Marketing to Gen y

Generation Y: Marketing to the YoungOnes (18-26s)

Euromonitor International : Strategy Briefing

September 2007

Strategy Briefings World

Euromonitor International Page i

List of Contents and Tables

Executive Summary ................................................................................................................................................ 1

Drivers....................................................................................................................................................................... 1

Summary 1 Characteristics of Generation Y......................................................................................... 2

Demographic Trends................................................................................................................................................. 2

Chart 1 Leading Countries by Number of People Aged 18-26, and % Growth 2001-2006 ................................................................................................................................... 3

Impact on Consumer Markets.................................................................................................................................... 4

Chart 2 Global Sales of Selected Products and Services 2001/2006............................................... 5

Outlook...................................................................................................................................................................... 5

Summary 2 Opportunities and Challenges of Marketing to Generation Y............................................ 6

Introduction ............................................................................................................................................................. 8

Definitions ................................................................................................................................................................. 8 Profile of Generation Y ............................................................................................................................................. 8

Drivers.................................................................................................................................................................... 11

Later Families ......................................................................................................................................................... 11

Table 1 Average Age of First Time Mothers 2001-2006 .............................................................. 12

Higher Education .................................................................................................................................................... 12

Table 2 % Population Aged 20-24 Continuing in Education 2001-2006 ...................................... 13

Generation Y at Work.............................................................................................................................................. 14

Spending Power....................................................................................................................................................... 14

Table 3 Average Gross Income by Age Group in Selected Markets 2006.................................... 16

Table 4 Growth in Gross Income by Age Group in Selected Markets 2001/2006 ........................ 17

Technology and Communications............................................................................................................................ 19

Table 5 Number of Mobile Phone Users by Country 2001-2006.................................................. 21

Chart 3 Mobile Phone Music Listeners 2005................................................................................ 22

the Social Networking Phenomenon........................................................................................................................ 22

Table 6 Number of Visitors to Social Networking Sites in the US, March 2006.......................... 23

the Changing Role of Men....................................................................................................................................... 24

Attitudes To Finance ............................................................................................................................................... 25

Travel ...................................................................................................................................................................... 26

Eating/drinking Habits ............................................................................................................................................ 27

Ethical Awareness ................................................................................................................................................... 29

Chart 4 Top Ten Issues Affecting American Youth 2006............................................................. 29

Demographics ........................................................................................................................................................ 29

Regional Trends ...................................................................................................................................................... 29

Chart 5 18-26s Population by Region 2006 .................................................................................. 30

Chart 6 % Growth in the 18-26s Population by Region 2001/2006.............................................. 30

Country Trends........................................................................................................................................................ 31

Table 7 Number of 18-26s by Country 2001/2006 ....................................................................... 31

Table 8 Proportion of 18-26s by Country 2001-2006 ................................................................... 32

Impact on Consumer Markets.............................................................................................................................. 33

Cosmetics and Toiletries ......................................................................................................................................... 33

Table 9 Global Sales in Selected Cosmetics and Toiletries Sectors 2001-2006............................ 36

Consumer Foodservice............................................................................................................................................ 37

Table 10 Global Sales of Selected Consumer Foodservice 2001-2006........................................... 39

Alcoholic Drinks...................................................................................................................................................... 39

Table 11 Global Sales of Selected Alcoholic Drinks 2001-2006 .................................................... 41


Euromonitor International Page ii

Marketing To Generation Y ................................................................................................................................. 42

Understanding the Market....................................................................................................................................... 42

Branding.................................................................................................................................................................. 42

Summary 3 US: Most Trusted Brands Among Generation Y Consumers 2007.................................. 43

Summary 4 UK: Preferred Brands Among Generation Y Consumers 2005........................................ 43

Advertising .............................................................................................................................................................. 44

Shifts in Major Markets........................................................................................................................................ 45

China....................................................................................................................................................................... 45

Table 12 China: 18-26s Population Trends 2001-2006................................................................... 45

Table 13 China: Sales of Selected Products and Services 2001/2006............................................. 47

France ..................................................................................................................................................................... 48

Table 14 France: 18-26s Population Trends 2001-2006 ................................................................. 48

Table 15 France: Sales and Growth of Selected Products 2001/2006............................................. 50

Germany.................................................................................................................................................................. 50

Table 16 Germany: 18-26s Population Trends 2001-2006 ............................................................. 50

Table 17 Germany: Sales and Growth of Selected Products 2001/2006......................................... 52

Italy ......................................................................................................................................................................... 52

Table 18 Italy: 18-26s Population Trends 2001-2006..................................................................... 52

Table 19 Italy: Sales and Growth of Selected Products 2001/2006 ................................................ 54

Japan....................................................................................................................................................................... 55

Table 20 Japan: 18-26s Population Trends 2001-2006 ................................................................... 55

Table 21 Japan: Sales and Growth of Selected Products 2001/2006............................................... 56

UK ........................................................................................................................................................................... 57

Table 22 UK: 18-26s Population Trends 2001-2006 ...................................................................... 57

Chart 7 Average % of Weekday Leisure Time Spent 2005 .......................................................... 58

Table 23 UK: Sales and Growth of Selected Products 2001/2006.................................................. 60

US............................................................................................................................................................................ 61

Table 24 US: 18-26s Population Trends 2001-2006 ....................................................................... 61

Table 25 US: Sales and Growth of Selected Products 2001/2006................................................... 63

Future Trends........................................................................................................................................................ 63

Trends To Watch ..................................................................................................................................................... 63

Chart 8 Forecast Countries by Number of 18-26s 2011................................................................ 65

Chart 9 Forecast Countries by Proportion of 18-26s 2011............................................................ 66

Forecast Sector Trends............................................................................................................................................ 67

Table 26 Forecast Global Sales in Selected Sectors 2006-2011...................................................... 68


Euromonitor International Page 1

GENERATION Y: MARKETING TO THE YOUNGONES (18-26S)

EXECUTIVE SUMMARY

Drivers

• Generation Y (currently aged 18-26) are typically the children of affluent baby boomers, the large cohortborn immediately following World War II. Now entering their student years or embarking on a professionalcareer, this generation encompasses a diverse range of young people.

• Generation Y are unified by the fact that many of them are still single, very technology-driven, fashion-conscious, status-aware, keen to spend and not afraid of credit.

• Often indulged as children by their baby boomer parents, with lives that were programmed and over-managed from an early age, Generation Yers have high expectations of themselves and others. They areoften considered to be less rebellious, but also less subservient, than previous generations.

• As young people delay marriage and childbirth in order to pursue higher education and a career – or simplyto live life to the full – they are often staying longer in the family home. This gives them a higher level ofdiscretionary spend than previous generations had at this age.

• An increasing number of young people are choosing to go into tertiary education, and student numbers havereached unprecedented levels in many countries. Exceptions include the UK, where many young people aredeterred from going to university by the high costs of student fees and living expenses.

• The labour force participation rate of people in this age group is higher in developing countries, whereyoung people tend to marry earlier. Nevertheless, the trend of young adults pursuing tertiary education is onthe rise in many of these countries.

• Generation Y are also the most diverse generation ever, in terms of ethnicity, tolerance and sense ofcommunity. This makes it more difficult for marketers to target specific cultures or ethnic backgrounds, buteasier to create global brands.

• In developed countries, "yuppies" (young, upwardly mobile professionals) are becoming "yeppies" (youngexperimenting perfection seekers), who are perceived as being less materialistic and more cerebral thanbefore, seeking happiness through perfection.

• In developing countries, Gen Y is in the vanguard of the new middle class. Where consumer confidence ishigh, such as in China, young adults will spend all they earn on luxury goods in order to appear successfuland not lose face, even if this means running up debts.

• Generation Y are highly adept at using new technology, having grown up with computers at home, multi-channel TVs, mobile phones, and, more recently, music downloads and instant messaging. They live life inthe fast lane and are used to multi-tasking.

• Along with teenagers, this generation are keen to communicate with peers via social networking sites suchas MySpace, Facebook and Korean site Cyworld. These allow them to make friends (and feed their egos)by posting their profiles and sharing messages.

• Gen Yers have a strong interest in music and on-line gaming, and are the main drivers of digitaldownloading and the growth of MP3 players. Community music sites, such as Habbo, are an interestingtrend, with music increasingly downloaded straight to mobile phones.

• Gender differences are less pronounced among the younger generation, with men becoming more interestedin shopping, fashion, fitness and personal grooming, and women interested in sport, adventure and pursuinga professional career.

• Many young people take time out of their education or careers to travel the world. This is leading toincreased globalisation, as well as demand in the East for products that are westernised, and in the West forethnic and international products.



• Generation Y are significant users of e-travel, making their travel bookings and enquiries on-line, usingbudget airlines and making use of consumer-generated sites, such as TripAdvisor.

• The gradual break-up of traditional meal structures means that for Generation Y, snacking, ready meals andeating out have become the norm. This demographic represents one of the core target markets for fast foodoperators.

• The importance of their social life also makes Generation Y a significant market for pubs, bars, coffeeshops and manufacturers of alcoholic drinks. However, this is a fickle consumer base, where brands canfrequently go in and out of fashion.

• A strong sense of social responsibility means that Gen Y consumers often seek products that are bothenvironmentally-friendly and ethical, and look for transparency and fair trading in a company. However, asfar as possible this must not come at the expense of convenience, which is all-important to this generation.

Summary 1 Characteristics of Generation Y

Characteristics What this means

Technology adopters Defined by the digital revolution; in constantcommunication with friends through e-mail, text-messaging etc; good at multitasking

Online community dwellers/peer to peerers Dedicate a good deal of leisure time to texting, on-linechatting and sites such as MySpace and YouTube

Egocentric Both indulged and over-managed by their boomerparents, they have high expectations of themselvesand others

Hedonistic spenders High spending and confident in the future; interestedin brands, status, money, lifestyle

Fashion influencers Influence Generation X and boomers in technology,fashion and what is cool; into celebrity status andpopular culture

Media mistrusters/spin detectors Demand transparency and straight talking

Civic-minded/socially conscious Prefer brands that are both environmentally friendlyand do not involve the exploitation of workers in poorcountries

Mass-advertising rejecters Mistrustful of traditional advertising methods; moreopen to viral marketing campaigns

Word of mouthers Fond of blogs and consumer-generated websites,such as TripAdvisor

Debt incurrers Not afraid to take out loans and buy on credit

Work/life balancers Primary career objective money and the good life; likeworking in teams, changing jobs frequently

Obedient, but not subservient Reject parents' lifestyles but accept parents' values

Tolerant Accepting of gay marriage, interracial relationships,marijuana use; non-judgmental about personal lives

Apathetic and sometimes frivolous Political apathy – little interest in war, politics orhistory; prime target audience for reality TV andcelebrity magazines

Source: Euromonitor International

Demographic Trends

• Generation Y represent a large cohort, due to the fact that these are the offspring of the baby boomers.However, this generation is generally much smaller than that of the baby boomers, as the 1980s and 1990swere a period of rapidly falling birth rates.



• In Southern Europe and Japan, and less markedly in Northern and Eastern Europe, Generation Y is smallerthan any of its predecessors, and its childhood years tended to be marked by small families, small classes atschool and school closures.

• On a global level, the 18-26 years age group represented 15.1% of the total population in 2006, apercentage which remained broadly stable over the 2001-2006 review period.

• Although Asia-Pacific held by far the greatest number of Generation Ys in 2006 (56%), in terms ofmarketing worth the greatest potential for marketers of products and services aimed at this generationremains in more developed regions.

• The greatest Generation Y population growth over the 2001-2006 period occurred in Africa and the MiddleEast, where the number of 18-26 year-olds increased by 16%, thanks to the region's young populations.

• All other regions experienced growth in the Generation Y population between 2001 and 2006, with thenotable exception of Western Europe, where their numbers fell by 1%. However, their spending power inthis developed region is relatively high.

• In absolute terms, due to their vast overall populations, India and China have the largest number of 18-26year-olds, at 186.6 million and 160.5 million, respectively, in 2006.

• While the number of Generation Ys in India grew by 9% over the 2001-2006 period, in China the numberfell by 6%. This is primarily the result of China's one-child policy, brought in to control population growthsome 30 years ago.

• Although Russia's population growth and birth rates are very low, the number of Generation Ys grew byalmost 10% between 2001 and 2006. The Soviet Union experienced a baby boom echo in the 1980s thatwas similar to that in the US, and Generation Y there is relatively large.

• Growth in the Generation Y population was also notably strong in the UK, compared to other WesternEuropean countries, at 12% over the review period.

• Generation Y accounted for as much as 19% of South Africa's population in 2006, largely due to the verylow life expectancy (the average age of the South African population is only 15, compared to a Europeanaverage of 30).

Chart 1 Leading Countries by Number of People Aged 18-26, and % Growth 2001-2006

Source: Euromonitor InternationalNote: Bubble size = total number of population aged 18-26



Impact on Consumer Markets

• Generation Yers are concerned about looking and feeling good, and therefore represent a significant targetmarket for manufacturers of cosmetics and toiletries – notably in sectors such as hair care products, men'stoiletries and fragrances.

• Colour cosmetics brands such as Cover Girl and Maybelline are renowned for their positioning in the massyouth market. Prestige companies are also entering the youth arena, including Estée Lauder's jane, LVMH'sUrban Decay and Bliss, and Wella's Tony & Tina.

• Direct sellers also turned their attention to the teens and 20-somethings audience over the review period,such as Avon with its Mark brand, and Mary Kay with Velocity.

• With the "mod-look" of dramatic, smoky eyes and nude lips being the prevailing trend among youngwomen in Western markets, mascara has become a key source of innovation, with thicker formulations anddual-application products leading the way.

• Other key trends included increased segmentation, for example ethnic-specific brands, such as Procter &Gamble's CoverGirl Queen Collection; and convenience, such as BeneFit's Pocket Pal gloss to go,foundations with built-in brushes and Avon's instant manicure nail strips.

• Men's toiletries grew rapidly over the review period, with global sales up by almost 61% in value terms.This can be largely attributed to a change of attitudes, whereby metrosexuality has become the lifestyle ofchoice for many young men.

• Besides the large cosmetics companies entering the men's market, a number of specialised start-ups haveemerged in recent years, such as NFG Stuff, or Not for Girls, which currently manufactures hair careproducts for US teens.

• In order to create a powerful image for brands targeting the more sophisticated metrosexual, the majorcompanies are using male style icons as spokesmen, such as TV grooming guru Kyan Douglas (L'Oréal)and footballer David Beckham (Gillette).

• Mass fragrances experienced strong growth of 53% between 2001 and 2006, driven by the launch ofcelebrity brands. However, designer fragrances are the latest thing, including Ralph Lauren's Ralph Hot,Yves Saint Laurent's Young Sexy Baby and Calvin Klein's newly launched cK in2u.

• Young adult males are regarded in consumer foodservice industry circles as heavy users of fast food. In theUS, this demographic is known to spend up to US$40 per day on fast food, and to consume fast food morethan 20 times per month.

• Fast food outlets are increasingly competing with coffee chains, such as Starbucks, for Generation Yspending. To encourage young people to linger, Burger King has created more comfortable outlets, withplasma TV screens, couches and coffee tables.

• In a bid to appeal to young, ethical consumers, McDonald's has rolled out sustainable, rainforest-friendlycoffee in Western Europe.

• Targeting young Internet users, viral marketing campaigns have also been initiated by several leading fastfood companies, with websites such as myspace.com and youtube.com proving useful avenues forcompanies attempting to up their "cool" quotient.

• Starbucks has maintained its lead over other coffee shop chains and continued to capture the interest ofGeneration Y consumers by developing premium new products, and recently introducing both wirelessInternet access and an in-store music delivery service in North America.

• Specialist coffee shops are enjoying dynamic growth in emerging regions, such as Eastern Europe and Asia-Pacific, thanks partly to the expansion of Starbucks, but also due to growth of local chains such as Poland'sCoffeeheaven.

• In developed beer markets, companies are struggling to maintain the interest of the younger generation,which is exhibiting a growing preference for more fashionable drinks, such as wine, spirits and RTDs(ready-to-drink alcoholic beverages).

• Beer companies have responded by turning their attention to other formats, such as functional or energybeers (in the US), fruit flavoured beer and "extra cold" formats.



• The dramatic growth of RTDs during the review period was fuelled by younger consumers' demand forsweet, easy-to-drink products offering distinctive, novel flavours, suited to consumption in fashionable barsand clubs.

• However, RTD sales slowed significantly from 2005, partly as a result of the sector's increasing maturity,but also due to governments' efforts to increase taxation on such products (eg, in France, the UK andGermany), in order to curb excessive consumption by younger consumers.

• Spirits manufacturers are focusing increasingly on the younger generation, who are motivated largely byfashion- and brand-consciousness. This encourages highly visible consumption in bars, nightclubs andrestaurants.

• New product development in spirits has focused on the introduction of flavoured variants in an attempt tocontinue to revitalise brand images and to appeal to the thirst for novelty amongst younger consumers.

• Super-premium products are also designed for highly fashion-conscious younger consumers. In the US,these include brands such as Hpnotiq and Envy NV Liqueur, which have avoided mainstream advertisingand developed a presence on city club scenes.

• The growing popularity of cocktails has played an important role in attracting younger consumers to spirits,such as vodka combined with the energy drink Red Bull.

Chart 2 Global Sales of Selected Products and Services 2001/2006

US$ million


Outlook

• Several trends are likely to emerge in the future that will enhance Generation Y's purchasing power andspending behaviour, making this demographic an attractive target for a range of manufacturers and serviceproviders.

• Many of today's 18 year-olds are about to embark on their student life, but generally with higher incomesthan those that went before them, as strong economic conditions are allowing parents to fund theirchildren's studies and provide them with more spending money.

• Furthermore, favourable student loans in many markets, along with the increased availability of creditfacilities, will allow students to travel more and enjoy a lifestyle previously unheard of.



• There may be exceptions in countries such as Germany where the recent introduction of higher tuition feesmay mean that students are less well off, or may be deterred from entering into further education altogether.

• As their level of wealth rises, students will be the launching platform for smart marketers looking togenerate life-long relationships with young, "high value" consumers.

• Generation Yers at the upper end of the age spectrum will be entering their peak wage-earning years, andwill be able to afford more luxury goods associated with family life, such as larger cars, more expensiveholidays and multimedia home entertainment systems.

• In developing countries with rapid economic growth, such as China, India and Vietnam, young adults withhigher disposable incomes will present a vast consumer base for international products.

• Young adults will remain key influencers of the purchasing of other demographic groupings, possessing the"techno savvy" and the style which enables them to be successful advocates of new technology to oldergenerations with greater spending power.

• The favoured sectors for the future in terms of young adult spending are likely to remain music, technologyand fashion, with specific interest in communications, entertainment, music, DVDs, games and clubbing.

• It is impossible to predict where fashion will go in the next 10 years, but the desire to be cool is perennial.For fashion, peer pressure and the media will stay the main influence on young consumers.

• Telecommunications, and particularly mobile phone growth, have profoundly changed the mindsets andlifestyles of young adults and re-prioritised spending patterns. Viral marketing, or the "word on the street",will remain an effective channel for marketers.

• Global and country-specific social networking sites will remain an important aspect of young people's livesin the future, and this will provide an ideal way for youth-orientated brand owners to target this generationthrough advertising, deals and promotions.

• Generation Y are highly aware of environmental issues and the need to look after their health in order toprolong their looks and life expectancies. In the future, this generation will be significant purchasers of alltypes of healthy foods, and green and ethical products.

• Generation Y will be the most naturally technology-adept workforce in history, demanding quick responsesfrom systems and colleagues. However, they will also be very insistent on a good work-life balance andwill be less inclined to be workaholics than the departing boomers.

• Despite their high earning potential, young people will be more likely to borrow large sums to finance theirstudies and housing, and also take out more debts on credit cards to purchase goods and services.

• Despite a general ageing of the global population, the 18-26 years age group is expected to swell slightlyover the forecast period, with its share of the total population predicted to rise from 15.1% in 2006 to 15.3%by 2011.

• In 2011, 18-26 year-olds will consist largely of today's teenagers, a cohort that is perhaps even morepampered and technology-driven than Generation Y, which has already been dubbed Generation Z.

• As today's children mature, they are likely to be heavily focused on health, well-being, the environment andtechnology. They will be even more aware than Generation Y of the need for sustainability and fair trade,having had these issues drummed into them from an early age.

• Women, who have traditionally driven purchasing decisions in many categories, will continue to makeprogress in business, politics and other areas of life. As a result, they may have less time for shopping andmight be expected to value convenience more highly than in the past.

• Generations Y and Z will be attracted to stores and brands that market to their lifestyles and not only theirage. They will remain suspicious of mega corporations, and will demand more transparency in all areas oftheir lives.

Summary 2 Opportunities and Challenges of Marketing to Generation Y

Opportunities Challenges

Generation Y represents a large cohort (and thereforea significant target market) in many countries, as they

This age group is in general declining slightly as aproportion of the total population, due to the rapid



are usually the offspring of baby boomers. ageing of societies.

Since many Gen Yers are single and still live with theirparents, their incomes are largely discretionary andare growing all the time.

Many Gen Yers are still students, or have not yetreached their full income potential, so their incomesare generally lower than those of Gen Xers or babyboomers.

More young people are choosing to pursue highereducation. Many are supported by wealthy parents, ortake out cheap loans to enable them to continue tospend as before.

In some countries (eg the UK and Germany), theintroduction of high tuition fees is eating into students'income and reducing their discretionary spend.

Young professionals, including DINKs, representparticularly lucrative segments for marketers, being alifestyle group with high disposable incomes.

Brought up in an age of prosperity and often by dotingparents, Generation Yers are demanding consumers,with high expectations of themselves and others.

Generation Y are the most diverse generation ever, interms of ethnicity, tolerance and sense of community.This offers opportunities to market a range of ethnicand non gender-specific products.

Young people are fickle consumers, with a low level ofbrand loyalty. They will turn quickly to the "next bigthing" as brands and products go in and out offashion.

This group creates a high demand for new technology,as Gen Yers are highly adept at using all kinds ofdigital media and multitasking.

Their need for speed makes this generation impatient– if a web-page takes more than a few seconds todownload they will click away from it.

In some developing regions, Generation Y was thefirst generation to benefit from Western modernamenities, as economic growth and marketliberalisation produced a new, young urban middleclass.

The gap between the rich and poor is especiallynoticeable among the members of Generation Y, andit is important to realise that most young people incountries such as China and India still live below thepoverty line.

Generation Y consumers – even in developingmarkets – are no longer afraid of credit and do notallow debt or low incomes to prevent them fromspending, or even from buying homes.

Any rise in interest rates will hit this generation hard,which tends not to save, or think much about thefuture.

Generation Y's passion for communicating via theInternet (eg social networking sites such as MySpace)or mobile phone presents immense viral marketingopportunities for companies, provided they have the"right" products and brands.

This generation is mistrustful or contemptuous oftraditional advertising methods, such as TV/radioadvertisements and print media.

Consumers of this generation are very status-orientated, and even those on low incomes are willingto spend large amounts on brands that they perceiveas enhancing their image.

Generation Yers' preference for either high- or low-end products and services means that manufacturersand retailers positioned mid-scale are missing out onopportunities to reach this group of consumers.

Whether students, professionals or non-professionals,Generation Y shares a passion for fashion, music andtechnology such as mobile phones, MP3 players andcomputer games etc.

The music industry is suffering declining sales, due tothe propensity of this generation to download musicfrom the Internet, either at a low price or throughillegal free downloading. In response to this,merchandising and concerts have become a keysource of profits for the music industry.

Young people are travelling more – often taking abreak of several months before embarking on tertiaryeducation in order to see the world and gain newexperiences.

Fear of terrorism and/or personal attacks is deterringsome young people from travelling.

Generation Yers are socially conscious, and thereforepresent opportunities to companies marketingproducts and services that are contribute towardssustainability.

It is essential for companies to be transparent whentargeting this generation, who are quick to boycottbrands they deem as unethical or "uncool".

A desire for individualism creates demand forpersonalisation, customisation and accessories.

Manufacturers must remain innovative, constantlyreinventing brands and marketing strategies to adaptto the changing needs of this consumer group.




