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Kylie Hall
Marketing, ACNielsen Consumer Segmentation & Targeting
Chris Hammer
Marketing, ACNielsen
The Hispanic market, one of the fastest growing population segments within the U.S., is finally gaining some needed attention. And the reason is clear. Hispanic disposable income is up 29% since 2001—over two times the growth among the general U.S. consumer. The younger generations of Hispanic consumers are driving this growth and are leaving behind a distinct cultural mark. Sixty percent of the Hispanic market is below the age of 30 and almost twice as likely to live in households of four or more people. All in all, those product categories that cater to big families with children, and/or younger consumers, should take note and pay particular attention to the Hispanic consumer.
While statistics point to the need for more marketing attention directed toward understanding the Hispanic consumer, ethnic marketing budgets tend to be the first sacrifice made in order to make revenue numbers for the year. However, the Hispanic market should not be so quickly overlooked. They are an extremely important group of consumers that should be targeted and consulted for future product ideas and marketing campaigns.
Using the clave
The English translation of the Spanish word clave is key. The key to unlocking the mystery behind Hispanic consumer purchasing behavior is a simple set of five rules (C-L-A-V-E) that outline a roadmap to driving successful Hispanic marketing strategies:
Commit to the initiative
Learn about the consumer
Act on insights and drive execution
Verify results to justify investment
Expand efforts to additional markets
Commit to the initiative
Before pursuing Hispanic marketing initiatives, it is important to secure a firm commitment both strategically and financially in order to go the distance with this effort. The days of putting a bilingual label on packaging or dedicating half of a store aisle to Hispanic brands no longer qualifies as Hispanic marketing. The commitment must be long-term and supported throughout the organization.
What separates those manufacturers that are having success with the Hispanic consumer from those that are struggling to gain an identity with this consumer? Those that are winning have made a decision and a commitment for some time now to embrace the Hispanic community to understand what drives consumption behavior. They have a true commitment and investment in Hispanic marketing and have put forth an effort to involve this consumer in their brands (hiring, agencies, marketing materials, focus groups, etc.). They have undertaken some dramatic changes in their stores that draw a Hispanic dominant shopper base, including hiring Hispanic employees, displaying bilingual signage, distributing bilingual coupons, and differentiating their overall product assortment to appeal to Hispanic consumers.
Learn about the consumer
As is common practice in the industry, many marketers tend to believe that a singular approach to targeting the Hispanic consumer is an effective way to begin their initiative. However, there are much deeper insights to be gained, and therefore, it is important to learn about the subtle and not-so subtle nuances that make up the Hispanic consumer before taking action.
So who are your Hispanic consumers? It is important to realize that a Hispanic individual can hail from one of over 20 different countries, including Colombia, Venezuela, the Dominican Republic, Uruguay and Guatemala. However, the majority of U.S. Hispanics are Mexicans, comprising almost 60% of the population. The Hispanic population on average is at the lower end of the socioeconomic scale, with only 15% of the population earning more than $75,000
per year compared to almost a third of the total U.S. population.
Learning about current consumption habits among Hispanic consumers is critical. Across total U.S. grocery, the Hispanic market (representative of the Hispanic contribution to total category sales) is outpacing the general market across several mainstream categories. See chart 1.
As we look into the high-growth Hispanic food and beverage categories where various flavor assortments are available, several key flavor preferences emerge. Berries, lemon, lime, orange and berry/lime combinations are most popular with Hispanics when comparing the Hispanic consumption growth of products with these attributes to the growth within the general market. For salty and other snacks, hot and spicy flavors, various cheeses (dominated by cheddar), honey, and cinnamon skew much higher to the Hispanic consumer.
Scents in non-food categories are another strong attribute with the Hispanic consumer. For scents, Hispanics appear to prefer citrus and berry scents. In addition, fresh, cinnamon and vanilla skew highly to the Hispanic consumer versus the general market. These attributes should be accounted for when deciding which products to market to the Hispanic community or before developing new products. See chart 2.
Within the perishables categories, the same trends are witnessed again, with lemon, lime, peppers and a spike in pork and seasoned meats when compared to the non-Hispanic consumer. See chart 3.
Act on insights and drive execution
Reaching the Hispanic consumer goes beyond category preferences and top-line demographics. In order to build and execute an effective marketing strategy, further insights on acculturation and geographic differences are necessary. As chart 4 indicates, differences in category preferences among the least and most acculturated Hispanic segments should not be overlooked. See chart 4.
