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Opportunities for Action in Consumer Markets
Advancing to the Next Level
of Latino Marketing:
Strike First, Strike Twice
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Advancing to the Next Level
of Latino Marketing:
Strike First, Strike Twice
Consumer companies are well aware of a major
opportunity in the U.S. Latino market. With a disposable income of $580 billion that is growing at a rate
of 10 percent per year, Latinos represent the largest
ethnic segment in the United States. As a group,
Latinos are young (their median age is 26 compared
with 35 for the general population) and are willing to
spend more than the non-Latino shopper in many
categories. (See Exhibit 1.) They are also eager to try
new brands—although once they find a brand they
like, they can become fiercely loyal. What’s more,
non-Latino suburban youths are looking to their lead
in music, fashion, and food. Early movers that target
Latinos will win a broad range of customers with
extremely high lifetime value.
Yet most product-development and marketing efforts
targeted to Latinos have been awkward, inconsistent,
and only moderately effective. When companies come
up against different dialects, spotty consumer data,
fragmented retail channels, and small drop sizes, they
often fall back on simply translating (sometimes clumsily) their traditional advertising. That weakens their
brand’s connection with current Latino customers
and misses an opportunity to attract new ones.
But some marketers have persevered and entered
what we characterize as the second generation of
Latino marketing. They’ve progressed from simply
recognizing Latinos as a viable market to understanding differences by country of origin and degree of
acculturation. Instead of merely translating ads into
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Exhibit 1. Latinos Spend Heavily
in Many Consumer Categories
Latino Spending in Each Category as a Percentage of the
Average Spending of Non-Latinos in the Category
172%
Footwear
Children’s apparel
161%
155%
Soft drinks
Imported beer
134%
Laundry and cleaning
supplies
134%
131%
Packaged cereal
Food at home
125%
103%
Telephone
Personal care
products
99%
Electronics
90%
New automobiles
82%
0
100
200
SOURCE: Packaged Facts, Paul Kagan Associates, September 2001.
Spanish, they pursue the most valuable Latino consumers through differentiated local advertising and
promotions.
Even that approach has its limits, however. With competition increasing and the level of play rising, the
advantage is now moving to third-generation marketers. These companies are making the Latino
market a platform for new-product launches and
line extensions. In so doing, they are also taking the
pole positions in the multiethnic mass market of
the future.
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Segmentation Pays Off
The Latino market is highly concentrated: two-thirds
of Latinos live in just four states—California, Florida,
New York, and Texas—and 14 localities account for
more than 60 percent of the Latino population. (See
Exhibit 2.) Furthermore, like most other immigrants,
Latinos tend to gather with their compatriots: Cubans
in Miami, Puerto Ricans and Dominicans in New
York, Mexicans in Chicago and Los Angeles. That
means the Latino market and its subgroups can be
Exhibit 2. U.S. Latinos Are Concentrated
in a Few Locations
10
Latino
population
growth,
1990–2000
CAGR (%)
8
6
Phoenix
Dallas
Washington, D.C.
Houston
Chicago
RiversideSan Bernardino
McAllenBrownsville
Orange County
San Diego
4
Miami
El Paso
2
New York
City
Los
Angeles
San
Antonio
0
20
40
60
80
100
Latino share of local population (%)
=1 million Latinos
SOURCE: U.S. Census Bureau.
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targeted easily and inexpensively through billboards,
local media, and event promotions. But to be effective, local marketers must recognize important differences among the various subgroups.
As second-generation marketers have discovered, the
Latino market is far from homogeneous. Mexicans
represent the largest subgroup in the United States,
with 58 percent of the Latino population. (See
Exhibit 3.) Immigrants from Cuba, Puerto Rico, the
Dominican Republic, Mexico, and Central and South
Exhibit 3. Mexicans Constitute
the Largest Latino Subgroup
U.S. Latino Growth by Place of Origin
40
Latino
population
(millions)
1990–2000
CAGR (%)
20
Other/
not classified
Central America
South America
Cuba
Puerto Rico
9.1
Mexico
4.4
2.5
3.1
1.3
2.5
20.6
13.5
0
Total Latino population (millions):
Share of total
U.S. population (%):
1990
2000
22.4
35.3
9.0
12.5
SOURCES: U.S. Census Bureau; BCG analysis.
Total CAGR:
4.7%
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America tend to speak different dialects, celebrate
different holidays (Cinco de Mayo in Texas and
Puerto Rican Day in New York), favor different traditional foods and drinks, and listen to different types
of music. In addition, Latinos’ awareness of and loyalty to traditional brands often depend on the
brands’ relative strength in their home country.