INTRODUCTION

Definitions

Children of the boomers

The term "Generation Y" generally refers to the group of people born immediately after Generation X. Thelatter consists of a relatively small cohort of people born in the decade or so following the baby boom. Mostmembers of Generation Y are therefore the offspring of the baby boomers, the large cohort born immediatelyfollowing World War II.

In many countries, births fell sharply in the mid-1960s and in the 1970s, as factors such as the Vietnam War(affecting the US), the sexual revolution and the entry of large numbers of women into the workforcecontributed to smaller and delayed families. However, although birth rates remained low into the 1980s, thesheer size of the baby boom generation produced a new wave of young people that far exceeded the generationthat went before it.

There is no official definition for Generation Y in terms of the exact range of birth years that this group covers,with some marketers including children born as recently as 2000. However, for the purposes of this report, andaccording to Euromonitor International's definitions, Generation Y refers to young adults born between 1981and 1989, who were aged between 18 and 26 in 2007 (as compared with Generation X, who were born between1968 and 1980 and are now aged between 27 and 39).

For marketing purposes, Generation Y are also sometimes referred to as "Millennials" or "Echo Boomers",although, again, the age definitions for these terms varies between sources, and according to some can includetoday's teens and tweens.

A diverse group, but largely single

Generation Y encompasses a diverse range of people, including students at tertiary education level, youngprofessionals embarking on their careers, and people who did not pursue higher education and have beenworking for several years, some with young families. Perhaps of most importance to marketers – both indeveloped and developing markets – are the high-earning graduates and potentially high-earning students thatwill shape future buying habits.

Many members of this generation are still single, due to the fact that many people are delaying marriage andchildbirth until their 30s in order to pursue higher education or a career, or simply want to live life to the fullbefore settling down. However, Generation Y also includes young couples, a proportion of whom are setting uphomes together and starting families. DINKs – double income no kids – represent a particularly lucrativesegment for marketers, being a lifestyle group with high disposable incomes.

Profile of Generation Y

The digital generation

Like baby boomers, Generation Y represents a cohort unlike any other that has gone before it. It could be saidthat this is the first generation to be defined more by its means of communication than by fashion or music.These young people grew up with computers at home, multi-channel TVs, mobile phones, music downloads andinstant messaging. They live life in the fast lane and are used to multi-tasking and all things digital.

High expectations

Often indulged as children by their baby boomer parents (who were determined to avoid repeating their ownharsh upbringings), and brought up in an age of affluence, Generation Y has different attitudes and expectationsto previous generations. Their lives have typically been programmed and over-managed from an early age, asparents ferried their children between numerous organised activities, such as sports practice, music, drama ordance lessons. This generation have been given high expectations by their doting parents, and are therefore oftendeemed to be unprepared for the "real world".



As a result of these factors, Generation Y is a generation that has long aimed to please, and in which rules seemto have replaced rebellion. However, obedience in this case should not be mistaken for conventionalism: formalattire is out, and, in the US, a recent survey by Pew Research Center for the People and the Press found thatmore than a third of 18-25 year-olds have a tattoo, and 30% have a body piercing.

This generation often does not recognise authority in the same way as baby boomers or Generation X, whichmeans they may sometimes be perceived as rude and spoilt. Young people tend to react based on what or howthey feel when they are approached or spoken to by authority figures, and are therefore less subservient thanprevious generations.

Reluctant to fly the nest

Nevertheless, Generation Y seems reluctant to stand on its own two feet. A professor of child psychology at theUniversity of Calgary recently stated that adolescence is now extended into the 30s. One reason for this is that,in most countries, education is postponing embarking upon a career. Another is the expectation of greaterlongevity. A third factor is young people leaving home later in life. In many developed countries, up to half ofall unmarried men and women between the ages of 20 and 34 still live with their parents.

In the US, a survey of college graduates from 2000 to 2006 by Experience Inc found that 58% of those polledhad moved back home after college and that 32% stayed more than a year. Even among those who had managedto stay away, Pew found that 73% of 18-25 year-olds had received financial assistance from their parents in thepast year, and 64% had received help with errands. 73% of Pew's respondents said they saw their parents at leastonce a week, and half did so daily.

In Australia, studies have found that today's 20-somethings are twice as likely to live with their parents as werepreceding generations. As a result, this group has been dubbed "kippers" – ie "kids in parents' pockets erodingretirement savings".

The impact of social change

More tolerant

Generation Y are also the most diverse generation ever, in terms of ethnicity, tolerance and sense of community.Although ethnic tensions among young people do exist in many areas, recent waves of immigration anddevelopments in race relations mean that Generation Y members are generally accepting of multiculturalism andinternationalism. Mixed race relationships in North America and Western Europe are common among thisgeneration. In addition, opinions on gay rights and gender roles are also being adjusted and redefined as eachgeneration emerges into adulthood. At the same time, Generation Y can be more spiritual and religious thantheir parents. The trend seems to be polarisation either toward or against faiths.

The gap between the rich and poor is especially noticeable among the members of Generation Y. While childrenof wealthy families typically enjoyed a host of extra-curricular activities during their childhood, less affluentfamilies were not able to afford such luxuries. This has partly contributed to the problem of gang-related streetcrime among some young people, especially in inner city areas.

In Eastern Europe, Generation Y is the first generation without clear memories of communism or dictatorialrule. In newly rich countries, such as South Korea or Greece, Generation Y has known nothing but developedworld standards of living, while their grandparents often grew up in developing world conditions. This can bethe source of inter-generational conflict, as the young reject many traditional ways of life. Generation Y wasalso the first generation in countries like India and China to benefit from Western modern amenities, due tomarket liberalisation.

Defining moments

Some of the cultural events and trends that have defined this generation over the years include:

• Hip Hop music and subculture

• Fall of the Berlin Wall

• Tiananmen Square Massacre



• Skateboarding movement of the 1990s and the early 2000s

• Two Gulf Wars

• The end of Apartheid in South Africa

• Death of Princess Diana

• The return of Hong Kong to the People's Republic of China

• Great economic prosperity in the 1990s buoyed by the dot-com bubble; the Dow Jones Industrial Averagebreaks 11,000 for the first time

• The Omagh Bombing and Good Friday Agreement in Northern Ireland signalling the end of the NorthernIreland Troubles

• Columbine High School massacre

• IPods and the digital downloading phenomenon

• The new millennium

• September 11 Terrorist Attacks and ensuing global War on Terror

• The wave of accounting scandals in 2002

• SARS epidemic in Spring 2003

• Indian Ocean tsunami disaster

• Post-Soviet crash of the Russian economy

• The rise of Newly Industrialized Countries, or NICs, such as China, India, Mexico and South Africa

• The massive boom in personalisation, P2P, Web 2.0, and the digital revolution in media

• Reality Television, such as American Idol and Big Brother

• The popularity of such community sites as MySpace and YouTube

Generation Y as consumers

Generation Y are consumerists by nature. Without the constraints of a family or, in most cases a mortgage, andoften with a professional income, they have discretionary income to spend as they please.

Followers of fashion

Although Generation Y covers a very diverse group of consumers, they have in common a propensity to buyrecorded music, fashion, mobile phones, MP3 players, computer games, fast food, TV, DVDs, PCs and Internetservices. Of these, music is probably the most important (although mobile phones and peripherals are believedto represent a larger proportion of their spend), because it informs and influences purchasing within most of theother sectors. Generation Y consumers are major purchasers of sports goods, which are generally within theclothing and footwear sector.

Young adults are also relevant for a large number of other consumer markets, such as food and drinks,cosmetics and toiletries, travel and hotels, household goods, communications and transportation. Students spendmoney on books, IT and stationery, but also on entertainment, alcoholic drinks and basic food, clothing andhome care products. They may also organise their own holidays, for which they may be prepared to take on anincreasing amount of debt.

The home making part of this age group is a major market for discount furniture (such as Ikea), as well as homeelectronics.

Bi-polarisation of demand

When it comes to actual purchases, Gen Y consumers avoid the middle of the road. They rarely purchaseanything that is not either at the high or low end of the retail scale. An example of this is the equal success of



retailers such as Abercrombie & Fitch and Forever 21 in the US, which illustrates the polar opposite buyinghabits of Gen Y consumers. As a result, retailers that are positioned as mid-scale are missing out on thisgeneration.

Yuppies become Yeppies

In developed countries, the new version of the "yuppie" (young, upwardly mobile professional) consumer isperceived as being less materialistic and more cerebral than before. The term "yeppie" (young experimentingperfection seeker) has been coined to identify a viable 21st century version. The yeppies, in the age group of 16to 24 years, are not single-mindedly materialistic like the yuppies. Their real search is for happiness by way ofperfection and achieving life-balance. The acronym suggests something beyond buying behaviour, with latermarriages and children indicating an experimenting, perfection-seeking mentality.

Desire for status

In the developing countries, Gen Y is in the vanguard of the new middle class. Where consumer confidence ishigh, such as in China, young adults will spend all they earn on luxury goods in order to appear successful andnot lose face, even if this means running up debts.

However, in India, a new version of the yuppie has been identified: the "guppie" (a Guargaon yuppie). Thisyoung urban professional is free spending, like the yuppie, but far more value conscious, being able to identifybargains. According to reports, the identification of the guppie – a yuppie with value for money attitude, iscausing major retailers to demand rethought marketing strategies.

DRIVERS

Later Families

Falling birth rates

For a number of years, birth rates have been falling around the world, and women have been waiting longerbefore having children. In more affluent countries, young adults can now afford interests and lifestyles that arenot compatible with large families. They often choose to postpone childbirth, in favour of building a career orhaving a good time. Marriage and children are no longer considered to be the ultimate aim in life, and morewomen are going to college and following careers that allow them the financial stability to live by themselves.

Furthermore, some sociologists believe that more young people are choosing to remain single, not only due to adesire for freedom, but also to an inability to handle close and personal relationships. This stems from fear ofcommitment and of being hurt, as well as society's new focus on the self.

In developing countries, the growing tendency for young adults to relocate from rural to urban areas, and evento work abroad for a number of years, has created a higher degree of mobility among younger generations,which in turn means that parenthood is often postponed and family sizes reduced. Furthermore, with birthcontrol now widely available, the number of unplanned births is falling. These factors, coupled with higherlevels of education and training, especially among women, have led to lower birth rates, and hence smallerhouseholds, worldwide.

First time mothers oldest in UK

In only six of the markets under review in the table below did the average age of first time mothers fall belowthat of the oldest of the Gen Y age group (as defined in this report) in 2006. The lowest age of first time motherswas seen in India, at 19.9, followed by Egypt (21.0), Turkey (22.2), Russia (24.5) and Poland (25.2). Perhapssurprisingly, the sixth country was the US, where the average age of first time mothers was only 25.3 in 2006.This is partly due to the high levels of immigration in the US, since the Hispanic population tends to have largerfamilies and from an earlier age.



The oldest first time mothers were seen in the Western European countries of the UK, the Netherlands, Spain,Switzerland, Italy, Denmark and Germany. In all of these countries, the average age of first time mothers wasover 29 in 2006, and rose over the 2001-2006 period.

Low birth rates in many developed and some developing countries are being driven by profound changes inconsumer attitudes, and by a generation of potential parents who would rather get rich and have fun than start afamily. According to a UK poll, both men and women believed it was more important for women to enjoythemselves than to have children, with 64% of men and 51% of women agreeing. A majority also thought thatdoing well at work and earning money counted for more than bringing up children. Just 36% of women believedthat people should put children ahead of their career. In a sign of the way male attitudes have changed afterfeminism, only 32% of men thought that women should put children before work. Both men and womenthought it was more important to live comfortably than to have children.

It is not only liberated and enfranchised women who are to blame: according to a study in Germany, it is menwho are primarily responsible for fewer births. In its study, the Robert Bosch Foundation found that many menare reluctant to start families. The study says one in four men in Germany do not want children, whereas one inseven women prefer to remain childless.

A related problem to not enough parents is the wrong parents: teen pregnancy is a major problem and one withmajor societal implications. The US has one of the highest teen birth rates in the world, ahead of Germany, theUK, Japan and France in teen birth and pregnancy rates, and with at least double the birth rate by teenagersbefore age 20 compared to Canada, France and Sweden. According to a survey, US teens from low-incomefamilies are 79% more likely to have a child by 18 than teens of a similar socioeconomic group in the UK.

Table 1 Average Age of First Time Mothers 2001-2006

2001 2002 2003 2004 2005 2006

UK 29.2 29.3 29.4 29.5 29.6 29.7Netherlands 29.2 29.2 29.3 29.3 29.4 29.4Spain 29.1 29.2 29.2 29.3 29.3 29.4Switzerland 28.9 29.0 29.0 29.1 29.2 29.3Italy 28.8 28.9 28.9 29.0 29.0 29.1Denmark 28.3 28.5 28.8 28.9 29.0 29.1Germany 28.4 28.5 28.6 28.8 28.9 29.0Japan 28.2 28.3 28.5 28.6 28.7 28.9Sweden 28.2 28.3 28.4 28.5 28.6 28.7France 28.0 28.1 28.2 28.2 28.3 28.4Norway 27.5 27.7 27.9 28.0 28.2 28.3Canada 27.5 27.7 27.8 28.0 28.1 28.3Finland 27.5 27.6 27.6 27.7 27.7 27.8Czech Republic 25.3 25.6 25.8 25.9 26.0 26.2US 24.7 24.8 24.9 25.1 25.2 25.3Poland 24.4 24.6 24.7 24.9 25.0 25.2Russia 23.8 23.9 24.0 24.2 24.3 24.5Turkey 21.7 21.8 21.9 22.0 22.1 22.2Egypt 21.0 21.0 21.0 21.0 21.0 21.0India 19.7 19.8 19.8 19.8 19.9 19.9

WORLD (total) 25.6 25.7 25.8 25.9 26.0 26.1Source: Euromonitor International

Higher Education

Students numbers growing

Despite the fact that Generation Yers are facing higher costs for higher education than previous generations, inmost countries of the world the number of students is reaching unprecedented levels. Indeed, the table belowshows that the percentage of 20-24 year-olds continuing in education rose substantially over the 2001-2006period in almost all the countries under review.



In the US, for example, the proportion of 20-24 year-olds continuing in education rose from 35.3% in 2001 to40.1% in 2006. A study of the US college student market (aged 18-30, from two-year and four-year colleges,attending part-or full-time) carried out by Harris Interactive in 2005 showed that the college market hadexpanded in every aspect – size, spending power and discretionary income. The study revealed that, whileenrolments were at an all time high (16.5 million students), the percentage of those employed had also reached awhopping 78%, which generated substantial levels of income and marking significant increases in discretionaryspend.

The highest proportion of young people going into higher education was seen in Italy, at almost 74%. Thisrepresented a substantial rise on the 2001 figure of 46%. Other countries in which more than half the number ofyoung people aged from 20-24 went into higher education in 2006 included Finland (70%), Denmark (54%),Spain (53%) and South Korea (53%).

In a small number of countries, the percentage of 20-24 year-olds going into higher education dropped slightlyover the review period. This was the case in Canada, Portugal, the UK and Austria.

British students deterred by high fees

In the case of the UK, many would-be students from poorer backgrounds are deterred by the high costs ofstudent fees and living expenses, although university funded or local authority funded grants are available insome cases. In March 2007, the British government revealed a new scheme for getting more young people frompoor homes into higher education. The central university admissions body, UCAS, said that it would start askingapplicants whether their parents had gone to university. Universities would be free to pass students' answers toadmissions officers with their applications, along with information about their social class and ethnicity.However, analysts believe that the problems should be addressed at an earlier age. With the same exam resultsyoung people from poor homes are as likely to apply, and to be accepted, at university as the well-off are. It isgetting those results in the first place that is the problem. Charging realistic fees and higher interest on loanswould make more money available to tackle the root cause of their exclusion.

The share of the population aged 20-24 in continuing education in developing countries is lower than indeveloped countries, whilst the labour force participation rate of people in this age group is higher in developingcountries. However, the trend of young adults pursuing further education is on the rise in developing countries.In Indonesia, for example, between 1996 and 2006, the proportion of the population aged 20-24 pursuing furthereducation doubled, from 10% to 20%. Particularly low shares in 2006 were seen in Turkey (11%) and Thailand(14%).

Table 2 % Population Aged 20-24 Continuing in Education 2001-2006

2001 2002 2003 2004 2005 2006

Italy 45.6 56.4 61.2 66.3 71.9 73.6Finland 53.7 55.9 60.1 63.9 68.6 70.1Denmark 42.5 45.5 47.8 50.4 53.2 54.3Spain 45.0 47.0 48.6 50.3 51.8 52.9South Korea 41.6 44.5 46.7 49.2 51.6 52.7Australia 40.8 43.0 45.2 47.4 49.8 50.8Sweden 43.9 48.3 48.7 49.2 49.8 50.8China 40.8 42.6 44.4 46.3 48.3 49.3Belgium 43.8 43.9 44.5 44.8 45.4 46.4Netherlands 41.1 40.7 41.7 42.3 43.1 44.0France 39.1 39.2 40.6 41.6 43.0 43.9Hungary 28.1 31.2 34.2 37.5 41.2 42.1Greece 34.3 35.8 37.6 39.2 40.8 41.7US 35.3 35.8 37.1 38.1 39.3 40.1Poland 37.2 37.8 38.0 38.3 38.4 39.1Norway 38.6 38.9 38.4 38.5 38.4 39.1Argentina 33.5 35.6 36.4 37.4 38.3 39.1Ireland 28.2 30.0 32.3 34.5 37.1 37.8Germany 35.8 36.0 36.2 36.3 36.7 37.4Brazil 30.1 30.5 31.2 31.8 32.6 33.3



Switzerland 28.8 30.0 30.3 30.7 31.2 31.8Canada 30.1 29.5 29.5 29.3 29.1 29.7Portugal 29.5 30.0 29.1 28.5 27.7 28.3Czech Republic 21.6 23.4 24.5 25.9 27.1 27.6UK 28.3 27.8 27.4 26.9 26.5 27.0Mexico 16.8 18.2 20.3 22.3 24.8 25.3Austria 24.5 24.1 23.9 23.4 23.1 23.5Malaysia 14.2 15.2 17.7 20.0 22.9 23.5Indonesia 13.0 14.4 16.1 17.9 19.9 20.4Thailand 9.9 11.6 12.8 13.2 14.1 14.4Turkey 10.9 11.4 11.2 11.0 10.9 11.1

WORLD (total) 29.9 31.2 32.2 33.3 34.5 35.2Source: Euromonitor International

Generation Y at Work

With the eldest batch of baby boomers in retirement and the rest soon to follow, the presence of Generation Yemployees is more important than ever. However, their attitudes to work are very different from those of thegenerations that went before them, and this is often the cause of conflict in the workplace. According to a recentsurvey by Lee Hecht Harrison, more than 70% of older employees in the US were dismissive of youngerworkers' abilities, while nearly half of employers say that younger employees are dismissive of the abilities oftheir older co-workers.

Unlike boomers, who tend to put a high priority on career, today's youngest workers are said to be moreinterested in making their jobs accommodate their family and personal lives. They want jobs with flexibility,telecommuting options and the ability to go part time or leave the workforce temporarily when they decide tohave children. As a result, employers are examining new ways to recruit and retain workers, and are trying tosell younger workers on their workplace flexibility and other qualities generally attractive to Generation Y.

Making an impact

According to one US analyst, Generation Y workers are like "Generation X on steroids", with high expectationsfor themselves, their employer and their bosses. They aim to work faster and better than other workers, and theywant fair and direct managers who are highly engaged in their professional development. They want to keeplearning, seeking out creative challenges and viewing colleagues as vast resources from whom to gainknowledge. They want immediate responsibility, making an important impact on day one. They are also goal-oriented, demanding short goals with tight deadlines so they can build up ownership of tasks.

Young people in the workplace tend to seek change and variety. They do not expect to stay in any one job, oreven a career, for very long, but are generally efficient at what they do, and multitask their way throughassignments as quickly as possible. They also have a preference for solving problems on-line, rather than byphone or face-to-face.

Generation Y workers have a reputation for experiencing boredom and frustration with slow-pacedenvironments, traditional hierarchies and even slightly outdated technologies – that is, almost everythingcommon in most workplaces. Furthermore, unlike previous generations, who have grown accustomed to theannual review, Gen Yers have grown up getting constant feedback and recognition from teachers, parents andcoaches, and demand the same from their bosses. Even the casual dress code of Generation Y, along with tattoosand body piercings, can offend older employees.

Unlike the generations that have gone before them, Gen Y have been pampered, nurtured and programmed witha range of activities since they were toddlers, meaning they are both high-performance and high-maintenance.They also believe in their own worth. Generation Y are much less likely to respond to the traditional command-and-control type of management still popular in much of today's work environments. They have often grown upquestioning their parents, and now they are questioning their employers.

Spending Power



Growing discretionary income

The gross income of people aged 20-24 accounted for 7.5% of the world's total in 2006, slightly lower than the8.3% share of this age group in the world's population. However, compared to previous generations occupyingthe age group, today's Generation Y have more money. One reason is that they tend to stay at home longer, withthe result that a significant proportion of what they earn becomes discretionary. Furthermore, young adults indeveloped countries generally do not have family responsibilities, which allows them to spend most of theirdisposable incomes on consumer goods for themselves.

Due to their efforts to obtain educational qualifications and better skills, the incomes of the population aged 20-24 in most developed countries have been rising faster than average income. Between 1996 and 2006, theproportion of 20-24 year-olds pursuing higher or further education rose from 28% to 40% in the OECDcountries. In general, students are receiving more generous allowances from parents as a result of the growingpurchasing power of boomer parents, and the fact that people generally have fewer children to support.Furthermore, many students take out loans, or supplement their income by working part-time during theirstudies. In 2007, the US House of Representatives voted to cut the interest rate on subsidised student loans byhalf, to 3.4%, over five years.

UK students benefit from cheap loans

In the UK, student loans are particularly cheap. Students can borrow college fees from the government, as wellas a sum towards living expenses, while the poorest get grants to cover their fees. The Student Loans Company,a subsidiary of the education department, currently lends around £3 billion a year (although some of this debt issoon to be privatised). Once a graduate starts earning, he or she needs to repay only 9% a year of their incomeover £15,000. Interest is never more than inflation, and anything unpaid after 25 years is written off. Studentsare therefore likely to repay only half of what it cost to lend them the money. However, the limit on borrowingfor living expenses is relatively low, forcing many poor students to take out expensive consumer debt to makeends meet. Furthermore, part-time students and those at further education colleges, who tend to be from poorerbackgrounds, are not eligible for the loans.

Family responsibilities drain incomes in developing markets

In many developing countries, lower rates of continuing education coincide with higher work activity among thepopulation aged 20-24. Young adults in many poor countries are burdened with family responsibilities and donot have significant independent spending power. These responsibilities, combined with their relatively lowincomes (in line with the overall low income levels), undermine further the purchasing power of youngconsumers in poor countries. In Brazil, for example, 81.0% of the population aged 20-24 are economicallyactive, accounting for 14.1% of the labour force.

In many low-income countries, young adults are particularly susceptible to unemployment, poverty and poorhealth. In many poor countries in Africa, HIV/AIDS seriously undermines the potential of a young populationand an youthful labour force. Also, people tend to marry at an early age in poor countries, which means thatmany 20-24 year-olds have family responsibilities.

Salaries rise with age and experience

Looking at the table below, in most countries, average gross income among 20-24 year-olds and 25-29 year-oldsis markedly lower than those in higher age groups. This reflects the high number of students or apprentices inthe lower age groups, with salaries tending to rise with age and experience and peak in the late 40s/early 50s.

However, interestingly, incomes in the lower age groups seem to have risen more strongly than those of mostolder age groups since 2001. This was the case in many developed and developing markets alike. In the case ofthe US, for example, incomes among the 15-19 age group showed the strongest growth between 2001 and 2006,of 52%, followed by the 20-24 age group, with growth of 26%.

Young adults' incomes are highest in the most developed markets of Western Europe. Average gross incomes inboth the 20-24 and 25-29 age groups were highest in Norway and Switzerland, respectively, in 2006. In the 20-24 age group, Germany ranked third, and the Netherlands fourth; while in the 25-29 age group, the third highestincomes were to be found in the UK, and the fourth highest in Germany.



