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 Companies ranging from Macy's Inc to Campbell Soup Co to Charles
Schwab Corp are talking to investors about their long-term plans to
appeal to the post-millennial generation, a group that Pew Research
expects to make up 40 percent of the U.S. workforce by 2020 and
ultimately surpass the 75.4 million millennials and 74.9 million
baby boomers.
"It's a matter of survival to get new customers. Today's 18 year old
is only 10 years away from being someone with a job and savings and
trying to figure out a 401(k) for the first time," said Peter Tuz,
portfolio manager of the $84 million Chase Growth Fund. He is shying
away from mall-based retailers as teens increasingly shop online.
Gregg Fisher, portfolio manager of the Gerstein Fisher Multi-Factor
Growth Equity fund, said that he is buying shares of Google-parent
Alphabet and Apple IncO> in part because he expects that they will
be able to adapt and continue to appeal to Generation Z, a group
that he is familiar with by watching the habits of his 13 year old
son.
“It’s like someone in the U.S. who was investing in China in the
early 90s. There’s a huge opportunity here for companies that are
willing to take some risk and bet on the future,” he said.
Generation Z differs from previous generations in that its members
have grown up with smartphones and the internet, making them more
focused on speed of service. Many also saw their parents struggle
during the Great Recession, making them more risk-averse, said Sean
Mahoney, editorial director at advertising agency Sparks and Honey.
Ten major companies have specifically addressed Generation Z in
earnings calls and investor presentations since the start of the
year, according to a Reuters analysis of transcripts, more than the
previous number of mentions by all companies over the last six years
combined.
Campbell cited Generation Z's focus on transparency as part of its
decision to stop opposing labeling for foods containing genetically
modified ingredients.
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Charles Schwab said that its financial advisers would transition
more to becoming "life coaches" rather than making specific
investment decisions as technology-trusting Generation Z comes of
age and places more faith in computer models than humans when
investing.
All of the companies mentioning Generation Z are consumer-focused, suggesting
that they are the most pressed to demonstrate to investors that they have a
pipeline of future customers, investors say.
SIGNS OF A NEW GENERATION
Companies have targeted teens for generations, but what makes this effort
different is that the majority of the 10 companies talking about Generation Z
now are not traditional teen marketers. They are instead focused on making their
products appealing to customers years away from their typical customers.
Food is increasingly viewed as an entertainment choice, with teens spending 20
percent more of their dollars at restaurants than millennials were in 2003,
according to a report from Piper Jaffray.
Restaurant-equipment maker Middleby Corp, for instance, told investors that with
smartphones and apps such as that of food-delivery service Seamless, Generation
Z now expects all restaurants to offer delivery. That should lead to increased
demand for its high-speed ovens to handle greater volumes, the company said.
"When I look at the next five to 10 years, Middleby is so well-positioned with
this generation," the company's chief executive, Selim Bassoul, told analysts.
(Reporting by David Randall; editing by Linda Stern)
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