The Lowdown on Low-Income Consumers

Low-income shoppers may not be top of mind among product developers, but targeting them represents an enormous and virtually untapped opportunity for today’s food industry. Just consider the numbers.

Low-income consumers are estimated to generate $115 billion in incremental consumer packaged goods (CPG) spending over the next decade, according to SymphonyIRI Group’s 2010 report titled The Lower Income Shopper. The number of lower-income households, defined as those with income <$35,000, is projected to grow from 42 million in 2010 to 51 million in 2020; their CPG spending will go from $109 billion to $140 billion. Hispanic, African American, Gen Yers ages18–34, consumers 65+, and households with children make up the key demographic segments within the diverse low-income segment.

More than half (56%) of lower-income households are preparing even more meals at home than they did in 2009, reports the Food Marketing Institute’s (FMI) 2010 U.S. Grocery Shopper Trends. Nine in 10 households (89%) with incomes <$25,000 and 81% with incomes of $25,000–$35,000 make a home-cooked meal 3+ times per week, up 8% and 4%, respectively, vs 2009. Moreover, members of 36% of lower-income households also are cooking more from scratch in 2010, softening demand for meal solutions, FMI reports.

Just under half (47%) of shoppers with incomes <$25,000 bought gourmet/specialty foods in 2010, up from 34% in 2009, according to the National Association of the Specialty Food Trade’s 2010 Today’s Specialty Food Consumer report. Not surprisingly, flavored basic ingredients including margarine/butter, sugar, and oils and unique/ethnic varieties of rice, flour, syrups, and other staples should have high appeal.

Lower and mid-income households are the most likely to cook for special occasions and to cook for fun with their families, according to Mintel’s 2008 Cooking Enthusiast—U.S. report. One-quarter (24%) entertain guests at least once a month, per Mintel’s 2008 Home Entertainment—U.S. report, making reasonable and convenient party fare another unmet need.

Cold cereal, yogurt, frozen dinners/entrees, frozen pizza, fresh bread/rolls, natural cheese, soup, luncheon meats, salty snacks, crackers, chocolate candy, cookies, and ice cream/sherbet are the largest food categories purchased by lower-income households, according to IRI’s 2010 report. More importantly, lower-income households are driving growth in many of these categories. Salty snacks, natural cheese, yogurt, fresh bread/rolls, and coffee are among the categories with the highest projections for future growth, according to IRI.

Lower-income households are also the most likely to buy canned meats and shelf-stable dinners, according to Nielsen Co. data. Beef and frozen meals/entrees are strong performers in the low-income consumer market, with a 10% jump in sales in 2009, according to a U.S. Dept. of Agriculture report. Six in 10 lower-income households (62%) bought fewer single-serve packs, 60% purchased smaller quantities of their favorite treats, and 40% bought less fresh produce over the past two years, per IRI’s 2009 Competing in a Transforming Economy report. Lastly, six in 10 low-income households are eating away from home less in 2010 than in 2009, according to FMI; however, those in low-income households are the most likely to eat in a fast-food restaurant for lunch.

Eating healthy is very important to 76% of those living in lower-income households vs 83% of those in the upper-income bracket, according to IRI’s 2009 report. Moreover, interest in healthy eating is accelerating. FMI reports that 44% of shoppers in lower-income households are very concerned about the nutritional content of their food, up 6% vs 2009; 28% feel their diet could be a lot healthier.

In 2009, 51% of those in lower-income households bought foods/drinks specifically for antioxidants, 53% for vitamins/minerals, 41% calcium, 33% fiber, 31% protein, and 26% omega-3 fatty acids, according to Packaged Facts’ 2009 Functional Foods and Beverages in the U.S. report. Not surprisingly, affluent shoppers remain about twice as likely to buy organic food as those in lower-income households, according to FMI.

Contrary to common belief, middle-income and high-income shoppers are most likely to check for grocery specials and use coupons, not lower-income shoppers, according to FMI. Shoppers in low-income households are among the least likely to stock up, buy large package sizes, or go to stores other than their primary store for specials. Consumers in 43% of low-income households expect to purchase more private label foods/drinks in 2010; more than half (52%) of low-income households are heavy store brand users, also according to FMI. And despite financial constraints, consumers in 71% of lower-income households like to try new food products, IRI reports, which is another reason it makes sense to target members of this market segment.

A. Elizabeth Sloan,
Contributing Editor
President, Sloan Trends Inc., Escondido, Calif.
[email protected]