Demographic Changes: A Business Opportunity, Not a Social Problem

When sales of adult diapers in Japan surpassed sales of diapers for newborns, the diaper manufacturer Oji Holdings had to change its business model: it shifted from children’s diapers to the production of incontinence diapers, thus adapting to the new reality: an aging society.

The Japanese technology industry recognized even before the diaper manufacturers that the demographic structure was becoming a market opportunity and responded with innovative products designed to focus on safety, autonomy, and health monitoring of the older population. The direction in which innovations are developing is best illustrated by the example of the Zojirushi electric kettle, which discreetly monitors the daily activities of older household members and sends notifications to the family if there are no activities or if the frequency of use changes significantly.

While in Japan, demographics became the starting point for redesigning business models, in much of Europe, including Croatia, it is still treated as a social problem that primarily requires political interpretation. However, the data is clear enough: demographics are no longer abstract statistics, but a change in market structure.

Traditional families are decreasing, while single-person households are increasing. Concurrently, the shortage of labor is being compensated by foreign workers, which is also changing the structure of consumption. All of this significantly affects both industry and business models. A single person spends, saves, and plans differently than a four-member family, which changes the dynamics of retail, housing, energy, and banking products. The decline in the number of newborns reduces demand in certain segments of products and services for children, while the increase in the share of older generations raises the need for health, food, and financial solutions tailored to that population. At the same time, the arrival of foreign workers changes the offerings of retail chains and hospitality establishments, creating new consumer niches and different patterns of demand. All of this clearly shows that demographics are entering business decisions and strategic directions of companies through the front door.

Adaptation on the Go

While the real sector is already incorporating these changes into its models, whether it wants to or not, at the level of public policies, demographics are simultaneously defined dryly: as a structural challenge and a developmental opportunity. This is precisely how demographic changes are interpreted by the Ministry of Demography and Immigration, which sees only its side of the story. According to its standpoint, the aging population creates strong pressure on public finances, the labor market, and the pension, health, and long-term care systems. The working-age population is decreasing, while the need for care and support services is increasing, which poses a challenge for competitiveness and fiscal sustainability.

– Although the Ministry of Demography and Immigration is not directly responsible for health or social care, it plays an important role in setting the direction of demographic policy within which these systems develop. The new law on demographic renewal should connect demographic goals with other public policies, including those that affect the development of services for older people. The aging population requires cooperation among multiple sectors and the adaptation of public systems and investment policies to new needs, and such an approach creates a more stable and predictable framework, which is also important for the private sector investing in health, care, housing, and other services related to the older population – stated the Ministry. There is no mention of the real sector. It is only mentioned when it lists ‘projects’ it is implementing to mitigate the effects of negative demographic trends. Thus, the Ministry only mentions the e-child card Mudrica, which involves several public partners and only a few private ones, and the initiative ‘Employer – Friend of the Family’ which encourages flexible forms of work and the inclusion of family policies in business strategies. Of course, these are also positive examples, but they currently signal direction more than they signify systematic, broadly branched cooperation between the state and the business sector in adapting to demographic changes.

While the public sphere is visibly clouded by symbolic discounts for prescription glasses for children and cheaper tickets for national parks for families with more children, demographic pressure does not have much time to wait for a more serious institutional evolution, so the real sector is adapting on the go.

Operational Problem

This is warned by Dr. Krešimir Ivanda, an assistant professor at the Faculty of Economics at the University of Zagreb. Demographic changes, he says, are not just a long-term trend and developmental paradigm, but an operational problem that already determines how companies hire, invest, and maintain the quality of products and services. The shortage of the working-age population, according to his interpretation, does not only mean slower growth but also a change in the quality of business. In practice, entrepreneurs are increasingly agreeing to any solution just to maintain business continuity. This results in a decline in the quality of services and final products, increases hiring costs, and prolongs the time needed to fill job vacancies.

Demographic trends also directly affect investment decisions. Capital follows labor. Demographically devastated areas can hardly attract new projects because investors assess not only the market but also the availability of people who will realize those projects. This applies at both the local and national levels. In the long run, warns Ivanda, all of this leads to a decline in competitiveness and weaker growth in added value. The structure of the economy further exacerbates this risk because a large part of activities is concentrated in labor-intensive sectors.

