July, 2016

Research Perspective and Comments & Analysis

Millennial Avocado Buyers Outspend Other Households

By Emiliano Escobedo, Executive Director, Hass Avocado Board

 

Millennial shoppers are becoming increasingly important to a retailer’s bottomline. The Hass Avocado Board’s Keys to the Cart: Driving Hass Avocado Sales at Retail study reveals how Millennials are impacting one of the largest categories in fresh produce.

Millennial households are one of several “high-value” shopper groups that are particularly influential in driving avocado category growth. Other high-value groups identified in the study include households that buy both bulk and bagged avocados (“Both” households) and households in regions with above average avocado sales relative to the region’s population (“Developed” regions).

This study analyzed two years of data (June 2013 through June 2015) from the IRI Consumer NetworkTM, which is a continuous household purchasing panel that captures actual shopper purchases and behaviors. For this study, Millennials were defined as households in which the head of household was between 25 and 34 years of age. Non-Millennial households were those in which the head of household was 35 or more years of age.

The avocado shopping habits of these two demographic groups were notably different, with Millennial households outperforming Non-Millennial households across a number of key purchase metrics. One prominent difference was household penetration — the percentage of households purchasing avocados. Fifty-six percent of Millennial households purchased avocados in the most current 12-month period studied, compared to 51 percent of Non-Millennial households.

Moreover, the annual Millennial spend of $22.66 exceeded the Non-Millennial spend by $2.43. Millennials bought less often than Non-Millennials (5.6 versus 6.1 occasions), but spent +22 percent more per occasion. The high household penetration and high spend rate for Millennials are evidence of their important influence on category growth.

The benefits of focusing on Millennial shoppers extends beyond the avocado category, with Millennials driving higher overall retail market basket value. Millennial baskets with avocados averaged $76.36 compared to $65.56 for Non- Millennial baskets — delivering an additional +16 percent average sales boost.

For many fresh produce commodities, sales of fixed weight/packaged units are exhibiting a clear retail growth trend. This study examined how fixed weight and bulk purchase options are playing out for the avocado category. The data showed that over the course of the year, the majority of households (82 percent) purchased only avocados sold in bulk. A small percentage (3 percent) purchased only bags. The remaining 15 percent of households purchased both bulk and bagged (not necessarily on the same occasion). Similar to the Millennials, this “Both” group comprises a high-value shopper segment in the avocado category.

Although not the largest group, “Both” buyers have above-average avocado spending habits. At $41.84, the annual spend by “Both” shoppers was twice that of Bulk-Only and three times that of the Bagged-Only shoppers. One factor driving this high annual spend is frequency of purchase. “Both” shoppers averaged 9.7 purchase occasions per year compared to 5.4 for Bulk-Only and 2.3 for Bagged-Only households. Retailers who offer bulk and bagged avocados may realize an increase in the value of their shopping baskets. At $81.22, the basket value for “Both” shoppers was +32 percent higher than Bulk-Only shoppers.

The study also looked into purchase habits across different geographies. Using the eight standard IRI regions, the study created an index that compared each region’s share of total avocado sales to its share of U.S. population. Regions with a higher index (California, West and South Central) were aggregated into the “Developed” group. Regions with a lower index (Plains, Great Lakes, Midsouth, Southeast and Northeast) were classified as “Emerging.”

The high index in Developed regions can be partly attributed to the higher percentage of households purchasing in these regions. Sixty-six percent of households in Developed regions bought avocados, compared to 45 percent in the Emerging group. Households in Developed regions also spent more each year on avocados. At $25.85, the annual spend in the Developed group was nearly +$9 higher. The strong household penetration and annual spend rate in the Developed group are indicative of a high level of shopper engagement, which bodes well for continued avocado category growth.

In contrast to the Developed regions, avocado consumption in the Emerging regions indexes lower. Yet the purchase metrics in this group point to ample opportunity for category growth. Currently, less than half of all households in this group purchase avocados. Increasing this rate — bringing more users to the category — could have a notable impact on category growth.

Among those households currently buying avocados, the annual avocado spend is up +32 percent versus the prior year. Retailers in Emerging regions also had higher value market baskets with avocados. At $69.11, the value was nearly +$3 higher than in Developed regions. Headroom to expand penetration, and strong annual spend and basket values point to a healthy outlook for growth in the Emerging regions.

