Grocery 2053: A Data-Driven Gaze into The Future
Affordable Health & Wellness
Table of Contents
SECTION 1
Executive Summary
- Wellness and finances are opposing forces for many consumers, and that’s not a coincidence. The struggle between buying healthy and affordability is real. Four out of five Customers aspire to choose healthier foods when shopping, but price is a barrier for three out of five, and that’s true across age groups. That’s also why the higher the income, the more likely Customers are to regularly choose healthy foods when shopping. What does differ across age groups is that younger Customers care more about their mental health, whereas older Customers care about their physical health.
- In the near term, retailers can help Customers by providing shoppers with a wider assortment of lower-price healthcare and product services, focusing on mental health for attracting younger Customers, and making it easier both in-store and online to shop based on their diet.
- Between now and 2053, we see retailers doing much more: assisting shoppers with a tailored health-helping AI, becoming their Customers’ trusted holistic health partner, and launching the very first retailer-owned organic coop in the industry.
Health & wellness has been quite the hot subject for decades and it will continue to be omnipresent in our daily lives for decades to come. It is the second most important trend after Fiscal Conservatism and that’s because health & wellness will never be fully independent of fiscal conservatism, at least not for most shoppers. The struggle between buying healthy and affordability is real.
“The biggest challenge is being able to get healthy food items. Because the items that have healthier profiles, such as less sugar or organic, the store will charge more for them. It's challenging having to pay more just to have something done right. If I didn't have this challenge, I could buy everything I wanted that was better for me, without having to make tradeoffs.”
- 45-54, 25-50k, Rural, 0 kids
Mental and physical health needs (two dimensions we’ve considered to determine the importance of this trend) have evolved with our aging population, have become more multi-faceted than ever, and are having a clear impact on choices we make as Customers.
SECTION 2
Current Market Forces Driving the Trend (secondary research)
Multidimensional Health
IIn our third wave of the Consumer Trends Tracker (include link to quarterly), 29% of Customers reported they buy products for a specific diet most or all the time with the top diets being (in order): Keto, Low carb, Low sugar, Vegetarian and Gluten free. It’s key to have the right assortment in the right categories and make it easy for customers to fulfill these health or diet-led missions. Other customers like those of GenZ will care more about other types of claims – fairtrade, plant-based, allergen-free, while older shoppers will focus on “avoid”-type claims. We also see a rise in value-conscious healthy shoppers. Customers now expect to get healthy options at the right price which are typically priced higher. Forty-five % of customers are planning to save money and 40% to increase their health focus ref. Surely, there must be crossover between both groups. Again, we have evidence of the constant tension between higher-in-the-pyramid needs like health & wellness and other more basic shopper needs like trying to save money.
Aging Population
The US population is aging and that isn't news. It is expected to grow from 335m to 369m in 2052. Sixty-five + segments will outpace the 25 to 54 groups, while the number of people aged 25-54 relative to ages 65+ falls from 2.3 to 1 in 2022, and from 1.7 to 1 in 2052. The fertility rate is already at 1.7, below that of the 2.1 replacement rate (the rate required to replace itself in absence of immigration), meaning most of the population growth will be driven by immigration to return to 1.1M/yr. And we can imagine immigration will also drive population growth among younger segments. The working age group, those aged 16-54, will grow at a slower rate (0.2%) than people aged 65+ (1.5%) ref. Retailers will need to adapt their products and services to this older growing segment that will have lower consumption levels due to life stage needs.
SECTION 3
Customer Motivations Driving the Trend (dh proprietary research)
Affordable health & wellness comes in second but is almost tied with Fiscal Conservatism in importance. With a broad appeal today across age and income, more than three out of four Customers chose healthier foods when shopping, and although it seems to be a less of a stressor when compared to finances, almost double the number of Customers rank health in their Top three when asked to trade off. Although personal choice is not a barrier to choosing healthy foods when shopping, price is – for three out of five Customers to be precise. Retailers that want to become a health destination will need to ensure that the price is right on health items.
This especially true given that players like Dollar General (link to DG article) have announced they would like to become a health destination by providing a wider assortment purportedly 40% cheaper along with basic health care services. In fact, about three in 10 shoppers say they are likely to use healthcare services in a grocery store, if offered. This number is similar across all age groups.
