Lower income groups present golden opportunity to food industry

Posted by Daniel Palmer on 10th February 2009

Lower-income shoppers are increasing in number around the world, with the latest American-based research from Information Resources, Inc. (IRI) revealing that these consumers represent an enormous opportunity for retailers and manufacturers during the slow economy. That is provided they understand that lower-income shoppers are not a homogenous group. “The Lower-Income II Report: Serving Budget-Constrained Shoppers in a Recessionary Environment” report uncovers the critical differences and recessionary spending patterns and behaviours of lower-income micro segments that are driving today’s CPG growth.

Five key lower-income micro segments have been identified and they will be responsible for many growth opportunities. The report empowers retailers and manufacturers to better understand the key differences among lower-income households, so that they can use these valuable insights to their competitive advantage in hopes of attracting and retaining lower-income household loyalty.

“Lower-income households are one of the hottest opportunities in the marketplace and will provide real growth for those who want to truly learn about the various micro-segments and their changing behaviours due to the economy,” IRI Consulting and Innovation President, Thom Blischok, advised. “Our latest research goes beyond the usual narrowly-focused reviews and provides meaningful implications and action steps which retailers and manufacturers can use today to drive growth. 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.”

“Our detailed channel and category-level analysis focuses on how the five lower-income micro segments are changing where they shop and what they buy during the current recession,” Sean Seitzinger, senior vice president at IRI Consulting and Innovation, explained. “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.”

Lower-Income Micro Segments
IRI studied five lower-income micro segments, which are positioned to drive a large share of sales growth for retailers and manufacturers during the challenging economy, including:

* Singles and married couples aged 25-34
* Seniors older than 65
* Households with children

Shopping and Spending Trends
During the third quarter of 2008, CPG spending and private label performance has improved, which is a trend being led by lower-income shoppers. However, most retailers are still missing the mark on their private label offerings and marketing to lower-income shoppers, who represent the single largest private label opportunity in the next five years. Progressive retailers can drive private label growth if they focus on building stronger relationships with lower-income shoppers by improving variety and packaging.

Compared with other income groups in today’s economy, budget-constrained, lower-income shoppers are shopping more frequently, but are spending less per trip. They are also aggressively shifting spending across channels, retailers, categories and brands.

In addition, younger households and households with kids are driving growth across key food categories, the report noted.

Retailer and Manufacturer Action Steps
Retailers can make the most out of their own unique opportunities by working with the following four-phase process:

* Value the size of the business opportunity and investment implications
* Utilise lower-income household segmentation as a means to differentiate from competitors
* Understand lower-income spending nuances and proactively adjust store offerings
* Validate the required steps towards success and execute and drive the process

Manufacturers can also win a larger share of spending across lower-income segments by sharpening their focus on these groups and improving understanding of emerging trends and future implications for their categories and brands. Identifying opportunity gaps is a key, the research concluded.