A similar tension is seen in public finances. Although expenditures for pensions, health, and social care are increasing, the growth of the economy and wages currently creates an impression of stability because absolute budget revenues are increasing.

Dependence on Foreign Workers

– This provides an illusion of long-term sustainability of the system. However, these systems were designed in a completely different demographic environment, with a different ratio between the working-age and retired populations – he warns.

The foundation of public systems remains intergenerational solidarity, but the numerical ratios of generations increasingly burden younger and working-age groups. The question is not whether the pressure will increase, but how quickly. In such circumstances, immigration, he says, imposes itself as a short-term solution.

– The economy needs labor immediately, so the choice is simple and binary: either we have labor or there is no economic activity – says Ivanda, noting that importing labor solves the shortage of employees, but at the same time opens new questions, from integration costs to pressure on the real estate market.

In the long term, the key question is what kind of economic structure Croatia wants to build. He believes that the priority should be a transformation towards sectors with higher added value and those that employ highly educated youth, while reducing dependence on activities that require mass import of labor.

– The goal must be for the most educated generation of youth to work in the industries of the future in Croatia – he emphasizes.

As three key directions of public policy, he cites reducing dependence on labor-intensive sectors, retaining youth through the development of quality institutions and business environments, and improving the balance between private and business life as a long-term condition for a more stable demographic picture.

Demographic challenges, concludes Ivanda, cannot be solved by individual measures and short-term interventions.

– If we do not change the structure of the economy and the institutional framework, demographics will long-term determine our growth ceiling. The question is not whether we will feel the consequences, but how much we will be willing to absorb them – says Professor Ivanda.

In this sense, demographics cease to be a topic of statistics and social policy and become a question of economic strategy. Without a clear vision of what kind of economy Croatia wants to have in ten or twenty years, the shortage of labor, pressure on public systems, and decline in competitiveness will not be an exception, but the ‘new normal.’

A similar warning, but from a broader, macro perspective, is given by innovation strategist and competitiveness advisor Ernest Vlačić. If current trends continue towards 2035 and 2040, he says, the labor market will transition from occasional unemployment to a chronic shortage of labor, especially in health, care, tourism, industry, and construction.

– This means wage growth without necessarily increasing productivity, greater pressure on competitiveness, and stronger dependence on foreign workers. Demographics then cease to be a background factor and become the main structural driver of the economy – explains Vlačić.

The Number of Family Households is Decreasing

Demographic changes clearly affect the shopping basket at Konzum. Older customers, they responded, shop more frequently, in smaller quantities, and with a higher share of cheaper, basic products, while singles and the younger population increasingly seek practical solutions such as smaller packaging and semi-prepared and ready meals.

– At the same time, there is a decline in categories related to children and youth, while the category of pets is growing significantly. The arrival of foreign workers increases demand for international and ethnic offerings – they state at Konzum, adding that the average basket is decreasing while the frequency of purchases is increasing; local stores and delivery are also becoming more important.

The conclusion is self-evident: if trends continue, Konzum expects further growth in practical, international, and healthier products, as well as a continued decrease in the average basket.

Podravka, thanks to the breadth and strength of its food portfolio in the Croatian market and international markets, does not record sudden changes in demand that could be directly linked to specific demographic trends. However, they state, they carefully monitor the aging population, the increase in single-person households, and the decline in the number of children, as all of this long-term affects the shaping of consumer habits and strategic development of the assortment.

– We respond to these changes with several parallel development directions. One of the key ones is the ‘Nutritional Strategy,’ aimed at continuously improving recipes, reducing the share of salt and sugar, and enriching products with fibers, proteins, vitamins, and minerals. At the same time, practical solutions for modern lifestyles are being developed, including smaller packaging, single-serve formats, and ready meals for quick preparation. This responds to the needs of smaller households and consumers who seek simplicity without compromising on taste and quality – they responded from Podravka, adding that they responsibly manage the portfolio by rationalizing the assortment, optimizing packaging, and selectively withdrawing products with smaller volumes to direct resources to key brands and categories with the greatest growth potential.