Table 3 Average Gross Income by Age Group in Selected Markets 2006

US$15-19 20-24 25-29 30-34 35-39 40-44

Australia 18,696 22,708 26,633 30,067 32,479 33,871Brazil 3,358 4,057 4,474 4,679 4,778 4,787Canada 19,718 25,141 30,746 35,716 39,296 41,423China 694 1,402 1,330 1,312 1,345 1,395Czech Republic 4,653 6,575 9,407 11,648 12,708 12,703France 29,869 34,724 37,627 39,725 41,673 43,576Germany 31,423 36,844 40,665 42,396 43,150 43,388India 480 755 867 858 837 834Italy 23,861 29,535 32,824 35,874 38,441 40,417Japan 27,944 33,697 36,774 38,546 39,866 40,560Mexico 6,145 7,302 7,921 8,144 8,168 8,009Netherlands 32,136 35,336 38,859 41,789 44,061 45,536Norway 39,873 49,051 52,817 53,272 53,289 53,721Poland 5,937 6,451 7,256 8,015 8,483 8,812Russia 3,458 4,038 4,484 4,704 4,703 4,631Singapore 15,455 17,599 18,664 20,443 22,250 23,152South Africa 2,377 3,000 3,739 4,381 4,821 5,048South Korea 14,426 15,370 16,382 17,606 18,606 19,250Spain 21,608 22,606 23,495 25,366 26,087 26,262Sweden 18,829 31,311 38,002 40,339 41,321 42,555Switzerland 39,947 43,851 47,740 51,173 53,698 55,426Taiwan 14,688 15,675 17,982 19,413 18,801 18,655Thailand 2,150 2,447 2,639 2,725 2,734 2,702UK 22,770 33,087 41,973 47,145 50,218 51,613US 24,853 34,741 39,917 44,008 47,582 51,492

50-54 55-59 60-64 65-69 70-74 75-79

Australia 33,703 32,659 31,431 30,262 29,220 28,288Brazil 4,468 4,172 3,908 3,688 3,499 3,329Canada 41,416 38,599 33,394 28,516 24,585 21,504China 1,211 1,198 1,008 879 795 752Czech Republic 12,401 12,493 11,696 10,620 9,601 8,892France 45,022 44,726 42,846 41,095 40,309 39,201Germany 43,149 42,684 40,160 38,859 37,427 36,513India 811 739 640 555 487 431Italy 40,010 37,486 33,673 30,639 27,722 25,521Japan 38,946 37,400 34,362 32,044 29,955 28,063Mexico 6,993 6,272 5,756 5,367 5,030 4,737Netherlands 45,734 44,413 41,569 38,668 35,910 33,748Norway 53,855 52,039 49,402 46,748 44,418 42,410Poland 8,631 8,300 7,813 7,476 7,149 7,073Russia 4,299 4,022 3,837 3,661 3,576 3,488Singapore 23,044 23,208 20,977 19,947 18,612 17,901South Africa 5,149 5,036 4,683 4,338 4,019 3,760South Korea 18,769 17,802 16,893 16,126 15,442 14,826Spain 27,283 26,996 24,977 22,413 20,641 19,116Sweden 44,647 44,077 42,788 41,415 40,359 39,201Switzerland 57,035 56,038 52,831 49,402 46,436 43,848Taiwan 17,161 18,140 14,756 15,041 14,129 14,045Thailand 2,598 2,494 2,290 2,091 1,924 1,780UK 50,542 47,947 45,910 41,920 39,294 36,839US 56,628 54,256 44,947 36,111 27,984 23,702

45-49

Australia 34,196Brazil 4,689Canada 42,134China 1,095



Czech Republic 12,395France 44,927Germany 43,260India 836Italy 41,051Japan 40,636Mexico 7,618Netherlands 46,131Norway 54,202Poland 8,873Russia 4,469Singapore 23,229South Africa 5,140South Korea 19,302Spain 26,713Sweden 43,936Switzerland 56,581Taiwan 18,053Thailand 2,655UK 52,344US 54,541

80+Australia 27,749Brazil 3,229Canada 19,810China 694Czech Republic 7,110France 33,159Germany 31,405India 400Italy 19,832Japan 23,065Mexico 4,566Netherlands 30,445Norway 41,266Poland 5,623Russia 3,818Singapore 13,340South Africa 3,599South Korea 14,460Spain 15,829Sweden 38,503Switzerland 42,370Taiwan 13,801Thailand 1,697UK 35,697US 18,741Source: Euromonitor International from national statistics

Table 4 Growth in Gross Income by Age Group in Selected Markets 2001/2006

% growth15-19 20-24 25-29 30-34 35-39 40-44

France 69.3 63.3 59.4 59.2 59.1 58.8Germany 62.4 65.7 63.8 60.5 59.3 59.4Italy 64.8 62.6 58.7 58.5 59.8 61.4Netherlands 54.4 55.3 58.4 60.6 61.5 61.5Norway 71.4 65.0 62.4 61.7 61.3 60.8Spain 68.3 58.3 52.5 60.3 64.4 62.8Sweden 96.0 72.4 63.9 61.8 60.0 58.5Switzerland 42.0 41.8 41.5 42.3 43.5 44.6UK 78.9 61.5 57.8 51.7 49.3 47.5Czech Republic 73.3 80.1 93.0 98.0 103.0 105.9



Poland 74.6 69.4 69.0 68.3 63.1 61.6Russia 244.3 177.8 157.5 157.4 158.5 163.0Canada 68.0 58.7 59.8 63.4 64.4 64.1US 51.5 26.3 19.8 17.2 14.8 12.2Brazil 63.8 60.0 59.4 59.2 57.8 55.8Mexico 24.1 9.3 2.9 -0.2 -2.1 -3.3China 47.4 98.0 63.1 56.9 52.8 104.0India 31.1 37.2 41.7 45.3 47.7 48.6Japan 8.8 18.9 18.8 15.1 11.6 8.8Singapore 66.5 56.4 33.0 22.4 22.7 25.0South Korea 88.4 87.2 83.8 82.4 79.8 78.7Taiwan 42.1 26.9 30.5 41.5 35.1 36.1Thailand 49.1 51.9 54.6 57.0 58.7 61.1Australia 92.3 83.7 77.2 74.4 72.0 71.5South Africa 111.9 89.1 69.7 57.9 51.8 48.8

50-54 55-59 60-64 65-69 70-74 75-79

France 56.7 58.5 58.5 58.6 61.8 63.3Germany 57.5 56.3 52.5 54.5 55.4 57.8Italy 67.2 72.5 71.2 71.7 68.8 69.3Netherlands 60.4 61.1 61.9 62.5 61.7 62.2Norway 61.5 62.6 65.1 66.9 68.3 69.9Spain 61.4 63.8 69.0 71.6 75.8 79.2Sweden 58.8 60.2 62.9 65.0 67.7 69.4Switzerland 45.1 44.5 44.7 44.9 45.2 45.5UK 53.3 52.0 63.2 62.2 65.0 68.8Czech Republic 108.2 109.3 110.8 111.5 108.7 110.0Poland 62.9 65.3 64.9 67.1 66.4 71.4Russia 169.7 168.5 168.7 166.8 170.8 169.3Canada 64.4 64.4 60.0 54.2 48.3 43.9US 14.4 18.5 27.2 38.4 41.0 55.1Brazil 55.3 57.9 59.9 60.9 62.3 63.2Mexico -3.4 -2.2 -1.3 -0.7 -0.2 0.3China 59.0 62.5 57.6 49.5 54.1 64.4Hong Kong, China 7.3 10.0 14.7 16.9 20.4 24.1India 48.9 50.2 52.2 54.1 55.9 57.7Indonesia 96.9 104.3 107.7 109.6 111.4 113.0Japan 4.1 4.7 2.7 2.6 2.2 1.5Singapore 26.2 29.6 27.6 35.0 37.8 46.5South Korea 78.7 79.6 81.0 82.5 83.9 85.2Taiwan 24.4 64.5 33.2 45.1 38.1 36.2Thailand 73.4 83.0 89.4 94.1 98.8 103.2Australia 72.2 73.1 74.6 75.8 77.0 78.1South Africa 47.0 48.0 50.6 55.3 58.4 62.3

45-49

France 58.2Germany 58.7Italy 64.3Netherlands 61.0Norway 60.8Spain 60.9Sweden 58.2Switzerland 45.2UK 52.2Czech Republic 107.1Poland 62.5Russia 163.9Canada 63.6US 11.9Brazil 54.6Mexico -3.9China 47.3India 48.6



Japan 7.2Singapore 26.4South Korea 78.1Taiwan 37.0Thailand 65.7Australia 71.5South Africa 47.4

80+France 41.1Germany 38.9Italy 36.1Netherlands 52.1Norway 70.8Spain 62.0Sweden 70.2Switzerland 45.6UK 66.2Czech Republic 76.5Poland 40.3Russia 189.5Canada 40.9US 46.9Brazil 64.0Mexico 0.7China 61.1Hong Kong, China 26.3India 58.8Indonesia 114.1Japan -13.5Singapore 21.5South Korea 86.0Taiwan 32.4Thailand 106.3Australia 78.8South Africa 64.5Source: Euromonitor International from national statistics

Technology and Communications

The digital generation

Generation Y was the first to grow up with modern media (eg cable and satellite TV, DVDs, wide screen TVs),as well as PCs and the Internet. They became accustomed from an early age to downloading music, instantmessaging and mobile phones, which came to fruition around 2001. Some of the key developments to haveaffected Generation Y throughout their early years are:

• Sophisticated computer graphics in video games, animated movies and television shows (late 1980s to mid-1990s)

• Digital cable (from mid-1990s)

• Mobile phones (from late 1990s)

• Instant messaging (from late 1990s)

• DVDs (from 1997)

• MP3 players (from 1997)

• TiVo and other such DVR devices (from 1999)

• HDTV (from 2001)

• Broadband Internet (from early 2000s)

• Digital cameras (from early 1990s)



• Robotic and digital pets (from 1990s)

• Camera phones (early 2000s)

• Text messaging (early 2000s)

• Social networking (late 1990s and onward)

• 3D virtual worlds, such as Second Life, Entropia Universe, and There (early-mid 2000s)

• Web 2.0 (mid 2000s)

• Increased surveillance by their baby boomer parents, such as GPS tracking, Internet-enabled home camerasystems, Internet monitoring and mobile phone monitoring, which many young people view as infringingon their personal rights (2000s).

A recent survey conducted by KRC Research and Hitachi Global Storage Technologies found in 2005 thatGeneration Y consumers had an average of US$2,199 worth of entertainment stored on devices such aslaptops/PCs, MP3 players, DVRs, mobile phones, PDAs, digital cameras or portable DVD players, comparedwith US$1,135 for the average American adult.

Staying connected

The young adults of Generation Y are adopting new technology faster than any other generation, according to arecent study by Forrester Research of young adults in the US and Canada. On average, they spend 12.2 hoursper week on the Internet, which is some 28% longer than the average Generation X user and twice as long as theaverage baby boomer. Studies have consistently shown that they are doing this at the expense of watching TV.The same survey showed that Gen Yers spend only 10.6 hours a week watching TV.

The typical Generation Y lives on-line, reading blogs, downloading podcasts, checking prices before buying,exchanging recommendations and influencing younger consumers. For the connected generation, the immediacyof on-line media is more appealing than TV and newspapers. Generation Yers spend 41% less time reading localnewspapers and 22% less time in front of the TV than baby boomers. However they are the primary consumersof social networking websites and instant messaging and are 50% more likely to use instant messaging thanGeneration Xers. Generation Yers are also three times more likely to read blogs than Generation Xers.

Generation Yers, according to analysts, appear to go in for self-actualisation, adventure and community, whichexplains their massive take-up of MySpace. According to analysts, the qualities of the site that appeal toGeneration Y are that it has the content they want: young adults posting their profiles, uploading photos, writingblogs and sharing messages; and community: a dedicated group of users who visit multiple times each day andconduct a considerable proportion of their lives on-line.

Mobile phones

Studies show that mobile phones have become the communication tool of choice for adults aged 18 to 26.According to Forrester Research, Generation Yers are the largest users of data services, and have been the mostsuccessful in integrating the phone into their lifestyles. As a result, many phone manufacturers and serviceproviders are developing phones and services aimed specifically at this market.

The number of mobile phone users worldwide is estimated to have risen by as much as 154% between 2001 and2006, to reach 2.4 billion. Penetration has passed 100% in various markets, but in many developing markets itremains low. There are other massive discrepancies: in actual usage of mobile phones and also in penetration inurban as compared to rural areas. There are also surprises when levels of penetration of mobile phones arecompared, with no obvious correlation between per capita wealth and ownership.

China led the world in 2006, with a total of 464 million users, having grown by 220% over the 2001-2006period. In February 2007, telecom operators began to roll out a "caller pays" billing system across the country,which effectively removes incoming call charges and thus reduces the monthly bill for mobile phone users. Inaddition, the roaming fee is also expected to be regulated and probably abandoned in the coming years. Thereduction of fees and charges will lead to robust growth in the number of mobile phones. China's rural areas, inparticular, present the largest opportunities for business expansion for mobile operators and manufacturers, asthese regions have large populations and low rates of penetration.



Russia and India have the world's fastest growing mobile phone markets. Mobile phones in India have helpedconsumers to overcome a landline shortage: in 2006, there were only 46 telephone lines in use per 1,000 people.Mobile services have widened access to markets for tens of millions of Indian farmers and fishermen, as theycan gain information about prices and new customers via mobile phone and no longer rely on the middle man.Thanks to downloads, the market for Bollywood films and mobile games based on popular Bollywood movieshas expanded massively, especially to rural areas where entertainment venues are few.

The number of mobile phone-only households is growing. In developed countries there are and will be manyhouseholds for whom mobile phones represent a far cheaper and more practical way of getting connected thanfixed line phones.

Table 5 Number of Mobile Phone Users by Country 2001-2006

'0002001 2006 % growth

2001/2006

China 144,820 463,991 220.4US 128,375 217,177 69.2Russia 7,750 143,193 1,747.6India 6,432 111,633 1,635.6Brazil 28,746 102,003 254.8Japan 74,819 98,181 31.2Germany 56,126 82,434 46.9Italy 51,246 75,074 46.5UK 46,283 64,905 40.2Mexico 21,758 52,324 140.5France 36,997 50,225 35.8Turkey 19,573 49,737 154.1Spain 29,656 42,324 42.7South Korea 29,046 40,050 37.9Philippines 12,159 35,560 192.5South Africa 10,787 34,232 217.3Poland 10,005 32,671 226.5Argentina 6,742 25,127 272.7Taiwan 21,786 23,248 6.7Malaysia 7,385 22,165 200.1Australia 11,132 19,721 77.2Thailand 7,550 19,682 160.7Canada 10,649 17,814 67.3Netherlands 12,200 16,420 34.6Source: Euromonitor International

Digital downloading

Downloading goes legal

According to a survey by TNS Infratest Media Research, 50% of teenagers and young people in their 20s listento an MP3 player on average for 90 minutes a day.

There were two drivers of the digital music global megatrend: the first, dating back to the advent of file sharingand Napster (now a legal site), was consumers wanting to listen to songs when, where and how they wished.The second driver was that it was possible to do it all for free, hence the ensuing battle as the recording industrydesperately tried to maintain control over its content and safeguard its revenues.

Trends in digital music over the past two years demonstrate that, on balance, consumers now prefer to be legal.This is demonstrated by the success of iTunes and the number of legal downloading sites, which increased from50 in 2004 to 335 in 2006.



According to IFPI, digital music sales tripled to US$1.1 billion in 2006, from US$380 million in 2004, withdigital music players becoming the accessory of choice and fans legally downloading 420 million tracks via theInternet – 20 times more than in 2004. Meanwhile, the volume of music licensed by record companies doubledto more than 2 million songs, and digital music now accounts for about 6% of record companies' revenues.

The rise of community music and the MPshe

The way consumers are buying music is evolving. Community music sales using community sites, such asHabbo, is a notable trend, while the advent of the "MPshe" consumer is also important, as women take overfrom men as the leading downloaders.

For both the music industry and wireless service providers, the business of selling music directly onto mobilephones is the next major opportunity. A significant proportion of legal downloading revenue is now accountedfor by mobile ring tones. Worldwide, according to the IFPI, mobile music accounts for about 40% of recordcompany digital revenues.

Another major trend in digital music is downloading to smart phones. In Japan, mobile music's most developedmarket, sales reached US$211 million (96% of all the country's digital music sales) in the first quarter of 2006.The speed of growth from country to country will depend on the comparative popularity of mobile devices:where there is high penetration of home PCs, such as in North America, growth will be slower than in Asianmarkets, where mobile phones are more popular than PCs.

Chart 3 Mobile Phone Music Listeners 2005

%*

Source: TNSNote: * % of mobile users who regularly listen to music on their mobiles

the Social Networking Phenomenon

The power and potential of social networking sites for global messages and for marketing has yet to be fullyunderstood and exploited by companies selling to Generation Y. On-line as a way of life is epitomised inMySpace (owned by News Corp) and the virtual social life, Cyworld, two hugely popular websites whichoriginated in the US and South Korea, respectively, but which have both expanded into the on-line"globosphere".

The power of viral marketing



Social networking sites have illustrated the unique real-time power of the Internet to spread information rapidlyacross the world. For example, following the death in the US of 18 year-old Anna Svidersky, her friends postedthe news of her murder on MySpace, and composed a tribute with a collage of photographs. This tragic eventbecame the apotheosis of viral marketing, with the story reverberating around the entire on-line world. Somecommentators regard this as a further example of changing social values. In an age where chat rooms and"virtual" friends are replacing traditional support structures such as religion and the family, the need to makeemotional connections is stronger than ever, even if they are not "real". According to reports, condolences fromall over the world continue to flood in, with over 30 video tributes currently hosted on YouTube alone. There isalready a 200-word entry on Anna Svidersky's life on Wikipedia, complete with a picture from her high-schoolyearbook.

Locals rival US giants

MySpace is by far the largest social networking site, with 41.9 million unique users in March 2006, according toresearch company comScore. Its main US-based competitor is Facebook, with 12.9 million unique users.However, Facebook is currently facing a lawsuit by ConnectU, a much smaller college social networking whichwas also created in 2004 by students at Harvard University and claims that Facebook copied its idea. The latestlawsuit requests that ConnectU be given control of Facebook. For its part, Facebook officials argue that the twosocial-networking sites have substantially different interfaces.

Several country-specific sites are also popping up to rival MySpace and Facebook. For example,Univillage.com, which was launched in the UK by lastminute.com founder Brent Hoberman in August 2006,had already signed up over 70,000 students by September 2006. Univillage aims to connect students atuniversities across the UK and offer them the chance to create profiles, and share music, photos and videos. Ithas set up partnerships with Universal, EMI, Warner, Sony BMG and a range of independent record labels.

In South Korea, one in three people (17 million) has a Cyworld membership, and amongst South Koreanconsumers in their 20s the take-up is 90%. Cyworld is highly profitable, reportedly earning over US$12 millionon revenue of US$110 million, mainly from selling virtual furniture. The site is owned by a division of SKCommunications, a mobile wireless provider. The company has already expanded into the Chinese and Japanesemarkets, and recently opened an office in San Francisco. According to reports, Cyworld becomes a vital part ofthe lives of its members, who, in some cases, prefer their cyber-egos to themselves in the real world.

Although MySpace and Cyworld are very different in style, the American press regards them as potentialcompetitors for the same demographic. What Cyworld has done is integrate all the features of the traditional"hompy" (mini-homepage) into a package, complete with an internal economy and mobile access. On the SouthKorean Cyworld, some US$250,000 per annum is currently changing hands in-network. The currency can bepurchased via debit, credit, charged to a users mobile account or through prepaid gift cards – a relatively newsystem as yet largely unexploited.

Social networking goes mobile

Towards the end of 2006, there were signs that social networks in the US were migrating from PCs to mobilephones, to suit the on-the-move lifestyles of young people. MySpace has now developed mobile services for itsusers, and also has a partnership with youth-oriented wireless carrier Helio, which offers social-networkingservices based on global positioning systems in high-end mobile phones. InterCasting Corp's Rabble is anotherexample of a GPS-based service, and Microsoft was testing mobile software, called SLAM, that would providepersonal locator services, as well as messaging and photo sharing.

Also at the end of 2006, Internet portal Yahoo launched an experimental site – Mixd – that offers mobile-phonesubscribers in the US the ability to send text messages and share videos and pictures among friends. The servicewas launched on several college campuses in order to focus on Yahoo's core target audience, Generation Y, whoare the largest users of mobile phones' data services. The service aims to make it easy for groups of friends touse text messaging as a way to organise a party, meet in a restaurant, attend a football game or arrange any othersocial activity. Individuals can also have private conversations, and people have the option whether to join agroup.

Table 6 Number of Visitors to Social Networking Sites in the US, March 2006



Million unique visitors

MySpace.com 41,889Facebook.com 12,917Xanga.com 7,448LiveJournal.com 4,047Yahoo! 360 3,614MyYearbook.com 3,613H15.com 2,609Tagworld.com 2,275Tagged.com 1,668Bebo.com 1,096Friendster.com 1,066Tribe Networks Inc 87143Things.com 661Sconex.com 372Source: comScore Media MetrixNote: All users at home, work and educational establishments

the Changing Role of Men

Many men of the Generation Y cohort may be described as "metrosexual", a term used to describe aheterosexual male with an unashamed interest in shopping, fashion, fitness and personal grooming. The modernmetrosexual has come about partly through changes in culture and attitudes towards masculinity. These arevisible in the media through television shows such as Queer Eye for the Straight Guy, as well as magazines suchas FHM, GQ, Men's Health and Maxim.

A recent survey published in the Dutch magazine Marketing Tribune demonstrated that metrosexuality is fastbecoming common among younger males, with "metro behaviour", such as shopping, fitness and fashioninterest, scoring much higher among the under-35s than among over-35s. Indeed, although metrosexual is notthe exclusive territory of late teens and generation Y men, the metrosexual lifestyle is more associated withyoung singles than a married man with children.

Metrosexual becomes ubersexual

Recently, there has been talk of the metrosexual being superseded by the "ubersexual". The findings of a USsurvey of men aged 21-34 by Miller Genuine Draft and the Kelton Research Group suggest a more complex andthoughtful typical generation Y male than the current marketing stereotypes. The typical male is more home-oriented and domestically accomplished than the clichéd picture of the untidy, clueless single male unable towash clothes and locate the kitchen other than to find a drink, but is at the same time less effeminate than themetrosexual. The ubersexual man can thus be said to be a more masculine version of the metrosexual, with awider set of interests.

Although a national survey, the findings of the Miller survey have a resonance across many countries, as youngmen seek new roles and images which fit societal changes. Defined as "evolving adults", according to the MillerGenuine Draft and Kelton Research Group survey, the typical Generation Y male (at the older end of the Gen Yage group) is a confident home entertainer. 57% of men aged 25-29 said that if a woman were to just pop in,they could prepare a full meal at a moment's notice using the items they have in the house. 68% of men ownedat least one cookbook, and 47% claimed to have used a cookbook within the last month. Furthermore, 55% ofthose in the 25-29 age group said they try to keep their living space as neat as possible as often as they can.

Men's skin care goes mainstream

The changing male image is reflected in purchases of personal products. Once a typical male grooming kitincluded a razor, a can of shaving cream, a bar of soap and deodorant. Today, men are buying more skin careproducts than ever before. According to commentators, grooming habits that a few years ago would have beendefined as metrosexual are now accepted as ordinary, and male products now include facial scrubs, toners andscented body washes. UK drugstore retailer Superdrug even sells a male eyeliner, called Guyliner. The trendsare not confined to the US and Europe: in 2005 Nivea launched a skin-whitening product for men in Asia.



Other findings of the Miller survey broaden the picture of the buying behaviour of Generation Y men, though itis difficult to extrapolate from the finding that wine drinkers own more shoes than beer drinkers, unless it is asimple matter of disposable income. (Including all types of shoes – athletic, work, etc – 43% of men surveyedowned five pairs of shoes or fewer, while 31% of men who preferred wine to beer or liquor owned 10 or morepairs of shoes.)

