Todd Hale discusses differences in the buying habits of Millennials and Boomers and how they might impact the future of frozen and refrigerated foods.
At last month’s 2015 NFRA Convention, I shared insights on how well NFRA member categories are connected across generational and multi-cultural consumer segments, as well as among households at the extremes of spending power.
A number of articles emphasize the importance of driving retail sales by connecting with younger population groups, whose size as well as current and future spending power are well-documented. The U.S. Census projects that by 2020, the majority of the U.S. population (57%) will be Millennials or younger. That group will include 190 million people, but that leaves 145 million hungry and thirsty consumers within the Gen X, Boomer and Greatest Generation segments.
According to U.S. Census data, about 30% of those between the ages of 18 and 34 are still living with a parent. While our two Millennials have left the nest and have their own careers and interests, we are always more than willing to open our wallets to support their spending habits. Given higher levels of unemployment for younger populations (9.1% among 20 to 24 year olds in September), as well as the number of under-employed Millennials who are working in jobs below their educational level and/or are saddled with high levels of college debt, I would assume there are many others who receive a little — or a lot — of financial support from their parents as well.
What can we learn from current spending levels across refrigerated and frozen departments and categories?
Dairy Department: Within the top-ranking categories (based on annual sales levels) in the dairy department, Nielsen Homescan metrics reveal fairly universal appeal (in terms of sales per 1,000 households) across Millennial and Boomer households. But within bottom-ranking dairy categories (ready-to-eat desserts, whipped toppings and refrigerated bread), Millennials have lower sales rates. Can demand among Millennials be built or will future category growth be a challenge? At the same time, Boomers are important to the success of a number of dairy department categories, particularly ready-to-eat desserts and whipped toppings. Warning: don’t walk away from these sales opportunities by trying too hard to attract younger consumers.
Deli Department: With few exceptions, deli department categories provide opportunities to connect with shoppers that really matter as there is good or solid development among Millennials and Boomers. Again, however, for deli department categories with low sales among Millennials (side dishes, salads and appetizers from the deli), will demand dissipate or grow as Millennials age? For categories like salads and appetizers where Boomer spending rates index 20% or greater than expected, don’t lose sight of your current power spenders.
Frozen Department: Nielsen measures fairly universal appeal for the largest frozen food categories, but again, there are exceptions. For example, Millennial-run households spend 20% or less on ice cream and novelties, so producers need to assess the risk of current Millennial spending rates on future sales. At the other end of the spectrum, Millennials over-spend on frozen poultry and frozen waffles, pancakes and french toast. Are manufacturers in these categories leveraging the kinds of communication messaging and devices that appeal to these younger shoppers to maximize sales opportunities?
Appeal among Millennials weakens in some mid- and bottom-tier frozen food categories. Sweet goods, whipped toppings, breakfast entrees, soup/chili/stew and bagels all report below-average spending by Millennials. Frozen categories with above-average spending among Millennials include breaded chicken and toaster pastries. Frozen sweet goods and frozen whipped toppings are two categories where Boomers exercise stronger spending.
Trying to connect your products to consumer groups can be a challenge when the extremes within those groups demonstrate unique demands as represented by their buying habits. This bifurcation of demand across Millennials and Boomer households is evident across many, but certainly not all, frozen and refrigerated categories. Where current demand is understated among younger population segments, manufacturers in those categories need to ascertain if demand will increase in the future or not and respond accordingly. Where current demand and spending is greater among older population segments, ride those waves as long as you can, but recognize that many good things do come to an end.