story by Kim Souza
ksouza@thecitywire.com
Editor’s note: The Supply Side section of The City Wire focuses on the companies, organizations, issues and individuals engaged in providing products and services to retailers. The Supply Side is managed by The City Wire and sponsored by Propak Logistics.
There are more than $1.7 trillion reasons why food companies, retailers and consumer product goods suppliers are focusing on the Hispanic population. Hispanics
account for one-sixth of the U.S. population, totaling 53 million people who have increased their spending by more than 200% since 2000.
A new report by Information Resources Inc. (IRI) projects Hispanic purchasing power will surpass $1.7 trillion in the next two years. In 2015 spending among Latinos is projected to reach $1.5 trillion.
While this growing demographic is diverse there are some commonalities such as the proliferation of smart phones and their use of social and mobile communication platforms that impact their path to purchase. Keeping tabs on their spending habits should be a priority for consumer packaged goods (CPG) companies.
“Aligning a service and market offering with the needs of Hispanic shoppers is rapidly becoming a critical success factor for sustained CPG and retail growth,” said Staci Covkin, principal at IRI. “Recent IRI research has demonstrated that improved insights and activation of these shoppers can result in significant sales and market share uplift.”
She said a typical CPG company with $1 billion in sales can earn an additional $71 million in incremental revenue through effective Hispanic marketing.
HISPANIC MARKET SEGMENTS
IRI classifies Hispanic consumers in three distinct categories:
• Acculturated Hispanics
With a median income of $62,000, these shoppers are familiar with American culture and language and tend to be more optimistic about the future. When shopping, acculturated Hispanics frequently want the best price or deal and are willing to compromise on product quality to some extent. They also tend to be more digitally savvy and concerned with their physical appearance than non-Hispanics.
• Bicultural Hispanics
While shoppers in this segment are bilingual, they choose to follow Hispanic traditions and are more inclined to buy products that are specifically marketed to Hispanics. As shoppers, bicultural Hispanics are also the most digitally savvy of all groups, are most likely to try new things, and are heavy consumers of both English- and Spanish-language media.
• Unacculturated Hispanics
With more limited knowledge of English, shoppers in this segment rely on Spanish translations on packaging and buy products specifically marketed to them. Though money is often tight for many unacculturated Hispanics, they are passionate about eating healthy foods and cooking fresh and traditional meals. Shoppers in this segment are also most likely to listen and be influenced by advertising before buying a product.
Another reason food companies and CPG firms are interested in Food Hispanic shoppers is that they tend to make more frequent trips to the grocery store and spend more per month on food than the general population.
Retailers and CPG manufacturers who haven't targeted the Hispanic population yet will likely do so in the future as the market represents a bright spot amid intense competition.
"If you look at most retailers across the U.S., their growth is pretty flat. As they're looking at sources of growth, the Hispanic market is an opportunity," noted Colin Stewart, a senior vice president at AMG Strategic Advisors, a unit of Acosta Sales & Marketing.
BIGGER SPENDERS
Hispanics have an average shopping budget of $425 per month, compared with $416 for the overall U.S. population, according to a report by AMG Strategic Advisors and Univision Communications.
"When you start looking at some of the details, they are even more valuable" to retailers, according to Elena Etcharren, senior vice president at AMG Strategic Advisors.
She said Hispanics spend more on routine and stock-up trips to the grocery store partly because they tend to have larger households than the general population. Hispanics also often bring their children when they shop, and they often influence purchase decisions.
Wal-Mart has long targeted the Hispanic shopper. Some of the efforts have paid off and others not so much. Liz Sanderson of Univision Communications noted in the report that Wal-Mart targets Hispanic shoppers with layouts designed to make them feel welcome, such as a display of mangoes or Hispanic heritage products at the entrance to the grocery department.
"I mention Wal-Mart because they're not traditionally a Hispanic retailer, but they're doing a great job of delighting Hispanics," she noted. Sanderson also credits H-E-B in south Texas for its focus on Hispanic products.
While Wal-Mart was singled out by Sanderson in the report, the retail giant recently shuttered its Supermercado de Mexico store in Houston after just five years in operation. Wal-Mart said it will “incorporate some things learned from the Supermercado test” into existing stores, such as the Walmart Neighborhood Market.
“We’re constantly testing new ideas and concepts with our customers. We think we can really serve customers with existing stores,” according to spokeswoman Betsy Harden.
Sanderson said Hispanics consume more beverages than the overall U.S. population, and they're more likely to select tropical flavors, such as passion fruit, mango or tamarind, she said. But they also like the new flavored waters and energy drinks.
Hispanics also buy more health and beauty products, fragrances, cosmetics and baby care products than the general population.
"Hispanics tend to be very sensorial. They like to pick up the product. They like to pick up the fruit and smell the fruit. They're very exploratory," Sanderson said in the report.
“While Hispanics have been price conscious since the recession, often choosing house brands over national ones, the research indicates 39% of Hispanic consumers are likely to switch back to national brands when the economy improves and their budgets expand,” she added.