According to market researcher Information Resources Inc (IRI), lower-income households actually outpace their higher-income counterparts in consumer packaged goods (CPG) spending.
The new report, based on a 2007 shopper survey, forecasts that the group will spend $85.3bn on CPG in 2007, and will generate an additional $84bn in incremental CPG growth during the next decade.
"Almost four out of every 10 consumers are considered lower income, representing one of the most underserved shopper segments in the United States," said Sean Seitzinger, leader of the IRI center for retail innovation.
"Retailers and manufactures need to have a thorough understanding of the various lower-income shoppers-they are a major growth 'silver bullet.' Once you break the group down and understand the wants and needs of the different shopper segments, you can then put the right products with the right pricing on the right shelves with the right displays to meet all of their needs."
The group's Lower-Income Shopper Report identifies five key lower-income micro segments that are forecast to be responsible for the growth opportunities in the category.
According to IRI, these uncover "huge variations" in shopping frequency and spending levels. This, it says, will help manufacturers better understand the key differences among lower-income households and provide them with ways to attract and retain lower-income household loyalty.
The micro-segments identified by the report are: singles and married couples aged 25-34; seniors older than 65; households with children; Hispanics; and African Americans.
The report provides four-year trends of key performance indicators for each micro segment, including category development, sales growth and household penetration across 60 food, beverage and non-food categories.
IRI said its report provides insights into which categories are best positioned for growth, which is most vulnerable, and how retailers and manufacturers should respond.
According to the market researcher, "both retailers and manufactures have been treating this group as a 'one size fits all' group by focusing exclusively on price as the only factor for differentiation and investing little in product and packaging innovation based on lower-income consumer needs".
Some of these needs include: improving variety and selection amounts value offering, especially private label; the need for smaller packaging for shorter buying cycles; products that address time-pressed lifestyles; innovative, better-for-you products that support healthy lifestyles and address obesity; and a strong variety of ethnic products that serve an increasingly diverse population.
"Lower-income households are one of the hottest opportunities in the marketplace and are already providing real growth for progressive retailers, such as Save-A lot, Aldi, and Dollar General. This will also be the sweet spot for Tesco's new retail format that is entering North America this fall," said IRI retail solutions and strategic consulting president Thom Blischok.