It’s not a surprise that many retailers are taking the leap into healthcare, like Dollar General’s recent appointment of a healthcare advisory board. And even with healthcare services, shoppers will scrutinize prices. Health that comes at a price will not cut it for shoppers. On the other hand, as more Customers adopt healthy shopping behaviors, retailers and manufacturers alike will be able to better benefit from economies of scale and hopefully pass those savings onto Customers to reach an equilibrium between health and price.
Physical health takes the lead over mental health for Customers -- and that is truer for shoppers above 45 years of age -- whereas younger Customers care more about their mental health. The younger the person, the more likely they are to feel stressed about their finances and mental health, with and without kids. Knowing this, retailers and brands alike could tailor their health proposition to different types of Customers. For example, foods that boost brain and memory would speak to younger shoppers. Could mental health care services be part of the value proposition? It will be up to each retailer to decide which type of shopper they want to serve best.
Choosing healthier foods when shopping is the only behavior that is pursued among a clear majority – above sustainability, value-based consumption, digital formats, and data protection. And so, helping shoppers become healthier versions of themselves will be key to success.
Now let’s talk about the aging population. If increasingly more of the population falls into the 65+ age range, this will shrink the overall grocery pie (in today’s dollars not accounting for inflation). People of retirement age 65+ have smaller budgets than people 25 – 64 ($395 v $511 per month). As such, a lower percentage of aging and lower-income households choose healthy foods when shopping. Newer generations are also less likely to want to have children and bigger households as a result. This will have an impact on the grocery pie in real dollars (people in the range of 18-54 with kids in the house have bigger grocery budgets than those without, $592 v $385) in the future.
In summary, given that older populations are much more likely to place importance on the health and welfare of self and friends and family, health & wellness will become more relevant as the proportion of the general population skews older. Additionally, younger generations appear more stressed and place a higher importance on mental health. As older generations die, mental health will likely be a greater need in the general population.
Sustainability (the health of the environment, welfare and others) too will matter, but likely not as much as mental and physical health. The stress caused by finances may be stronger among younger generation. This suggests that sustainability will continue to be aspirational, and something traded off if one must focus more on finances or health. Sustainability that lives at the intersection of better for you and value will continue to be essential. And even then, it must live at the intersection of price.
As “Save Me Money” and “Make It Better” (quality) continue to be drivers of prominence, healthy foods and experiences/products that support mental health will become more important. Sustainable, natural, and organic products will only become a bigger part of the “Make it Better” pillar once they become affordable. We can conclude that health & wellness is somewhat at the mercy of Fiscal Conservatism, with 60% of Customers still saying price is a barrier to choosing healthier products. With “Save Me Money” dominating Customer behavior, Customers will expect health products and services to be provided at the right price.
SECTION 4
What Customers Have to Say
“Price and food allergies. We prefer to eat healthy food, but organic food has gotten so expensive we can’t eat that much anymore. We also don’t eat as much local foods because of the price. If we did not have price issues, we would be buying all organic, many local foods, and shopping at specialty stores locally. We would also be purchasing everything we could that supported food allergies and environmentally conscious brands.”
- 45-54, 75-100k, Suburban, 4 kids
“The biggest challenge is being able to get healthy food items. Because the items that have healthier profiles, such as less sugar or organic, stores will charge more for them. It’s challenging having to pay more just to have something done right. If I didn’t have this challenge, I could buy everything I wanted that was better for me, without having to make tradeoffs.”
- 45-54, 25-50k, Rural, 0 kids
SECTION 5
What Can Retailers Do?
All retailers should align their organization to optimize performance amid the backdrop of affordable health & wellness. There are certain retailers who are better positioned to capitalize on this trend than others.
Retailer 2053 Ranking Methodology
To determine which retailers those were, we looked at:
- Which retailers have more of the “customer of the future” currently in their stores? In other words, which retailers skewed higher on a shopper base that was younger than 44?
- How much do the needs of their shoppers align with the given trend? In other words, do their behaviors and desires indicate the trend is highly relevant to them?
- How much work does the retailer need to do to better align their value proposition with this trend, so they can ride its currents over the next 30 years?
