Putting Generation Y in Focus

The new face of change is staring at us, bringing with it a whole line of challenges. Generation Y, the generation born starting in 1979, 1980 or 1981 (depending on who you listen to) is larger than the baby boomer population and is showing signs of shopping patterns that promise to be every bit as unsettling as those of their parents and grandparents.

U.S. Grocery Shopper Trends, FMI's recently released annual study of shopper behavior, caught a solid glimpse of this new generation and some of the signs we may all need to start studying. (Although we have collected statistics on Generation Y previously, 2005 marked the first year that our sample size of this group was large enough to present a credible picture. In large part, the sample improved because Gen Y is getting older and represents a larger segment of shoppers than ever before.)

Gen Y is more diverse than any previous generation, with 25 percent non-white. Their tastes are equally diverse with Gen Y showing far more interest in ethnic foods than any other group.

However, whether the foods are ethnic or traditional, Gen Y doesn't seem interested in cooking them. Gen Y eats out more than any other group in FMI's study, thanks in large part to having grown up in households where eating out was much more prevalent. They are interested in eating healthier, even though much of their eating out is concentrated in quick-serve restaurants.

It's interesting to point out that Gen Y eats out much more than the slightly older Generation X. However, Gen X is now in child-bearing years, which may be altering shopping and eating habits for those consumers. One stark difference between the two groups is their use of gourmet coffee shops. More than 10 percent of Gen Yers go to gourmet coffee shops three times a week or more. Only two percent of Gen Xers go to gourmet coffee shops as often.

When it comes to health issues, Gen Y is looking for information to guide them to better choices, but again these shoppers behave differently. Unlike all other shoppers who see the supermarket as the best place for such information, Gen Y looks to discount stores first and supermarkets second. This is a clear sign that these shoppers, who grew up in the era of channel blurring, don't associate one channel or another with a specific specialty.

Getting information to Gen Y will be challenging too. Unlike their parents and grandparents, Gen Y doesn't turn to newspapers or magazines for shopping information. For them, the best communication vehicles are the Internet and television. However, retailers tell FMI that nearly two-thirds of their current ad budget is spent on newspapers - a practice that may need to shift to meet these new shoppers.

It's just one more way that Gen Y will challenge all of us to examine current business models to find a path to the future.

The Healthy Eating Dilemma

For years, consumers have had a love/hate relationship with healthy eating-embracing the idea of a healthier lifestyle but often passing up the salad bar for a Big Mac.

Sales trends show declines in various "good-for-you" products during the fourth quarter holidays, when consumers seem to go on something of a healthy eating hiatus. That's followed by a one-week spike in sales New Year's week - evidence of both the power and short-term nature of New Year's diet-related resolutions.

Meanwhile, manufacturers have never been more committed to bringing healthy alternatives to market. In 2004, scores of products geared to specific health benefits were introduced - over 3,000 in the no/reduced fat category alone. Of the 11 good-for-you segments analyzed by ACNielsen's LabelTrends service, the low-/no-sugar and organic segments have shown strong, sustained growth. The former registered an 11.3% sales gain in the four weeks ending March 19, continuing a string of double-digit gains. Organics also remained strong with an increase of 14.4% for the same four-week period. As for the low-carb diet, sales of products touting reduced carbs have been slowing since the summer of 2004.

People find that staying on diets is very challenging. The good-for-you product segments enjoying sustained growth are those that offer health benefits without requiring a whole new way of eating.

Our research underscores a more pervasive issue; that only a small percentage of people lead a healthy lifestyle. A study by Michigan State University found only 3% of Americans have an exercise and diet regimen that qualifies as healthy. Dr. Matthew Reeves, an epidemiologist and lead researcher on the project noted that the criteria were so basic that he would have expected at least 15% to qualify for the healthy lifestyle index. Furthermore, the results were not much better for upper income, college educated people than anyone else.

How much more can the industry do to help? Marketers have rolled out items that address virtually every health concern. Retailers have responded with promotions, recipes, in-store nutritionists and special sections. In the UK, Tesco is going even further, with plans to introduce "signposts" on the front of its private label products that quickly and easily help shoppers understand each product's key nutritional information.

At a time when consumers and the food industry are trying to navigate the USDA's new food pyramid and figure out what really constitutes healthy eating, it's more important than ever for manufacturers and retailers to help shoppers who want to eat healthily cut through the clutter of confusing messages.