The hunt for the Hispanic dollar; Companies are trying to attract a US population that is becoming less and less homogenous

October 14, 2013 5:35 pm

The hunt for the Hispanic dollar

By Barney Jopson

A new approach: Huggies last year took popular products from Mexico to the US; the retailer Target stocks the Mexican beauty brand Tio Nacho in Los Angeles and a cornflour popular with Venezuelans and Colombians in Miami; and Pepsi included a shot of a Mexican wrestling mask in its Super Bowl ad his year

Add up the headcount at a baby shower, says Lizette Williams, and you will understand that new arrivals in Hispanic-American families are a big deal. A Puerto Rican mother from New York, her own party four years ago attracted so many well-wishers that the shower of clothes and nappies became a downpour. All told there were 100 guests. “Just think about that,” she says. “Think about the kind of the stature in which it’s held. This is a major life event. It’s almost like a second wedding.”According to Nielsen, a research group, Hispanic-American mothers spend a higher proportion of their shopping budgets on newborns than other Americans. And that effect is multiplied by the birth rate: Hispanic women are having more children than their non-Hispanic peers.

Little wonder, then, that baby product makers are eager to cater to Latino parents. But doing so is often harder than executives imagine, because the meaning of being Hispanic-American is becoming more complex.

Corporate interest in Hispanic consumers began to surge in the middle of the past decade. Then, the focus was largely on immigrants. But 2010 marked a turning point: Census Bureau data showed Hispanics born in the US had replaced immigrants as the main drivers of Latino population growth – accounting for 70 per cent of the expansion between 2000 and 2009.

Consumer businesses, from bleach maker Clorox to the television network ABC, were suddenly rushing to appeal to so-called “native-born” Hispanics. But this newly popular group is not conveniently homogenous. Instead, it has been adding fresh dimensions of diversity to the Latino population. That is why, three years on, many of those who create products and advertising aimed at them are still experimenting to find out what works.

Ms Williams should know. Not only is she a Hispanic-American mother, she is also a senior brand manager for multicultural strategy at Huggies, the nappy brand owned by Kimberly-Clark. Her job is to cater to the habits and tastes of US Hispanic mums. Last year, for instance, she helped Huggies bring popular green tea and cucumber scented baby wipes from Mexico to the US, taking care to put them in supermarkets with a lot of Latino shoppers. But, Ms Williams says, “this isn’t about just treating Hispanic consumers as a single bloc”.

Plenty of companies have learnt the hard way that ethnic groups do not always conform to corporate visions of accessible homogeneity. Gestures meant to signal familiarity with an audience can backfire and trigger charges of stereotyping or even racism. It should not be news that Mexicans are different from Cubans who are different from Dominicans, and so on. (Yes, chilli is a big part of Mexican cuisine but no, that does not mean spicy food is common in the Spanish-speaking Caribbean.)

Target, the discount retailer, says it keeps the heritage of local Latinos in mind while filling shelves. It puts the Mexican beauty brand Tio Nacho in its Los Angeles stores and stocks Harina PAN corn flour, popular in Venezuela and Colombia, in Miami.

But as the number of US-born Hispanics grows, differences linked to national ancestry are being supplemented by something less-familiar: a kaleidoscope of diversity relating to self-identity, acculturation and language preferences.

Communities plural

The buying power of US Latinos was $1.2tn in 2012, more than the GDP of all but 13 national economies, according to the Selig Center at the University of Georgia’s Terry College of Business. The country’s 53m Hispanics account for 17 per cent of the population and the Census Bureau forecasts they will reach 31 per cent – or 129m – by 2060.

The consultancy Geoscape has divided the community into subgroups to help companies understand the market is not homogenous:

Americanizado: Third- generation Americans for whom English is dominant. They speak nearly no Spanish and have few Hispanic cultural practices.

Nueva Latina: The largest subgroup comprises second-generation Americans who retain some Hispanic cultural practices and speak some Spanish but prefer English.

Bicultural: This group contains bilinguals who were immigrants as children or young adults.

