ETHNIC MERCHANDISING: Latin lessons
"If you are not serving this customer, you are out of business." So said Rhonda Harper, s.v.p. and director of Ketchum, one of a select group of retail and marketing experts at the recent Hispanic Retail 360 Conference & Product Showcase, who concluded that Latino consumers hold the key to future success or failure at retail.
How important is the Hispanic market to U.S. retailers? Important enough, apparently, that despite the threat of Hurricane Rita bearing down on the Gulf Coast of Texas, more than 350 retailers, suppliers, and other retail industry players met in Dallas on Sept. 26 and Sept. 27 to trade ideas about how to increase their business with the growing U.S. Hispanic market.
As it turned out, the hurricane veered eastward and missed Dallas. In its place were two days of hot, sunny weather -- and coverage of many hot topics.
Spending on the rise
To understand how profoundly the Hispanic consumer is going to affect U.S. retailing, consider the following statistics: At 13.7 percent of the total U.S. population, Hispanics currently comprise the nation's largest minority. By 2009, nearly one in six people in the U.S. will be of Hispanic origin, and by 2050, that figure will rise to one in four people. Further, the purchasing power of this group has jumped by about 50 percent in less than five years, growing at a much faster rate than other ethnic populations. In 2004, Hispanics had $686 billion in spending power, and that number is estimated to grow to $992 billion by 2009.
Doug Darfield, s.v.p. of Nielsen Media Research, suggested that these growth rates might even be underrepresented due to a significant population of illegals not captured in U.S. Census data, as well as the rewording of an ethnic origin question in the most recent census.
While clearly lucrative, this market may not be quite so simple to serve. Keynote speaker Jim Perkins, founder of ULATAM Solutions Group and author of the new book Beyond Bodegas: Developing a Retail Relationship with Hispanic Customers, noted that in reaching the Hispanic consumer, the challenge for the retailer is to learn to drive the necessary changes and innovations mandated by these consumers, while understanding and marketing to their cultures.
And what a challenge that is: The Hispanic demographic group is made up of a variety of countries of origin, cultures, and traditions. The complexity of the Hispanic population makes marketing to these customers a tricky business. Mike Tolley, president of Mi Pueblo Food Centers, a Hispanic grocer in Southern California, advised other retailers, "You have to clearly identify the customer and you have to understand her. If you are just a Hispanic store [without targeting a specific segment of the Hispanic population], you will fail because that's too broad. You cannot be all things to all Hispanics."
Reminding retailers that "all marketing is local," Gary Meo, s.v.p. of Scarborough Research, reported on results of a study of Hispanic purchase behavior in several key markets. The study showed that "emerging and second-tier markets present marketers with a different set of challenges than more established Miami or Los Angeles." Understanding these differences, said Meo, "can help marketers to tailor local strategies and campaigns. Marketers should target consumers in these emerging and second-tier markets accordingly. Investment will pay off as Hispanics age and assimilate."
For example, in the Hispanic community in Atlanta, which is in comparatively early stages of development, shoppers are more price-conscious and favor discount/value retail brands. These shoppers are light media consumers who tend to favor Spanish media. Retailers who emphasize the value of the brand will do well, but they must be communicated to on their own terms, in their language, where they live.
Roy White, v.p. of education for the GMDC Educational Foundation, said, "Although individuals coming from Mexico and Central America make up a significant majority of the Hispanic population in the U.S., it certainly would be a mistake to assume that approaches for that particular market, primarily in the western U.S., would be the same for the large numbers of individuals from the Caribbean living along the Eastern seaboard. There are differences and subtleties in the language that can make marketing communication problematic."
Paul Mena, senior category manager for Hispanic at Tree of Life, a large ethnic foods distributor, agreed. He warned attendees that "one pitfall [that companies often run into] is proper translation from English to Spanish. What is translated to 'Mexican' may not fall well on the ears of a Puerto Rican or Cuban."