Training to achieve fitness and a good looking physique has become more popular than "real" outdoorcompetitive sports and games like football. Thus, looking athletic has assumed greater importance than beingathletic. According to a recent report by the drugs charity DrugScope, one of the most popular recreational drugsamongst young males is now steroids, and this prescription-only product is now a "metrodrug", used by youngstraight men in much the same way as many gay men have traditionally used steroids as a short cut to a tonedmuscular body.

Attitudes To Finance

Generation debt

There have been major changes in consumer attitudes to debt over the last decade, and it is Generation Yconsumers – the new "debt generation" – who are the standard bearers of credit growth. Consumers are nolonger ashamed of debt, it has become a normal part of people's lives. Generation Y want to achieveimmediately what it took their parents' generation years to achieve, and the way to accomplish this is throughcredit.

In many countries, credit cards are now used as an extension to cash, and in some countries more purchases arenow made on debit cards than with cash. Meanwhile, the number of consumers with debts of more thanUS$100,000 is steadily growing. In the UK, cases of extreme debt doubled between 2004 and 2005. At the sametime the proportion of young people experiencing difficulties with unsecured debt also showed a markedincrease. There are many reasons for this. In developed countries, this is the first generation with easy access tocredit, and not only student loans. According to research by the US Senate in 2003, new college students areoffered approximately eight credit cards during their first week of college.

According to a recent survey by Commonwealth Bank (CBA), 73% of Generation Y consumers in Australiahave some form of debt, though of those with debt, 57% are not concerned about it.

Living for today

The sea change in consumer attitudes to debt is not confined to developed countries. There is a consumer cultureamong 20-30s in China which causes them to spend much or all of the money they make (and often more) ontravel, clothes, food, drink and fashionable places of entertainment. This grouping have high expectations anddo not allow debt or low incomes to prevent them spending. The attitude is essentially hedonistic – enjoyingtoday without fear, and not saving for the future.

The problem with consumer debt is when it passes the tipping point which means that perceived net worth isfalling rather than rising. According to a recent report by the Vanier Institute for the Family, average net worth(assets minus debt) for Canadians under the age of 25 fell by 95% between 1984 and 1999. Since that time, thevolume of consumer borrowing has accelerated. One reason for this is the temptation to borrow in order totravel, with many young adults touring the world before settling into a work routine. The Youth TourismConsortium of Canada reports that travel among the under-30s accounts for almost a quarter of the country'stourism market.

When the Generation Y consumers finally set up home, the tendency is not for deferred gratification. The "insta-house" phenomenon is a term coined to describe the trend among young adults to spend fearlessly when theyfirst set up home, rather than adopting the cautious approach of their parents. A reason for this is the tendency ofgeneration Y to be influenced by marketing messages. Generation Y use parents as models, but to diverge fromrather than emulate. They want the same comforts they enjoyed when living at home and are not prepared towait. Debt is one way of not having to wait.

At the same time, studies in the US show that Generation Y consumers are concerned about savings andretirement. After witnessing the financial insecurity that beset earlier generations affected by layoffs and the



dot-com bust, many of today's newest entrants into the workforce do care about such benefits as retirementplans. According to a survey in 2006, carried out by Diversified Investment Advisors in the US, 37% ofGeneration Y consumers expect to start saving for retirement before they reach 25, with 46% of those alreadyworking indicating so. 49% say retirement benefits are a very important factor in their job choices. Among thoseeligible, 70% of the Generation Y respondents contribute to their 401(k) plan (a US retirement savings plan thatis funded by employee contributions and often matching contributions from the employer).

Travel

Gap year travel

Today's Generation Y, and students in particular, are choosing to travel more than ever before, and are venturingfurther afield and to more unusual destinations. The reasons for this are manifold. To begin with, this generationhas grown up in a global and multicultural society, with all the information they need at their fingertips. Youngpeople are therefore more savvy about different places and cultures than ever before. Furthermore, due to theInternet and budget airlines, travel has become cheaper. Combined with the easier availability of credit,travelling the world – albeit on a shoestring – has become possible for a larger number of young people.

UK remains principal market

The number of people taking a gap year has risen strongly in recent years. This is usually a break betweenuniversity and starting a career, when young people travel and work abroad to gain some experience of the "realworld". The Gapyear Company estimates that in the UK there are 50,000 pre-university "gappers" and 150,000during and post-university gappers, 60% of whom are female. The average time away is four months, and theaverage spend £3,000.

The gap year market has undergone many transformations. Back in the 1960s, gappers from the UK travelledmainly to cheap destinations, such as Greece. Then came InterRailing (a train ticket which allowed unlimitedtravel on Europe's trains), which became popular in the 1980s. In the 1990s, cheaper flights led to the take-off ofinternational student travel, and students began to travel the world for a number of reasons, be it courses,volunteering, expeditions, work, travelling or simply to achieve life-long ambitions. Experiential travel is nowprioritised over partying and ticking off famous destinations. Interacting with local communities and developingskills or choosing a theme are increasingly important. Younger travellers often select experiences that relate totheir studies (eg music-focused explorations such as following the Blues Highway across America. Gap yearexperiences are often used by students on their CVs or on personal statements for university applications.

There is said to be a noticeable decline in interest in traditional expeditions through companies such as RaleighInternational and VSO. New companies are attracting the young market with more unusual challenges, such assailing a clipper round the globe.

Backpackers become more adventurous

In terms of destinations, according to STA Travel, South-east Asia is making a huge comeback following theIndian Ocean tsunami of December 2004. Thailand, the original backpacker destination, is as popular as ever, asis India, due to average flight costs dropping from £500 to £300 in recent years, whilst countries such as Laos,Cambodia and Vietnam, only for the adventurous in the 1990s, are now a common stop-off. South America andAfrica are also reported to be booming, while Australia and New Zealand remain popular. Many 18-30 year oldswork in Australia and New Zealand on a holiday visa, which was extended to two years in 2006, as long as aperiod of agricultural labour is undertaken.

New emerging destinations for backpackers include Panama, Bolivia, Nicaragua, Borneo and South Korea.However, students are tending to avoid destinations such as the Middle East and Indonesia, which areconsidered less safe.

Safety fears deter some

However, despite strong growth in recent years, there were signs in 2007 that the market for gap year travel, inthe UK in particular, was beginning to slow, due to factors such as fears about personal safety, environmentalimpact, higher university fees and mounting debt. UCAS, the university admissions service, revealed that the



number of young people applying to defer their entry to university in 2007 dropped to 22,656, compared with23,354 in 2006, despite a rise in the total numbers going to university.

An increasing number of services are geared towards catering to student and gap year travellers. The UK hassome well established student travel agencies, the largest of which is STA Travel. The company was set up over25 years ago by a group of young Australian travellers, whose aim was to enable other young people to discoverthe world on a tight budget. It now has over 65 university and high street branches throughout the UK and 450worldwide.

Pre-paid cards for gappers

Financial institutions are also developing suitable payment solutions for gap year travellers. For example, TheMoney Shop recently introduced its Titanium Cashplus prepaid MasterCard, in conjunction with specialistprepaid card firm Advanced Payment Solutions. According to the company's own survey of 1,800 British 18-25years-olds in 2006, one in 10 of these were considering or planning a gap year world trip in the near future, andwould leave the UK with an average of £3,064 in savings. However, 25% of these believed they would verysoon run out of money. The Titanium Cashplus prepaid MasterCard works in a similar way to a pay-as-you-gomobile phone and can be pre-loaded with cash at any Money Shop or Post Office branch. It can be used on-line,over the phone and at any ATM to withdraw cash. The card is also considered a safer way to travel, since if it islost or stolen the thief would only be able to spend what was left on the card.

E-travel

Generation Yers tend to eschew bricks and mortar travel retailers for on-line sites that combine conveniencewith low prices and seemingly limitless advice. Low-cost carriers (LCCs) are especially popular with students,young couples or singles travelling on a budget and keen to explore new destinations; while on-line travelagencies (OTAs) such as Expedia, Travelocity and Orbitz offer the convenience of being able to compare faresacross a number of scheduled airlines. The new "meta-search" sites, like SideStep and Kayak, offer the ultimateconvenience since they scan the inventories of the OTAs as well as individual airlines. Furthermore, anincreasing number of specialist websites cater to the individual needs of young travellers with specific interests.

Advice from the horse's mouth

Wary of company spin, Generation Y tend to be the principal users of consumer-created sites such asTripAdvisor (now part of Expedia). These comprise user-generated feedback which is disseminated via blogs,reviews, user groups and forums, enabling people to read first-hand reviews from travellers like themselves.

Gaining an on-line presence is, therefore, seen as the way forward for travel retailers looking to grab theattention of Generation Y. Companies with innovative marketing methods, such as Travelzoo's "top deal" e-mailbulletins are the most likely to succeed in reaching this target group. Travelzoo offer subscribers a weekly "top20" of cheap and often unusual travel deals, which are hand-picked by an editorial team from submissions madeby travel companies that often wish to offload spare inventory. Travelzoo entered the UK market in April 2005,and within a year had around 500,000 subscribers. Total subscribers worldwide now top 10 million, andGermany and Spain now have their own bulletins.

Clarity is key

Speed and transparency are everything to Generation Y. Websites that are uncluttered and offer the simplest farestructures are key to reaching these consumers. For example, in 2007 Teletextholidays tightened controls onhow travel companies advertise prices on its website, forcing suppliers to include the cost of compulsory extrasin the on-screen price. The move came after Thomson announced it would be absorbing the cost of fuel in itsprices to make it more transparent for customers. TripAdvisor also recently announced a major revamp of itswebsite after being criticised for a gradual "cluttering" of the site in recent years as more functionality and toolshave been added. The company aimed in 2007 to make the site easier to navigate and more inspirational innature.

Eating/drinking Habits



Health versus indulgence

In developed markets, Generation Y are the first generation to have grown up often without structured meals athome, since many of their boomer parents went out to work. They have been used to snacking or eatingerratically all their lives, and their current eating habits reflect these experiences.

Generation Y is also more health aware, despite having spent their childhood surrounded by junk food and TVdinners. Childhood obesity began to become a problem during the 1990s, when this generation were growingup, but young people are now keen to rectify the situation, even going to extremes by trying to emulate the "sizezero" celebrities that fill the pages of glossy magazines.

At the same time, however, young people are prone to indulgences: for example, while consumption of bottledwater is growing among young people, so is alcohol consumption. While people are joining the gym andparticipating more in team sports, binge drinking is a growing problem in some countries.

Developing world consumers turn to packaged foods

In developing markets, young people are increasingly choosing to buy packaged foods in modern retailchannels, rather than buying loose or fresh products at traditional wet markets or specialist outlets. In China, forexample, increased exposure to Western culture has encouraged young consumers to try Western products, suchas ready meals pasta and frozen food, which the older generations are less willing to do.

On the whole, Generation Y seeks foods that are convenient, healthy, interesting and portable, thereby appealingto their on-the-go lifestyles and desire to try new things. This includes snack foods, as well as chilled/frozenready meals, chilled pasta and chilled processed meats that can be quickly prepared at home. Many youngpeople either skip breakfast altogether or turn to foods that are quick and easy to prepare, or that may be eatenon the move, including bakery products, breakfast cereals and breakfast bars.

The search for convenience

Fast food is another popular option for time-pressed students and young professionals looking for convenience.Moreover, young consumers are more likely than older generations to experiment with a wide range of ethnicfoods, rather than choose traditional dishes.

In developed markets, small, inner-city "metro" supermarkets and convenience stores are well suited toGeneration Y consumers. With their extended opening hours and ubiquitous locations, they are an increasinglyimportant retail format for a wide range of convenience foods, such as chilled ready meals.

Social drinking

Despite increased awareness among the younger generations for the need to stay fit and healthy, sales of alcoholare high among the members of Generation Y. Without commitments they have more time and money tocommit to their social life, and drinking is a big part of this. In some countries, drinking has long been afavourite pastime of students, whether at student bars or private parties.

Younger people are drinking to reflect their sense of identity and personality. Individuality is becoming moreimportant. Status comes from choosing the "right" drink and the "right" brand. There is often a sense ofbelonging coming from shared drinking habits, for example, from where people drink, when they drink andwhat they drink.

These modern drinking habits are particularly strong in emerging markets, where the young people who aremoving to the cities aspire to be part of the "global village". It is the shopping malls, and the bars and coffeebars where they are first able to experience this "global village" culture. Cities like Mumbai and Shanghai arefull of young people keen to spend their newly earned wages on having a good time. The hotel bars are filledwith young men and women considering mojitos and caipirinhas. They may be the top end of the market but it isa sector that is vibrant and growing.

Binge-drinking (defined as more than five drinks in a session) is a problem among young drinkers in manymarkets, which has recently led to some changes in regulations. Once restricted to a male pastime, binge-drinking is becoming increasingly common amongst women, and alcohol abuse amongst women in general is on



the rise. Recent UK-based research estimates that in the 18-25 year-age group, alcohol abuse rose by around32% in men and 70% in women between 1991 and 2003.

Ethical Awareness

Research suggests that Generation Y consumers are civic-minded and socially conscious as individuals,consumers and employees. This creates strong demand among this generation for products that are consideredless harmful to the environment, both in terms of manufacture and recyclability, and those that are less likely toinvolve the exploitation of workers in poor countries, such as items with the Fairtrade logo. It also reinforces theneed for companies marketing products to this generation to improve their Corporate Social Responsibility(CSR) policies and use these to their advantage.

Although they are less radical than the baby boomer activists in the 1960s and 1970s, known for theirdemonstrations for civil rights, women's equality and protecting the environment, Generation Y are far moreaware of the world. This is largely due to the vast amount of information that is readily available on the Internet.Furthermore, tragedies such as the 9/11 terrorist attacks and Hurricane Katrina have scarred the adolescence ofthis generation, and experts see signs that Generation Y are creating their own brand of social consciousness.

The findings of an on-line study carried out in the US in 2006 by Cone Inc and AMP Insights suggested thatGeneration Y are the most socially conscious consumers to date. The study showed that 61% of 13-25 year-oldsfeel personally responsible for making a difference in the world, and that 81% had volunteered in the past year(although it should be noted that many high schools require volunteering, which has become a must for thecollege résumé). A further 69% considered a company's social and environmental commitment when decidingwhere to shop, while 83% would trust a company more if it is socially/environmentally responsible.

Chart 4 Top Ten Issues Affecting American Youth 2006

%

Source: 2006 Cone, AMP InsightsNote: Top 10 causes on the minds of 15-25 year-olds (survey base: 1,658)

DEMOGRAPHICS

Regional Trends

Echo boomers form large cohort in the West ...



In the West, Generation Y, though encompassing a narrower age group than Generation X, is generally thelarger of the two generations, since it represents the offspring of the baby boom generation that immediatelyfollowed World War II. However, while the echo was much larger than the previous cohorts, this generation isgenerally much smaller than that of the baby boomers, as in many rich countries, the 1980s and 1990s were aperiod of rapidly falling birth rates. In Southern Europe and Japan, and less markedly in Northern and EasternEurope, Generation Y is dramatically smaller than any of its predecessors, and its childhood years tended to bemarked by small families, both immediate and extended, small classes at school and school closures.

On a global level, the 18-26 years age group represented 15.1% of the total population in 2006, a percentagewhich remained broadly stable over the review period. This was slightly up from the 15.0% share recorded eachyear between 2002 and 2005, but down on the 15.2% share of 2001.

... but Asia-Pacific still home to majority

In line with overall population patterns, Asia-Pacific held by far the greatest number of Generation Ys in 2006,accounting for 56% of the global total. However, in terms of marketing worth, the greatest potential formarketers of products and services aimed at this generation remains in the developed markets of North Americaand Western Europe. Although these two regions together accounted for only 10% of the Generation Ypopulation in 2006, the greatest amount of wealth resides in these regions.

Also reflecting overall demographic trends, the greatest Generation Y population growth over the 2001-2006period occurred in Africa and the Middle East, where the number of 18-26 year-olds increased by 16%. Theregion has a young and growing youth population, although purchasing power again remains fairly low amongthe majority of consumers. This region accounted for almost one fifth of the global number of 18-26 year-olds.

All other regions experienced growth in the Generation Y population between 2001 and 2006, with the notableexception of Western Europe, where their numbers fell by 1%. However, their spending power in this developedregion is relatively high.

Chart 5 18-26s Population by Region 2006

%


Chart 6 % Growth in the 18-26s Population by Region 2001/2006

% growth




Country Trends

India's young and growing population

In absolute terms, due to their vast overall populations, India and China had the largest number of young peoplein the 18-26 age group in 2006, at 186.6 million and 160.5 million, respectively. However, the two countrieshave experienced very different growth patterns. While the number of Generation Ys in India grew by 9% overthe 2001-2006 period, in China the number fell by 6%. While India has one of the world's youngest and fastestgrowing populations, China has felt the effects of its one-child policy, brought in to control population growthsome 30 years ago. This is now causing an ageing of the Chinese population.

Despite the large number of potential Generation Y consumers in these developing markets, it should be notedthat the vast majority of young people of this generation still live in poverty. Student numbers in these countriesare low as a proportion of the total population, and many young people have been working since they werechildren.

Echo boom in Russia

Although Russia's population growth and birth rates are very low, the number of Generation Ys grew by almost10% between 2001 and 2006. This is because, in the Soviet Union during the 1980s, there was a baby boomecho similar to that in the US, and Generation Y there is relatively large.

Growth in the Generation Y population was particularly strong in the UK, compared to other Western Europeancountries, at 12% over the review period.

Generation Y accounts for the largest share of the population in the developing countries of South Africa (19%),Vietnam (18%) and Egypt (18%). In the case of South Africa, the high share of young people is due to the verylow life expectancy, the average age of the population there being only 15, compared to a European average of30.

Table 7 Number of 18-26s by Country 2001/2006

'0002001 2006 % growth

India 170,856 186,623 9.2China 170,724 160,523 -6.0Indonesia 37,530 38,384 2.3



US 35,438 38,023 7.3Brazil 30,105 30,765 2.2Russia 20,120 22,066 9.7Mexico 17,770 17,991 1.2Vietnam 13,707 14,988 9.3Philippines 12,947 14,127 9.1Egypt 11,690 12,862 10.0Japan 14,938 12,535 -16.1Turkey 12,138 11,782 -2.9South Africa 7,887 9,153 16.1Thailand 9,578 8,995 -6.1Germany 8,351 8,771 5.0UK 6,450 7,198 11.6France 6,925 7,082 2.3South Korea 6,974 6,321 -9.4Poland 5,603 5,785 3.2Italy 6,481 5,719 -11.8Argentina 5,604 5,716 2.0Spain 5,689 5,257 -7.6Venezuela 4,074 4,484 10.0Malaysia 3,853 4,337 12.6Canada 3,790 4,069 7.4Taiwan 3,511 3,286 -6.4Romania 3,164 3,028 -4.3Australia 2,378 2,539 6.8Netherlands 1,746 1,756 0.6Greece 1,492 1,310 -12.2Czech Republic 1,502 1,286 -14.4Portugal 1,406 1,256 -10.6Hungary 1,443 1,240 -14.1Belgium 1,141 1,156 1.3Israel 974 1,011 3.7Sweden 949 971 2.2Bulgaria 1,032 967 -6.4Austria 875 936 7.0Hong Kong, China 849 852 0.3Slovakia 835 804 -3.8Switzerland 760 800 5.3Ireland 568 621 9.5Finland 588 589 0.1Denmark 590 539 -8.7New Zealand 462 535 15.7Singapore 492 512 4.1Norway 506 502 -0.8Source: Official statistics, Euromonitor International

Table 8 Proportion of 18-26s by Country 2001-2006

18-26s as % population2001 2006 % point change

South Africa 17.6 18.5 0.9Vietnam 17.4 17.8 0.4Egypt 17.8 17.7 -0.1Mexico 17.8 16.8 -1.0Indonesia 17.5 16.8 -0.7Brazil 17.5 16.8 -0.7Venezuela 16.6 16.7 0.1India 16.5 16.6 0.2Philippines 16.6 16.5 -0.1Malaysia 16.0 16.3 0.3Turkey 17.9 16.2 -1.6Colombia 16.4 15.9 -0.5Russia 13.8 15.5 1.7



Poland 14.6 15.2 0.5Argentina 15.5 15.0 -0.4Slovakia 15.5 14.9 -0.6Ireland 14.8 14.8 0.0Taiwan 15.8 14.4 -1.4Thailand 16.1 14.4 -1.7Chile 14.3 14.3 0.1Israel 15.1 14.3 -0.8Romania 14.5 14.0 -0.4South Korea 15.1 13.3 -1.8New Zealand 11.9 13.2 1.3US 12.4 12.7 0.3Bulgaria 13.0 12.6 -0.4Czech Republic 14.7 12.5 -2.2Canada 12.2 12.5 0.3Australia 12.2 12.4 0.2Hungary 14.1 12.3 -1.8China 13.5 12.3 -1.2Spain 14.1 12.0 -2.0Hong Kong, China 12.6 12.0 -0.7UK 10.9 11.9 1.0Portugal 13.7 11.9 -1.8Greece 13.6 11.8 -1.9France 11.7 11.6 -0.1Singapore 11.9 11.4 -0.5Austria 10.9 11.3 0.4Finland 11.4 11.2 -0.1Belgium 11.1 11.0 -0.1Norway 11.2 10.8 -0.4Netherlands 10.9 10.8 -0.2Switzerland 10.6 10.7 0.2Sweden 10.7 10.7 –Germany 10.2 10.6 0.5Denmark 11.0 9.9 -1.1Japan 11.7 9.8 -1.9Italy 11.4 9.7 -1.6Source: Euromonitor International

IMPACT ON CONSUMER MARKETS

Cosmetics and Toiletries

Generation Y are concerned about looking good, and, with their growing purchasing power, they thereforerepresent a significant target market for manufacturers of cosmetics and toiletries – in particular, hair careproducts, men's toiletries and fragrances. Young consumers are typically attracted by distinctive brands offeringproducts which are fun and add glamour. Nonetheless, as consumer lifestyles evolve, tastes are becoming moresophisticated at an earlier age, with less call for whimsical appeal.

Colour cosmetics

Each of the cosmetics and toiletries sectors under review grew strongly over the review period. The largest, andone of the most mature, was that of colour cosmetics, with a 2006 value of US$35.7 billion.

Premium players cater to the young

Colour cosmetics brands such as Cover Girl and Maybelline are renowned for their positioning in the massyouth market. However, Estée Lauder was the first prestige company to enter the arena with the acquisition ofUS mass colour cosmetics brand jane, which is predominantly distributed through discounters such as Wal-Mart. Since then, other prestige marketers have followed suit, also keen to exploit the growing buying power ofyoung women. LVMH, traditionally focused on the mature consumer, acquired the prestige brands Urban Decay



and Bliss in a bid to woo 12-25 year-olds. Wella, meanwhile, added niche brand Tony & Tina to its portfolio in2002.

Direct sellers have also turned their attention to this audience. Avon launched a major new brand, Mark, in2003, which is aimed at 12-24 year-old women. Mark is claimed to be a "celebration of young women and themark they are making in the world". The aim of the brand was to provide young women with a businessopportunity to sell the make-up, which consisted of around 300 products designed to be fun and modern. Amagazine/catalogue called "meetmark" was delivered to an initial target audience of 10 million young womenevery four to six weeks, and featured the Mark products, trends and lifestyle stories. To maintain the social spiritof the brand, Mark representatives and customers are able to connect at the brand's website.

Mary Kay similarly introduced Velocity, a fragrance, skin care and colour cosmetics collection in 2001,representing its first foray into the youth market. This highlights both the emergence of a mix of specificallyteen-oriented brands as well as the cross-over of established prestige brands leveraging their reputation to appealto young consumers.

Mascara an area of focus for new product development

With the "mod-look" of dramatic, smoky eyes and nude lips being the prevailing trend among young women inWestern markets, mascara has become a key source of innovation, with thicker formulations and dual-application products leading the way. 2006 also saw a new emphasis on delivery, with brushes being replacedwith high-precision plastic wands in products including Cover Girl's Lash Exact and Max Factor's LashPerfection. Another key trend in the colour cosmetics market has been towards increased segmentation and aproliferation of ethnic-specific brands, such as Procter & Gamble's CoverGirl Queen Collection. Catering forconvenience is also essential for today's young on-the-go consumers, with examples including BeneFit's PocketPal gloss-to-go, foundations with built-in brushes and Avon's instant manicure nail strips.

