US firms want to be 'best friends' with Gen Z

GENERATION Z: This generation has grown up with smartphones and the Internet, making Gen Z members more focused on speed of service.


    May 27, 2016

    US firms want to be 'best friends' with Gen Z

    A SMALL but growing number of companies in the US are starting to target Generation Z - the 69 million high school-age kids and younger who will soon outnumber the millennials before them.

    And they are not just pitching typical teen products such as acne creams and video games.

    Companies from Macy's and Campbell Soup to Charles Schwab are talking to investors about their long-term plans to appeal to the post-millennial generation.

    This is a group that Pew Research expects to make up 40 per cent of the United States workforce by 2020 and ultimately surpass the 75.4 million millennials and 74.9 million baby boomers.

    "It's a matter of survival to get new customers. Today's 18- year-old is only 10 years away from being someone with a job and savings" and trying to figure out an investment/retire-ment plan for the first time," said Peter Tuz, portfolio manager of the US$84 million (S$116 million) Chase Growth Fund.

    He is shying away from mall-based retailers as teens increasingly shop online.

    Gregg Fisher, portfolio manager of the Gerstein Fisher Multi-Factor Growth Equity fund, is buying shares of Google parent Alphabet and Apple.

    He expects they will be able to adapt and continue to appeal to Gen Z, a group that he is familiar with by watching the habits of his 13-year-old son.

    Gen Z differs from previous generations in that its members have grown up with smartphones and the Internet, making them more focused on speed of service.

    Many also saw their parents struggle during the Great Recession, making them more risk-averse, said Sean Mahoney, editorial director at advertising agency Sparks And Honey.

    Ten major companies have specifically addressed Gen Z in earnings calls and investor presentations since the start of the year, according to a Reuters analysis of transcripts, more than the previous number of mentions by all companies over the past six years.

    Campbell Soup cited Gen Z's focus on transparency as part of its decision to stop opposing labelling for foods containing genetically modified ingredients.

    Charles Schwab said its financial advisers would transition more to becoming "life coaches" rather than making specific investment decisions as technology-trusting Gen Z comes of age and places more faith in computer models than humans when investing.

    All the companies mentioning Gen Z are consumer-focused, suggesting that they are the most pressed to demonstrate to investors that they have a pipeline of future customers, investors say.

    Companies have targeted teens for generations. But what makes this effort different is that the majority of the 10 companies talking about Gen Z now are not traditional teen marketers. They are instead focused on making their products appealing to customers years away from their typical customers.

    Food is increasingly viewed as an entertainment choice, with teens spending 20 per cent more of their dollars at restaurants than millennials were in 2003, according to a report from Piper Jaffray.

    Restaurant-equipment maker Middleby, for instance, told investors that with smartphones and apps such as that of food-delivery service Seamless, Gen Z now expects all restaurants to offer delivery.

    That should lead to increased demand for its high-speed ovens to handle greater volumes, the company noted.

    "When I look at the next five to 10 years, Middleby is so well-positioned with this generation," the company's chief executive, Selim Bassoul, told analysts.