Disregarding these cultural nuances is a "deal breaker," added Perkins. Retailers need to understand the explosion in size from ongoing immigration, a high birth rate, and the resurgence in "being Latino," he said, and retailers must show "a willingness to take risks, respond, and build an infrastructure to serve this customer."
A unique consumer
"You will not find this consumer elsewhere in the world," said Santiago Blanco, director, Hispanic Marketing, for Coca-Cola, who worked in Mexico for many years. The usual demographic markers, such as age, income, and household size don't tell the whole story. The key, said Blanco, is acculturation, the degree of similarity or difference in consumption behavior between the Hispanic consumer and the general market consumer. Often, says Blanco, "you'll find different levels of acculturation interacting in the same household, with an unacculturated mom buying for an acculturated teen."
Julie Simard, consultant for consumer research for the Integras division of Claritas, and Steve Kent, s.v.p. of retailer client service for Spectra, noted that while many CPG marketers and researchers often use "language spoken" as a proxy for acculturation to help them better understand consumption behavior, language alone doesn't fully predict a Hispanic consumer's consumption behavior.
A recent Spectra Culture Point Model, which analyzed Hispanic consumption for 4,200 items in Simmons' National and Hispanic surveys, pointed toward the necessity to consider acculturation and lifestyles when targeting the Hispanic population. Findings showed that urban and rural residents have different purchasing behavior, as do those at various levels of acculturation. Marketing and merchandising programs must reflect these points. When some Hispanic marketing efforts fail, said Kent, it may be due to "a failure to consider acculturation levels, country of origin, and lifestyle."
Despite the diversity of cultures contained within the Hispanic population, there are many similarities, said GMDC's White, including family structure, communal leisure, meaning of time, work ethic, tradition, home, religion, loyalty/conservatism, food, and music.
Another hallmark of the Hispanic market is its relative youth. Darfield pointed out that with 34 percent of the Hispanic population under age 18, ethnic youth represent a timely marketing opportunity.
Simard and Kent also noted that Hispanics skew younger than the total U.S. population, with the median age of the former at 26.3, compared with 35.9 for the latter.
Use Spanish appropriately
In another presentation, Sharon Abish, senior director of marketing for ACNielsen, and David Morse, president of New American Dimensions, a leading multicultural consulting firm, pointed out another implication of marketing to this consumer: "If you are targeting adults today, it makes sense to do it in Spanish. If you are targeting the second generation, they are bilingual or English-dominant."
The relative youth of this population also indicates their willingness to embrace technology. Hispanics apparently are more Internet savvy than most marketers realize. A recent study cited by Carlos Fuentes, director, multicultural marketing for Vertis, a leading direct marketer, showed that "more U.S. Hispanics use the Internet to make final decisions on brands than their general market counterparts do." Results also showed that 69 percent of U.S. Hispanics go online to learn about features and benefits, up from 61 percent a year ago. Furthermore, 63 percent go online for advice on which brands to buy, up from 56 percent last year.
One mistake in serving the Hispanic consumer, said Mena of Tree of Life, is lack of complete commitment and follow-through in the store. "You can have 60 well-merchandised feet of dry grocery, and not the first thing in produce." Another pitfall, he warned, is a "strict adherence to category management. Data doesn't help you find diamonds in the rough."
But perhaps the biggest obstacle to success, several speakers agreed, is a lack of commitment from retail senior management to marketing to the Hispanic community. Gary Berman, c.e.o. of Si Change Consulting, said he sees the same problem over and over in his consulting practice. "Organizational infrastructure is not in place. The only people who can effect a change in a company are the c.e.o.'s. In order to have fundamental change, you need senior management on board."
Senior management needs to understand that with one in five children in the United States of Hispanic descent, "It ain't a niche, it's a market," said Ketchum's Harper. She urged retailers to "move from transactions to relationships. It's about how you operate your whole business, how you assort your entire store."
Darfield of Nielsen Media pointed out that there's an absence of dedicated ethnic business divisions on the part of both retailers and suppliers. "It is difficult to gain support/funding to address ethnic marketing needs."
