Marketing To Gen y

Generation Y: Marketing to the Young Ones (18-26s)
Euromonitor International : Strategy Briefing September 2007
Strategy Briefings
World
List of Contents and Tables

Executive Summary ................................................................................................................................................ 1 Drivers....................................................................................................................................................................... 1 Summary 1 Characteristics of Generation Y ......................................................................................... 2 Demographic Trends................................................................................................................................................. 2 Chart 1 Leading Countries by Number of People Aged 18-26, and % Growth 20012006 ................................................................................................................................... 3 Impact on Consumer Markets.................................................................................................................................... 4 Chart 2 Global Sales of Selected Products and Services 2001/2006............................................... 5 Outlook...................................................................................................................................................................... 5 Summary 2 Opportunities and Challenges of Marketing to Generation Y ............................................ 6 Introduction ............................................................................................................................................................. 8 Definitions ................................................................................................................................................................. 8 Profile of Generation Y ............................................................................................................................................. 8 Drivers.................................................................................................................................................................... 11 Later Families ......................................................................................................................................................... 11 Table 1 Average Age of First Time Mothers 2001-2006 .............................................................. 12 Higher Education .................................................................................................................................................... 12 Table 2 % Population Aged 20-24 Continuing in Education 2001-2006 ...................................... 13 Generation Y at Work.............................................................................................................................................. 14 Spending Power....................................................................................................................................................... 14 Table 3 Average Gross Income by Age Group in Selected Markets 2006.................................... 16 Table 4 Growth in Gross Income by Age Group in Selected Markets 2001/2006 ........................ 17 Technology and Communications............................................................................................................................ 19 Table 5 Number of Mobile Phone Users by Country 2001-2006.................................................. 21 Chart 3 Mobile Phone Music Listeners 2005................................................................................ 22 the Social Networking Phenomenon........................................................................................................................ 22 Table 6 Number of Visitors to Social Networking Sites in the US, March 2006.......................... 23 the Changing Role of Men....................................................................................................................................... 24 Attitudes To Finance ............................................................................................................................................... 25 Travel ...................................................................................................................................................................... 26 Eating/drinking Habits ............................................................................................................................................ 27 Ethical Awareness ................................................................................................................................................... 29 Chart 4 Top Ten Issues Affecting American Youth 2006............................................................. 29 Demographics ........................................................................................................................................................ 29 Regional Trends ...................................................................................................................................................... 29 Chart 5 18-26s Population by Region 2006 .................................................................................. 30 Chart 6 % Growth in the 18-26s Population by Region 2001/2006.............................................. 30 Country Trends........................................................................................................................................................ 31 Table 7 Number of 18-26s by Country 2001/2006 ....................................................................... 31 Table 8 Proportion of 18-26s by Country 2001-2006 ................................................................... 32 Impact on Consumer Markets.............................................................................................................................. 33 Cosmetics and Toiletries ......................................................................................................................................... 33 Table 9 Global Sales in Selected Cosmetics and Toiletries Sectors 2001-2006............................ 36 Consumer Foodservice............................................................................................................................................ 37 Table 10 Global Sales of Selected Consumer Foodservice 2001-2006........................................... 39 Alcoholic Drinks...................................................................................................................................................... 39 Table 11 Global Sales of Selected Alcoholic Drinks 2001-2006 .................................................... 41
Euromonitor International
Page
Strategy Briefings
World
Marketing To Generation Y ................................................................................................................................. 42 Understanding the Market....................................................................................................................................... 42 Branding.................................................................................................................................................................. 42 Summary 3 US: Most Trusted Brands Among Generation Y Consumers 2007.................................. 43 Summary 4 UK: Preferred Brands Among Generation Y Consumers 2005........................................ 43 Advertising .............................................................................................................................................................. 44 Shifts in Major Markets........................................................................................................................................ 45 China....................................................................................................................................................................... 45 China: 18-26s Population Trends 2001-2006................................................................... 45 Table 12 Table 13 China: Sales of Selected Products and Services 2001/2006............................................. 47 France ..................................................................................................................................................................... 48 Table 14 France: 18-26s Population Trends 2001-2006 ................................................................. 48 Table 15 France: Sales and Growth of Selected Products 2001/2006............................................. 50 Germany.................................................................................................................................................................. 50 Table 16 Germany: 18-26s Population Trends 2001-2006 ............................................................. 50 Table 17 Germany: Sales and Growth of Selected Products 2001/2006 ......................................... 52 Italy ......................................................................................................................................................................... 52 Table 18 Italy: 18-26s Population Trends 2001-2006 ..................................................................... 52 Table 19 Italy: Sales and Growth of Selected Products 2001/2006 ................................................ 54 Japan ....................................................................................................................................................................... 55 Table 20 Japan: 18-26s Population Trends 2001-2006 ................................................................... 55 Table 21 Japan: Sales and Growth of Selected Products 2001/2006............................................... 56 UK ........................................................................................................................................................................... 57 Table 22 UK: 18-26s Population Trends 2001-2006 ...................................................................... 57 Chart 7 Average % of Weekday Leisure Time Spent 2005 .......................................................... 58 Table 23 UK: Sales and Growth of Selected Products 2001/2006 .................................................. 60 US............................................................................................................................................................................ 61 Table 24 US: 18-26s Population Trends 2001-2006 ....................................................................... 61 Table 25 US: Sales and Growth of Selected Products 2001/2006................................................... 63 Future Trends ........................................................................................................................................................ 63 Trends To Watch ..................................................................................................................................................... 63 Chart 8 Forecast Countries by Number of 18-26s 2011................................................................ 65 Chart 9 Forecast Countries by Proportion of 18-26s 2011............................................................ 66 Forecast Sector Trends............................................................................................................................................ 67 Table 26 Forecast Global Sales in Selected Sectors 2006-2011...................................................... 68
Page
ii
Strategy Briefings
World
GENERATION Y: MARKETING TO THE YOUNG ONES (18-26S)

EXECUTIVE SUMMARY
Drivers
Generation Y (currently aged 18-26) are typically the children of affluent baby boomers, the large cohort born immediately following World War II. Now entering their student years or embarking on a professional career, this generation encompasses a diverse range of young people. Generation Y are unified by the fact that many of them are still single, very technology-driven, fashionconscious, status-aware, keen to spend and not afraid of credit. Often indulged as children by their baby boomer parents, with lives that were programmed and overmanaged from an early age, Generation Yers have high expectations of themselves and others. They are often considered to be less rebellious, but also less subservient, than previous generations. As young people delay marriage and childbirth in order to pursue higher education and a career or simply to live life to the full they are often staying longer in the family home. This gives them a higher level of discretionary spend than previous generations had at this age. An increasing number of young people are choosing to go into tertiary education, and student numbers have reached unprecedented levels in many countries. Exceptions include the UK, where many young people are deterred from going to university by the high costs of student fees and living expenses. The labour force participation rate of people in this age group is higher in developing countries, where young people tend to marry earlier. Nevertheless, the trend of young adults pursuing tertiary education is on the rise in many of these countries. Generation Y are also the most diverse generation ever, in terms of ethnicity, tolerance and sense of community. This makes it more difficult for marketers to target specific cultures or ethnic backgrounds, but easier to create global brands. In developed countries, "yuppies" (young, upwardly mobile professionals) are becoming "yeppies" (young experimenting perfection seekers), who are perceived as being less materialistic and more cerebral than before, seeking happiness through perfection. In developing countries, Gen Y is in the vanguard of the new middle class. Where consumer confidence is high, such as in China, young adults will spend all they earn on luxury goods in order to appear successful and not lose face, even if this means running up debts. Generation Y are highly adept at using new technology, having grown up with computers at home, multichannel TVs, mobile phones, and, more recently, music downloads and instant messaging. They live life in the fast lane and are used to multi-tasking. Along with teenagers, this generation are keen to communicate with peers via social networking sites such as MySpace, Facebook and Korean site Cyworld. These allow them to make friends (and feed their egos) by posting their profiles and sharing messages. Gen Yers have a strong interest in music and on-line gaming, and are the main drivers of digital downloading and the growth of MP3 players. Community music sites, such as Habbo, are an interesting trend, with music increasingly downloaded straight to mobile phones. Gender differences are less pronounced among the younger generation, with men becoming more interested in shopping, fashion, fitness and personal grooming, and women interested in sport, adventure and pursuing a professional career. Many young people take time out of their education or careers to travel the world. This is leading to increased globalisation, as well as demand in the East for products that are westernised, and in the West for ethnic and international products.
Page
Strategy Briefings
World
Generation Y are significant users of e-travel, making their travel bookings and enquiries on-line, using budget airlines and making use of consumer-generated sites, such as TripAdvisor. The gradual break-up of traditional meal structures means that for Generation Y, snacking, ready meals and eating out have become the norm. This demographic represents one of the core target markets for fast food operators. The importance of their social life also makes Generation Y a significant market for pubs, bars, coffee shops and manufacturers of alcoholic drinks. However, this is a fickle consumer base, where brands can frequently go in and out of fashion. A strong sense of social responsibility means that Gen Y consumers often seek products that are both environmentally-friendly and ethical, and look for transparency and fair trading in a company. However, as far as possible this must not come at the expense of convenience, which is all-important to this generation.
Characteristics of Generation Y What this means Defined by the digital revolution; in constant communication with friends through e-mail, textmessaging etc; good at multitasking Dedicate a good deal of leisure time to texting, on-line chatting and sites such as MySpace and YouTube Both indulged and over-managed by their boomer parents, they have high expectations of themselves and others High spending and confident in the future; interested in brands, status, money, lifestyle Influence Generation X and boomers in technology, fashion and what is cool; into celebrity status and popular culture Demand transparency and straight talking Prefer brands that are both environmentally friendly and do not involve the exploitation of workers in poor countries Mistrustful of traditional advertising methods; more open to viral marketing campaigns Fond of blogs and consumer-generated websites, such as TripAdvisor Not afraid to take out loans and buy on credit Primary career objective money and the good life; like working in teams, changing jobs frequently Reject parents' lifestyles but accept parents' values Accepting of gay marriage, interracial relationships, marijuana use; non-judgmental about personal lives Political apathy little interest in war, politics or history; prime target audience for reality TV and celebrity magazines
Summary 1 Characteristics
Technology adopters
Online community dwellers/peer to peerers Egocentric
Hedonistic spenders Fashion influencers
Media mistrusters/spin detectors Civic-minded/socially conscious
Mass-advertising rejecters Word of mouthers Debt incurrers Work/life balancers Obedient, but not subservient Tolerant Apathetic and sometimes frivolous
Source:
Demographic Trends
Generation Y represent a large cohort, due to the fact that these are the offspring of the baby boomers. However, this generation is generally much smaller than that of the baby boomers, as the 1980s and 1990s were a period of rapidly falling birth rates.
Page
Strategy Briefings
World
In Southern Europe and Japan, and less markedly in Northern and Eastern Europe, Generation Y is smaller than any of its predecessors, and its childhood years tended to be marked by small families, small classes at school and school closures. On a global level, the 18-26 years age group represented 15.1% of the total population in 2006, a percentage which remained broadly stable over the 2001-2006 review period. Although Asia-Pacific held by far the greatest number of Generation Ys in 2006 (56%), in terms of marketing worth the greatest potential for marketers of products and services aimed at this generation remains in more developed regions. The greatest Generation Y population growth over the 2001-2006 period occurred in Africa and the Middle East, where the number of 18-26 year-olds increased by 16%, thanks to the region's young populations. All other regions experienced growth in the Generation Y population between 2001 and 2006, with the notable exception of Western Europe, where their numbers fell by 1%. However, their spending power in this developed region is relatively high. In absolute terms, due to their vast overall populations, India and China have the largest number of 18-26 year-olds, at 186.6 million and 160.5 million, respectively, in 2006. While the number of Generation Ys in India grew by 9% over the 2001-2006 period, in China the number fell by 6%. This is primarily the result of China's one-child policy, brought in to control population growth some 30 years ago. Although Russia's population growth and birth rates are very low, the number of Generation Ys grew by almost 10% between 2001 and 2006. The Soviet Union experienced a baby boom echo in the 1980s that was similar to that in the US, and Generation Y there is relatively large. Growth in the Generation Y population was also notably strong in the UK, compared to other Western European countries, at 12% over the review period. Generation Y accounted for as much as 19% of South Africa's population in 2006, largely due to the very low life expectancy (the average age of the South African population is only 15, compared to a European average of 30).
Leading Countries by Number of People Aged 18-26, and % Growth 2001-2006
Chart 1
Source: Note:
Euromonitor International Bubble size = total number of population aged 18-26
Page
Strategy Briefings
World
Impact on Consumer Markets

