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I’m not lovin’ it: How Millennials could kill McDonalds

July 16, 2015
  • The 'Millennial' generation is turning away from some food products due to mistrust of corporate information and changing tastes
  • Sales are mixed or down for companies like McDonald's and Coca-Cola
  • To recapture the lucrative youth market, new product offerings and PR strategies are required

For the first eight years of my life, I grew up in communist Poland. I remember the food queues, but I also remember the delicious home-made food cooked by my grandmother. Back in those days in Poland, processed food was considered a luxury and western brands were a treat which could only be bought in special government- approved shops.

When I moved to England in 1980, my whole world changed. Not only were there no food queues, but the biggest revelation was the fast food restaurants like McDonald’s, Burger King and Taco Bell, as well as the huge variety of snacks and treats. 

At that time, in the early 1980s, the links between processed foods and obesity were tenuous, but as the problem continued to grow it started to reach the public consciousness. Over time this has led to an increasingly bigger spotlight on processed food and fast food companies. Books such as ‘Salt, Sugar, Fat: How the Food Giants Hooked Us’ by Michael Moss were published and documentaries like ‘Super-Size Me’ were released, openly criticizing food and beverage companies and the role they play in contributing to the growing global obesity crisis.

And yet with lifestyles changing, people becoming less active and processed foods featuring ever-more in our diets, we have seen almost a doubling of obesity worldwide since the 1980s. According to the World Health Organization (WHO), 39% of adults aged 18 years and over were overweight in 2014, and 13% were obese; 42 million children under the age of 5 were overweight or obese in 2013. 

At the same time, we are seeing the emergence of the next demographic – the ‘Millennials’. Born between 1980 and 2000, the Millennials are predicted to be the next big spenders. Today, their spending is at US$2.45 trillion, and by 2018, it is projected to reach US$3.39 trillion, surpassing the ‘Baby Boomers’. 

This is a group of future consumers that companies simply cannot ignore. Millennials have different attitudes to life, and in this instance food. They put more importance on ‘wellness’ in their daily lives and are more likely to try and maintain healthy eating habits. They place priority on freshness, quality and ingredient transparency.

Bozena Jankowska is Global Co-Head of ESG at Allianz Global Investors.
Bozena Jankowska is Global Co-Head of ESG at Allianz Global Investors.

And unlike previous generations, the Millennials are ‘digital natives’: they were born into the digital world, with socialmedia playing a significant role in their lives. A 2013 Food Survey by Sanford Bernstein shows that individuals who are very active on social media tend to be more distrustful of the food system than others.

Millennials remain highly skeptical of nutrition information being made available to them, believing it to be influenced by corporate interests. As a consequence, when food and beverage companies make claims about the healthy properties of their products without making many changes to improve their nutritional value, Millennials will be less likely to believe them and will be more likely to turn away from them. We have already seen two casualties – McDonalds and Coca-Cola. 

In the case of McDonalds, the company has seen a steady drop in their sales volumes; CEO Don Thompson left in January 2015 after nearly twelve months of sales either down or flat. What is becoming evident is that the company has a serious branding problem with respect to the health and wellness issue, which will likely make it difficult to find a quick fix to their sales problem.

The company has been attempting to attract customers (and in particular Millennials) by launching various campaigns, for example, by allowing customers to customize their menu by choosing their own toppings and ingredients, or the social media campaign called “Our Food. Your Questions” which allows customers via Twitter or Facebook to ask questions about how McDonald’s food is prepared, sourced or what it contains. 

More recently the company has hired a social media marketing agency to target Millennials with a campaign that speaks directly to their philanthropic priorities, recognizing that they are drawn to companies that have a history of giving back.

Maybe it’s too little too late, and a burger is a burger, but this illustrates two things. Firstly, consumers are becoming more aware and want to be more informed about the food they are putting into their bodies, and, companies that are slow to adapt to changing consumer tastes – particularly those around healthier eating, freshness and quality – will suffer. Secondly, product reformulation and the use of newer and ‘better for you’ ingredients is a major challenge for companies. 

An example of the latter point: Coca-Cola, the second casualty of the emerging health and wellness trend with mixed sales growth over the last few years, has in 2014 launched ‘Coke Life’ which is based on a natural, plant-based sweetener called stevia (sweeteners extracted from stevia leaves are calorie-free and up to 200 times sweeter than table sugar). Based on AllianzGI proprietary analysis, feedback from the product launch is mixed, with some stating that stevia can leave a bitter aftertaste. This illustrates the difficulties faced by companies as they strive to improve the nutritional value of their products.

It’s clear that, despite the challenges, if food and beverage companies are to ensure they remain ‘future proof’ and able to meet fast changing consumer preferences, they must focus on innovation. Investors and consumers alike will want to understand how far companies are willing to push themselves on their nutrition-related policies, practices and performance to deliver the innovation that is being asked of them.

Bozena Jankowska
This is an edited version of an article that originally appeared in ESG Matters, May 2015.

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