Keynoter Perkins agreed, and expanded on Darfield's comment. "The commitment must come from all parts of the company, particularly human resources, in terms of recruiting and staffing," he said. Staffing in particular is a key issue to attract Hispanics, many of whom adhere to the adage "If we can't work here, we won't shop here." To bridge the cultural gap that exists at the retail level, noted Perkins, "employees need to realize that everyone has to make adjustments, and common ground must be found."
Influencing the mainstream
The growth of the Hispanic market is also affecting overall U.S. consumer behavior.
"The market for ethnic marketing and merchandising is bigger than just the growing ethnic marketplace," said Terry Soto, president and c.e.o. of About Marketing Solutions. "From 2000 to 2002, mainstream manufacturers introduced more than 1,800 products classified as Hispanic or Mexican, to capitalize on the mainstream's interest in ethnic flavors and styles."
The implication for food retailers, said Soto, is that "retailers who compete effectively for consumers of ethnic Hispanic and non-Hispanic will be in a position to profit. Those who ignore the changing makeup of, and trends in, the marketplace, or only make token efforts, will not find success."
Right now, she added, "the food retail industry is in its infancy with regard to ethnic merchandising. Retailers must build flexibility into their organizations to respond to customers on a local level."
The Hispanic Retail 360 Conference & Product Showcase was produced by the Retail Group of VNU Business Media and VNU Expositions. The event was sponsored by platinum sponsors Coca-Cola and Vertis, gold sponsors Anheuser-Busch, Energizer, and Tree of Life, and "in association" sponsors MBR Industries, E&J Gallo Winery, Hershey Foods Corp., Procter & Gamble, Quaker/ Tropicana/Gatorade, and La Fiesta 4th.
Information partners and presenters included ACNielsen, Nielsen Media Research, Spectra, Scarborough Research, and Claritas. Association partners were the GMDC and the Hispanic Marketing & Communications Association. Publication partners were Progessive Grocer, Marketing y Medios, Convenience Store News, The Gourmet Retailer, and Display & Design Ideas.
The next Hispanic Retail 360 Conference & Product Showcase is slated to be held in Chicago in early August 2006. For more information go to www.hispanicretail360.com, which features updates on future developments.
How important is the Hispanic market to U.S. retailers? Important enough, apparently, that despite the threat of Hurricane Rita bearing down on the Gulf Coast of Texas, more than 350 retailers, suppliers, and other retail industry players met in Dallas on Sept. 26 and Sept. 27 to trade ideas about how to increase their business with the growing U.S. Hispanic market.
As it turned out, the hurricane veered eastward and missed Dallas. In its place were two days of hot, sunny weather -- and coverage of many hot topics.
Spending on the rise
To understand how profoundly the Hispanic consumer is going to affect U.S. retailing, consider the following statistics: At 13.7 percent of the total U.S. population, Hispanics currently comprise the nation's largest minority. By 2009, nearly one in six people in the U.S. will be of Hispanic origin, and by 2050, that figure will rise to one in four people. Further, the purchasing power of this group has jumped by about 50 percent in less than five years, growing at a much faster rate than other ethnic populations. In 2004, Hispanics had $686 billion in spending power, and that number is estimated to grow to $992 billion by 2009.
Doug Darfield, s.v.p. of Nielsen Media Research, suggested that these growth rates might even be underrepresented due to a significant population of illegals not captured in U.S. Census data, as well as the rewording of an ethnic origin question in the most recent census.
While clearly lucrative, this market may not be quite so simple to serve. Keynote speaker Jim Perkins, founder of ULATAM Solutions Group and author of the new book Beyond Bodegas: Developing a Retail Relationship with Hispanic Customers, noted that in reaching the Hispanic consumer, the challenge for the retailer is to learn to drive the necessary changes and innovations mandated by these consumers, while understanding and marketing to their cultures.