Generation Yers are concerned about looking and feeling good, and therefore represent a significant target market for manufacturers of cosmetics and toiletries notably in sectors such as hair care products, men's toiletries and fragrances. Colour cosmetics brands such as Cover Girl and Maybelline are renowned for their positioning in the mass youth market. Prestige companies are also entering the youth arena, including Este Lauder's jane, LVMH's Urban Decay and Bliss, and Wella's Tony & Tina. Direct sellers also turned their attention to the teens and 20-somethings audience over the review period, such as Avon with its Mark brand, and Mary Kay with Velocity. With the "mod-look" of dramatic, smoky eyes and nude lips being the prevailing trend among young women in Western markets, mascara has become a key source of innovation, with thicker formulations and dual-application products leading the way. Other key trends included increased segmentation, for example ethnic-specific brands, such as Procter & Gamble's CoverGirl Queen Collection; and convenience, such as BeneFit's Pocket Pal gloss to go, foundations with built-in brushes and Avon's instant manicure nail strips. Men's toiletries grew rapidly over the review period, with global sales up by almost 61% in value terms. This can be largely attributed to a change of attitudes, whereby metrosexuality has become the lifestyle of choice for many young men. Besides the large cosmetics companies entering the men's market, a number of specialised start-ups have emerged in recent years, such as NFG Stuff, or Not for Girls, which currently manufactures hair care products for US teens. In order to create a powerful image for brands targeting the more sophisticated metrosexual, the major companies are using male style icons as spokesmen, such as TV grooming guru Kyan Douglas (L'Oral) and footballer David Beckham (Gillette). Mass fragrances experienced strong growth of 53% between 2001 and 2006, driven by the launch of celebrity brands. However, designer fragrances are the latest thing, including Ralph Lauren's Ralph Hot, Yves Saint Laurent's Young Sexy Baby and Calvin Klein's newly launched cK in2u. Young adult males are regarded in consumer foodservice industry circles as heavy users of fast food. In the US, this demographic is known to spend up to US$40 per day on fast food, and to consume fast food more than 20 times per month. Fast food outlets are increasingly competing with coffee chains, such as Starbucks, for Generation Y spending. To encourage young people to linger, Burger King has created more comfortable outlets, with plasma TV screens, couches and coffee tables. In a bid to appeal to young, ethical consumers, McDonald's has rolled out sustainable, rainforest-friendly coffee in Western Europe. Targeting young Internet users, viral marketing campaigns have also been initiated by several leading fast food companies, with websites such as myspace.com and youtube.com proving useful avenues for companies attempting to up their "cool" quotient. Starbucks has maintained its lead over other coffee shop chains and continued to capture the interest of Generation Y consumers by developing premium new products, and recently introducing both wireless Internet access and an in-store music delivery service in North America. Specialist coffee shops are enjoying dynamic growth in emerging regions, such as Eastern Europe and AsiaPacific, thanks partly to the expansion of Starbucks, but also due to growth of local chains such as Poland's Coffeeheaven. In developed beer markets, companies are struggling to maintain the interest of the younger generation, which is exhibiting a growing preference for more fashionable drinks, such as wine, spirits and RTDs (ready-to-drink alcoholic beverages). Beer companies have responded by turning their attention to other formats, such as functional or energy beers (in the US), fruit flavoured beer and "extra cold" formats.
Page
Strategy Briefings
World
The dramatic growth of RTDs during the review period was fuelled by younger consumers' demand for sweet, easy-to-drink products offering distinctive, novel flavours, suited to consumption in fashionable bars and clubs. However, RTD sales slowed significantly from 2005, partly as a result of the sector's increasing maturity, but also due to governments' efforts to increase taxation on such products (eg, in France, the UK and Germany), in order to curb excessive consumption by younger consumers. Spirits manufacturers are focusing increasingly on the younger generation, who are motivated largely by fashion- and brand-consciousness. This encourages highly visible consumption in bars, nightclubs and restaurants. New product development in spirits has focused on the introduction of flavoured variants in an attempt to continue to revitalise brand images and to appeal to the thirst for novelty amongst younger consumers. Super-premium products are also designed for highly fashion-conscious younger consumers. In the US, these include brands such as Hpnotiq and Envy NV Liqueur, which have avoided mainstream advertising and developed a presence on city club scenes. The growing popularity of cocktails has played an important role in attracting younger consumers to spirits, such as vodka combined with the energy drink Red Bull.
Global Sales of Selected Products and Services 2001/2006
Chart 2 US$ million
Source:
Outlook
Several trends are likely to emerge in the future that will enhance Generation Y's purchasing power and spending behaviour, making this demographic an attractive target for a range of manufacturers and service providers. Many of today's 18 year-olds are about to embark on their student life, but generally with higher incomes than those that went before them, as strong economic conditions are allowing parents to fund their children's studies and provide them with more spending money. Furthermore, favourable student loans in many markets, along with the increased availability of credit facilities, will allow students to travel more and enjoy a lifestyle previously unheard of.
Page
Strategy Briefings
World
There may be exceptions in countries such as Germany where the recent introduction of higher tuition fees may mean that students are less well off, or may be deterred from entering into further education altogether. As their level of wealth rises, students will be the launching platform for smart marketers looking to generate life-long relationships with young, "high value" consumers. Generation Yers at the upper end of the age spectrum will be entering their peak wage-earning years, and will be able to afford more luxury goods associated with family life, such as larger cars, more expensive holidays and multimedia home entertainment systems. In developing countries with rapid economic growth, such as China, India and Vietnam, young adults with higher disposable incomes will present a vast consumer base for international products. Young adults will remain key influencers of the purchasing of other demographic groupings, possessing the "techno savvy" and the style which enables them to be successful advocates of new technology to older generations with greater spending power. The favoured sectors for the future in terms of young adult spending are likely to remain music, technology and fashion, with specific interest in communications, entertainment, music, DVDs, games and clubbing. It is impossible to predict where fashion will go in the next 10 years, but the desire to be cool is perennial. For fashion, peer pressure and the media will stay the main influence on young consumers. Telecommunications, and particularly mobile phone growth, have profoundly changed the mindsets and lifestyles of young adults and re-prioritised spending patterns. Viral marketing, or the "word on the street", will remain an effective channel for marketers. Global and country-specific social networking sites will remain an important aspect of young people's lives in the future, and this will provide an ideal way for youth-orientated brand owners to target this generation through advertising, deals and promotions. Generation Y are highly aware of environmental issues and the need to look after their health in order to prolong their looks and life expectancies. In the future, this generation will be significant purchasers of all types of healthy foods, and green and ethical products. Generation Y will be the most naturally technology-adept workforce in history, demanding quick responses from systems and colleagues. However, they will also be very insistent on a good work-life balance and will be less inclined to be workaholics than the departing boomers. Despite their high earning potential, young people will be more likely to borrow large sums to finance their studies and housing, and also take out more debts on credit cards to purchase goods and services. Despite a general ageing of the global population, the 18-26 years age group is expected to swell slightly over the forecast period, with its share of the total population predicted to rise from 15.1% in 2006 to 15.3% by 2011. In 2011, 18-26 year-olds will consist largely of today's teenagers, a cohort that is perhaps even more pampered and technology-driven than Generation Y, which has already been dubbed Generation Z. As today's children mature, they are likely to be heavily focused on health, well-being, the environment and technology. They will be even more aware than Generation Y of the need for sustainability and fair trade, having had these issues drummed into them from an early age. Women, who have traditionally driven purchasing decisions in many categories, will continue to make progress in business, politics and other areas of life. As a result, they may have less time for shopping and might be expected to value convenience more highly than in the past. Generations Y and Z will be attracted to stores and brands that market to their lifestyles and not only their age. They will remain suspicious of mega corporations, and will demand more transparency in all areas of their lives.
Opportunities and Challenges of Marketing to Generation Y Challenges This age group is in general declining slightly as a proportion of the total population, due to the rapid
Summary 2 Opportunities
Generation Y represents a large cohort (and therefore a significant target market) in many countries, as they
Page
Strategy Briefings
World
are usually the offspring of baby boomers. Since many Gen Yers are single and still live with their parents, their incomes are largely discretionary and are growing all the time. More young people are choosing to pursue higher education. Many are supported by wealthy parents, or take out cheap loans to enable them to continue to spend as before. Young professionals, including DINKs, represent particularly lucrative segments for marketers, being a lifestyle group with high disposable incomes. Generation Y are the most diverse generation ever, in terms of ethnicity, tolerance and sense of community. This offers opportunities to market a range of ethnic and non gender-specific products. This group creates a high demand for new technology, as Gen Yers are highly adept at using all kinds of digital media and multitasking. In some developing regions, Generation Y was the first generation to benefit from Western modern amenities, as economic growth and market liberalisation produced a new, young urban middle class. Generation Y consumers even in developing markets are no longer afraid of credit and do not allow debt or low incomes to prevent them from spending, or even from buying homes. Generation Y's passion for communicating via the Internet (eg social networking sites such as MySpace) or mobile phone presents immense viral marketing opportunities for companies, provided they have the "right" products and brands. Consumers of this generation are very statusorientated, and even those on low incomes are willing to spend large amounts on brands that they perceive as enhancing their image. Whether students, professionals or non-professionals, Generation Y shares a passion for fashion, music and technology such as mobile phones, MP3 players and computer games etc.
ageing of societies. Many Gen Yers are still students, or have not yet reached their full income potential, so their incomes are generally lower than those of Gen Xers or baby boomers. In some countries (eg the UK and Germany), the introduction of high tuition fees is eating into students' income and reducing their discretionary spend. Brought up in an age of prosperity and often by doting parents, Generation Yers are demanding consumers, with high expectations of themselves and others. Young people are fickle consumers, with a low level of brand loyalty. They will turn quickly to the "next big thing" as brands and products go in and out of fashion. Their need for speed makes this generation impatient if a web-page takes more than a few seconds to download they will click away from it. The gap between the rich and poor is especially noticeable among the members of Generation Y, and it is important to realise that most young people in countries such as China and India still live below the poverty line. Any rise in interest rates will hit this generation hard, which tends not to save, or think much about the future. This generation is mistrustful or contemptuous of traditional advertising methods, such as TV/radio advertisements and print media.
Generation Yers' preference for either high- or lowend products and services means that manufacturers and retailers positioned mid-scale are missing out on opportunities to reach this group of consumers. The music industry is suffering declining sales, due to the propensity of this generation to download music from the Internet, either at a low price or through illegal free downloading. In response to this, merchandising and concerts have become a key source of profits for the music industry. Fear of terrorism and/or personal attacks is deterring some young people from travelling.
Young people are travelling more often taking a break of several months before embarking on tertiary education in order to see the world and gain new experiences. Generation Yers are socially conscious, and therefore present opportunities to companies marketing products and services that are contribute towards sustainability. A desire for individualism creates demand for personalisation, customisation and accessories.
Source: Euromonitor International
It is essential for companies to be transparent when targeting this generation, who are quick to boycott brands they deem as unethical or "uncool". Manufacturers must remain innovative, constantly reinventing brands and marketing strategies to adapt to the changing needs of this consumer group.
Page
Strategy Briefings
World
INTRODUCTION
Definitions
Children of the boomers The term "Generation Y" generally refers to the group of people born immediately after Generation X. The latter consists of a relatively small cohort of people born in the decade or so following the baby boom. Most members of Generation Y are therefore the offspring of the baby boomers, the large cohort born immediately following World War II. In many countries, births fell sharply in the mid-1960s and in the 1970s, as factors such as the Vietnam War (affecting the US), the sexual revolution and the entry of large numbers of women into the workforce contributed to smaller and delayed families. However, although birth rates remained low into the 1980s, the sheer size of the baby boom generation produced a new wave of young people that far exceeded the generation that went before it. There is no official definition for Generation Y in terms of the exact range of birth years that this group covers, with some marketers including children born as recently as 2000. However, for the purposes of this report, and according to Euromonitor International's definitions, Generation Y refers to young adults born between 1981 and 1989, who were aged between 18 and 26 in 2007 (as compared with Generation X, who were born between 1968 and 1980 and are now aged between 27 and 39). For marketing purposes, Generation Y are also sometimes referred to as "Millennials" or "Echo Boomers", although, again, the age definitions for these terms varies between sources, and according to some can include today's teens and tweens. A diverse group, but largely single Generation Y encompasses a diverse range of people, including students at tertiary education level, young professionals embarking on their careers, and people who did not pursue higher education and have been working for several years, some with young families. Perhaps of most importance to marketers both in developed and developing markets are the high-earning graduates and potentially high-earning students that will shape future buying habits. Many members of this generation are still single, due to the fact that many people are delaying marriage and childbirth until their 30s in order to pursue higher education or a career, or simply want to live life to the full before settling down. However, Generation Y also includes young couples, a proportion of whom are setting up homes together and starting families. DINKs double income no kids represent a particularly lucrative segment for marketers, being a lifestyle group with high disposable incomes.
Profile of Generation Y
The digital generation Like baby boomers, Generation Y represents a cohort unlike any other that has gone before it. It could be said that this is the first generation to be defined more by its means of communication than by fashion or music. These young people grew up with computers at home, multi-channel TVs, mobile phones, music downloads and instant messaging. They live life in the fast lane and are used to multi-tasking and all things digital. High expectations Often indulged as children by their baby boomer parents (who were determined to avoid repeating their own harsh upbringings), and brought up in an age of affluence, Generation Y has different attitudes and expectations to previous generations. Their lives have typically been programmed and over-managed from an early age, as parents ferried their children between numerous organised activities, such as sports practice, music, drama or dance lessons. This generation have been given high expectations by their doting parents, and are therefore often deemed to be unprepared for the "real world".
Page
Strategy Briefings
World
As a result of these factors, Generation Y is a generation that has long aimed to please, and in which rules seem to have replaced rebellion. However, obedience in this case should not be mistaken for conventionalism: formal attire is out, and, in the US, a recent survey by Pew Research Center for the People and the Press found that more than a third of 18-25 year-olds have a tattoo, and 30% have a body piercing. This generation often does not recognise authority in the same way as baby boomers or Generation X, which means they may sometimes be perceived as rude and spoilt. Young people tend to react based on what or how they feel when they are approached or spoken to by authority figures, and are therefore less subservient than previous generations. Reluctant to fly the nest Nevertheless, Generation Y seems reluctant to stand on its own two feet. A professor of child psychology at the University of Calgary recently stated that adolescence is now extended into the 30s. One reason for this is that, in most countries, education is postponing embarking upon a career. Another is the expectation of greater longevity. A third factor is young people leaving home later in life. In many developed countries, up to half of all unmarried men and women between the ages of 20 and 34 still live with their parents. In the US, a survey of college graduates from 2000 to 2006 by Experience Inc found that 58% of those polled had moved back home after college and that 32% stayed more than a year. Even among those who had managed to stay away, Pew found that 73% of 18-25 year-olds had received financial assistance from their parents in the past year, and 64% had received help with errands. 73% of Pew's respondents said they saw their parents at least once a week, and half did so daily. In Australia, studies have found that today's 20-somethings are twice as likely to live with their parents as were preceding generations. As a result, this group has been dubbed "kippers" ie "kids in parents' pockets eroding retirement savings". The impact of social change More tolerant Generation Y are also the most diverse generation ever, in terms of ethnicity, tolerance and sense of community. Although ethnic tensions among young people do exist in many areas, recent waves of immigration and developments in race relations mean that Generation Y members are generally accepting of multiculturalism and internationalism. Mixed race relationships in North America and Western Europe are common among this generation. In addition, opinions on gay rights and gender roles are also being adjusted and redefined as each generation emerges into adulthood. At the same time, Generation Y can be more spiritual and religious than their parents. The trend seems to be polarisation either toward or against faiths. The gap between the rich and poor is especially noticeable among the members of Generation Y. While children of wealthy families typically enjoyed a host of extra-curricular activities during their childhood, less affluent families were not able to afford such luxuries. This has partly contributed to the problem of gang-related street crime among some young people, especially in inner city areas. In Eastern Europe, Generation Y is the first generation without clear memories of communism or dictatorial rule. In newly rich countries, such as South Korea or Greece, Generation Y has known nothing but developed world standards of living, while their grandparents often grew up in developing world conditions. This can be the source of inter-generational conflict, as the young reject many traditional ways of life. Generation Y was also the first generation in countries like India and China to benefit from Western modern amenities, due to market liberalisation. Defining moments Some of the cultural events and trends that have defined this generation over the years include: Hip Hop music and subculture Fall of the Berlin Wall Tiananmen Square Massacre
Page
Strategy Briefings
World
Skateboarding movement of the 1990s and the early 2000s Two Gulf Wars The end of Apartheid in South Africa Death of Princess Diana The return of Hong Kong to the People's Republic of China Great economic prosperity in the 1990s buoyed by the dot-com bubble; the Dow Jones Industrial Average breaks 11,000 for the first time The Omagh Bombing and Good Friday Agreement in Northern Ireland signalling the end of the Northern Ireland Troubles Columbine High School massacre IPods and the digital downloading phenomenon The new millennium September 11 Terrorist Attacks and ensuing global War on Terror The wave of accounting scandals in 2002 SARS epidemic in Spring 2003 Indian Ocean tsunami disaster Post-Soviet crash of the Russian economy The rise of Newly Industrialized Countries, or NICs, such as China, India, Mexico and South Africa The massive boom in personalisation, P2P, Web 2.0, and the digital revolution in media Reality Television, such as American Idol and Big Brother The popularity of such community sites as MySpace and YouTube
Generation Y as consumers Generation Y are consumerists by nature. Without the constraints of a family or, in most cases a mortgage, and often with a professional income, they have discretionary income to spend as they please. Followers of fashion Although Generation Y covers a very diverse group of consumers, they have in common a propensity to buy recorded music, fashion, mobile phones, MP3 players, computer games, fast food, TV, DVDs, PCs and Internet services. Of these, music is probably the most important (although mobile phones and peripherals are believed to represent a larger proportion of their spend), because it informs and influences purchasing within most of the other sectors. Generation Y consumers are major purchasers of sports goods, which are generally within the clothing and footwear sector. Young adults are also relevant for a large number of other consumer markets, such as food and drinks, cosmetics and toiletries, travel and hotels, household goods, communications and transportation. Students spend money on books, IT and stationery, but also on entertainment, alcoholic drinks and basic food, clothing and home care products. They may also organise their own holidays, for which they may be prepared to take on an increasing amount of debt. The home making part of this age group is a major market for discount furniture (such as Ikea), as well as home electronics. Bi-polarisation of demand When it comes to actual purchases, Gen Y consumers avoid the middle of the road. They rarely purchase anything that is not either at the high or low end of the retail scale. An example of this is the equal success of
Page
10
Strategy Briefings
World
retailers such as Abercrombie & Fitch and Forever 21 in the US, which illustrates the polar opposite buying habits of Gen Y consumers. As a result, retailers that are positioned as mid-scale are missing out on this generation. Yuppies become Yeppies In developed countries, the new version of the "yuppie" (young, upwardly mobile professional) consumer is perceived as being less materialistic and more cerebral than before. The term "yeppie" (young experimenting perfection seeker) has been coined to identify a viable 21st century version. The yeppies, in the age group of 16 to 24 years, are not single-mindedly materialistic like the yuppies. Their real search is for happiness by way of perfection and achieving life-balance. The acronym suggests something beyond buying behaviour, with later marriages and children indicating an experimenting, perfection-seeking mentality. Desire for status In the developing countries, Gen Y is in the vanguard of the new middle class. Where consumer confidence is high, such as in China, young adults will spend all they earn on luxury goods in order to appear successful and not lose face, even if this means running up debts. However, in India, a new version of the yuppie has been identified: the "guppie" (a Guargaon yuppie). This young urban professional is free spending, like the yuppie, but far more value conscious, being able to identify bargains. According to reports, the identification of the guppie a yuppie with value for money attitude, is causing major retailers to demand rethought marketing strategies.
DRIVERS
Later Families
Falling birth rates For a number of years, birth rates have been falling around the world, and women have been waiting longer before having children. In more affluent countries, young adults can now afford interests and lifestyles that are not compatible with large families. They often choose to postpone childbirth, in favour of building a career or having a good time. Marriage and children are no longer considered to be the ultimate aim in life, and more women are going to college and following careers that allow them the financial stability to live by themselves. Furthermore, some sociologists believe that more young people are choosing to remain single, not only due to a desire for freedom, but also to an inability to handle close and personal relationships. This stems from fear of commitment and of being hurt, as well as society's new focus on the self. In developing countries, the growing tendency for young adults to relocate from rural to urban areas, and even to work abroad for a number of years, has created a higher degree of mobility among younger generations, which in turn means that parenthood is often postponed and family sizes reduced. Furthermore, with birth control now widely available, the number of unplanned births is falling. These factors, coupled with higher levels of education and training, especially among women, have led to lower birth rates, and hence smaller households, worldwide. First time mothers oldest in UK In only six of the markets under review in the table below did the average age of first time mothers fall below that of the oldest of the Gen Y age group (as defined in this report) in 2006. The lowest age of first time mothers was seen in India, at 19.9, followed by Egypt (21.0), Turkey (22.2), Russia (24.5) and Poland (25.2). Perhaps surprisingly, the sixth country was the US, where the average age of first time mothers was only 25.3 in 2006. This is partly due to the high levels of immigration in the US, since the Hispanic population tends to have larger families and from an earlier age.
Page
11
Strategy Briefings
World
The oldest first time mothers were seen in the Western European countries of the UK, the Netherlands, Spain, Switzerland, Italy, Denmark and Germany. In all of these countries, the average age of first time mothers was over 29 in 2006, and rose over the 2001-2006 period. Low birth rates in many developed and some developing countries are being driven by profound changes in consumer attitudes, and by a generation of potential parents who would rather get rich and have fun than start a family. According to a UK poll, both men and women believed it was more important for women to enjoy themselves than to have children, with 64% of men and 51% of women agreeing. A majority also thought that doing well at work and earning money counted for more than bringing up children. Just 36% of women believed that people should put children ahead of their career. In a sign of the way male attitudes have changed after feminism, only 32% of men thought that women should put children before work. Both men and women thought it was more important to live comfortably than to have children. It is not only liberated and enfranchised women who are to blame: according to a study in Germany, it is men who are primarily responsible for fewer births. In its study, the Robert Bosch Foundation found that many men are reluctant to start families. The study says one in four men in Germany do not want children, whereas one in seven women prefer to remain childless. A related problem to not enough parents is the wrong parents: teen pregnancy is a major problem and one with major societal implications. The US has one of the highest teen birth rates in the world, ahead of Germany, the UK, Japan and France in teen birth and pregnancy rates, and with at least double the birth rate by teenagers before age 20 compared to Canada, France and Sweden. According to a survey, US teens from low-income families are 79% more likely to have a child by 18 than teens of a similar socioeconomic group in the UK.
Table 1 Average Age of First Time Mothers 2001-2006 2001 UK Netherlands Spain Switzerland Italy Denmark Germany Japan Sweden France Norway Canada Finland Czech Republic US Poland Russia Turkey Egypt India WORLD (total)
2002 29.3 29.2 29.2 29.0 28.9 28.5 28.5 28.3 28.3 28.1 27.7 27.7 27.6 25.6 24.8 24.6 23.9 21.8 21.0 19.8 25.7
2003 29.4 29.3 29.2 29.0 28.9 28.8 28.6 28.5 28.4 28.2 27.9 27.8 27.6 25.8 24.9 24.7 24.0 21.9 21.0 19.8 25.8
2004 29.5 29.3 29.3 29.1 29.0 28.9 28.8 28.6 28.5 28.2 28.0 28.0 27.7 25.9 25.1 24.9 24.2 22.0 21.0 19.8 25.9
2005 29.6 29.4 29.3 29.2 29.0 29.0 28.9 28.7 28.6 28.3 28.2 28.1 27.7 26.0 25.2 25.0 24.3 22.1 21.0 19.9 26.0
2006 29.7 29.4 29.4 29.3 29.1 29.1 29.0 28.9 28.7 28.4 28.3 28.3 27.8 26.2 25.3 25.2 24.5 22.2 21.0 19.9 26.1
29.2 29.2 29.1 28.9 28.8 28.3 28.4 28.2 28.2 28.0 27.5 27.5 27.5 25.3 24.7 24.4 23.8 21.7 21.0 19.7 25.6
Higher Education
Students numbers growing Despite the fact that Generation Yers are facing higher costs for higher education than previous generations, in most countries of the world the number of students is reaching unprecedented levels. Indeed, the table below shows that the percentage of 20-24 year-olds continuing in education rose substantially over the 2001-2006 period in almost all the countries under review.
Page
12
Strategy Briefings
World
In the US, for example, the proportion of 20-24 year-olds continuing in education rose from 35.3% in 2001 to 40.1% in 2006. A study of the US college student market (aged 18-30, from two-year and four-year colleges, attending part-or full-time) carried out by Harris Interactive in 2005 showed that the college market had expanded in every aspect size, spending power and discretionary income. The study revealed that, while enrolments were at an all time high (16.5 million students), the percentage of those employed had also reached a whopping 78%, which generated substantial levels of income and marking significant increases in discretionary spend. The highest proportion of young people going into higher education was seen in Italy, at almost 74%. This represented a substantial rise on the 2001 figure of 46%. Other countries in which more than half the number of young people aged from 20-24 went into higher education in 2006 included Finland (70%), Denmark (54%), Spain (53%) and South Korea (53%). In a small number of countries, the percentage of 20-24 year-olds going into higher education dropped slightly over the review period. This was the case in Canada, Portugal, the UK and Austria. British students deterred by high fees In the case of the UK, many would-be students from poorer backgrounds are deterred by the high costs of student fees and living expenses, although university funded or local authority funded grants are available in some cases. In March 2007, the British government revealed a new scheme for getting more young people from poor homes into higher education. The central university admissions body, UCAS, said that it would start asking applicants whether their parents had gone to university. Universities would be free to pass students' answers to admissions officers with their applications, along with information about their social class and ethnicity. However, analysts believe that the problems should be addressed at an earlier age. With the same exam results young people from poor homes are as likely to apply, and to be accepted, at university as the well-off are. It is getting those results in the first place that is the problem. Charging realistic fees and higher interest on loans would make more money available to tackle the root cause of their exclusion. The share of the population aged 20-24 in continuing education in developing countries is lower than in developed countries, whilst the labour force participation rate of people in this age group is higher in developing countries. However, the trend of young adults pursuing further education is on the rise in developing countries. In Indonesia, for example, between 1996 and 2006, the proportion of the population aged 20-24 pursuing further education doubled, from 10% to 20%. Particularly low shares in 2006 were seen in Turkey (11%) and Thailand (14%).
Table 2 % Population Aged 20-24 Continuing in Education 2001-2006 2001 Italy Finland Denmark Spain South Korea Australia Sweden China Belgium Netherlands France Hungary Greece US Poland Norway Argentina Ireland Germany Brazil 45.6 53.7 42.5 45.0 41.6 40.8 43.9 40.8 43.8 41.1 39.1 28.1 34.3 35.3 37.2 38.6 33.5 28.2 35.8 30.1 2002 56.4 55.9 45.5 47.0 44.5 43.0 48.3 42.6 43.9 40.7 39.2 31.2 35.8 35.8 37.8 38.9 35.6 30.0 36.0 30.5 2003 61.2 60.1 47.8 48.6 46.7 45.2 48.7 44.4 44.5 41.7 40.6 34.2 37.6 37.1 38.0 38.4 36.4 32.3 36.2 31.2 2004 66.3 63.9 50.4 50.3 49.2 47.4 49.2 46.3 44.8 42.3 41.6 37.5 39.2 38.1 38.3 38.5 37.4 34.5 36.3 31.8 2005 71.9 68.6 53.2 51.8 51.6 49.8 49.8 48.3 45.4 43.1 43.0 41.2 40.8 39.3 38.4 38.4 38.3 37.1 36.7 32.6 2006 73.6 70.1 54.3 52.9 52.7 50.8 50.8 49.3 46.4 44.0 43.9 42.1 41.7 40.1 39.1 39.1 39.1 37.8 37.4 33.3
Page
13
Strategy Briefings
World
Switzerland Canada Portugal Czech Republic UK Mexico Austria Malaysia Indonesia Thailand Turkey WORLD (total)
28.8 30.1 29.5 21.6 28.3 16.8 24.5 14.2 13.0 9.9 10.9 29.9
30.0 29.5 30.0 23.4 27.8 18.2 24.1 15.2 14.4 11.6 11.4 31.2
30.3 29.5 29.1 24.5 27.4 20.3 23.9 17.7 16.1 12.8 11.2 32.2
30.7 29.3 28.5 25.9 26.9 22.3 23.4 20.0 17.9 13.2 11.0 33.3
31.2 29.1 27.7 27.1 26.5 24.8 23.1 22.9 19.9 14.1 10.9 34.5
31.8 29.7 28.3 27.6 27.0 25.3 23.5 23.5 20.4 14.4 11.1 35.2
Generation Y at Work
With the eldest batch of baby boomers in retirement and the rest soon to follow, the presence of Generation Y employees is more important than ever. However, their attitudes to work are very different from those of the generations that went before them, and this is often the cause of conflict in the workplace. According to a recent survey by Lee Hecht Harrison, more than 70% of older employees in the US were dismissive of younger workers' abilities, while nearly half of employers say that younger employees are dismissive of the abilities of their older co-workers. Unlike boomers, who tend to put a high priority on career, today's youngest workers are said to be more interested in making their jobs accommodate their family and personal lives. They want jobs with flexibility, telecommuting options and the ability to go part time or leave the workforce temporarily when they decide to have children. As a result, employers are examining new ways to recruit and retain workers, and are trying to sell younger workers on their workplace flexibility and other qualities generally attractive to Generation Y. Making an impact According to one US analyst, Generation Y workers are like "Generation X on steroids", with high expectations for themselves, their employer and their bosses. They aim to work faster and better than other workers, and they want fair and direct managers who are highly engaged in their professional development. They want to keep learning, seeking out creative challenges and viewing colleagues as vast resources from whom to gain knowledge. They want immediate responsibility, making an important impact on day one. They are also goaloriented, demanding short goals with tight deadlines so they can build up ownership of tasks. Young people in the workplace tend to seek change and variety. They do not expect to stay in any one job, or even a career, for very long, but are generally efficient at what they do, and multitask their way through assignments as quickly as possible. They also have a preference for solving problems on-line, rather than by phone or face-to-face. Generation Y workers have a reputation for experiencing boredom and frustration with slow-paced environments, traditional hierarchies and even slightly outdated technologies that is, almost everything common in most workplaces. Furthermore, unlike previous generations, who have grown accustomed to the annual review, Gen Yers have grown up getting constant feedback and recognition from teachers, parents and coaches, and demand the same from their bosses. Even the casual dress code of Generation Y, along with tattoos and body piercings, can offend older employees. Unlike the generations that have gone before them, Gen Y have been pampered, nurtured and programmed with a range of activities since they were toddlers, meaning they are both high-performance and high-maintenance. They also believe in their own worth. Generation Y are much less likely to respond to the traditional commandand-control type of management still popular in much of today's work environments. They have often grown up questioning their parents, and now they are questioning their employers.
Spending Power
Page
14
Strategy Briefings
World
Growing discretionary income The gross income of people aged 20-24 accounted for 7.5% of the world's total in 2006, slightly lower than the 8.3% share of this age group in the world's population. However, compared to previous generations occupying the age group, today's Generation Y have more money. One reason is that they tend to stay at home longer, with the result that a significant proportion of what they earn becomes discretionary. Furthermore, young adults in developed countries generally do not have family responsibilities, which allows them to spend most of their disposable incomes on consumer goods for themselves. Due to their efforts to obtain educational qualifications and better skills, the incomes of the population aged 2024 in most developed countries have been rising faster than average income. Between 1996 and 2006, the proportion of 20-24 year-olds pursuing higher or further education rose from 28% to 40% in the OECD countries. In general, students are receiving more generous allowances from parents as a result of the growing purchasing power of boomer parents, and the fact that people generally have fewer children to support. Furthermore, many students take out loans, or supplement their income by working part-time during their studies. In 2007, the US House of Representatives voted to cut the interest rate on subsidised student loans by half, to 3.4%, over five years. UK students benefit from cheap loans In the UK, student loans are particularly cheap. Students can borrow college fees from the government, as well as a sum towards living expenses, while the poorest get grants to cover their fees. The Student Loans Company, a subsidiary of the education department, currently lends around 3 billion a year (although some of this debt is soon to be privatised). Once a graduate starts earning, he or she needs to repay only 9% a year of their income over 15,000. Interest is never more than inflation, and anything unpaid after 25 years is written off. Students are therefore likely to repay only half of what it cost to lend them the money. However, the limit on borrowing for living expenses is relatively low, forcing many poor students to take out expensive consumer debt to make ends meet. Furthermore, part-time students and those at further education colleges, who tend to be from poorer backgrounds, are not eligible for the loans. Family responsibilities drain incomes in developing markets In many developing countries, lower rates of continuing education coincide with higher work activity among the population aged 20-24. Young adults in many poor countries are burdened with family responsibilities and do not have significant independent spending power. These responsibilities, combined with their relatively low incomes (in line with the overall low income levels), undermine further the purchasing power of young consumers in poor countries. In Brazil, for example, 81.0% of the population aged 20-24 are economically active, accounting for 14.1% of the labour force. In many low-income countries, young adults are particularly susceptible to unemployment, poverty and poor health. In many poor countries in Africa, HIV/AIDS seriously undermines the potential of a young population and an youthful labour force. Also, people tend to marry at an early age in poor countries, which means that many 20-24 year-olds have family responsibilities. Salaries rise with age and experience Looking at the table below, in most countries, average gross income among 20-24 year-olds and 25-29 year-olds is markedly lower than those in higher age groups. This reflects the high number of students or apprentices in the lower age groups, with salaries tending to rise with age and experience and peak in the late 40s/early 50s. However, interestingly, incomes in the lower age groups seem to have risen more strongly than those of most older age groups since 2001. This was the case in many developed and developing markets alike. In the case of the US, for example, incomes among the 15-19 age group showed the strongest growth between 2001 and 2006, of 52%, followed by the 20-24 age group, with growth of 26%. Young adults' incomes are highest in the most developed markets of Western Europe. Average gross incomes in both the 20-24 and 25-29 age groups were highest in Norway and Switzerland, respectively, in 2006. In the 2024 age group, Germany ranked third, and the Netherlands fourth; while in the 25-29 age group, the third highest incomes were to be found in the UK, and the fourth highest in Germany.
Page
15
Strategy Briefings
World
Table 3 US$
Average Gross Income by Age Group in Selected Markets 2006
15-19 Australia Brazil Canada China Czech Republic France Germany India Italy Japan Mexico Netherlands Norway Poland Russia Singapore South Africa South Korea Spain Sweden Switzerland Taiwan Thailand UK US 18,696 3,358 19,718 694 4,653 29,869 31,423 480 23,861 27,944 6,145 32,136 39,873 5,937 3,458 15,455 2,377 14,426 21,608 18,829 39,947 14,688 2,150 22,770 24,853 50-54 Australia Brazil Canada China Czech Republic France Germany India Italy Japan Mexico Netherlands Norway Poland Russia Singapore South Africa South Korea Spain Sweden Switzerland Taiwan Thailand UK US 33,703 4,468 41,416 1,211 12,401 45,022 43,149 811 40,010 38,946 6,993 45,734 53,855 8,631 4,299 23,044 5,149 18,769 27,283 44,647 57,035 17,161 2,598 50,542 56,628 45-49 Australia Brazil Canada China 34,196 4,689 42,134 1,095
20-24 22,708 4,057 25,141 1,402 6,575 34,724 36,844 755 29,535 33,697 7,302 35,336 49,051 6,451 4,038 17,599 3,000 15,370 22,606 31,311 43,851 15,675 2,447 33,087 34,741 55-59 32,659 4,172 38,599 1,198 12,493 44,726 42,684 739 37,486 37,400 6,272 44,413 52,039 8,300 4,022 23,208 5,036 17,802 26,996 44,077 56,038 18,140 2,494 47,947 54,256
25-29 26,633 4,474 30,746 1,330 9,407 37,627 40,665 867 32,824 36,774 7,921 38,859 52,817 7,256 4,484 18,664 3,739 16,382 23,495 38,002 47,740 17,982 2,639 41,973 39,917 60-64 31,431 3,908 33,394 1,008 11,696 42,846 40,160 640 33,673 34,362 5,756 41,569 49,402 7,813 3,837 20,977 4,683 16,893 24,977 42,788 52,831 14,756 2,290 45,910 44,947
30-34 30,067 4,679 35,716 1,312 11,648 39,725 42,396 858 35,874 38,546 8,144 41,789 53,272 8,015 4,704 20,443 4,381 17,606 25,366 40,339 51,173 19,413 2,725 47,145 44,008 65-69 30,262 3,688 28,516 879 10,620 41,095 38,859 555 30,639 32,044 5,367 38,668 46,748 7,476 3,661 19,947 4,338 16,126 22,413 41,415 49,402 15,041 2,091 41,920 36,111
35-39 32,479 4,778 39,296 1,345 12,708 41,673 43,150 837 38,441 39,866 8,168 44,061 53,289 8,483 4,703 22,250 4,821 18,606 26,087 41,321 53,698 18,801 2,734 50,218 47,582 70-74 29,220 3,499 24,585 795 9,601 40,309 37,427 487 27,722 29,955 5,030 35,910 44,418 7,149 3,576 18,612 4,019 15,442 20,641 40,359 46,436 14,129 1,924 39,294 27,984
40-44 33,871 4,787 41,423 1,395 12,703 43,576 43,388 834 40,417 40,560 8,009 45,536 53,721 8,812 4,631 23,152 5,048 19,250 26,262 42,555 55,426 18,655 2,702 51,613 51,492 75-79 28,288 3,329 21,504 752 8,892 39,201 36,513 431 25,521 28,063 4,737 33,748 42,410 7,073 3,488 17,901 3,760 14,826 19,116 39,201 43,848 14,045 1,780 36,839 23,702
Page
16
Strategy Briefings
World
Czech Republic France Germany India Italy Japan Mexico Netherlands Norway Poland Russia Singapore South Africa South Korea Spain Sweden Switzerland Taiwan Thailand UK US Australia Brazil Canada China Czech Republic France Germany India Italy Japan Mexico Netherlands Norway Poland Russia Singapore South Africa South Korea Spain Sweden Switzerland Taiwan Thailand UK US
Source:
12,395 44,927 43,260 836 41,051 40,636 7,618 46,131 54,202 8,873 4,469 23,229 5,140 19,302 26,713 43,936 56,581 18,053 2,655 52,344 54,541 80+ 27,749 3,229 19,810 694 7,110 33,159 31,405 400 19,832 23,065 4,566 30,445 41,266 5,623 3,818 13,340 3,599 14,460 15,829 38,503 42,370 13,801 1,697 35,697 18,741
Euromonitor International from national statistics
Table 4 % growth
Growth in Gross Income by Age Group in Selected Markets 2001/2006
15-19 France Germany Italy Netherlands Norway Spain Sweden Switzerland UK Czech Republic 69.3 62.4 64.8 54.4 71.4 68.3 96.0 42.0 78.9 73.3
20-24 63.3 65.7 62.6 55.3 65.0 58.3 72.4 41.8 61.5 80.1
25-29 59.4 63.8 58.7 58.4 62.4 52.5 63.9 41.5 57.8 93.0
30-34 59.2 60.5 58.5 60.6 61.7 60.3 61.8 42.3 51.7 98.0
35-39 59.1 59.3 59.8 61.5 61.3 64.4 60.0 43.5 49.3 103.0
40-44 58.8 59.4 61.4 61.5 60.8 62.8 58.5 44.6 47.5 105.9
Page
17
Strategy Briefings
World
Poland Russia Canada US Brazil Mexico China India Japan Singapore South Korea Taiwan Thailand Australia South Africa
74.6 244.3 68.0 51.5 63.8 24.1 47.4 31.1 8.8 66.5 88.4 42.1 49.1 92.3 111.9 50-54
69.4 177.8 58.7 26.3 60.0 9.3 98.0 37.2 18.9 56.4 87.2 26.9 51.9 83.7 89.1 55-59 58.5 56.3 72.5 61.1 62.6 63.8 60.2 44.5 52.0 109.3 65.3 168.5 64.4 18.5 57.9 -2.2 62.5 10.0 50.2 104.3 4.7 29.6 79.6 64.5 83.0 73.1 48.0
69.0 157.5 59.8 19.8 59.4 2.9 63.1 41.7 18.8 33.0 83.8 30.5 54.6 77.2 69.7 60-64 58.5 52.5 71.2 61.9 65.1 69.0 62.9 44.7 63.2 110.8 64.9 168.7 60.0 27.2 59.9 -1.3 57.6 14.7 52.2 107.7 2.7 27.6 81.0 33.2 89.4 74.6 50.6
68.3 157.4 63.4 17.2 59.2 -0.2 56.9 45.3 15.1 22.4 82.4 41.5 57.0 74.4 57.9 65-69 58.6 54.5 71.7 62.5 66.9 71.6 65.0 44.9 62.2 111.5 67.1 166.8 54.2 38.4 60.9 -0.7 49.5 16.9 54.1 109.6 2.6 35.0 82.5 45.1 94.1 75.8 55.3
63.1 158.5 64.4 14.8 57.8 -2.1 52.8 47.7 11.6 22.7 79.8 35.1 58.7 72.0 51.8 70-74 61.8 55.4 68.8 61.7 68.3 75.8 67.7 45.2 65.0 108.7 66.4 170.8 48.3 41.0 62.3 -0.2 54.1 20.4 55.9 111.4 2.2 37.8 83.9 38.1 98.8 77.0 58.4
61.6 163.0 64.1 12.2 55.8 -3.3 104.0 48.6 8.8 25.0 78.7 36.1 61.1 71.5 48.8 75-79 63.3 57.8 69.3 62.2 69.9 79.2 69.4 45.5 68.8 110.0 71.4 169.3 43.9 55.1 63.2 0.3 64.4 24.1 57.7 113.0 1.5 46.5 85.2 36.2 103.2 78.1 62.3
France Germany Italy Netherlands Norway Spain Sweden Switzerland UK Czech Republic Poland Russia Canada US Brazil Mexico China Hong Kong, China India Indonesia Japan Singapore South Korea Taiwan Thailand Australia South Africa
56.7 57.5 67.2 60.4 61.5 61.4 58.8 45.1 53.3 108.2 62.9 169.7 64.4 14.4 55.3 -3.4 59.0 7.3 48.9 96.9 4.1 26.2 78.7 24.4 73.4 72.2 47.0 45-49
France Germany Italy Netherlands Norway Spain Sweden Switzerland UK Czech Republic Poland Russia Canada US Brazil Mexico China India
58.2 58.7 64.3 61.0 60.8 60.9 58.2 45.2 52.2 107.1 62.5 163.9 63.6 11.9 54.6 -3.9 47.3 48.6
Page
18
Strategy Briefings
World
Japan Singapore South Korea Taiwan Thailand Australia South Africa France Germany Italy Netherlands Norway Spain Sweden Switzerland UK Czech Republic Poland Russia Canada US Brazil Mexico China Hong Kong, China India Indonesia Japan Singapore South Korea Taiwan Thailand Australia South Africa
Source:
7.2 26.4 78.1 37.0 65.7 71.5 47.4 80+ 41.1 38.9 36.1 52.1 70.8 62.0 70.2 45.6 66.2 76.5 40.3 189.5 40.9 46.9 64.0 0.7 61.1 26.3 58.8 114.1 -13.5 21.5 86.0 32.4 106.3 78.8 64.5
Euromonitor International from national statistics
Technology and Communications

