Millennials Key to Future Private Label Growth

November 18, 2009
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A new report from Chicago-based Information Resources Inc. (IRI) says Americans born between 1979 and 1989 represent one of the largest demographic groups in the country.

A new report from Chicago-based Information Resources Inc. (IRI) says Americans born between 1979 and 1989 represent one of the largest demographic groups in the country. Also called Millennials, they were hit hard by the recession, but these 20-somethings are about to enter a strong period of growth in terms of both income and spending, making them a key target of retailers and manufacturers hoping to grab a piece of an estimated $54.3 billion opportunity.

"Future CPG spending growth from Millennials, driven by women shoppers, will be a major source of new sales growth for retailers and manufacturers, who are continuing to compete in a volatile economic environment," said KK Davey, executive vice president of IRI's Consulting & Innovation group. "This consumer group is even larger and more diverse than Generation X, and they are on the brink of experiencing a broad range of lifestyle changes, such as first home purchases, marriage, parenthood, career development and larger incomes."

But Millennials do not behave like other demographic groups. According to the report, they shop less often, spend more per trip and do a greater share of their CPG spending at supercenters such as Walmart, highlighting the increased importance of both low prices and convenient one-stop shopping among young adult consumers. However, Millennials' attitudes toward store brands, as well as their propensity to buy store brands, is very similar to other groups, debunking the notion that acceptance of private label builds over time and is strongest among older, more experienced shoppers.

According to Consulting & Innovation Group Director Brent Baarda, Millennials' penchant for store brands stems in part from their youth experiences.

"They don't remember the old black-and-white 'generics,' so they don't have to be retrained regarding the quality of private label products," he said.

Thanks to great improvements in store brand quality over the past decade or so, Baarda told PL Buyer, Millennials have had “nothing but positive experiences with store brands."

Moreover, although Millennial women are more likely to have lower incomes than women in their 30s, 40s and 50s, they haven't yet developed into savvy shoppers, added Sean Seitzinger, Consulting & Innovation group senior vice president. They are less likely to clip coupons, study ad circulars and create a shopping list. Instead, he explained, they try to choose a retailer they trust to help them save money. And trust in a particular retailer often translates into trust in that retailer's store brands.

"This group is really open to having a different kind of relationship with retailers," Seitzinger remarked. "Millennials want them to provide information and share their expertise in a variety of areas, creating a phenomenal opportunity for retailers to take a big step forward. The door is wide open for those willing to invest in understanding these consumers and evolving along with them."

For example, the report said, retailers should focus their private label development efforts not only on categories with strong private label growth trends, but also on those categories in which young shoppers demonstrate a strong propensity to buy store brands (such as yogurt and toaster pastries).

"There are a lot of opportunities for retailers to expand private label into categories where they haven't played before," Baarda remarked. "It may be time for them to be more aggressive in terms of private label expansion, even if it's at the expense of third- and fourth-tier brands."

For more information or to purchase a copy of the report, "Winning with Millennial Women Shoppers," contact Sean Seitzinger at 678-613-1427 or -- Denise Leathers

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