Never before has the kitchen been so lifeless. For generations, the once-centerpiece of the American home has become much less important – marginalized by Millennials and younger generations who choose to order up their nourishment with a few silent taps of the cell phone rather than the clank of pots and pans.
Seemingly overnight, this shift in eating habits has roiled the business models of food-oriented consumer packaged goods (CPG) companies.
So how did this happen? And, what can CPG companies and the grocery stores that peddle their wares do to re-gain mindshare in the public consciousness?
Millennials–A force to reckon with
As the largest living generation by population (79.8 million in 2016), according to Pew Research Center, Washington, D.C., Millennials wield a sizable influence on the world in which they live. Trailing Baby Boomers and GenXers when it comes to the number of households they head, many Millennials still live under their parents’ roof or are in some other shared living situation.
In fact, Millennials (ages 21-38) headed only 28 million households, according to a 2016 study by Pew Research Center. This is significantly less than were headed by Generation X (ages 39-54) or Baby Boomers (ages 55-73). This is because Millennials defer marrying and starting families relative to previous generations. But, their sheer size portends shifting trends in grocery sales.
Millennials are also more likely to eat out or order in prepared foods, and more than half have no inclination to cook for themselves or their families (the largest such group among any previous generation).
In fact, nearly two-thirds of Millennials reported purchasing prepared deli food, carry-out, delivery or fast food within the last seven days, while only 47% of traditionalists and 56% of GenXers did so, as outlined in this report by New Hope Network, Boulder, Colo. The impact sees food purchases shifting away from grocery stores, and toward restaurants and meal kit services – the latter representing a growing portion of food sales. In fact, meal kits are currently a $2.2 billion business, according to SmithCorona, Cleveland, Ohio, and are expected to grow 25-30% annually in the next five years.
Furthermore, there is a shift away from the neighborhood big-box in favor of online-only grocery retailers, according to research presented by Statista, New York. This means less store traffic and less impulse purchases, thus putting pressure on already razor-thin grocery margins.
And, these trends are expected to continue to grow. For instance, online grocery retailing, as a whole, is expected to be a $100 billion business by 2024, according to a study released by Food Marketing Institute (FMI), Arlington, Va., and Nielsen, Chicago.
CPG challenges and opportunities
So, how can a CPG food company remain competitive in this shifting landscape or stanch the flow away from their products?
1. Stay current. Skate to where the puck is going. Make sure to stay focused and updated on trends related to distribution and communication. Participate in growing channels of distribution and in consumers’ communication vehicles. Within grocery stores, one area of recent growth is frozen foods. After several years in decline, frozen foods are being driven by Millennials who, as they defer families, are attracted by the convenience and lack of waste of frozen entrées.
2. Innovate. Offer products that are more prepared and easier to prepare quickly. And, make sure products are on-trend. For example, Millennials are more likely to be vegetarian, according to this Statista study, and more likely to buy organic. If you don’t offer those options, consider expansion through acquisition.
3. Light bites. Today’s consumer is looking to fill the void between meals. That’s why a focus on meal occasions that are less likely to be eaten out or delivered, like snacks, can be a winner.
4. Contemporary partnerships. Gain distribution with growing online options. For example, consider forming a collaborative effort with a meal kit provider to drive revenue and exposure to their clients.
5. Multi-channel marketing. Make sure you are finding today’s shopper where they “live” – don’t be afraid to devote a healthy portion of your budget to online promotion, as well as offering consumer-focused online options to supplement your in-store presence.
Lastly, grocery stores can – and should – be a part of the equation. Long derided as dinosaurs of another age, grocery stores that have kept pace with changing trends have succeeded because they respond to the shifting winds.
In fact, 62% of consumers surveyed in a poll conducted by Phononic, Durham, N.C., said they were looking for stores that focused on meals-to-go; still others saw a role for today’s grocer as a smaller, specialized operation where people are able to meet specific needs.