In the last few years, the food industry has been one of the few bright spots in the small-business economy, with trends such as craft beers, locally sourced foods and artisanal products capturing consumer dollars—and creating opportunities for small food producers and retailers. However, the rise of the Millennials and the aging of the Baby Boomers are bringing new challenges and increased opportunities that are already transforming the food industry and will continue to do so in the next decade. Here’s what a new report by Jefferies and Alix Partners found—and what you need to know to keep your food business growing strong.
Millennials Move Up, Boomers Down
By 2020, Millennials over age 25 (which is when income typically starts to rise) will make up nearly 20 percent of the U.S. population, compared wtih only 5 percent in 2010. The spending power of these 64 million consumers will rise, with the average household income expected to reach $45,000 (compared with $28,000 in 2010). Overall, Millennials’ spending on food for at-home dining will increase by $50 billion per year through 2020.
During the same time period, the Baby Boomers will fall to less than 20 percent of the U.S. population. As they move from their peak earning years to retirement (or semi-retirement), they’ll become more reliant on fixed incomes. As a result, their spending on at-home food is projected to drop as much as $15 billion annually through 2020.
What Do Millennials Want?
Millennials’ attitudes about food differs quite a bit from those of Boomers.
Convenience is king. Millennials want what they want, when and where they want it. Already, within the restaurant industry, we’ve seen the growth of breakfast menu items and late-night eating options to cater to hungry Millennials whenever hunger strikes. The same applies for at-home food purchases—Millennials want to be able to find food anywhere, anytime.
Distribution models matter. As a result of their “need it now” mentality and their tech-savviness, Millennials are willing to buy foods from many channels—online, mobile shopping, delivery, and different types of brick-and-mortar stores.
Loyalty is a thing of the past. Millennials know they have lots of options for both food products and food retailers—and they exercise them. Brand names are less important to them than they are to Boomers.
They’re price-sensitive—sort of. For Millennials earning less than $20,000 annually, price is the number-one factor in food purchasing—but as their incomes rise, price becomes less important. For these higher-earning Millennials, convenience, freshness, health, variety and natural or organic ingredients are key, and they are more willing than Boomers to pay extra for these features.
What Does This Mean for the Food Entrepreneur?
Look for areas of overlap. Fresh, healthy foods appeal to both Boomers and Millennials, so this is an area of great opportunity for food producers and retailers, no matter who the target market is.
Focus on customer needs. Both new and established food producers and retailers will need to keep on top of what customers want and adjust accordingly. If you don’t have what Millennials want, they won’t hesitate to buy from your competitor.
Be nimble and innovative. Be ready to turn on a dime, in terms of what you make, how you price it, where you sell it and how you market it. Millennials move fast—and to feed their appetites for “what’s next,” your food business needs to move fast, too.