Consumer products companies are facing a variety of challenges and opportunities resulting from a massive and rapid shift in consumer demographics. What are some of these shifts and what do CP companies need to do to capitalize on them to drive long-term profitable growth? Let’s take a close look.
Urbanization
First, “Urbanization” is a significant global trend. People are increasingly moving to cities. By 2025 it’s estimated that 60% of the world’s population will live in cities and there will be 35 global mega-cities with populations of 10 million or more, up from 20 at the end of 2012. And, 55% of these mega-cities will be in the developing world.
More people living in cities means better access to resources, infrastructure and health care, which influences the next manifestation of the trend – life expectancy.
Growing life expectancy
All around the world, people are living longer. In 1955 average global life expectancy was 43 years. By 2025 it will rise to 73 years. 26 countries will have an average life expectancy at birth of 80 years or more, and no country on earth will have a life expectancy of less than 50 years.
This longevity relates directly to healthier living. More people living in cities along with, the next manifestation of the trend – rising global affluence – means better access to infrastructure and quality health care leading to a corresponding decline in infectious disease.
Growing affluence
In addition to living longer and healthier consumers are, by and large, becoming richer. By 2025 the global middle class will have grown to an estimated 2 billion people with an aggregate consumption power of 10 Trillion Euros annually.
And, on top of that, there will be 5 billion more consumers who are not yet considered middle class but who are considered upwardly mobile that will command an additional 4 Trillion Euros in aggregate spending power.
Together, this dramatic increase in relative global affluence points to significant opportunities to serve different needs and preferences of emerging classes of new global consumers, leading to the final manifestation of the trend.
People are living differently
Longer life expectancy, better access to resources and health care, growing global affluence means that people are changing their lifestyles. For example, rising affluence and better access to health care are leading to increases in birth rates in emerging markets. Simultaneously, consumers in mature markets are increasingly focusing on new options such as career development and education rather than marriage and childbirth leading to declining birth rates.
There are many ways this plays out for consumers but, just taking the examples above, this means a growing number of multi-person households in emerging markets, and a corresponding rise in single households in mature markets, and especially growing numbers of single households among the aging population.
What it means for the consumer products industry
Taken together, these demographic shifts are influencing significant implications for consumer products companies.
First, consumer values are changing as consumers are becoming more affluent, getting better access to health care and living longer driving interest and awareness in health, wellness, safety, sustainability and more.
At the same time, channels are evolving. As more and more people live together in larger and larger urban environments “local” brands tailored to micro markets are increasingly trusted by consumers while consumers are exploring maturing retail channels alongside emerging direct-to-consumer channels.
Growing global affluence also means that new consumer segments are emerging, creating net new opportunities for consumer products companies to create new go-to-market strategies to drive new growth.
And, finally, preferences are shifting. Consumers are placing a greater emphasis on accessibility, convenience and experience and, as a result, considering quality as a greater determination of value than just price.
With these challenges in mind, consumer products companies are pursuing a variety of initiatives to address them including:
‘Glocalization’, or delivering brands and brand standards on a global basis but in a way that’s tailored to the needs and preferences of local markets
Differentiation through packaging, marketing and selling similar products differently to differing consumer strata
Diversification into new and alternative influence and sales channels while also improving service and collaboration with established retail partners
And, finally, combination, or the blending of product categories to create new and innovative new products such as nutraceuticals which combine nutrition and pharmaceutical products.
As significant as some of these changes are, all of these initiatives represent net new opportunities for CP companies to capitalize on shifting consumer demographics to identify new markets, accelerate innovation processes, and reach new consumers to help drive long-term profitable growth.