The Case for a Millennial Ronald McDonald

Marketing to kids is big business. Two- to fourteen year olds influence an estimated $500 billion per year in household purchasing. Marketers have caught on: while recent estimates are tougher to find, $17B in online advertisements targeted kids in 2007 (up from $100M in 1983). About $2B of that is in food and beverage, and video games make up another $1B (growing quickly). Despite industry noise about improving practices, 96% of food and beverage advertisements on children’s television are for foods high in saturated fat, trans fat, sugar, and/or sodium.

The problem is, it’s working.

Every year, the market research firm Smarty Pants publishes a list of the top brands for kids, and the results are sobering. In 2015, 13 of the top 20 brands were fast food or junk food, slightly up from 12 in 2010. Meanwhile, one in three American kids and teens is overweight or obese, about three times the rate forty years ago. Marketing has a greater impact on kids than on adults, which makes it hard to change consumption patterns for the better without putting huge dollars behind advertising campaigns. That makes it hard for healthier alternatives to scale. Is it any wonder that Plum Organics, arguably the biggest recent success story in new kids’ food brands, mainly serves kids that can’t pull groceries off a shelf yet?

But there’s a bright spot here: millennials are starting to have kids. This group is already shifting purchasing away from traditional CPG players toward brands that are smaller, healthier, more local, and better aligned with their values. Why wouldn’t they want the same things in what they feed their children, literally and metaphorically? This group is also easier to reach via online and social media channels, which are more accessible to young startups with small budgets.

There’s a huge opportunity for better, healthier companies to capture share as children of millennials grow from infants to gradeschoolers. The challenge is, they need to balance appealing to kids as well as to parents. Parents don’t like to take the risk of buying something if they worry their kid won’t like it and it’ll wind up in the trash. That’s especially true for lower-income families on tight food budgets. The only companies that will truly combat this problem are ones that pass the kid test as well as the parent test. Minecraft is a perfect example: kids are obsessed with it, but not because it’s good for them.

Let’s be clear: going up against OREO and M&M (and their marketing budgets) won’t be easy. New entrants can’t outspend them, so they need to change the game by being more creative and innovative. The iPad and Netflix, now in the top five kids brands, didn’t even make the top 100 in 2010, while YouTube has risen from #86 to #7.

So who will be top 10 in 2020? We think they will be companies that offer rich, educational media, provide fun, healthy food at reasonable prices, and use character-driven content to help kids develop socially and emotionally.