Millennials are the next baby boom. As boomers start to move into the traditional retirement years and presumably spend less, we need someone to take their place as good restaurant customers and the engine of our consumer-driven economy.
Millennials, also known as Generation Y, are the most likely candidates. First, they’re more numerous: There are 85 million of them, compared with 80 million baby boomers. And they are young. Millennials are approximately 15 to 34 years old now and will be aging into their higher-spending family formation years over the next decade.
By contrast, boomers are now about 45 to 64 years old and will be aging into the 55- to 74-year-old age group between now and 2020. But, as we all should know by now, baby boomers act differently than their age group has historically. It’s not likely they will go quietly into retirement and sharply curtail their spending; it’s just not in their DNA.
Households under age 35 now account for about $24 of every $100 spent in restaurants, according to Bureau of Labor Statistics surveys of consumer spending. But households ages 45 to 64 are responsible for about $40 of that $100.
Over the next 10 years, we project that Millennials are likely to increase their share to at least $40, while boomer households might pull back to somewhere in the range of $30 to $35. In any case, assuming no big changes in the other age segments, the net effect will be a real increase in total restaurant spending.
Millennials are, for the most part, the children or grandchildren of baby boomers. But there the similarities end. Boomers are not very racially diverse: only 27 percent are Hispanic, African-American, Asian or multi-racial, compared with more than 40 percent of Millennials.
Millennials make far more use of digital mobile devices —we can’t call them cell phones anymore — for texting, taking photos, Internet access, social networking and who knows what else. On the other hand, baby boomers with such devices use them mostly for, yes, phone calls.
This means that a baby boomer might talk to one or two of their friends about your restaurant in advance of a visit, but a Millennial might use texting or a social media site to get five or 10 opinions while they’re in your parking lot.
The point is that marketing methods that may have been working just fine for baby boomers are not likely to be as effective on customers 30 years younger. Over the next five to 10 years, a major challenge for restaurant operators that have targeted one of these two large market segments is to create menu items and/or environments that appeal to both of them.
This will not be easy for some entertainment-heavy restaurants that appeal to young adults, but that may be too noisy or distracting for their parents or grandparents.
However, the one meal that both generations seem to most easily agree on a venue for is breakfast. That may account for its high sales growth over the past five years.
The combination of high future growth at both ends of the age spectrum suggests that breakfast revenues have more room to grow.
Peter Francese, a demographics and consumer markets expert, is the founder of American Demographics magazine and the author of numerous books. He is the demographic trends analyst for Ogilvy & Mather and director of demographic forecasts for the New England Economic Partnership.
