Time for Marketers to Grow Up?

By CRIS PRYSTAY and SARAH ELLISON

 THE WALL STREET JOURNAL, February 27, 2003

Marketers Revamp Strategy As World's Population Ages

If demography is destiny, then consumer products companies are facing an aging future. As the world's birthrates slow and its population ages, multinational companies are being forced to reconsider strategies for selling diapers, arthritis medicine and everything in between.

But some remain reluctant to let go of their fixation on youth. Lois Coleman, who organizes focus-groups for consumer companies, says she is almost never asked to study people over age 50. Even for the bran flakes she helped launch in Mexico, she was asked to talk to consumers under 35. "It was a bran cereal," she says, pausing. "Now who do you think really needed that product -- the kids in their 20s?"

For now, many companies find themselves straddling a widening gap between the relatively young populations of developing countries and the aging populations of the developed world -- and trying to find growth opportunities in both.

"For decades, our industry took for granted that population growth in the developed countries would deliver a substantial part of the sales growth," said A.G. Lafley, chief executive of Procter & Gamble Co., at a recent conference on laundry detergent. "Few imagined the day would come when we would see zero population growth -- let alone decline -- in major markets. Yet that is what we are facing today."

Growth has to come from developing markets, Mr. Lafley says -- so, the company built a low-cost diaper factory in Vietnam, where it sells diapers for 15-cents a piece, less expensive than in the West. Population growth in other "young" countries such as Mexico and Brazil are a critical source of sales growth, providings the extra bodies to buy more toothpaste and laundry detergent and other staples. But pricing is an issue, too: On average, prices of laundry products in developing countries can be half or even less than half the price in developed markets, P&G says.

Meanwhile, P&G has focused on one of the clear advantages of selling in developed markets: affluent, albeit aging, consumers. In the fall, P&G launched a toothpaste for aging women, called "Rejuvenating Effects" in the U.S. One of P&G's latest blockbuster beauty products is its Olay anti-aging cream, which it rolled out first in Western Europe and the U.S. The best opportunities for its $500 million osteoporosis drug, Actonel, are (in descending order) Japan, Italy, France, the rest of Western Europe and then the U.S.

Some big multinationals are still clinging to dated ideas about the demographic makeup of new markets. "There is a big gap between the realities of demographics and the way advertisers approach it," says Mike Townsin, regional director of MediaCom Asia Pacific, the media planning and research arm of ad agency Grey Worldwide.

In Asia, for example, the young adults that attracted multinational marketers in the 1980s now have grown up and become so-called empty-nesters -- that is, people from the age of 40 to 59 whose youngest child is nearing financial independence, according to research company Asian Demographics Ltd., of Auckland, New Zealand. At the peak of their careers and newly dependent-free, empty-nesters are a fast-growing group in powerful economies such as Hong Kong, Singapore, Korea and Taiwan. Their numbers are forecast to grow by 30% to 10.9 million in the next decade. Meanwhile, the youth market will shrink by 10% to 11.4 million in the same decade, according to the research company.

Yet multinationals are, for the most part, still obsessed with romancing Asia's youth. Coca-Cola Japan, for example, isn't yet targeting Baby Boomers, says a spokesman. The company has been making canned teas and coffees for years but hasn't yet created ads pitching them to seniors.

Motorola Inc. makes phones with features that aging consumers like, such as a zoom function to bump up the font size on the tiny screen and even internal speakers that can connect with hearing aids. But still the company hasn't developed ad campaigns highlighting these features or targeting seniors. "Our strategic direction is to focus on the youth," says Mabel Tay, Motorola's director of brand and consumer communications for Asia Pacific.

In Japan, several domestic companies have already begun to get with the program, reorienting their marketing to the senior set. They have little choice: Half of Japan's population will be over 50 by 2025, according to the U.S. Census Bureau's International Database on Aging. In the U.S., in comparison, 36% of the population will be over 50 by that time.

Toymaker Takara Co. Ltd. is trying to gain a foothold in the growing adult market with creations including a two-seater mini electric car, home karaoke systems and robots that open beer cans. Two years ago, Meiji Dairies Corp., which had long pitched its yogurts to children and health-conscious young adults, started making a yogurt for people over 40, called LG21. The product contains a bacteria that kills off another type of bacteria that many older Japanese carry and that is believed to cause stomach ulcers and even cancer. The company forecasts LG21 sales will make up 25% of its total expected yogurt sales for the year ending March 31, 2003. Says Seichi Sato, manager of Meiji's yogurt-marketing department: "The advantage of the [older] market is there is virtually no competitors."

Yamaha Corp. recognized Japan's ranks of teenagers had thinned over the past decade. Two years ago, the company created an easy-to-play electronic guitar for Baby Boomers who grew up on the Beatles and Japanese folk rock and always wanted to play.

"The population of younger people is decreasing in Japan, and at the same time there's many entertainment products, like Playstation and Nintendo, competing for their interest," says Yasuhiko Asahi, of Yamaha's EZ EG Guitar product. "We're now looking at people 50 years old and up. They'll retire in the near future, and generally have more money and more time."

Of course, there are many good reasons why global marketers have learned to shy away from older consumers, in Asia and other places. Young adults do spend more freely than older adults: They are quicker to pick up on new technologies, and quicker to open their wallets. And children exert a strong influence over their parent's spending.

Young people "don't hesitate to buy new products compared to elderly people, who take time to consider and closely examine any new purchase," says Setsuo Sakamoto, executive director of Japanese ad agency Hakuhodo Inc.'s "elder business development unit."

Pitching products to Asia's elders means learning more about the cultural and historical nuances shaping their values, says Richard Pinder, regional managing director at ad agency Leo Burnett. Asia's middle class youth, on the other hand, all speak MTV. "They are easier to understand," says Mr. Pinder. "They're more willing to spend. They're more Western."

Still, he notes, sooner or later the demographic reality will force a change. "It's going to become a major issue" he says.