How millennials became the world’s most powerful consumers
The moment long feared by brands that were built for baby boomers has arrived
● When Scott Norton and Mark Ramadan were undergraduates at Brown University in Rhode Island in the US a decade ago, they were horrified not by the 2008 financial crisis but by Heinz tomato ketchup.
The sauce was so common, it seemed it would be there forever. “At the centre of supermarkets were all these classic American brands that hadn’t evolved in 70 years,” recalls Norton.
As they talked to their friends, they realised that none of them wanted bland, mass-market products shipped from factories by huge corporations. So they started to mix their own organic ketchup.
On graduation, they founded a company and, having no origin story with resonance, named it after a mythical Victorian called Sir Kensington, a monocled adventurer who had “advised the British East India company in the acquisition of spices”.
The pair are now 31, at the heart of a millennial generation that has come of age, transforming business not only in the US but around the world.
In April, their company was acquired by Unilever. Their ketchup has just gone on shelves in Walmart and Target.
This is the millennial moment, long expected and feared by companies that built their brands for baby boomers. They are ageing and their offspring are no longer teenagers, or even students. Pew Research Centre defines millennials as the 73 million Americans aged between 22 and 37, who will next year overtake boomers in number.
“We don’t think of them as special or different any more. They are the core of our business,” says Alan Jope, president of beauty and personal care at Unilever.
The coming of age of the world’s two billion millennials is not only a generational shift: it is one of ethnicity and nationality.
Some 43% of US millennials are black, and millennials in Asia vastly outnumber those in Europe and the US. Despite China’s former one-child policy, it has 400 million millennials, while Morgan Stanley estimates that India’s 410 million millennials will spend $330-billion (about R4.2-trillion) annually by 2020.
Millennials have reached what the bank calls “the most important age range for economic activity”, when households are formed, babies are born and money is spent not just on going out but on settling down.
Simon Isaacs, co-founder of Fatherly, an information and e-commerce site for millennial parents, cites family camping as one of its most popular topics. “That does extremely well for us. They like to buy cool family tents and share videos of their trips.”
This reflects the depth to which technology is integrated into millennials’ lives. They are used to not only communicating online but buying most things: $25-billion was spent on Alibaba’s Singles Day online shopping festival in China in November.
Big companies have scrambled to adjust to millennial tastes. “Local, original, and what they can feel and trust are all good. Maybe there is a bit of a reaction to globalisation,” says Laurent Freixe, who heads Nestlé’s Americas business.
But it is placing immense strain on institutions that once thrived on mass marketing of products through TV advertising. Growth has slowed and investors are unhappy.
“They are only about global brands, one size fits all. But the world has changed. Millennials want these little brands, local brands,” activist investor Nelson Peltz said last year as he attacked Procter & Gamble.
Some are being outflanked by young rivals. Google and Facebook have shaken marketing groups such as Publicis and WPP, and Netflix last month overtook Walt Disney as the world’s most valuable entertainment company.
Often, revenues are simply nibbled away by upstarts: Boston Consulting Group estimates that between 2011 and 2016, large US consumer groups lost $22-billion in sales to smaller brands.
Ella Kieran, head of WPP’s Stream conferences for its clients, is the epitome of the high-flying young global executive. At 31, she and her entrepreneur husband have a oneyear-old daughter, and she divides her time
Millennials are settling down, entering the most important age range for economic activity Morgan Stanley
between London and New York. But the couple are still renting, and she worries about her generation’s future.
“The pessimism of my generation is the sense that you cannot change things,” she says. “If you don’t have a lot of money, it does not feel as if you are going to get it. Now, as I have a family, I’m happy that baby food is better, thanks to five years of people before me saying: ‘This brand does not speak to me.’ But you guys got houses and we got slightly nicer shampoo.”
In the US and Europe, many millennials are disenchanted with their lot as they attain maturity. They are highly educated, but their sophistication and ambition are not matched by security. This is largely an accident of history. Older millennials entered the workforce in the mid-2000s, and many lost jobs after the 2008 crisis. They were also caught by rapid inflation in house prices.
The milestones of leaving home, getting a job, marrying and having children have been delayed. It has spawned widespread distrust, both in organisations and individuals.
Malcolm Harris, author of Kids These Days, a book about “why it sucks to have been born between 1980 and 2000”, says distrust is only natural among a generation that has to struggle for security. The preference for local, organic and craft products is also logical, in his view: “You want to be part of a circle of production and consumption that is not centred on enriching the 1%.”
The pattern of preferring smaller, independent brands and outlets extends to media consumption. Technology and social media have unleashed an extraordinary fragmentation in how they absorb information.
New companies can reach millennials via social media, which further encourages fragmentation. Beauty is a prime example. Revenues of smaller brands grew 16% a year between 2008 and 2016, according to the consultancy McKinsey.
Beauty’s expansion into a $250-billion global industry has been fuelled by Instagram. Marla Beck, co-founder of Bluemercury, a US chain of cosmetics stores, cites the growth of face masks. “Masks used to be a teeny category but they are very visual. You can display your face [on Instagram] and show that you know about lifestyle, that you take care of yourself,” she says.
Helen Brand, UBS European luxury analyst, says: “A few years ago, millennials were seen as young people who could not afford luxury.” Now the bank estimates that they account for 50% of Gucci’s sales and 65% of Yves Saint Laurent’s. It is a taste of millennials’ buying power — their collective annual income will exceed $4-trillion by 2030, according to the World Bank.
This also reflects the divide in fortunes among millennials, not just between high and low earners but between those born to asset-rich baby boomers and those lacking familial wealth. Accenture estimates there will be a transfer of at least $30-trillion in wealth from US baby boomers to millennials during the next three decades.
Other millennials are out of luck, along with the institutions that flourished in the baby boom era and are being disrupted.
As one of them, Kieran of WPP has little sympathy for the consumer giants. “We can’t win on anything else, so if we rattle the cage of corporations on sustainability, that’s good.” — © The Financial Times