Catering to Hispanic Consumers

When the U.S. Census Bureau's 2000 numbers were released, no one was surprised that the Hispanic market had grown. What was surprising was the number itself — 35.2 million Latinos resided in the United States in 2000, or 12.5 percent of the total U.S. population. And the likelihood is the Hispanic population will more than double again in the next 50 years. In fact, the U.S. Census Bureau predicts that by 2025, we will have the world's second-largest Hispanic population and by 2050, one in every four Americans will be of Hispanic origin.

A Changing Landscape

The word "Hispanic" is a U.S. marketing term. It does not refer to a race of people, but rather is a term that clumps a conglomeration of ethnicities into one ethnic classification. Members of these ethnicities come from 20 different countries who once here in the U.S. refer to themselves as Hispanic or Latino.

"This is tomorrow's mainstream market. It's not a niche," states Thomas Tseng, director of marketing for the Los Angeles-based Cultural Access Group. "You can't afford to ignore these consumers anymore."

Since 1990, this growing segment has expanded 57.9 percent — more than four times the rate of nonHispanics. Anyone involved in retail has to be cognizant of this ethnic group which now comprises 40 million Americans. Hispanic purchasing power is increasing at greater than twice the national rate and is currently estimated at anywhere from $400 billion to $542 billion per year. And, that spending is estimated to reach $1 trillion by 2010. If you take their buying power as a group and compare it against world trade, U.S. Hispanics would rank 11th among world leaders in gross product consumption.

A recent two-day conference held in Miami, Fla., was dedicated to providing attendees with strategies for reaching the U.S. Hispanic market. During the conference, a series of research gurus tackled incumbent issues.

Ricardo Lopez, president of East Brunswick, N.J.-based Hispanic Research, said, "The Hispanic market is the growth market of the future — without the Hispanic market, there will not be significant growth in the U.S. market in the next 50 years. In order to do business in the U.S., we have to pay attention to the Hispanic market."

Cesar M. Melgoza, president of Miami-based information solutions firm Geoscape, said the importance of the Hispanic family and culture will have a profound impact on retail in the coming decade.

"There's nearly 40 million Hispanics now and we're growing very rapidly. We tend to have larger families, so we spend more than average for many categories in consumer goods, particularly in the food categories," he said. "Much of the Hispanic culture is food and entertainment oriented. Food is always a very important subject."

Hispanic Recipes

Hispanic influences sway mainstream America today. The culinary world celebrates regional Mexican cuisine, the flavors of Latin America, and traditional Spanish fare. On the American table, chips and salsa, fajitas, dulce de leche, mojitos, and black bean soup are the trends. Even McDonald's is serving up its own Latin fare. Mintel Consumer Intelligence predicts these trends will explode in 2002 and has selected Latin cuisine as the Cuisine of the Year.

According to Lynn Dornblaser, editorial director N.A. of Mintel-gnpd, "The rising 'coolness' factor of everything Latin will take hold in the food and beverage industry. Until now, the products we've seen with 'south of the border' flavorings have been few and far between and primarily from ethnic companies. But this style is starting to trickle into popular products — everything from dulce de leche-flavored M&M's to apple-flavored soda from Coca-Cola. The Latin flavor is about to explode in a big way, perhaps in meal kits, seasonings, and candy."

These cultural statements and shifts are occurring at a time when Hispanics are still a minority, but they won't remain in this position long. Today's majority is expected to contribute only 25% of the population growth over the next decade before steadily declining in influence. Over the next 20 years, the general-market Baby Boomer population is projected to grow by less than 10%, while the Hispanic market is expected to increase by more than 70%.

"Not since the post-World War II era have we seen a population shift that rivals the dramatic change expected in the next 50 years," said Tim Kregor, executive vice president, group product management at Chicago, Ill.-based Spectra Marketing. "Much sooner than that, companies competing in the low-margin business of consumer packaged goods will have their fortunes shaped by how well they understand and cater to a new generation of families — one that speaks a different language and responds to different cues."

Melgoza says there is a definite interest in high-quality gourmet foods and kitchenware among Hispanic consumers, particularly in those ingredients and tools which celebrate or authenticate their culture. In fact, carrying specific Hispanic products can build loyalty for your store within your local Hispanic populations.