And what a challenge that is: The Hispanic demographic group is made up of a variety of countries of origin, cultures, and traditions. The complexity of the Hispanic population makes marketing to these customers a tricky business. Mike Tolley, president of Mi Pueblo Food Centers, a Hispanic grocer in Southern California, advised other retailers, "You have to clearly identify the customer and you have to understand her. If you are just a Hispanic store [without targeting a specific segment of the Hispanic population], you will fail because that's too broad. You cannot be all things to all Hispanics."
Reminding retailers that "all marketing is local," Gary Meo, s.v.p. of Scarborough Research, reported on results of a study of Hispanic purchase behavior in several key markets. The study showed that "emerging and second-tier markets present marketers with a different set of challenges than more established Miami or Los Angeles." Understanding these differences, said Meo, "can help marketers to tailor local strategies and campaigns. Marketers should target consumers in these emerging and second-tier markets accordingly. Investment will pay off as Hispanics age and assimilate."
For example, in the Hispanic community in Atlanta, which is in comparatively early stages of development, shoppers are more price-conscious and favor discount/value retail brands. These shoppers are light media consumers who tend to favor Spanish media. Retailers who emphasize the value of the brand will do well, but they must be communicated to on their own terms, in their language, where they live.
Roy White, v.p. of education for the GMDC Educational Foundation, said, "Although individuals coming from Mexico and Central America make up a significant majority of the Hispanic population in the U.S., it certainly would be a mistake to assume that approaches for that particular market, primarily in the western U.S., would be the same for the large numbers of individuals from the Caribbean living along the Eastern seaboard. There are differences and subtleties in the language that can make marketing communication problematic."
Paul Mena, senior category manager for Hispanic at Tree of Life, a large ethnic foods distributor, agreed. He warned attendees that "one pitfall [that companies often run into] is proper translation from English to Spanish. What is translated to 'Mexican' may not fall well on the ears of a Puerto Rican or Cuban."
Disregarding these cultural nuances is a "deal breaker," added Perkins. Retailers need to understand the explosion in size from ongoing immigration, a high birth rate, and the resurgence in "being Latino," he said, and retailers must show "a willingness to take risks, respond, and build an infrastructure to serve this customer."
A unique consumer
"You will not find this consumer elsewhere in the world," said Santiago Blanco, director, Hispanic Marketing, for Coca-Cola, who worked in Mexico for many years. The usual demographic markers, such as age, income, and household size don't tell the whole story. The key, said Blanco, is acculturation, the degree of similarity or difference in consumption behavior between the Hispanic consumer and the general market consumer. Often, says Blanco, "you'll find different levels of acculturation interacting in the same household, with an unacculturated mom buying for an acculturated teen."
Julie Simard, consultant for consumer research for the Integras division of Claritas, and Steve Kent, s.v.p. of retailer client service for Spectra, noted that while many CPG marketers and researchers often use "language spoken" as a proxy for acculturation to help them better understand consumption behavior, language alone doesn't fully predict a Hispanic consumer's consumption behavior.
A recent Spectra Culture Point Model, which analyzed Hispanic consumption for 4,200 items in Simmons' National and Hispanic surveys, pointed toward the necessity to consider acculturation and lifestyles when targeting the Hispanic population. Findings showed that urban and rural residents have different purchasing behavior, as do those at various levels of acculturation. Marketing and merchandising programs must reflect these points. When some Hispanic marketing efforts fail, said Kent, it may be due to "a failure to consider acculturation levels, country of origin, and lifestyle."
Despite the diversity of cultures contained within the Hispanic population, there are many similarities, said GMDC's White, including family structure, communal leisure, meaning of time, work ethic, tradition, home, religion, loyalty/conservatism, food, and music.
Another hallmark of the Hispanic market is its relative youth. Darfield pointed out that with 34 percent of the Hispanic population under age 18, ethnic youth represent a timely marketing opportunity.
Simard and Kent also noted that Hispanics skew younger than the total U.S. population, with the median age of the former at 26.3, compared with 35.9 for the latter.
