Generational preferences impact the food industry

Couple Grocery ShoppingScott Etzel, Wells Fargo Sector Manager, Protein

Courtney Buerger Schmidt, Wells Fargo Sector Analyst, Protein and Dairy

Changes are taking place throughout the food industry to address an increasingly important generation — the millennial. Born between 1977 and 1992, millennials have now surpassed baby boomers, born 1943-1960, to become the country’s largest, living generation. According to the latest U.S. Census report, millennials, totaling 83.1 million, now represent one-quarter of the U.S. population, with boomers totaling 75.4 million.

Today, millennials boast a staggering purchasing power of $250 billion, and the segment’s size and clout also means that they are the top arbiters of food culture. Since millennials are strong influencers in today’s foodservice and retail grocery landscapes, it makes good business sense to understand what drives their food choices.

As co-authors of this article, I (Scott) am a “boomer”, while my fellow author, Courtney, is a “millennial”. We both love food, but we have different food preferences and priorities, and these impact how and where we shop, what we purchase, and where we dine out. In this article, we will explore how the differences between our two generations are creating challenges for the food industry, and how the industry is adapting in order to cater to millennials’ food tastes and buying preferences.

As shown in the table below, millennials are more ethnically diverse and represent eating habits from many different cultures. This diversity drives trends around their exploration of authentic, global food experiences. It influences their dining habits and food choices, and it also allows millennials to confidently navigate the vast array of ingredient options available today at even the most basic of grocery outlets.

Key Demographics by Generation

Source: Foodways of Millennials and Gen Z 2016 report

Following are some of the key differences in food shopping and food consumption that food marketers must recognize between the boomer and millennial generations as they develop future strategies.

Grocery shopping

Boomers are more likely to shop at traditional grocery stores, and will seek out established national brands or private label counterparts. Price is less important than convenience and familiarity with boomers. Boomers are more loyal to brands from established food manufacturing firms such as Kellogg’s, Campbell’s, Kraft Heinz, and General Mills, and have only modest interest in new brands. Additionally, boomers aren’t insistent on locally grown produce.

In contrast, millennials are open to buying food and beverage products online, and often shop at multiple venues rather than purchasing everything at traditional “one-stop-shop” supermarkets. Millennials are less brand loyal and prefer less expensive foods, yet prioritize convenience, and are willing to pay more for fresh, healthy foods. 84% of millennials report that freshness is most likely to influence their purchases of foods and beverages, and 41% indicate that they would pay a premium for freshness.1 Millennials also buy and eat fresh produce more often than older generations.1

Research finds that millennials are increasingly reading food package labels, and are avoiding food additives. Millennials’ preference for non-packaged, less-processed foods has squeezed the traditional, major brands, forcing consolidation moves in order to gain larger market share and achieve efficiencies given that the large consumer packaged goods companies have struggled to connect with younger shoppers. According to IRI data, America’s top 25 food companies have lost $18 billion in market share during the past five years, while small and mid-sized manufacturers accounted for 46% of industry growth during this same time period.2

In response, food giants are increasingly acquiring smaller, startup food companies, in large part, to achieve credibility and authenticity among these younger consumers. Part of the attraction of these startup and younger food companies is their successful use of social media to create brand awareness and promote their products to this younger generation.

Social media has become an important advertising vehicle with recent research indicating that 71% of consumers are more likely to make a purchase after seeing a social media recommendation.3 While the larger, more established food companies have websites and have long utilized more traditional advertising to promote their brands, these food giants haven’t garnered the large social media following achieved by the younger, more progressive brands favored by millennials. The new reality is that millennials’ affinity for technology shapes how they shop. They utilize technology to gain instant access to price comparisons and product information, as well as to view peer reviews which impact their purchase decisions.

Finally, millennials are also more aligned with key food movements than boomers, and prefer brands that give consideration to the health and social implications of their products. For example, 30% of millennials, a higher proportion than in older generations, consume foods that are certified organic.1 Additionally, millennials give priority to products that are locally sourced, and also favor brands that place value on animal welfare.

Dining out

Restaurants and foodservice operators are facing their own set of challenges to address the differing taste preferences across the generations. When dining out, boomers are more comfortable with the known dining experience, and favor American, Italian, Mexican, and Chinese restaurants. Boomers are less likely to venture into Thai, Vietnamese, Cuban, Ethiopian, and other ethnic formats that are favored by millennials who continually seek a new, unique, fresh, and flavorful experience when dining out. The widening preference gap makes it challenging for foodservice operators to create an environment and offer selections that appeal to both generations.