According to the IDDBA's 2000 report The Hispanic Consumer: Attitudes, Buying Behavior, and Purchase Drivers, traditional foods for holidays such as Christmas Eve and Cinco de Mayo are served by 80 percent of respondents and 62 percent would like their supermarkets to offer traditional foods for such occasions. Ninety-five percent celebrate birthdays with cakes, and 62 percent would like their grocery stores to offer catering services for Quinceanearos, the traditional coming-of-age party for many Hispanic girls on their 15th birthdays.

The celebration of culture — also being referred to as retro-acculturation — is common among both immigrant and American-born Hispanics. Retro-acculturation, as defined in Marketing to American Latinos by M. Isabel Valdés, refers to the "conscious search for ethnic identity or roots, especially by second-, third-, or fourth-generation Hispanic Americans who have lost some or most of their cultural traits." This subsegment of the Hispanic market is growing steadily as the Latino middle class continues to expand.

For gourmet retailers, this embracing of Hispanic culture means a continued growth in interest among home chefs in recreating traditional celebrations. Since most Hispanic cultural celebrations center on food, cooking, and eating within the home, they create a higher demand for the proper ingredients and tools. It is also an opportunity for gourmet retailers to educate these consumers with classes and in-store ethnic celebrations.

Melgoza said determining the segmentation of the local Hispanic community is a critical element in successfully serving this population.

Hispanic-Americans have immigrated or are descendants of immigrants from more than 20 different countries, including Argentina, Cuba, Mexico, Spain, Brazil, the Dominican Republic, Peru, and Panama.

"Country of origin is very important," Melgoza explained. "About 60 percent of Hispanics are of Mexican descent. That leaves 40 percent who aren't."

Differentiating Your Market

One of the primary distinctions of today's Hispanic population is its acculturation versus its assimilation. Ethnic populations entering the U.S. in past decades prided themselves on their ability to assimilate the American Melting Pot. That is no longer the case today.

"Immigrants today do not come to this country with the mind-set of leaving old traditions behind," Lopez said. "The Melting Pot is now a Salad Bowl with all the ingredients coexisting together. As a country, we are saying it's okay not to melt into the pot."

The IDDBA research showed interesting differences that vary according to different ethnicities. For example, the majority of Cubans and Puerto Ricans prefer shaved meats from their delis, whereas the majority of those from South America prefer thicker meats.

In the dairy section, cheese is a favorite among Hispanic-Americans, with 91 percent viewing it as a good source of calcium for their families. While Hispanic-Americans are most likely to say that they buy bakery items from the supermarket bread aisles, 81 percent "often" buy bakery products from the in-store bakery. According to the IDDBA study, in their 1.6 shopping trips per week to the in-store bakery, 60 percent of Hispanic-American consumers would like to be able to purchase fresh tortillas. Overall, they eat flour tortillas 3.3 times per week, with Mexican-Americans consuming them an average of 4.2 times per week.

In addition, two-thirds of Hispanics dine at home more often than the average U.S. household. Hispanics cook dinner at home an average of 5.6 times per week and 53 percent of them cook dinner at home nightly.

The level of acculturation and the socioeconomic status of Hispanic communities within your store's shopping radius will determine the playing field you face.

"Many people who are not in tune with the Hispanic marketplace don't realize the socioeconomic gap is beginning to close between Hispanics and nonHispanics. There is actually quite a bit of buying power," Melgoza explained. "It is essential that retailers understand it's an important market to address. It's a growing market which certainly does not want cheap products; they want high quality."

Melgoza suggests retailers determine the importance of Hispanic consumer spending within their markets and fine-tune their store inventory, staff, and merchandising accordingly.

He recommends that retailers begin by asking themselves basic questions, such as, "If I have a store in an Hispanic neighborhood, do my employees speak the language?"

He added, "You need to measure the market segments within your store's trading area. Ask yourself: 'Should I treat all Hispanics the same or should I understand all the differences? When should I be addressing them in Spanish versus English?'"

Half of all Hispanics live in two states — California and Texas. Most Hispanic communities have developed in metropolitan areas, with the majority being located in Los Angeles, New York City, and Miami. Each of these metro areas has a culture all its own.

