Marketing to Latinos: What Are You Missing? – Part 1
While the growing opportunity in the Latino market is now generally recognized, retailers may still be missing significant areas necessary to capitalize on business with this increasingly important segment.
By Jodean Robbins
The Latino market continues to represent an increasingly powerful and growing consumer force in the United States. According to the U.S. Census Bureau, the estimated Hispanic population of the United States as of July 1, 2008, is 46.9 million, making people of Hispanic origin the nation’s largest ethnic or race minority. “Hispanics constituted 15 percent of the nation’s total population,” reports Laura Sonderup, managing director and senior strategist with Hispanic marketing agency, Hispanidad, located in Denver, CO. “It is important also to take into account the roughly 10 to 12 percent of the Hispanic population that is ‘undercounted,’ as a result of lack of response and lack of proper documentation.”
“Since 2000, Hispanics have accounted for more than half (50.5 percent) of the overall population growth in the United States,” says Manuel E. Machado, CEO/co-chairman for MGSCOMM, a Coral Gables, FL-based advertising agency that specializes in Hispanic communications. “As a point of reference, more than one in two people added to the population between July, 2007 and July, 2008 was Hispanic. By 2020, the United States will be the largest Spanish speaking country in the world. By 2050, the projected Hispanic population in the United States is 132.8 million or 30 percent of the total U.S. population.”
The Latino community represents significant purchasing power. “According to the Selig Center of Economic Growth at the Terry College of Business of the University of Georgia, Latino consumers controlled $978 billion of spending power in 2009,” says Gary Caloroso, partner and president of Sahlman Williams Public Relations and Marketing in Tampa, FL. “They project Latino purchasing power will be $1.4 trillion in 2014.”
“The Latino consumer is an exceptionally large buying force and this enormous buying force continues to grow,” explains Emily Fragoso, marketing manager with Coast Produce Co. Inc., headquartered in Los Angeles, CA. “According to the 2008 Times & Trends – Hispanic Consumers: Capturing CPG Market Potential, the Hispanic market drives $34 billion in CPG spending. The Hispanic spending per household is significantly greater than the national spending averages across almost every channel.”
This type of purchasing power translates into retail success for many. “Successful marketers are already reaching Hispanic sub-groups and having a positive impact on their business,” reports Machado. “Hispanic consumer demographics and purchase behavior for medium- to high-spend categories, such as food at home, make it critical for produce companies to allocate an appropriate portion of their total national business and marketing resources to the Hispanic/bilingual market.”
“There is tremendous purchasing power behind the Latino customer,” says Maria Brous, director of media and community relations for Publix Super Markets Inc., based in Lakeland, FL, with more than 1,000, including four Publix Sabor stores and an additional one opening soon. “One of the biggest mistakes a retailer can make is to discount the buying power of Hispanics.”
For the produce department in particular, the Latino shopper is a coveted customer. “If actual numbers aren’t impressive enough, then Hispanic buying habits should push your interest over the top,” says Mary Ostlund, director of marketing for Homestead, FL-based Brooks Tropicals LLC. “Hispanics shop for quality. Price will be a factor, but overall, their priority is putting fresh, nutritious food on their tables. Quality produce delivers the great taste with the nutrition and freshness that Hispanics want for their families.”
Dispelling Myths
Despite the increasing recognition of the importance of the Latino market, there are still varying degrees of understanding and mistake making in trying to reach them. Jaime Leon, marketing manager for Frieda’s Inc., headquartered in Los Alamitos, CA, says, “The two most common mistakes in retail marketing to Latinos are first, stereotyping or not understanding who the customer really is, and secondly, not understanding the spending power of the Latino consumer.”
“One of the most common mistakes made by American grocers and other retailers is assuming Hispanic consumers are downscale shoppers,” adds Marion Tabard, marketing director for Turbana Corp., based in Coral Gables, FL. “Although Hispanics tend to have lower income levels than non-Hispanic, white households, the amount they spend on groceries and other products is actually greater than non-Hispanic, white households and many other segments. Furthermore, Hispanics spend more on premium products such as fresh fruit, vegetables, fish and premium meat products. Hispanic households will spend far more on average than non-Hispanic whites on food consumed at home. As Latinos form a larger part of the American population, they will represent an increasingly large part of grocers’ profits.”