Demographics also strongly affect higher education. The decline in the number of first-graders and high school graduates means a smaller pool of potential freshmen, or generally students, which is bad news for public universities and even worse for private higher education institutions, thus raising the question of stronger internationalization, emphasizes the rector of VERN’ University, Vedran Mornar.

– We are ready to open up to a larger number of foreign students, but the key obstacle is the restrictive visa regime, which must be resolved soon – Mornar believes, noting that Croatian private higher education institutions could open up to students from Far Eastern countries such as India and China, who could even stay to work in Croatia after their studies, which would be a long-term alternative to importing unqualified labor.

In the insurance industry, the aging population has even more direct financial implications. In Croatia osiguranje, they state that the increase in the share of those over 65 in society significantly raises healthcare costs, especially in the segment of specialist examinations, diagnostics, and treatment of chronic diseases.

– The continuation of demographic trends, primarily the aging of the population, will very likely trigger further growth in demand for private healthcare services. The need for specialist examinations, diagnostic procedures, rehabilitation, and regular monitoring of chronic diseases will particularly increase. Along with the quantity of services, patient expectations will also change. It will no longer be just about examinations, but a comprehensive healthcare experience that includes quick appointments, clear and timely information, coordination of examinations, and continuity of care. Private providers who can ensure this will play an increasingly important role in the healthcare system – they state from Croatia osiguranje, concluding that demographic changes will stimulate the development of the private healthcare market, but will also require greater responsibility, quality, and clearly defined value for policyholders.

Dividend of Longevity

In such circumstances, adaptation is no longer a matter of choice, but necessity. As an illustration, he also cites Japan, which has already gone through a similar process: strong growth in the healthcare technology and care economy sector, development of assistive technologies and robotics, and adaptation of urban life to the older population. Demographic pressure there has changed traditional business models, from retail to service organization.

– Demography is not just one of the factors of competitiveness. It is not even a footnote to the growth strategy; it is its first page. If the working-age population is decreasing and aging, the potential for growth declines regardless of the quality of the strategy. Innovations are then no longer a choice but a response to demographic pressure – believes Vlačić, emphasizing that in this context, Croatia still needs to show that it can react as quickly as Japan.

While Vlačić views demographic trends primarily as a structural limitation on growth potential, some economists warn that the same change can have a developmental dimension, provided that the perspective changes.

A different perspective is offered by economists from Osijek, Prof. Dr. Ivana Barković Bojanić and Prof. Dr. Aleksandar Erceg from the Faculty of Economics at the Josip Juraj Strossmayer University. In the book ‘Silver Economy,’ which is also a university textbook, they warn that it is crucial to distinguish aging from longevity, as this difference changes the entire economic logic.

– For economists, this distinction is not terminological but fundamental. Aging is most often viewed through the lens of cost and rising fiscal pressure, while longevity means an extended period of productivity, consumption, and social engagement – emphasizes Barković Bojanić.

In other words, changing the perspective shifts the focus from cost mitigation to activating potential. Instead of a defensive approach, the emphasis is placed on optimizing human capital, technological innovations, and market adaptation. In this context, the so-called dividend of longevity is increasingly discussed, notes Erceg, an economic benefit arising from a longer period of health, knowledge, and work ability.

Diverse Market

– The older population is not viewed as a homogeneous group but as a diverse market with different levels of income, education, and digital skills. This opens up space for new segments and products, from preventive healthcare and financial services to adapted housing, tourism, and lifelong education – believes Erceg.

In their opinion, artificial intelligence and digital technologies can mitigate the labor shortage and preserve productivity, but only with investments in skills and adaptation of public policies.

And here we are, if you allow us, at the weakest point of the conclusion from Lider. Public policies today need to provide answers for tomorrow, and these answers must not be based on the question of how many inhabitants Croatia will have in twenty years, but what kind of economy those inhabitants will be able to sustain and what those predominantly older inhabitants will ultimately need. The example of Japan shows us that demographics can set limits, but they do not have to determine fate. There, aging has stimulated the development of technology, robotics, and new industries. Here, with public policies that react slowly and fragmentarily, it can only (p)remain a limitation on growth.