But don't be fooled by these regional or metropolitan concentrations. Hispanics do not comprise a static population. You can find them living in Iowa, Arkansas, and Colorado. Half a million Mexican-Americans reside in the Atlanta area, with the wealthiest collection of Hispanics dwelling in the Washington, D.C. area.

Melgoza stressed the importance of studying the local population in order to determine your marketing needs. Each Hispanic community encompasses people who have been in the U.S. for varied lengths of time and therefore, have had more opportunity to improve their socioeconomic status.

"You have to understand how acculturated the Hispanic population is and look at the income. If you have a high socioeconomic status and a high degree of assimilation, then immigration is not so recent and density is not so high and those situations help you determine if you have the climate to sell higher-end products. I think socioeconomic status is more important than income itself as it includes education, occupation, housing characteristics — home ownership and things like that — which will help you understand and predict that consumer's behavior."

Valdés recommends in her book that marketers understand the Hispanic consumer by gathering as much information as possible on the sociocultural aspect of the group you are targeting. There is a major difference between general-market and immigrant-market segments. Marketing to recent arrivals requires an understanding of how these immigrants lived at home. Valdés recommends gaining firsthand experience by touring Hispanic neighborhoods and attending Hispanic cultural events. She also states the importance of being a guest in a Hispanic household and sharing a meal, as well as traveling abroad, if possible.

Valdés writes, "To effectively communicate with the Hispanic market and gain their share of heart, you need to get to know Hispanic consumers by learning as much as possible about who they are, how they live, their likes and dislikes, and what they enjoy in life. Recognizing and dealing with stereotypes is the starting point."

Stereotypes she points out include those placing Hispanics at the low end of the socioeconomic scale. Remember, U.S. Hispanics are the wealthiest Latin-American consumers in the Americas. Another stereotype is that Hispanics don't wish to participate in American society. Valdés is quick to point out that Hispanics are becoming more and more "entrenched in American society."

Family Affair

The U.S. Hispanic population boom changes everything for marketers who target families with kids. Eighty-one percent of Hispanic households are families that include children versus the 67 percent of general-population households which include children. Most marketers face a crossroads with the coming population shift. A great many of the best-known brands in America have traditionally been and are today largely dependent on families with kids. The focus, from geographic markets to advertising media and copy, has been primarily on the Baby Boomer market.

That will have to change. Brands selling primarily to families will need to be prepare for a world where more than 25% of their consumers are Hispanic, and more than 50% are nonwhite.

"The only way you can market to Hispanics in this country is to completely understand the market," Lopez said. "You really have to do your homework."

Even more meaningful for marketers — particularly packaged goods manufacturers — is the change in age group populations. Hispanic consumers will account for an increasing number of the children in this country over the next few decades. By 2030, we can expect more than 50% of U.S. children to be nonwhite, while the vast majority of the elderly (more than 75%) will be white consumers.

Therefore, a shifting population will have its greatest impact on marketers of products that are aimed at families with children at home. Until now, targeting the "general market" has been sufficient to build very large consumer products businesses. It won't be long at all before a multifocused strategy is imperative.

Grocery Aisles

Already, Hispanic consumers are significantly important to a wide variety of food categories. For example, 13% of those residing in Hispanic households are more likely to be heavy consumers of popcorn, 19% are more likely to buy cookies, and 41% are more likely to buy meat snacks than those in general-market households.

One category — frozen food — that will be affected dramatically by the changing population was examined by Spectra Marketing. Over the next 50 years, sales of frozen food items (both Mexican entrees and overall prepared foods) are projected to increase at a pace that's just 10% slower than the general population growth — 33% sales growth versus a 43% increase in the U.S. population.

In the process, manufacturers will more than double their dependency on Hispanic consumers. This is true for two reasons — population growth and because of the popularity of ethnic cuisine. Mexican foods comprise the most popular prepared frozen entrees today, and while the expectation is that they'll decline, they'll decline less and still account for higher sales than other varieties.

And Mexican frozen entrees will remain a favorite for segments of the Hispanic community. Whereas in 2000, Hispanic consumers accounted for 14% of frozen entree sales, in 2050, that number is projected to become 30%.