Men's toiletries

The most significant growth was recorded in the men's toiletries subsector, where sales rose by 49% in valueterms between 2001 and 2006, to reach US$9.7 billion. This can be largely attributed to a change of attitudes,whereby metrosexuality has become the lifestyle of choice for many young men. This trend has opened up arange of opportunities for marketers, especially in the area of men's grooming products. Companies are enteringthe sector by relaunching traditional brands (as in the case of Procter & Gamble's Old Spice), creating men-onlylines (such as Avon's M or Lancôme Homme) or through acquisition. An example of the latter is Inter Parfums'2004 purchase of a 64% interest in Nickel, a company that has developed skin care products for men soldthrough prestige department and speciality stores in Western Europe and the US.

Besides the large cosmetic companies entering the men's market, a number of specialised start-ups haveemerged in recent years, such as NFG Stuff ("Not for Girls"), which currently manufactures hair care productsfor young men in the US, and is planning line extensions into other men's grooming product segments.

Some companies are even investing in the area of men's cosmetics. For example, in July 2006, UK drugstoreretailer Superdrug launched its Guyliner male cosmetics range, designed for "edgy punky boys".

The use of style icons

Brands targeting the more sophisticated metrosexual are obliged to have a powerful trendy image, and ideally beassociated with fashion and high lifestyle. For example, L'Oréal recently signed Kyan Douglas, the groomingguru of the TV series "Queer Eye for the Straight Guy", as its new spokesman, while Procter & Gamble choseDavid Beckham to be the face of its Gillette shaving products.

Although the metrosexual concept is most developed in Western countries, and Europe in particular, it isshowing signs of extending into emerging markets, where men have traditionally played a dominant role. Forexample, as a result of urbanisation, increased disposable incomes and exposure to Western media, Indian menare showing a growing interest in personal grooming. This has made India's urban areas a key target for leadingmanufacturers of men's grooming products, resulting in a series of new product launches in 2005. Theseincluded Emami's Fair and Handsome skin cream, following the results of a study revealing that almost 30% ofcold cream users are men.



Fragrances

Mass fragrances also experienced excellent growth of 53% between 2001 and 2006, reaching a value ofUS$12.5 billion.

The cult of celebrity continues to wield its influence over fragrances, and launches of celebrity scents were morenumerous than ever in 2006. Some of the more recent stars to put their names to brands include Kate Moss,Kylie Minogue and Gwen Stefani. In July 2007, Bollywood actress Shilpa Shetty took advantage of her new-found fame in the UK, after winning reality TV show Celebrity Big Brother, by launching her new perfumebrand, S2. Shilpa Shetty is seen as a role model for Generation Y, having dealt with a televised race row withpoise and dignity, and afterwards being conferred with a doctorate from Leeds Metropolitan University. Herfragrance is an example of the new type of cross-over product appealing to this generation, with its "ethnicaroma" encompassing jasmine and citrus.

Nevertheless, statistics released by market research company NPD Group indicate that the consumer appeal ofcelebrity fragrances have waned considerably. It claimed that sales of celebrity scents in department stores in theUS fell by 17% in 2006, to US$140 million, despite a significant increase in the number of new celebrity scents.According to NPD Group, the latest trend is for fragrances from designer brands rather than celebrities. Theseinclude Ralph Lauren's Ralph Hot and Yves Saint Laurent's Young Sexy Baby, both launched in 2006, as wellas the new cK in2u (see box below) from Calvin Klein.

Case Study: Calvin Klein

Calvin Klein famously captured the Generation X market back in 1994, when it launched cK One, a unisexfragrance that embodied the disaffected, sexually ambivalent grunge youth of the time. With its unconventionalblack and white advertisements, filled with moping, androgynous models, cK One has been touted as the mostperfectly tailored fragrance ever pitched to one market, said to be selling 20 bottles per minute at its peak.

Faced with rapidly declining sales of cK One, Calvin Klein (which was purchased by Phillips-Van Heusen in2002) and its fragrance licensee Coty introduced a sequel in 2007, which claimed to target the "technosexualgeneration" of 20-somethings. cK in2u comes in a bottle designed by Fabien Baron, which consists of whiteplastic and glass (similarly to an iPod). The name, designed to be both sexy and "texty", is written in theshorthand of an instant message to attract the attention of young people whose romantic lives are defined in partby casual hook-ups. The women's scent is said to include hints of pink grapefruit, bergamot and redcurrant, witha core of neon amber, while the men's version is more "beachy", with a mix of lime, cocoa and musk. AsGeneration Y is used to fast-moving information and images, the fragrance is designed to be quick-acting andimmediately recognisable on the skin.

Calvin Klein is trying to reach Generation Y consumers by creating an on-line community, whatareyouin2.com,patterned after sites like MySpace and Facebook. The company has invited students at film schools around thecountry to submit short films addressing the theme of "what are you into?", and their clips can be found on thesite.

Furthermore, in July 2007 Calvin Klein became the first global fragrance brand to launch in the virtual world ofSecond Life, with the new cK in2u fragrance brand. Residents and visitors to Second Life are able to visit thecK in2u site to pick up virtual bottles of the new cK fragrances, connect with other in-world virtual partners byspraying them with fizzing fragrance bubbles to initiate dialogue, and use specially modified cK graffiti bottlesto express themselves and whatever they or their friends are "in 2". UK consumers are then able to click throughto the cK in2u.com website to request a free "real world" sample.

At the time of writing it was too early to predict whether the new cK in2u will be as successful as itspredecessor, cK One, or whether it will be off-putting to Generation Y, who, after all, do not like to be directlytargeted and may find the whole "technosexual" concept rather patronising.

Creating fragrances to appeal to Generation Y is not only a priority in the West. Music channel MTV Indialaunched a range of youth-orientated, "affordably priced" eau de parfums, eau de toilettes, aftershaves anddeodorants in 2007. The MTV Plugged range is being marketed in partnership with Dubai-based beautycompany Scion International. In this way, MTV has leveraged the strong brand equity that it has acquiredamong young people in India. The range will be distributed across India by the Emami Group in over 60 citiesand towns.



Hair care

Hair colourants appeal to women of all demographics, as baby boomers and older consumers use them to coverup grey hair and retain their youth, while teenagers and young adults colour their hair in order to express theirindividuality. The popularity of hair colourants among Generation Y has been spurred by the fact that productsfacilitate self-expression without permanence and give young people the flexibility to change their image as andwhen desired, and keep up with the latest trends.

Manufacturers of other hair care products are also turning their attentions to Generation Y as they look tosegment their ranges and maintain a youthful image. Procter & Gamble's rebranding of its Herbal Essencesrange of shampoos and conditioners was named among the top five most effective in the 2007 ReBrand 100Global Awards (see box).

Case Study: Herbal Essences

Procter & Gamble acquired the Herbal Essences brand as part of its 2001 acquisition of Clairol. However, thebrand had already begun to flag by the 1990s, due to increased competition from other natural and organic haircare products from major consumer marketers and boutique brands like the Body Shop. The brand wastemporarily revived by the "Totally Organic Experience" ad campaign, which portrayed shampooing withHerbal Essences as an orgasmic experience, but consumers soon tired of this concept and sales once again beganto suffer.

After 18 months of consumer research, Procter & Gamble launched a new brand strategy for Herbal Essences inMay 2006, which was designed to attract its core demographic, the "spontaneous, optimistic, altruistic,experiential" Gen Y female. The strategy included a new logo, whereby the traditional rose illustration wasreplaced by a streamlined circle and a much more prominent brand name. It also incorporated a range of catchynew names, including collections such as Body Envy, Break's Over, Totally Twisted and Hello Hydration.Perhaps most importantly, the range was given a packaging makeover, based on using packaging shape as themain differentiator. Curvy new shampoo and conditioner bottles were designed not only to look attractive, but tonest together to encourage tandem buys.

The relaunch was accompanied by a "holistic" marketing campaign, supported by an unprecedented US$37.8million in advertising expenditure in major media in 2006. As a result of the rebranding initiative, in the firstthree months of its launch the overall volume share of Herbal Essences brand was said to have risen by 6%, withsome retailers seeing 9% volume share increases.

Table 9 Global Sales in Selected Cosmetics and Toiletries Sectors 2001-2006

US$ million2001 2002 2003 2004 2005 2006

Colour cosmetics 27,725 27,754 30,347 32,785 34,448 35,714Mass fragrances 8,159 8,262 9,063 10,054 11,348 12,513Colourants 7,237 7,447 8,196 8,911 9,514 9,980Men's toiletries 6,004 6,145 7,147 8,177 9,081 9,651Styling agents 6,476 6,572 7,271 7,686 7,870 7,945

%growth

2001/2006

Colour cosmetics 28.8Mass fragrances 53.4Colourants 37.9Men's toiletries 60.7Styling agents 22.7Source: Euromonitor InternationalNote: Men's toiletries excludes shaving products



Consumer Foodservice

Fast food

Young adults are one of the key target demographics for fast food operators. In particular, young, single malesare often referred to in consumer food service industry circles as heavy users. As they make less money thanolder consumers and have less discretionary income, demand in this age group is high for value menus, withofferings such as US$0.99 hamburgers. These heavy users often order much larger amounts of food at a singlevisit than occasional users, sometimes by a factor of two or three. They are known to spend up to US$40 per dayon fast food, and to consume fast food more than 20 times per month. Such users account for approximately60% of all fast food transactions in the US.

Burger King directly targets the young male

Burger King is one operator that directly targets the young adult demographic. For example, in 2005, thecompany used the lead singer of an alternative band popular with Generation X and Yers for its TV advertisingcampaign, in order to target the 20-something demographic in the US. In the US, new-look stores have beenlaunched that include plasma TV screens, couches and coffee tables designed to create a relaxed atmosphere thatattracts young adults and invites them to linger. Similarly, planned refurbishment of some 200 outlets in the UKin 2007 will give them a more edgy, contemporary look.

To appeal to young ethical consumers, McDonald's is rolling out sustainable, rainforest-friendly coffee inWestern Europe. Packaging and recycling are also likely to become hot topics, especially for fast food, as thesustainability debate develops.

To target young Internet users, viral marketing campaigns have also been initiated by several leadingcompanies, including Burger King (interactive website starring Subservient Chicken), Domino's Pizza (on-linetreasure hunt in conjunction with eBay.com) and Starbucks (itsredagain.com). Websites such as myspace.comand youtube.com are also proving useful avenues for companies such as Burger King, attempting to up its"cool" quotient through a popular myspace.com profile, and Chipotle Mexican Grill, successfully appealing tocollege students via a video competition on youtube.com. In addition, e-mail marketing is fast becoming animportant method for reaching consumers, with the advantages of being cost effective, easy-to-use, measurableand much cheaper per contact than traditional direct mail.

Bakery gains share from burgers

Fast food has benefited from the general speeding up of lifestyles that has affected all age groups, and globalsales recorded value growth of 43% over the 2001-2006 period to reach an estimated US$405.4 billion.

In the developed markets of North America and Western Europe, bakery fast food has made strong progress atthe expense of burger bars. Bakery was boosted by promotion and expansion activity on the part of operatorssuch as Subway, and also by consumer demand for novelty and healthier options in fast food. Bakery's growth isbeing driven by chain expansion, combined with growing demand for premium sandwiches. In the US, Subwayopened over 7,000 new units between 2001 and 2005, while Quizno's, Panera Bread and McAlister's Deli allincreased their outlet numbers by more than 150%. In Western Europe, Subway doubled its sales between 2004and 2005, while Prêt à Manger and La Brioche Dorée also saw strong growth.

Traditional burger restaurants are diversifying in order to gain new consumers and respond to health trends.McDonald's launch of its Asian Salad in Germany in 2006 is a good illustration of these trends. The majorchains also upgraded their coffee offer in order to fend off competition from coffee shops and enhance theirmorning sales. Most recently, burger chains have demonstrated an increasing focus on nutritional information(with Quick launching a nutrition labelling scheme and calorie-controlled menus in 2006, as part of its newTaste and Nutrition initiative), premium products (such as Burger King's Angus burger) and the breakfastmarket (for example, McDonald's is reported to be testing kitchens that will allow it to serve breakfast all day).

Health becomes a priority

Although Generation Y are core consumers of fast food, health is generally considered to be of great importanceto this generation, and fast food operators have had to adapt their offer accordingly.



Trans fat content became a particular issue for fast food chains at the close of the review period, with KFCannouncing in 2006 that it would switch cooking oil to eliminate trans fats from its products in the US by April2007, in time for a proposed ban on trans fats in New York. KFC also took action on nutrition concerns with theformation in late summer 2006 of a Moms Matter! Advisory Board, similar to the Global Moms Panel launchedby McDonald's a few months earlier.

In the Asia-Pacific region, chicken fast food remains popular despite concerns over bird flu and health issues.This is thanks to the region's traditional fondness for chicken and efforts by KFC to promote its food as healthy,safe and garnished with local taste appeal.

In Japan, convenience store fast food has enjoyed significant growth, as urban populations grow and citydwellers look for quick and affordable meal solutions. Convenience store fast food, particularly bento (Japaneselunchboxes), is popular in Japan because it is perceived as fast, healthy and convenient.

With its young population, Latin America is an increasingly important market for fast food operators. Asian fastfood operator Gendai, for example, currently has a strategy to establish new outlets in Brazilian shopping mallsgeared towards young consumers in the A and B socioeconomic groups, in metropolitan areas. In Chile,upmarket sushi delivery services, such as those offered by Asian FSR/fast food operators Sushihana andSushita, have enjoyed considerable recent success among young, urban professionals.

Coffee shops

Coffee shops have become a popular place for young people to "hang out", and the concept is catching on theworld over, thanks largely to the "Starbucks effect". Sales though this type of outlet more than doubled over thereview period to reach US$22.9 billion, with growth amounting to 109% between 2001 and 2006. Starbuckswas the most dynamic of the top 20 CFS operators in value sales terms in 2005, increasing its sales by 25% (seebox).

Case Study: Starbucks

Starbucks is a truly global organisation that has built up a powerful brand which can be leveraged to support thecompany's expansion into new markets and new business areas. Starbucks pioneered the coffee house concept inthe 1980s. Through various partnerships, the company has licensed rights to produce and distribute branded icecream, coffee-flavoured liqueurs and ready-to-drink coffees in the US.

By 2006, Starbucks had more than 11,000 stores worldwide, of which 984 new stores were opened betweenSeptember 2005 and March 2006. The company had 165 outlets in China and was looking to develop itsnetwork further in Brazil and Russia.

Starbucks has maintained its lead over other coffee shop chains and has continued to capture the interest ofGeneration Y consumers, due to the brand's "cool" factor, and the fact that it continues to develop premium newproducts and innovate widely in entertainment. The outlets offer a comfortable environment for young people torelax, and recently introduced both wireless Internet access and an in-store music delivery service in NorthAmerica. In September 2007, Starbucks announced that its customers in the US would soon be able towirelessly browse, preview and download music from the iTunes Wi-Fi Music Store at Starbucks using iPods,iPhones or any computer with iTunes software. Among the features is a "now playing" service, whichautomatically displays the name of the song playing in the store. The move intensifies Starbucks' commitment tomusic sales as a way to enhance the customer experience.

With regard to product innovation, Starbucks is currently carrying out its smoothie experiment in an attempt toaddress health concerns, as well as offering more handcrafted beverages, which are made in front of theconsumer.

Starbucks also appeals to young people due to its perception as being socially responsible – Starbucks Corp iscommitted to socially responsible coffee buying practices, and Starbucks Fair Trade coffee is available in 23countries. The company's commitment to social and environmental issues will stand it in good stead asconsumers become increasingly aware of the Fair Trade movement and the ethical treatment of coffee farmers.On the other hand, some young people view Starbucks as a global giant, taking business away from smallindependent cafés.



Coffee chains have grown rapidly in Western Europe, but have faced opposition in some markets, such as Italy,due strong differences in coffee drinking culture (Italians prefer strong, not very milky coffee, and "to go" isalmost unheard of), as well as competition from the established position of local cafés.

Coffee concept catches on in developing markets

In Eastern Europe, the coffee shop culture remains in its infancy in many markets, although growth is likely tobe stimulated by the expansion of Starbucks, which has announced aggressive expansion plans for Russia.Russia's leading chain, Coffee House, targets business executives, office workers and students, chargingpremium prices of US$2 for an espresso and more than US$3 for a cappuccino. Coffeeheaven, the Polish coffeeshop market leader, is also planning to expand in central Europe, having already opened outlets in Slovakia andRomania.

Specialist coffee shops are enjoying dynamic growth in Asia-Pacific, despite long-standing tea-drinkingtraditions in major markets such as China and India. Starbucks has led the way in attracting consumers to coffeeshops with branding that offers lifestyle appeal. Trendy 20-somethings are being won over to coffee shops bythis positioning, to the detriment of traditional cafés, such as Kissaten, in Japan. Major chains are appealing tothese young consumers as a fashionable place to socialise or hold business meetings and some, such asStarbucks, Ikari Coffee and Dante, had introduced wi-fi to many outlets by the end of the review period toenhance their attractiveness.

Table 10 Global Sales of Selected Consumer Foodservice 2001-2006

US$ million2001 2002 2003 2004 2005 2006

Fast food 284,091 294,425 322,157 352,234 379,099 404,648Coffee shops 10,960 12,118 14,163 17,243 19,762 22,945

%growth

2001/2006

Fast food 42.4Coffee shops 109.3Source: Euromonitor International

Alcoholic Drinks

Beer

In developed beer markets, such as the US, the UK, Australia and Germany, Beer companies are struggling tomaintain the interest of the younger generation, which is exhibiting a growing preference for wine, spirits andRTDs (ready-to-drink alcoholic beverages) on the grounds of fashion. Cocktails have become very popularamong young people, and spirits are generally perceived as a healthier alternative to beer. Beer companies havethus turned their attention to other formats, such as functional and fruit flavoured beer, as demand for maltbeverages has waned. Some industry commentators in the UK and the US suggest that blush wines are pickingup the slack from declining RTDs, with many brands positioned to target younger consumers, especially femalesaged 18-22 years old.

Beer goes functional

The functional or energy beer segment has emerged predominantly in the US, where Anheuser-Busch broughtthe concept to the mainstream with the launch of B(E) in 2005, a beer that contains caffeine, ginseng andguarana. The product was also launched in the UK in 2006. Furthermore, Anheuser-Busch's main rival,SABMiller, acquired the Sparks energy beer brand. The strategy behind the launch of these products wasprimarily to lure young consumers that have drifted towards mixed spirits drinks, such as Red Bull with vodka,due to their "easy-to-drink" nature.



Another key concept that has been launched by beer companies to stimulate interest among younger drinkers inWestern Europe is the "extra cold" format. Predominantly focused on the UK, momentum has grown behind theconcept, with it hitting the mainstream in 2005, proving a rare success story in beer during the year. Scottish &Newcastle was the main exponent of this trend, launching Kronenbourg Extra Cold and Kronenbourg 1664 ColdPremier in 2005, as well as extending its core brands Foster's and John Smith's with new extra cold variants;while Guinness introduced Guinness Extra Cold, and tailored its advertising to the younger consumer.

RTDs/High-strength premixes

The dramatic growth of RTDs during the review period was fuelled by younger consumers' demand for easy-to-drink products offering distinctive, novel flavours, suited to consumption in fashionable bars and clubs. Fashionand highly visible consumption in on-trade outlets have played an increasingly important part in alcoholicdrinks, as younger consumers, particularly women, have broken with long-established consumption patterns.

RTDs have also exploited the fact that younger consumers have been raised on the sweet taste of products suchas carbonated soft drinks. In essence, RTDs are an alcoholic beverage designed for and targeted at the modernyounger consumer and, crucially, at the financially independent women who are increasingly offering growthopportunities in otherwise mature markets.

Market hampered by new laws

However, the end of the review period saw growth in RTDs sales slow significantly, partly as a result of thesector's increasing maturity, especially as it struggled to attract male consumers in certain markets. Anothercrucial factor dampening RTDs' performance has been the efforts of governments to respond to anxieties thatRTDs are encouraging underage drinking and younger consumers to drink to excess. In France, high levels oftaxation have constrained the sector's development, and markets such as the UK and Germany have followed theFrench example by increasing the taxation on RTDs in order to curb excessive consumption of the products,especially amongst younger consumers.

Spirits

Spirits manufacturers are focusing increasingly on the younger generation, who are motivated largely byfashion- and brand-consciousness. This encourages highly visible consumption in bars, nightclubs andrestaurants. Manufacturers have further fuelled sales through on-trade outlets by using them as the focus fortheir promotional activity, particularly in markets with strict legislation on the advertising of spirits. Spiritsproducers have recognised that the on-trade wields a significant influence on at-home consumption, as newdrinks are often first tried in bars and restaurants, and fashions and trends are first formed through on-premiseconsumption.

Flavoured variants create interest

A particularly prominent aspect of new product development has been the introduction of flavoured variants ofmajor spirits brands in an attempt to continue to revitalise brand images and to appeal to the thirst for noveltyamongst younger consumers. The trend towards flavoured products was pioneered by premium vodka brands,notably Absolut, but has since become increasingly prominent in categories such as rum and gin, as theychallenge vodka for the attention of fashion-conscious younger consumers. Even the super-premium GreyGoose vodka brand recently expanded its line to include a vanilla flavour.

Leading rum brands Bacardi and Malibu have also added a number of flavoured varieties to their ranges inrecent years, while the Gordon's and Beefeater gin brands were both extended into the flavoured spirits segmentat the end of the review period. At present, this trend is most obvious in major developed markets, such as theUK and, particularly, the US; however, as emerging regions increasingly see younger consumers mirror trendsfrom the West, it is likely to become a feature of urban environments of developing markets in the near future.

Super-premium brands target fashion-conscious

The quickening race to attract younger consumers has not only led to the revitalisation of existing brandsthrough product and packaging innovation and creative marketing, it has also led to the emergence of a newkind of spirits brand developed and targeted directly at highly fashion-conscious younger consumers. As is the



case with many trends, including the development of a super-premium category in areas such as vodka, thistrend has been pioneered in the US, where the liqueurs sector saw the emergence of brands such as Hpnotiq,Alizé Blue, Drambuie Sylk Cream and Envy NV Liqueur, which gained strong credibility amongst ultra-fashion-conscious younger consumers by restraining from mainstream advertising and developing a presence onthe club scene in major metropolitan areas such as New York. Often the strategy would involve the sponsoringof events and parties to generate excitement around the brands amongst a very precisely targeted consumergroup.

Such is the challenge of targeting the younger, hip consumer base with disposable income to spend onsocialising that several drinks companies have associated themselves with popular music genres, notably rap andhip-hop, including Cristal champagne, Moscato wine, Patron tequila and Hpnotiq liqueur.

The Jägermeister bitters brand is an example of a spirits company that has adapted itself successfully to modernmarket conditions by repositioning itself in the US as a "trendy" drink for younger consumers. In contrast to itsprevious image, which mainly focused on its health properties as a digestif, Jägermeister revamped itsadvertising strategy to appeal more to fashion-conscious younger consumers in the US, publicising itselfthrough the sponsorship of youth-orientated events, such as rock concerts.

Popularity of home cocktails fuels growth

The growing popularity of cocktails has played an important role in attracting younger consumers to spirits, andhas underpinned the strong performance of products such as vodka and rum, which have proved versatile basesfor cocktails and long drinks in several markets. In Italy, younger generations perceive spirits such as whisk(e)y,brandy and amaro to be old-fashioned, and seldom now follow the traditional association of spirits consumptionwith meal-times. However, their consumption of cocktails such as the vodka and Red Bull, Mojito and CubaLibre is steadily increasing, spurred by the growing "happy hour" trend. Cocktails are preferred for their loweralcohol content, their sweeter taste and the fact that they take longer to be consumed, which makes them cheaperfor young people in bars and clubs. Significantly, the traditional local spirit sambuca recorded an improvedperformances in 2005. The main reason was the repositioning of this product from a traditional Italian spirit to aproduct targeted at younger consumers.

