Hispanics Key to Growth

There’s a positive connection between corporate Hispanic marketing and revenue growth specific for consumer packaged goods and CPG-based retail companies.

That’s according to AHAA: The Voice of Hispanic Marketing, which has released its second comprehensive study featuring data that shows a significant difference in the revenue growth rate attained by CPG companies which designate a higher focus to the Hispanic market than those corporations who focus less.

“This new information is compelling because the data indicates that the Hispanic market can be a big determinant in corporate success,” said Roberto Orci, chairman of AHAA and CEO of Acento Advertising. “CPG companies not only want to gain market share among their competitors but they also want to provide growth and stability for their investors – investing in Hispanic marketing is a clear strategy in achieving that two-fold objective.”

The study analyzed the top 500 overall U.S. advertisers between 2006 and 2010. The regression model showed similar correlation findings and significance levels for the CPG set of companies when tested against the full sample of consistent top advertisers for the same time period. The study found, with a 95 percent confidence level, that among CPG brands, the share of overall marketing resources dedicated to the booming Hispanic segment explains about a third of their overall revenue growth.

“The connection is clear and very significant,” said Dr. Cristina Garcia, professor of statistics at USC, who oversaw the methodology of the study. “The study found evidence that the proportion of resources a company, irrelevant of market category, puts behind Hispanic consumers is an essential driver for sustainable growth performance.”

Effective growth leaders consistently put higher focus on creating solid relationships with the valuable Hispanic consumer base. Conversely, CPG underperformers tend to overlook Hispanic growth opportunities resulting typically in sluggish growth, and by consequence, slower value creation to their shareholders.

Thirty-nine CPG companies and retailers were included in the final study, a subset of 211 public companies with consistently advertised in Hispanic media between 2006 and 2010. The study identified seven companies as best-in-class, driving the highest overall organic revenue growth from their consistent leading efforts in the Hispanic market, including Coca-Cola, General Mills, Ralcorp, Groupe Danone, Nestlé, Walmart and Walgreens. Other companies analyzed include Clorox, Unilever, Kimberly-Clark, Target, Church & Dwight, CVS, Hormel, PepsiCo, Kellogg’s, Diageo, Pernod Ricard, Sara Lee, Fortune Brands, Rubbermaid, NutriSystem, ConAgra, Campbell’s, Hershey’s, Loréal and Estée Lauder.

Accounting for 17 percent of the U.S. population and boasting $1.2 trillion buying power, Hispanics are the ideal staples consumer. Not only do they represent 56 percent of the U.S. population growth between 2000 and 2010, but they spend more time and money per trip to the grocery store than the national average, they bring more family members with them to shop, and they tend to be more brand loyal with a lesser emphasis on price point.

Boasting much larger households (3.8 persons per household compared to 2.5 for non-Hispanic households), Hispanics also have an annual household formation rate six times faster than that of non-Hispanic households (2.5 percent compared to 0.4 percent). In fact, according to a recent study by Credit Suisse, over the next 10 years, Hispanic households’ food at home expenditures are estimated to grow at a 5.7 percent average annual rate compared to just 2.5 percent for non-Hispanic households. This makes Hispanic marketing a strategic imperative for CPG companies and their retail counterparts.

The younger age and larger Hispanic household size contributes to Hispanic households having the highest consumer spending potential for necessary spending on food at home and personal care. Hispanic food at home cumulative lifetime spending is over 50 percent higher than that of non-Hispanic white, while Hispanic personal care cumulative lifetime spending is about 33 percent higher than that of non-Hispanic white.

The Hispanic market has moved from opportunity to a required corporate strategy for sustainable growth. Wall Street analysts have said that “Hispanic marketing strength may be one of the best indicators for whether management teams are doing ‘next frontier’ thinking or just trying to fix yesterday’s problems.”

The AHAA study shows that brands that focus on Hispanic marketing with determination and discipline are most likely to see more rapid topline revenue growth than those who are not as focused on this market.

While allocation is being measured in this study, sound evidence demonstrates that consistent-significant Hispanic marketers drive superior revenue growth among CPG manufacturers and retail. This research underscores that companies must deliver consistent integrated approaches and do not benefit from one-offs or translations of general market campaigns. While proper ad spend above-the-line is basic, it is only part of the puzzle.

“Hispanic media spend across all disciplines should be more broadly defined as corporate-wide holistic investment in this growth segment, reflecting the most appropriate cultural insights and developing integrated marketing strategies from product innovation to customer experience in order to leap-frog corporate revenues into an accelerated growth rate,” said Carlos Santiago of Santiago Solutions Group, who conducted the study for AHAA.

The study was commissioned by the AHAA Research Committee and executed by the Santiago Solutions Group. AHAA analyzed all 35,000 U.S. advertisers and their allocation trends to Hispanic media for five years between 2006 and 2010.

McLean, Va.-based AHAA: The Voice of Hispanic Marketing represents the best minds and resources dedicated to Hispanic-specialized marketing.