The American consumer is changing. Uneven population growth, a growing base of older consumers with new needs, changes in household spending, a declining percentage of households with children and particularly increased ethnic diversity mean that manufacturers and retailers need to rethink how they invest their marketing dollars.
Ethnic households will represent the majority by 2050. Their spending power will increase 25 percent by 2020, and a staggering 75 percent by 2050. “It’s critical to understand how your portfolio stacks up and to develop strategies now that will reap future benefits,” said John Lewis, President, Nielsen North America, during a session at Nielsen’s Consumer 360 event in Orlando, Florida. “Where do multicultural consumers shop? What do they buy? And which product innovations will appeal to them?”
When we look at future landscape across select CPG categories, we see several themes begin to emerge. This chart below compares the development (% of volume from growing consumer groups) and the projected category growth to the year 2020.
Growth is expected in baby categories (baby food and formula), which is not surprising as the multicultural segments are well developed among younger families. A few personal care categories emerge (liquid hand soap and wipes) as well as natural cooking ingredients (eggs, oil and flour). Manufacturers and retailers should leverage these categories as trip drivers to attract these critical consumer segments.
Pet food categories are expected to grow at a slower rate than the population as dry dog and cat foods are underdeveloped among multicultural households and dry dog food among the aging population. While the wet and moist segments of these categories are expected to grow at a faster rate than dry, the growth is still projected to be slightly below the average.
Upon further investigation into pet ownership, the Hispanic segment represents the biggest opportunity as nearly 60 percent of Hispanics own a pet, compared to only about one-third (32%) of African American and 56 percent of 55+ households.
The beverage category is one that is slated for high growth – especially among flavored brands. “A solid focus on multi-cultural households is one of our global strategic pillars,” said Elina Brager, Lead, National Category Advisory Initiatives at The Coca-Cola Company.
As far as the retail landscape is concerned, the channels that will benefit from the shifts in the American population are the drug, dollar and club channels. “And we know,” continued Brager, “Fanta has a strong buyer overlap with the Family Dollar shopper, so we’ve teamed with Family Dollar to enhance the shopper experience via in-store promotions, which have been very successful.”
Family Dollar’s growth potential is off the charts, and multicultural shoppers are playing a major role in their success. “We actively seek ways to reach the Hispanic shopper in particular,” said Katie Pollock, DVP of Integrated Insights & Category Management at Family Dollar. “Their shopping baskets are on average 10 percent larger than any other group.”
Sparkling soft drinks are one of the top 10 items that are consistently purchased by Hispanic customers at the Dollar Store. So, the company created a campaign in partnership with Coca Cola that promoted Fanta in both English and Spanish to reach as much of the audience as possible.
The campaign was a huge success. “The Family Dollar value message came across to our Hispanic shoppers and drove an increase of over 50 percent in Fanta brand sales in impacted stores,” said Pollock, “I really recommend collaboration with supplier partners who share your focus. We have to stop thinking of multi-cultural groups as the exception to the rule, they are becoming the norm.”
Once risk and opportunities are identified, further analyses can help fuel an effective action plan. Ask questions about what diverse forces mean to you and what you can do differently:
- How do we strengthen vulnerable segments?
- Where do growing demographic groups shop?
- What new product innovations might attract them?
- Are there cross promotional opportunities to attract new categories?