Similarly, in the UK, cocktails have encouraged younger consumers to migrate from other alcoholic beverages,particularly RTDs. Former consumers of such products appear to have grown away from sweet-tastingmulticoloured RTDs towards more sophisticated cocktails.

"Approachable" wines for Gen Y

Although Generation Y is far from being the most important target group for wine producers, a report publishedin August 2007 by the Adams Wine Handbook suggested that the wine market in the US is currently beingdriven by wines aimed at the younger generation. The "approachable wines" segment, which comprises brandstargeted specifically at the 21-30 age group, include brands such as Yellow Tail, Pinot Evil, Killer Juice andDog House.

Yellow Tail has reportedly become the leading imported wine in the US. Launched in 2001, its popularity hasbeen driven not only by its taste-appeal to wine novices but by its distinctive brand name and label. The brandwas also driven by effective marketing via a joint venture with importer WJ Deutsch & Sons. The success ofYellow Tail has had an impact on other wine producers, which are now introducing new, consumer-friendlylabels that appeal to younger consumers.

Table 11 Global Sales of Selected Alcoholic Drinks 2001-2006

US$ million2001 2002 2003 2004 2005 2006

Beer 136,483 138,087 152,322 167,278 175,358 183,346RTDs/high-strengthpremixes 7,977 9,752 11,119 12,347 12,758 13,018

%growth



2001/ 2006

Beer 34.3RTDs/high-strengthpremixes 63.2Source: Euromonitor International

MARKETING TO GENERATION Y

Understanding the Market

For a long time, baby boomers and Generation X have been the most important generation to marketers, due tothe large size of this demographic and their significant spending power. However, marketers have recentlybegun to turn their attention to Generation Y, whose strong opinions and spending appears to be surpassing thatof all previous generations. The challenge for marketers is to form a closer connection with these consumers,who could, after all, become their long-term customers.

In some ways, like children, young adults are "getting older younger". This is due to many factors, but the keychange over the last decade has been the ability to communicate with and be influenced by peer groups, and theincreased spending power and confidence which enfranchises teenagers as consumers and makes young adultssophisticated, confident and accomplished purchasers.

Gen Y as influencers

Understanding how to sell to young adults has massive reward potential. Young adults have become hugepurchasing icons in areas of fashion and music and arbiters of coolness in general, influencing those in their late20s, 30s and 40s, and even the boomer generation. If companies can identify a trend while this is still hiddenfrom the next oldest demographic they can reap the benefits of being the first to bring it to a higher spendingmarket.

Studies have shown that teens and young adults want instant gratification and immediacy, as well asmerchandise that is either cheap or elite, thus squeezing out mid-range products. What Generation Y wants outof a brand is simplicity, convenience, a clean, healthy image and individuality. Furthermore, while the "cool"factor is essential, Generation Y also like to be individual, and this gives rise to demand for products that areeasier to accessorise, such as cars that can be adapted with new rims, wheels and exhausts.

Preferred retailers

Due to the fact that they have spent their lives on the Internet, Generation Y are more empowered than previousgenerations, often having as much knowledge of a product as sellers themselves. Retail outlets in the US that arepopular with young people include higher end retailers such as Abercrombie & Fitch and J Crew, as well aslower end ones, such as Forever 21.

Generation Y also have different preferences than older generations when it comes to e-commerce. According toa US survey by Jupiter Research of consumers who had bought products or services on-line in the past 12months, people aged 18 to 24 favoured Best Buy, Circuit City and eBay more than consumers as a whole, andwere less likely to shop at the Macy's or JC Penney websites than other consumers.

Branding

Brand loyalty among the Generation Y audience tends not to be as strong overall as it is among olderconsumers. Consequently, companies that once held an edge over their competition simply because they heldwidely known and popular brands may feel pressure from new companies entering the scene that are being madepopular by teenagers and Generation Y.



A survey of 100 Generation Y trend-setters in the US published in 2007 by Outlaw Consulting concluded thatthis demographic is drawn to brands that are simple and offer convenience, both in terms of the product's visualappearance and the way in which offerings are organised.

The sample mostly targeted consumers aged 21-27, and the goal was to compile a "Trust Index" of brands thatevoke "deeply positively feelings" among the trend-setters. The Most Trusted 15 brands named by the trend-setters in the survey are shown in the table below.

The reasons for trusting certain brands were various. For example, In-N- Out Burger was a respected brandbecause it pays its employees well, making trend-setters happier to eat there than at a fast food chain whereworkers were not treated well. Jet Blue was very popular among trend-setters, who cited factors such as itssimple website and fare structure, low prices and lack of restrictions.

The survey concluded that any company that is inconvenient or confusing, or that used over-designed imagery,is seen as out of touch and too "corporate" by the younger generation.

Summary 3 US: Most Trusted Brands Among Generation Y Consumers 2007

Brand Sector

Apple Computers

Trader Joe's Retail

Jet Blue Airline

In-N-Out Burger Consumer foodservice

Ben & Jerry's Ice cream

Whole Foods Retail

Adidas Sportswear

American Apparel Fashion

Target Retail

H&M clothing stores Retail

Levi's Fashion

Volkswagen Automobiles

Converse Sportswear

Vitamin Water Beverages

Red Stripe Jamaican beer Beverages

Source: Outlaw ConsultingNote: Survey covered "trend-setters" aged 21-27

British Gen Yers like technology and chocolate

A study of preferred brands by Facegroup carried out on 16-25 year-olds in the UK in 2006 revealed that youngpeople in this market have the strongest affinity with technology brands. When respondents were asked tochoose "my kind of brand" from a list of 60, Sony headed the list, while Internet brands Google, Microsoft andeBay also featured among the top 10.

The chocolate brands Cadburys and Galaxy were also among the top 10 brands chosen by Generation Yers,suggesting that dieting is not as strong a priority as it may be among older generations, and that young adultsmay share some of the characteristics of teens and tweens.

Summary 4 UK: Preferred Brands Among Generation Y Consumers 2005

Brand Sector

Sony Electronics



Google Internet

Microsoft IT

Nokia Mobile phones

Cadburys Chocolate

Coca-Cola Beverages

Ebay Internet

Tesco Retailer

Galaxy Chocolate

Boots Retailer

Source: Face Tech Tribe Report (Facegroup)Note: 16-25 year-olds; ranking, when asked "My Kind of Brand", prompted from a list of 60 brands

Advertising

The speed with which word of mouth spreads information concerning fashion, music, gigs, venues, coolproducts, rip-offs etc is faster with the Generation Y group than it has ever been before, because of its masteryof technology and social structures built around on-line (and texting) communication.

The advertising industry is finding Generation Y hard to reach by traditional methods. Because of the personaltechnology available to them, they are watching less television and consuming less print media. At the sametime, they put their trust in peer-to-peer networks, where select groups of people discover something new – inmusic, the local area, in fashion – and share it.

Advertising goes on-line

A recent survey by Forrester Research found that advertisers are slashing TV ad budgets and channelling themoney into on-line advertising. In an effort to penetrate the inner circle and elevate their brands and products to"it" status, marketers have little choice but to re-evaluate their advertising and marketing techniques. Withrelatively new areas such as video-on-demand, on-line gaming, mobile and interactive emerging, marketers havemajor opportunities for unprecedented levels of consumer targeting. For example, L'Oréal has been targeting itscolour cosmetics brand, Maybelline, at young consumers through the mobile Internet in Japan, where around63% of the country's 21 million users are aged between 15-25.

Customisation is thought to be key to reaching this audience, for example by way of sector-specific emails andnewsletters, blogs and on-line industry networks. All of these can be tailored to Generation Y, who are on theInternet checking e-mails, shopping for the latest fashions or consumer electronics or researching jobs.

The popularity of such websites as YouTube, which allows consumers to upload and share videos, hasenfranchised the consumer as a producer of advertising, while a plethora of forums and notice boards has madethe consumer both a commentator and arbiter of taste. Using the new media, teenagers and Generation Y maketheir own commercials – often disparaging famous brands – and spread them virally.

In-game advertising reaches young males

Interactive games are also being used by marketers hoping to get their products in front of Generation Y. Men ofthis generation are the hardest market to reach as they watch less television than women. However, on-linegaming sites are enormously popular with this group. For example, in the US, IGN Entertainment, which hassites such as ign.com, and gamespy.com, claims to average 15 to 20 million unique users a month, 91% ofwhom are male, with an average age of 22. Furthermore, UGO Networks, a fantasy entertainment portal, aimedat the 18-34s age bracket, reportedly attracts about 10 million unique US visitors each month.

In May 2006, it was announced that Microsoft would acquire the in-game advertising company Massive in a bidto dominate this market, which is expected to be worth US$1 billion by 2010. Microsoft intended to extendMassive's technology beyond gaming for use in products such as Windows Live, as well as the company's newon-line ad delivery product adCenter. Massive's technology enables the delivery of advertisements within on-



line games, often in formats that mirror real-life advertising media. Hoardings, billboards and poster sites arecommonly seen in games, especially sports titles, which attempt to mirror reality. Platforms such as Xbox andPlayStation enable gamers to play against each other in real time across the globe, and because theadvertisements are delivered in real-time, MSN is aiming to sell the value of the service based on its ability totarget small groups of consumers. The in-game advertisements are not only updateable and trackable, elementssuch as the geographic location of the player, particular audience demographics or time of playing can becatered for and delivered globally. This is regarded as an excellent way of reaching the 18-34 year-old maledemographic, because, according to Microsoft, this group continues to spend more time playing video gamesthan watching TV.

For women, community and entertainment sites offer the best opportunities for marketers. For example, in theUS, gURL.com (part of the iVillage Network) is a community site for teenage girls and young women. With itsfocus on interactivity, advertisers are afforded plenty of opportunities to connect with the audience via quizzes,games, and interactive features that showcase their products.

Companies such as 360 Youth also offer access to millions of Generation Y consumers, both male and female.The network includes such sites as Alloy, CollegeXpress, and ELLEgirl Magazine.

Sponsoring sports/music events gives credibility

Alcohol brands and soft drinks often penetrate the music and sports industries in order to reach the youngergeneration. In the UK, Carling is using music as part of its strategy, with its name on music venues across theUK and sponsorship of the 2006 Reading Festival. Red Bull uses sport, particularly flying and motor sport, tosupport its positioning as an energy drink that "gives you wiiings". In North America, Smirnoff is sponsoringthe House of Blues: live blues inspired music and events. Budweiser sponsored the 2006 Fifa World Cup inGermany.

SHIFTS IN MAJOR MARKETS

China

Population trends

Although the total number of people in the 18-26 age group in China fell over the review period, this masks anotable upturn in both 2005 and 2006. In 2006, there were 160.5 million 18-26 year-olds, which represented justover 12% of the total population. The decline in the earlier part of the review period was largely due to China'sone-child policy. However, a child-bearing peak in the 1990s has led to a small bulge in this age group in recentyears.

Table 12 China: 18-26s Population Trends 2001-2006

2001 2002 2003 2004 2005 2006

Number of 18-26s ('000) 170,724 158,925 154,087 151,125 155,555 160,523% growth -6.9 -3.0 -1.9 2.9 3.2

% total population 13.5 12.5 12.0 11.7 12.0 12.3Source: Euromonitor International

Generation Y profile

The only child syndrome

Generation Y in China are the first group of only children, ie those born after the introduction of China's one-child policy in the late 1970s, to have significant spending power. Since their parents' resources do not have tobe shared among siblings, they have more to draw on. This, combined with the new consumer culture ofspending rather than saving, makes Generation Y a very hot segment for marketers.



Many only children have grown up enjoying significant material comforts compared with their parents'generation, and now have considerable spending autonomy. Horizon Research, a Chinese market-researchcompany, found in 2004 that many teenagers in big cities can receive cash handouts from relatives and familyfriends during the lunar New Year festival of 1,000-2,000 yuan, which is the equivalent to more than a month'swages for the average urban worker.

The new influencers

Furthermore, advertisers in China believe young people are exerting a strong influence over the spending habitsof their elders. Many are far better educated than their parents, whose studies were disrupted by the politicalcampaigns of Chairman Mao. Their ability to persuade their parents to adopt certain brands extends well intotheir adult life, due to the fact that young Chinese people tend to continue living with their parents at least untilmarriage.

While students generally have lower discretionary incomes, being totally dependent on families to pay for theirtuition and living expenses, university graduates usually get far better-paid jobs than those without tertiaryeducation. This group expanded rapidly during the review period, thanks to government efforts to increaseenrolment. In 2004, 2.8 million students graduated from institutions of higher education in China, which wasmore than twice as many as in 2002.

Unafraid of debt

Although savings levels in China are still high, today's young people have a significantly different attitudetowards debt than previous generations. They have high expectations and do not allow debt or low income toprevent them from spending, be it on travel, clothes, food, drink or fashionable places of entertainment. Theattitude is essentially hedonistic – enjoying today without fear, and not saving for the future.

In common with their Indian counterparts, the typical urban Chinese generation Y does not worry abouteconomic downturns, believing that time is on their side. They have years to start saving for marriage, childrenand mortgages, while retirement is not on the radar. This attitude is partly based on confidence in the country'sfuture: inflation and interest rates are low and the country is achieving a healthy surplus, even if they are not.According to economists, this imparts a sense of security. However, the picture is different in rural China, whichis still mired in poverty, while many inland cities are still several years behind Beijing's level of wealth.

Optimism for the future

In 2005, Business Week magazine conducted a survey of 1,000 MBA students at 13 of China's top institutions.Amongst the key results was the high level of optimism in China's and their own future: more than 50% ofMBA students expected a large pay rise on graduation: 25% expected to at least double their salary aftergraduation and 25% expected to start a business within five years of graduation.

Multinationals, large local companies and state-owned organisations are competing fiercely for talentedGeneration Yers in China. After a few years of good experience, well-qualified young workers have their pickof mid-level, career-oriented jobs. Their salaries are now much higher than just a few years ago, and they haveunprecedented choices. Salary is much higher on their agenda than is the case with their Western counterparts,but, as in the west, they are seeking strong personal development, including good contact and mentoring withtheir bosses and senior management.

Live or die

A recent survey of young urbanites on the Chinese mainland found that two thirds are willing to "seize everyopportunity to enjoy life", including buying high-end consumer goods and luxury brands. Some 57% of therespondents "dared to consume tomorrow's money", while only 48% were concerned with the debt issue. Thosespending "tomorrow's money" on luxury goods in the name of living a "quality life" are known as"Yueguangzu" in Chinese, meaning that they spend all they earn each month without saving anything. TheYueguangzus are well-educated, have good jobs and are eager to be accepted and respected by society. Theytherefore wear 10,000-yuan (around US$1,200) suits, use brand-name suitcases, high quality cosmetics andjewellery to make themselves look successful and are willing to buy on credit or bank borrowings to acquire thelook and lifestyle of success.



Part of the reason for luxury goods purchases in China is the fear of losing face. The China Suicide Researchand Prevention Centre recently revealed that, according to a survey of 15,431 depression sufferers over the pasttwo years, people in their 20s accounted for almost 38% of the total, while people in their 30s made up 23%.Around 40% of those surveyed had university degrees. A recent report from the Ministry of Health showed thatsuicide is the fifth most common cause of death in China, but the main one for people aged between 20 and 35.

Cars the new must-have

Although they have little savings, two hot topics among this group of people are houses and cars. Small,economical cars, such as the VW Polo, are popular among young people. Most car manufacturers have focusedon this consumer group and have introduced many new styles of cars to appeal to young adults. Additionally, allkinds of social activities and club lifestyles are very popular among this age group.

Consumer market trends

Young Chinese women are very interested in fashion and style, including clothes, shoes and bags, while men arealso becoming more concerned about their appearance. Demand for male skin care products, perfume and evenbeauty salons promises a bright future and many business opportunities in these areas. Luxury products arepopular among young adults with high incomes. Young males enjoy mobile phones, PDAs and digital cameras,whilst young females are more interested in jewellery and high-profile brands such as Prada and Chanel.

Within the consumer foodservice sector, small full-service restaurants located in local neighbourhoods, offeringsimilar food to home-cooked dishes at competitive prices, are frequently patronised by young consumers withbusy lifestyles. Fast food, either western or Asian, as well as home delivery/100% takeaway, is also a popularchoice among such consumers. Coffee shops have grown rapidly from a small base, as higher disposableincomes have given rise to lifestyle changes among young urban Chinese consumers.

Mobile phone calls to become cheaper

Sales of mobile phones more than doubled over the review period, to reach a value of US$15.9 billion in 2006.In February 2007, telecom operators began to roll out a "caller pays" billing system across the country, whicheffectively removes incoming call charges and thus reduces the monthly bill for mobile phone users. In addition,the roaming fee is also expected to be regulated and probably abandoned in the coming years. The reduction offees and charges should lead to strong growth in the number of mobile phones over the forecast period.

Sales of portable MP3 players are still in their infancy, but growing very rapidly among the new urban middleclasses. Virtually unheard of in Mainland China at the start of the review period, portable MP3 players havebecome the most popular consumer electronic product for Chinese youngsters. Almost every young personwants to own an MP3 player and there are now many brands available in the market. Many domesticmanufacturers entered this subsector as it became the fashion "must have" item. As the penetration of thesedevices is still quite low, there is still a great deal of room for further expansion over the forecast period.

Absence of drinking culture among young people

With regard to alcohol consumption, the drinking culture that typifies student life in many Western markets isnot apparent in China. Here, alcohol tends to be consumed largely by older generations, although there is agrowing trend for young urbanites to frequent fashionable bars. Beer is popular in certain regions, such as theprovinces of Cichuan and Chongqing, where it is consumed with hot pot dishes by young consumers. However,this mainly consists of domestic economy lager rather than premium or foreign brands.

Most cosmetics and toiletries sectors enjoyed strong growth over the review period. Sales of colour cosmeticsgrew by 78% between 2001 and 2006, to reach a value of US$1.2 billion. As a result, Western manufacturersare tapping into this growing market. For example, L'Oréal acquired local mass colour cosmetics brand Yue-Saiin 2004, and re-vamped its image in 2005 by using Taiwanese film star Shu Qi in its campaigns to appeal toyounger working women. Within hair care, styling agents are chiefly targeted at young people, while colourantsare often used by young fashion-conscious consumers.

Table 13 China: Sales of Selected Products and Services 2001/2006



US$ million2001 2006 % growth

Fast food 19,828 39,881 101.1Mobile phones 7,648 15,897 107.9Beer 9,344 12,914 38.2Colour cosmetics 658 1,169 77.5Portable MP3 players 42 553 1,216.7Recorded music 72 148 104.8Colourants 83 148 77.6Styling agents 108 134 24.5Coffee shops 13 108 746.5Mass fragrances 71 107 51.5Men's toiletries 38 92 139.6Source: Euromonitor International

France

Population trends

France's population of 18-26 year-olds remained very steady over the review period, amounting to 7.1 million in2006. They accounted for just under 12% of the total population, a percentage which remained virtuallyunchanged from 2001.

Table 14 France: 18-26s Population Trends 2001-2006

2001 2002 2003 2004 2005 2006

Number of 18-30s ('000) 6,925 6,897 6,935 6,997 7,043 7,082% growth -0.4 0.5 0.9 0.7 0.6



Students on the rise, but incomes remain low

The number of students going on to higher education in France has risen over the last couple of decades, since itwas a major aim of French politicians in the 1980s that 80% of future generations should at least achieve thebaccalauréat (normally taken at age 18), which allows them to go to university, or business or engineeringschool. Most students in France derive an income either from their parents or from a government grant, or both.They rarely have part-time jobs, tending to work only in the summer holidays.

Many French students purchase their first car while at university. With the overall increase in consumption ofalcoholic drinks, the number of car accidents affecting people of studying age and young adults is rising rapidly.Several public information campaigns have been launched to help change this behaviour, while innovativeproducts have been launched to test blood alcohol levels and are regularly distributed by the owners ofnightclubs.

As a rule, the limited purchasing power of the population of studying age restricts its capacity to purchaseexpensive goods. Many students eat in student restaurants or in fast food restaurants. Pizza and pasta alsofeature regularly in the food intake of the average student, who will often save money to go to the cinema orhave a drink with friends.

Young professionals reluctant to grow up



According to French sociologists and journalists, many young professionals in France today can be described as"adulescent", ie living the life they did as students. They still go out at night and are in no hurry to get marriedor have children. Many of them live alone but they may also live with their parents for convenience. This trendis beneficial for the manufacturers of some products, as it effectively extends the segment of teenagers toinclude a group with a similar way of life, but with higher incomes and greater independence. This way of lifeoffers significant sales potential for some products, especially in new technologies, for example MP3 players,mobile phones or digital cameras, as young adults are more mobile and their one-room apartments are relativelysmall. Designer clothing and shoes also have significant sales potential amongst young adults.

On the one hand, people of this generation are very conscious of, and involved in environmental and peacecampaigns. However, on the other hand, they tend to live more by the maxim "carpe diem" ("seize the day").These consumers are not expected to settle down in their early 20s but rather in their late 20s and early 30s. Thebudget allocated to furniture is very low and this explains the success of Ikea amongst this segment of thepopulation, as the Swedish retailer is able to provide affordable but trendy furniture.

Young people on the move

The most dominant and innovative trend among the French young adult population is their desire to travel inorder to gain new experiences. The success of the Erasmus programme, which facilitates study abroad, and theincreasing number of young adults who cross the Channel to work in the UK are significant. France is perceivedby many young people as too traditional in its way of life, while London and Berlin are considered much moreattractive than Paris for socialising. In addition, experience of professional employment abroad is increasinglyperceived as advantageous for young candidates applying for jobs in France and one that provides significantbenefits to their future employers.


Demand in France for new technology, such as mobile phones and portable MP3 players, has burgeoned inrecent years. Revenues from mobile phone sales grew by 214% between 2001 and 2006, to reach US$11.3billion, while sales of portable MP3 players reached US$964 million in 2006.

The value of the fast food market in France doubled over the review period, to US$6.1 billion, fuelled bydemand from the younger generation. Bakery products were particularly popular, with sandwiches withintriguing fillings and available to eat on-the-go at any time day or night now a sign of modern urban Frenchlife. However, because of France's strong café culture, coffee shops have failed to take off in a big way in thiscountry. Although sales through specialist coffee shops grew dramatically over the review period, they were stillvery low by 2006, at just US$47 million.

New taxes on RTDs cause price to double

Within the alcoholic drinks market, RTDs/high-strength premixes achieved strong overall growth of 59% invalue between 2001 and 2006, despite the restrictions placed on them during the review period. RTDs sawdramatic growth up to 2004, as young adults, as part of the "soda" generation, have a sweeter tooth thanprevious generations. However, in 2004, the French government raised taxes on pre-mixes to the same rate asbeverages that use fermented malt and contain between 1.2° and 12° of alcohol, as well as a level of sugar above35g per litre. The tax doubled the final price of most RTDs, and caused a decline in sales in 2005 and 2006.

Beer is not typically consumed heavily by young people in France, as the bitter taste does not appeal to them,and young consumers, especially women, are increasingly looking for sweeter alcoholic drinks. Brewers haveresponded to this challenge by launching premium beers, mostly imported from Germany, Benelux and the UK,and, in particular, flavoured beers.

Cosmetics and toiletries lack new product development

Young people represent a significant market for cosmetics and toiletries, with men of around 20 years of agebeing the major consumers of specialised men's toiletries. However, there has been little in the way of recentnew product innovation aimed at the youth market in both the hair care and fragrances sectors. One exceptionwas Schwarzkopf's Got2b!, a styling product line aimed at 15-30 year-olds, launched in 2005. The range offersfragrances like bubble-gum and lollipops, catchy names (eg Raide Dingue smoothing balm, Plein les Yeuxshining spray and Rien à Cirer wax) and attractive packaging. Furthermore, brands such as Fructis Manga Look



(Gemey Maybelline Garnier SNC) have focused on making styling more appealing and entertaining to regainthe interest of young consumers.