The Latino consumer also tends to prioritize fresh purchases, despite the economic climate. “Even during the economic recession, Hispanics have maintained their spending in certain categories,” reports MGSCOMM’s Machado. “As reported by the Hispanic Economic Survey August 2009, Hispanic grocery shoppers, in general, were most likely to reduce spending by cutting down on beverages and meat and less willing to cut out dairy and fresh produce items.”
This means good results for retailers who remain consistent with Hispanic outreach. Fragoso explains, “From research gathered from the PMA Consumer Trends ’08 Savory, Spicy and Culturally Clued-in: What the Hispanic America Consumer Wants and our own marketing program, Coast Caliente, keeping a consistent Hispanic messaging including bilingual POS, packaging and education is important. Commonly, multi-cultural programs are the first things to go with hard times. That should not be the case knowing the buying power associated with this cultural group. There isn’t a lot of competition of traditional retailers hitting the mark with this, making it a prime opportunity for grocery stores to get it correct.”
The Latino community is still one of the best markets for the traditional supermarket. “Latinos are a great customer for traditional supermarkets,” asserts Alfonso Cano, produce director for Northgate Market, a 30-store chain based in Anaheim, CA. “The Costcos and Trader Joe’s have not yet infiltrated many of these demographical areas.”
“A great example of the power of the Latino market is the re-emergence of the independent stores,” agrees Dick Spezzano, president of Spezzano Consulting Service Inc., located in Monrovia, CA. “Twenty years ago, we were talking about the demise of independents; now we’re seeing strong growth, and in many cases, independents taking over abandoned chain store sites.”
Growing representation as buyers on wholesale markets is another indication of Latino grocery growth. “As wholesale produce distributors, we see steady growth in the number of Latino customers buying on the Philadelphia Market,” reveals John Vena, president of John Vena Inc., based in Philadelphia, PA.
Who’s In Your Store?
While the size and spending power of the Latino market may not be a surprise, some retailers may still be surprised to find which Latino customers are among their shoppers. “You can’t make regional or city subgroups as specific as they used to be,” reports Frieda’s Leon. “With the flow and pattern of immigration, there are Latinos of all origins in all markets. You can’t divide up the market anymore. For example, some Central American immigration is following the Mexican route so we’re seeing pockets of Central Americans in traditionally Mexican-dominated cities.”
“We’ve learned over the past four decades how Hispanic customers are migrating northward,” states Publix’s Brous. “Specifically for Publix, this means other parts of Florida, but also Georgia, South Carolina and Tennessee. The population has spread and there is not just one base anymore per city. Before, when you looked at South Florida, you could say it was a highly Cuban base, but that’s not true anymore. Now, there are pockets of all different nationalities. The best thing a retailer can do is understand and celebrate the differences.”
Migration and earlier acculturation are paving the way for much more mobile Hispanics. “One of the biggest shifts we’re finding now is that Latinos are much more mobile early in their acculturation,” adds Spezzano. “We’re starting to see pockets where we didn’t see them before because early arrivals are not staying as close to the port of entry. For example, they’re coming into Southern California, but within five years they’re moving to Minneapolis.
“Specific areas may always be predominantly one nationality as families recruit families,” states Veronica Kraushaar, president of VIVA Global Marketing LLC, in Nogales, AZ. “However, there is greater geographic spread with Latinos today. One oft-missed group is the rural Latinos. We tend to think of Latinos as city-dwellers, but what about the great numbers in all the agricultural areas in the country?”
Currently, there are twenty states in which Hispanics are the largest minority group. “These states are Arizona, California, Colorado, Connecticut, Florida, Idaho, Iowa, Kansas, Massachusetts, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, Oregon, Rhode Island, Texas, Utah, Washington and Wyoming,” reports Hispanidad’s Sonderup.
States or cities not previously known for significant Hispanic communities are now seeing surprising growth and diversity. Sonderup explains, “The states with the highest percentage increases in Hispanic population between July 1, 2007, and July 1, 2008, were the Carolinas. South Carolina’s increase was 7.7 percent and North Carolina’s was 7.4 percent. In fact, the fastest growth is being posted in states which have not, historically, had a significant Hispanic population base.”
Vena adds, “We have always had a strong community from Puerto Rico, but now we have growing numbers of Latinos, particularly people from Mexico, buying on a regular basis. Throughout the Philadelphia metropolitan area there is an increase of small retailers and restaurants geared to different communities.”
The challenge for retailers is to understand and serve the needs of all these different customers. “We believe that produce marketing campaigns have to be as inclusive as possible while remaining sensitive to the needs of all groups,” states Caloroso of Sahlman Williams.
