Recorded May 16, 2023.
The New Consumer‘s founder and editor-in-chief, Dan Frommer, shares key takeaways from his latest consumer trends report, including the state of online grocery, TikTok’s role in driving commerce, and the rise in popularity of celebrity brands.
Dan Frommer on the increasingly popular concept of food as medicine: “We’ve seen, of course, the trend over the last couple of decades of ‘better for you’ food. Most Americans are aware of these trends. Two-thirds say they’re aware of organic foods. More than half are aware of things like probiotics, the keto diet, plant-based meat. What’s interesting though is that among those who are aware, there’s a pretty big range in how much they’re interested in participating or consuming some of those trends. Food as medicine is something that we’ve been watching that’s a big one. About two-thirds of the people who are aware of food as medicine are interested in it. Things like adaptogens are a little more fringe or niche, you might say. Only 14% of people say they’re aware of a adaptogens, but among those more than half are interested in consuming them.”
Dan Frommer on the grocery market and opportunity for growth: “Grocery itself is a trillion dollar a year market in the U.S. alone, and 10% of that or so online is still basically a 100 billion dollar market over the last 12 months in consumer spending. Why that matters? My background is a technology journalist. When attention or money heads online, it rarely heads to the same place it went offline. As advertising dollars digitized, they did not go to the newspapers and magazines websites. They went to Facebook and Google, and we expect a share shift like that in grocery as well. We’ll see what percentage of the market shifts, maybe not as dramatically as social media. But we ask, what is a grocery store? Online it’s much different. There are a lot of different companies going after grocery dollars online, ranging from online native grocers like Thrive Market and Hungry Root to taxi—what you think of as a ride sharing app like Uber. Restaurant delivery apps like DoorDash, meal kit companies, direct-to-consumer brands. Then there’s this whole boom in ultra-fast delivery companies.”
Dan Frommer on TikTok’s influence on younger consumers: “We see TikTok not only as an entertainment platform, but also as a platform for driving commerce. So we asked, ‘Where do you typically discover new food and beverage recipes?’ There’s a pretty stark generational difference here. Gen Z And millennials are much more likely to say Youtube and TikTok as their top 2 platforms.”
Dan Frommer on algorithmic media consumption for food and grocery: “Another thing that is important to me is I’ve seen the kind of unintended consequences of consuming media by algorithm, and the effects it has on the world. Increasingly people are are consuming groceries by algorithm, either through an online grocer’s recommendation system or increasingly, they are doing online ads. I think it’s called retail media networks. It’s a big growth thing that they’re looking for. But the net result is that more people are eating food that a computer recommended to them.”
Dan Frommer on the market appetite for celebrity brands: “There’s a lot of excitement around brands founded by celebrities and creators, and we’re curious if they have a special advantage in the market. One of the reasons for this has been this profound increase in customer acquisition costs for e-commerce merchants. It’s more expensive to grow and to exist as an e-commerce brand than it used to be. Celebrity brands have widely proliferated across different verticals including apparel, spirits, food, CPG, beauty and wellness. Venture funding has also grown for these brands according to FABID. However, the crunch in venture that has affected basically every field is also so far affecting celebrity CPG brands as well this year. The 2023 forecast is basically lower than has been over the past 2 years based on investments year-to-date.”
Dan Frommer on how celebrity brands stack up to their peers: “Looking at some data from Earnest, celebrity brands can actually really perform in the same ballpark as top peers. This is showing the growth rate of U.S. consumer credit and debit card sales directly conducted with these brands as measured by Earnest. And you can see Skims, which is Kim Kardashian’s apparel brand, growing faster than even a really prestige brand, like Alo Yoga, Lululemon, and Spanx during this period. Also holding its own in areas like average transaction size, average orders per customer, and total spending year-to-date.”
Dan Frommer on the current macro view of consumer spending: “This is fresh data from Earnest’s Orion transaction data showing that both online and in-store consumer spending overall is actually trending down year-over-year. Right now, it looks like it’s around 5% down, year-over-year in April, and this is across a very wide variety of categories. It had improved somewhat in in the early months of this year, as opposed to last year, but now trending down. That said, Americans are spending more money than ever on food, even adjusting for inflation. It’s not just prices going up; people are spending more.”
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