With money and time to spend, seniors are market to watch

Drug Store News, Sept 23, 2002

Forget--at least for a moment--the teen market, the 20-something sector and even the over-40 crowd. The biggest marketing opportunity for many manufacturers and retailers--especially drug stores--will be the senior market over the next several decades.

This fast-growing senior group typically has more money to spend than teens and more time in which to spend it. In fact, the number of people in the United States over the age of 65 is likely to double to 70 million from 35 million between 2000 and 2030. The 65-plus segment represented 12.4 percent of the population in 2000, but will represent a 20-percent slice by 2030.

According to recent estimates, the ages 57 to 66 population group has more than $550 million in spending power, and the 67-plus group has roughly $30 billion more, or $580 billion, at its disposal. They are spending large chunks of this money on health and nutrition, and they re spending disproportionately less on such categories as apparel and "shelter."

These figures are hard for marketers and retailers to ignore.

The good news for drug stores is that prescription sales growth--and, to a lesser extent, the whole health and well-being segment--is likely to track this growth in the senior market. This population group historically has depended more heavily on prescription drugs than any other population segment, and that fact is not likely to change. Indeed, a recent AARP study found that people in the 45-plus age bracket, on average, take four prescription medications per day.

"The regular use of prescription medications among Americans age 45-plus has risen over the past 16 years as more people have insurance or other health coverage that helps them pay prescription drug costs," AARP stated in its report. The "large majority" of this group's members also takes their medications as they are prescribed, understands why they are taking the medications and reads the literature that comes with the prescription.

Given this focus on health displayed by the aging population--and also driven by the boom. in direct-to-consumer advertising methods employed by almost all the branded pharmaceutical companies--the growth in the prescription market has been nothing short of outstanding. The National Association of Chain Drug Stores reported that retail pharmacies filled more than 3 billion prescriptions last year totaling more than $164 billion. The sales number is expected to grow to $188.5 billion in 2002.

"Prescriptions in America are going to boom," Walgreen Co. chairman Dan Jorndt stated earlier this month in a Presentation at the Goldman Sachs Global Retailing Conference, noting that the baby boomer and "age wave" is where the population growl will really be seen over the next several years. "We think prescription dollars will almost double," he said. "That's why we're opening so many stores; we have to run as fast as we can.

Walgreens, like CVS and Eckerd, is following this population growth and building its presence in such growing warm-weather markets as Florida, Arizona, Texas and California. CVS and Eckerd both are expected to open a first batch of Phoenix-area stores late this year and early in 2003. CVS also is expanding in Florida and Texas, two other states that will have plenty of population action over the next decade.

More than just prescriptions

While prescription drugs certainly will generate sizable sales gains over the next few years, a number of front-end categories stand to prosper in the senior market, as well, such as vitamins and supplements, home diagnostic tools and other home health care products, anti-aging personal care products and heal thy snacks.

"There's no doubt about it that people are liberating themselves from having to act their age," noted well-known gerontologist Ken Dychtwald. "In the years ahead, it's likely that a new stage, 'middlescence,' will occupy the period from [ages] 40 to 60, late adulthood from 60 to 80, and old age will be postponed to around 80-plus," he added.

He predicted that the increase in the number of seniors will lead to such changes and new ideas as anti-aging spas and anti-aging wrinkle creams, more adventure travel, automobiles for empty-nesters, mature dating services, a lifelong education boom and Internet sites for seniors.

"More and more businesses will realize that this age power is a new marketplace opportunity," Dychtwald added.

A recent AARP study, "The Truth About Brand Loyalty & The 45+ Market," found that the 45-plus consumer is open-minded to new products, and its members are just as likely as younger consumers to experiment with or switch brands. Roper ASW conducted the study.

"We know that brand loyalty does not always increase with age," AARP noted in its findings. "Marketers who abandon this kind, of stereotype will find themselves well rewarded."

Among the various consumer age groups, the reality is that consumer experience, not age, dictates brand choices, AARP noted. Buying decisions are often driven more by category than by age. Brand loyalty does not rank high as a point of consideration when seniors are making purchases.