies with meaningful climate impact have positioned themselves, with sustainability and climate messaging as secondary (see Allbirds) or even implicit (see The RealReal, Poshmark, Carvana). Consumers buy Allbirds because they are comfortable, unique, and affordable. Consumers buy items from The RealReal and Poshmark, and cars from Carvana, to own secondhand what they possibly could not otherwise afford. Sellers sell on these platforms to make money from goods they no longer plan to use.
Forerunner has long believed that while consumers have become increasingly more inclined to purchase with sustainability and their footprint in mind, the product quality and price point must match the conventional alternatives to catalyze mainstream adoption. This line of thinking informed our investment in Eclipse, which is revolutionizing plant-based dairy starting with ice cream. Eclipse created a plant-based milk base that creates dairy products indistinguishable from conventional dairy. There’s no trade-off in taste or texture for Eclipse’s ice cream; in fact, there’s the added benefit for the nearly 70% of global consumers who experience lactose intolerance. While in the early days, consumers will pay a premium price for Eclipse, over time and at scale, the company has potential to reach price parity. The same can be said for plant-based meat, with Beyond Meat and Impossible leading the way and projections expecting price parity in the next few years.
While there's an important debate about the role consumers play in addressing climate change compared to companies, there’s no doubt that consumers can vote with their dollars to influence political and social change. At Forerunner, we’re optimistic that there will be game-changing, consumer-facing companies that address climate head on. We also believe that in order to build a game-changing business, founders must be able to find a path to transform their offering from a feel good, nice-to-have into a compelling need-to-have. What makes for an obvious economic benefit and calculation that can drive mainstream adoption?
This Week’s Top 10 Consumer Insights
As The Great Resignation continues to make headlines, consumers are closely considering the actions of the companies they work for. The Supreme Court’s recent decision on Roe v. Wade became an important issue for women across the entire country—and many companies struggled with how exactly to address it. According to new data, only 10% of companies addressed reproductive rights publicly, while ~40% chose to speak to their employees internally. Another 10% didn’t yet know how they would respond.
Amazon is doubling down on healthcare with a massive acquisition this week. The company is purchasing One Medical for $18 per share in an all-cash, $3.9B deal for the publicly-traded company. Amazon said it wants to streamline the process for seeking medical care, but it remains to be seen how the takeover will affect the nearly 767,000 One Medical members across 188 locations and 25 markets.
Where would you look for your next lunch or drinks spot? A Google exec recently said that according to internal data, young people don’t always consult the search engine. Instead, roughly 40% of young people turn to TikTok or Instagram to find their next go-to dining location.
As Netflix continues to bleed customers during an impending recession—although not as many as earlier this year—the company is making sharp changes to its strategy. The streamer will launch a Microsoft-supported ad subscription option in 2023, as well as finally crack down on password sharing. Users will soon have to pay to add a household to their account.
Meta wants the purchase journey to be much simpler on Instagram—for both consumers and small businesses alike. This week, the company launched the capability for shoppers to pay-in-chat using Meta Pay.
Consumers started snacking and drinking in larger amounts during the pandemic, and execs say the demand is still strong. One example: Premixed cocktails were the fastest-growing segment of the alcohol market, with revenue spiking 42% YOY last year. These quick cocktails placed second only to vodka in terms of overall consumer consumption in 2021.
As consumer traffic to suburban malls dies off, Macy’s is shifting its strategy—it will continue to open up smaller, standalone stores. The Market by Macy’s and Macy’s Backstage franchises are set to rival budget chains like T.J. Maxx.
Nike Style launches an immersive retail experience in Seoul, Korea this week. In Nike’s latest play for a next-gen store, consumers will be able to shop gender-agnostic products localized to the region. The location mixes a physical and digital retail experience, including augmented reality touchpoints onsite.
Uber is ramping up its grocery delivery services for users. It’s the largest update to the service since it rolled out in 2020, and will allow consumers to order groceries after hours, schedule deliveries, and track their purchases on the way to their doors. Revenue for Uber’s delivery segment ($2.51B) was almost equal to its mobility segment revenue ($2.52B) in Q1.
In a moment that should prompt a stronger spotlight on climate change, a massive heat wave descended upon Europe this week. Approximately 2,000 people have died in Spain and Portugal, thousands have been forced to flee wild fires in the south of France, and notably, many people are ill-prepared for this type of weather. In places like England, 95% of households do not have air conditioning—though AC might not be the solution, as too many adopters may overload electrical grids. Experts are weighing potential climate-friendly options to help, like heat pumps.
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“Through our own retail experiences and broader omnichannel strategy, our goal is the same: bring Glossier to more people. We’re taking a strategic and intentional approach to our retail stores; knowing we can’t be everywhere all at once, we're choosing locations where we have an existing community of customers and an opportunity to expand on that… [Retail stores are] just one channel and one touchpoint for our customers, among many that we need to deliver on.”
—Kyle Leahy, new CEO of Glossier, speaks to Vogue Business on the company’s evolving retail strategy as the brand expands into new locations this year and next (including D.C., Atlanta, Philadelphia, and New York).
For all fitness devotees, ŌURA just announced an integration with Strava. That means if you forget your ring for a workout, your data will still show up in your Readiness and Activity scores in the ŌURA app.
CNBC profiles Josh Fabian’s rise from high-school dropout to Founder of the rapidly-expanding video gaming startup.
Chime just opened a new HQ in San Francisco’s financial district. That bright, shiny new sign looks good, right?
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