Nov 17 2017
The US population is aging, driven by steady declines in the birth rate and increases in the average life expectancy. Moreover, the largest age demographic in the United States, the baby-boomer generation, is driving growth in the number of adults over 50. This generation is composed of individuals born between 1946 and 1964, who represent close to one-quarter of the US population. Baby boomers are currently between 50 and 68 years old; however, as the youngest members of this cohort reach the age of 65 by 2029, the US Census Bureau estimates that this demographic will account for more than 20.0% of the US population. In comparison individuals aged 65 and older comprised just 13.0% of the US population in 2010, before the oldest baby boomers reached this age bracket. As the fastest-growing age demographic in the United States, baby boomers are impacting a number of specialized industries that are adapting to meet this generation’s particular financial, medical and general well-being needs.
More baby boomers to retire and travel
After delaying leaving the workforce as a result of the recession’s impact on their wealth, an increasing number of baby boomers are expected to retire over the next five years, bolstering the sales of small businesses owned by older entrepreneurs. In addition, as retirees allocate a greater portion of their time toward leisure, more baby boomers are expected to travel, boosting the number of domestic and international trips taken by US residents. Higher retirement rates among older business owners and higher travel rates among retirees will benefit business appraisers and travel insurers over the next five years.
Discovering their value
Business valuators, or appraisers, quantify the financial worth of various-sized companies, from sole proprietorships to large multinational corporations. According to the American Society of Appraisers, business valuation firms prepare transaction-based appraisals for mergers, acquisitions, initial public offerings (IPOs) and debt and equity financing; tax-based appraisals for estate planning, charitable contributions and granting of stock options; and litigation-based appraisals for bankruptcy, shareholder actions and breach of contract, among other reports. IBISWorld estimates revenue for the Business Valuation Firms industryto reach $7.4 billion in 2014.
Many business owners seeking the services of this industry are of retirement age. According to the Market Pulse survey report by the International Business Brokers Association and M&A Source, presented by Pepperdine University, retirement is consistently one of the largest drivers of small business sales. Consequently, as the US population continues to age, business appraisers will be able to take advantage of increasing demand from the growing number of small-business owners that are looking to retire. Over the five years to 2019, IBISWorld expects revenue for the Business Valuation Firms industry to rise at an annualized rate of 2.9%.
Traveling with peace of mind
The Travel Insurance industry provides coverage for unexpected travel and medical expenses for US residents traveling internationally and, to a lesser extent, domestically. Travel insurers underwrite policies such as trip cancellation and delay protection, baggage and other personal effects protection, emergency medical assistance and accidental death coverage. Revenue for the Travel Insurance industry is projected to reach $2.5 billion in 2014.
Baby boomers comprise the largest market for travel insurers, accounting for more than half of all policies sold, as this age group generally consists of retirees who have more time to travel. In addition, baby boomers have higher disposable incomes and are more familiar with insurance products than younger age groups, making them more likely to purchase policies. Older travelers are also subject to higher premiums because they are more likely to have preexisting health conditions that could result in medical claims, further driving revenue growth. As more baby boomers retire and travel over the five years to 2019, revenue for the Travel Insurance industry is expected to rise at an annualized rate of 3.2%.
Specialized medical care to help higher-risk population
Baby boomers will demand more frequent and better quality medical care in coming years. According to the Agency for Healthcare Research and Quality, more than 91.0% of seniors and 58.0% of adults had prescription medication expenses in 2011. In addition, according to the National Health and Nutrition Examination Survey, more than two-thirds of adults are either overweight or obese, which has contributed to significant rises in chronic diseases like heart disease and type 2 diabetes. Thus, niche industries that contain medical costs and facilitate new medical treatments, such as pharmacy benefit managers (PBMs) and medical marijuana stores, are expected to thrive over the next five years.
Putting stress on the healthcare system
PBMs are third-party administrators of prescription drug programs. According to the Pharmaceutical Care Management Association (PCMA), PBMs implement prescription drug benefits for more than 210 million Americans, playing a powerful role in the US healthcare system by impacting prescription drug costs and consumer access to certain medications. PBMs manage all aspects of a prescription drug benefit plan, including creating formularies of preferred medicines, negotiating with drug manufacturers for discounts and rebates, negotiating with pharmacies to establish retail networks for dispensing drugs and establishing automated processes for determining coverage eligibility at the point of sale. In 2014, revenue for the Pharmacy Benefit Management industry is forecast to reach $263.4 billion.
Demand for prescription drug coverage will continue to grow as the population ages and chronic diseases and other illnesses become more prevalent. According to the American Hospital Association and First Consulting Group, more than 60.0% of baby boomers will grapple with at least one chronic condition by 2030, with over one-third battling obesity, one-quarter living with diabetes and close to half suffering from arthritis. Therefore, more baby boomers will require medications in coming years, which will boost demand for pharmacy benefit management services to manage prescription drug costs and process claims associated with prescription drug plans. Over the five years to 2019, revenue for the Pharmacy Benefit Management industry is expected to grow at an annualized rate of 5.2%.
