Grocery 2053: A Data-Driven Gaze into The Future
Values-Based Consumption
Table of Contents
SECTION 1
Executive Summary
- Values-based consumption -- like sustainability and employee welfare -- remains aspirational and ranks last when we ask Customers to trade off with other needs like finances and personal health. That is because, like affordable health & wellness, consumer needs that are less personal and immediate to the individual take a back seat and tend to be satisfied only after these needs are fulfilled (like one’s finances). Younger Customers are two to three times more likely to be concerned with health, the environment, and the welfare of others outside their immediate circle. Even for this younger consumer, only one in 10 say it is a top need to satisfy.
- In the near term, retailers can attract post millennial generations by getting involved in causes that matter to them, showcase activist brands, use packaging that makes a difference, communicate their ESG strategy, and turn their staff into ambassadors when making changes and invest in continuous education for employees
- Between now and 2053, we see retailers doing much more: launching the first sustainable-packaging-only/local-only organic-only coop, launching their own grocery education academy, starting a foundation for a cause that matters to Consumers, and by going fully sustainable.
The world is more connected, and its people are more informed than ever. There is a growing sense of shared values and our impact on this world and its environment. We could debate that the sustainability revolution has yet to happen if we compare it to the scale of the first and second industrial revolutions. Perhaps drastic events like further elevation of global temperatures will motivate governments and corporations to take a significant turn.
In this section, we will be looking at how much we truly value not only the environment and wildlife, but also that of friends and family – in other words, we are looking beyond our own personal health. Just like with affordable health & wellness, Customers are always trading off needs, and values-based consumption, including sustainability, is subject to the same law of grocery physics of Fiscal Conservatism as is health & wellness. Unless Customers’ need of saving money are satisfied, sustainability remains an aspirational need.
Of course, this may change when the impacts of climate change and food scarcity are felt in a more significant way. When we hit that tipping point, governments will likely get involved by creating legislation forcing retailers and other players in the food arena (e.g., namely farmers with regenerative agricultural practices) to implement more drastic sustainable practices. If we don’t feel a Customer pull before that point, we can expect some sustainability and other values-based needs to go from being aspirational to maybe even competing with other immediate needs. Time will tell.
SECTION 2
Current Market Forces Driving the Trend (secondary research)
GenZ overhaul
Post-millennials will drive many of the future retail trends. They are the most diverse with 48% being part of ethnic minorities ref, are more gender-fluid, and are generally in opposition to previous generations like Baby Boomers and Gen X who control wealth and status today. Retailers and brands will need to balance attracting this segment without alienating older segments. They expect brands and retailers to reflect their values, even among their suppliers. They not only consume with their ideals in mind but are not shy to invest or divest in companies according to their values. They own 95% of crypto along with millennials. This generation is more activist in nature and believes in brands created with activism in mind. Nineteen percent of all Customers claim they have purchased based on purpose-driven brand actions, and we can expect that number to be higher for GenZ ref. They believe in circular and sustainable consumption as opposed to hyper consumption.
Ethnic makeup evolution
Non-whites will make up 60% of the US population by 2060, 45% by 2030. In 2060, the US population will look like this: 28% Hispanic, 6% biracial, 15% Black and 10% Asian. An evolving ethnic makeup means emerging need states and ways of consuming, and retailers will need to adapt. ref
Sustainability
As mentioned, customers believe in circular and sustainable consumption (valuated at $109 B) with significant growth ref. And it's not only about products instore or online but what retailers and brands are doing behind closed doors. The Russian-led energy crisis will accelerate the growth of clean green energy (valuated at $257 B) and is forcing economies to not only diversify supply but also types of energy. The impact of climate change is real with $92 B of costs for the US alone ref. Customers are watching and making different choices in terms of packaging, supply chains, waste, ESG targets, and carbon footprint. Forty-four percent of Fortune 500 companies now have ESG targets or policies in place. Thirty trillion dollars has already been invested globally versus $3 T in 2004 ref.
SECTION 3
Customer Motivations Driving the Trend (dh proprietary research)
On average, values-based consumption (consumption based on sustainability and the welfare of wildlife, the environment, and those outside the friends and family circle like store employees) is not the biggest source of stress for customers, and when forced to trade off (top three needs), Customers opt for other pillars like finances and health. However, one out of every two Customers say they choose sustainable, organic products, and stores that show they care about their employees, and they do so regularly when shopping. As with other trends, we see that values-based consumption matters more to younger generations.
In fact, younger Customers are two to three times more likely to be concerned with the health and welfare of the environment and its wildlife and that of people outside their immediate circle. However, it is not a big source of stress among any age group when compared to other stressors and falls behind finances and health.
Sustainable, natural, and organic foods appeal more to Customers aged 44 and under. This explains why younger generations are more likely than older ones to act on their values. In fact, up to three of five Customers choose stores that clearly show they care about their employees. Retailers that do so will be rewarded.
