Doug Anderson, SVP, Research & Development, The Nielsen Company
SUMMARY: The recent recession has already wiped out a decade of growth in the U.S. The number of jobs in the country is almost the same as it was in 1999, and the S&P 500 index is in almost the exact place it was in 1999. Home ownership, which rose rapidly in the 2000s, is at about the same point today due to foreclosures. The numbers of Americans who have investments in stocks and bonds has also dropped. Incomes have been flat or have fallen in constant dollars for the majority of American households. Growth will be hard to come by both now and in the coming decades—successful marketers in 2010 will factor the U.S. shifting demographic profile into the marketing mix.
It all begins with aging. U.S. fertility rates have fallen by 44% since the peaks of the Baby Boom and are projected to continue to fall by another 12% over the next several decades. Falling fertility, combined with rising life expectancy and the large Baby Boom generation just nearing retirement age, equates to an aging population. By 2037, nearly one in three households in the U.S. will be headed by someone over the age of 65. Aging, however, is only the most obvious impact. There are five other key trends fostered by aging that will completely alter the marketplace for consumer products.
Growth is Found in Less-Developed World
Worldwide there is still substantial, though slowing, population growth. By 2030, world population will have grown by around 20%. Only 3.2% of this growth will come from the more developed world. The less-developed regions will grow 31 times faster than the more developed ones. Some of the older countries in Europe as well as Japan will lose population. Marketers in the developed world will be locked into share wars while those able to compete in the less-developed world could see substantial growth.
The Share of Households With Children Decline
The other side of the coin of an aging U.S. population is that the share of households that have children will continue to decline, as it has since the peaks of the Baby Boom in the late 1950s. Because fertility rates continue to fall, average family size will also fall, further impacting sales volume. By the middle 2020s, the share of U.S. households with children under 18 will fall below 30%. In Western Europe and Japan, the share will be much lower, making large families with children a niche market.
Immigration and Ethnic Familes Fuel Growth
The majority of population growth in the U.S. will come from new immigrants and the children they have in this country. Since most immigrants are young, families with children will become more ethnic, more quickly, than the total population. By 2025, the majority of families with children in the U.S. will be multi-cultural (Hispanic, Black, Asian, etc.). Less than half of families with children will be native born non-Hispanic White. Multi-cultural marketing will be essential when selling to families with children.
Older Consumers Have New Needs
The Baby Boom will seek to rewrite what it means to be old exactly as they have rewritten what it means to be children and adults. Marketers willing to reach out to the Baby Boom as they age can tap into a large marketplace. Those who are not willing to market to persons over the age of 65 will miss out on the first generation to grow up in a full blown consumer marketplace. Baby Boomers will not spend on the same categories as their parents did. For example, consumption of alcoholic beverages is much higher for Baby Boomers than for the current cohort of 65+ persons. Marketers who assume that the Baby Boom will start to behave like current older Americans, just because they reach the age of 65, do so at their peril.
CPG Spending Declines
As population growth slows in the U.S., so will spending on consumer products. Household size will decline across the board, the largest families will be smaller and a large share of the population will live in one or two person households. Nielsen projections demonstrate that households closest to the poverty line will gain in share at the expense of all other households, but especially those in the middle and upper middle classes, who will shrink the share the most. The impacts of these two trends means that after 2020, Nielsen projections show per household spending on packaged goods will begin to fall. The current recession is already impacting spending in the short-term. Growth will be very hard to come by both now and in the coming decades.