Food industry marketers will need to batten down the hatches because the challenges facing the food-at-home sector are set to accelerate for the next few years, asserts a study by Jefferies, the global investment bank, and AlixPartners, the global business advisory firm. Their joint study, Trouble in Aisle 5, surveyed 2,000 consumers and concluded that the industry is on the cusp of some major changes, driven mostly by changing demographics.
As Boomers are supplanted by Millennials, retailers and manufacturers need to take into account the different ways the two generations prefer to shop and their profoundly different attitudes towards consumption. Millennials are primarily interested in convenience and exploring the retail options that give them "what they want, when they want it," whether that means going back and forth between different delivery modes (e.g., online or smartphone shopping) or even using different channels (e.g., mass merchants, grocery and club). In addition, this generation born between 1982 and 2001 is less brand-loyal than the Boomers born between 1946 and 1964. While less than half of Millennials (47%) say brands are "extremely" or "somewhat" important in their grocery purchasing decisions, as many as 61% of Boomers say the same. Furthermore, only 41% of Millennials' total food spending is at traditional grocers, compared to 50% of Boomers' total food spending.
Another difference between the older and younger generations is price sensitivity. Millennials are more price sensitive than Boomers, though as their incomes increase, they are more open to paying for attributes like "convenience, freshness, health, variety (of flavors, international/ethnic cuisines, product sizes) and natural/organic." Meanwhile, Boomers remain committed to more traditional shopping modes, like visiting local grocery stores and using paper coupons. However, as they age into retirement and their incomes fall, these mature shoppers will be less willing to pay more for their desires. In fact, by 2020, at-home food spending by Boomers could fall by as much as $15 billion per year.
"The at-home food industry is just beginning to feel the impact of this major demographic shift as Millennials rise in prominence and Baby Boomers adjust to meet the requirements of age and a fixed income," said Scott Mushkin, Managing Director and Senior Equity Research Analyst covering Food & Drug Retailing and Packaged Food at Jefferies. "The bottom line for food-at-home industry stalwarts is that big changes are coming, and companies who don't fully understand those changes risk being marginalized."
Image credited to "Mind the Gap: Millennials vs Boomers by Column Five Media, http://www.visualizing.org/visualizations/mind-gap-millennials-vs-boomers
WHAT DOES IT MEAN TO ME?
Appealing to the preferences and habits of both generations will require a deft hand. It will be particularly challenging for grocery stores to modify their offerings enough to attract Millennials without also alienating its core Boomer shoppers. This dynamic may be good news for manufacturers who are able to support those retailers looking for help in finding this delicate balance. Offer this support to your grocery partners by creating marketing initiatives that are flexible enough to appeal to all generations as well as customizable, e.g., create different versions for different audiences.
"Rise of the Millennials," Grocery Headquarters, 6/27/12 www.groceryheadquarters.com/2012/06/rise-of-the-millennials/