The digital generation Generation Y was the first to grow up with modern media (eg cable and satellite TV, DVDs, wide screen TVs), as well as PCs and the Internet. They became accustomed from an early age to downloading music, instant messaging and mobile phones, which came to fruition around 2001. Some of the key developments to have affected Generation Y throughout their early years are: Sophisticated computer graphics in video games, animated movies and television shows (late 1980s to mid1990s) Digital cable (from mid-1990s) Mobile phones (from late 1990s) Instant messaging (from late 1990s) DVDs (from 1997) MP3 players (from 1997) TiVo and other such DVR devices (from 1999) HDTV (from 2001) Broadband Internet (from early 2000s) Digital cameras (from early 1990s)
Page
19
Strategy Briefings
World
Robotic and digital pets (from 1990s) Camera phones (early 2000s) Text messaging (early 2000s) Social networking (late 1990s and onward) 3D virtual worlds, such as Second Life, Entropia Universe, and There (early-mid 2000s) Web 2.0 (mid 2000s) Increased surveillance by their baby boomer parents, such as GPS tracking, Internet-enabled home camera systems, Internet monitoring and mobile phone monitoring, which many young people view as infringing on their personal rights (2000s).
A recent survey conducted by KRC Research and Hitachi Global Storage Technologies found in 2005 that Generation Y consumers had an average of US$2,199 worth of entertainment stored on devices such as laptops/PCs, MP3 players, DVRs, mobile phones, PDAs, digital cameras or portable DVD players, compared with US$1,135 for the average American adult. Staying connected The young adults of Generation Y are adopting new technology faster than any other generation, according to a recent study by Forrester Research of young adults in the US and Canada. On average, they spend 12.2 hours per week on the Internet, which is some 28% longer than the average Generation X user and twice as long as the average baby boomer. Studies have consistently shown that they are doing this at the expense of watching TV. The same survey showed that Gen Yers spend only 10.6 hours a week watching TV. The typical Generation Y lives on-line, reading blogs, downloading podcasts, checking prices before buying, exchanging recommendations and influencing younger consumers. For the connected generation, the immediacy of on-line media is more appealing than TV and newspapers. Generation Yers spend 41% less time reading local newspapers and 22% less time in front of the TV than baby boomers. However they are the primary consumers of social networking websites and instant messaging and are 50% more likely to use instant messaging than Generation Xers. Generation Yers are also three times more likely to read blogs than Generation Xers. Generation Yers, according to analysts, appear to go in for self-actualisation, adventure and community, which explains their massive take-up of MySpace. According to analysts, the qualities of the site that appeal to Generation Y are that it has the content they want: young adults posting their profiles, uploading photos, writing blogs and sharing messages; and community: a dedicated group of users who visit multiple times each day and conduct a considerable proportion of their lives on-line. Mobile phones Studies show that mobile phones have become the communication tool of choice for adults aged 18 to 26. According to Forrester Research, Generation Yers are the largest users of data services, and have been the most successful in integrating the phone into their lifestyles. As a result, many phone manufacturers and service providers are developing phones and services aimed specifically at this market. The number of mobile phone users worldwide is estimated to have risen by as much as 154% between 2001 and 2006, to reach 2.4 billion. Penetration has passed 100% in various markets, but in many developing markets it remains low. There are other massive discrepancies: in actual usage of mobile phones and also in penetration in urban as compared to rural areas. There are also surprises when levels of penetration of mobile phones are compared, with no obvious correlation between per capita wealth and ownership. China led the world in 2006, with a total of 464 million users, having grown by 220% over the 2001-2006 period. In February 2007, telecom operators began to roll out a "caller pays" billing system across the country, which effectively removes incoming call charges and thus reduces the monthly bill for mobile phone users. In addition, the roaming fee is also expected to be regulated and probably abandoned in the coming years. The reduction of fees and charges will lead to robust growth in the number of mobile phones. China's rural areas, in particular, present the largest opportunities for business expansion for mobile operators and manufacturers, as these regions have large populations and low rates of penetration.
Page
20
Strategy Briefings
World
Russia and India have the world's fastest growing mobile phone markets. Mobile phones in India have helped consumers to overcome a landline shortage: in 2006, there were only 46 telephone lines in use per 1,000 people. Mobile services have widened access to markets for tens of millions of Indian farmers and fishermen, as they can gain information about prices and new customers via mobile phone and no longer rely on the middle man. Thanks to downloads, the market for Bollywood films and mobile games based on popular Bollywood movies has expanded massively, especially to rural areas where entertainment venues are few. The number of mobile phone-only households is growing. In developed countries there are and will be many households for whom mobile phones represent a far cheaper and more practical way of getting connected than fixed line phones.
Table 5 '000 2001 2006 % growth 2001/2006 220.4 69.2 1,747.6 1,635.6 254.8 31.2 46.9 46.5 40.2 140.5 35.8 154.1 42.7 37.9 192.5 217.3 226.5 272.7 6.7 200.1 77.2 160.7 67.3 34.6 Number of Mobile Phone Users by Country 2001-2006
China US Russia India Brazil Japan Germany Italy UK Mexico France Turkey Spain South Korea Philippines South Africa Poland Argentina Taiwan Malaysia Australia Thailand Canada Netherlands
144,820 128,375 7,750 6,432 28,746 74,819 56,126 51,246 46,283 21,758 36,997 19,573 29,656 29,046 12,159 10,787 10,005 6,742 21,786 7,385 11,132 7,550 10,649 12,200
463,991 217,177 143,193 111,633 102,003 98,181 82,434 75,074 64,905 52,324 50,225 49,737 42,324 40,050 35,560 34,232 32,671 25,127 23,248 22,165 19,721 19,682 17,814 16,420
Digital downloading Downloading goes legal According to a survey by TNS Infratest Media Research, 50% of teenagers and young people in their 20s listen to an MP3 player on average for 90 minutes a day. There were two drivers of the digital music global megatrend: the first, dating back to the advent of file sharing and Napster (now a legal site), was consumers wanting to listen to songs when, where and how they wished. The second driver was that it was possible to do it all for free, hence the ensuing battle as the recording industry desperately tried to maintain control over its content and safeguard its revenues. Trends in digital music over the past two years demonstrate that, on balance, consumers now prefer to be legal. This is demonstrated by the success of iTunes and the number of legal downloading sites, which increased from 50 in 2004 to 335 in 2006.
Page
21
Strategy Briefings
World
According to IFPI, digital music sales tripled to US$1.1 billion in 2006, from US$380 million in 2004, with digital music players becoming the accessory of choice and fans legally downloading 420 million tracks via the Internet 20 times more than in 2004. Meanwhile, the volume of music licensed by record companies doubled to more than 2 million songs, and digital music now accounts for about 6% of record companies' revenues. The rise of community music and the MPshe The way consumers are buying music is evolving. Community music sales using community sites, such as Habbo, is a notable trend, while the advent of the "MPshe" consumer is also important, as women take over from men as the leading downloaders. For both the music industry and wireless service providers, the business of selling music directly onto mobile phones is the next major opportunity. A significant proportion of legal downloading revenue is now accounted for by mobile ring tones. Worldwide, according to the IFPI, mobile music accounts for about 40% of record company digital revenues. Another major trend in digital music is downloading to smart phones. In Japan, mobile music's most developed market, sales reached US$211 million (96% of all the country's digital music sales) in the first quarter of 2006. The speed of growth from country to country will depend on the comparative popularity of mobile devices: where there is high penetration of home PCs, such as in North America, growth will be slower than in Asian markets, where mobile phones are more popular than PCs.
Chart 3 %* Mobile Phone Music Listeners 2005
Source: Note:
TNS * % of mobile users who regularly listen to music on their mobiles
the Social Networking Phenomenon

The power and potential of social networking sites for global messages and for marketing has yet to be fully understood and exploited by companies selling to Generation Y. On-line as a way of life is epitomised in MySpace (owned by News Corp) and the virtual social life, Cyworld, two hugely popular websites which originated in the US and South Korea, respectively, but which have both expanded into the on-line "globosphere". The power of viral marketing
Page
22
Strategy Briefings
World
Social networking sites have illustrated the unique real-time power of the Internet to spread information rapidly across the world. For example, following the death in the US of 18 year-old Anna Svidersky, her friends posted the news of her murder on MySpace, and composed a tribute with a collage of photographs. This tragic event became the apotheosis of viral marketing, with the story reverberating around the entire on-line world. Some commentators regard this as a further example of changing social values. In an age where chat rooms and "virtual" friends are replacing traditional support structures such as religion and the family, the need to make emotional connections is stronger than ever, even if they are not "real". According to reports, condolences from all over the world continue to flood in, with over 30 video tributes currently hosted on YouTube alone. There is already a 200-word entry on Anna Svidersky's life on Wikipedia, complete with a picture from her high-school yearbook. Locals rival US giants MySpace is by far the largest social networking site, with 41.9 million unique users in March 2006, according to research company comScore. Its main US-based competitor is Facebook, with 12.9 million unique users. However, Facebook is currently facing a lawsuit by ConnectU, a much smaller college social networking which was also created in 2004 by students at Harvard University and claims that Facebook copied its idea. The latest lawsuit requests that ConnectU be given control of Facebook. For its part, Facebook officials argue that the two social-networking sites have substantially different interfaces. Several country-specific sites are also popping up to rival MySpace and Facebook. For example, Univillage.com, which was launched in the UK by lastminute.com founder Brent Hoberman in August 2006, had already signed up over 70,000 students by September 2006. Univillage aims to connect students at universities across the UK and offer them the chance to create profiles, and share music, photos and videos. It has set up partnerships with Universal, EMI, Warner, Sony BMG and a range of independent record labels. In South Korea, one in three people (17 million) has a Cyworld membership, and amongst South Korean consumers in their 20s the take-up is 90%. Cyworld is highly profitable, reportedly earning over US$12 million on revenue of US$110 million, mainly from selling virtual furniture. The site is owned by a division of SK Communications, a mobile wireless provider. The company has already expanded into the Chinese and Japanese markets, and recently opened an office in San Francisco. According to reports, Cyworld becomes a vital part of the lives of its members, who, in some cases, prefer their cyber-egos to themselves in the real world. Although MySpace and Cyworld are very different in style, the American press regards them as potential competitors for the same demographic. What Cyworld has done is integrate all the features of the traditional "hompy" (mini-homepage) into a package, complete with an internal economy and mobile access. On the South Korean Cyworld, some US$250,000 per annum is currently changing hands in-network. The currency can be purchased via debit, credit, charged to a users mobile account or through prepaid gift cards a relatively new system as yet largely unexploited. Social networking goes mobile Towards the end of 2006, there were signs that social networks in the US were migrating from PCs to mobile phones, to suit the on-the-move lifestyles of young people. MySpace has now developed mobile services for its users, and also has a partnership with youth-oriented wireless carrier Helio, which offers social-networking services based on global positioning systems in high-end mobile phones. InterCasting Corp's Rabble is another example of a GPS-based service, and Microsoft was testing mobile software, called SLAM, that would provide personal locator services, as well as messaging and photo sharing. Also at the end of 2006, Internet portal Yahoo launched an experimental site Mixd that offers mobile-phone subscribers in the US the ability to send text messages and share videos and pictures among friends. The service was launched on several college campuses in order to focus on Yahoo's core target audience, Generation Y, who are the largest users of mobile phones' data services. The service aims to make it easy for groups of friends to use text messaging as a way to organise a party, meet in a restaurant, attend a football game or arrange any other social activity. Individuals can also have private conversations, and people have the option whether to join a group.
Table 6 Number of Visitors to Social Networking Sites in the US, March 2006
Page
23
Strategy Briefings
World
Million unique visitors MySpace.com Facebook.com Xanga.com LiveJournal.com Yahoo! 360 MyYearbook.com H15.com Tagworld.com Tagged.com Bebo.com Friendster.com Tribe Networks Inc 43Things.com Sconex.com
Source: Note: comScore Media Metrix All users at home, work and educational establishments
41,889 12,917 7,448 4,047 3,614 3,613 2,609 2,275 1,668 1,096 1,066 871 661 372
the Changing Role of Men