However, values-based consumption remains an aspirational need (one that people will seek to fulfill only if those other needs are satisfied). In a trade-offs exercise, it falls near the bottom. All this points to fiscal conservatism and affordable health & wellness as stronger, more influential long-term trends than values-based consumption, at least from a demand-side perspective.
SECTION 4
What Customers Have to Say
“The company itself does matter to me. If they treat their employees badly or commit shady practices, I am less likely to use them. I try not to use Amazon because of the union busting and how the website has become far worse than years ago. Scams are everywhere, manipulative pricing, and horrible customer service. Besides that, all that really matters to me is value: quality, variety of products, one-shop-stop, and ease of use. I prefer not to interact with people if possible. Online shopping or checking yourself out is more convenient. When in a physical store I just want to get in and out. I don't like to linger. I want to limit my shopping to as little time as possible.”
- 25-34, 75-100k, Suburban, 0 kids
“The prices are going up and I am not able to buy everything in one store. I would prefer shopping only at one store instead of two stores. I would rather buy from local farmers and not have my food shipped from a different country. That’s why I shop at grocery stores where everything in there is mostly from local farmers and butchers. I would rather help out the small businesses instead of the big corporations. They make enough money”
- 45-54, 25-50k, Suburban, 1 kid
SECTION 5
What Can Retailers Do?
All retailers should align their organization to optimize performance amid the backdrop of values-based consumption. 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, does shopper 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’re choosing to focus on our 1st and 2nd quartile retailers from the overall RPI ranking ref, as well as other household names in grocery.
These 10 retailers have succeeded in convincing Customers they care not only about sustainability but also about their employees. Should major environmental shifts be accelerated by global events, which we can expect, values-based consumption may occupy a bigger place in Customers’ hearts and wallets. Amazon, H-E-B, Trader Joe’s, Costco and Wegman’s will already be positioned to succeed in this area.
Over the next 30 years, all retailers can benefit from some or all of the following actions:
Visionary structural moves
1. Launch the first sustainable-packaging-only local-only organic-only coop.
See our Affordable health & wellness section.
2. Launch your own Grocery education academy.
It’s not only an opportunity to attracting younger Customers who care about your employees, but also a chance to give back to your communities and allow employees to access education perhaps not available to them via traditional channels. We have heard of some big names like Amazon and Walmart paying their employees’ full tuition. Whether it is at a big or even smaller scale, investing in your employees’ education can be strategic for attracting and retaining great employees. Maybe it’s about giving them access to online courses via existing platforms, or your very own suite of courses. Maybe it’s about employees trying other roles on a rotation basis for a few months. Maybe it’s even letting instore employees shadow colleagues and vice versa. Whatever you do, say it loud and proud in your communities. This is an initiative you will feel good about.
3. Pick a cause that matters to Customers and start your own foundation.
Pick a cause that matters to Customers and start your own foundation. Racism. Gender Equality. Poverty. Healthcare. LGBTQ. Find out which causes matters most to your future Customers (those aged 44 and below) and launch your own foundation. For example, the Walmart Foundation supports women-led farmers but that might look completely different for you. Food waste is another cause linked to Grocery – it accounts for $400 Billion in the US each year and some not-for-profits specialize in what they call food rescue. Think about “Flashfood,” which helps major retailers divert food from landfills and helps save up to 50% on groceries at the same time ref. Whatever cause you choose, make sure you survey Customers and understand what matters most to them and whatever you pick, let your Customers know about it and let them get involved.
4. Be the first retailer to go fully sustainable.
Make that an integral part of your ESG strategy. One out of every two Customers choose stores committed to environmental sustainability. Go fully electric with your fleet, install solar panels on all roofs of your buildings, invest your profits in wind farms, set up hydroponic farms on your roofs. Maybe launch a format with no packaging at all, only bulk. Remember, you are a significant part of the community where you operate. Whatever ESG strategy you choose, you have the potential of significantly transforming communities around stores, not just the stores themselves. Help others reach their sustainability objectives by transforming everyone’s energy usage in the community.
Good consistent hygiene moves
- To attract GenZ and generations that follow, get involved in causes that matter to post-millennials.
- Showcase activist and sustainable/organic brands and packaging that make a difference.
- Invest in your employees, whatever that looks like. Take BJ’s. They provide employees with affordable mental health & wellness services, education, and caregiver support via LifeSpeak’s holistic on-demand platform ref. Remember from our Affordable health & wellness section, mental health particularly appeals to younger Customers
- Develop and communicate a widespread ESG strategy if you have not yet done so.
- Turn your staff into ambassadors when making changes to ESG.
- Include older segments in the conversation so as not to alienate them.
- Invest in continuous education for your employees -- to avoid skills and demand mismatch -- and promote your investments in education to existing and future employees as part of a great retention and talent acquisition strategy. This will not only increase employee satisfaction, but also appeal to younger Customers who care about the welfare of employees.
