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Hispanic consumers mean more to U.S. food companies than a bridge to Latin flavors. Much more. They are the largest-growing segment of the nation's population, and wield billions in purchasing power. They also present an enigmatic marketing challenge that many food companies have yet to fully unravel.
Current census figures indicate that U.S. Hispanics now account for 13 to 14 percent of the nation's population. More significantly, their growth rate outpaces that of the general population by a ratio of ten to one. As a result, Hispanics will comprise 18 percent of the U.S. population by 2015, according to The Selig Center for Economic Growth. Some experts believe this number is conservative.
What's more, Hispanics over-index in food purchases; they have larger families than general market America and regard family-invested home cooking as a cornerstone of their culture. They are also more brand loyal than the general market, visit grocery stores more -- up to five times a week , and, once there, spend $50 billion on groceries annually. Needless to say, these cultural attributes translate into a wealth of opportunities for food companies.
"If U.S. Hispanics were to form their own independent country, it would be the world's largest Hispanic buying power," says Richard Ross, brand manager for Tampico Fruit Punches, a top-selling U.S. fruit drink whose success owes much to the strength of the Hispanic market. "It nets out to about 1.5 the size of Mexico in terms of buying power."
"It's a huge opportunity," agrees Gustavo de Mello, vice president of Lapiz, the Hispanic marketing arm of the Chicago-based ad agency Leo Burnett. Importantly, Hispanic households tend be larger than those of the general market, he points out. "If you control one household in the general market you're reaching and average 2 to 3 people. If you reach a Hispanic household you can affect twice that number."
Hispanic America's growing influence on U.S. culture could extend that reach further, resulting in products that not only serve traditional and acculturated Hispanic markets, but also cross over.
Yet the marketing dollars devoted to the Hispanic sector have been meager relative to its size. Other than a select few leading the way, "most companies weren't doing a great job [of focusing on this market] before the 2000 census," says Ross. "The amount of money spent on promotions to the Hispanic community weren't [proportional] to its size. Ad budgets then were one to two percent."
They're not much larger now. Although larger companies such as Kraft Foods, Pepsico and Coca-Cola now have marketing divisions to focus on the Hispanic market, most such budgets have remained static, according to recent figures reported by the Chicago Tribune.
Companies that are investing more aggressively have learned that the road to this treasure trove of spending power can twist and turn in unexpected ways.
Latin culture is unique, both from the American mainstream and other ethnic groups, such as African-Americans. As a result, some "basic mistakes" have been made, says de Mello. "Mostly cultural issues."
"You have to begin with a fundamental understanding of your consumer," Karl Williams, marketing manager, Latino Marketing, Pepsi Cola North America told attendees of Foods & Beverages for the Hispanic Consumer, a July conference presented by the World Research Group in Chicago.
One problem is that the Hispanic American market isn't as homogenous as it appears. In fact, it may be less a market than a continuum, which begins with the intermingling of country of origin values and traditional U.S. customs and practices. The next step is interaction with both U.S. customs and those of other minority groups, which over time creates something unique and varied: the American-Latino consumer.
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