Many men of the Generation Y cohort may be described as "metrosexual", a term used to describe a heterosexual male with an unashamed interest in shopping, fashion, fitness and personal grooming. The modern metrosexual has come about partly through changes in culture and attitudes towards masculinity. These are visible in the media through television shows such as Queer Eye for the Straight Guy, as well as magazines such as FHM, GQ, Men's Health and Maxim. A recent survey published in the Dutch magazine Marketing Tribune demonstrated that metrosexuality is fast becoming common among younger males, with "metro behaviour", such as shopping, fitness and fashion interest, scoring much higher among the under-35s than among over-35s. Indeed, although metrosexual is not the exclusive territory of late teens and generation Y men, the metrosexual lifestyle is more associated with young singles than a married man with children. Metrosexual becomes ubersexual Recently, there has been talk of the metrosexual being superseded by the "ubersexual". The findings of a US survey of men aged 21-34 by Miller Genuine Draft and the Kelton Research Group suggest a more complex and thoughtful typical generation Y male than the current marketing stereotypes. The typical male is more homeoriented and domestically accomplished than the clichd picture of the untidy, clueless single male unable to wash clothes and locate the kitchen other than to find a drink, but is at the same time less effeminate than the metrosexual. The ubersexual man can thus be said to be a more masculine version of the metrosexual, with a wider set of interests. Although a national survey, the findings of the Miller survey have a resonance across many countries, as young men seek new roles and images which fit societal changes. Defined as "evolving adults", according to the Miller Genuine Draft and Kelton Research Group survey, the typical Generation Y male (at the older end of the Gen Y age group) is a confident home entertainer. 57% of men aged 25-29 said that if a woman were to just pop in, they could prepare a full meal at a moment's notice using the items they have in the house. 68% of men owned at least one cookbook, and 47% claimed to have used a cookbook within the last month. Furthermore, 55% of those in the 25-29 age group said they try to keep their living space as neat as possible as often as they can. Men's skin care goes mainstream The changing male image is reflected in purchases of personal products. Once a typical male grooming kit included a razor, a can of shaving cream, a bar of soap and deodorant. Today, men are buying more skin care products than ever before. According to commentators, grooming habits that a few years ago would have been defined as metrosexual are now accepted as ordinary, and male products now include facial scrubs, toners and scented body washes. UK drugstore retailer Superdrug even sells a male eyeliner, called Guyliner. The trends are not confined to the US and Europe: in 2005 Nivea launched a skin-whitening product for men in Asia.
Page
24
Strategy Briefings
World
Other findings of the Miller survey broaden the picture of the buying behaviour of Generation Y men, though it is difficult to extrapolate from the finding that wine drinkers own more shoes than beer drinkers, unless it is a simple matter of disposable income. (Including all types of shoes athletic, work, etc 43% of men surveyed owned five pairs of shoes or fewer, while 31% of men who preferred wine to beer or liquor owned 10 or more pairs of shoes.) Training to achieve fitness and a good looking physique has become more popular than "real" outdoor competitive sports and games like football. Thus, looking athletic has assumed greater importance than being athletic. According to a recent report by the drugs charity DrugScope, one of the most popular recreational drugs amongst young males is now steroids, and this prescription-only product is now a "metrodrug", used by young straight men in much the same way as many gay men have traditionally used steroids as a short cut to a toned muscular body.
Attitudes To Finance
Generation debt There have been major changes in consumer attitudes to debt over the last decade, and it is Generation Y consumers the new "debt generation" who are the standard bearers of credit growth. Consumers are no longer ashamed of debt, it has become a normal part of people's lives. Generation Y want to achieve immediately what it took their parents' generation years to achieve, and the way to accomplish this is through credit. In many countries, credit cards are now used as an extension to cash, and in some countries more purchases are now made on debit cards than with cash. Meanwhile, the number of consumers with debts of more than US$100,000 is steadily growing. In the UK, cases of extreme debt doubled between 2004 and 2005. At the same time the proportion of young people experiencing difficulties with unsecured debt also showed a marked increase. There are many reasons for this. In developed countries, this is the first generation with easy access to credit, and not only student loans. According to research by the US Senate in 2003, new college students are offered approximately eight credit cards during their first week of college. According to a recent survey by Commonwealth Bank (CBA), 73% of Generation Y consumers in Australia have some form of debt, though of those with debt, 57% are not concerned about it. Living for today The sea change in consumer attitudes to debt is not confined to developed countries. There is a consumer culture among 20-30s in China which causes them to spend much or all of the money they make (and often more) on travel, clothes, food, drink and fashionable places of entertainment. This grouping have high expectations and do not allow debt or low incomes to prevent them spending. The attitude is essentially hedonistic enjoying today without fear, and not saving for the future. The problem with consumer debt is when it passes the tipping point which means that perceived net worth is falling rather than rising. According to a recent report by the Vanier Institute for the Family, average net worth (assets minus debt) for Canadians under the age of 25 fell by 95% between 1984 and 1999. Since that time, the volume of consumer borrowing has accelerated. One reason for this is the temptation to borrow in order to travel, with many young adults touring the world before settling into a work routine. The Youth Tourism Consortium of Canada reports that travel among the under-30s accounts for almost a quarter of the country's tourism market. When the Generation Y consumers finally set up home, the tendency is not for deferred gratification. The "instahouse" phenomenon is a term coined to describe the trend among young adults to spend fearlessly when they first set up home, rather than adopting the cautious approach of their parents. A reason for this is the tendency of generation Y to be influenced by marketing messages. Generation Y use parents as models, but to diverge from rather than emulate. They want the same comforts they enjoyed when living at home and are not prepared to wait. Debt is one way of not having to wait. At the same time, studies in the US show that Generation Y consumers are concerned about savings and retirement. After witnessing the financial insecurity that beset earlier generations affected by layoffs and the
Page
25
Strategy Briefings
World
dot-com bust, many of today's newest entrants into the workforce do care about such benefits as retirement plans. According to a survey in 2006, carried out by Diversified Investment Advisors in the US, 37% of Generation Y consumers expect to start saving for retirement before they reach 25, with 46% of those already working indicating so. 49% say retirement benefits are a very important factor in their job choices. Among those eligible, 70% of the Generation Y respondents contribute to their 401(k) plan (a US retirement savings plan that is funded by employee contributions and often matching contributions from the employer).
Travel
Gap year travel Today's Generation Y, and students in particular, are choosing to travel more than ever before, and are venturing further afield and to more unusual destinations. The reasons for this are manifold. To begin with, this generation has grown up in a global and multicultural society, with all the information they need at their fingertips. Young people are therefore more savvy about different places and cultures than ever before. Furthermore, due to the Internet and budget airlines, travel has become cheaper. Combined with the easier availability of credit, travelling the world albeit on a shoestring has become possible for a larger number of young people. UK remains principal market The number of people taking a gap year has risen strongly in recent years. This is usually a break between university and starting a career, when young people travel and work abroad to gain some experience of the "real world". The Gapyear Company estimates that in the UK there are 50,000 pre-university "gappers" and 150,000 during and post-university gappers, 60% of whom are female. The average time away is four months, and the average spend 3,000. The gap year market has undergone many transformations. Back in the 1960s, gappers from the UK travelled mainly to cheap destinations, such as Greece. Then came InterRailing (a train ticket which allowed unlimited travel on Europe's trains), which became popular in the 1980s. In the 1990s, cheaper flights led to the take-off of international student travel, and students began to travel the world for a number of reasons, be it courses, volunteering, expeditions, work, travelling or simply to achieve life-long ambitions. Experiential travel is now prioritised over partying and ticking off famous destinations. Interacting with local communities and developing skills or choosing a theme are increasingly important. Younger travellers often select experiences that relate to their studies (eg music-focused explorations such as following the Blues Highway across America. Gap year experiences are often used by students on their CVs or on personal statements for university applications. There is said to be a noticeable decline in interest in traditional expeditions through companies such as Raleigh International and VSO. New companies are attracting the young market with more unusual challenges, such as sailing a clipper round the globe. Backpackers become more adventurous In terms of destinations, according to STA Travel, South-east Asia is making a huge comeback following the Indian Ocean tsunami of December 2004. Thailand, the original backpacker destination, is as popular as ever, as is India, due to average flight costs dropping from 500 to 300 in recent years, whilst countries such as Laos, Cambodia and Vietnam, only for the adventurous in the 1990s, are now a common stop-off. South America and Africa are also reported to be booming, while Australia and New Zealand remain popular. Many 18-30 year olds work in Australia and New Zealand on a holiday visa, which was extended to two years in 2006, as long as a period of agricultural labour is undertaken. New emerging destinations for backpackers include Panama, Bolivia, Nicaragua, Borneo and South Korea. However, students are tending to avoid destinations such as the Middle East and Indonesia, which are considered less safe. Safety fears deter some However, despite strong growth in recent years, there were signs in 2007 that the market for gap year travel, in the UK in particular, was beginning to slow, due to factors such as fears about personal safety, environmental impact, higher university fees and mounting debt. UCAS, the university admissions service, revealed that the
Page
26
Strategy Briefings
World
number of young people applying to defer their entry to university in 2007 dropped to 22,656, compared with 23,354 in 2006, despite a rise in the total numbers going to university. An increasing number of services are geared towards catering to student and gap year travellers. The UK has some well established student travel agencies, the largest of which is STA Travel. The company was set up over 25 years ago by a group of young Australian travellers, whose aim was to enable other young people to discover the world on a tight budget. It now has over 65 university and high street branches throughout the UK and 450 worldwide. Pre-paid cards for gappers Financial institutions are also developing suitable payment solutions for gap year travellers. For example, The Money Shop recently introduced its Titanium Cashplus prepaid MasterCard, in conjunction with specialist prepaid card firm Advanced Payment Solutions. According to the company's own survey of 1,800 British 18-25 years-olds in 2006, one in 10 of these were considering or planning a gap year world trip in the near future, and would leave the UK with an average of 3,064 in savings. However, 25% of these believed they would very soon run out of money. The Titanium Cashplus prepaid MasterCard works in a similar way to a pay-as-you-go mobile phone and can be pre-loaded with cash at any Money Shop or Post Office branch. It can be used on-line, over the phone and at any ATM to withdraw cash. The card is also considered a safer way to travel, since if it is lost or stolen the thief would only be able to spend what was left on the card. E-travel Generation Yers tend to eschew bricks and mortar travel retailers for on-line sites that combine convenience with low prices and seemingly limitless advice. Low-cost carriers (LCCs) are especially popular with students, young couples or singles travelling on a budget and keen to explore new destinations; while on-line travel agencies (OTAs) such as Expedia, Travelocity and Orbitz offer the convenience of being able to compare fares across a number of scheduled airlines. The new "meta-search" sites, like SideStep and Kayak, offer the ultimate convenience since they scan the inventories of the OTAs as well as individual airlines. Furthermore, an increasing number of specialist websites cater to the individual needs of young travellers with specific interests. Advice from the horse's mouth Wary of company spin, Generation Y tend to be the principal users of consumer-created sites such as TripAdvisor (now part of Expedia). These comprise user-generated feedback which is disseminated via blogs, reviews, user groups and forums, enabling people to read first-hand reviews from travellers like themselves. Gaining an on-line presence is, therefore, seen as the way forward for travel retailers looking to grab the attention of Generation Y. Companies with innovative marketing methods, such as Travelzoo's "top deal" e-mail bulletins are the most likely to succeed in reaching this target group. Travelzoo offer subscribers a weekly "top 20" of cheap and often unusual travel deals, which are hand-picked by an editorial team from submissions made by travel companies that often wish to offload spare inventory. Travelzoo entered the UK market in April 2005, and within a year had around 500,000 subscribers. Total subscribers worldwide now top 10 million, and Germany and Spain now have their own bulletins. Clarity is key Speed and transparency are everything to Generation Y. Websites that are uncluttered and offer the simplest fare structures are key to reaching these consumers. For example, in 2007 Teletextholidays tightened controls on how travel companies advertise prices on its website, forcing suppliers to include the cost of compulsory extras in the on-screen price. The move came after Thomson announced it would be absorbing the cost of fuel in its prices to make it more transparent for customers. TripAdvisor also recently announced a major revamp of its website after being criticised for a gradual "cluttering" of the site in recent years as more functionality and tools have been added. The company aimed in 2007 to make the site easier to navigate and more inspirational in nature.
Eating/drinking Habits
Page
27
Strategy Briefings
World
Health versus indulgence In developed markets, Generation Y are the first generation to have grown up often without structured meals at home, since many of their boomer parents went out to work. They have been used to snacking or eating erratically all their lives, and their current eating habits reflect these experiences. Generation Y is also more health aware, despite having spent their childhood surrounded by junk food and TV dinners. Childhood obesity began to become a problem during the 1990s, when this generation were growing up, but young people are now keen to rectify the situation, even going to extremes by trying to emulate the "size zero" celebrities that fill the pages of glossy magazines. At the same time, however, young people are prone to indulgences: for example, while consumption of bottled water is growing among young people, so is alcohol consumption. While people are joining the gym and participating more in team sports, binge drinking is a growing problem in some countries. Developing world consumers turn to packaged foods In developing markets, young people are increasingly choosing to buy packaged foods in modern retail channels, rather than buying loose or fresh products at traditional wet markets or specialist outlets. In China, for example, increased exposure to Western culture has encouraged young consumers to try Western products, such as ready meals pasta and frozen food, which the older generations are less willing to do. On the whole, Generation Y seeks foods that are convenient, healthy, interesting and portable, thereby appealing to their on-the-go lifestyles and desire to try new things. This includes snack foods, as well as chilled/frozen ready meals, chilled pasta and chilled processed meats that can be quickly prepared at home. Many young people either skip breakfast altogether or turn to foods that are quick and easy to prepare, or that may be eaten on the move, including bakery products, breakfast cereals and breakfast bars. The search for convenience Fast food is another popular option for time-pressed students and young professionals looking for convenience. Moreover, young consumers are more likely than older generations to experiment with a wide range of ethnic foods, rather than choose traditional dishes. In developed markets, small, inner-city "metro" supermarkets and convenience stores are well suited to Generation Y consumers. With their extended opening hours and ubiquitous locations, they are an increasingly important retail format for a wide range of convenience foods, such as chilled ready meals. Social drinking Despite increased awareness among the younger generations for the need to stay fit and healthy, sales of alcohol are high among the members of Generation Y. Without commitments they have more time and money to commit to their social life, and drinking is a big part of this. In some countries, drinking has long been a favourite pastime of students, whether at student bars or private parties. Younger people are drinking to reflect their sense of identity and personality. Individuality is becoming more important. Status comes from choosing the "right" drink and the "right" brand. There is often a sense of belonging coming from shared drinking habits, for example, from where people drink, when they drink and what they drink. These modern drinking habits are particularly strong in emerging markets, where the young people who are moving to the cities aspire to be part of the "global village". It is the shopping malls, and the bars and coffee bars where they are first able to experience this "global village" culture. Cities like Mumbai and Shanghai are full of young people keen to spend their newly earned wages on having a good time. The hotel bars are filled with young men and women considering mojitos and caipirinhas. They may be the top end of the market but it is a sector that is vibrant and growing. Binge-drinking (defined as more than five drinks in a session) is a problem among young drinkers in many markets, which has recently led to some changes in regulations. Once restricted to a male pastime, bingedrinking is becoming increasingly common amongst women, and alcohol abuse amongst women in general is on
Page
28
Strategy Briefings
World
the rise. Recent UK-based research estimates that in the 18-25 year-age group, alcohol abuse rose by around 32% in men and 70% in women between 1991 and 2003.
Ethical Awareness
Research suggests that Generation Y consumers are civic-minded and socially conscious as individuals, consumers and employees. This creates strong demand among this generation for products that are considered less harmful to the environment, both in terms of manufacture and recyclability, and those that are less likely to involve the exploitation of workers in poor countries, such as items with the Fairtrade logo. It also reinforces the need for companies marketing products to this generation to improve their Corporate Social Responsibility (CSR) policies and use these to their advantage. Although they are less radical than the baby boomer activists in the 1960s and 1970s, known for their demonstrations for civil rights, women's equality and protecting the environment, Generation Y are far more aware of the world. This is largely due to the vast amount of information that is readily available on the Internet. Furthermore, tragedies such as the 9/11 terrorist attacks and Hurricane Katrina have scarred the adolescence of this generation, and experts see signs that Generation Y are creating their own brand of social consciousness. The findings of an on-line study carried out in the US in 2006 by Cone Inc and AMP Insights suggested that Generation Y are the most socially conscious consumers to date. The study showed that 61% of 13-25 year-olds feel personally responsible for making a difference in the world, and that 81% had volunteered in the past year (although it should be noted that many high schools require volunteering, which has become a must for the college rsum). A further 69% considered a company's social and environmental commitment when deciding where to shop, while 83% would trust a company more if it is socially/environmentally responsible.
Chart 4 % Top Ten Issues Affecting American Youth 2006
Source: Note:
2006 Cone, AMP Insights Top 10 causes on the minds of 15-25 year-olds (survey base:
1,658)
DEMOGRAPHICS
Regional Trends
Echo boomers form large cohort in the West ...
Page
29
Strategy Briefings
World
In the West, Generation Y, though encompassing a narrower age group than Generation X, is generally the larger of the two generations, since it represents the offspring of the baby boom generation that immediately followed World War II. However, while the echo was much larger than the previous cohorts, this generation is generally much smaller than that of the baby boomers, as in many rich countries, the 1980s and 1990s were a period of rapidly falling birth rates. In Southern Europe and Japan, and less markedly in Northern and Eastern Europe, Generation Y is dramatically smaller than any of its predecessors, and its childhood years tended to be marked by small families, both immediate and extended, small classes at school and school closures. On a global level, the 18-26 years age group represented 15.1% of the total population in 2006, a percentage which remained broadly stable over the review period. This was slightly up from the 15.0% share recorded each year between 2002 and 2005, but down on the 15.2% share of 2001. ... but Asia-Pacific still home to majority In line with overall population patterns, Asia-Pacific held by far the greatest number of Generation Ys in 2006, accounting for 56% of the global total. However, in terms of marketing worth, the greatest potential for marketers of products and services aimed at this generation remains in the developed markets of North America and Western Europe. Although these two regions together accounted for only 10% of the Generation Y population in 2006, the greatest amount of wealth resides in these regions. Also reflecting overall demographic trends, the greatest Generation Y population growth over the 2001-2006 period occurred in Africa and the Middle East, where the number of 18-26 year-olds increased by 16%. The region has a young and growing youth population, although purchasing power again remains fairly low among the majority of consumers. This region accounted for almost one fifth of the global number of 18-26 year-olds. All other regions experienced growth in the Generation Y population between 2001 and 2006, with the notable exception of Western Europe, where their numbers fell by 1%. However, their spending power in this developed region is relatively high.
Chart 5 % 18-26s Population by Region 2006
Source:
Chart 6 % growth
% Growth in the 18-26s Population by Region 2001/2006
Page
30
Strategy Briefings
World
Source:
Country Trends
India's young and growing population In absolute terms, due to their vast overall populations, India and China had the largest number of young people in the 18-26 age group in 2006, at 186.6 million and 160.5 million, respectively. However, the two countries have experienced very different growth patterns. While the number of Generation Ys in India grew by 9% over the 2001-2006 period, in China the number fell by 6%. While India has one of the world's youngest and fastest growing populations, China has felt the effects of its one-child policy, brought in to control population growth some 30 years ago. This is now causing an ageing of the Chinese population. Despite the large number of potential Generation Y consumers in these developing markets, it should be noted that the vast majority of young people of this generation still live in poverty. Student numbers in these countries are low as a proportion of the total population, and many young people have been working since they were children. Echo boom in Russia Although Russia's population growth and birth rates are very low, the number of Generation Ys grew by almost 10% between 2001 and 2006. This is because, in the Soviet Union during the 1980s, there was a baby boom echo similar to that in the US, and Generation Y there is relatively large. Growth in the Generation Y population was particularly strong in the UK, compared to other Western European countries, at 12% over the review period. Generation Y accounts for the largest share of the population in the developing countries of South Africa (19%), Vietnam (18%) and Egypt (18%). In the case of South Africa, the high share of young people is due to the very low life expectancy, the average age of the population there being only 15, compared to a European average of 30.
Table 7 '000 2001 India China Indonesia 170,856 170,724 37,530 2006 186,623 160,523 38,384 % growth 9.2 -6.0 2.3 Number of 18-26s by Country 2001/2006
Page
31
Strategy Briefings
World
US Brazil Russia Mexico Vietnam Philippines Egypt Japan Turkey South Africa Thailand Germany UK France South Korea Poland Italy Argentina Spain Venezuela Malaysia Canada Taiwan Romania Australia Netherlands Greece Czech Republic Portugal Hungary Belgium Israel Sweden Bulgaria Austria Hong Kong, China Slovakia Switzerland Ireland Finland Denmark New Zealand Singapore Norway
Source: Official statistics, Euromonitor International
35,438 30,105 20,120 17,770 13,707 12,947 11,690 14,938 12,138 7,887 9,578 8,351 6,450 6,925 6,974 5,603 6,481 5,604 5,689 4,074 3,853 3,790 3,511 3,164 2,378 1,746 1,492 1,502 1,406 1,443 1,141 974 949 1,032 875 849 835 760 568 588 590 462 492 506
38,023 30,765 22,066 17,991 14,988 14,127 12,862 12,535 11,782 9,153 8,995 8,771 7,198 7,082 6,321 5,785 5,719 5,716 5,257 4,484 4,337 4,069 3,286 3,028 2,539 1,756 1,310 1,286 1,256 1,240 1,156 1,011 971 967 936 852 804 800 621 589 539 535 512 502
7.3 2.2 9.7 1.2 9.3 9.1 10.0 -16.1 -2.9 16.1 -6.1 5.0 11.6 2.3 -9.4 3.2 -11.8 2.0 -7.6 10.0 12.6 7.4 -6.4 -4.3 6.8 0.6 -12.2 -14.4 -10.6 -14.1 1.3 3.7 2.2 -6.4 7.0 0.3 -3.8 5.3 9.5 0.1 -8.7 15.7 4.1 -0.8
Table 8
Proportion of 18-26s by Country 2001-2006
18-26s as % population 2001 South Africa Vietnam Egypt Mexico Indonesia Brazil Venezuela India Philippines Malaysia Turkey Colombia Russia 17.6 17.4 17.8 17.8 17.5 17.5 16.6 16.5 16.6 16.0 17.9 16.4 13.8 2006 18.5 17.8 17.7 16.8 16.8 16.8 16.7 16.6 16.5 16.3 16.2 15.9 15.5 % point change 0.9 0.4 -0.1 -1.0 -0.7 -0.7 0.1 0.2 -0.1 0.3 -1.6 -0.5 1.7
Page
32
Strategy Briefings
World
Poland Argentina Slovakia Ireland Taiwan Thailand Chile Israel Romania South Korea New Zealand US Bulgaria Czech Republic Canada Australia Hungary China Spain Hong Kong, China UK Portugal Greece France Singapore Austria Finland Belgium Norway Netherlands Switzerland Sweden Germany Denmark Japan Italy
14.6 15.5 15.5 14.8 15.8 16.1 14.3 15.1 14.5 15.1 11.9 12.4 13.0 14.7 12.2 12.2 14.1 13.5 14.1 12.6 10.9 13.7 13.6 11.7 11.9 10.9 11.4 11.1 11.2 10.9 10.6 10.7 10.2 11.0 11.7 11.4
15.2 15.0 14.9 14.8 14.4 14.4 14.3 14.3 14.0 13.3 13.2 12.7 12.6 12.5 12.5 12.4 12.3 12.3 12.0 12.0 11.9 11.9 11.8 11.6 11.4 11.3 11.2 11.0 10.8 10.8 10.7 10.7 10.6 9.9 9.8 9.7
0.5 -0.4 -0.6 0.0 -1.4 -1.7 0.1 -0.8 -0.4 -1.8 1.3 0.3 -0.4 -2.2 0.3 0.2 -1.8 -1.2 -2.0 -0.7 1.0 -1.8 -1.9 -0.1 -0.5 0.4 -0.1 -0.1 -0.4 -0.2 0.2 0.5 -1.1 -1.9 -1.6
IMPACT ON CONSUMER MARKETS