Hispano: Immigrated as adults 10 or more years ago. Speak some English but prefer Spanish.

Latinoamericana: Recent immigrants who speak nearly no English.

Some US-born Hispanics are likely to display more public pride in being Latino than their own parents or grandparents, even if they speak less Spanish. Others reject the pan-ethnic label, favouring instead a single national identity, be it American or otherwise. One Hispanic mother told Huggies: “I think in English, but I pray in Spanish.”

Getting to grips with all this is not easy. “If you think about the shift in the demographics and how we go to market, it really begins to change everything,” says Ms Williams.

Understanding the process of acculturation, or Americanisation, is particularly difficult. Geoscape, a consultancy, has classified Hispanics into five groups on a Latin-US culture spectrum: Latinoamericana, Hispano, Bicultural, Nueva Latina, and Americanizado (see box).

Conventional wisdom says that the longer Hispanics are in the US, the more they will blend into the mainstream. But a report from Nielsen last year challenged that assumption. It said that because Hispanic cultures are proving to be unusually resilient, people “are not disappearing into the American melting pot”.

Companies clearly require more finesse than the New York law firm that produced a subway ad aimed at Latinos with the hotline number 1-800-Margarita. But striving for cultural sensitivity and nuance can go too far when Hispanic consumers become atomised into tiny subgroups that demand multiple micro-strategies.

Language is already an active field of experimentation.Nestlé says that, despite assumptions that consumers would regard Latino food in English-language boxes as inauthentic, it has found that many Hispanics want bilingual labels. Later this month Univision and Disney-owned ABC are due to launch Fusion, a new television network that will target young Hispanics and broadcast in English.

As for consumer products themselves, the growth of US-born Hispanics means simply importing a Latin American success story to the US is often not enough. Stephen Palacios, executive director at Added Value Cheskin, a marketing agency, says that, partly because US Hispanics have different socioeconomic profiles from their Latin American counterparts, “there are some cautions around taking marketing tools and strategies from other countries and applying them here”. For example, a cut-price laundry detergent that is successful in Latin America may not appeal to Hispanic-Americans because, as their incomes rise, they aspire to trade up to higher-priced, more effective alternatives.

Carlos Velasco, president of Nestlé’s international brands division, says the Swiss company, which sells $300m of products to US Hispanics every year, has gone from importing Mexican goods to the US to developing new products that will appeal to “acculturated” Mexican-Americans.

In the 1990s it brought its La Lechera condensed milk to the US, but this year Mr Velasco expanded the brand by putting it on baking kits for a cheesecake flavoured with dulce de leche, a caramel sauce popular in many parts of South America.

Adefining feature of the new Hispanic market is its fluidity. David Cardona, director of multicultural sales at Clorox, says: “There is a lot of confusion about what [acculturation] really means and how it works.” Neat-looking classifications are not so useful because people move back and forth depending on the context.

“If it’s something related to household care, family wellbeing, motherhood and the role as a woman, they probably tend to skew more heavily to the Latina type of mindset,” he says. “When it comes to work, it’s more along the lines of the American.”

This year Target released a “Clap Your Hands” television ad with a soundtrack that alternated between English and Spanish because the company says “that’s how a lot of people communicate now in the States. It’s not one or the other, but it’s both.”

Mr Palacios says it is possible to get bogged down in cultural subtleties. “There is a desire to compete on the ability to have a nuanced understanding of subsets of the Hispanic market, which I find intellectually fascinating but practically useless for general marketers,” he says. “Are you going to market to communities of 400,000 people?”

In some cases, he continues, the right approach is not to be “ethnic-specific” at all, but instead “ethnic-inclusive”: to make sure that a mainstream product includes signals that tell Latinos it is relevant to them too. He cites a 2013 Pepsi Super Bowl commercial, set at a house party, in which a man in a Mexican wrestling mask appears very briefly. “If you are of Mexican origin, what you get in that ad is that you are included,” he says.

What is not an option is doing nothing. “The Latino segment is the driving force of this millennial generation,” says Ms Williams. “They are redefining who is the ‘us’ in the US.”

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: