Breaking Up With Old Habits

Do old habits die hard? Or do they just take a bit of time?

It is theorized it can take about 66 days for the average consumer to form a new habit. This is important because, when we think about investments, we consider what may impact earnings power five years out and what could alter demand patterns in the meantime. Certainly, disruptive events like pandemic shutdowns can provide a strong impetus for consumers to change what and how they buy.

Some interesting patterns we’ve seen emerging are a gravitation toward bigger, better known brands. In essence, when most shopping is done from home or in limited, in-store spurts, consumers seem a bit more considerate in their consumption, less prone to sampling, and placing more value on the tried-and-true while seeking to minimize search costs.

We are also seeing a rapid acceleration in adoption of digital media and e-commerce. In retrospect, this may seem obvious—particularly because it is a trend we have witnessed before. In many ways, China has led in its acceleration of digital adoption—many businesses point to the outbreak of SARS in the early 2000s as one of the drivers. Consumers who were either unable or uncomfortable freely shopping in person quickly turned to digital platforms, notably mobile.

These trends—a preference for larger, better known brands and spiking digital adoption—can reinforce each other and create a longer-term, virtuous cycle for some of the largest consumer packaged goods manufacturers who have defensible brands, the capacity to invest, and the technological capability to win in an omni-channel world.

Another interesting trend is the investments we see being made in homes—upgrading kitchens and backyards—which is evidence of consumers voting with their wallets by making long-term investments in their future at-home experiences.

Another important question then becomes—how long does it take to break a consumption habit? Do habits formed during pandemic shut-ins stick with today’s consumers, or does another 66-day stint as economies open more fully (when they open more fully) undo prior habit formation?

Perhaps not. Research points to habits being harder to break than they are to form. And, we need to consider how formative recent events have been, particularly for young people. In their lifetime, a typical Millennial homeowner has witnessed the bursting of the Tech Bubble, the horror and aftermath of 9/11, the Great Recession and the crash of the housing market, and now the COVID-19 pandemic. Could this generation be somewhat akin to the Greatest Generation? Their experience in the Great Depression then WWII certainly shaped their long-term behaviors. That generation was known for their risk averse, cautious nature when it came to spending and saving, and their appreciation for the dollar. Perhaps that earlier generation can instruct us somewhat as we look forward and assess demand patterns of Millennials and Gen-Zers as they enter prime spending years.

What we can certainly see over the years and across the globe is a crisis can be a tremendous catalyst for change—and this particular catalyst could have a more permanent impact on long-term consumption habits than investors currently appreciate.