Cosmetics and Toiletries
Generation Y are concerned about looking good, and, with their growing purchasing power, they therefore represent a significant target market for manufacturers of cosmetics and toiletries in particular, hair care products, men's toiletries and fragrances. Young consumers are typically attracted by distinctive brands offering products which are fun and add glamour. Nonetheless, as consumer lifestyles evolve, tastes are becoming more sophisticated at an earlier age, with less call for whimsical appeal. Colour cosmetics Each of the cosmetics and toiletries sectors under review grew strongly over the review period. The largest, and one of the most mature, was that of colour cosmetics, with a 2006 value of US$35.7 billion. Premium players cater to the young Colour cosmetics brands such as Cover Girl and Maybelline are renowned for their positioning in the mass youth market. However, Este Lauder was the first prestige company to enter the arena with the acquisition of US mass colour cosmetics brand jane, which is predominantly distributed through discounters such as WalMart. Since then, other prestige marketers have followed suit, also keen to exploit the growing buying power of young women. LVMH, traditionally focused on the mature consumer, acquired the prestige brands Urban Decay
Page
33
Strategy Briefings
World
and Bliss in a bid to woo 12-25 year-olds. Wella, meanwhile, added niche brand Tony & Tina to its portfolio in 2002. Direct sellers have also turned their attention to this audience. Avon launched a major new brand, Mark, in 2003, which is aimed at 12-24 year-old women. Mark is claimed to be a "celebration of young women and the mark they are making in the world". The aim of the brand was to provide young women with a business opportunity to sell the make-up, which consisted of around 300 products designed to be fun and modern. A magazine/catalogue called "meetmark" was delivered to an initial target audience of 10 million young women every four to six weeks, and featured the Mark products, trends and lifestyle stories. To maintain the social spirit of the brand, Mark representatives and customers are able to connect at the brand's website. Mary Kay similarly introduced Velocity, a fragrance, skin care and colour cosmetics collection in 2001, representing its first foray into the youth market. This highlights both the emergence of a mix of specifically teen-oriented brands as well as the cross-over of established prestige brands leveraging their reputation to appeal to young consumers. Mascara an area of focus for new product development With the "mod-look" of dramatic, smoky eyes and nude lips being the prevailing trend among young women in Western markets, mascara has become a key source of innovation, with thicker formulations and dualapplication products leading the way. 2006 also saw a new emphasis on delivery, with brushes being replaced with high-precision plastic wands in products including Cover Girl's Lash Exact and Max Factor's Lash Perfection. Another key trend in the colour cosmetics market has been towards increased segmentation and a proliferation of ethnic-specific brands, such as Procter & Gamble's CoverGirl Queen Collection. Catering for convenience is also essential for today's young on-the-go consumers, with examples including BeneFit's Pocket Pal gloss-to-go, foundations with built-in brushes and Avon's instant manicure nail strips. Men's toiletries The most significant growth was recorded in the men's toiletries subsector, where sales rose by 49% in value terms between 2001 and 2006, to reach US$9.7 billion. This can be largely attributed to a change of attitudes, whereby metrosexuality has become the lifestyle of choice for many young men. This trend has opened up a range of opportunities for marketers, especially in the area of men's grooming products. Companies are entering the sector by relaunching traditional brands (as in the case of Procter & Gamble's Old Spice), creating men-only lines (such as Avon's M or Lancme Homme) or through acquisition. An example of the latter is Inter Parfums' 2004 purchase of a 64% interest in Nickel, a company that has developed skin care products for men sold through prestige department and speciality stores in Western Europe and the US. Besides the large cosmetic companies entering the men's market, a number of specialised start-ups have emerged in recent years, such as NFG Stuff ("Not for Girls"), which currently manufactures hair care products for young men in the US, and is planning line extensions into other men's grooming product segments. Some companies are even investing in the area of men's cosmetics. For example, in July 2006, UK drugstore retailer Superdrug launched its Guyliner male cosmetics range, designed for "edgy punky boys". The use of style icons Brands targeting the more sophisticated metrosexual are obliged to have a powerful trendy image, and ideally be associated with fashion and high lifestyle. For example, L'Oral recently signed Kyan Douglas, the grooming guru of the TV series "Queer Eye for the Straight Guy", as its new spokesman, while Procter & Gamble chose David Beckham to be the face of its Gillette shaving products. Although the metrosexual concept is most developed in Western countries, and Europe in particular, it is showing signs of extending into emerging markets, where men have traditionally played a dominant role. For example, as a result of urbanisation, increased disposable incomes and exposure to Western media, Indian men are showing a growing interest in personal grooming. This has made India's urban areas a key target for leading manufacturers of men's grooming products, resulting in a series of new product launches in 2005. These included Emami's Fair and Handsome skin cream, following the results of a study revealing that almost 30% of cold cream users are men.
Page
34
Strategy Briefings
World
Fragrances Mass fragrances also experienced excellent growth of 53% between 2001 and 2006, reaching a value of US$12.5 billion. The cult of celebrity continues to wield its influence over fragrances, and launches of celebrity scents were more numerous than ever in 2006. Some of the more recent stars to put their names to brands include Kate Moss, Kylie Minogue and Gwen Stefani. In July 2007, Bollywood actress Shilpa Shetty took advantage of her newfound fame in the UK, after winning reality TV show Celebrity Big Brother, by launching her new perfume brand, S2. Shilpa Shetty is seen as a role model for Generation Y, having dealt with a televised race row with poise and dignity, and afterwards being conferred with a doctorate from Leeds Metropolitan University. Her fragrance is an example of the new type of cross-over product appealing to this generation, with its "ethnic aroma" encompassing jasmine and citrus. Nevertheless, statistics released by market research company NPD Group indicate that the consumer appeal of celebrity fragrances have waned considerably. It claimed that sales of celebrity scents in department stores in the US fell by 17% in 2006, to US$140 million, despite a significant increase in the number of new celebrity scents. According to NPD Group, the latest trend is for fragrances from designer brands rather than celebrities. These include Ralph Lauren's Ralph Hot and Yves Saint Laurent's Young Sexy Baby, both launched in 2006, as well as the new cK in2u (see box below) from Calvin Klein. Case Study: Calvin Klein Calvin Klein famously captured the Generation X market back in 1994, when it launched cK One, a unisex fragrance that embodied the disaffected, sexually ambivalent grunge youth of the time. With its unconventional black and white advertisements, filled with moping, androgynous models, cK One has been touted as the most perfectly tailored fragrance ever pitched to one market, said to be selling 20 bottles per minute at its peak. Faced with rapidly declining sales of cK One, Calvin Klein (which was purchased by Phillips-Van Heusen in 2002) and its fragrance licensee Coty introduced a sequel in 2007, which claimed to target the "technosexual generation" of 20-somethings. cK in2u comes in a bottle designed by Fabien Baron, which consists of white plastic and glass (similarly to an iPod). The name, designed to be both sexy and "texty", is written in the shorthand of an instant message to attract the attention of young people whose romantic lives are defined in part by casual hook-ups. The women's scent is said to include hints of pink grapefruit, bergamot and redcurrant, with a core of neon amber, while the men's version is more "beachy", with a mix of lime, cocoa and musk. As Generation Y is used to fast-moving information and images, the fragrance is designed to be quick-acting and immediately recognisable on the skin. Calvin Klein is trying to reach Generation Y consumers by creating an on-line community, whatareyouin2.com, patterned after sites like MySpace and Facebook. The company has invited students at film schools around the country to submit short films addressing the theme of "what are you into?", and their clips can be found on the site. Furthermore, in July 2007 Calvin Klein became the first global fragrance brand to launch in the virtual world of Second Life, with the new cK in2u fragrance brand. Residents and visitors to Second Life are able to visit the cK in2u site to pick up virtual bottles of the new cK fragrances, connect with other in-world virtual partners by spraying them with fizzing fragrance bubbles to initiate dialogue, and use specially modified cK graffiti bottles to express themselves and whatever they or their friends are "in 2". UK consumers are then able to click through to the cK in2u.com website to request a free "real world" sample. At the time of writing it was too early to predict whether the new cK in2u will be as successful as its predecessor, cK One, or whether it will be off-putting to Generation Y, who, after all, do not like to be directly targeted and may find the whole "technosexual" concept rather patronising. Creating fragrances to appeal to Generation Y is not only a priority in the West. Music channel MTV India launched a range of youth-orientated, "affordably priced" eau de parfums, eau de toilettes, aftershaves and deodorants in 2007. The MTV Plugged range is being marketed in partnership with Dubai-based beauty company Scion International. In this way, MTV has leveraged the strong brand equity that it has acquired among young people in India. The range will be distributed across India by the Emami Group in over 60 cities and towns.
Page
35
Strategy Briefings
World
Hair care Hair colourants appeal to women of all demographics, as baby boomers and older consumers use them to cover up grey hair and retain their youth, while teenagers and young adults colour their hair in order to express their individuality. The popularity of hair colourants among Generation Y has been spurred by the fact that products facilitate self-expression without permanence and give young people the flexibility to change their image as and when desired, and keep up with the latest trends. Manufacturers of other hair care products are also turning their attentions to Generation Y as they look to segment their ranges and maintain a youthful image. Procter & Gamble's rebranding of its Herbal Essences range of shampoos and conditioners was named among the top five most effective in the 2007 ReBrand 100 Global Awards (see box). Case Study: Herbal Essences Procter & Gamble acquired the Herbal Essences brand as part of its 2001 acquisition of Clairol. However, the brand had already begun to flag by the 1990s, due to increased competition from other natural and organic hair care products from major consumer marketers and boutique brands like the Body Shop. The brand was temporarily revived by the "Totally Organic Experience" ad campaign, which portrayed shampooing with Herbal Essences as an orgasmic experience, but consumers soon tired of this concept and sales once again began to suffer. After 18 months of consumer research, Procter & Gamble launched a new brand strategy for Herbal Essences in May 2006, which was designed to attract its core demographic, the "spontaneous, optimistic, altruistic, experiential" Gen Y female. The strategy included a new logo, whereby the traditional rose illustration was replaced by a streamlined circle and a much more prominent brand name. It also incorporated a range of catchy new names, including collections such as Body Envy, Break's Over, Totally Twisted and Hello Hydration. Perhaps most importantly, the range was given a packaging makeover, based on using packaging shape as the main differentiator. Curvy new shampoo and conditioner bottles were designed not only to look attractive, but to nest together to encourage tandem buys. The relaunch was accompanied by a "holistic" marketing campaign, supported by an unprecedented US$37.8 million in advertising expenditure in major media in 2006. As a result of the rebranding initiative, in the first three months of its launch the overall volume share of Herbal Essences brand was said to have risen by 6%, with some retailers seeing 9% volume share increases.
Table 9 US$ million 2001 Colour cosmetics Mass fragrances Colourants Men's toiletries Styling agents 27,725 8,159 7,237 6,004 6,476 % growth 2001/2006 Colour cosmetics Mass fragrances Colourants Men's toiletries Styling agents
Source: Note:
Global Sales in Selected Cosmetics and Toiletries Sectors 2001-2006
2002 27,754 8,262 7,447 6,145 6,572
2003 30,347 9,063 8,196 7,147 7,271
2004 32,785 10,054 8,911 8,177 7,686
2005 34,448 11,348 9,514 9,081 7,870
2006 35,714 12,513 9,980 9,651 7,945
28.8 53.4 37.9 60.7 22.7
Euromonitor International Men's toiletries excludes shaving products
Page
36
Strategy Briefings
World
Consumer Foodservice
Fast food Young adults are one of the key target demographics for fast food operators. In particular, young, single males are often referred to in consumer food service industry circles as heavy users. As they make less money than older consumers and have less discretionary income, demand in this age group is high for value menus, with offerings such as US$0.99 hamburgers. These heavy users often order much larger amounts of food at a single visit than occasional users, sometimes by a factor of two or three. They are known to spend up to US$40 per day on fast food, and to consume fast food more than 20 times per month. Such users account for approximately 60% of all fast food transactions in the US. Burger King directly targets the young male Burger King is one operator that directly targets the young adult demographic. For example, in 2005, the company used the lead singer of an alternative band popular with Generation X and Yers for its TV advertising campaign, in order to target the 20-something demographic in the US. In the US, new-look stores have been launched that include plasma TV screens, couches and coffee tables designed to create a relaxed atmosphere that attracts young adults and invites them to linger. Similarly, planned refurbishment of some 200 outlets in the UK in 2007 will give them a more edgy, contemporary look. To appeal to young ethical consumers, McDonald's is rolling out sustainable, rainforest-friendly coffee in Western Europe. Packaging and recycling are also likely to become hot topics, especially for fast food, as the sustainability debate develops. To target young Internet users, viral marketing campaigns have also been initiated by several leading companies, including Burger King (interactive website starring Subservient Chicken), Domino's Pizza (on-line treasure hunt in conjunction with eBay.com) and Starbucks (itsredagain.com). Websites such as myspace.com and youtube.com are also proving useful avenues for companies such as Burger King, attempting to up its "cool" quotient through a popular myspace.com profile, and Chipotle Mexican Grill, successfully appealing to college students via a video competition on youtube.com. In addition, e-mail marketing is fast becoming an important method for reaching consumers, with the advantages of being cost effective, easy-to-use, measurable and much cheaper per contact than traditional direct mail. Bakery gains share from burgers Fast food has benefited from the general speeding up of lifestyles that has affected all age groups, and global sales recorded value growth of 43% over the 2001-2006 period to reach an estimated US$405.4 billion. In the developed markets of North America and Western Europe, bakery fast food has made strong progress at the expense of burger bars. Bakery was boosted by promotion and expansion activity on the part of operators such as Subway, and also by consumer demand for novelty and healthier options in fast food. Bakery's growth is being driven by chain expansion, combined with growing demand for premium sandwiches. In the US, Subway opened over 7,000 new units between 2001 and 2005, while Quizno's, Panera Bread and McAlister's Deli all increased their outlet numbers by more than 150%. In Western Europe, Subway doubled its sales between 2004 and 2005, while Prt Manger and La Brioche Dore also saw strong growth. Traditional burger restaurants are diversifying in order to gain new consumers and respond to health trends. McDonald's launch of its Asian Salad in Germany in 2006 is a good illustration of these trends. The major chains also upgraded their coffee offer in order to fend off competition from coffee shops and enhance their morning sales. Most recently, burger chains have demonstrated an increasing focus on nutritional information (with Quick launching a nutrition labelling scheme and calorie-controlled menus in 2006, as part of its new Taste and Nutrition initiative), premium products (such as Burger King's Angus burger) and the breakfast market (for example, McDonald's is reported to be testing kitchens that will allow it to serve breakfast all day). Health becomes a priority Although Generation Y are core consumers of fast food, health is generally considered to be of great importance to this generation, and fast food operators have had to adapt their offer accordingly.
Page
37
Strategy Briefings
World
Trans fat content became a particular issue for fast food chains at the close of the review period, with KFC announcing in 2006 that it would switch cooking oil to eliminate trans fats from its products in the US by April 2007, in time for a proposed ban on trans fats in New York. KFC also took action on nutrition concerns with the formation in late summer 2006 of a Moms Matter! Advisory Board, similar to the Global Moms Panel launched by McDonald's a few months earlier. In the Asia-Pacific region, chicken fast food remains popular despite concerns over bird flu and health issues. This is thanks to the region's traditional fondness for chicken and efforts by KFC to promote its food as healthy, safe and garnished with local taste appeal. In Japan, convenience store fast food has enjoyed significant growth, as urban populations grow and city dwellers look for quick and affordable meal solutions. Convenience store fast food, particularly bento (Japanese lunchboxes), is popular in Japan because it is perceived as fast, healthy and convenient. With its young population, Latin America is an increasingly important market for fast food operators. Asian fast food operator Gendai, for example, currently has a strategy to establish new outlets in Brazilian shopping malls geared towards young consumers in the A and B socioeconomic groups, in metropolitan areas. In Chile, upmarket sushi delivery services, such as those offered by Asian FSR/fast food operators Sushihana and Sushita, have enjoyed considerable recent success among young, urban professionals. Coffee shops Coffee shops have become a popular place for young people to "hang out", and the concept is catching on the world over, thanks largely to the "Starbucks effect". Sales though this type of outlet more than doubled over the review period to reach US$22.9 billion, with growth amounting to 109% between 2001 and 2006. Starbucks was the most dynamic of the top 20 CFS operators in value sales terms in 2005, increasing its sales by 25% (see box). Case Study: Starbucks Starbucks is a truly global organisation that has built up a powerful brand which can be leveraged to support the company's expansion into new markets and new business areas. Starbucks pioneered the coffee house concept in the 1980s. Through various partnerships, the company has licensed rights to produce and distribute branded ice cream, coffee-flavoured liqueurs and ready-to-drink coffees in the US. By 2006, Starbucks had more than 11,000 stores worldwide, of which 984 new stores were opened between September 2005 and March 2006. The company had 165 outlets in China and was looking to develop its network further in Brazil and Russia. Starbucks has maintained its lead over other coffee shop chains and has continued to capture the interest of Generation Y consumers, due to the brand's "cool" factor, and the fact that it continues to develop premium new products and innovate widely in entertainment. The outlets offer a comfortable environment for young people to relax, and recently introduced both wireless Internet access and an in-store music delivery service in North America. In September 2007, Starbucks announced that its customers in the US would soon be able to wirelessly browse, preview and download music from the iTunes Wi-Fi Music Store at Starbucks using iPods, iPhones or any computer with iTunes software. Among the features is a "now playing" service, which automatically displays the name of the song playing in the store. The move intensifies Starbucks' commitment to music sales as a way to enhance the customer experience. With regard to product innovation, Starbucks is currently carrying out its smoothie experiment in an attempt to address health concerns, as well as offering more handcrafted beverages, which are made in front of the consumer. Starbucks also appeals to young people due to its perception as being socially responsible Starbucks Corp is committed to socially responsible coffee buying practices, and Starbucks Fair Trade coffee is available in 23 countries. The company's commitment to social and environmental issues will stand it in good stead as consumers become increasingly aware of the Fair Trade movement and the ethical treatment of coffee farmers. On the other hand, some young people view Starbucks as a global giant, taking business away from small independent cafs.
Page
38
Strategy Briefings
World
Coffee chains have grown rapidly in Western Europe, but have faced opposition in some markets, such as Italy, due strong differences in coffee drinking culture (Italians prefer strong, not very milky coffee, and "to go" is almost unheard of), as well as competition from the established position of local cafs. Coffee concept catches on in developing markets In Eastern Europe, the coffee shop culture remains in its infancy in many markets, although growth is likely to be stimulated by the expansion of Starbucks, which has announced aggressive expansion plans for Russia. Russia's leading chain, Coffee House, targets business executives, office workers and students, charging premium prices of US$2 for an espresso and more than US$3 for a cappuccino. Coffeeheaven, the Polish coffee shop market leader, is also planning to expand in central Europe, having already opened outlets in Slovakia and Romania. Specialist coffee shops are enjoying dynamic growth in Asia-Pacific, despite long-standing tea-drinking traditions in major markets such as China and India. Starbucks has led the way in attracting consumers to coffee shops with branding that offers lifestyle appeal. Trendy 20-somethings are being won over to coffee shops by this positioning, to the detriment of traditional cafs, such as Kissaten, in Japan. Major chains are appealing to these young consumers as a fashionable place to socialise or hold business meetings and some, such as Starbucks, Ikari Coffee and Dante, had introduced wi-fi to many outlets by the end of the review period to enhance their attractiveness.
Table 10 US$ million 2001 Fast food Coffee shops 284,091 10,960 % growth 2001/2006 Fast food Coffee shops
Global Sales of Selected Consumer Foodservice 2001-2006
2002 294,425 12,118
2003 322,157 14,163
2004 352,234 17,243
2005 379,099 19,762
2006 404,648 22,945
42.4 109.3
Alcoholic Drinks
Beer In developed beer markets, such as the US, the UK, Australia and Germany, Beer companies are struggling to maintain the interest of the younger generation, which is exhibiting a growing preference for wine, spirits and RTDs (ready-to-drink alcoholic beverages) on the grounds of fashion. Cocktails have become very popular among young people, and spirits are generally perceived as a healthier alternative to beer. Beer companies have thus turned their attention to other formats, such as functional and fruit flavoured beer, as demand for malt beverages has waned. Some industry commentators in the UK and the US suggest that blush wines are picking up the slack from declining RTDs, with many brands positioned to target younger consumers, especially females aged 18-22 years old. Beer goes functional The functional or energy beer segment has emerged predominantly in the US, where Anheuser-Busch brought the concept to the mainstream with the launch of B(E) in 2005, a beer that contains caffeine, ginseng and guarana. The product was also launched in the UK in 2006. Furthermore, Anheuser-Busch's main rival, SABMiller, acquired the Sparks energy beer brand. The strategy behind the launch of these products was primarily to lure young consumers that have drifted towards mixed spirits drinks, such as Red Bull with vodka, due to their "easy-to-drink" nature.
Page
39
Strategy Briefings
World
Another key concept that has been launched by beer companies to stimulate interest among younger drinkers in Western Europe is the "extra cold" format. Predominantly focused on the UK, momentum has grown behind the concept, with it hitting the mainstream in 2005, proving a rare success story in beer during the year. Scottish & Newcastle was the main exponent of this trend, launching Kronenbourg Extra Cold and Kronenbourg 1664 Cold Premier in 2005, as well as extending its core brands Foster's and John Smith's with new extra cold variants; while Guinness introduced Guinness Extra Cold, and tailored its advertising to the younger consumer. RTDs/High-strength premixes The dramatic growth of RTDs during the review period was fuelled by younger consumers' demand for easy-todrink products offering distinctive, novel flavours, suited to consumption in fashionable bars and clubs. Fashion and highly visible consumption in on-trade outlets have played an increasingly important part in alcoholic drinks, as younger consumers, particularly women, have broken with long-established consumption patterns. RTDs have also exploited the fact that younger consumers have been raised on the sweet taste of products such as carbonated soft drinks. In essence, RTDs are an alcoholic beverage designed for and targeted at the modern younger consumer and, crucially, at the financially independent women who are increasingly offering growth opportunities in otherwise mature markets. Market hampered by new laws However, the end of the review period saw growth in RTDs sales slow significantly, partly as a result of the sector's increasing maturity, especially as it struggled to attract male consumers in certain markets. Another crucial factor dampening RTDs' performance has been the efforts of governments to respond to anxieties that RTDs are encouraging underage drinking and younger consumers to drink to excess. In France, high levels of taxation have constrained the sector's development, and markets such as the UK and Germany have followed the French example by increasing the taxation on RTDs in order to curb excessive consumption of the products, especially amongst younger consumers. Spirits Spirits manufacturers are focusing increasingly on the younger generation, who are motivated largely by fashion- and brand-consciousness. This encourages highly visible consumption in bars, nightclubs and restaurants. Manufacturers have further fuelled sales through on-trade outlets by using them as the focus for their promotional activity, particularly in markets with strict legislation on the advertising of spirits. Spirits producers have recognised that the on-trade wields a significant influence on at-home consumption, as new drinks are often first tried in bars and restaurants, and fashions and trends are first formed through on-premise consumption. Flavoured variants create interest A particularly prominent aspect of new product development has been the introduction of flavoured variants of major spirits brands in an attempt to continue to revitalise brand images and to appeal to the thirst for novelty amongst younger consumers. The trend towards flavoured products was pioneered by premium vodka brands, notably Absolut, but has since become increasingly prominent in categories such as rum and gin, as they challenge vodka for the attention of fashion-conscious younger consumers. Even the super-premium Grey Goose vodka brand recently expanded its line to include a vanilla flavour. Leading rum brands Bacardi and Malibu have also added a number of flavoured varieties to their ranges in recent years, while the Gordon's and Beefeater gin brands were both extended into the flavoured spirits segment at the end of the review period. At present, this trend is most obvious in major developed markets, such as the UK and, particularly, the US; however, as emerging regions increasingly see younger consumers mirror trends from the West, it is likely to become a feature of urban environments of developing markets in the near future. Super-premium brands target fashion-conscious The quickening race to attract younger consumers has not only led to the revitalisation of existing brands through product and packaging innovation and creative marketing, it has also led to the emergence of a new kind of spirits brand developed and targeted directly at highly fashion-conscious younger consumers. As is the
Page
40
Strategy Briefings
World
case with many trends, including the development of a super-premium category in areas such as vodka, this trend has been pioneered in the US, where the liqueurs sector saw the emergence of brands such as Hpnotiq, Aliz Blue, Drambuie Sylk Cream and Envy NV Liqueur, which gained strong credibility amongst ultrafashion-conscious younger consumers by restraining from mainstream advertising and developing a presence on the club scene in major metropolitan areas such as New York. Often the strategy would involve the sponsoring of events and parties to generate excitement around the brands amongst a very precisely targeted consumer group. Such is the challenge of targeting the younger, hip consumer base with disposable income to spend on socialising that several drinks companies have associated themselves with popular music genres, notably rap and hip-hop, including Cristal champagne, Moscato wine, Patron tequila and Hpnotiq liqueur. The Jgermeister bitters brand is an example of a spirits company that has adapted itself successfully to modern market conditions by repositioning itself in the US as a "trendy" drink for younger consumers. In contrast to its previous image, which mainly focused on its health properties as a digestif, Jgermeister revamped its advertising strategy to appeal more to fashion-conscious younger consumers in the US, publicising itself through the sponsorship of youth-orientated events, such as rock concerts. Popularity of home cocktails fuels growth The growing popularity of cocktails has played an important role in attracting younger consumers to spirits, and has underpinned the strong performance of products such as vodka and rum, which have proved versatile bases for cocktails and long drinks in several markets. In Italy, younger generations perceive spirits such as whisk(e)y, brandy and amaro to be old-fashioned, and seldom now follow the traditional association of spirits consumption with meal-times. However, their consumption of cocktails such as the vodka and Red Bull, Mojito and Cuba Libre is steadily increasing, spurred by the growing "happy hour" trend. Cocktails are preferred for their lower alcohol content, their sweeter taste and the fact that they take longer to be consumed, which makes them cheaper for young people in bars and clubs. Significantly, the traditional local spirit sambuca recorded an improved performances in 2005. The main reason was the repositioning of this product from a traditional Italian spirit to a product targeted at younger consumers. Similarly, in the UK, cocktails have encouraged younger consumers to migrate from other alcoholic beverages, particularly RTDs. Former consumers of such products appear to have grown away from sweet-tasting multicoloured RTDs towards more sophisticated cocktails. "Approachable" wines for Gen Y Although Generation Y is far from being the most important target group for wine producers, a report published in August 2007 by the Adams Wine Handbook suggested that the wine market in the US is currently being driven by wines aimed at the younger generation. The "approachable wines" segment, which comprises brands targeted specifically at the 21-30 age group, include brands such as Yellow Tail, Pinot Evil, Killer Juice and Dog House. Yellow Tail has reportedly become the leading imported wine in the US. Launched in 2001, its popularity has been driven not only by its taste-appeal to wine novices but by its distinctive brand name and label. The brand was also driven by effective marketing via a joint venture with importer WJ Deutsch & Sons. The success of Yellow Tail has had an impact on other wine producers, which are now introducing new, consumer-friendly labels that appeal to younger consumers.
Table 11 US$ million 2001 Beer RTDs/high-strength premixes 136,483 7,977 % growth 2002 138,087 9,752 2003 152,322 11,119 2004 167,278 12,347 2005 175,358 12,758 2006 183,346 13,018 Global Sales of Selected Alcoholic Drinks 2001-2006
Page
41
Strategy Briefings
World
2001/ 2006 Beer RTDs/high-strength premixes