Inspiring innovative treatments
Medical marijuana stores provide prescription-only medical marijuana to consumers with varying symptoms and conditions, including Alzheimer’s disease, anorexia, AIDS, HIV, glaucoma, cancer, arthritis, epilepsy, nausea, pain, cachexia, Crohn’s disease, migraines, multiple sclerosis, spasticity and wasting syndrome. While all domestic sales of marijuana were previously prohibited, several states have legalized marijuana for medical purposes, starting with California in 1998; most recently, Maryland and New York passed legislation in 2014. As marijuana becomes more accepted as a medical treatment, IBISWorld estimates revenue for the Medical Marijuana Stores industry to reach $2.6 billion in 2014.
Baby boomers are more likely to require medical marijuana since a number of health conditions for which medical marijuana is prescribed, such as Alzheimer’s disease and cancer, are prevalent among members of this age group. Illustrative of this trend, 27.0% of consumers who are prescribed medical marijuana are more than 50 years old. Consequently, demand for industry services will continue to increase as baby boomers age, driving growth in the proportion of the population that is most susceptible to chronic illnesses that can be treated with medical marijuana. As the size of this market increases, IBISWorld projects revenue for the Medical Marijuana Stores industry to surge over the five years to 2019, growing at an annualized rate of 26.6%.
In pursuit of the fountain of youth
As rising medical costs and higher rates of chronic conditions put stress on the US healthcare system, preventative care to improve the health and well being of aging baby boomers will be increasingly emphasized. Rising health consciousness will lead older individuals to realize the importance of physical fitness and engage in low-impact exercise, such as yoga and Pilates. Moreover, as technological advancements extend the average life expectancy in the United States, baby boomers will seek products to look as youthful as they feel. To this end, demand for cosmeceuticals, which are cosmetics with pharmaceutical capabilities, such as wrinkle-reducing moisturizers, will also rise over the next five years.
Gaining strength and flexibility
Pilates and yoga studios offer classes to consumers of all ages seeking to improve their health through low-impact exercise. Pilates is a body-conditioning routine used to build strength and flexibility, while yoga is a physical and spiritual practice focused on breath control, flexibility and strength. According to the 2012 Yoga in America study, 8.7% of adults in the United States practice yoga, and more than one-third of practicing adults are aged 45 and older. As Pilates and yoga continue to gain popularity, IBISWorld estimates revenue for the Pilates and Yoga Studios industry to reach $7.2 billion in 2014.
As more baby boomers retire, they will be able to dedicate a greater portion of their time to physical fitness activities. Pilates and yoga classes are popular among baby boomers because of the presence of instructors to inform them and the relaxed and social atmosphere to support them in their journey toward better health. Pilates and yoga are also accessible to individuals of all fitness levels, reducing the intimidation factor associated with starting a new exercise regime. Moreover, yoga’s low-impact movements provide older individuals with relief from arthritis and other ailments. As more baby boomers practice Pilates and yoga over the five years to 2019, IBISWorld projects revenue for the Pilates and Yoga Studios industry to grow at an annualized rate of 2.7%.
Keeping up appearances
The aging population is also driving growth in cosmeceuticals. Antiaging topical treatments, such as creams and peels, account for the majority of cosmeceuticals at about 30.0% of the market. These products use additives, including antioxidants and acids, to help improve the youthful appearance of skin. Additives are supposed to lessen wrinkles by reducing the breakdown of skin cells; remove dead cells from the skin for a smoother complexion; correct imbalances in skin tone; and improve the firmness of skin. IBISWorld estimates revenue for the Cosmeceutical Skincare Production industry to total $5.5 billion in 2014.
Baby boomers are increasing the size of the potential market for antiaging products. Women in this age group are the primary consumers of wrinkle-reducing moisturizers and other antiaging topical treatments. Moreover, older women tend to have higher disposable income than their younger counterparts, enabling them to substitute cosmeceuticals for everyday cosmetics. As baby boomers increasingly demand antiaging products to maintain their youthful appearance, IBISWorld projects revenue for the Cosmeceutical Skincare Production industry to grow at an annualized rate of 6.8% over the five years to 2019.
The upcoming demographic shift brought on by the aging baby boomer generation is bound to have broad economic implications for many industries. Baby boomers are not only the fastest-growing demographic in the country, but also one of the wealthiest. As they enter retirement, they will be endowed with more time to spend on recreational activities and consumption. Furthermore, they are increasingly dependent on a range of critical life-prolonging services. As America’s largest cohort advances into their golden years, opportunity abounds for industries poised to cater to their needs. In coming years, companies in an array of manufacturing, retail and service-related industries will need to adjust to this evolution in the consumer marketplace to thrive.