The Millennial Food Shift: How CPG Food Companies Can Rescue Their Market

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 phase shift in eating habits has roiled the business models of food-oriented consumer packaged goods (CPG) companies. They can no longer count on being a key ingredient in the daily lives of today’s consumer.

So how did this happen? And what can CPG companies—and the grocery stores that peddle their wares—do to regain mindshare in the public consciousness?

Millennials – A Force to Reckon With

As the largest living generation by population (79.8 million in 2016), 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 (considered to be between the ages of 21 and 38) headed only 28 million households, according to a 2016 study. This is significantly less than were headed by Generation X (ages 39 to 54) or Baby Boomers (ages 55 to 73), as Millennials defer marrying and starting families relative to previous generations. But their sheer size portends shifting trends in grocery sales.

Millennials are 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, carryout, delivery or fast food within the last seven days, while only 47 percent of traditionalists and 56 percent of GenX did so. The impact has been a shift of food purchases shifting away from grocery stores, and toward restaurants and meal kit services – the latter representing a growing portion of food sales. Meal kits are currently a $2.2 billion business, and are expected to grow 25 to 30 percent annually in the next five years.

When we take a closer look at those who are still purchasing grocery items, we can see a stunning trend. There is a shift away from the neighborhood big-box, in favor of online-only grocery retailers. This means less store traffic and less impulse purchases – putting pressure on already razor-thin grocery margins.

And these trends are expected to continue to grow – a recent study found that 13 percent of traditional grocery shoppers indicated they will spend more of their grocery budget with Amazon in the near future. In fact, online grocery retailing, as a whole, is expected to be a $100 billion business by 2025.

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. Make sure to 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 entrees.
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, and more likely to buy organic, so explore new products to meet that need. If you don’t offer those options, consider expansion through acquisition. One example is the Pace brand, known for its salsa condiment. They have introduced a heat-and-eat microwaveable meal that has no preservatives or artificial flavors or colors. Minute Rice launched ready-to-eat individual servings to appeal to Millennials looking for easy, single serve options.
3. Light Bites – Today’s consumer is looking to fill the void—quite literally—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. Multichannel 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.

One last piece of the puzzle: 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 responded to the shifting winds.

Sixty-two percent of consumers surveyed in a recent poll 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.

What are you doing to make your CPG product more appealing to Millennials?