34.3 63.2
MARKETING TO GENERATION Y
Understanding the Market
For a long time, baby boomers and Generation X have been the most important generation to marketers, due to the large size of this demographic and their significant spending power. However, marketers have recently begun to turn their attention to Generation Y, whose strong opinions and spending appears to be surpassing that of all previous generations. The challenge for marketers is to form a closer connection with these consumers, who could, after all, become their long-term customers. In some ways, like children, young adults are "getting older younger". This is due to many factors, but the key change over the last decade has been the ability to communicate with and be influenced by peer groups, and the increased spending power and confidence which enfranchises teenagers as consumers and makes young adults sophisticated, confident and accomplished purchasers. Gen Y as influencers Understanding how to sell to young adults has massive reward potential. Young adults have become huge purchasing icons in areas of fashion and music and arbiters of coolness in general, influencing those in their late 20s, 30s and 40s, and even the boomer generation. If companies can identify a trend while this is still hidden from the next oldest demographic they can reap the benefits of being the first to bring it to a higher spending market. Studies have shown that teens and young adults want instant gratification and immediacy, as well as merchandise that is either cheap or elite, thus squeezing out mid-range products. What Generation Y wants out of a brand is simplicity, convenience, a clean, healthy image and individuality. Furthermore, while the "cool" factor is essential, Generation Y also like to be individual, and this gives rise to demand for products that are easier to accessorise, such as cars that can be adapted with new rims, wheels and exhausts. Preferred retailers Due to the fact that they have spent their lives on the Internet, Generation Y are more empowered than previous generations, often having as much knowledge of a product as sellers themselves. Retail outlets in the US that are popular with young people include higher end retailers such as Abercrombie & Fitch and J Crew, as well as lower end ones, such as Forever 21. Generation Y also have different preferences than older generations when it comes to e-commerce. According to a US survey by Jupiter Research of consumers who had bought products or services on-line in the past 12 months, people aged 18 to 24 favoured Best Buy, Circuit City and eBay more than consumers as a whole, and were less likely to shop at the Macy's or JC Penney websites than other consumers.
Branding
Brand loyalty among the Generation Y audience tends not to be as strong overall as it is among older consumers. Consequently, companies that once held an edge over their competition simply because they held widely known and popular brands may feel pressure from new companies entering the scene that are being made popular by teenagers and Generation Y.
Page
42
Strategy Briefings
World
A survey of 100 Generation Y trend-setters in the US published in 2007 by Outlaw Consulting concluded that this demographic is drawn to brands that are simple and offer convenience, both in terms of the product's visual appearance and the way in which offerings are organised. The sample mostly targeted consumers aged 21-27, and the goal was to compile a "Trust Index" of brands that evoke "deeply positively feelings" among the trend-setters. The Most Trusted 15 brands named by the trendsetters in the survey are shown in the table below. The reasons for trusting certain brands were various. For example, In-N- Out Burger was a respected brand because it pays its employees well, making trend-setters happier to eat there than at a fast food chain where workers were not treated well. Jet Blue was very popular among trend-setters, who cited factors such as its simple website and fare structure, low prices and lack of restrictions. The survey concluded that any company that is inconvenient or confusing, or that used over-designed imagery, is seen as out of touch and too "corporate" by the younger generation.
Summary 3 Brand Apple Trader Joe's Jet Blue In-N-Out Burger Ben & Jerry's Whole Foods Adidas American Apparel Target H&M clothing stores Levi's Volkswagen Converse Vitamin Water Red Stripe Jamaican beer
Source: Note: Outlaw Consulting Survey covered "trend-setters" aged 21-27
US: Most Trusted Brands Among Generation Y Consumers 2007 Sector Computers Retail Airline Consumer foodservice Ice cream Retail Sportswear Fashion Retail Retail Fashion Automobiles Sportswear Beverages Beverages
British Gen Yers like technology and chocolate A study of preferred brands by Facegroup carried out on 16-25 year-olds in the UK in 2006 revealed that young people in this market have the strongest affinity with technology brands. When respondents were asked to choose "my kind of brand" from a list of 60, Sony headed the list, while Internet brands Google, Microsoft and eBay also featured among the top 10. The chocolate brands Cadburys and Galaxy were also among the top 10 brands chosen by Generation Yers, suggesting that dieting is not as strong a priority as it may be among older generations, and that young adults may share some of the characteristics of teens and tweens.
Summary 4 Brand Sony UK: Preferred Brands Among Generation Y Consumers 2005 Sector Electronics
Page
43
Strategy Briefings
World
Google Microsoft Nokia Cadburys Coca-Cola Ebay Tesco Galaxy Boots

Source: Note:
Internet IT Mobile phones Chocolate Beverages Internet Retailer Chocolate Retailer

Face Tech Tribe Report (Facegroup) 16-25 year-olds; ranking, when asked "My Kind of Brand", prompted from a list of 60 brands
Advertising
The speed with which word of mouth spreads information concerning fashion, music, gigs, venues, cool products, rip-offs etc is faster with the Generation Y group than it has ever been before, because of its mastery of technology and social structures built around on-line (and texting) communication. The advertising industry is finding Generation Y hard to reach by traditional methods. Because of the personal technology available to them, they are watching less television and consuming less print media. At the same time, they put their trust in peer-to-peer networks, where select groups of people discover something new in music, the local area, in fashion and share it. Advertising goes on-line A recent survey by Forrester Research found that advertisers are slashing TV ad budgets and channelling the money into on-line advertising. In an effort to penetrate the inner circle and elevate their brands and products to "it" status, marketers have little choice but to re-evaluate their advertising and marketing techniques. With relatively new areas such as video-on-demand, on-line gaming, mobile and interactive emerging, marketers have major opportunities for unprecedented levels of consumer targeting. For example, L'Oral has been targeting its colour cosmetics brand, Maybelline, at young consumers through the mobile Internet in Japan, where around 63% of the country's 21 million users are aged between 15-25. Customisation is thought to be key to reaching this audience, for example by way of sector-specific emails and newsletters, blogs and on-line industry networks. All of these can be tailored to Generation Y, who are on the Internet checking e-mails, shopping for the latest fashions or consumer electronics or researching jobs. The popularity of such websites as YouTube, which allows consumers to upload and share videos, has enfranchised the consumer as a producer of advertising, while a plethora of forums and notice boards has made the consumer both a commentator and arbiter of taste. Using the new media, teenagers and Generation Y make their own commercials often disparaging famous brands and spread them virally. In-game advertising reaches young males Interactive games are also being used by marketers hoping to get their products in front of Generation Y. Men of this generation are the hardest market to reach as they watch less television than women. However, on-line gaming sites are enormously popular with this group. For example, in the US, IGN Entertainment, which has sites such as ign.com, and gamespy.com, claims to average 15 to 20 million unique users a month, 91% of whom are male, with an average age of 22. Furthermore, UGO Networks, a fantasy entertainment portal, aimed at the 18-34s age bracket, reportedly attracts about 10 million unique US visitors each month. In May 2006, it was announced that Microsoft would acquire the in-game advertising company Massive in a bid to dominate this market, which is expected to be worth US$1 billion by 2010. Microsoft intended to extend Massive's technology beyond gaming for use in products such as Windows Live, as well as the company's new on-line ad delivery product adCenter. Massive's technology enables the delivery of advertisements within on-
Page
44
Strategy Briefings
World
line games, often in formats that mirror real-life advertising media. Hoardings, billboards and poster sites are commonly seen in games, especially sports titles, which attempt to mirror reality. Platforms such as Xbox and PlayStation enable gamers to play against each other in real time across the globe, and because the advertisements are delivered in real-time, MSN is aiming to sell the value of the service based on its ability to target small groups of consumers. The in-game advertisements are not only updateable and trackable, elements such as the geographic location of the player, particular audience demographics or time of playing can be catered for and delivered globally. This is regarded as an excellent way of reaching the 18-34 year-old male demographic, because, according to Microsoft, this group continues to spend more time playing video games than watching TV. For women, community and entertainment sites offer the best opportunities for marketers. For example, in the US, gURL.com (part of the iVillage Network) is a community site for teenage girls and young women. With its focus on interactivity, advertisers are afforded plenty of opportunities to connect with the audience via quizzes, games, and interactive features that showcase their products. Companies such as 360 Youth also offer access to millions of Generation Y consumers, both male and female. The network includes such sites as Alloy, CollegeXpress, and ELLEgirl Magazine. Sponsoring sports/music events gives credibility Alcohol brands and soft drinks often penetrate the music and sports industries in order to reach the younger generation. In the UK, Carling is using music as part of its strategy, with its name on music venues across the UK and sponsorship of the 2006 Reading Festival. Red Bull uses sport, particularly flying and motor sport, to support its positioning as an energy drink that "gives you wiiings". In North America, Smirnoff is sponsoring the House of Blues: live blues inspired music and events. Budweiser sponsored the 2006 Fifa World Cup in Germany.
SHIFTS IN MAJOR MARKETS

