The Rise of the Millennials

A millennial is anyone born broadly between 1980 – 20001, i.e. 15 – 35 year olds.

This year they overtook Generation X (35 – 49 year olds) to become the largest part of the UK workforce with 11m workers representing 35%2.

However, as you would expect, their earnings3 and wealth is at a much lower share – but rising.

They grew up with the internet and a socially-networked world.

Their views have been shaped by two big stock market crashes, a huge recession and a tough jobs market. They are adept at using (online) research to (in)validate big business claims.

They are less (organised) religious, get married later in life and have children later in life4.

They tend to believe that businesses should pay as much attention to people and purpose as it does to products and profit5.

They are about to move into their highest earning part of their life.

They don’t think a selfie stick looks laughable.


The internet has been with us for a long time and we can all see that some businesses have been destroyed, new businesses created and many other businesses have had to materially adjust. Furthermore, it has re-shaped most of our lives.

Millennials though are using new technology, which invariably involves the internet, to drive additional change. In essence, they are bringing the power of the internet to life.

We can’t see it all yet either because it is not quoted, or not used by ourselves or, in many cases, a change we can see is put down to other factors such as a slower economic cycle – but it is there. I suspect it is a strong structural trend which will materially change the prospects of many quoted companies.

Let’s take the pub and restaurant sector as an example of where perhaps we are starting to see the effect of Millennials.

In fact, this is a prime example of where a structural trend I think I can see can be dismissed as an economic variance others can see. It takes two to make a market.

Millennials are much more likely to eat out6 and more often. So far, so good for the pub and restaurant sector.

However, Millennials don’t buy into the vices of the prior generations – smoking and drinking is out, healthy living is in7. And, for Millennials as our own ESG Research shows8, healthy eating is a large part of healthy living.

Furthermore, this demand for leisure and social activity is more driven by an appetite for new experiences.

They have a focus on price. Thrift is in and brand loyalty, if it prices itself too high for what it provides, is out. However, they are willing to pay up for healthy food and for brands that benefit society / environment such as using ingredients that are sustainably sourced9.

Showing where Millennials are bringing the internet to life within this sector, a third of consumers now prefer to reserve restaurant seats online, many of which are young adults10. Operators that do not have the ability to offer online booking (and 30% of those online bookings are made when the venue is closed) will miss out.

And they want speed – they want their order to be taken quickly, to arrive quickly and don’t want to wait to pay the bill11. And over half of them would like to use their mobile device to order and pay for their food.

Finally, Millennials like to graze – they would rather snack than have set meal times12.

This all adds up to the “fast casual” being their eating out format of choice and high prices need to be justified by factors perhaps alien to many of us13. Consumers get the atmosphere and quality of a full service restaurant with the speed of a quick service restaurant. Price points lie between the fast food outlets / pub food and full service restaurants.

It does, therefore, put a headwind up against the more traditional quoted pubs and restaurants.

If you want to see what Millennials can do, take a look at how McDonalds in the US is struggling as the likes of Shake Shack and Five Guys provide healthier eating, transparency on ingredients and sourcing14. And they are coming to the UK15.


As we stand today, the quoted pub and restaurant sector is reporting positive trading but perhaps not as positive as many would have hoped for.

Outside of the quoted sector, we are seeing an explosive growth of new supply in casual dining restaurants16, which, I suspect, is taking market share away from other parts of the restaurant sector17.

Indeed, we are now seeing some quoted companies slow down their opening programs citing lower returns from new units given lower spending from the consumer (as well as higher build cost) and indeed suggesting the consumer is diverting their spending elsewhere.

I think it is fair to say that none of the quoted companies are at the forefront of innovation with respect to Millennials with the notable exception of Domino’s Pizza (technology wise and quality of ingredients though perhaps not the calorie count!).   Their app was downloaded 5m times in 201418.

The barrier that many of the existing quoted companies face is incumbency. Part of their business model is scale which allows them to exert their buying power on suppliers and so enhance their profitability or improve their competitive position through lower costs.

Diverting some of that scale into an innovative unit serving sustainably sourced food all day would perhaps not give the same immediate returns than a well run pub with food offering. The debate though is whether that pub is still doing the same level of business in a decade.

In defence of the quoted sector they can, over time, adjust their business model if “fast casual” proves to be more than a passing fad (remember when there were almost 50 Walkabouts back in 2004?). They were drinks led in the 1980s, moved a little into food in the 1990s and accelerated this in the 2000’s. Besides, it is perhaps unlikely that we are ever going to have 400 Chilango restaurants.

Perhaps the closest we have is JD Wetherspoon who are showing constant innovation with breakfast, coffee, food through the day, high levels of reinvestment in their estate and offering value for money18.

One (crude) measurement is followers on twitter as of July 2015: Nando’s UK has 1.6m followers; whereas Pitcher & Piano has c3,900 (Marstons); Sizzling Pubs c2,600 (Mitchells & Butler); and Loch Fyne (Greene King) does not even appear to have a Twitter account. Compare that to the newer entrants such as Shake Shack UK already with c16,300 followers and Five Guys UK c20,700.


The point about an emerging structural theme is that cyclical factors can mask its existence for a long time. But eventually it emerges.

Furthermore, you do not want to be a highly leveraged company / sector if this theme takes hold and turns out to be a headwind.

Reviewing the history of the quoted UK regional newspaper market is a recent example of how such trends play out.


Andrew Neville


4. http//
8. ESG Matters Issue 9, The Millennials: Shaping the future of food, pages 8 – 11
18.BarCap Research, April 2015


Author - Andrew Neville

Andrew Neville

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