“US population is aging: older people tend to consume and spend less”

US consumers Apr14Its not just the UK that is seeing an earthquake taking place in consumer demand patterns, as the blog discussed last week.  The same earthquake is taking place in the world’s largest consumer market, the USA.  As the Wall Street Journal reports:

  • “For the past three years running, unit sales of consumer products have been largely flat”
  • “Over a third of packaged food and household products are now sold with discounts”
  • “In some categories, such as soda, toilet paper and potato chips, over 50% of purchases include discounts

In summary, Neilson reports that “33.7% of consumer packaged goods—from soda and razors to shampoo, shaving cream and paper towels—were sold on promotion in the 12 months through February 2014“.  And any price increases have been well below inflation: 2013 prices were just 0.6% higher than in 2012.

Equally important is the growing recognition that demographics are a major cause of the change.  As the WSJ notes:

Shoppers are visiting stores less often, partly because of the Internet. Unemployment remains high, meaning pennies are pinched. The U.S. population is aging, and research shows older people tend to consume and spend less.”

Blog readers saw this research here first, of course, as Boom, Gloom and the New Normal began publication nearly 3 years ago.  Those companies who have since adapted their business models are now well ahead of their competition.

As the WSJ’s chart above shows, some important categories of consumer spend saw actual declines in sales last year.  These are just the early warning signs.  The vast majority of affluent Americans are very similar in demographic profile to Europeans.  They are the white BabyBoomers, with current median ages of 42 years and median incomes of $42k/year, as the blog described in December when concluding:

Essentially, therefore, this means that currently higher-paid whites will be retiring, and there will be relatively more lower-paid Hispanics and blacks in the workforce – unless salary patterns change quite dramatically.  Add to this the fact that most Americans have not made adequate provision for retirement, and it is clear that today’s already weak trends in consumer spending are likely to get worse, not better

Businesses now need to change course - and very quickly.  As the consumer product companies are already discovering, it was a great mistake to believe central bank promises that recovery was inevitable.  Please don’t hesitate to contact the blog if you would like further details of the strategy workshops it can provide for Board-level and other senior managers.

TUESDAY UPDATE:  After reading the above post, a blog reader has kindly forwarded comments from the L’Oreal earnings conference call last night:  “The beginning of the year in the consumer market in the US has been very slow…It has been flat, and honestly I don’t remember a flat market for many years in the USA for our Consumer division”.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. The aim of this blog is to share ideas about the influences that may shape the chemical industry over the next 12 – 18 months. It will try to look behind today’s headlines, to understand what may happen next in important issues such oil prices, economic growth and the environment. We may also have some fun, investigating a few of the more offbeat events that take place from time to time. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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