The high-value segments detailed in this study, are key drivers of category growth at retail. The insights gained in this study can help decision-makers spot prime opportunities for the next big wave of category growth.

 

Perfect Storm Accounts For Avocado Success

Trying to understand the future actions of consumers brings to mind Winston Churchill’s explanation of the difficulty of predicting the actions of Russia. He said the forecast was “a riddle wrapped in a mystery inside an enigma” — so it goes with consumer data.

It is true, of course, that Millennials behave differently than other age cohorts, but it is also true that age cohorts differ from each other by more than age. They have different family sizes, different ethnicities, different work habits, living arrangements, familiarity with technology, and so forth.

For example, according to the white paper, “Millennials Coming of Age” by Costa Mesa, CA-based Experian Marketing Services, 10 percent of the Baby Boomers are Hispanic, but 22 percent of Millennials are Hispanic.

So this leaves open the question of whether the driving force behind any procurement or consumption differences between these age cohorts is age, or some other factor, such as ethnicity.

Some of these questions are chicken-and-the-egg-type questions. That those consumers who purchase both bulk and bagged avocados should lean toward the high end of purchasing is not surprising.

But do retailers that have these consumers have a propensity toward carrying both bagged and bulk product and promote both with discounts and recipes? Likewise, are those retailers with customers who are not fans of avocados less inclinded to carry both bagged and bulk? If these retailers do carry bagged and bulk without adequate consumer demand, then do they give smaller displays without sales or promotional support?

Geography is also a conundrum. Many years ago, a U.S.-based group of Italian chestnut importers was established with the goal of spending money to increase sales of chestnuts from Italy. The goal was clear, but the effort foundered over geography.

The importers, working with the late Barney McClure, simply could not agree on whether it was a wiser path to promote chestnuts in traditional markets, such as New York, Philadelphia, Boston, San Francisco — places where Italian immigrants and street vendors had long ago established the habit of eating “chestnuts roasting on an open fire,” as the Nat King Cole classic explained — or to go to markets where chestnuts were not widely consumed.

It is a truism among marketers that the easiest sale is to your existing customers.

So, almost certainly, a promotional campaign targeted on markets where consumers are familiar with the item and enjoy the item would be the most effective way to boost short-term sales. The chestnut marketing campaign would remind consumers to buy, suggest additional recipes, and boost top-of-mind awareness. Because all local retailers sell the product, consumers could translate this awareness into procurement.

Of course, long term, there is a big win in converting areas that do not heavily consume one’s product into high consumption areas.

It is a challenge and, perhaps, not really a function of individual product marketing. As an ethnic group moves into an area where people of that ethnicity were only lightly populated before, one would expect consumption to rise. Indeed, one would expect a kind of triple causation:

First, the ethnic group eats the product and that boosts sales. Second, the presence of the ethnic group leads to ethnic-themed restaurants, which leads consumers who are not members of that ethnic group to try the cuisine and to possibly duplicate it at home. Third, the presence of a core market makes it feasible for retailers to carry the item, and its availability makes it an option for all consumers.

It is also true that due to the popularity of travel, the Food Network, etc., a certain cuisine can become more popular. So we sell more avocados for guacamole as Mexican food becomes more popular.

Plus health news can boost sales. Avocados have surely been helped by the idea that fats and oils are not bad. Healthy monounsaturated fat of the avocados should be consumed, not avoided.

Of course, the marketing by geography is really an issue for producers. Retailers have little choice but to sell to the customers they have in their locale.

One other issue that complicates reading data such as this Research Perspective is that it is based on dollars spent — not volume. Very low prices often accompany very high volume, and thus do not fully reflect the increase in sales of avocados, or any item that moves from a low volume/high price to high volume/low price situation.

Avocado sales boomed because of a perfect storm: A growth in immigration by ethnic groups that love avocados; a change in merchandising to allow the sale of pre-ripened, ready-to-eat avocados; a boom in cuisines that use avocados; a health message encouraging consumption; and regulatory changes that allowed for imports from Mexico to spread across the country. Moving marketing to the next level will mean studying the research more shrewdly.