- How well does the retailer perform on Fiscal Conservatism? Since finances will likely remain the most immediate need for shoppers, any retailer who makes a trend affordable is more likely to win.
Given how distant we are gazing into the future, we are choosing to focus on our 1st and 2nd quartile retailers from the overall RPI ranking ref, as well as other household names in grocery.
Drugstores like CVS, Rite Aid, and Walgreens will benefit from future tailwinds of the affordable health & wellness trend simply because of the nature of their business and what matters to their customers. However, with the blurring of lines between Grocery and Pharmacy, drugstores should try to do more if they don’t want to get left behind. How innovative drugstores get – perhaps by offering Fresh categories and other holistic health benefits – will be key to staying on the podium. Others like Amazon and H-E-B will carve a space for themselves based on their ability to provide affordable health.
Based on our 3rd wave of the Customer Trends Tracker , we know that 44% of Customers want retailers to help them make healthier choices, and that number is growing.
Over the next 30 years, all retailers can benefit from some or all of the following actions
Visionary structural moves
1. Offer Customers a Health-Helper AI and Score.
This idea builds on our budgeting AI idea. We can agree most Customers would buy organic and sustainable products all the time if they could afford it (at least, that’s what they told us). And half of them follow a specific diet. But of course, they are limited by their budget. By allowing Customers to set dietary preferences for different members of the household, provide a set budget, and a desired health score, you could become their trusted health advisor and save them money and time while doing so. Think of France’s Nutri-Score which helps customers navigate products via a color-coded graded indicator representative of a product’s nutritional quality. You could allow Customers to set a desired health score and budget, helping them to balance their wellness objectives with their current finances. From our verbatims, many Customers associate health with cooking from scratch, and being able to purchase fresh produce, meats, and organic products. So, it may mean letting Customers define how many meals they would like to make versus how many ready-to-eat options they would like in their weekly grocery wish list. In other words, “Help Customer Be Healthy,” whatever that means to that specific Customer.
2. Become trusted holistic health partners.
Why stop at helping Customers with their groceries? As we saw in the data, health matters to Customers. Mental Health more for younger Customers, and physical health for older Customers. Retailers could offer much more than prescriptions to Customers. They could become trusted health advisors and increase one-stop-shopability while doing so. Imagine a store with a gym or physiotherapy center with counselors, clinicians and other mental therapists in an in-store clinic. And imagine being able to offer services at prices that are competitive for Customers. You would be helping customers get healthier in a holistic way and doing so within their budget. Alternatively, you could partner up with third-party Wellness providers. We already see industry players making major moves like this, e.g., (1) Dollar General’s 2022 piloting of three DocGo mobile health clinics (urgent and preventive care) (2) Kroger with its Little Clinic locations, and (3) H-E-B’s Wellness Primary Care Clinic
3. Launch the first retailer-owned organic coop of the industry.
Think of a retail or consumer-owned coop where like-minded individuals and retailers have a personal stake in helping shoppers make healthier choices daily. Members could pay a lifetime membership fee, with access to rewards as a percentage of their yearly purchases and other benefits. One of the biggest benefits here may be that the coop allows for the purchasing of large volumes of organic, local, and other diet-specific (keto or vegan for instance) products at prices that could compete with national retailers. This would not only help shoppers satisfy their health needs but would also remove the significant price barrier. In other words, consumers would not need to choose between one or the other. You could be their savior, or they could be their own savior in a consumer-owned coop scenario.
Good consistent hygiene moves
- Saving money will always dominate, so help Customers solve their struggle between being healthy and saving money by providing shoppers with a wider lower-price health assortment and healthcare services.
- Ensure coverage of physical and mental health claims where they matter most, by category and age segment, and that starts with understanding your shopper.
- Provide a holistic wellness omnichannel experience and make it easier for Customers to consistently find relevant products both in-store and online. Create a better online taxonomy for specific diets or provide a separate or integrated health & wellness in-store section that will vary on the category and novelty of a trend.
- Position yourself to win the hearts of 65+ shoppers as they will represent a bigger proportion of the population in the future, albeit with different purchasing preferences, smaller budgets, and smaller consumption overall.
- Competition will be fierce for the declining lower age groups. Make sure you have a diversified format/banner/in-store/online strategy to appeal to different age groups without alienating any.
