ETHICAL shopping may sound like the pastime of well-meaning hippies, but tell that to the boardroom.

A retail revolution is underway, according to market analysts, and the trend dubbed “ethical consumerism” is now big business.

According to a report by the Institute for Grocery Distribution, shoppers are increasingly prepared to pay a premium for high-quality organic, free-range or fair trade products.

Even Tesco is branching out from its bulk-buy, low-cost strategy, it said.

Ethical consumerism is now worth £25 billion a year in Britain, with £4 billion coming from food and drink sales. That market, while accounting for only 4 per cent of total food sales, is growing at an annual rate of 7.5 per cent — much faster than conventional groceries at 4.2 per cent.

The trend is so great that Britain has been chosen to host the world’s largest organic store, which will open within months in West London.

The arrival of the US organics chain Whole Foods looks set to accelerate the expansion of ethical shopping.

The company, which made a $136 million (£74 million) after-tax profit selling ethical goods to affluent Americans, is preparing to open a 75,000sq ft shop on the site of Barkers of Kensington, the 135-year-old store that closed this year.

Shopping habits in Britain are changing rapidly. Annual sales of fair trade products are worth £200 million.

In the US, Wal-Mart, the world’s biggest retailer, has earmarked a chunk of its $570 million-plus advertising budget to promote the sale of organic foods. And Whole Foods’ smaller rival, Wild Oats, generated sales of more than $1 billion last year. Independent retailers account for only a quarter of the $14 billion organic food market.

Whole Foods, founded in 1980 by John Mackey, a college dropout and vegan animal rights activist, caused uproar among American consumers last month when it stopped selling live lobsters and crabs because it believes the trade in sentient crustaceans to be inhumane.

The ban did not come about overnight, however. The company spent seven months studying lobster behaviour to determine whether the animals suffered when kept in tanks.

Whole Foods decided to stop selling the creatures because it could not ensure that they would be treated with respect and compassion on the journey from the Maine sea bed to the dining table.

Mr Mackey said: “We place as much emphasis on the importance of humane treatment and quality of life for all animals as we do on the expectations for quality and flavour.”

His company has earned the nickname “the Wal-Mart of wheatgerm”, and profit remains a priority despite the emphasis on ethics.

Mr Mackey, 52, bought the London-based organics chain Fresh & Wild in 2004 for £21 million, but he has claimed that these stores may not survive where Whole Foods outlets are opened nearby.

The Institute for Grocery Distribution believes that the ethical shopping trend is growing so fast that soon it will apply as much to toothpaste, soap and tea towels as it does to organic milk, free-range eggs and chicken and fair trade coffee and chocolate.

It has even identified several types of ethical shopper. These include Showboaters, who are concerned with their middle-class image, Guerrillas, who boycott certain brands, and Lapsed Activists, who would like to do better.

Julie Starck, of the institute, said: “For years retailers and manufacturers have focused on price and competing on whose is the cheapest. Shoppers may still like low prices, but now they want to be sure where the food comes from.”

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