Millennials: Harnessing the Buying Power of the Next Generation
Debby Cannon, Ph.D., CHE
July/August 2010
The National Restaurant Association designated in their “What’s Hot: Top 20 Trends in2010” that locally grown produce was the “No. 1 Trend” for foodservice opera- tions, followed by locally sourced meats and seafood (#2), locally produced wine and beer (#5), farm/estate-branded ingredi- ents (#8), sustainable seafood (#10) and organic produce (#12).
There’s no doubt that local, organic and sustainable dining is hot, but understanding what is considered “healthy cuisine” is not a simple matter. Comprehending consumer preferences for healthy food is even more puzzling. With 65% of American adults overweight, one might assume the market for healthy food is limited. However, we know from the trends charted that the de- mand is actually increasing. Evidence of this can be seen in all segments of foodservice from quick service to fine dining.
Research has shown that the primary consumers of organic food are women ages 30 to 45 who have children in the household and who are environmentally conscious. Interest in organic foods also seems to be growing among younger individuals — particularly college students.
As part of the millennial generation (those in the 16-29 age range), college students and others in the “younger than 30 set” are of great interest to most industries. With more than 70 million in this gen- eration, they already compose 50% of the workforce and, in time, will grow in pres- ence with the eventual retirement of baby boomers. These millennials, with their strong buying power, are already making an impact on the hospitality industry. This can be seen in the “lifestyle hotels” of Hotel INDIGO, aloft and N YLO, all the way to McDonald’s decision to incorporate an am- biance of Starbucks into their restaurants.
But what are the food preferences of millennials? While locally produced preferences have not received research attention yet, consumer preferences for organically grown items have been the focus of several academic studies that have centered primarily on college students.
One study (Dahm, Samonte and Shows, 2009) of 443 students in a midsized south- ern university found that positive attitudes toward environmentally friendly practices were linked to positive attitudes toward organic foods. Students who were more oriented to sustainable practices overall were more likely to purchase and consume organic products. Other research, however (such as the study by Magnusson et al., 2001), found taste to be a top factor in the purchase of organic food regardless of philosophical ties to sustainability.
Colleges have recognized students’ increasing interest in healthier foods. According to Dahm and her team of re- searchers, the University of Wisconsin at Madison was the first major American public university to consistently put foods grown on local farms on the regular menu. Over the last 10 years, the introduction of organic food options on college campuses has grown exponentially. According to the national farm-to-college program manager of the Community Food Security Coalition, based in Los Angeles, about 200 campuses around the country buy at least some food from local farmers.
What does this mean for the restaurant industry as it addresses the buying power of more than 76 million millennials? Eating habits cultivated during college, particularly supported by campus dining operations offering organic, local and other healthy food options, can and probably will transcend beyond college.
Another research finding relevant to the restaurant industry is the perception of where to find healthy food items. In one college-based study, a strong majority of students (79%) indicated organic and locally grown foods were available in grocery stores and health food stores. Slightly less than 10% (9.7%) indicated organic products were available in restaurants. These findings indicate an opportunity for restaurants, through targeted external marketing and internal selling (servers aware of items that are locally grown and produced, increased visibility on menus) to reach this sizable market segment.
Georgia State’s School of Hospitality also conducted research on students this past spring with findings relevant to the restaurant industry. A survey of 364 students targeted their eating habits and price points for the three day parts: breakfast, lunch and dinner.
The study separated students who were commuters (did not live on campus) and those who lived in campus dorms, but the overall results were consistent for both groups. Of the commuter students, 45% indicated they would be willing to spend up to 50 cents more per meal for organic food with 30% indicating they would spend up to $1.00 more per meal. Ten percent of the commuter students indicated a threshold of $2.00 in their willingness to extend their consumer dollars for organic items. Students living on campus were more supportive of spending up to $.50 more per meal (71%) with lower percentages going up by $1.00 (20%) and $1.50 (9%) per meal.
The basic conclusion of this study was that a significant proportion of students will support their preference for organic items and even spend more — up to a point.
Millennial buying patterns, particularly focused on food and beverage preferences, will be an area for rich and relevant exploration for now and the future.
Debby Cannon, Ph.D., CHE, is Director of the Cecil B. Day School of Hospitality, located in the highly ranked Robinson College of Business at Georgia State University.
The school offers three different programs: A B.B.A. degree with a major in hospitality; a cer- tificate program (a post-baccalaureate program) in hospitality operations, event planning and meeting planning; and an M.B.A. degree with a concentration on hotel real estate. Visit the School of Hospitality’s website at www.robinson.gsu.edu/ hospitality, or call (404) 413-7615