Table 15 France: Sales and Growth of Selected Products 2001/2006


Mobile phones 3,613 11,346 214.0Fast food 3,031 6,062 100.0Beer 1,835 2,595 41.4Colour cosmetics 922 1,420 54.0Recorded music 1,828 1,300 -28.9Portable MP3 players 14 964 6,785.7Colourants 525 741 41.0Men's toiletries 226 459 103.5Styling agents 339 444 30.9Mass fragrances 279 380 36.3RTDs/high-strength premixes 139 220 58.9Coffee shops 8 47 475.3Source: Euromonitor International

Germany

Population trends

The total number of young people in Germany aged between 18 and 26 rose marginally year on year over thereview period to reach 8.7 million in 2006. Their proportion of the total population also increased slightly, from10.2% in 2001 to 10.6% in 2006.

Table 16 Germany: 18-26s Population Trends 2001-2006

2001 2002 2003 2004 2005 2006

Number of 18-26s ('000) 8,351 8,470 8,576 8,637 8,701 8,771% growth 1.4 1.2 0.7 0.7 0.8



Older students, lower graduation rates

Students in Germany traditionally study for many years, sometimes not completing their qualifications untiltheir late 20s. However, the average age of students recently began to fall, after tuition fees were imposed onthose who fail to complete their courses in the prescribed time. According to the Federal Statistics Office, theaverage age of students fell from 26.2 in 2002/2003 to 25.5 in 2004/2005.

Tertiary level graduation rates in Germany are lower than in other OECD countries. Between 1995 and 2004,the rate in Germany was just 8%, compared to the OECD average of 49%. It is feared that the October 2006introduction of tuition fees in many federal states will further affect tertiary education numbers and impact thelabour force and economy in the long term.

Germany has tried to improve international competitiveness through the introduction of bachelors and masterscourses, a system previously unknown to German tertiary educational institutions. The number of bachelor-graduates rose by 66% in 2005. These courses, however, require more intensive guidance by teachers, which iscostly. This is one of the reasons why tuition fees were introduced.



Tuition fees may lead to bank loans

Banks do not currently grant loans to students. However, most students are able to finance their studies with theStaatsdarlehen, a needs-based, interest-free loan granted by the government. Those who do not fulfil itsrequirements are eligible for Bildungskredit, an educational loan that carries an interest rate. With theintroduction of tuition fees it is thought that students will become more reliant on loans. This may affectconsumer habits of graduates, since they will be concentrating on paying off their debts.

The habit of taking a gap year to travel around the world is not as well established in Germany as it is in the UK,as the average school leaving age is about 20. This could soon change, as many German states are introducingan eight-year secondary school curriculum, which will enable students to enter university at a younger age.

Low spending power

Students' disposable incomes are typically low, as money is generally saved rather than spent. Therefore, peopleof studying age are prime users of bars, cocktail bars, festivals, cafés and lower priced restaurants, such as pizza,pasta and Thai or other Oriental restaurants. There is also increased interest in American-style coffee/muffinbars rather than the traditional German coffee and cake emporia.

Unemployment among young graduates is high, and the German government's recent decision to cut socialsecurity transfer payments for the young unemployed has further reduced the spending power of this age group.Young people aged 18-25 will receive only 80% of the full entitlement while living at home with their parents,amounting to a maximum of €276 per month.

However, once in employment, the advantages in terms of income levels of those with tertiary education aregreat. The strong rise in graduate earnings in recent years is important in a country where economic growth hasbeen lagging, partly due to depressed consumption.

A cautious attitude to debt

Although German consumers have traditionally been wary of bank cards, young Germans are more open to theidea of buying on credit. However, in general, German consumers – even the younger generations – are morecautious, and are reluctant to meet their immediate needs by going into debt.


According to market research company IMAS International, the most widely recognised brands by youngpeople in Germany in 2005 were Volkswagen, Müller (dairy), Mercedes, McDonald's, Maggi (packaged food),Haribo (confectionery), Nivea (cosmetics and toiletries), Milka (chocolate), Coca-Cola, L'Oréal, BMW, Toyota,Audi, Persil, Deutsche Telekom, Krombacher (brewery), Opel and Ford.

Sporting goods remain popular

Sports goods and outdoor equipment are popular among Germany's Generation Y consumers, despite their highprices. A Medialine study from Focus Magazine shows that German consumers spent around €40 billion onfitness, sports and outdoor activities in 2005. Although cheap sports, such as jogging, running and working outat home, are the top activities for this age group, the lifestyle concept advertised by many manufacturers isparticularly attractive to those interested in adventure and winter sports. These more affluent consumers'readiness to spend a higher share of their income on good sports equipment is steadily increasing.

Despite Germany's economic difficulties and environmental awareness, sales of technological time-savingproducts, such as mobile phones, portable computers and portable MP3 players, have also risen strongly, as inother markets.

Fast food on the rise

Fast food was the largest of the markets under review in 2006, with sales of US$8.4 billion. This format isgrowing at the expense of most other types of consumer foodservice, with the number of fast food outletsincreasing in the cities, particularly at transport hubs, leisure centres and other hotspots. Fast food outlets meetthe needs of the changing lifestyles in German cities, and the concept of fast food as a timesaving convenience



is part of the daily management of time. Companies such as Subway can target this segment and are growingrapidly.

The coffee shop concept is relatively new in Germany, and sales through this type of outlet increaseddramatically over the review period, reaching US$310 million by 2006. Starbucks entered the German marketonly in 2002, through a joint venture with KarstadtQuelle. In 2004, when the chain had expanded to 37 outlets,Starbucks acquired KarstadtQuelle's share of the business.

Malt-based RTDs fuel alcohol growth

Germany has a significant beer market, with a value of US$6.3 billion in 2006. However, young people are notthe core consumers of beer in Germany, and several manufacturers have recently introduced milder tastingbeers, such as Beck's, Kölsch, Bavarian speciality Helles and some imported beers, such as Hannen Brauerei'sTuborg Pilsener, to appeal more to this generation and rejuvenate sales.

Many young consumers have turned to malt-based RTDs, which benefit from their up-to-date design and lessbitter taste. However, as in France, spirit-based RTDs experienced strong declines towards the end of the reviewperiod, after new legislation came into effect in August 2004 which introduced higher taxes on such products todiscourage young people from buying them. Malt-based RTDs were not affected by the legislation andcontinued to flourish.

Table 17 Germany: Sales and Growth of Selected Products 2001/2006


Fast food 5,549 8,382 51.1Beer 4,962 6,327 27.5Mobile phones 1,221 4,534 271.3Recorded music 2,106 1,790 -15.0Colour cosmetics 1,104 1,413 28.0Mass fragrances 591 798 34.9Styling agents 515 697 35.2RTDs/high-strength premixes 370 677 82.8Colourants 484 549 13.5Portable MP3 players 7 527 7,428.6Men's toiletries 246 388 57.4Coffee shops 110 310 182.8Source: Euromonitor International

Italy

Population trends

Italy's population has been ageing markedly for some time, due to its very low birth rate. This is one of the fewcountries in Western Europe to have seen a significant decline in the number of young people over the reviewperiod. Between 2001 and 2006, the population of 18-26 year-olds declined by almost 12%, to 5.7 million, andits percentage of the population dropped from 11.4% in 2001 to just 9.7% by 2006.

Table 18 Italy: 18-26s Population Trends 2001-2006

2001 2002 2003 2004 2005 2006

Number of 18-26s ('000) 6,481 6,230 6,018 5,923 5,833 5,719% growth -3.9 -3.4 -1.6 -1.5 -1.9





The number of Italians enrolling at universities has increased significantly since 2001, when the governmentintroduced a new two-tier system which includes postgraduate degrees. According to ISTAT, in 2005, 45% ofhigh school leavers entered university, while 20% of Italians aged 24-30 years had a degree. However, thenumber of people who do not complete these degrees is also high and growing.

Family loyalties

The veneration of family and the desire of young people to live close to their parents runs deep in Italian culture.Caring for elderly parents is still considered a social duty; grandparents return the favour by watching overchildren after school; and on Sunday, gathering all the generations together for a leisurely family lunch remainsa regular nationwide ritual.

Furthermore, according to a study of young adults in 10 nations published in 2006, young Italians stay in thefamily nest much longer than other Europeans. Unmarried Italians topped the poll, with 83% living with theirparents, compared to 63% in the second ranked nation, Spain. Lack of jobs or affordable accommodation wasthe main reason for staying at home, cited by 44% of males and 23% of females. However, 21% of men and33% of women also admitted that the convenience of having clothes cleaned and meals cooked was a majorfactor in the decision.

For those who are able to move out of their parents' home to live on their own or get married, parents typicallyhelp them to buy or rent their first house, or more often an apartment. As even rented accommodation is usuallyunfurnished in Italy, this group is an important target for manufacturers of furniture, household goods andappliances.

Status remains paramount to Italian youth

Generation Y in Italy has embraced technology and is willing to experiment. Brands and reputations matter agreat deal to these fashion-conscious individuals. This is also the age when young adults often purchase theirfirst new car, with Fiat's Cinquecento model especially popular among young people, due to its low price andcompact size. Smart cars are also popular, though more expensive.


Clothes, especially branded ones, are important for this age group. However, students and workers at an earlystage of their career have only limited disposable incomes for such items. Whilst they wish to follow the latesttrends and purchase expensive designer goods, they often cannot afford to do so. The introduction of cheaperdesigner ranges, such as Armani Jeans, is an attempt to attract Italian students to buy such ranges at an earlierage than they could otherwise afford to do, thus encouraging brand loyalty at an early age.

High mobile phone penetration

Of the sectors under review in the table below, mobile phones was by far the largest in 2006, with sales reachingUS$4.1 billion. According to the latest figures from the International Telecommunication Union (ITU), Italy hasthe highest mobile phone penetration rate in Europe, at 109 phones per 100 inhabitants. However, it should benoted that these figures relate to the number of activated SIM cards in use, rather than the actual number ofphones or users. According to a recent Ericsson survey, young people are attracted by advanced services thatoffer them enriched communication, such as imaging and video, and services that are fun, such as music andgames.

Although Italy has in general proved resistant to fast food, growth of 92% in value sales over the 2001-2006period proves that the concept has caught on among the young generation. Burger fast food has never enjoyedgreat success in Italy, but bakery fast food has become popular as consumers have begun to seek healthy andquicker lunchtime options. Another notable trend is the fact that multiplex cinemas and commercial centres hadbecome the most profitable locations for fast food outlets by the end of the review period.

Coffee shops meet resistance in Italy



Despite Italy's strong coffee culture, and the fact that the Starbucks concept was inspired by the Italian coffeetradition, specialist coffee shops are a very new concept in Italy. Starbucks still has no presence in this market,partly due to competition from the established position of local cafés. Segafredo Zanetti, the leading Italiancoffee shop chain by value, chose to build a presence outside of Italy first due to resistance to specialist coffeeshop concepts in its home market. Its breakthrough into the Italian market owed much to the fact that it wasalready a respected Italian coffee brand, rather than a foreign coffee shop chain. Also, Segafredo has adopted adistinctive brand positioning, which tends to be less standardised than Starbucks. Italians are used to espressobars and are not open to new types of coffee, or the concept of drinking from plastic cups or taking coffeeoutside to drink in the street. However, the younger generation could change all this. Sales through coffee shopsgrew from just US$1 million in 2001 to US$48 million in 2006, and Starbucks has announced plans to enter themarket.

Drink-driving a growing problem

Although the consumption of alcoholic drinks in Italy is still low compared to other countries, such as the UK,there have been signs in recent years that young people are drinking more, particularly at weekends and outsidemeal times, and they are starting drinking at a younger age. This has led to a problem of drink-driving amongyoung people, with the proportion of those tested found to have exceeded the legal limit for alcohol intake beinghighest among those aged between 23 and 27 years old. A significant number test positive between 04:00hrs and06:00hrs, when they have just left night-clubs. The government is trying to address the problem by encouragingyoung people to choose a "designated driver" for evenings out, who will not drink any alcohol. Moreover, thepolice have increased the number of patrols on roads, especially at the weekend, when the number of caraccidents is higher.

Sales of spirits-based RTDs rose substantially over the review period, but most of this growth occurredfollowing their launch in 2003. Since then, sales have tailed off, which has partly been blamed on a lack ofinnovation. While the leading brand Bacardi Breezer launched a new watermelon version in 2005, there were nonew flavours added in 2006.

Celebrity perfumes drive fragrance sales

Mass fragrances was one of the best performing subsectors in the cosmetics and toiletries market over thereview period, recording value growth of 90%. Both premium and mass fragrances have benefited in Italy fromthe popularity of celebrity fragrances among young people. For example, Jennifer Lopez launched her newperfume, Glow by J-Lo, targeting party girls, while Lovely by Sarah Jessica Parker was launched on the back ofthe success of the TV series Sex and the City. The new fragrance was advertised exclusively on the Voguewebsite, to capture the attention of Generation Y. Other celebrity fragrances launched in 2005 include Curiousdi Britney Spears by Elizabeth Arden, targeting women in the 14-24 age bracket. New fragrances designed foryoung and trendy men include That's Amore Gai Mattiolo Tatoo Lui, from ITF SpA.

Table 19 Italy: Sales and Growth of Selected Products 2001/2006


Mobile phones 2,196 4,103 86.8Fast food 1,536 2,949 92.1Beer 1,179 1,863 57.9Colour cosmetics 806 1,118 38.7Recorded music 522 600 14.9Colourants 219 331 51.1Mass fragrances 165 313 90.0Styling agents 250 310 24.1Portable MP3 players – 264 n/aMen's toiletries 144 258 80.1RTDs/high-strength premixes 58 137 138.0Coffee shops 1 48 4290.9Source: Euromonitor International



Japan

Population trends

The number of young people in Japan has been in free-fall for a number of years, as birth rates remain low andthe population ages. The number of 18-26s declined by 16% between 2001 and 2006, to 12.5 million. Thisrepresented just 9.8% of the total population, compared to 11.7% in 2001.

The shrinking youth demographic, combined with the modern, work-shy attitudes of young people in Japan, arecausing concern, given that this generation will soon have to carry the burden of supporting the world's fastest-ageing society.

Table 20 Japan: 18-26s Population Trends 2001-2006

2001 2002 2003 2004 2005 2006

Number of 18-26s ('000) 14,938 14,574 14,239 13,902 12,670 12,535% growth -2.4 -2.3 -2.4 -8.9 -1.1



Today, Japan's youth have a very different outlook and aspirations than their predecessors. The "salarymen" thatemerged after World War II and contributed to the country's regeneration were regarded as slaves to theircompanies, often working 12 hours a day, six or seven days a week, while women, once they had married, quitwork to raise children. Today's young people are not prepared to dedicate their lives to work, and are moreinterested in thinking for themselves and doing what pleases them. Students are choosing to study arts overengineering. Graduates are choosing to postpone career choices and marriage, taking time to travel, undertaketemporary jobs or simply do nothing for a while. The term "parasite singles" is used in Japan to describe youngpeople who are content to live off their parents well into their 20s.

More relaxed work ethic

Many accuse Japan's Generation Y of lacking eagerness compared to previous generations, and this cohort havebeen described as "Generation Slump". Born in the 1980s, at the height of Japan's post-war miracle economy,they reaped the benefits of being the children of the world's second-richest country. Because they came fromsmall families, they were often doted on and given substantial allowances, which they largely spent on leisure.They were not under as much pressure at school as their parents, as government officials attempted to ease the"exam hell" endured by generations of Japanese.

However, despite their relatively easy upbringing, malaise is common among today's Generation Y. Depressionand suicide are common, especially among those who are unable to get jobs after graduating. This may be due todisillusionment following a decade of economic recession. The word "freeter", (a combination of "free" and theGerman word "Arbeiter," or "worker"), is now commonly used in Japanese society to describes young peoplewho do change professions or jobs frequently, and choose not to take up an offered job if they do not like thesound of it.

Online gaming a popular pastime

Young Japanese people are very interested in fashion and clothing, especially women. Others from thisconsumer group, especially young men, are particularly interested in video games. The popularity of on-linegaming is also on the rise. Within this group there are also many who prefer going out, either socialising orpractising sports such as baseball and soccer.

Young men in Japan have been taking far more care over their appearance in the last few years. Indeed, in 2001,a popular young men's magazine, Popeye, revealed the results of a survey that showed that the fourth most



admired profession among men in their early 20s was "beautician", which was popular as a result of a number ofcelebrity hair stylists who often appeared on TV.


Eating out more frequently

Young consumers, particularly those living alone, are increasingly eating out with their friends, rather thanreturning home after work to cook. Research shows that Japanese people in their 20s eat out over three times aweek, while the overall average is just over twice a week. Single working men in Japan are not usually keencooks and will continue to enjoy dining out or buying prepared food from convenience stores or delivery shops.Japan's consumer foodservice market is being supported by free magazines and websites offering reviews andcoupons for restaurants. Hot Pepper is one of the largest free magazines, with over five million copies printedmonthly, and Guru Nabi is the most prominent on-line website, sponsored by about 40,000 restaurants. Thesemedia and their associated coupons are especially popular among university students and young professionals.

Fast food was by far the largest of the sectors under review in 2006, with sales of US$34.6 billion. The sector isfairly mature, with growth amounting to just 20% over the review period. However, coffee shops areincreasingly popular, enjoying growth of 50% to reach a value of US$3.1 billion in 2006. The largest suchchains are Doutor Coffee Shop, Starbucks and Tully's, which are all present across Japan.

Beer sales on the decline ...

Japan has a large market for beer, which amounted to a value of US$18.9 billion in 2006. However, salesdeclined strongly over the review period, by 13%, due to factors such as market saturation, poor economicconditions and the Japanese health craze, as well as the country's ageing population. Beer is drunk by allgenerations in Japan, and is not particularly associated with young people. The key beer players in Japan areAsahi and Kirin, the latter of which also distributes foreign brands, such as Heineken, OB and Pilsner in Japan.

Imported alcoholic drinks are enjoying strong consumer interest among younger drinkers in Japan, who areoften keen to try out new things. In addition to sampling new spirits or mixes at nightclubs, the greateravailability of affordable imported products in retail channels further encourages trials and home consumptionamong younger consumers organising house parties and gatherings. The growing number of singles with theirown residence in urban cities further encourages off-trade sales.

... but RTDs more popular

RTDs/high-strength premixes enjoyed strong value growth of 65% over the review period. Chu-hai, a traditionalJapanese RTD, was particularly successful, due to new product developments and a more fashionable image.Products such as those in the Asahi Cocktail Partner series caught up with the rising health consciousnessamong Japanese consumers.

Some domestic spirits are also attracting a younger demographic. For example, shochu (including otsu-typeshochu), which used to be perceived as an "old man's drink" (usually consumed at izakaya, or Japanese-stylebars), became increasingly popular among young working women during the review period. The main lure ofthe drink was its reputation as a healthy drink and its comparatively low alcohol content of 20-25%.

Japan's mobile phones market is fairly mature, but the market for portable MP3 players continues to growstrongly, with sales rising by a massive 317% between 2001 and 2006. Sales of recorded music fell sharply overthe review period, as downloading became ever cheaper.

All of the cosmetics and toiletries sectors under review are mature, and experienced either slow value growth ordecline over the review period. Styling agents suffered a sharp fall of 14% in value.

Table 21 Japan: Sales and Growth of Selected Products 2001/2006




Fast food 28,962 34,637 19.6Beer 21,702 18,943 -12.7Mobile phones 6,870 7,765 13.0Colour cosmetics 5,556 5,735 3.2Recorded music 5,256 4,135 -21.3Coffee shops 2,104 3,148 49.6RTDs/high-strength premixes 1,653 2,728 65.1Men's toiletries 1,004 1,036 3.2Styling agents 1,188 1,017 -14.4Colourants 825 831 0.8Portable MP3 players 178 742 316.9Mass fragrances 153 144 -6.4Source: Euromonitor International

UK

Population trends

The UK is one of the few markets to have experienced a relatively strong rise in the population of 18-26 year-olds over the review period. Their number grew by 12% between 2001 and 2006, to reach 7.2 million, whiletheir share of the total population increased from 10.9% in 2001 to 11.9% in 2006.

Table 22 UK: 18-26s Population Trends 2001-2006

2001 2002 2003 2004 2005 2006




Students in debt

Since 2001, the British government has set out to raise the proportion of young people going on to highereducation to 50% by 2010. According to the Department for Education and Skills, it reached a record level of43% in 2003/2004, compared with just 7% in 1964. A key factor for people of studying age is the cost of highereducation courses. For the academic year 2005/2006, higher education tuition fees across the UK were £1,175.From September 2006 onward, however, universities and colleges offering higher education courses in England,Wales and Northern Ireland were able to vary the fees they charge new students, up to a maximum of £3,000 peryear. Scotland retained significantly lower annual tuition fees of £1,700, leading to heightened competition forplaces in Scottish universities and colleges.

Financing their higher education is a key focus for British students. The Office for National Statistics reportedthat in 2004/2005, 81% of eligible students in the UK took out loans to support them through higher education,with the average amount being £3,390. Analysis carried out for the Department for Education and Skillsinvestigated the spending patterns of full-time university students in England and Wales. 90% of studentssurveyed were between 17 and 20 years old at the start of their courses, with the remaining 10% between 21 and24 years old. In the 2002/2003 academic year, total average expenditure per student was almost £7,000,representing an increase of 28% on 1998/1999.

A study by the Financial Times, published in March 2006, indicated that student debt in the UK rose by 18.7%in 2005, to just over £14.6 billion. The average student starts his or her working life with a £12,000 debt to berepaid.

Spending habits of students



The UK student market has been estimated to have a spending power of some £20 billion per annum, of which£1 billion is spent on mobile phones.

In general, students tend to spend most of their income on essential items, such as accommodation, food, billsand household goods. The government survey showed that living costs account for around two thirds of theirexpenditure. Students are also significant consumers of specific items relating to their coursework, however,such as textbooks and stationery. When they go out, they tend to frequent low-cost venues, such as StudentUnion bars, and cheap restaurants and clubs. Students are a particularly strong target for banks, not least becausethey compete to provide student loans which they are aware will typically take some time to be repaid once theindividual has graduated and is earning a living.

A study by youth marketing company Face carried out in 2005 showed that students in the UK differ from non-students in that they are early adopters of technology, with almost twice as many owning a laptop and an MP3player. They are also much less likely than non-students to partake in sedentary technologies such as gamingand watching TV.

Student accommodation

Within the student accommodation market, expectations and standards are changing rapidly. Only five yearsago, the sector was dominated by universities offering traditional halls of residence and local landlords offeringmulti-let houses. However, the environment has recently become far more competitive, as specialised corporatedevelopers and operators have expanded their portfolios by buying existing stock or developing their own sites.The latest Annual Report from property consultants King Sturge stated that student accommodation sales topped£500 million in 2006, making it a multi-million pound investment sector. While shared bed-sits used to be thenorm, en suite facilities are now considered standard in most bedrooms, as are high-speed data networks.Indeed, in King's Cross, London, one private equity developer is currently constructing 800 studios for the topend of the student market – complete with free wireless Internet connection throughout the building, 24-hoursecurity guards, coffee shops, a cinema and a gymnasium.

According to King Sturge's latest survey on UK student accommodation, the total value of the market, at the endof 2006, was worth more than £17 billion (excluding student accommodation in shared houses). While some100,000 beds have been purpose-built by private sector developers/operators in recent years, around 300,000beds are still owned and operated by the higher education sector. However, a significant proportion of these arenow outdated and fail to meet both the needs and expectations of today's students.

Young people reluctant to flee family nest

An increasing number of young people in the UK are living at home with their parents for longer. This is partlydue to the growing number of people going on to higher education but it is also the result of people delayingmarriage and child-rearing, often until they are in their 30s. Furthermore, with house prices at an all-time high inthe UK, many young adults cannot afford to get onto the property ladder. Their options are either renting orstaying at home with parents.

Most leisure time now spent on-line

The Face Tech Tribe Report of May 2005 revealed that young adults aged 16-25 spent the largest share of theirweekday leisure time on-line (25%), followed by watching television (22%). A further 16% of time on averagewas spent out drinking with friends. The work and social lifestyles of women in their 20s, in particular, appearto be changing, with a growing culture of late nights, smoking and binge-drinking. As well as being positive formanufacturers of alcoholic drinks and cigarettes, this also offers opportunities to marketers of products such asskin care, for example, to target this generation with products that prevent premature ageing.

