A Blog by Jonathan Low

 

Nov 4, 2015

The Disappearing Middle Class and Other Seismic Threats to American Mega Brands

 The big consumer mega-brands grew up with television from the 1950s to the 1980s. The number of channels through which scalable messages could be received - and delivered - were few. Customers were content with what, in retrospect, was a limited number of offerings. Sales and profits followed.

But technological disruption and globalization have changed the factors driving purchase behavior. Instead of mega-brands and TV, consumers and marketers must adapt to multiple channels and platforms, as well as the plethora of products and services tailored to segmented and, increasingly, individual tastes.

Some of the same forces that shaped those changes has also led to stagnation of household incomes in developed countries, the customers traditionally willing and able to pay a premium for a branded product.

The result is that brands, especially global mega-brands, are finding that their customer base is shifting and becoming more fragmented as are the sources of their financial and economic growth. The challenge is now survival and the question is who will adapt with sufficient speed and effectiveness to survive. JL

Kate Taylor and Hayley Petersen report in Business Insider:

The share of households in the middle tier of income earners has fallen to 43% from 55% since the 1970s. The pace of change is accelerating as consumers evolve their preferences and pressure is placed on the industry to operate differently. Even Walmart, known for its cheap prices, is tailoring its strategy to the expectation that growth will come from upper-income households in the years ahead.
In 2015, the American family means something completely different than in previous generations.
For brands, this means making some major changes.
Campbell Soup Co. CEO Denise Morrison revealed in a Fortune article that there are four major shifts that fuel her biggest concern as a business leader: evolving the company quickly enough to keep up with a rapidly changing culture.
These four accelerating seismic shifts profoundly affect how consumers engage with food, according to Morrison.
Here are the four major changes, and how some of the biggest players are attempting to keep up with a rapidly shifting society.

1. A new American family

In January, Campbell's Consumer and Customer Insights Department released some research on what it called the "new American family."
Some revelations about this new family: The majority of households are adult-only, the average family size is shrinking, and traditional gender roles are on the decline.
In October, Campbell launched an advertising campaign called "Made for Real, Real Life," showcasing nonidealized meals consumed by "families of different configurations, culture, faces and life choices," including same-sex parents and a childless couple glued to their smartphones.
The definition of "all-American" has to change in marketing and products.
TLC

2. Growing health awareness

A new awareness of nutrition and desire for transparency has affected food companies across the industry in 2015, as Taco Bell promised to cut artificial flavoring, Chipotle went GMO-free, and McDonald's and Starbucks changed its pumpkin spice latte recipes to contain actual pumpkin.
With greater access to dietary and health information, customers care about having healthy options.
silviastorti/flickr

3. An evolving digital landscape

In prior decades, companies could communicate with customers through a limited number of networks: print ads, television commercials, face-to-face contact.
Now, each company has a seemingly endless list of social networks to choose from. Few brands would forsake Facebook or Twitter, and more companies are turning to newer social-media networks.
Taco Bell, for example, now reveals new menu offerings on Snapchat and Periscope. With new ways to connect with customers, it is essential that brands stay plugged in to the swiftly changing digital world.

4. A new global economic reality

Companies need to come to term with the fact that the middle class is shrinking in developed markets like the US.
This puts consumer giants like McDonald's and Walmart in a tough spot because they have to appeal to consumers seeking pricey organic food and those who want the Dollar Menu.
McDonald's has adapted by offering some high-end items, like its buttermilk chicken sandwich and "create your taste" gourmet burgers. It has also ramped up promotions on its classic burgers, fries, and McNuggets.

Walmart is opening Neighborhood Markets, Whole Foods-esque purveyors of organic food, while also stocking its Supercenters with dollar-store staples such as single rolls of toilet paper.

The Hershey Company reported flat sales for the most recent quarter and cut its profit outlook for the year.
Company executives blamed the disappointing results in part on the changing income landscape in the US.
"We think that consumer bifurcation has been an important driver," Hershey CEO John Bilbrey said on an earnings call, referring to the growing gap between upper-income and lower-income consumers.
Upper-income consumers are buying more premium treats, while lower-income individuals are purchasing discounted chocolates, he said. Hershey's has been losing market share, as a result.
"While overall consumer confidence is trending up, lower income consumers continue to be fragile as income and wage growth has been minimal," he said. "Higher income and more confident consumers are driving premium growth, while cost-conscious consumers are driving the value segment."
Hershey's is hoping that its acquisition of the Canadian company Allan Candy will help it compete for lower-income consumers, Bilbrey said. The company is also ramping up its premium offerings.

Campbell Soup CEO Morrison also recently identified "a shrinking middle class in developed markets" as one of four "seismic" shifts that are impacting her company.
"The pace of change is accelerating as consumers endlessly evolve their preferences and unceasing pressure is placed on the industry to operate differently," she wrote in Fortune.
Even Walmart, which is known for its cheap prices, is tailoring its business strategy to the expectation that growth will come from upper-income households in the years ahead.
"The nature of e-commerce, the nature of the Neighborhood Markets and other things we’re doing do create an opportunity for us to be even more relevant to customers that are at the higher end of the scale," Walmart CEO Doug McMillon said at an investor meeting this month, according to Fortune.
The share of households in the middle tier of income earners has fallen to 43% from 55% since the 1970s, according to The New York Times.
And those households in the middle tier haven't gotten a raise since 1999.
After adjusting for inflation, US median household income, at $53,657 in 2014, is still 6.5% lower than pre-recession levels in 2007, and 7.2% lower than its peak in 1999, according to the US Census Bureau.

10 comments:

yhumirue said...

Such a very useful article. Very interesting to read this article.I would like to thank you for the efforts you had made for writing this awesome article. 스포츠토토

yhumirue said...

카지노사이트 I am mainly passionate about your outstanding achieve

yhumirue said...

온라인카지노 I have visited your website ever since and it didn’t fail me.

메이저사이트모음 said...

Many thanks for the article, I have a lot of spray lining knowledge but always learn something new. Keep up the good work and thank you again. 메이저사이트모음

안전놀이터 said...

You make so many great points here that I read your article a couple of times. Your views are in accordance with my own for the most part. This is great content for your readers. 안전놀이터


keonhacai said...

Hello, I'm happy to see some great articles on your site. Would you like to come to my site later? My site also has posts, comments and communities similar to yours. Please visit and take a look keonhacai


Champions League said...

Pretty good post. I just stumbled upon your blog and wanted to say that I have really enjoyed reading your blog posts. Any way I’ll be subscribing to your feed and I hope you post again soon. 온라인카지노사이트

Champions League said...

That is really fascinating, 카지노사이트홈 You're a very skilled blogger.
I've joined your rss feed and stay up for in search
of more of your excellent post. Additionally, I've shared your site
in my social networks

Champions League said...

I appreciate, cause I found exactly what I was looking for. You’ve ended my 4 day long hunt! God Bless you man. Have a nice day. 프로토

Champions League said...

I feel this is among the most vital info for me. And i am happy reading your article. But want to remark on few general things, The web site taste is perfect, the articles is in point of fact great : D. Excellent task, cheers 스포츠토토티비

Post a Comment