By 2020 Millennials over the age of 25 will comprise 19% of the population, an increase of 5% from 2010. Age 25 is considered to be a milestone birthday because median income tends to jump 60%. Conversely, the number of Baby Boomers under age 60 will decrease 17.6 million in 2020, from 59.8 million in 2010. And in the realm of income, after age 60 median income “falls sharply” about 16%. The shifts, the study said, will lead “to an annual $50 billion increase in food-at-home spending by Millennials and a $10-15 billion decrease for Baby Boomers by 2020.”
The winners in this generational shift, according to the report, will be mass, specialty and online retailers; natural/organic and specialty distributors, private label manufacturers and manufacturers that cater to special dietary needs or health-focuses. The losers will be grocery stores and branded/processed food manufacturers.
Millennials prefer cheaper, convenient food; however, they are willing to pay more for fresh and healthy food. They are more connected with the “food to fork” movement, and are supportive of organic, artisanal and small batch foods. That said, natural and organic products will continue to be important to Millennials.
“Across the seven food categories we surveyed, Millennials responded that buying natural and organic food was far more important to them than it was for the Baby Boomers,” the firm wrote. “These trends were especially true in fresh food categories including fruits and vegetables as well as meat and seafood. Perhaps the most interesting observation, and one that certainly has implications for manufacturers and retailers, is that wealthy Millennials are much more likely to buy natural and organic products and are much more likely to have a brand preference for those purchases, which on the surface is good news for branded manufacturers of natural and organic items. We would note, however, that consumers in our survey appear to blur the lines between retailers and manufacturers as was demonstrated by the fact that that Millennials named Trader Joe’s (the natural & organic/specialty retailer) as one of their favorite packaged food brands.”
The shopping and food preferences of Millennials could pose far-reaching implications considering they’re very likely to pass those same preferences down to their children—something branded and processed food manufacturers should be wise to in the long run. “For food companies there will be greater pressure to deliver more for less—fresher, higher-quality products, with more choices and more convenience,” the firm asserted. “At the same time, driven by the Millennials, consumers are becoming less brand-loyal, they are more willing to shop across channels and are less aligned with traditional grocers. This will require food companies to be more nimble, with more innovative product development, leaner and efficient supply chains and more effective use of trade spend, in our opinion.”
For traditional grocers, this trend signifies the need to redefine their typical store model by increasing the focusing on perishables while connecting with customers in the center store. “While Millennials have yet to lock in their preferences for a lifetime, they are clearly much less loyal to the ‘one stop shop’ supermarket format than their parents were, creating significant obstacles for traditional retailers,” the report stated. “But trouble for the grocery store looks to be a boon for specialty, mass merchants, club stores, and even on-line purveyors of everyday items.”
That’s not to say Baby Boomers don’t have any clout at all. “A generation that 30 years ago drove a fitness craze, is now turning their attention toward what they put in their bodies as a means of remaining healthy and extending longevity,” the firm wrote. “Fresh and healthy will clearly continue to gain importance, as will products that help with specific dietary needs that result from growing older.
Unlike Millennials, Boomers are more loyal to brands and retailers and prefer to shop the old fashioned way: in the actual store, with coupons. “With income falling, this generation appears less willing to pay additional money for what they desire,” the report said. “The combination of having less wealth than expected due to the financial crisis and falling income seem to be making Baby Boomers ‘cheap.’ With longer ties to the community and with a strong awareness of environmental issues, Baby Boomers are generally more interested in purchasing locally produced products than their kids.”
For more information, or to download a free copy of this extensive report, follow this link.