The New Mainstream

10/1/2012

As their buying power nears $1.5 trillion, Hispanic consumers are no longer on the sidelines

By anyone's count, $1 trillion is an awe-inspiring figure. What about $1.5 trillion? Understandably, it is hard to wrap your head around numbers like that. But those are the very real numbers that Hispanic buying power hit in 2010 and where it will reach in 2015 — just a few short years away. In fact, if ranked among all the countries across the globe, Hispanic Americans would comprise the 12th largest economy.

Want even more impressive numbers? The Hispanic population in the United States is forecast to grow 167 percent in the next 40 years, according to Nielsen research. "In other words, it's like in 40 years, you added an additional 10 New York cities populated with only Hispanics," explained Monica Gil, Nielsen's senior vice president of government and public affairs.

Gil and her colleague James Russo, vice president of global consumer insights at Nielsen, were two of the presenters at the eighth annual Hispanic Retail 360 Summit in August who stressed the power and importance of the Hispanic consumer in today's world and beyond.

"Future growth is more important than what is happening now," Gil said. "If you are not engaging them, how will your brand survive?"

That should be the question on every retailer's mind, but it's not always the case. The numbers may be staggering — and presenting them at the Hispanic Retail 360 Summit may seem like preaching to the choir — but there's still a long way to go to penetrate the C-suites of the retail community.

According to Russo, Nielsen's research found that 50 percent of companies say targeting the Hispanic consumer is extremely important. Another 82 percent say they have organizational goals tied to the Hispanic consumer. But the saying and doing are two different things, and as they say, companies need to put their money where their mouth is. For example, Hispanic marketing makes up only 24 percent of the multicultural budget, he noted.

"It is no longer [a question of] if there is a Hispanic opportunity," explained David Mesas, senior client advisor at Geoscape. "It is, 'How is your company engaging the Hispanic consumer?'"

Hispanics' move from niche to mainstream goes beyond just numbers. As powerful as they are, the numbers only tell part of the story, said Guy Garcia, president of new mainstream initiatives at EthniFacts. "There are changes under the surface," he said. "We all feel it."

Those changes are beginning to be seen and felt in every part of the United States. Hispanics have moved out of the traditional melting pot states such as New York, California and Texas and into the suburbs of every state. Notably, Garcia added, there has been a huge influx of Hispanics into the South.

"The U.S. Hispanic market is our 'domestic' emerging class," added Isabel Valdes, president of Isabel Valdes Consulting, a consumer insights consulting firm.

And it is not just ethnic groups that are driving the move beyond niche. The "creative class" — a large part of the U.S. population that embraces change and multicultural influences — combines with the largest ethnic groups to make up the mainstream, Garcia explained.

"It is misguided to say that there is a one-way acculturation. What has always happened is mutual acculturation," he said, noting that each new group arriving has changed the fabric of America. "It has always been a two-way street."

With identities constantly evolving, the two-way street is almost becoming the mandatory road to take. According to the 2010 U.S. Census, nine million people identified themselves by two or more ethnicities, Garcia cited.

"2050 is projected to be the year that minorities become the majority, but 2050 is today. [Los Angeles] is 2050. New York is 2050. Miami is 2050," said XL Alliance Managing Partner Lili Gil Valletta, adding that the current minority population is 68 percent in New York and 70 percent in Los Angeles. "In many major U.S. markets, they are already the majority."

So, what is stopping companies from stepping up their efforts? Some decision makers may still find barriers to entry a little intimidating, according to presenters during the conference.

For example, executives may be hesitant to venture into unfamiliar territory or find it too complex. Others may find the cost prohibitive or hard to fit into the company's other priorities, said Terry Soto, president and CEO of About Marketing Solutions Inc.

"There is a lot of resistance. It's almost as if we don't want to admit [that] it is all of our roles to identify and leverage growth opportunities for the company across total market," Soto said.

As they move off the sidelines, though, retailers need to remember that while they may be edging into the mainstream, Hispanic consumers are still loyal to their roots at heart.

As keynote speaker J.R. Martinez explained, he may be a retired soldier, actor and winner of "Dancing with the Stars," but underneath it all, he is still Latino.

"Anything I am today comes from the roots instilled in me by my culture and by my mother," said Martinez, whose mother moved to the U.S. from El Salvador in search of the American dream. "I was born in this country. I was raised in this country, but it is very important to me not to forget my roots."

Staying true to their roots is a common theme among the Hispanic market. People want to connect to the future without losing their past, according to Javier Farfan, senior director of cultural branding at PepsiCo.

"My department is called cultural branding, not multicultural marketing," he said. "Multicultural marginalizes multicultural consumers rather than integrating multicultural at the core."

Some retailers already get it — not to say that it has been easy. Carlos Torres, chief operating officer of Supermercados El Rancho, has it a little easier than most. The grocery retailer concentrates on one niche, the Mexican consumer — primarily first and second generation.

