Study sees demanding times ahead for food makers and grocers

New York – The rise in aging boomers and Millennials will mean challenges for established food brands and traditional grocery stores in the coming decade, says a new study.

Jefferies, a global investment firm, and AlixPartners, a global business advisory firm, produced the study, which they called Trouble in Aisle 5 – a reference to traditional centre of the supermarket purchases.

Confluence of factors

The study found that the changing demographics, economic factors and customer preferences among boomers and Millennials has the potential to create a long-term disruption across the food-industry value chain that could transform where and how consumers shop for groceries as well as what products they will choose.

The study found that over the next decade Millennials (who were born between 1982 and 2001) and baby boomers (who were born between 1946 and 1964) will enter the next phase of their lives and spending patterns.

The change will mean pressure on established food brands and traditional grocery stores by consumers with very different values.

Millennials

The study found that Millennials have different attitudes toward consumption than baby boomer parents and grandparents.

For instance, for Millennials convenience is a major priority. And they’re much less loyal to both food brands and traditional grocery stores. They’re also much more willing to explore different distribution models and spread their shopping across different brands and channels.

Millennials are also more price-sensitive than baby boomers. But as their income rises, product quality, healthy and natural/organic will also increase in importance. And while they are more price sensitive, Millennials will pay more for convenience, freshness, healthy, variety (of flavours, international/ethnic cuisines, product sizes, etc.) and natural/organic.

Baby boomers

Baby boomers will still have an influence even as Millennials rise in numbers. So food-makers and grocers will have to adjust to meet their needs as they age and as their finances, preferences and choices change.

Baby boomers are generally more loyal to both brands and retailers, and prefer to shop at the local grocer.  Boomers will be adjusting to changing finances and will be paying greater attention to their food choices as a means of remaining healthy and extending longevity.

The study found that both boomers and Millennials see fresh and healthy as a priority.

What industry should do

Overall, the study says the changes will mean food companies will have to be more nimble, launch more innovative products, use leaner supply chains and make more effective use of marketing initiatives.

For grocers, they may have to redefine their model and focus on perishables while engaging and re-engaging customers in the centre store.

While Millennials have yet to lock in their preferences for a lifetime, they are clearly much less loyal than their forebears to the “one-stop-shop” supermarket format, creating significant obstacles for traditional retailers. But trouble for the grocery store looks to be a boon for specialty retailers, mass merchants, club stores and even on-line purveyors of everyday items, says the study.