Chart 7 Average % of Weekday Leisure Time Spent 2005



Source: Face Tech Tribe ReportNote: 16-25 year-olds

Gen Y most likely to be online

A recent study by comScore, which examined the online activities of people age 15-24 in the UK, found thatthis age group was 25% more likely to be online than the general population, spending 24% more time onlinethan the average Internet user in April 2007. The study revealed that younger people use the Internet more thanother age groups for communications, content, community and commerce.

The comScore study confirmed that social networking sites are the most popular sites among the 15-24 agegroup, including Facebook.com (where they represented 50% of total users in April 2007), Bebo.com (43%) andTagged.com (37%). Other properties with strong teen and young adult appeal in the UK include ARTISTdirectNetwork and Alloy, which are news and entertainment sites.


Generation Y represents the core market for mobile phones and portable MP3 players. The latter grewexponentially over the review period, from a value of just US$7 million in 2001 to US$1.7 billion in 2006.However, value sales of mobile phones actually declined by 19% between 2001 and 2006, as a result of fallingprices. The mobile phones market has also reached a certain level of maturity as penetration rates have reachedvery high levels.

Fast food goes upmarket

The UK has a substantial fast food market, with sales worth US$24.4 billion in 2006. This market grew stronglyover the review period, by 60%, which was largely due to a significant shift towards premium products. Thistrend was particularly noticeable in the bakery fast food segment, where traditional sandwiches, like ham,cheese and tomato, were replaced on shelves by more sophisticated offerings such as French smoked duck andcamembert. Burger chains have also gone upmarket, with chains such as Gourmet Burger Kitchen and FineBurger Co appealing to young urban professionals. Coffee shops are a popular venue for young people to "hangout" in the UK. These experienced even more rapid growth between 2001 and 2006, with sales increasing by156% to reach US$1.9 billion.

Beer culture going strong

Beer remains a popular drink among young people in England, and sales continued to perform well over thereview period, rising by 29%. Recent efforts by breweries have included the introduction of citrus-basedvariants of popular standard lagers, in order to appeal to female drinkers disillusioned with RTDs. Breweries



also looked to the dynamic speciality and imported beers subsector for new product launches. In the light ofadverse publicity surrounding binge drinking and drunkenness among Britain's young people, a notable trend in2006 was for low-alcohol beers (LAB), which typically contain between 0.5% and 3% abv. Coors is alreadypresent in this segment with C2, a 2% abv variant of Carling, while Scottish & Newcastle announced plans torelease Foster's Quench, a 2% variant of its best-selling standard lager.

RTDs/high-strength premixes suffered an 18% decline in sales over the review period, having lost share to moretrendy drinks such as premium ciders (in particular, "cider over ice" brands like Magners), as well as spirits foruse in home-made cocktails. Concern over their high sugar content was also reflected in the poor performanceof the RTD sector in 2006, although low-sugar drinks, such as Bacardi Breezer's half sugar range and Diageo'sArcher's Vea, continued to perform well. Another fast-growing subsector was that of alcoholic milk-baseddrinks, which are considered more healthy than traditional brands. These include Brown and Vodka Mudshake.

New hair care products target party goers

Most of the cosmetics and toiletries sectors under review performed well between 2001 and 2006. Many recentnew products in the styling agents subsector have been aimed at the young partying generation, includingWella's ShockWaves Tuff Stuff Gel, ShockWaves Xtrovert One Night Wonder Wax and L'Oréal Paris StudioLine Party Proof Gel. These are designed to provide extra strong hold for long nights out and to be resistant towater and sweat. Alberto-Culver's new range, VO5 Air Style, meanwhile, is meant to provide a more naturallook while still connecting to its younger consumer base.

Within the colourants sector, younger consumers tend to use temporary colourants. As they are inspired byfashion and celebrity trends, many youth-targeted brands use celebrity endorsement in their marketing strategiesto appeal to this demographic group.

Premium colour cosmetics brands that traditionally targeted more mature consumers are looking to extend theirranges to offer more youth-orientated colour cosmetics, while new players entering are targeting youngconsumers, including BeneFit and Pout. In 2005, Guerlain introduced its Kiss Kiss lipstick brand, whichpackaging that evokes a fun-loving, sexy image for younger consumers.

Celebrity perfumes fuel fragrance sector

Mass fragrances have benefited from a trend towards celebrity fragrances, with Glow by J-Lo proving a hit withteenagers and young women in their 20s. Jennifer Lopez's fashionable credentials hit a chord with the UK'sMTV-watching generation who, with higher disposable incomes, found the £20 price tag well within their reach.In 2005, Elizabeth Arden's Curious Britney Spears met with similar success among the same target group, andthe star's next perfume, Fantasy, soon followed.

Men's toiletries enjoyed the strongest growth of the cosmetics and toiletries sectors under review between 2001and 2006, with sales up by 68%, as young men became more aware of the need for good skin care and hygieneroutines. Brands such as Unilever's Lynx created a clearly defined position and strategy targeting young menaged 16-22.

Table 23 UK: Sales and Growth of Selected Products 2001/2006


Fast food 15,236 24,405 60.2Beer 5,706 7,358 29.0Recorded music 2,817 3,100 10.1Colour cosmetics 1,352 1,962 45.1Coffee shops 751 1,921 155.9Mobile phones 2,097 1,698 -19.0Portable MP3 players 7 1,667 23,714.3RTDs/high-strength premixes 1,678 1,376 -17.9Men's toiletries 458 768 67.7Styling agents 402 540 34.4Colourants 285 374 31.6Mass fragrances 173 222 28.3




US

Population trends

The US's population of 18-26 year-olds grew gradually over the review period, with growth peaking at 2% in2003 and falling to below 1% by 2006. At 38.0 million, 18-26 year-olds represented 12.7% of the totalpopulation, a proportion which remained unchanged between 2004 and 2006.

Table 24 US: 18-26s Population Trends 2001-2006

2001 2002 2003 2004 2005 2006




Students gain clout

A study of the US college student market (ages 18-30, from two-year and four-year colleges, attending part-orfull-time) carried out by Harris Interactive in 2005 showed that the college market had expanded in every aspect– size, spending power and discretionary income. The study revealed that, while enrolments were at an all timehigh (16.5 million students), the percentage of those employed had also reached a massive 78%, whichgenerated substantial levels of income and marking significant increases in discretionary spend.

Overall spending among college students had increased by almost 16% since the previous study in 2003, toreach over US$175 billion, while discretionary spending had soared to US$41 billion, representing a rise of 24%since the 2003 study.

Today's American students are described in the study as among the savviest of consumers with a strong workethic, but among the hardest to captivate. The study revealed that 15% of college students consideredthemselves early adopters of electronic devices and gadgets (for males, this proportion reached 24%). Thepenetration of some consumer electronics, like mobile phones, was widespread (85% of students owned one),and the models they used were more sophisticated. Of those that owned a mobile phone, 75% sent and receivedtext messages and 63% played games; 60% could access the Internet through their phone, and 36% could take,send and receive pictures. Personalisation rated highly, with almost 50% of students who owned a mobilereporting that they had downloaded ring tones. Technology is also important in other areas of students' lives:63% of students planned to make a technology purchase in the coming year, with 20% planning to buy a digitalcamera and 17% an MP3 player.

Brands with a conscience

The study also revealed important data on preferences, including the types of products students prefer to buyand the marketing content they prefer to see, and disparities across ethnic and gender lines. Today's collegestudents are still looking for a good deal – 80% of students reported a preference for buying brands that were onsale – but their preferences weighed heavily towards socially conscious brands. Though not all students aredirectly involved in these activities, many are conscientious consumers, contributing to important causesthrough brand preference. 31% said that they preferred brands that are environmentally safe, 26% preferredbrands that give back to the community and 20% preferred brands connected with a cause. 26% were willing topay more for a brand with a great image.

Despite trends towards brands signing big celebrities to promote their products, only 4% of students agreed withthis, whereas 36% thought advertisers should use everyday people in advertisements, and 35% thought



advertisers should use humour in their advertisements. Reflecting these findings, peer influence is gainingimportance over television advertising. As many as 91% of students said they pay attention to the more non-traditional advertising method of word of mouth, with almost 70% of students who paid attention toadvertisements saying that this most influenced their purchasing decisions. Nearly half (48%) of collegestudents considered sampling a product to be most influential to purchasing decisions.

Minorities are key influencers

While the use of personal digital technology has reached all college demographics, minorities tend to be theleaders and influencers. Within mobile phone technology usage patterns, for example, African Americans leadvirtually every category over Caucasians and Hispanics, logging a greater percentage of text messages, games,pictures and web surfing hours, and downloading more ring tones, files and news to their phone. However, thisdemographic may prove difficult to reach via traditional media: as much as 93% of African American collegeconsumers claimed to "multi-task while watching television".

Looking at differences between ethnic groups, beyond communications and technology, Hispanics spent themost on entertainment at US$40 per month on average, 54% more than African Americans and just slightlymore than Caucasians. Meanwhile, African Americans spent 50% more on average than Caucasians on clothingand shoes, and 20% more on personal care products.

Graduates represent lucrative market

A study by research company Experience estimated that "Mature Millennials" (ie, the college-educated 18-24year-old audience) represent a US$100+ billion market, making purchasing decisions up to US$400 per month.They are also of importance due to the fact that they are often first-time purchasers, and being major influencers,their acceptance or rejection of a product can make a significant difference to its success.

Studies by Experience over a decade revealed that the purchasing power of this group of consumers is growing.As Mature Millennials graduate from college, their annual income will increase significantly, from aroundUS$15,000 on average to US$90,000 with three or more years of work experience. Their monthly discretionaryspend will rise from nearly US$240 on average for recent graduates to more than US$430 for graduates withthree or more years of experience.

Their credit card usage also grows with their income. While they have fewer than two credit cards in college,this will increase to more than three cards per graduate with three or more years of work experience. Theirincome combined with credit usage is what makes this demographic such an attractive market.

After surveying 20,000 Mature Millennials, Experience found that almost 70% spend six or more hours eachweek on the Internet, while less than 50% spend the same amount watching television. These percentages dropsignificantly with regards to other media: unlike young adults of previous generations, most Mature Millennialsspend only two hours or less reading magazines or newspapers.


Bakery leading fast food growth

The US has the world's largest market for fast food, and men aged 18-34 are its largest consumer group. Somechains (eg Hardee's, Carl Juniors and Burger King) targeted this group with extra large portions towards the endof the review period. Fast food chains also focused on reaching on-the-go consumers beyond the traditionallunch day-part, by introducing new coffee and breakfast items. Burger King launched its new BK Joe coffee in2005, and McDonald's followed in 2006 with a new premium roast coffee. Others focused on expanding theirevening day-part with hot items appropriate for dinner. Subway introduced a selection of toasted sandwiches,such as the Bourbon Chicken sandwich, which is marketed as a dinner sandwich.

Fast food bakery saw strong growth, led by sandwich fast food brands like Subway and Quizno's, as well as fastcasual brand Panera Bread. Panera Bread Co is one of the most closely watched chains in the sector, due to itsrapid growth and status as the largest fast casual chain. Positioned as a bakery-café, the chain's menu is wide-ranging and covers a number of items that might otherwise not be encountered in the fast food sector, such as aTuscan chicken sandwich on tomato basil bread.



Coffee specialists also continued on their strong growth path, with sales more than doubling between 2001 and2006, to reach US$10.6 billion. These were driven by the continued expansion of Starbucks, but also by theemergence of smaller coffee chains, such as the Coffee Beanery and Caribou Coffee, which benefit from theirperceived higher quality coffee and personable atmosphere.

Beer fuelled by foreign and premium products

Beer represents a large market in the US, with sales worth US$38.6 billion in 2006. Growth over the reviewperiod was fuelled by the increasing popularity of foreign and premium beers, at the expense of domesticproducts. The leading imports successfully established a distinct and appealing image for their brands, egCorona's Mexican holiday in a bottle, Heineken's European cool and Beck's historic German quality. However,pricing in supermarkets and convenience stores has been very competitive, as the two leading brands ofimported lager, Heineken and Corona Extra, have been reluctant to push through any significant yearly priceincreases.

Demand for mobile technology, such as mobile phones and MP3 players, continued to soar in the USthroughout the review period. Sales of the latter grew from just US$241 million in 2001 to US$2.4 billion sixyears later. However, sales of recorded music fell by 12% over the review period, due to the decline of CD salesin favour of cheaper music downloads.

Cosmetics and toiletries reach maturity

Most of the cosmetics and toiletries sectors in the table below showed slow growth or, in the case of massfragrances, decline over the review period. The one exception was men's toiletries, where sales soared by 73%between 2001 and 2006. However, this was partly due to the success of anti-ageing products, such asBeiersdorf's new Nivea for Men Active Firming Lotion, which target older men. Products aimed at the youngergeneration include Axe and Old Spice's body wash extensions, as these iconic brands' message of "getting thegirl" has a natural cross-category appeal.

Table 25 US: Sales and Growth of Selected Products 2001/2006


Fast food 140,328 171,246 22.0Beer 33,151 38,608 16.5Mobile phones 10,489 18,687 78.2Recorded music 13,406 11,757 -12.3Coffee shops 5,231 10,552 101.7Colour cosmetics 7,544 8,601 14.0Portable MP3 players 241 2,390 891.7Men's toiletries 1,381 2,382 72.5RTDs/high-strength premixes 1,705 1,933 13.3Colourants 1,635 1,647 0.7Styling agents 1,410 1,593 13.0Mass fragrances 1,514 1,244 -17.8Source: Euromonitor International

FUTURE TRENDS

Trends To Watch

Students of the future

In the future, Generation Y will become an increasingly important consumer group, as their income prospectsare forecast to improve significantly in many countries. Several trends are likely to emerge that will enhance thepurchasing power and spending behaviour of young adults, making them an attractive target for a range ofmanufacturers and service providers.



The future spending patterns of Generation Y will depend on which end of the age spectrum they are currentlyat. Many of today's 18 year-olds are about to embark on their student life, but generally with higher incomesthan those that went before them, as wealthy boomer parents living in an era of strong economies are better ableto fund their children's studies and provide them with more spending money. Furthermore, favourable studentloans and the increased availability of credit facilities will allow students to enjoy a lifestyle previously unheardof. This may not be the case in all countries, however. In Germany, for example, there are fears that studentswill not be as well off in the future, or that young people may be deterred from further education altogether, dueto the recent introduction of higher tuition fees. On the other hand, this may encourage more students to buckledown and achieve their degrees within a shorter time, with the goal of achieving a well-paid job by their mid-20s.

On the whole, the expectations of future students will be high: they will not want to alter the comfortablelifestyles that they have grown up with, and will be prepared to borrow more to achieve this. As their level ofwealth rises, students will be the launching platform for smart marketers looking to generate life-longrelationships with young, "high value" consumers.

In their quest for new experiences and as travel becomes easier, more students are likely to take a "gap year"after secondary education and before going to university, which is likely to be funded by credit or wealthyparents. This will provide opportunities for airlines and holiday companies to target these young people withspecial deals, as well as for financial institutions to target them with specific products, such as pre-paid cards.

The next lifestage

For Generation Yers at the upper end of the age spectrum, going into their late 20s and early 30s over theforecast period, many of these people will be settling down and having a family. Their needs will thereforechange significantly over the forecast period, more closely resembling those of the current Generation Xers,whose incomes in some markets are drained by high mortgages and the demands of their children. However, atthe same time, these consumers will be entering their peak wage-earning years, often with dual incomes, andproviding economies remain strong, they will be able to afford more luxury goods associated with family life,such as larger cars and more expensive holidays. Having grown up surrounded by modern technology, theseconsumers will create strong demand for the latest equipment, be it in the form of high-performing PCs, digitalhome entertainment systems or satellite navigation devices.

Prospects in developing markets

In developing countries with rapid economic growth, such as China, India and Vietnam, the large population ofyoung adults with higher disposable incomes presents a vast consumer base. As young people in these countriesare very much in touch with global consumer trends, the Asia-Pacific region presents significant marketpotential for international consumer goods companies. In developing countries where economic growth is robustand where many job and training opportunities exist, an increasing number of young adults are following thetrend in developed countries of delaying marriage to pursue educational and career goals. This helps to enhancetheir independent spending power, as these young adults can now spend less of their disposable incomes onessential goods (such as food), and more on fashion and entertainment.

Technology and fashion to remain paramount

The favoured sectors for the future in terms of young adult spending are likely to remain music, technology andfashion. The main preoccupation of Generation Y, at least before they settle down to have families, will beleisure activity in general, with specific interest in communications, entertainment, music, DVDs, games andclubbing. Young adults will remain key influencers of the purchasing of other demographic groupings,possessing the "techno savvy" and the style which enables them to be successful advocates of new technology toolder generations with greater spending power.

It is impossible to predict where fashion will go in the next 10 years, but the desire to be cool is perennial. Whatconstantly develops is the way being cool is communicated. For fashion, peer pressure and the media will staythe main influence on teenagers and 20-somethings. Telecommunications, and particularly mobile phonegrowth, have profoundly changed the mindsets and lifestyles of young adults and re-prioritised spendingpatterns. Viral marketing will remain an effective channel for marketers.



Generation Y are highly aware of environmental issues and the need to look after their health in order to prolongtheir looks and life-spans. In the future, this generation will be significant purchasers of healthier foods, naturalcosmetics and toiletries and anti-ageing products, as well as all things green.

The ability of Generation Y to keep in touch and communicate with so many peer groups, special interest groupsand friends offers immense viral marketing opportunities for companies selling products to young adults.However this is always provided they have a product which the word on the street, as communicated via texting,e-mailing and chatlines, pronounces cool.

Global social networking sites such as Facebook and MySpace, as well as country-specific versions, such as theUK's Univillage, will remain an important aspect of young people's lives into the future, and this will be an idealway for youth-orientated brand owners to target this generation through advertising, deals and promotions.

Attitudes towards work

Generation Y will have the most profound impact on the workforce of any demographic to date, as they replaceretiring boomers, and subsequently Generation Xers. This is because they will be the most naturally technology-adept workforce in history, demanding quick responses from technology, systems and colleagues. However,analysts also expect Generation Yers to be very insistent on a good work-life balance and will be less inclined toworkaholism than the departing boomers. This does not augur well for countries like Japan, where youngergenerations will need to work hard to care for the ageing population.

Despite their rising earning potentials, young people will be more likely to get in debt. They will not onlyborrow large sums to finance their studies and housing, but are also likely to take out more debts on credit cardsto purchase goods and services, or in other words, to finance their increasingly independent lifestyle. This offerssignificant opportunities for banks and other financial institutions to create loyalty from an early age.

Make way for Generation Z ...

Despite a general ageing of the global population, the 18-26 years age group is expected to swell slightly overthe forecast period, with its share of the total population predicted to rise from 15.1% in 2006 to 15.3% by 2011.However, in 2011, this age group will consist largely of today's teenagers, a cohort that is perhaps even morepampered and technology-driven than Generation Y.

Little attitudinal research has been completed to date on the next generation, which is being referred to by someas Generation Z. This includes those born in 1990 or after, who are currently in their teens. As these childrenmature, they are likely to be heavily focused on health, well-being, the environment and technology. They willbe even more aware than Generation Y of the need for sustainability and fair trade, having had these issuesdrummed into them from an early age.

Trends that have characterised Generation Y will become even more pronounced with Generation Z: youngwomen will increasingly demand education, careers and sporting opportunities over marriage and children,while young men will not rely on women to undertake household chores and cooking, and will take more of aninterest in their appearance. Women, who have traditionally driven purchasing decisions in many categories,will continue to make progress in business, politics and other areas of life. As a result, they will have less timefor shopping and might be expected to value convenience more highly than in the past.

Generations Y and Z will be attracted to stores and brands that market to their lifestyles and not only their age.They will remain suspicious of mega corporations, and will demand transparency. Although they will be loyal toretailers and stores who deliver consistent value, quality and service, they will be equally likely to jump aboardthe next new bandwagon.

Today's teenagers have also been dubbed the M generation, for whom multitasking is a way of life. They maybe instant messaging ("IMing"), while chatting on a mobile phone, playing iTunes, and doing homework. Arecent survey by the Pew Internet and American Life Project showed that 82% of American children are on-lineby the seventh grade, and use it to play music, games and films, e-mail, IM, and use Google and MySpace.

Chart 8 Forecast Countries by Number of 18-26s 2011



'000 people


Chart 9 Forecast Countries by Proportion of 18-26s 2011

% total population




Forecast Sector Trends

Fast food will benefit from demand for convenience

Fast food will remain the largest of the sectors under review, and will continue to see fairly robust growth overthe forecast period, with sales set to increase by 18% in real value terms by 2011. Fast food will suit the on-the-go lifestyles of the young generation, providing it develops a more healthy image. The future will see a growingtendency for fast food chains to locate outlets in non-traditional locations, such as travel venues, to attract theseconsumers. Similarly, convenience store fast food is expected to grow strongly, as expectations of finding fastfood away from the high street grow, while drive-thrus are likely to become increasingly common. Bakery fastfood chains will continue to appeal to Generation Y, with Subway, for example, benefiting from its strongmarketing, convenience and the health appeal of its sandwiches.

Coffee shops to provide "third place" for youths to relax

Specialist coffee shops are predicted to enjoy the strongest growth of the sectors under review over the forecastperiod, of 38% in real value terms, as the coffee culture continues to catch on around the world. The major



chains, such as Starbucks, Costa Coffee and Caffè Nero, will continue to expand, thus fuelling the market, alongwith growing demand for premium beverages and for a "third place" for relaxation, work or socialising.

Starbucks is expected to expand significantly in Asia, especially China, where retail sales of fresh coffee arecurrently negligible but are growing strongly. In June 2007, along with its local partner Dong Suh Foods, thecompany launched Starbucks Discoveries chilled RTD coffee in South Korea, following its debut in Japan andTaiwan in 2005. Starbucks Discoveries products are set to appeal to those young consumers who look up toWestern culture. Starbucks is likely to continue to roll out its Discoveries products in other Asian markets, suchas Hong Kong and Singapore.

Moderate growth for beers and RTDs

Sales of beer and RTDs/high-strength premixes are expected to rise by 13% and 15%, respectively, between2006 and 2011. Although major brewers continue to roll out new varieties, including crossover beer and energydrink products, sales in a number of key markets, notably the US, are likely to be undermined as the youngerdemographic gravitates towards trendier spirits and wines, or abandons alcoholic drinks altogether in favour ofhealthier options like energy drinks, sports drinks or bottled water.

Men's toiletries to fuel cosmetics and toiletries growth

Generation Y will continue to represent a significant market for manufacturers of cosmetics and toiletries, due totheir strong interest in fashion and looking good. Mass fragrances and men's toiletries are expected to performwell between 2006 and 2011, while the more mature sectors, such as styling agents, could stagnate. As the oldermembers of this generation begin to approach 30, marketers of skin care products will target them with productsdesigned to prevent premature ageing, in an attempt to further segment their ranges. Men will take an increasinginterested in their own skin care regimes, and marketers will design products with a cool image to attract thisgroup, which may continue to be marketed using new metrosexual icons. Designer brands positioned in themasstige segment are likely to fuel the fragrances sector in the future, including Calvin Klein's new brand cKin2u.

Table 26 Forecast Global Sales in Selected Sectors 2006-2011

US$ million, constant 2006 prices2006 2007 2008 2009 2010 2011

Fast food 404,648 419,893 435,068 450,349 464,431 477,918Beer 183,346 187,563 192,866 197,860 202,928 207,772Coffee shops 22,945 25,284 26,848 28,468 29,996 31,665RTDs/high-strengthpremixes 13,018 13,405 13,797 14,196 14,612 14,984Mass fragrances 12,513 12,967 13,466 13,990 14,468 14,956Men's toiletries 9,651 10,094 10,518 10,940 11,375 11,824Colourants 9,980 10,192 10,421 10,696 10,944 11,229Styling agents 7,945 7,993 8,071 8,148 8,228 8,321

% growth

Fast food 18.1Beer 13.3Coffee shops 38.0RTDs/high-strengthpremixes 15.1Mass fragrances 19.5Men's toiletries 22.5Colourants 12.5Styling agents 4.7Source: Official statistics, Euromonitor International

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