It is a different story for Rafael Cueller, president and CEO of Cuellar LLC dba ShopRite, a part of Wakefern Food Corp. The grocer's New Jersey store caters to several different ethnicities, meaning he and his team need to find a way to meet all those customers' needs.

"The market I operate in is complex. We are not just dealing with one or two ethnicities or even one or two Hispanic ethnicities," Cueller explained, noting that his customers comprise 16 different Hispanic ethnicities and approximately nine other ethnicities. "Marketing to them is not the easiest thing to do."

A retailer needs to invest in getting to know the customers and learn from them, stressed Ricky Castro, director of ethnic marketing and merchandising strategies at Save-A-Lot Food Stores.

Other companies that have made an investment — both in time and money — to market the Hispanic consumer include CVS Caremark, Advance Auto Parts, Target Corp. and Chrysler Corp.

"We have all seen the challenges companies have faced trying to capture the Hispanic and multicultural consumer," acknowledged Jose Barra, senior vice president of health and beauty at mass merchandiser Target. "For years, [companies] just translated, but that doesn't work. It takes an investment to connect on a deeper level."

That connection needs to be sincere and respectful, he said, and it doesn't hurt to have a diverse team mirroring your customers.

"What's missing is having senior-level executives at the table that know what is going on around the country," said Armando Martín, managing partner at XL Alliance.

Senior leadership commitment is a key driver to a successful total market approach to reach not only the Hispanic consumer, but also the multicultural consumer, explained Ida Chacon, vice president of marketing and commercial solutions at Latinum Network. The to-do list also includes three other important elements: companies must establish a plan, build a "train" to get everyone in the organization on board, and execute to delight all consumers.

"This is not a marathon," said Justin Byrd, head of multicultural marketing and advertising at Chrysler. "Understand when it's time to walk. Understand when it's time to jog. And understand when it's time to run like hell."

Byrd added that there is a difference between selling something to your organization and getting the organization to buy into something.

Although the pace may seem slow at times, Hispanics are a consumer group that is here to stay. "We are all on the same journey. We are all going through the same checkpoints. We are just going at different speeds," he said.

Male, Blue-Collar…and Hispanic?

By now, it should come as no surprise to anyone that the core convenience store customer is male, falls between the ages of 18 and 34, and holds a job in a blue-collar field. But what may be surprising is that "Hispanic" is starting to show up in the core list of attributes.

Just who the Hispanic c-store shopper is was the focus of one session at this year's Hispanic Retail 360 Summit, which took place in Los Angeles Aug. 15-17.

According to Leyhla Ahuile, senior analyst of multicultural reports at Mintel International Group, this shopper is male, 18 to 34 years old and shops at a convenience store at least once a week. Those who are Spanish-language dominate spend more on non-gas purchases, while Hispanic consumers who prefer to speak English spend more on gasoline.

Hispanics' place in the core c-store profile is likely to keep growing as new generations turn into consumers. Hispanic teenagers, 12 to 17 years old, are just as likely to shop at a convenience store and spend just as much as their non-Hispanic counterparts, Ahuile explained.

That profile fits right in line with BP's ampm convenience store brand. As Jim Hachtel, the chain's senior category manager, explained, the brand's core consumers are male (58 percent), multicultural (42 percent), blue-collar (51 percent), earn an annual income less than $40,000 (55 percent) and are between the ages of 21 and 44 years old (55 percent). They also possess key characteristics: they visit c-stores up to three times a day, they are loyal to their store, and their primary mission is to refuel their vehicles and themselves, he said.

But why this brand and the Hispanic consumer? BP's ampm locations are primarily found in the Southwest region of the United States and California, so the Hispanic consumer "is right in our backyard," Hachtel said. The retailer has 950 convenience stores and gas stations selling approximately 2,900 different products a day throughout the West.

To meet this consumer group's needs, the company launched a separate website, ampm-espanol.com, employed a media campaign — including television, radio, print, outdoor digital and social — in Spanish, and is involved in sponsorships and promotional activities close to Hispanic consumers' hearts.

"All our communication vehicles are developed to be culturally relevant and not just simply translated from the general market," Hachtel noted.

However, BP ampm does take a cue from its general market campaigns with outdoor advertising to ensure visual synergies between the messages. As an added bonus, it cuts down on costs for the final artwork, he said.

Mintel's research points to several key items for convenience store operators to carry if they want to attract — and keep — the Hispanic consumer. Older consumers favor buying lottery tickets, while younger males between 18 and 34 years old are known to purchase calling cards, Ahuile said. Milk and bottled juice, common items for families, prove popular with the Spanish-dominate Hispanic consumer, she added.

The top three things Hispanic consumers would like to see in a c-store are fax and photocopying services, an entertainment kiosk where they can rent videos, and an Internet kiosk.

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