For the first time, UK has more people over 60 years old than children under 16 years old. This requires companies like Kraft Foods to not only adjust their business practices, such as advertisement and product packaging, but also develop new products or services in order to better serve older customers in the future.
Table of Contents
1. Introduction ————————————————————————————————– 4
2. Investigation on the statement concerning the aging population ————————————–5
3. Implication for Kraft Foods on serving future customers ———————————————-7
4. Implication for Kraft Foods on future product development policy ———————————-8
5. Conclusion ————————————————————————————————— 9
6. Reference List———————————————————————————————–10
List of Figures:
Figure 1: More Pensioners Than Under 16s
Figure 2: Proportion of population aged 60 or over: world and development regions, 1950 – 2050
The recent published statement concerning UK’s aging population has raised much discussion in terms of companies’ business practices in serving elderly customers. This report chooses Kraft Foods as the target company, critically discussing the effects of aging population on its future customers and new product development policy. The structure of the report is as follows: Primarily a quick investigation on the citied statement will be included, followed by its implications for the company in serving its future customers. Finally, possible effects on future product development policy will be examined from a resource based view.
Investigation on the statement
People aged 60 or over in the UK first outnumbered children under 16, according to the UK Office for National Statistics. The office revealed that 13,262,256 UK citizens were 60 or over by mid-2007, up from 12, 298, 071 in 2006. Meanwhile, the number of children under 18 years old fell from 13,119, 654 to 13,111,023 over the same time period (UK Office for National Statistics, 2008).
Moreover, the number of people defined as the pensionable age, that is over 65 for men and over 60 for women, rose by 1.9 per cent to 11, 58 million from 2007 to 2008. They accounted for 19% of the total population, comparing 18.9% for children below the age of 16 (Ibid). The statisticians also identified that the over-80s were the fastest growing age group with 1.2 million increases since 2001 (Figure 1). These numbers all point to the aging nature of the UK’s society.
However, UK is not the single nation facing the challenge of aging population. It has been a problem faced by the entire world in the recent 50 years, especially in the developed countries, and is going to become more severe in 2050 (Figure 2). Japan ranks first in terms of the percentage of aging population with 22.7% of the total population, followed by Italy, Spain, UK and Germany (Statistics Bureau, Government of Japan, 2010; United Nations, 2010). United States on the other hand is the exception with only 12% of population over 65 (Department of Health & Human Service, Government of United States, 2009).
Implication for Kraft Foods on serving future customers
Kraft Foods is the world’s second largest food company with revenues of $40.4 billion in 2009 (Kraft Foods 2010). The company enjoys numerous top brands with high customer loyalty in the UK market. Given the aging nature of UK’s society, the company is now confronted by a need to change its focus from young customers to older audits (Thompson, 2007). This requires Kraft Foods to adjust its business practices, mainly on advertisement and product designing and packaging in order to better serve future customers.
Older people differ from the younger generation in certain psychological and behavioural ways. Primarily, compared with those aged under 35, older adults are regarded to be more experienced, knowledgeable and alert. Thus, they are less likely to be affected by those superficial features of the product while focusing more on practicality and functionality (Ibid). Besides, the aged are less affected by the uniform culture of globalization. They stuck in their ways of consumption and therefore are believed more difficult to understand or target (Thompson and Thompson, 2009).
One particular aspect Kraft Foods must change is advertising. Current advertising targets almost exclusively with younger audiences with complex and unconventional information structures. However, it is not going to work for older adults since their ability to learn from new information is slower. They may not able to follow the quick pace of information presentation in television or radios, and feel difficult to understand those incomplete sentences and quick cut editing (Nielson and Curry, 1997). Adding to the fact that a substantial proportion of older customers have some difficulty in hearing and/or reading information printed in small font sizes, Kraft Foods is suggested to use more direct and traditional advertisement channels for older customers (Thompson, 2007).
Furthermore, old people also face the difficulties in product packaging. It is estimated by Goodwin and Hartshorn (2002) that 2.7 million people aged over 55 have stopped buying product simply because they cannot open them. While it is reasonable that modern packaging emphasises items like maintaining the integrity of the product, avoiding spillage, looking good and protecting the environment, factors such as openability and readability should also be taken into account when serving older consumers (Ibid).
Implication for Kraft Foods on future product development policy
At present Kraft Foods focuses on core categories of products including cheese and dairy, chocolate, biscuits and coffee in the UK market (Kraft Foods UK, 2010). However, the majority of them are still targeting children, youths and busy young families. Little has been done to meet the special needs of older consumers who actually spend most on food (Thompson, 2007).
The resource-based view argues that valuable (V), rare (R), imitable (I) and non-substitutable (O) resources can allow firms to sustain a competitive advantage (Peng, 2009). Primarily, only firm-specific value-added resources can lead to competitive advantage and they can be acquired both internally and externally. Intensive market researches should be conducted to understand what older customers really want, and then develop certain products, such as healthy or functional foods to meet their needs. In addition, resources must be rare. Valuable but common resources will only result in competitive parity but not an advantage (Ibid). Hence, Kraft Foods must try to find out a new product line that competitors have not targeted. Once the company has developed a new product, it must prevent the product from imitation. Logo, trademark and patent should be applied to protect the intellectual property. Finally, only if few substitutes available will the new developed product succeed. Otherwise, customers can easily turn to other similar products so that the competitive advantage is not sustained.
In conclusion, this essay has successfully investigated the statement of aging population in UK, and then analyzed its implications on Kraft Foods in terms of serving future customers and developing new products. It is suggested that Kraft Foods should shift its strategies on advertisement and food packing, as well as develop new healthy goods based on the VRIO framework in order to be successful in the 21st century.
Department of Health & Human Service, Government of United States (2009) A Profile of Older Americans 2009 [online]. Available: http://www.aoa.gov/ (Accessed: 23rd November 2010)
Goodwin, E. and Hartshorn, R. (2002) Opening up: Packaging that can be Opened by Anyone, London, Helen Hamlyn Research Centre.
Kraft Foods Inc. (2010) Annual Reports – period December 31, 2009 [online]. Available: Available: http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9NDk3MDF8Q2hpbGRJRD0tMXxUeXBlPTM=&t=1 (Accessed: 25th November 2010)
Kraft Foods UK (2010) Welcome to Kraft Foods [online]. Available: http://www.kraftfoods.co.uk/kraft/page?siteid=kraft-prd&locale=uken1&PagecRef=414&Mid=414 (Accessed: 25th November 2010)
Nielson, J. & Curry, K. (1997) Creative strategies for connecting with mature individuals, Journal of Consumer Marketing, Vol. 14 (4), pp.310-322.
Peng, M. W. (2009) Global Strategic Management (2nd Ed). South-Western, Cengage Learning.
Statistics Bureau, Government of Japan (2010) Statistical Handbook of Japan 2010 – Chapter 2 Population [online]. Available: http://www.stat.go.jp/ (Accessed: 23rd November 2010)
Thompson, N. J. (2007) Age Myopia in Marketing: Marketers Must Adapt to the Demographics Reality. University of Hertfordshire Business School Working Paper.
Thompson, N. J. and Thompson, K. E. (2009) Can marketing practice keep up with Europe’s ageing population? European Journal of Marketing, Vol. 43 No. 11/12, pp. 1281-1288.
United Kingdom Office for National Statistics (2008) Aging Population [online]. Available: http://www.statistics.gov.uk/cci/nugget.asp?id=2157 (Accessed: 25th November 2010).
United Nations (2010) World Population Ageing: 1950-2050 [online]. Available: http://www.un.org/esa/population/publications/worldageing19502050/ (Accessed: 25th November 2010)