Will millennials be the death of traditional food grocers?

Move over boomers—the millennial generation is rising to spending prominence, just as you’re facing retirement. This spells trouble for conventional grocers and food brands, but it could be the next best thing for natural, organic and healthy products

U.S. food retailers and manufacturers are facing a tidal wave of change as one mega-generation (the millennials) comes of age and another (the baby boomers) moves into the next phase of their lives.

The shifts in buying preferences and values that are accompanying these massive demographic changes will create significant challenges for traditional grocers and food brands, according to a new joint study by the global investment bank Jefferies and AlixPartners, a global business advisory firm.

SuperValu, Winn-Dixie, Safeway and other conventional grocers have long catered to the needs of baby boomers, who have enjoyed a super-sized influence over consumer shopping trends for decades. But now, the gigantic swarm of young people born between 1982 and 2001 are rising to prominence, and findings from the study titled "Trouble in Aisle 5" indicate that these younger consumers approach food shopping much differently.

Convenience and price trump loyalty

For one, on-the-go millennials are even more focused on convenience than are their parents and grandparents, according to the Jefferies and AlixPartners' survey of more than 2,000 consumers conducted in May. These shoppers "expect to get what they want, when and where they want it, and they know they have options for both products and retailers," said David Garfield, managing director at AlixPartners and head of the firm's Consumer Products Practice.

But won't brand loyalty keep these shoppers coming to a store even if it doesn't always cater to their needs? That might have been the case with baby boomers, but not with millennials. These consumers are not what one might typically define as "brand loyal," and they're also much more comfortable buying food in a variety of channels, including via the Internet and in drug and convenience stores.

Additionally, the economy has not been particularly kind to millennials over the last decade and that has made these consumers more price sensitive than baby boomers. Among those millennials surveyed who earn less than $20,000 a year, price is the most important attribute impacting food buying decisions, the study found.

Health attracts both millennials and boomers

That's the gloomy news—at least for traditional grocers and food brands—found in "Trouble in Aisle 5." On a brighter note, the survey findings point to significant opportunity for natural and organic retailers and brands.

As their incomes rise—and they are expected to do so handsomely over the next eight years—millennials are more willing to invest in product attributes such as product quality, health profile and natural/organic, the researchers report.

Case in point: 58 percent of millennials say they are willing to pay more for natural and organic, compared with 43 percent of the baby boomers who say the same. (Click to tweet this)

Although they may be less attracted to natural and organic, baby boomers—like younger shoppers—are increasingly focused on health and wellness, the survey found.

"In addition to adjusting to a new financial situation, baby boomers are now paying greater attention regarding their food choices as a means of remaining healthy and extending longevity," said Rich Vitaro, director in the Consumer Products Practice at AlixPartners. "Taste, freshness and quality will continue to be important, as will products addressing health and wellness, and specific dietary needs tied to aging."

How is the rise of the millennial generation affecting your store or natural products brand? Share in the comments.

As we explore in NEXT: The Natural Products Forecast 2013, both baby boomers and millennials are expected to continue to be powerful forces shaping the natural products landscape. Learn more and order your copy of NEXT to understand how best to cater to the changing needs, values and preferences of these dynamic demographic groups.  

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