It is interesting to note that many business owners do not take demographics into account when planning their products and services for the broader public. One of the main reasons for the current world economic turmoil is the fact that the baby boomer generation born between 1946 and 1964, which created the largest consumer boom from the 1980s to 2008, is in the process of retiring and therefore not spending as much as they used to.
The above chart information was derived from Statistics New Zealand.
In the United States especially generation X which follows the baby boomers from 1965 to 1984 is 11% smaller than the baby boomer generation. When you do the maths it is very clear that an 11% smaller population will lead to lower sales and reduced profits. Many businesses in the US and around the world are suffering due to a smaller population demanding fewer products from all over the world. This reduced number in Gen X is not as prevalent in New Zealand as our generation X is in fact more or less the same size as the baby boomer generation that was born in New Zealand. New Zealand has benefited from a huge immigration spurt at this age group. The Baby Boomers have declined by around 450,000 mainly due to emigration.
The above chart was compiled from information supplied by the US statistics agency.
Generation Y born between 1985 and 2010 will be over 100 million in the United States. This will be the biggest population growth that the United States has seen since the baby boomer generation. The result of this is that a future boom in sales for many different types of products is on the horizon within the next 10 to 15 years. The oldest of this group is now 28 and will be looking to settle down in the next 10 years. In New Zealand as of the 2006 Census the number of generation Y is 1.6 million.
Taking all of the above into account it is very clear that business owners need to be very sure of the demographic that they are targeting in order to sell their products and services. The war generation born between 1924 and 1946 is a declining market. The youngest of that generation is now 66 and not spending as they would have if they were 20 years younger. Market research has shown that the higher spending years of most people is at 42 years of age. It is also during the early 40s that motor vehicle consumption for families is at its highest. If you do the maths you will know that the average family will have children in their teen years at 42 that need to be driven to various functions and sporting events. Many families will need a car and/or minibus to drive the kids to these events.
The baby boomers, of which the youngest is now 48, are steadily heading out of their peak spending years. Many will be empty nesters as the average age is around 56. Most of them as well as the war generation have most of the things that they need in their life and will only spend on the things that they really need for example food fuel for their cars, and talking about cars a smaller more compact model is what most will be looking for. Clothing will not be very important for these generations as most of them will be comfortable with their bodies and the way that they are currently dressed. Most will not be spending on jewellery or any other such luxuries to make them look more attractive as many will be in a relationship of some sort or other. Much of this generation will also avoid going to restaurants and prefer to buy value added and tasty pre-packaged foods that they can enjoy at home while watching their home entertainment Theatre Systems or socialising with their friends.
How does this relate to the food industry? Well, all of these generations will need to eat in order to survive. The trend of late has been to eat healthier foods. The baby boomers especially are still young at heart but in the main have let their bodies go and would like to find some of that youth through eating better and exercising more going forward. It is here that restaurants and food producing businesses can target this demographic with wholesome nutritious foods that are pre-packed and almost ready to eat. Baby boomers love things that make their lives easier as long as you’re not out to rip them off.
As mentioned earlier generation X is much smaller than that of the baby boomers and will not fill restaurants and frequent food places as much as the baby boomers have in the past. Generation Y will take up the slack however they are around 10 years away from that type of consumption. Generation Y is also more interested in “green” foods and services.
So what is a food company to do? This is the time for most businesses and especially food businesses to really sit down and work out who is in their demographic and what it is that they really like. Obviously the normal cost-cutting exercises will need to be completed in most businesses to make sure that they survive for at least the next 10 years before the next boom in business is going to eventuate. Food businesses need to concentrate on their profit margins as sales numbers will not be as relevant as they have been in the past.
I would like to invite you to discuss these points with me and let me know how the demographic change that is occurring is affecting your business. With your input we can find ways to increase your business profits.
Tibor Mackor – Better Business Strategies.