Do You Have The Right Stuff?
Understanding the specific Latino customer and having the right product for them is fundamental, but complex nonetheless. “Having the ‘right’ product may be the most important aspect of sales for us and our customer,” says Northgate’s Cano. “However, to ‘have the correct product’ is subject to interpretation. You could have pasillas, jalapenos, serranos, avocados, cilantro, Roma tomatoes, and papaya, just to name a few. Yet are they the right size, color, taste, price, or variety in order to make it ‘the correct product?’ A retailer has to ask and look for themselves if they do not know.”
“Retailers should play around with the mix to meet their customers’ needs and to optimize sales,” advises Brook’s Ostlund.
Having the right product mix begins with a real understand of who the Latino consumers are in your store. “It’s about knowing the type of Latino consumer in the product mix,” agrees Robert Schueller, director of public relations for Melissa's World Variety Produce, headquartered in Los Angeles, CA. “Don't lump and assume Mexican products work for all Latino consumers.”
“It is vital that you carry the right stuff,” agrees Fragoso with Coast. “Retailers will be most successful if their staff understands the cultures and the products important to the culture. This includes knowing what items are important to particular sub-groups and at what time of year.”
“If you want the Latino dollar, you need to understand your specific Latino customer,” advises Spezzano. “Don’t just assume you’re serving them with a broadline Hispanic supplier or by having a tropical section. You will be rewarded with loyalty and spending if you have the right mix.”
A wise retailer will work hard to keep the Latino dollar in their store. “Our job is to make Publix their one-stop destination where they can find everything they’re looking for in both perishable and dry goods,” says Brous. “We want them here when they need something. We make sure to special order products if necessary. We do everything we have to, including shopping the competition so the customer doesn’t have to make multiple trips to other stores. We also take advantage if a customer asks for a special order. We see the opportunity to put it out on the sales floor and see how the product moves with other customers.”
Developing the right product mix may require time and a personal touch. “This is where some of the traditional tools used by retailers to understand consumption may not work,” warns VIVA’s Kraushaar. “For example, very few Hispanics use loyalty cards and most pay in cash, making compilation of profiling data impossible. The Hispanic-directed retailer needs to invest much more time practicing what we call MBWA (Management By Walking Around). hey need to talk to and watch their customers in action. Only then will they truly understand their customer base.”
“We’ve spent many years researching and tweaking our product selection and it will vary from store to store,” says Publix’s Brous. “It is so important to recognize that not every Latino is the same. Part of our emerging business department looks at the Hispanic market and sourcing products to reach many different demographics. Assess your produce department and understand what you currently have versus what you’re hearing from customers. Look at what products are available on the market. You need to figure out what works for your particular customers, your particular store and your particular area.”
The produce floor is one of the best tools for accessing information on the right product mix. “Buyers should work very closely with the store managers and hold them responsible for getting the right feedback as to what products are needed,” recommends Spezzano of Spezzano Consulting. “They can go into the local small stores and find out what they’re carrying. There isn’t anything the local small stores carry that you can’t get as a chain or larger independent. Also, your specialty wholesalers can help out in understanding the mix you should have. Just don’t do a one-size-fits-all!”
“We suggest retailers look at the demographics in the store areas to ensure they have the right mix of products for their Latino customers,” says Turbana’s Tabard. “The customer preferences are likely to change according to their nationality and customs. Hispanics are very loyal shoppers and they appreciate finding a wide assortment of Hispanic ethnic products.”
Overall, an understanding of the individual customers will yield results. “It really comes down to not lumping all Hispanics into one,” stresses Brous. “Our customers are savvy and know when grocers are sincerely trying to meet the needs of the community.”
“Latino consumers are becoming more demanding,” adds Spezzano. “As consumers become acculturated and educated, the bar has been raised in those stores who serve the market. Because of that, you can’t just meander around. You have to have professional managers as well as those who know the market and what specific needs the customers have.”
For Part II, please see our Produce Plus section at
www.producebusiness.com
PULLQUOTES
“One of the biggest shifts we’re finding now is that Latinos are much more mobile early in their acculturation. We’re starting to see pockets where we didn’t see them before because early arrivals are not staying as close to the port of entry.”
-- Dick Spezzano
Spezzano Consulting Service
“It is so important to recognize that not every Latino is the same. Assess your produce department and understand what you currently have versus what you’re hearing from customers. You need to figure out what works for your particular customers, your particular store and your particular area.”
-- Maria Brous
Publix Super Markets Inc.