Use Spanish appropriately
In another presentation, Sharon Abish, senior director of marketing for ACNielsen, and David Morse, president of New American Dimensions, a leading multicultural consulting firm, pointed out another implication of marketing to this consumer: "If you are targeting adults today, it makes sense to do it in Spanish. If you are targeting the second generation, they are bilingual or English-dominant."
The relative youth of this population also indicates their willingness to embrace technology. Hispanics apparently are more Internet savvy than most marketers realize. A recent study cited by Carlos Fuentes, director, multicultural marketing for Vertis, a leading direct marketer, showed that "more U.S. Hispanics use the Internet to make final decisions on brands than their general market counterparts do." Results also showed that 69 percent of U.S. Hispanics go online to learn about features and benefits, up from 61 percent a year ago. Furthermore, 63 percent go online for advice on which brands to buy, up from 56 percent last year.
One mistake in serving the Hispanic consumer, said Mena of Tree of Life, is lack of complete commitment and follow-through in the store. "You can have 60 well-merchandised feet of dry grocery, and not the first thing in produce." Another pitfall, he warned, is a "strict adherence to category management. Data doesn't help you find diamonds in the rough."
But perhaps the biggest obstacle to success, several speakers agreed, is a lack of commitment from retail senior management to marketing to the Hispanic community. Gary Berman, c.e.o. of Si Change Consulting, said he sees the same problem over and over in his consulting practice. "Organizational infrastructure is not in place. The only people who can effect a change in a company are the c.e.o.'s. In order to have fundamental change, you need senior management on board."
Senior management needs to understand that with one in five children in the United States of Hispanic descent, "It ain't a niche, it's a market," said Ketchum's Harper. She urged retailers to "move from transactions to relationships. It's about how you operate your whole business, how you assort your entire store."
Darfield of Nielsen Media pointed out that there's an absence of dedicated ethnic business divisions on the part of both retailers and suppliers. "It is difficult to gain support/funding to address ethnic marketing needs."
Keynoter Perkins agreed, and expanded on Darfield's comment. "The commitment must come from all parts of the company, particularly human resources, in terms of recruiting and staffing," he said. Staffing in particular is a key issue to attract Hispanics, many of whom adhere to the adage "If we can't work here, we won't shop here." To bridge the cultural gap that exists at the retail level, noted Perkins, "employees need to realize that everyone has to make adjustments, and common ground must be found."
Influencing the mainstream
The growth of the Hispanic market is also affecting overall U.S. consumer behavior.
"The market for ethnic marketing and merchandising is bigger than just the growing ethnic marketplace," said Terry Soto, president and c.e.o. of About Marketing Solutions. "From 2000 to 2002, mainstream manufacturers introduced more than 1,800 products classified as Hispanic or Mexican, to capitalize on the mainstream's interest in ethnic flavors and styles."
The implication for food retailers, said Soto, is that "retailers who compete effectively for consumers of ethnic Hispanic and non-Hispanic will be in a position to profit. Those who ignore the changing makeup of, and trends in, the marketplace, or only make token efforts, will not find success."
Right now, she added, "the food retail industry is in its infancy with regard to ethnic merchandising. Retailers must build flexibility into their organizations to respond to customers on a local level."
The Hispanic Retail 360 Conference & Product Showcase was produced by the Retail Group of VNU Business Media and VNU Expositions. The event was sponsored by platinum sponsors Coca-Cola and Vertis, gold sponsors Anheuser-Busch, Energizer, and Tree of Life, and "in association" sponsors MBR Industries, E&J Gallo Winery, Hershey Foods Corp., Procter & Gamble, Quaker/ Tropicana/Gatorade, and La Fiesta 4th.
Information partners and presenters included ACNielsen, Nielsen Media Research, Spectra, Scarborough Research, and Claritas. Association partners were the GMDC and the Hispanic Marketing & Communications Association. Publication partners were Progessive Grocer, Marketing y Medios, Convenience Store News, The Gourmet Retailer, and Display & Design Ideas.
The next Hispanic Retail 360 Conference & Product Showcase is slated to be held in Chicago in early August 2006. For more information go to www.hispanicretail360.com, which features updates on future developments.