Frozen seafood is a similar story. Today, nonHispanic white consumers buy 83% of iced fish dinners; in 2050, that number will likely be 68%. Meanwhile, Hispanic consumers are expected to up their consumption of microwaved fish from 7% in 2000 to 17% in 2050, making them the clear opportunity segment for the category.

Marketing tools

The first step toward successfully catering to Hispanic consumers is to determine the segmentation of Hispanic populations represented in your community. Do you have a Cuban, Mexican, or Puerto Rican majority? — in other words, you need to answer the question, "What country of origin lives predominantly within your store's range?"

After determining the population base, stocking authentic ethnic cookbooks is a great place to begin when you're courting the acculturated immigrant and American-born Hispanic. Include cookbooks from various regions of Spain, Peru, Colombia, Mexico, or South America — whichever countries relate to your local Hispanic population. A great overview is Steven Raichlen's Healthy Latin Cooking: 200 Sizzling Recipes from Mexico, Cuba, the Caribbean, Brazil, and Beyond (Rodale Books 1998). Published simultaneously in English and Spanish editions, Raichlen guides us through Latin American cooking and culinary culture, serving it up with flavor and finesse in a healthful manner.

Become familiar with the ingredients and implements required to recreate the dishes in these cookbooks. Learn about Hispanic holidays and celebrations and target your advertising and promotions to them.

Manufacturers and associations are also making their own moves to reach this important audience. The National Pork Producers Council published La Cocina Latina: Recipes Inspired by Latin Kitchens in 1997. This Spanish-English language pamphlet is available to specialty food stores as in-store literature to be distributed at the meat counter. Numerous specialty food manufacturers are creating Spanish-English labels. Kitchenware manufacturers are introducing a new generation of Hispanic cooking tools and small electrics. At last month's IHA Show in Chicago, high-quality calderos (Dutch ovens), tamale steamers, and stove-top espresso makers were introduced.

In fact, you probably already carry an assortment of products aimed at the Hispanic consumer. Merchandising these products to showcase your ethnic diversity will help win over these important shoppers. Create displays combining rice cookers, Dutch ovens, griddles, steamers, and stockpots together with warm, brightly colored oven-to-tableware and decorative serving pieces.

Study the cooking tools Hispanics utilize. Learn how to use them yourself and then train your staff about authentic tools such as the cazuela (a clay cooking vessel that's wider on the top than on the bottom), the comal (a griddle made of clay, aluminum, iron, or steel), and the molcajete (a stone mortar). You may already have some of the items in stock inventoried under generic American names such as griddles or mortars and pestles.

The New Cook's Catalog is also a great reference offering explanations of tools such as the Mexican lime press, the metate (used to grind corn for tortillas), the metlapil, the mezzaluna, and the tortilla press. Also included are cookbook recommendations such as Foods and Wines of Spain by Penelope Casas (Knopf, 1982) and Authentic Mexican Cooking by Rick Bayless (Morrow, 1987).

Find out about ingredients used in Hispanic cuisine. Do you know what Oaxacan Mexican-style chocolate is? How about masa harina, or comales, or chiote paste? Dried beans, dried chiles, piloncillo, canned chipotles, hoja santa, and specialty cheeses are ingredients essential for reproducing some of the best authentic Mexican foods. But don't limit yourself to spices. With research, you'll realize that while Hispanics like to refer to themselves as spicy-hot people, they aren't necessarily speaking of food. Mexican-Americans are influenced by Mexican-Indian, Native American, and Spanish cuisines; Puerto Rican tropical cuisine reflects African and Spanish elements; and Cuban-American cuisine exhibits an African-Spanish influence with a tropical flare.

It is imperative that you understand the differences in your Hispanic community before creating any targeted campaign. You may think there's nothing to it — throw a few Spanish words into your signage, create some Spanish-language advertising, or set up some Hispanic celebratory events. But there's more to it than that. The complexity of the Hispanic market can be illustrated with a simple word — torta. Mexicans and Mexican-Americans eat tortas as part of the main course, but Chileans, Argentines, and Peruvians consume them as dessert. A torta is a sandwich and sometimes a cheese omelet for Mexicans, but serves as a sweet cake for the other groups. Don't let a simple assumption derail your plans of targeting the fastest-growing and most influential consumer buying population for the next 50 years. !Buena Suerte!