Thursday, August 16, 2012

Changing Demographics Mean Trouble for Brands & Grocers

There’s trouble ahead for established food brands and traditional grocery stores, says a new report from Jefferies-AlixPartenrs. A combination of economic factors and changing demographics and preferences has the potential to create a long-term disruption across the food-industry value chain that transforms where and how consumers shop for groceries as well as what products they choose.

Food-at-home spending by aging Baby Boomers will decrease up to $15 billion per year through 2020. This spending will increase by $50 billion annually for Millennials, but they are 23% less likely to value food brands in their purchasing decision and 11% less likely to shop at traditional grocers.
“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 officials associated with the Jefferies-AlixPartners study. 

Jefferies, the global investment bank, and AlixPartners, the global business advisory firm, conducted the joint study, 
Trouble in Aisle 5, which found that the traditional food-at-home vertical, which is already facing trouble, is likely to see its challenges accelerate over the next few years. The study, which included a survey of 2,000 consumers conducted in May, finds that a confluence of factors appear poised to rapidly transform the food-at-home industry. 

The root cause of the impending transformation lies in changing demographics. As a result, established food brands and traditional grocery stores will be pressured at both ends by sets of consumers with very different value equations.

“We envision an environment that will require increased nimbleness and a relentless focus on the consumer for established food manufacturers and retailers, and the potential for rapid growth for new concepts and products,” said David Garfield, Managing Director at AlixPartners and head of the firm’s Consumer Products Practice.

“Millennials clearly present significant challenges, and food-makers and traditional grocery retailers need to start making changes now to address the emerging needs of this demographic group, as in many ways we’re just in the second inning of this ball game,” said Scott Mushkin, Managing Director and Senior Equity Research Analyst covering Food & Drug Retailing and Packaged Food at Jefferies. 

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