The perfect storm that’s hitting the food industry and spurring consolidation and product development changes among major food manufacturers has one big constituency to thank: millennials.
The 18-to-34-year-old demographic, in the midst of disrupting a variety of industries, is rewriting the script in the grocery sector.
Food giants are increasingly buying smaller, startup food labels in large part to provide credibility—and authenticity—among these younger consumers.
Millennials’ preference for nonpackaged, less-processed food has squeezed traditional players, forcing consolidation moves, including The Kraft Heinz Company’s recently withdrawn offer for rival Unilever.
“All of the action we are seeing is driven by the quickly evolving changes of millennials’ eating and food behavior,” said Matt Kleinschmit, managing director of consumer and shopper insights at marketing research firm Maru/Matchbox. “They are radically changing the makeup of the food and beverage space. What used to be considered premium increasingly has become table stakes for millennials.”More than three-fifths of millennials said they are willing to pay more for organic, natural, sustainably and locally sourced food.
In a November 2016 survey of US consumers ages 18 and older, Maru/Matchbox found that millennials are much more likely to value features such as “GMO free” and “locally sourced” compared with their older counterparts. And more than three-fifths said they are willing to pay more for organic, natural, sustainably and locally sourced food.
The reason: More than eight in 10 millennials said they feel more responsible or health conscious if they buy products with these features and benefits, and a similar percentage said seeing those features and benefits would make them more likely to buy the product.
That thinking and behavior has spurred the growth of premium food and beverages, or those that cost at least 20% more than the average category price, according to a December 2016 Nielsen report. The premium end of the US food market rose 8% in the year ended April 2, 2016, outpacing the 3% growth of the whole category.
The study found that big food giants are not the beneficiaries of this shift. Rather, smaller companies are the winners. For example, the 25 largest food and beverage companies in the US drove only 3% of total category growth from 2011 to 2015, while companies below the top 100 drove nearly half of the growth.