China
Population trends Although the total number of people in the 18-26 age group in China fell over the review period, this masks a notable upturn in both 2005 and 2006. In 2006, there were 160.5 million 18-26 year-olds, which represented just over 12% of the total population. The decline in the earlier part of the review period was largely due to China's one-child policy. However, a child-bearing peak in the 1990s has led to a small bulge in this age group in recent years.
Table 12 China: 18-26s Population Trends 2001-2006 2001 Number of 18-26s ('000) % growth % total population
2002 158,925 -6.9 12.5
2003 154,087 -3.0 12.0
2004 151,125 -1.9 11.7
2005 155,555 2.9 12.0
2006 160,523 3.2 12.3
170,724
13.5
Generation Y profile The only child syndrome Generation Y in China are the first group of only children, ie those born after the introduction of China's onechild policy in the late 1970s, to have significant spending power. Since their parents' resources do not have to be shared among siblings, they have more to draw on. This, combined with the new consumer culture of spending rather than saving, makes Generation Y a very hot segment for marketers.
Page
45
Strategy Briefings
World
Many only children have grown up enjoying significant material comforts compared with their parents' generation, and now have considerable spending autonomy. Horizon Research, a Chinese market-research company, found in 2004 that many teenagers in big cities can receive cash handouts from relatives and family friends during the lunar New Year festival of 1,000-2,000 yuan, which is the equivalent to more than a month's wages for the average urban worker. The new influencers Furthermore, advertisers in China believe young people are exerting a strong influence over the spending habits of their elders. Many are far better educated than their parents, whose studies were disrupted by the political campaigns of Chairman Mao. Their ability to persuade their parents to adopt certain brands extends well into their adult life, due to the fact that young Chinese people tend to continue living with their parents at least until marriage. While students generally have lower discretionary incomes, being totally dependent on families to pay for their tuition and living expenses, university graduates usually get far better-paid jobs than those without tertiary education. This group expanded rapidly during the review period, thanks to government efforts to increase enrolment. In 2004, 2.8 million students graduated from institutions of higher education in China, which was more than twice as many as in 2002. Unafraid of debt Although savings levels in China are still high, today's young people have a significantly different attitude towards debt than previous generations. They have high expectations and do not allow debt or low income to prevent them from spending, be it on travel, clothes, food, drink or fashionable places of entertainment. The attitude is essentially hedonistic enjoying today without fear, and not saving for the future. In common with their Indian counterparts, the typical urban Chinese generation Y does not worry about economic downturns, believing that time is on their side. They have years to start saving for marriage, children and mortgages, while retirement is not on the radar. This attitude is partly based on confidence in the country's future: inflation and interest rates are low and the country is achieving a healthy surplus, even if they are not. According to economists, this imparts a sense of security. However, the picture is different in rural China, which is still mired in poverty, while many inland cities are still several years behind Beijing's level of wealth. Optimism for the future In 2005, Business Week magazine conducted a survey of 1,000 MBA students at 13 of China's top institutions. Amongst the key results was the high level of optimism in China's and their own future: more than 50% of MBA students expected a large pay rise on graduation: 25% expected to at least double their salary after graduation and 25% expected to start a business within five years of graduation. Multinationals, large local companies and state-owned organisations are competing fiercely for talented Generation Yers in China. After a few years of good experience, well-qualified young workers have their pick of mid-level, career-oriented jobs. Their salaries are now much higher than just a few years ago, and they have unprecedented choices. Salary is much higher on their agenda than is the case with their Western counterparts, but, as in the west, they are seeking strong personal development, including good contact and mentoring with their bosses and senior management. Live or die A recent survey of young urbanites on the Chinese mainland found that two thirds are willing to "seize every opportunity to enjoy life", including buying high-end consumer goods and luxury brands. Some 57% of the respondents "dared to consume tomorrow's money", while only 48% were concerned with the debt issue. Those spending "tomorrow's money" on luxury goods in the name of living a "quality life" are known as "Yueguangzu" in Chinese, meaning that they spend all they earn each month without saving anything. The Yueguangzus are well-educated, have good jobs and are eager to be accepted and respected by society. They therefore wear 10,000-yuan (around US$1,200) suits, use brand-name suitcases, high quality cosmetics and jewellery to make themselves look successful and are willing to buy on credit or bank borrowings to acquire the look and lifestyle of success.
Page
46
Strategy Briefings
World
Part of the reason for luxury goods purchases in China is the fear of losing face. The China Suicide Research and Prevention Centre recently revealed that, according to a survey of 15,431 depression sufferers over the past two years, people in their 20s accounted for almost 38% of the total, while people in their 30s made up 23%. Around 40% of those surveyed had university degrees. A recent report from the Ministry of Health showed that suicide is the fifth most common cause of death in China, but the main one for people aged between 20 and 35. Cars the new must-have Although they have little savings, two hot topics among this group of people are houses and cars. Small, economical cars, such as the VW Polo, are popular among young people. Most car manufacturers have focused on this consumer group and have introduced many new styles of cars to appeal to young adults. Additionally, all kinds of social activities and club lifestyles are very popular among this age group. Consumer market trends Young Chinese women are very interested in fashion and style, including clothes, shoes and bags, while men are also becoming more concerned about their appearance. Demand for male skin care products, perfume and even beauty salons promises a bright future and many business opportunities in these areas. Luxury products are popular among young adults with high incomes. Young males enjoy mobile phones, PDAs and digital cameras, whilst young females are more interested in jewellery and high-profile brands such as Prada and Chanel. Within the consumer foodservice sector, small full-service restaurants located in local neighbourhoods, offering similar food to home-cooked dishes at competitive prices, are frequently patronised by young consumers with busy lifestyles. Fast food, either western or Asian, as well as home delivery/100% takeaway, is also a popular choice among such consumers. Coffee shops have grown rapidly from a small base, as higher disposable incomes have given rise to lifestyle changes among young urban Chinese consumers. Mobile phone calls to become cheaper Sales of mobile phones more than doubled over the review period, to reach a value of US$15.9 billion in 2006. In February 2007, telecom operators began to roll out a "caller pays" billing system across the country, which effectively removes incoming call charges and thus reduces the monthly bill for mobile phone users. In addition, the roaming fee is also expected to be regulated and probably abandoned in the coming years. The reduction of fees and charges should lead to strong growth in the number of mobile phones over the forecast period. Sales of portable MP3 players are still in their infancy, but growing very rapidly among the new urban middle classes. Virtually unheard of in Mainland China at the start of the review period, portable MP3 players have become the most popular consumer electronic product for Chinese youngsters. Almost every young person wants to own an MP3 player and there are now many brands available in the market. Many domestic manufacturers entered this subsector as it became the fashion "must have" item. As the penetration of these devices is still quite low, there is still a great deal of room for further expansion over the forecast period. Absence of drinking culture among young people With regard to alcohol consumption, the drinking culture that typifies student life in many Western markets is not apparent in China. Here, alcohol tends to be consumed largely by older generations, although there is a growing trend for young urbanites to frequent fashionable bars. Beer is popular in certain regions, such as the provinces of Cichuan and Chongqing, where it is consumed with hot pot dishes by young consumers. However, this mainly consists of domestic economy lager rather than premium or foreign brands. Most cosmetics and toiletries sectors enjoyed strong growth over the review period. Sales of colour cosmetics grew by 78% between 2001 and 2006, to reach a value of US$1.2 billion. As a result, Western manufacturers are tapping into this growing market. For example, L'Oral acquired local mass colour cosmetics brand Yue-Sai in 2004, and re-vamped its image in 2005 by using Taiwanese film star Shu Qi in its campaigns to appeal to younger working women. Within hair care, styling agents are chiefly targeted at young people, while colourants are often used by young fashion-conscious consumers.
Table 13 China: Sales of Selected Products and Services 2001/2006
Page
47
Strategy Briefings
World
US$ million 2001 Fast food Mobile phones Beer Colour cosmetics Portable MP3 players Recorded music Colourants Styling agents Coffee shops Mass fragrances Men's toiletries
2006 39,881 15,897 12,914 1,169 553 148 148 134 108 107 92
% growth 101.1 107.9 38.2 77.5 1,216.7 104.8 77.6 24.5 746.5 51.5 139.6
19,828 7,648 9,344 658 42 72 83 108 13 71 38
France
Population trends France's population of 18-26 year-olds remained very steady over the review period, amounting to 7.1 million in 2006. They accounted for just under 12% of the total population, a percentage which remained virtually unchanged from 2001.
Table 14 France: 18-26s Population Trends 2001-2006 2001 Number of 18-30s ('000) % growth % total population
2002 6,897 -0.4 11.6
2003 6,935 0.5 11.6
2004 6,997 0.9 11.6
2005 7,043 0.7 11.6
2006 7,082 0.6 11.6
6,925
11.7
Generation Y profile Students on the rise, but incomes remain low The number of students going on to higher education in France has risen over the last couple of decades, since it was a major aim of French politicians in the 1980s that 80% of future generations should at least achieve the baccalaurat (normally taken at age 18), which allows them to go to university, or business or engineering school. Most students in France derive an income either from their parents or from a government grant, or both. They rarely have part-time jobs, tending to work only in the summer holidays. Many French students purchase their first car while at university. With the overall increase in consumption of alcoholic drinks, the number of car accidents affecting people of studying age and young adults is rising rapidly. Several public information campaigns have been launched to help change this behaviour, while innovative products have been launched to test blood alcohol levels and are regularly distributed by the owners of nightclubs. As a rule, the limited purchasing power of the population of studying age restricts its capacity to purchase expensive goods. Many students eat in student restaurants or in fast food restaurants. Pizza and pasta also feature regularly in the food intake of the average student, who will often save money to go to the cinema or have a drink with friends. Young professionals reluctant to grow up
Page
48
Strategy Briefings
World
According to French sociologists and journalists, many young professionals in France today can be described as "adulescent", ie living the life they did as students. They still go out at night and are in no hurry to get married or have children. Many of them live alone but they may also live with their parents for convenience. This trend is beneficial for the manufacturers of some products, as it effectively extends the segment of teenagers to include a group with a similar way of life, but with higher incomes and greater independence. This way of life offers significant sales potential for some products, especially in new technologies, for example MP3 players, mobile phones or digital cameras, as young adults are more mobile and their one-room apartments are relatively small. Designer clothing and shoes also have significant sales potential amongst young adults. On the one hand, people of this generation are very conscious of, and involved in environmental and peace campaigns. However, on the other hand, they tend to live more by the maxim "carpe diem" ("seize the day"). These consumers are not expected to settle down in their early 20s but rather in their late 20s and early 30s. The budget allocated to furniture is very low and this explains the success of Ikea amongst this segment of the population, as the Swedish retailer is able to provide affordable but trendy furniture. Young people on the move The most dominant and innovative trend among the French young adult population is their desire to travel in order to gain new experiences. The success of the Erasmus programme, which facilitates study abroad, and the increasing number of young adults who cross the Channel to work in the UK are significant. France is perceived by many young people as too traditional in its way of life, while London and Berlin are considered much more attractive than Paris for socialising. In addition, experience of professional employment abroad is increasingly perceived as advantageous for young candidates applying for jobs in France and one that provides significant benefits to their future employers. Consumer market trends Demand in France for new technology, such as mobile phones and portable MP3 players, has burgeoned in recent years. Revenues from mobile phone sales grew by 214% between 2001 and 2006, to reach US$11.3 billion, while sales of portable MP3 players reached US$964 million in 2006. The value of the fast food market in France doubled over the review period, to US$6.1 billion, fuelled by demand from the younger generation. Bakery products were particularly popular, with sandwiches with intriguing fillings and available to eat on-the-go at any time day or night now a sign of modern urban French life. However, because of France's strong caf culture, coffee shops have failed to take off in a big way in this country. Although sales through specialist coffee shops grew dramatically over the review period, they were still very low by 2006, at just US$47 million. New taxes on RTDs cause price to double Within the alcoholic drinks market, RTDs/high-strength premixes achieved strong overall growth of 59% in value between 2001 and 2006, despite the restrictions placed on them during the review period. RTDs saw dramatic growth up to 2004, as young adults, as part of the "soda" generation, have a sweeter tooth than previous generations. However, in 2004, the French government raised taxes on pre-mixes to the same rate as beverages that use fermented malt and contain between 1.2 and 12 of alcohol, as well as a level of sugar above 35g per litre. The tax doubled the final price of most RTDs, and caused a decline in sales in 2005 and 2006. Beer is not typically consumed heavily by young people in France, as the bitter taste does not appeal to them, and young consumers, especially women, are increasingly looking for sweeter alcoholic drinks. Brewers have responded to this challenge by launching premium beers, mostly imported from Germany, Benelux and the UK, and, in particular, flavoured beers. Cosmetics and toiletries lack new product development Young people represent a significant market for cosmetics and toiletries, with men of around 20 years of age being the major consumers of specialised men's toiletries. However, there has been little in the way of recent new product innovation aimed at the youth market in both the hair care and fragrances sectors. One exception was Schwarzkopf's Got2b!, a styling product line aimed at 15-30 year-olds, launched in 2005. The range offers fragrances like bubble-gum and lollipops, catchy names (eg Raide Dingue smoothing balm, Plein les Yeux shining spray and Rien Cirer wax) and attractive packaging. Furthermore, brands such as Fructis Manga Look
Page
49
Strategy Briefings
World
(Gemey Maybelline Garnier SNC) have focused on making styling more appealing and entertaining to regain the interest of young consumers.
Table 15 US$ million 2001 Mobile phones Fast food Beer Colour cosmetics Recorded music Portable MP3 players Colourants Men's toiletries Styling agents Mass fragrances RTDs/high-strength premixes Coffee shops
France: Sales and Growth of Selected Products 2001/2006
2006 11,346 6,062 2,595 1,420 1,300 964 741 459 444 380 220 47
% growth 214.0 100.0 41.4 54.0 -28.9 6,785.7 41.0 103.5 30.9 36.3 58.9 475.3
3,613 3,031 1,835 922 1,828 14 525 226 339 279 139 8
Germany
Population trends The total number of young people in Germany aged between 18 and 26 rose marginally year on year over the review period to reach 8.7 million in 2006. Their proportion of the total population also increased slightly, from 10.2% in 2001 to 10.6% in 2006.
Table 16 Germany: 18-26s Population Trends 2001-2006 2001 Number of 18-26s ('000) % growth % total population
2002 8,470 1.4 10.3
2003 8,576 1.2 10.4
2004 8,637 0.7 10.5
2005 8,701 0.7 10.5
2006 8,771 0.8 10.6
8,351
10.2
Generation Y profile Older students, lower graduation rates Students in Germany traditionally study for many years, sometimes not completing their qualifications until their late 20s. However, the average age of students recently began to fall, after tuition fees were imposed on those who fail to complete their courses in the prescribed time. According to the Federal Statistics Office, the average age of students fell from 26.2 in 2002/2003 to 25.5 in 2004/2005. Tertiary level graduation rates in Germany are lower than in other OECD countries. Between 1995 and 2004, the rate in Germany was just 8%, compared to the OECD average of 49%. It is feared that the October 2006 introduction of tuition fees in many federal states will further affect tertiary education numbers and impact the labour force and economy in the long term. Germany has tried to improve international competitiveness through the introduction of bachelors and masters courses, a system previously unknown to German tertiary educational institutions. The number of bachelorgraduates rose by 66% in 2005. These courses, however, require more intensive guidance by teachers, which is costly. This is one of the reasons why tuition fees were introduced.
Page
50
Strategy Briefings
World
Tuition fees may lead to bank loans Banks do not currently grant loans to students. However, most students are able to finance their studies with the Staatsdarlehen, a needs-based, interest-free loan granted by the government. Those who do not fulfil its requirements are eligible for Bildungskredit, an educational loan that carries an interest rate. With the introduction of tuition fees it is thought that students will become more reliant on loans. This may affect consumer habits of graduates, since they will be concentrating on paying off their debts. The habit of taking a gap year to travel around the world is not as well established in Germany as it is in the UK, as the average school leaving age is about 20. This could soon change, as many German states are introducing an eight-year secondary school curriculum, which will enable students to enter university at a younger age. Low spending power Students' disposable incomes are typically low, as money is generally saved rather than spent. Therefore, people of studying age are prime users of bars, cocktail bars, festivals, cafs and lower priced restaurants, such as pizza, pasta and Thai or other Oriental restaurants. There is also increased interest in American-style coffee/muffin bars rather than the traditional German coffee and cake emporia. Unemployment among young graduates is high, and the German government's recent decision to cut social security transfer payments for the young unemployed has further reduced the spending power of this age group. Young people aged 18-25 will receive only 80% of the full entitlement while living at home with their parents, amounting to a maximum of 276 per month. However, once in employment, the advantages in terms of income levels of those with tertiary education are great. The strong rise in graduate earnings in recent years is important in a country where economic growth has been lagging, partly due to depressed consumption. A cautious attitude to debt Although German consumers have traditionally been wary of bank cards, young Germans are more open to the idea of buying on credit. However, in general, German consumers even the younger generations are more cautious, and are reluctant to meet their immediate needs by going into debt. Consumer market trends According to market research company IMAS International, the most widely recognised brands by young people in Germany in 2005 were Volkswagen, Mller (dairy), Mercedes, McDonald's, Maggi (packaged food), Haribo (confectionery), Nivea (cosmetics and toiletries), Milka (chocolate), Coca-Cola, L'Oral, BMW, Toyota, Audi, Persil, Deutsche Telekom, Krombacher (brewery), Opel and Ford. Sporting goods remain popular Sports goods and outdoor equipment are popular among Germany's Generation Y consumers, despite their high prices. A Medialine study from Focus Magazine shows that German consumers spent around 40 billion on fitness, sports and outdoor activities in 2005. Although cheap sports, such as jogging, running and working out at home, are the top activities for this age group, the lifestyle concept advertised by many manufacturers is particularly attractive to those interested in adventure and winter sports. These more affluent consumers' readiness to spend a higher share of their income on good sports equipment is steadily increasing. Despite Germany's economic difficulties and environmental awareness, sales of technological time-saving products, such as mobile phones, portable computers and portable MP3 players, have also risen strongly, as in other markets. Fast food on the rise Fast food was the largest of the markets under review in 2006, with sales of US$8.4 billion. This format is growing at the expense of most other types of consumer foodservice, with the number of fast food outlets increasing in the cities, particularly at transport hubs, leisure centres and other hotspots. Fast food outlets meet the needs of the changing lifestyles in German cities, and the concept of fast food as a timesaving convenience
Page
51
Strategy Briefings
World
is part of the daily management of time. Companies such as Subway can target this segment and are growing rapidly. The coffee shop concept is relatively new in Germany, and sales through this type of outlet increased dramatically over the review period, reaching US$310 million by 2006. Starbucks entered the German market only in 2002, through a joint venture with KarstadtQuelle. In 2004, when the chain had expanded to 37 outlets, Starbucks acquired KarstadtQuelle's share of the business. Malt-based RTDs fuel alcohol growth Germany has a significant beer market, with a value of US$6.3 billion in 2006. However, young people are not the core consumers of beer in Germany, and several manufacturers have recently introduced milder tasting beers, such as Beck's, Klsch, Bavarian speciality Helles and some imported beers, such as Hannen Brauerei's Tuborg Pilsener, to appeal more to this generation and rejuvenate sales. Many young consumers have turned to malt-based RTDs, which benefit from their up-to-date design and less bitter taste. However, as in France, spirit-based RTDs experienced strong declines towards the end of the review period, after new legislation came into effect in August 2004 which introduced higher taxes on such products to discourage young people from buying them. Malt-based RTDs were not affected by the legislation and continued to flourish.
Table 17 US$ million 2001 Fast food Beer Mobile phones Recorded music Colour cosmetics Mass fragrances Styling agents RTDs/high-strength premixes Colourants Portable MP3 players Men's toiletries Coffee shops
Germany: Sales and Growth of Selected Products 2001/2006
2006 8,382 6,327 4,534 1,790 1,413 798 697 677 549 527 388 310
% growth 51.1 27.5 271.3 -15.0 28.0 34.9 35.2 82.8 13.5 7,428.6 57.4 182.8
5,549 4,962 1,221 2,106 1,104 591 515 370 484 7 246 110
Italy
Population trends Italy's population has been ageing markedly for some time, due to its very low birth rate. This is one of the few countries in Western Europe to have seen a significant decline in the number of young people over the review period. Between 2001 and 2006, the population of 18-26 year-olds declined by almost 12%, to 5.7 million, and its percentage of the population dropped from 11.4% in 2001 to just 9.7% by 2006.
Table 18 Italy: 18-26s Population Trends 2001-2006 2001 Number of 18-26s ('000) % growth % total population
2002 6,230 -3.9 10.9
2003 6,018 -3.4 10.5
2004 5,923 -1.6 10.2
2005 5,833 -1.5 10.0
2006 5,719 -1.9 9.7
6,481
11.4
Page
52
Strategy Briefings
World
Generation Y profile The number of Italians enrolling at universities has increased significantly since 2001, when the government introduced a new two-tier system which includes postgraduate degrees. According to ISTAT, in 2005, 45% of high school leavers entered university, while 20% of Italians aged 24-30 years had a degree. However, the number of people who do not complete these degrees is also high and growing. Family loyalties The veneration of family and the desire of young people to live close to their parents runs deep in Italian culture. Caring for elderly parents is still considered a social duty; grandparents return the favour by watching over children after school; and on Sunday, gathering all the generations together for a leisurely family lunch remains a regular nationwide ritual. Furthermore, according to a study of young adults in 10 nations published in 2006, young Italians stay in the family nest much longer than other Europeans. Unmarried Italians topped the poll, with 83% living with their parents, compared to 63% in the second ranked nation, Spain. Lack of jobs or affordable accommodation was the main reason for staying at home, cited by 44% of males and 23% of females. However, 21% of men and 33% of women also admitted that the convenience of having clothes cleaned and meals cooked was a major factor in the decision. For those who are able to move out of their parents' home to live on their own or get married, parents typically help them to buy or rent their first house, or more often an apartment. As even rented accommodation is usually unfurnished in Italy, this group is an important target for manufacturers of furniture, household goods and appliances. Status remains paramount to Italian youth Generation Y in Italy has embraced technology and is willing to experiment. Brands and reputations matter a great deal to these fashion-conscious individuals. This is also the age when young adults often purchase their first new car, with Fiat's Cinquecento model especially popular among young people, due to its low price and compact size. Smart cars are also popular, though more expensive. Consumer market trends Clothes, especially branded ones, are important for this age group. However, students and workers at an early stage of their career have only limited disposable incomes for such items. Whilst they wish to follow the latest trends and purchase expensive designer goods, they often cannot afford to do so. The introduction of cheaper designer ranges, such as Armani Jeans, is an attempt to attract Italian students to buy such ranges at an earlier age than they could otherwise afford to do, thus encouraging brand loyalty at an early age. High mobile phone penetration Of the sectors under review in the table below, mobile phones was by far the largest in 2006, with sales reaching US$4.1 billion. According to the latest figures from the International Telecommunication Union (ITU), Italy has the highest mobile phone penetration rate in Europe, at 109 phones per 100 inhabitants. However, it should be noted that these figures relate to the number of activated SIM cards in use, rather than the actual number of phones or users. According to a recent Ericsson survey, young people are attracted by advanced services that offer them enriched communication, such as imaging and video, and services that are fun, such as music and games. Although Italy has in general proved resistant to fast food, growth of 92% in value sales over the 2001-2006 period proves that the concept has caught on among the young generation. Burger fast food has never enjoyed great success in Italy, but bakery fast food has become popular as consumers have begun to seek healthy and quicker lunchtime options. Another notable trend is the fact that multiplex cinemas and commercial centres had become the most profitable locations for fast food outlets by the end of the review period. Coffee shops meet resistance in Italy
Page
53
Strategy Briefings
World
Despite Italy's strong coffee culture, and the fact that the Starbucks concept was inspired by the Italian coffee tradition, specialist coffee shops are a very new concept in Italy. Starbucks still has no presence in this market, partly due to competition from the established position of local cafs. Segafredo Zanetti, the leading Italian coffee shop chain by value, chose to build a presence outside of Italy first due to resistance to specialist coffee shop concepts in its home market. Its breakthrough into the Italian market owed much to the fact that it was already a respected Italian coffee brand, rather than a foreign coffee shop chain. Also, Segafredo has adopted a distinctive brand positioning, which tends to be less standardised than Starbucks. Italians are used to espresso bars and are not open to new types of coffee, or the concept of drinking from plastic cups or taking coffee outside to drink in the street. However, the younger generation could change all this. Sales through coffee shops grew from just US$1 million in 2001 to US$48 million in 2006, and Starbucks has announced plans to enter the market. Drink-driving a growing problem Although the consumption of alcoholic drinks in Italy is still low compared to other countries, such as the UK, there have been signs in recent years that young people are drinking more, particularly at weekends and outside meal times, and they are starting drinking at a younger age. This has led to a problem of drink-driving among young people, with the proportion of those tested found to have exceeded the legal limit for alcohol intake being highest among those aged between 23 and 27 years old. A significant number test positive between 04:00hrs and 06:00hrs, when they have just left night-clubs. The government is trying to address the problem by encouraging young people to choose a "designated driver" for evenings out, who will not drink any alcohol. Moreover, the police have increased the number of patrols on roads, especially at the weekend, when the number of car accidents is higher. Sales of spirits-based RTDs rose substantially over the review period, but most of this growth occurred following their launch in 2003. Since then, sales have tailed off, which has partly been blamed on a lack of innovation. While the leading brand Bacardi Breezer launched a new watermelon version in 2005, there were no new flavours added in 2006. Celebrity perfumes drive fragrance sales Mass fragrances was one of the best performing subsectors in the cosmetics and toiletries market over the review period, recording value growth of 90%. Both premium and mass fragrances have benefited in Italy from the popularity of celebrity fragrances among young people. For example, Jennifer Lopez launched her new perfume, Glow by J-Lo, targeting party girls, while Lovely by Sarah Jessica Parker was launched on the back of the success of the TV series Sex and the City. The new fragrance was advertised exclusively on the Vogue website, to capture the attention of Generation Y. Other celebrity fragrances launched in 2005 include Curious di Britney Spears by Elizabeth Arden, targeting women in the 14-24 age bracket. New fragrances designed for young and trendy men include That's Amore Gai Mattiolo Tatoo Lui, from ITF SpA.
Table 19 US$ million 2001 Mobile phones Fast food Beer Colour cosmetics Recorded music Colourants Mass fragrances Styling agents Portable MP3 players Men's toiletries RTDs/high-strength premixes Coffee shops
Italy: Sales and Growth of Selected Products 2001/2006
2006 4,103 2,949 1,863 1,118 600 331 313 310 264 258 137 48
% growth 86.8 92.1 57.9 38.7 14.9 51.1 90.0 24.1 n/a 80.1 138.0 4290.9
2,196 1,536 1,179 806 522 219 165 250 144 58 1
Page
54
Strategy Briefings
World
Japan
Population trends The number of young people in Japan has been in free-fall for a number of years, as birth rates remain low and the population ages. The number of 18-26s declined by 16% between 2001 and 2006, to 12.5 million. This represented just 9.8% of the total population, compared to 11.7% in 2001. The shrinking youth demographic, combined with the modern, work-shy attitudes of young people in Japan, are causing concern, given that this generation will soon have to carry the burden of supporting the world's fastestageing society.
Table 20 Japan: 18-26s Population Trends 2001-2006 2001 Number of 18-26s ('000) % growth % total population
2002 14,574 -2.4 11.4
2003 14,239 -2.3 11.2
2004 13,902 -2.4 10.9
2005 12,670 -8.9 9.9
2006 12,535 -1.1 9.8
14,938
11.7
Generation Y profile Today, Japan's youth have a very different outlook and aspirations than their predecessors. The "salarymen" that emerged after World War II and contributed to the country's regeneration were regarded as slaves to their companies, often working 12 hours a day, six or seven days a week, while women, once they had married, quit work to raise children. Today's young people are not prepared to dedicate their lives to work, and are more interested in thinking for themselves and doing what pleases them. Students are choosing to study arts over engineering. Graduates are choosing to postpone career choices and marriage, taking time to travel, undertake temporary jobs or simply do nothing for a while. The term "parasite singles" is used in Japan to describe young people who are content to live off their parents well into their 20s. More relaxed work ethic Many accuse Japan's Generation Y of lacking eagerness compared to previous generations, and this cohort have been described as "Generation Slump". Born in the 1980s, at the height of Japan's post-war miracle economy, they reaped the benefits of being the children of the world's second-richest country. Because they came from small families, they were often doted on and given substantial allowances, which they largely spent on leisure. They were not under as much pressure at school as their parents, as government officials attempted to ease the "exam hell" endured by generations of Japanese. However, despite their relatively easy upbringing, malaise is common among today's Generation Y. Depression and suicide are common, especially among those who are unable to get jobs after graduating. This may be due to disillusionment following a decade of economic recession. The word "freeter", (a combination of "free" and the German word "Arbeiter," or "worker"), is now commonly used in Japanese society to describes young people who do change professions or jobs frequently, and choose not to take up an offered job if they do not like the sound of it. Online gaming a popular pastime Young Japanese people are very interested in fashion and clothing, especially women. Others from this consumer group, especially young men, are particularly interested in video games. The popularity of on-line gaming is also on the rise. Within this group there are also many who prefer going out, either socialising or practising sports such as baseball and soccer. Young men in Japan have been taking far more care over their appearance in the last few years. Indeed, in 2001, a popular young men's magazine, Popeye, revealed the results of a survey that showed that the fourth most
Page
55
Strategy Briefings
World
admired profession among men in their early 20s was "beautician", which was popular as a result of a number of celebrity hair stylists who often appeared on TV. Consumer market trends Eating out more frequently Young consumers, particularly those living alone, are increasingly eating out with their friends, rather than returning home after work to cook. Research shows that Japanese people in their 20s eat out over three times a week, while the overall average is just over twice a week. Single working men in Japan are not usually keen cooks and will continue to enjoy dining out or buying prepared food from convenience stores or delivery shops. Japan's consumer foodservice market is being supported by free magazines and websites offering reviews and coupons for restaurants. Hot Pepper is one of the largest free magazines, with over five million copies printed monthly, and Guru Nabi is the most prominent on-line website, sponsored by about 40,000 restaurants. These media and their associated coupons are especially popular among university students and young professionals. Fast food was by far the largest of the sectors under review in 2006, with sales of US$34.6 billion. The sector is fairly mature, with growth amounting to just 20% over the review period. However, coffee shops are increasingly popular, enjoying growth of 50% to reach a value of US$3.1 billion in 2006. The largest such chains are Doutor Coffee Shop, Starbucks and Tully's, which are all present across Japan. Beer sales on the decline ... Japan has a large market for beer, which amounted to a value of US$18.9 billion in 2006. However, sales declined strongly over the review period, by 13%, due to factors such as market saturation, poor economic conditions and the Japanese health craze, as well as the country's ageing population. Beer is drunk by all generations in Japan, and is not particularly associated with young people. The key beer players in Japan are Asahi and Kirin, the latter of which also distributes foreign brands, such as Heineken, OB and Pilsner in Japan. Imported alcoholic drinks are enjoying strong consumer interest among younger drinkers in Japan, who are often keen to try out new things. In addition to sampling new spirits or mixes at nightclubs, the greater availability of affordable imported products in retail channels further encourages trials and home consumption among younger consumers organising house parties and gatherings. The growing number of singles with their own residence in urban cities further encourages off-trade sales. ... but RTDs more popular RTDs/high-strength premixes enjoyed strong value growth of 65% over the review period. Chu-hai, a traditional Japanese RTD, was particularly successful, due to new product developments and a more fashionable image. Products such as those in the Asahi Cocktail Partner series caught up with the rising health consciousness among Japanese consumers. Some domestic spirits are also attracting a younger demographic. For example, shochu (including otsu-type shochu), which used to be perceived as an "old man's drink" (usually consumed at izakaya, or Japanese-style bars), became increasingly popular among young working women during the review period. The main lure of the drink was its reputation as a healthy drink and its comparatively low alcohol content of 20-25%. Japan's mobile phones market is fairly mature, but the market for portable MP3 players continues to grow strongly, with sales rising by a massive 317% between 2001 and 2006. Sales of recorded music fell sharply over the review period, as downloading became ever cheaper. All of the cosmetics and toiletries sectors under review are mature, and experienced either slow value growth or decline over the review period. Styling agents suffered a sharp fall of 14% in value.
Table 21 US$ million 2001 2006 % growth Japan: Sales and Growth of Selected Products 2001/2006
Page
56
Strategy Briefings
World
Fast food Beer Mobile phones Colour cosmetics Recorded music Coffee shops RTDs/high-strength premixes Men's toiletries Styling agents Colourants Portable MP3 players Mass fragrances
28,962 21,702 6,870 5,556 5,256 2,104 1,653 1,004 1,188 825 178 153
34,637 18,943 7,765 5,735 4,135 3,148 2,728 1,036 1,017 831 742 144
19.6 -12.7 13.0 3.2 -21.3 49.6 65.1 3.2 -14.4 0.8 316.9 -6.4
UK
Population trends The UK is one of the few markets to have experienced a relatively strong rise in the population of 18-26 yearolds over the review period. Their number grew by 12% between 2001 and 2006, to reach 7.2 million, while their share of the total population increased from 10.9% in 2001 to 11.9% in 2006.
Table 22 UK: 18-26s Population Trends 2001-2006 2001 Number of 18-26s ('000) % growth % total population
2002 6,495 0.7 11.0
2003 6,583 1.4 11.1
2004 6,780 3.0 11.4
2005 6,969 2.8 11.6
2006 7,198 3.3 11.9
6,450
10.9
Generation Y profile Students in debt Since 2001, the British government has set out to raise the proportion of young people going on to higher education to 50% by 2010. According to the Department for Education and Skills, it reached a record level of 43% in 2003/2004, compared with just 7% in 1964. A key factor for people of studying age is the cost of higher education courses. For the academic year 2005/2006, higher education tuition fees across the UK were 1,175. From September 2006 onward, however, universities and colleges offering higher education courses in England, Wales and Northern Ireland were able to vary the fees they charge new students, up to a maximum of 3,000 per year. Scotland retained significantly lower annual tuition fees of 1,700, leading to heightened competition for places in Scottish universities and colleges. Financing their higher education is a key focus for British students. The Office for National Statistics reported that in 2004/2005, 81% of eligible students in the UK took out loans to support them through higher education, with the average amount being 3,390. Analysis carried out for the Department for Education and Skills investigated the spending patterns of full-time university students in England and Wales. 90% of students surveyed were between 17 and 20 years old at the start of their courses, with the remaining 10% between 21 and 24 years old. In the 2002/2003 academic year, total average expenditure per student was almost 7,000, representing an increase of 28% on 1998/1999. A study by the Financial Times, published in March 2006, indicated that student debt in the UK rose by 18.7% in 2005, to just over 14.6 billion. The average student starts his or her working life with a 12,000 debt to be repaid. Spending habits of students
Page
57
Strategy Briefings
World
The UK student market has been estimated to have a spending power of some 20 billion per annum, of which 1 billion is spent on mobile phones. In general, students tend to spend most of their income on essential items, such as accommodation, food, bills and household goods. The government survey showed that living costs account for around two thirds of their expenditure. Students are also significant consumers of specific items relating to their coursework, however, such as textbooks and stationery. When they go out, they tend to frequent low-cost venues, such as Student Union bars, and cheap restaurants and clubs. Students are a particularly strong target for banks, not least because they compete to provide student loans which they are aware will typically take some time to be repaid once the individual has graduated and is earning a living. A study by youth marketing company Face carried out in 2005 showed that students in the UK differ from nonstudents in that they are early adopters of technology, with almost twice as many owning a laptop and an MP3 player. They are also much less likely than non-students to partake in sedentary technologies such as gaming and watching TV. Student accommodation Within the student accommodation market, expectations and standards are changing rapidly. Only five years ago, the sector was dominated by universities offering traditional halls of residence and local landlords offering multi-let houses. However, the environment has recently become far more competitive, as specialised corporate developers and operators have expanded their portfolios by buying existing stock or developing their own sites. The latest Annual Report from property consultants King Sturge stated that student accommodation sales topped 500 million in 2006, making it a multi-million pound investment sector. While shared bed-sits used to be the norm, en suite facilities are now considered standard in most bedrooms, as are high-speed data networks. Indeed, in King's Cross, London, one private equity developer is currently constructing 800 studios for the top end of the student market complete with free wireless Internet connection throughout the building, 24-hour security guards, coffee shops, a cinema and a gymnasium. According to King Sturge's latest survey on UK student accommodation, the total value of the market, at the end of 2006, was worth more than 17 billion (excluding student accommodation in shared houses). While some 100,000 beds have been purpose-built by private sector developers/operators in recent years, around 300,000 beds are still owned and operated by the higher education sector. However, a significant proportion of these are now outdated and fail to meet both the needs and expectations of today's students. Young people reluctant to flee family nest An increasing number of young people in the UK are living at home with their parents for longer. This is partly due to the growing number of people going on to higher education but it is also the result of people delaying marriage and child-rearing, often until they are in their 30s. Furthermore, with house prices at an all-time high in the UK, many young adults cannot afford to get onto the property ladder. Their options are either renting or staying at home with parents. Most leisure time now spent on-line The Face Tech Tribe Report of May 2005 revealed that young adults aged 16-25 spent the largest share of their weekday leisure time on-line (25%), followed by watching television (22%). A further 16% of time on average was spent out drinking with friends. The work and social lifestyles of women in their 20s, in particular, appear to be changing, with a growing culture of late nights, smoking and binge-drinking. As well as being positive for manufacturers of alcoholic drinks and cigarettes, this also offers opportunities to marketers of products such as skin care, for example, to target this generation with products that prevent premature ageing.
Chart 7 Average % of Weekday Leisure Time Spent 2005
Page
58
Strategy Briefings
World
Source: Note:
Face Tech Tribe Report 16-25 year-olds
Gen Y most likely to be online A recent study by comScore, which examined the online activities of people age 15-24 in the UK, found that this age group was 25% more likely to be online than the general population, spending 24% more time online than the average Internet user in April 2007. The study revealed that younger people use the Internet more than other age groups for communications, content, community and commerce. The comScore study confirmed that social networking sites are the most popular sites among the 15-24 age group, including Facebook.com (where they represented 50% of total users in April 2007), Bebo.com (43%) and Tagged.com (37%). Other properties with strong teen and young adult appeal in the UK include ARTISTdirect Network and Alloy, which are news and entertainment sites. Consumer market trends Generation Y represents the core market for mobile phones and portable MP3 players. The latter grew exponentially over the review period, from a value of just US$7 million in 2001 to US$1.7 billion in 2006. However, value sales of mobile phones actually declined by 19% between 2001 and 2006, as a result of falling prices. The mobile phones market has also reached a certain level of maturity as penetration rates have reached very high levels. Fast food goes upmarket The UK has a substantial fast food market, with sales worth US$24.4 billion in 2006. This market grew strongly over the review period, by 60%, which was largely due to a significant shift towards premium products. This trend was particularly noticeable in the bakery fast food segment, where traditional sandwiches, like ham, cheese and tomato, were replaced on shelves by more sophisticated offerings such as French smoked duck and camembert. Burger chains have also gone upmarket, with chains such as Gourmet Burger Kitchen and Fine Burger Co appealing to young urban professionals. Coffee shops are a popular venue for young people to "hang out" in the UK. These experienced even more rapid growth between 2001 and 2006, with sales increasing by 156% to reach US$1.9 billion. Beer culture going strong Beer remains a popular drink among young people in England, and sales continued to perform well over the review period, rising by 29%. Recent efforts by breweries have included the introduction of citrus-based variants of popular standard lagers, in order to appeal to female drinkers disillusioned with RTDs. Breweries
Page
59
Strategy Briefings
World
also looked to the dynamic speciality and imported beers subsector for new product launches. In the light of adverse publicity surrounding binge drinking and drunkenness among Britain's young people, a notable trend in 2006 was for low-alcohol beers (LAB), which typically contain between 0.5% and 3% abv. Coors is already present in this segment with C2, a 2% abv variant of Carling, while Scottish & Newcastle announced plans to release Foster's Quench, a 2% variant of its best-selling standard lager. RTDs/high-strength premixes suffered an 18% decline in sales over the review period, having lost share to more trendy drinks such as premium ciders (in particular, "cider over ice" brands like Magners), as well as spirits for use in home-made cocktails. Concern over their high sugar content was also reflected in the poor performance of the RTD sector in 2006, although low-sugar drinks, such as Bacardi Breezer's half sugar range and Diageo's Archer's Vea, continued to perform well. Another fast-growing subsector was that of alcoholic milk-based drinks, which are considered more healthy than traditional brands. These include Brown and Vodka Mudshake. New hair care products target party goers Most of the cosmetics and toiletries sectors under review performed well between 2001 and 2006. Many recent new products in the styling agents subsector have been aimed at the young partying generation, including Wella's ShockWaves Tuff Stuff Gel, ShockWaves Xtrovert One Night Wonder Wax and L'Oral Paris Studio Line Party Proof Gel. These are designed to provide extra strong hold for long nights out and to be resistant to water and sweat. Alberto-Culver's new range, VO5 Air Style, meanwhile, is meant to provide a more natural look while still connecting to its younger consumer base. Within the colourants sector, younger consumers tend to use temporary colourants. As they are inspired by fashion and celebrity trends, many youth-targeted brands use celebrity endorsement in their marketing strategies to appeal to this demographic group. Premium colour cosmetics brands that traditionally targeted more mature consumers are looking to extend their ranges to offer more youth-orientated colour cosmetics, while new players entering are targeting young consumers, including BeneFit and Pout. In 2005, Guerlain introduced its Kiss Kiss lipstick brand, which packaging that evokes a fun-loving, sexy image for younger consumers. Celebrity perfumes fuel fragrance sector Mass fragrances have benefited from a trend towards celebrity fragrances, with Glow by J-Lo proving a hit with teenagers and young women in their 20s. Jennifer Lopez's fashionable credentials hit a chord with the UK's MTV-watching generation who, with higher disposable incomes, found the 20 price tag well within their reach. In 2005, Elizabeth Arden's Curious Britney Spears met with similar success among the same target group, and the star's next perfume, Fantasy, soon followed. Men's toiletries enjoyed the strongest growth of the cosmetics and toiletries sectors under review between 2001 and 2006, with sales up by 68%, as young men became more aware of the need for good skin care and hygiene routines. Brands such as Unilever's Lynx created a clearly defined position and strategy targeting young men aged 16-22.
Table 23 US$ million 2001 Fast food Beer Recorded music Colour cosmetics Coffee shops Mobile phones Portable MP3 players RTDs/high-strength premixes Men's toiletries Styling agents Colourants Mass fragrances 15,236 5,706 2,817 1,352 751 2,097 7 1,678 458 402 285 173 2006 24,405 7,358 3,100 1,962 1,921 1,698 1,667 1,376 768 540 374 222 % growth 60.2 29.0 10.1 45.1 155.9 -19.0 23,714.3 -17.9 67.7 34.4 31.6 28.3 UK: Sales and Growth of Selected Products 2001/2006
Page
60
Strategy Briefings
World
Source:
US
Population trends The US's population of 18-26 year-olds grew gradually over the review period, with growth peaking at 2% in 2003 and falling to below 1% by 2006. At 38.0 million, 18-26 year-olds represented 12.7% of the total population, a proportion which remained unchanged between 2004 and 2006.
Table 24 US: 18-26s Population Trends 2001-2006 2001 Number of 18-30s ('000) % growth % total population
2002 35,989 1.6 12.5
2003 36,696 2.0 12.6
2004 37,231 1.5 12.7
2005 37,679 1.2 12.7
2006 38,023 0.9 12.7
35,438
12.4
Generation Y profile Students gain clout A study of the US college student market (ages 18-30, from two-year and four-year colleges, attending part-or full-time) carried out by Harris Interactive in 2005 showed that the college market had expanded in every aspect size, spending power and discretionary income. The study revealed that, while enrolments were at an all time high (16.5 million students), the percentage of those employed had also reached a massive 78%, which generated substantial levels of income and marking significant increases in discretionary spend. Overall spending among college students had increased by almost 16% since the previous study in 2003, to reach over US$175 billion, while discretionary spending had soared to US$41 billion, representing a rise of 24% since the 2003 study. Today's American students are described in the study as among the savviest of consumers with a strong work ethic, but among the hardest to captivate. The study revealed that 15% of college students considered themselves early adopters of electronic devices and gadgets (for males, this proportion reached 24%). The penetration of some consumer electronics, like mobile phones, was widespread (85% of students owned one), and the models they used were more sophisticated. Of those that owned a mobile phone, 75% sent and received text messages and 63% played games; 60% could access the Internet through their phone, and 36% could take, send and receive pictures. Personalisation rated highly, with almost 50% of students who owned a mobile reporting that they had downloaded ring tones. Technology is also important in other areas of students' lives: 63% of students planned to make a technology purchase in the coming year, with 20% planning to buy a digital camera and 17% an MP3 player. Brands with a conscience The study also revealed important data on preferences, including the types of products students prefer to buy and the marketing content they prefer to see, and disparities across ethnic and gender lines. Today's college students are still looking for a good deal 80% of students reported a preference for buying brands that were on sale but their preferences weighed heavily towards socially conscious brands. Though not all students are directly involved in these activities, many are conscientious consumers, contributing to important causes through brand preference. 31% said that they preferred brands that are environmentally safe, 26% preferred brands that give back to the community and 20% preferred brands connected with a cause. 26% were willing to pay more for a brand with a great image. Despite trends towards brands signing big celebrities to promote their products, only 4% of students agreed with this, whereas 36% thought advertisers should use everyday people in advertisements, and 35% thought
Page
61
Strategy Briefings
World
advertisers should use humour in their advertisements. Reflecting these findings, peer influence is gaining importance over television advertising. As many as 91% of students said they pay attention to the more nontraditional advertising method of word of mouth, with almost 70% of students who paid attention to advertisements saying that this most influenced their purchasing decisions. Nearly half (48%) of college students considered sampling a product to be most influential to purchasing decisions. Minorities are key influencers While the use of personal digital technology has reached all college demographics, minorities tend to be the leaders and influencers. Within mobile phone technology usage patterns, for example, African Americans lead virtually every category over Caucasians and Hispanics, logging a greater percentage of text messages, games, pictures and web surfing hours, and downloading more ring tones, files and news to their phone. However, this demographic may prove difficult to reach via traditional media: as much as 93% of African American college consumers claimed to "multi-task while watching television". Looking at differences between ethnic groups, beyond communications and technology, Hispanics spent the most on entertainment at US$40 per month on average, 54% more than African Americans and just slightly more than Caucasians. Meanwhile, African Americans spent 50% more on average than Caucasians on clothing and shoes, and 20% more on personal care products. Graduates represent lucrative market A study by research company Experience estimated that "Mature Millennials" (ie, the college-educated 18-24 year-old audience) represent a US$100+ billion market, making purchasing decisions up to US$400 per month. They are also of importance due to the fact that they are often first-time purchasers, and being major influencers, their acceptance or rejection of a product can make a significant difference to its success. Studies by Experience over a decade revealed that the purchasing power of this group of consumers is growing. As Mature Millennials graduate from college, their annual income will increase significantly, from around US$15,000 on average to US$90,000 with three or more years of work experience. Their monthly discretionary spend will rise from nearly US$240 on average for recent graduates to more than US$430 for graduates with three or more years of experience. Their credit card usage also grows with their income. While they have fewer than two credit cards in college, this will increase to more than three cards per graduate with three or more years of work experience. Their income combined with credit usage is what makes this demographic such an attractive market. After surveying 20,000 Mature Millennials, Experience found that almost 70% spend six or more hours each week on the Internet, while less than 50% spend the same amount watching television. These percentages drop significantly with regards to other media: unlike young adults of previous generations, most Mature Millennials spend only two hours or less reading magazines or newspapers. Consumer market trends Bakery leading fast food growth The US has the world's largest market for fast food, and men aged 18-34 are its largest consumer group. Some chains (eg Hardee's, Carl Juniors and Burger King) targeted this group with extra large portions towards the end of the review period. Fast food chains also focused on reaching on-the-go consumers beyond the traditional lunch day-part, by introducing new coffee and breakfast items. Burger King launched its new BK Joe coffee in 2005, and McDonald's followed in 2006 with a new premium roast coffee. Others focused on expanding their evening day-part with hot items appropriate for dinner. Subway introduced a selection of toasted sandwiches, such as the Bourbon Chicken sandwich, which is marketed as a dinner sandwich. Fast food bakery saw strong growth, led by sandwich fast food brands like Subway and Quizno's, as well as fast casual brand Panera Bread. Panera Bread Co is one of the most closely watched chains in the sector, due to its rapid growth and status as the largest fast casual chain. Positioned as a bakery-caf, the chain's menu is wideranging and covers a number of items that might otherwise not be encountered in the fast food sector, such as a Tuscan chicken sandwich on tomato basil bread.
Page
62
Strategy Briefings
World
Coffee specialists also continued on their strong growth path, with sales more than doubling between 2001 and 2006, to reach US$10.6 billion. These were driven by the continued expansion of Starbucks, but also by the emergence of smaller coffee chains, such as the Coffee Beanery and Caribou Coffee, which benefit from their perceived higher quality coffee and personable atmosphere. Beer fuelled by foreign and premium products Beer represents a large market in the US, with sales worth US$38.6 billion in 2006. Growth over the review period was fuelled by the increasing popularity of foreign and premium beers, at the expense of domestic products. The leading imports successfully established a distinct and appealing image for their brands, eg Corona's Mexican holiday in a bottle, Heineken's European cool and Beck's historic German quality. However, pricing in supermarkets and convenience stores has been very competitive, as the two leading brands of imported lager, Heineken and Corona Extra, have been reluctant to push through any significant yearly price increases. Demand for mobile technology, such as mobile phones and MP3 players, continued to soar in the US throughout the review period. Sales of the latter grew from just US$241 million in 2001 to US$2.4 billion six years later. However, sales of recorded music fell by 12% over the review period, due to the decline of CD sales in favour of cheaper music downloads. Cosmetics and toiletries reach maturity Most of the cosmetics and toiletries sectors in the table below showed slow growth or, in the case of mass fragrances, decline over the review period. The one exception was men's toiletries, where sales soared by 73% between 2001 and 2006. However, this was partly due to the success of anti-ageing products, such as Beiersdorf's new Nivea for Men Active Firming Lotion, which target older men. Products aimed at the younger generation include Axe and Old Spice's body wash extensions, as these iconic brands' message of "getting the girl" has a natural cross-category appeal.
Table 25 US$ million 2001 Fast food Beer Mobile phones Recorded music Coffee shops Colour cosmetics Portable MP3 players Men's toiletries RTDs/high-strength premixes Colourants Styling agents Mass fragrances
US: Sales and Growth of Selected Products 2001/2006
2006 171,246 38,608 18,687 11,757 10,552 8,601 2,390 2,382 1,933 1,647 1,593 1,244
% growth 22.0 16.5 78.2 -12.3 101.7 14.0 891.7 72.5 13.3 0.7 13.0 -17.8
140,328 33,151 10,489 13,406 5,231 7,544 241 1,381 1,705 1,635 1,410 1,514
FUTURE TRENDS
Trends To Watch
Students of the future In the future, Generation Y will become an increasingly important consumer group, as their income prospects are forecast to improve significantly in many countries. Several trends are likely to emerge that will enhance the purchasing power and spending behaviour of young adults, making them an attractive target for a range of manufacturers and service providers.
Page
63
Strategy Briefings
World
The future spending patterns of Generation Y will depend on which end of the age spectrum they are currently at. Many of today's 18 year-olds are about to embark on their student life, but generally with higher incomes than those that went before them, as wealthy boomer parents living in an era of strong economies are better able to fund their children's studies and provide them with more spending money. Furthermore, favourable student loans and the increased availability of credit facilities will allow students to enjoy a lifestyle previously unheard of. This may not be the case in all countries, however. In Germany, for example, there are fears that students will not be as well off in the future, or that young people may be deterred from further education altogether, due to the recent introduction of higher tuition fees. On the other hand, this may encourage more students to buckle down and achieve their degrees within a shorter time, with the goal of achieving a well-paid job by their mid20s. On the whole, the expectations of future students will be high: they will not want to alter the comfortable lifestyles that they have grown up with, and will be prepared to borrow more to achieve this. As their level of wealth rises, students will be the launching platform for smart marketers looking to generate life-long relationships with young, "high value" consumers. In their quest for new experiences and as travel becomes easier, more students are likely to take a "gap year" after secondary education and before going to university, which is likely to be funded by credit or wealthy parents. This will provide opportunities for airlines and holiday companies to target these young people with special deals, as well as for financial institutions to target them with specific products, such as pre-paid cards. The next lifestage For Generation Yers at the upper end of the age spectrum, going into their late 20s and early 30s over the forecast period, many of these people will be settling down and having a family. Their needs will therefore change significantly over the forecast period, more closely resembling those of the current Generation Xers, whose incomes in some markets are drained by high mortgages and the demands of their children. However, at the same time, these consumers will be entering their peak wage-earning years, often with dual incomes, and providing economies remain strong, they will be able to afford more luxury goods associated with family life, such as larger cars and more expensive holidays. Having grown up surrounded by modern technology, these consumers will create strong demand for the latest equipment, be it in the form of high-performing PCs, digital home entertainment systems or satellite navigation devices. Prospects in developing markets In developing countries with rapid economic growth, such as China, India and Vietnam, the large population of young adults with higher disposable incomes presents a vast consumer base. As young people in these countries are very much in touch with global consumer trends, the Asia-Pacific region presents significant market potential for international consumer goods companies. In developing countries where economic growth is robust and where many job and training opportunities exist, an increasing number of young adults are following the trend in developed countries of delaying marriage to pursue educational and career goals. This helps to enhance their independent spending power, as these young adults can now spend less of their disposable incomes on essential goods (such as food), and more on fashion and entertainment. Technology and fashion to remain paramount The favoured sectors for the future in terms of young adult spending are likely to remain music, technology and fashion. The main preoccupation of Generation Y, at least before they settle down to have families, will be leisure activity in general, with specific interest in communications, entertainment, music, DVDs, games and clubbing. Young adults will remain key influencers of the purchasing of other demographic groupings, possessing the "techno savvy" and the style which enables them to be successful advocates of new technology to older generations with greater spending power. It is impossible to predict where fashion will go in the next 10 years, but the desire to be cool is perennial. What constantly develops is the way being cool is communicated. For fashion, peer pressure and the media will stay the main influence on teenagers and 20-somethings. Telecommunications, and particularly mobile phone growth, have profoundly changed the mindsets and lifestyles of young adults and re-prioritised spending patterns. Viral marketing will remain an effective channel for marketers.
Page
64
Strategy Briefings
World
Generation Y are highly aware of environmental issues and the need to look after their health in order to prolong their looks and life-spans. In the future, this generation will be significant purchasers of healthier foods, natural cosmetics and toiletries and anti-ageing products, as well as all things green. The ability of Generation Y to keep in touch and communicate with so many peer groups, special interest groups and friends offers immense viral marketing opportunities for companies selling products to young adults. However this is always provided they have a product which the word on the street, as communicated via texting, e-mailing and chatlines, pronounces cool. Global social networking sites such as Facebook and MySpace, as well as country-specific versions, such as the UK's Univillage, will remain an important aspect of young people's lives into the future, and this will be an ideal way for youth-orientated brand owners to target this generation through advertising, deals and promotions. Attitudes towards work Generation Y will have the most profound impact on the workforce of any demographic to date, as they replace retiring boomers, and subsequently Generation Xers. This is because they will be the most naturally technologyadept workforce in history, demanding quick responses from technology, systems and colleagues. However, analysts also expect Generation Yers to be very insistent on a good work-life balance and will be less inclined to workaholism than the departing boomers. This does not augur well for countries like Japan, where younger generations will need to work hard to care for the ageing population. Despite their rising earning potentials, young people will be more likely to get in debt. They will not only borrow large sums to finance their studies and housing, but are also likely to take out more debts on credit cards to purchase goods and services, or in other words, to finance their increasingly independent lifestyle. This offers significant opportunities for banks and other financial institutions to create loyalty from an early age. Make way for Generation Z ... Despite a general ageing of the global population, the 18-26 years age group is expected to swell slightly over the forecast period, with its share of the total population predicted to rise from 15.1% in 2006 to 15.3% by 2011. However, in 2011, this age group will consist largely of today's teenagers, a cohort that is perhaps even more pampered and technology-driven than Generation Y. Little attitudinal research has been completed to date on the next generation, which is being referred to by some as Generation Z. This includes those born in 1990 or after, who are currently in their teens. As these children mature, they are likely to be heavily focused on health, well-being, the environment and technology. They will be even more aware than Generation Y of the need for sustainability and fair trade, having had these issues drummed into them from an early age. Trends that have characterised Generation Y will become even more pronounced with Generation Z: young women will increasingly demand education, careers and sporting opportunities over marriage and children, while young men will not rely on women to undertake household chores and cooking, and will take more of an interest in their appearance. Women, who have traditionally driven purchasing decisions in many categories, will continue to make progress in business, politics and other areas of life. As a result, they will have less time for shopping and might be expected to value convenience more highly than in the past. Generations Y and Z will be attracted to stores and brands that market to their lifestyles and not only their age. They will remain suspicious of mega corporations, and will demand transparency. Although they will be loyal to retailers and stores who deliver consistent value, quality and service, they will be equally likely to jump aboard the next new bandwagon. Today's teenagers have also been dubbed the M generation, for whom multitasking is a way of life. They may be instant messaging ("IMing"), while chatting on a mobile phone, playing iTunes, and doing homework. A recent survey by the Pew Internet and American Life Project showed that 82% of American children are on-line by the seventh grade, and use it to play music, games and films, e-mail, IM, and use Google and MySpace.
Chart 8 Forecast Countries by Number of 18-26s 2011
Page
65
Strategy Briefings
World
'000 people
Source:
Chart 9 % total population
Forecast Countries by Proportion of 18-26s 2011
Page
66
Strategy Briefings
World
Source:
Forecast Sector Trends

