Supermarkets’ Future at Mercy of Millennials

You’d think Supermarket News editors have heard it all after 17 years of conducting annual financial analyst roundtables.

But the most recent one, profiled this week, was different and in some ways bleaker than the others.

The top-notch group of analysts did their usual excellent job of assessing the business outlook, but they kept pointing to deep-seated societal problems that defied easy solutions.

“I am very concerned that we are on a long, steady path downward,” said John Heinbockel, managing director at Guggenheim Securities, about economic challenges.

Financial pressures have “been more or less the story of the middle class for years, and it will probably destroy the supermarket industry as we know it if we continue down this path,” said Scott Mushkin, an analyst with Jefferies & Co.

In a new wrinkle, there was more emphasis on one demographic group that represents either peril or promise for supermarkets. Millennials, it was said, will have an outsized impact on the future course of supermarkets. Those shoppers, who range in age approximately from their late teens to the mid-30s, are really feeling the economic heat.

“There’s a massive wave of Millennials that are 22 years old, and the unemployment rate for people ages 25 to 34 is already really high,” Mushkin said.

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Importantly, Millennials have been holding off on forming households, Mushkin added, a factor that is further pressuring the economy and food retailing. He said the percentage of people 25 to 34 living in multi-generational households is the highest since the 1940s.

But the story isn’t all doom and gloom. There’s a chance that Millennials could spark “a renaissance of the food-at-home industry sometime next year” if younger consumers begin to speed up household formation, especially if the economy lends a bit of cooperation, Mushkin emphasized.

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Earlier this year, Mushkin and his company released a report, called “Trouble in Aisle 5,” which urged supermarkets to make changes aimed at drawing more Millennial shoppers.

All this makes sense because this generation will become more important as the influence of Baby Boomers fades. But unlike Boomers, Millennials need to be sold on supermarkets as the outlet that best meets their needs.

Supermarkets can’t control the economy or the pace of household formation. But they can position themselves to be ready when the stars are in alignment.