Gen Z and Millennials Are Leading the Charge in the Wellness Revolution
Americans are really getting into health and wellness these days, and it seems Gen Z and millennials are at the forefront of this movement. We’re talking big money here, with people spending over $500 billion annually in the U.S. on wellness, and that number is growing steadily at 4% to 5% each year, according to folks at McKinsey. What’s really striking is that almost 30% of Gen Zers and millennials say they’re prioritizing wellness “a lot more” than they were just a year ago. Compare that to 23% of older generations who said the same, and you can see a clear trend.
This isn’t just survey talk; Bank of America’s credit card data backs it up. Spending at fitness clubs, for instance, has been on the rise across the board for months. But it’s Gen Z and millennials who are really ramping things up, according to Bank of America analyst Alexander Perry. He shared with CNBC that “We’re seeing increased prioritization of fitness by these generations and they’re behaving in ways that prior generations did not. They’re really prioritizing fitness first and foremost, but we also believe they’re prioritizing other healthy ways of living, focused on healthy eating, drinking, aging, to name a few.” For example, the average Gen Z household spends a whopping 2.8 times more than baby boomers on fitness and allocates over three times more of their budget to it.
It’s not just about spending more, it’s about changing habits. Perry pointed out that foot traffic at fitness centers is “well surpassing” that at bars and clubs. He explained, “They’re adopting different leisure activities on the weekends. The leisure-based activities that are seemingly healthy are what these younger generations are gravitating towards. We think this is pretty sticky and has pretty long-term implications.” This shift aligns perfectly with the rise in spending on non-alcoholic beer and seltzers, which have, on average, been 28 points higher than their alcoholic counterparts since 2021.
The Shifting Tides of Alcohol Consumption
Last year, per capita alcohol consumption actually fell by 3% year over year, bringing it to a 10% decline compared to its peak in 2021. Bernstein reports this is the lowest level since 1962. Meanwhile, the International Wine and Spirits Record (IWSR) has even projected that non-alcoholic beer will overtake ale to become the second-largest beer category by volume worldwide this year.
Now, here’s a twist: after years of surveys showing a decline in alcoholic beverage consumption among younger people, new data from IWSR suggests an uptick. Participation rates among Gen Z consumers have risen to 70% in the six months leading up to May, a significant jump from 46% just two years ago. It’s certainly something to keep an eye on.
Beyond fitness and drinks, anti-aging and recovery products are also gaining traction with this cohort. Perry noted a significant rise in Google searches for terms like “cold plunge” and “red light therapy.”
Companies Poised to Benefit from the Wellness Wave
So, who stands to gain from this wellness boom led by Gen Z and millennials? According to Bank of America’s Perry, there are a couple of fitness clubs in a great spot.
Life Time, a high-end fitness provider, seems to be quickly identifying fast-growing trends. Perry highlighted their speedy adoption of pickleball, the fastest-growing sport in the U.S. “They were pretty quick to identify the pickleball trend,” Perry said. “They started repurposing parts of their clubs to pickleball courts, and now are one of the largest pickleball providers in the U.S.” The company is also getting into the cold-plunge tub trend, which Perry believes will be a good long-term move for them. Analysts generally have an “overweight” rating on Life Time, seeing about a 30% upside to its average price target.
Then there’s Planet Fitness, which is well-positioned as the largest value-oriented fitness provider. Perry mentioned that the company has a high penetration of first-time gym goers, and their reach among Gen Z and millennials “has continued to expand and been very strong.” Analysts covering Planet Fitness typically have a “buy” rating, with roughly 7% upside to its average price target.
On the anti-aging front, SharkNinja is looking to capitalize with its light therapy mask, CryoGlow. Perry noted that the company was quick to spot the trend of healthy aging and red-light therapy face masks. “If their past product portfolio is an example of what they’re going to be rolling out, I think that you’ll continue to see them play in this wellness space in a bigger way,” Perry predicted. Analysts give SharkNinja an average “buy” rating with a 14% upside to its average price target.
The Alcohol Outlook: A Mixed Bag
While that recent uptick in Gen Z drinking habits is a bit of an outlier, the overall trend points to declining alcohol sales. Morgan Stanley believes that the Gen Z cohort probably won’t match prior generations in terms of drinking habits as they age. They suggest that wellness trends like weight-loss and diabetes drugs, along with a general negative perception of alcohol’s health implications, are playing a part. Plus, as older, heavier drinkers age, they’ll naturally be less able to consume as much alcohol, as analyst Sarah Simon pointed out earlier this year. This means the zero-alcohol segment is “ripe for strong growth,” she wrote. Her favorite stocks in this space lean towards soft drinks and beer, with Coca-Cola being her top U.S. pick, and she also likes Belgian-based Anheuser-Busch InBev (BUD).
However, Bernstein analyst Nadine Sarwat doesn’t necessarily think the moderation among younger generations will stick as they get older. She also believes economic pressure and the way social media has changed socializing have impacted Gen Z’s alcohol consumption. “Once they enter full working adulthood, they are reverting back to drinking patterns of previous people in working adulthood,” she said. It seems no one can quite agree on why they’re drinking less in those crucial younger years, but Sarwat speculates, “Some of it is probably health and wellness. Some of it is probably social media, that it’s changed socializing. Some of it is definitely economic pressure.”
It’s clear that the wellness trend is a powerful force, reshaping consumer behavior and creating new opportunities across various industries. What do you think about these evolving habits among younger generations?