Commentary
Lower Income CPG Shopper Growth Outpacing Others
- by Jack Loechner , Staff Writer @mp_research, February 27, 2009
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.
Jack Loechner is the Editor of The Center for Media Research's daily Research Brief. You can reach him at jack@mediapost.com.