Despite a strong start to the year, consumer confidence dimmed at the end of Q1 2019, and is currently surging again due to a strong labor market. But, trade issues could easily cloud this outlook. This mixed bag is impacting consumer spending on food and beverages, according to the latest IRI Consumer Connect survey released by IRI, Chicago.
Food inflation softened in Q1 2019 to 1.7% compared to 2.2% in 2018, but not everyone is freely opening their wallets. Younger Millennials (born 1990+) are outspending older generations in food dollars, according to the study, “Early View 2019,” while older cohorts are more likely to be using a number of money-saving tactics to keep food bills manageable.
“Younger Millennials have been lulled by the historically low unemployment rates, which is boosting their overall confidence and loosening their wallets,” says Joan Driggs, vice president of content and thought leadership. “At the other end of the spectrum, many baby boomers, retirees and seniors are concerned about their retirement savings due the volatile stock market this year, and are watching their expenses more carefully. In recent years, Millennials have been less optimistic than older consumers and were spending less. We are now seeing a role reversal that is impacting spending on edibles across the board.”
Food and beverage trends
Edible sales increased in January, however, the growth was slower than the industry average and cooled off in February and March. The West (4.1%) and Plains (3%) regions led the way in edible growth, and the Northeast (1.4%) and South Central (1.2%) had the slowest growth for the 13 weeks ending March 25, 2018.
Store-wide department sales trends are rather mixed. Beverage and liquor were top-performing departments in Q1, while the general food and refrigerated departments, which experienced 3.7% and 3.2% growth in January, respectively, declined by 1.5% and 1.1%, respectively, in March.
Produce and meat posted declines in pounds, placing downward pressure on the whole sector in Q1, while the bakery department posted strong dollar growth driven by price. Perimeter pound growth slowed compared to a year ago across most sectors, including deli cheese, deli meat, deli prepared, bakery, meat, produce and seafood.
Generational spending and saving habits
Younger Millennial spending on food and beverages is clearly outpacing older baby boomers and retirees who struggled in Q1. In fact, younger Millennials’ edible dollar sales grew by 21.5% for March compared to a year ago. And, edible dollars sales for retirees and seniors is down by 3.8% for March compared to a year ago.
Older generations are feeling a bit pinched, and are embracing a wide variety of money-saving tactics (younger Millennials, older Millennials, Gen X, younger boomers, older boomers, retirees and seniors):
- Buy private label: 74%, 88%, 87%, 83%, 79%, 77%
- Try new, lower-priced brands: 70%, 80%, 79%, 73%, 69%
- Visit multiple retailers: 60%, 61%, 57%, 54%, 48%
- Download coupons from retailer/manufacturer website: 46%, 62%, 60%, 56%, 48%, 39%
In addition, these older cohorts are more likely to buy food and beverage brands other than their preferred brand because they are on sale and buy brands because they have a coupon. However, retirees and seniors won’t scrimp on certain items, with 44% regularly purchasing premium quality food and beverage products compared to 38% of younger Millennials.
Emerging trends in sustainable and plant-based products
With nearly six in 10 consumers interested in eating less meat and nearly eight in 10 Millennials eating meat alternatives, it is no secret that plant-based eating is gaining momentum.
However, consumers also are looking to the power of plants for products that do more — for their bodies, their families, the environment and the world. The rate of consumer acceptance of plant-centric products across the store is increasing rapidly, going from just a handful of categories in 2014 to more than 90 categories, totaling more than $13 billion in cumulative sales in 2018.
The need for cleaner and healthier products goes beyond plant-based products, with 78% of consumers saying sustainable sourcing of ingredients is an important product attribute. Research conducted by IRI and New York University’s Stern Center for Sustainable Business, New York, found that sustainably marketed products delivered 50.1% of market growth from 2013-2018 while representing 16.6% of the CPG market in dollar sales in 2018. Across all categories, sustainably marketed products delivered $113.9 billion in sales in 2018, 29% growth compared to 2013 and are expected to grow to $140.5 billion by 2023.
“The latest generational spending habits combined with increased interest in plant-based and sustainable products opens up an array of new opportunities for CPG marketers,” adds Driggs. “To be successful, marketers must consider the importance of social media reviews, create fresh, relatable content and be authentic when targeting younger consumers. This doesn’t mean marketers should lose sight of older consumers, who still have the greatest purchasing power, but marketers must be very savvy and develop personalized, targeted marketing campaigns that appeal to the various generations of shoppers.”