Fast food will benefit from demand for convenience Fast food will remain the largest of the sectors under review, and will continue to see fairly robust growth over the forecast period, with sales set to increase by 18% in real value terms by 2011. Fast food will suit the on-thego lifestyles of the young generation, providing it develops a more healthy image. The future will see a growing tendency for fast food chains to locate outlets in non-traditional locations, such as travel venues, to attract these consumers. Similarly, convenience store fast food is expected to grow strongly, as expectations of finding fast food away from the high street grow, while drive-thrus are likely to become increasingly common. Bakery fast food chains will continue to appeal to Generation Y, with Subway, for example, benefiting from its strong marketing, convenience and the health appeal of its sandwiches. Coffee shops to provide "third place" for youths to relax Specialist coffee shops are predicted to enjoy the strongest growth of the sectors under review over the forecast period, of 38% in real value terms, as the coffee culture continues to catch on around the world. The major
Page
67
Strategy Briefings
World
chains, such as Starbucks, Costa Coffee and Caff Nero, will continue to expand, thus fuelling the market, along with growing demand for premium beverages and for a "third place" for relaxation, work or socialising. Starbucks is expected to expand significantly in Asia, especially China, where retail sales of fresh coffee are currently negligible but are growing strongly. In June 2007, along with its local partner Dong Suh Foods, the company launched Starbucks Discoveries chilled RTD coffee in South Korea, following its debut in Japan and Taiwan in 2005. Starbucks Discoveries products are set to appeal to those young consumers who look up to Western culture. Starbucks is likely to continue to roll out its Discoveries products in other Asian markets, such as Hong Kong and Singapore. Moderate growth for beers and RTDs Sales of beer and RTDs/high-strength premixes are expected to rise by 13% and 15%, respectively, between 2006 and 2011. Although major brewers continue to roll out new varieties, including crossover beer and energy drink products, sales in a number of key markets, notably the US, are likely to be undermined as the younger demographic gravitates towards trendier spirits and wines, or abandons alcoholic drinks altogether in favour of healthier options like energy drinks, sports drinks or bottled water. Men's toiletries to fuel cosmetics and toiletries growth Generation Y will continue to represent a significant market for manufacturers of cosmetics and toiletries, due to their strong interest in fashion and looking good. Mass fragrances and men's toiletries are expected to perform well between 2006 and 2011, while the more mature sectors, such as styling agents, could stagnate. As the older members of this generation begin to approach 30, marketers of skin care products will target them with products designed to prevent premature ageing, in an attempt to further segment their ranges. Men will take an increasing interested in their own skin care regimes, and marketers will design products with a cool image to attract this group, which may continue to be marketed using new metrosexual icons. Designer brands positioned in the masstige segment are likely to fuel the fragrances sector in the future, including Calvin Klein's new brand cK in2u.
Table 26 Forecast Global Sales in Selected Sectors 2006-2011
US$ million, constant 2006 prices 2006 Fast food Beer Coffee shops RTDs/high-strength premixes Mass fragrances Men's toiletries Colourants Styling agents 404,648 183,346 22,945 13,018 12,513 9,651 9,980 7,945 % growth Fast food Beer Coffee shops RTDs/high-strength premixes Mass fragrances Men's toiletries Colourants Styling agents
Source:
2007 419,893 187,563 25,284 13,405 12,967 10,094 10,192 7,993
2008 435,068 192,866 26,848 13,797 13,466 10,518 10,421 8,071
2009 450,349 197,860 28,468 14,196 13,990 10,940 10,696 8,148
2010 464,431 202,928 29,996 14,612 14,468 11,375 10,944 8,228
2011 477,918 207,772 31,665 14,984 14,956 11,824 11,229 8,321
18.1 13.3 38.0 15.1 19.5 22.5 12.5 4.7
Official statistics, Euromonitor International
Page
68

Marketing To Gen y

Enviado por

Dados do documento

Título original

Direitos autorais

Formatos disponíveis

Compartilhar este documento

Compartilhar ou incorporar documento

Opções de compartilhamento

Você considera este documento útil?

Este conteúdo é inapropriado?

Direitos autorais:

Formatos disponíveis

Marketing To Gen y

Enviado por

Direitos autorais:

Formatos disponíveis

Generation Y: Marketing to the Young Ones (18-26s)

Euromonitor International : Strategy Briefing September 2007

List of Contents and Tables

GENERATION Y: MARKETING TO THE YOUNG ONES (18-26S)

Online community dwellers/peer to peerers Egocentric

Hedonistic spenders Fashion influencers

Media mistrusters/spin detectors Civic-minded/socially conscious

Euromonitor International Bubble size = total number of population aged 18-26

Impact on Consumer Markets

Chart 2 US$ million

Average Gross Income by Age Group in Selected Markets 2006

Euromonitor International from national statistics

Growth in Gross Income by Age Group in Selected Markets 2001/2006

Euromonitor International from national statistics

Technology and Communications

TNS * % of mobile users who regularly listen to music on their mobiles

the Social Networking Phenomenon

the Changing Role of Men

% Growth in the 18-26s Population by Region 2001/2006

Proportion of 18-26s by Country 2001-2006

IMPACT ON CONSUMER MARKETS

Global Sales in Selected Cosmetics and Toiletries Sectors 2001-2006

2002 27,754 8,262 7,447 6,145 6,572

2003 30,347 9,063 8,196 7,147 7,271

2004 32,785 10,054 8,911 8,177 7,686

2005 34,448 11,348 9,514 9,081 7,870

2006 35,714 12,513 9,980 9,651 7,945

28.8 53.4 37.9 60.7 22.7

Euromonitor International Men's toiletries excludes shaving products

Global Sales of Selected Consumer Foodservice 2001-2006

2002 294,425 12,118

2003 322,157 14,163

2004 352,234 17,243

2005 379,099 19,762

2006 404,648 22,945

2001/ 2006 Beer RTDs/high-strength premixes

Google Microsoft Nokia Cadburys Coca-Cola Ebay Tesco Galaxy Boots

Internet IT Mobile phones Chocolate Beverages Internet Retailer Chocolate Retailer

SHIFTS IN MAJOR MARKETS

2002 158,925 -6.9 12.5

2003 154,087 -3.0 12.0

2004 151,125 -1.9 11.7

2005 155,555 2.9 12.0

2006 160,523 3.2 12.3

19,828 7,648 9,344 658 42 72 83 108 13 71 38

2002 6,897 -0.4 11.6

2003 6,935 0.5 11.6

2004 6,997 0.9 11.6

2005 7,043 0.7 11.6

2006 7,082 0.6 11.6

France: Sales and Growth of Selected Products 2001/2006

2002 8,470 1.4 10.3

2003 8,576 1.2 10.4

2004 8,637 0.7 10.5

2005 8,701 0.7 10.5

2006 8,771 0.8 10.6

Germany: Sales and Growth of Selected Products 2001/2006

2002 6,230 -3.9 10.9

2003 6,018 -3.4 10.5

2004 5,923 -1.6 10.2

2005 5,833 -1.5 10.0

2006 5,719 -1.9 9.7

Italy: Sales and Growth of Selected Products 2001/2006