Lower Income CPG Shopper Growth Outpacing Others

According to a study from by Resources, Inc., lower-income households' Consumer Product Goods spending growth is outpacing higher income households' in the United States and will generate $84 billion in incremental CPG spending during the next decade. They shop more frequently than other income groups, but spend less per trip.

Lower-income shoppers are not a homogenous group, and the report focuses on the differences and recessionary spending patterns and behaviors of lower-income micro segments driving CPG growth. Five key lower-income micro segments will be responsible for many growth opportunities, says the report.

Lower Income Micro Segment Goals & Values

Micro Segment

Financial Concerns & Goals

Lifestyle Values

Age 25-34

Optimistic about getting ahead; worried about debt

Live on the fly, spontaneously; eat out regularly; friends key

Age 65+

Worried about healthcare & costs; controlling expenses key

Eat in; TV, family & friends key

HH with Kids

Worries about kids'welfare; paycheck to paycheck; can't save

Some carryout meals. Kids'school & sports key

Hispanics

Worries about job security; need multiple incomes to survive

Eat as a family; Family gatherings & sports key

African Americans

Worried about daily needs; shop only with paychecks

Prefer fast foods ; TV, family & sports key

Source: Information Resources, Inc, 2008

This report disposes many conventional views of lower income shoppers.

Much of what retailers and manufacturers believe about their lifestyles, their attitudes, and their spending is wrong, says the report

Lower Income Shopper Myths and Research Findings

Conventional View

What the Research Reveals

Lower income shoppers spend less than higher income households and as a result, represent a lower economic opportunity

Lower income households CPG spending growth is outpacing higher income households, and this group will generate over $84 billion dollars in spending growth over the next decade

In the current recessionary period, households with lower incomes generally share the same shopping tendencies

Micro-segmenting lower income shoppers uncovers huge variations in shopping frequency and spending levels as well as channel and category-level dynamics

Lower income shoppers are less profitable because they only buy value brands and other products when they're on sale

Lower income shoppers are more interested in good values than in sale items. Further, retailers have enormous untapped opportunities to target these shoppers with value-based private label products and messaging.

A low price reputation is the most important criteria that lower income shoppers use when selecting a store

Survey results tell us that lower income shoppers select stores on the basis of many key factors that are just as important as price.

Source: Information Resources, Inc., 2008

Lower income U.S. households are projected to increase based on a growing Hispanic population and growth in the number of retiring Baby Boomers in the coming decade. Also, many will shift into the middle-income group.

US Households by Income Group (% HH in Constant 2005 Dollars)

 

2000

2005

2010

2015

Under $35K

36.5%

38.4

'38.6

38.9

$35K - $55K

20.0

19.3

19.6

19.9

Over $55K

43.5

42.3

41.8

41.3

Source: Dept. of Commerce Census Bureau; 2006 Annual Social andEconomic Supplement (2005); IRI projection

Younger households and households with kids are driving growth across key food categories. African American and older household spending has increased notably in salty snacks and chocolate candy; Hispanics in frozen dinners & cereals.

Lower Income Micro-Segment Spending Growth In Ten Largest Food Categories

 

Lower Income Food Shopper Micro-Segments % Spending Change in Dollars/1000 HH, 2008 vs 2005

Food Category

Category Size ($Mil)

HH Age 25-34

HH Age 65+

Hispanic

African American

HH with Children

Frozen Dinners/Entrees

$8,244.5

21.9%

4.6%

10.8%

0.1%

18.3%

Salty Snacks

$7,658.7

15.4

15.9

3.1

9.4

8.7

Fresh Bread & Rolls

$7,440.2

30.7

6.8

-1.4

4.1

14.8

Cold Cereal

$7,289.4

23.3

3.7

9.9

-1.5

13.0

Natural Cheese

$6,913.1

33.1

6.5

8.2

-2.8

16.6

Chocolate Candy

$5,475.7

40.0

16.6

5.9

21.3

12.6

Soup

$4,318.9

24.6

3.6

3.5

0.0

17.9

Cookies

$3,985.6

4.1

-0.7

6.0

-7.8

-2.8

Crackers

$3,959.9

30.3

3.9

6.8

-3.5

13.6

Ice Cream/Sherbet

$3,833.8

9.8

1.5

-13.6

4.7

0.6

Total Food Categories

$175,9

71.916.6

5.6

-0.2

1.2

8.2

Source: Information Resources, Inc, 2008

Conservative growth estimates project U.S. lower income households to grow to over 50 million and for annual CPG spending to climb to over $100 billion.

This trend represents an incremental 10-year CPG opportunity of $84.2 billion.

U.S. Lower Income Projections (Census Bureau Survey & IRI Panel Data)

 

2008

2013

2018

Total U.S.  Households (millions)

45.6

48.7

52.0

CPG $ Spending (billions)

$87.6

$96.0

$105.2

Sources: Dept. of Commerce Census Bureau; 2006 Annual Social and Economic Supplement. 2005 Survey; IRI Consumer Network, 52 weeks ending 5/11/2008 -295 categories -all outlets.

IRI Consulting and Innovation President Thom Blischok, says "...at this point in history, the lower-income shopper is continuously challenged to stretch each and every one of their dollars, which will continue for at least the next four-to-eight years."

Sean Seitzinger, senior vice president, IRI Consulting and Innovation, explains ".,. once you understand the wants and needs of the different shopper segments, you can then put the right products with the right pricing on the right shelves with the right displays to meet all of their needs."

For more information on the report and IRI, please access the PDF file here, or read the complete release here.

 

Recommend (1)