Targeting Old Gold & Young Prospects

Beverage & Beer Retailing Summit reveals untapped demographic opportunities

Older consumers represent an unmined opportunity for retailers and marketers of alcoholic and non-alcoholic beverages, as attendees of the 2013 Convenience Store News and Progressive Grocer Beverage & Beer Retailing Summit learned.

“Whether working, retired or in need of care, older consumers are a key but often overlooked demographic,” Sarah Theodore, senior global food and drink analyst for Mintel, a global market research firm, said in her presentation addressing how to target one of today’s largest consumer groups while shaping tomorrow’s.

In the United States, there will be 24 million more 55- to 75-year-olds than 15- to 24-year-olds by 2015, Theodore pointed out. “Being older is different today,” she said. Half of the 40 million members of the AARP are still working and the labor participation rate of U.S. seniors is now 7.5 percent, up from just 4.3 percent in 1990.

“Seniors are working well past retirement age,” Theodore said, citing statistics that indicate 44 percent of U.S. workers expect to continue to work full time “because they want to” and 36 percent expect to continue to work full time “because they have to” due to financial worries.

The impact of this aging demographic is putting a strain on the economy, as the global cost of caring for the elderly is projected to rise by 300 percent by 2050. The change, however, also opens up new opportunities for retailers. “Retailers can create stores and services that help seniors stay independent and better enjoy the shopping experience, or help multigenerational families manage care,” Theodore explained.

The effect of these shifting demographics is significant for beverages. Mintel research shows that while beer consumption declines with age, wine drinking increases. Similarly, regular cola consumption declines as people age, but consumption of diet cola increases.

The aging of the consumer market will impel brands to adopt a more “ageless approach.” Forty percent of American seniors say they feel insulted by advertisements or customer service that suggests they are less competent or more forgetful because they are old. As Theodore noted, “brands need to consider marketing that ignores age and focuses on universal lifestyle aspirations of success, humor, intelligence, beauty, etc.”

She went on to spotlight several products from around the world that successfully target older consumers, including Tropicana Essentials juice with magnesium to fight fatigue (in the United Kingdom); Innershine Red Collagen Youth drink containing collagen and red algae to maintain youth (Taiwan); Coors Light’s ergonomically accessible aluminum can (Canada); and the J.P. Chenet Cabernet-Syrah Wine carton with easy-to-grab handle (France).

While older Americans represent an overlooked opportunity, younger consumers are the next generation of shoppers. It’s important to know what they will need as they age, according to Theodore. “Today’s teens are challenged by a poor economy and health concerns,” she told the audience of roughly 25 convenience, grocery and drugstore retailers. “But they are also better connected than their parents and growing up in an era of new attitudes.”

Teens represent only about 12 percent of the U.S. population, but at 41 million strong, their numbers are much higher in the U.S. than in all other developed countries.

Difficult economic times have forced younger Americans to stay home more (40 percent of 18- to 24-year-olds live with their parents), save more and spend less. Successful products for teens will embrace this new reality of budget-minded economizing or offer low-price escapist alternatives.

Health is also important to teens, so products that are positioned as “better-for-you” will appeal to them. In addition, they are more eco-conscious. Sixty-seven percent of U.S. teens define their favorite brand as one that “supports good causes and gives to charities.” This means products that are eco-sensitive or Fair Trade can resonate with them.

BREWING UP SUCCESS AT THE COFFEE BAR

When it comes to coffee, drinkers of all ages are demanding more from their cup of joe.

Although Starbucks Corp. remains the king of coffee and a major competitor to c-store retailers, the company actually did the convenience industry a favor, Steve Montgomery of consulting firm b2b Solutions said in his Summit presentation, “Trends in C-store Coffee.”

With coffee serving as a destination point within the store for a large number of customers who stop in specifically to get their java fix, more retailers are looking harder at how their coffee programs can stay competitive — or even better, get ahead.

Today’s coffee drinkers are more knowledgeable about coffee, more aware of gourmet and specialty coffee drinks and more demanding of quality — yet convenience is still imperative, Montgomery emphasized. As a result, c-stores must make their coffee programs better, but still quick and accessible. This especially comes into play when retailers consider self-service coffee islands vs. the use of baristas, which can result in long lines.

Customization is also a key area to focus on. Montgomery described customers’ attitude as “I want it and I want it my way.” Condiments are no longer just side items — the variety available is growing, and they allow customers to make their coffee the way they want it, in greater detail. The barista question comes into play in this area, as Montgomery noted that taking the “we can allow you to do it yourself” attitude can serve as a point of differentiation, letting customers customize their coffee while still moving quickly.

The actual layout of the coffee area inside a convenience store makes a difference as well. With the industry moving from replenishment to refreshment, coffee has largely moved from against the wall to an island. Retailers should carve out a clear path to the coffee island and consider ways to build incremental sales by catching people’s attention on the way back from getting their coffee.

Despite the multiple ways c-stores can improve their coffee programs, retailers must be careful not to alienate existing customers who like things the way they are. “The customer’s perception is the reality we deal with,” Montgomery said, even if a store is moving from a terrible roast to a great one.

His suggestions for easing the transition are:

• Launch a sample program, allowing customers to try up to five or six new coffee brews at any time.
• Don’t advertise a changed coffee blend at all.
• If the program update is focused on packaging or branding, focus on “same product, different container.” Many customers perceive a changed cup as a changed beverage.

When it comes to competition beyond coffee shops, c-stores must keep an eye on fast-food chains like McDonald’s Corp., which have made a point of pushing their coffee offerings in recent years. Another competitor that often goes overlooked is single-cup brewers such as Keurig. An increasing number of homes and offices have added such machines.

The most successful c-store coffee programs will be those that keep a close eye on what challenges and opportunities they’ll face in the future, as well as those that exist in the present.

Editor’s note: This is part two of a two-part feature. Part one of the 2013 Beverage & Beer Retailing Summit coverage appeared in the August issue of Convenience Store News.