The majority of tenured restaurants and foodservice operators originally created strategies that catered to the boomer generation, and now must think toward evolution that satisfies the following millennial habits and preferences in order to gain market share with this newly dominant generation:

  • Technology connected — the internet and social media guide what and where millennials eat, providing product information and food and restaurant reviews
  • Adventurous — millennials are intrigued by food venues with a story as evidenced by the popularity of food trucks with this younger consumer
  • Communal — millennials view eating as a social event and favor venues and delivery services that indulge this
  • Locally grown and healthy — organic and farm-to-table attributes are important to this segment
  • Affordable — healthy and tasty food for a reasonable price is now taking precedent over “all-you-can-eat” and “super-sized”
  • Convenient — living life in the fast lane, millennials prefer fast, delivery, deli foods over casual and fine dining

Food delivery and takeout

For boomers, ordering food for delivery or take-out is typically restricted to pizza or Chinese food. Millennials, on the other hand, employ much broader consideration when ordering for home delivery, and will order from any restaurant that offers a unique flavor experience. Millennials tend to favor delivery to avoid the hassles of going out, and also like the option of each person being able to select their entree of choice from the delivery menu.

The increasingly popular home delivery meal kits have also gained traction with the millennial generation since they accommodate the convenient, healthy, and unique taste experience that millennials crave. According to research by the NPD Group, Ltd., 55% of millennials are “very and somewhat interested” in home delivered meal kits compared to 44% for the overall general public. Given millennials’ increased desire to order online from both restaurants and meal kit purveyors such as Blue Apron or Hello Fresh, food companies are now forced to give added consideration to whether their products will maintain the quality and integrity involved with travel and delivery to the doorstep.

To compete with restaurant delivery and meal kits, grocery stores are now expanding their offerings of fully assembled/partially prepared meals that can be taken home for immediate consumption with little to no cooking required. Fully prepared grocery store takeout meals have carved out a 13.5% share of the total restaurant market, and now compete directly with restaurant takeout meals. In addition, many retail grocery stores are now offering “curbside” services enabling groceries and prepared meals to be ordered online and picked up without ever stepping inside the retail store.

Conclusion

Without question, the millennial generation is impacting how the broad food industry sources, manufacturers, prepares, and delivers its products. To date, the food industry has met many of the identified millennial challenges by introducing more organic foods, antibiotic meats and poultry, and cage-free eggs, along with creating technology to fully trace production from farm to fork. Further, foods free of artificial ingredients and preservatives and packed in environmentally friendly or recyclable packaging have increased, and have appeal to both boomers and millennials.

Continued evolution with the focus on the millennial will be increasingly important for the entire food industry. Millennials and boomers collectively represent 55% of the total U.S. population. However, the percentage of millennials to boomers will become more and more lopsided over time as boomers age. As such, farmers, food manufacturers, retail grocery stores, and foodservice operations must recognize and understand the differing preferences between boomers and millennials in order to effectively strategize and implement new and enhanced products, venues, delivery options, and menu items. This will be critical to survive and thrive as the buying power of the millennial generation increases its dominancy.

Scott EtzelScott Etzel is a senior vice president and sector manager within Wells Fargo’s Food and Agribusiness Industry Advisors Group with focus on the seafood sector.

Scott joined Wells Fargo in 1987 as an agribusiness consultant focused on lending to California’s fruit, vegetable, nursery, tree nut, wine, and forest product industries. He has been with Wells Fargo since then excepting from 1994 – 1996, when he was employed as director of Environmental Affairs for the Northwest Food Processors Association in Portland, Oregon. Prior to joining Wells Fargo, Scott held positions in trade association management and food brokerage representing the fruit and vegetable processing industries.

Scott is a graduate of Oregon State University and holds a B.S. degree in food science and technology.

Courtney Buerger SchmidtCourtney Buerger Schmidt is an assistant vice president and sector analyst within Wells Fargo’s Food and Agribusiness Industry Advisors Group with focus on the protein and dairy sectors.

Courtney joined Wells Fargo in April 2014 as a relationship manager within The Private Bank Wealth Management group where she advised clients on estate planning, investments, asset management, and achieving and managing wealth. Prior to joining Wells Fargo, Courtney spent six years as a commodity broker and research analyst with Frontier Risk Management working with large agribusiness clients to develop hedge and risk management strategies, and was also assistant director of the research division that focused on the areas of livestock, grain, and oilseed.

Courtney holds a bachelor of science degree in agricultural economics with an emphasis in finance and real estate from Texas A&M University. She has previously held her Series 3 license and Property and Casualty Insurance license. Courtney is a member of the Texas A&M College of Agriculture Development Council.

1. Source: http://chefsbest.com/millennials-food-preferences
2. Source: http://www.fooddive.com/news/can-food-companies-keep-pace-with-millennials-preferences/439414
3. Source: The Food Institute “Winning the “Me Generation” through shopper analytics” webinar; VisionCritical, Nielsen, HubSpot, SproutSocial