Consumption differences become more apparent when segmenting Hispanic consumers by acculturation. ACNielsen has built the Culture Point Model to measure consumers' degree of product purchase acculturation. The more alike a consumer is to the mainstream population, the more acculturated they are. The less alike a consumer is to the mainstream, the more they retain their unique purchasing behaviors, the less acculturated they are. See chart 5.
In addition to purchase behavior, it is evident that, culturally, the acculturated Hispanic is quite different from the least acculturated Hispanic. The adoption of American values, for better or worse, appear as Hispanics become more acculturated. Behavioral and attitudinal changes are taking place—some of which explain the reason behind trends toward convenient meals, such as sacrificing time with family to advance; thinking that money is the best measure of success; etc.
Aside from acculturation, it is important to pay attention to local market demographics and distinctions. As the U.S. Hispanic population grows, Hispanic communities are emerging beyond the traditional magnet markets.
In reference to Chart 6, Atlanta has a much smaller Hispanic population; however, the growth rate of the Hispanic market was 33% between 2000 and 2004. Geographically, Atlanta and Miami are fairly close in proximity, but the demographic differences between the Hispanic consumers in each city are important factors to consider when developing and executing a marketing strategy.
As differences among Hispanic consumers are uncovered, the following marketing questions should emerge:
- Should the message to the Hispanic community differ from the message to the general market?
- How much of the marketing campaign should be in the Spanish language?
- To what extent do general market initiatives sufficiently address the Hispanic population—what's working and what's not?
- How should my distribution and assortment differ among major Hispanic markets?
- How do I measure results?
In order to answer these critical questions, a consideration into the development among three acculturation levels (least acculturated, bicultural and most acculturated) must be addressed.
Verify results to justify investment
Once the marketing plan has been implemented, efforts must be authenticated using measurement tools in order to validate performance. Demonstrating a successful ROI is an important part of justifying a commitment to the initiative and securing ongoing funding.
Expand efforts to additional markets
Beyond looking nationally at the Hispanic consumer, understanding trends from other Hispanic countries, such as Mexico, will lead to important insights for product expansion opportunities. Several food and beverage categories are showing significant growth over the last year in Mexico. Of note in these categories is how many of the top three brands for these categories in Mexico are U.S. brands. This can be a strong indicator of how well a brand will perform in these categories with Hispanics as they immigrate to the U.S. See chart 7.
Similar to the food and beverage categories, but on an even larger growth scale, some non-food brands were booming in Mexico over the last year. This supports the earlier point that non-food growth is coming from existing U.S. brands and not Hispanic line-extensions, because there is already U.S. brand awareness across many of these categories in their country of origin. Take the paper towel category, for instance, where a growth rate of 4.6% was achieved in the U.S. compared to 227% in Mexico. Could the U.S. see a boom in this category over the next few years? Which U.S. brands will be prepared? See chart 8.
Maruchan Soups is a prime case study example to look at how trends in Mexico translate to the U.S. With over 70% market share within the dry soup category in Mexico; Maruchan Soups has a stronghold on the marketplace. In the U.S, Maruchan Soups index highly not only toward least acculturated Hispanics, but also to those Hispanics of Mexican origin.
Another example of a Mexican brand entering the U.S. is Grupo's LALA. LALA, the largest dairy product company in Mexico, recently embarked on a marketing campaign to bring their products to key U.S. markets. Even though dairy is a very developed category, LALA gained regional distribution for its fresh milk, yogurt and other items in early 2005 in some key U.S. cities with a heavy Mexican population. The release of these brands was a success as many Hispanic consumers were given a taste of a brand they grew up with in Mexico and had not had access to in the U.S. until now. LALA is an example of how the Hispanic consumer can have a distinct impact on a category and how important it is for manufacturers and retailers to position themselves for success with the Hispanic consumer so they are not as vulnerable when brands like LALA come into a market.
Insights to action
Clearly, Hispanics are influencing consumer markets today with how and why they buy. To effectively reach and ultimately be embraced by the Hispanic consumer, a firm commitment to a strategic initiative aimed at learning about this consumer and embracing the livelihood of the Hispanic community must be made. The marketplace is advancing in measurement and analytics tools that assist in understanding the importance of this consumer to local markets, but these tools are only useful when a commitment to Hispanic marketing initiatives is made. The market is wide open and ripe for opportunity. Economists are predicting that the Hispanic population boom of the first 20 years of the 2000s will have the same magnitude of impact to the U.S. consumer marketplace as the Baby Boom of the 1950s and '60s. Low-hanging fruits are available for the pickingÑtake advantage today!
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