But place of origin isn’t the only criterion for segmentation. Latinos’ media habits and price sensitivities
also vary depending on degree of acculturation as
well as age and marital status. Family men and married women who work, for example, are usually more
sensitive to price than the average consumer, but new
arrivals can be highly insensitive to prices for what
they perceive to be status brands. These differences
will affect advertising decisions about timing, choice
of medium, and language.
Consider Jorge, a 32-year-old landscaper who, with his
wife, Rosa, and two children, immigrated to Los
Angeles from Guadalajara three years ago. Jorge
works a second job as a carpenter, and Rosa works
part-time cleaning homes. In pursuing the American
dream, the couple is saving up for a modest onebedroom house in East Los Angeles. Yet despite their
limited disposable income, Jorge and Rosa favor many
premium brands that were unavailable to them in
Mexico. Jorge, for example, enjoys drinking Chivas
Regal whisky with his friends while watching his old
hometown soccer team on the local Univision station.
Chivas, a brand that denotes power and success,
would have been out of his price range in Mexico.
Rosa shops daily for the evening meal, as she did in
Mexico, so she tends to purchase smaller packages at
higher price points. And despite the premium, she is
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extremely loyal to Goya products, Kellogg’s Corn
Flakes, General Mills’ Cheerios, and Kraft cheeses.
Why these brands and not others? Because, Rosa
explains, she’s seen their ads in her neighborhood
grocery store and on billboards in her community,
and she’s heard about them on the Spanish radio station. And these are the brands that her friends have
been loyal to for years. The couple’s ability to purchase name brands is, for them, a sign of progress in
their new country.
Advancing to the Third Generation
Although investments are paying off for secondgeneration marketers, simply understanding subgroup differences is no longer enough. As noted
above, third-generation marketers are striving to create new demand by launching new products and line
extensions.
While not quite a third-generation marketer, HäagenDazs has experimented successfully with line extensions. It took a candy flavor popular among Latinos to
create Dulce de Leche ice cream—the company’s
second-fastest seller after vanilla wherever it is
stocked. Similarly, General Mills has introduced two
dessert products to its Betty Crocker brand: arroz con
leche (rice pudding) and flan (custard).
Beyond product adaptations, third-generation marketers take a holistic approach, which entails an even
deeper understanding and finer microsegmentation
of consumers, coordinated with local marketing
events and real community involvement. By focusing
on specific segments, these marketers stimulate
demand that didn’t exist before, and they “leverage
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the travel trail” to promote products and reinforce
brand preferences in the home country as well as the
new one. (See Exhibit 4.)
Diageo’s Johnnie Walker Black Label (JWB) brand of
Scotch is a recent example. The market for all hard
liquors has been dwindling, and Scotch in particular
seems mostly limited to white males over 50. Among
Latinos, however, Scotch is still popular. And in the
Dominican Republic, JWB has been one of the most
sought-after brands. JWB played on that strength to
launch an extended campaign for Dominicans in
metropolitan New York, where they represent one of
the largest immigrant groups. For example, it put up
Exhibit 4. The Advantage Has Moved
to the Third Generation of Latino Marketers
First generation:
Identify the
opportunity
Translate ad copy
into Spanish
Sponsor national
events
Second generation:
Segment the
market
Understand differences by home
country and acculturation
Market specifically
to Latinos
Experiment with
local marketing
Third generation:
Take a holistic
approach
Advance to microsegmentation of the
market
Develop product
adaptations and line
extensions
Establish a focused
organization for Latino
marketing
Increase community
presence
• Events
• Charities
Focus on trendsetters
“Leverage the travel
trail”
SOURCE: BCG analysis.
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billboard ads throughout the Dominican community
that showed only the brand name and an image of
Johnnie Walker in his top hat, thereby avoiding the
problem of different dialects. It also leveraged the
“reverse” travel trail (Dominicans going back home
for a visit) by covering airports in the Dominican
Republic with advertisements for JWB and sponsoring
baseball teams there.
In an even more effective initiative, JWB capitalized
on the fact that Dominicans are concentrated in a few
neighborhoods by mounting a creative and inexpensive campaign targeted to the young professional
microsegment. It positioned the brand as slightly
upscale from the mass market by associating it with
Dominican nightclubs where young people have to
dress up to gain entrance. To make the association,
JWB sponsored the hottest Dominican merengue
groups at those nightclubs and featured its brand
heavily. These moves reinforced the image many
young Latinos look for in a brand: sophisticated
enough to be part of mainstream U.S. culture, yet
cool enough to be Latino. Consequently, a bottle of
JWB Scotch, which might cost $20 at a liquor store,
could be found on nearly every table in a Dominican
club, despite a 500 percent markup.
Not only did JWB double its case volume in the U.S.
Latino market by targeting Dominicans, it also went
right to the center of the Spanish-speaking culture in
New York and became known as a brand for “hip and
upscale” young adult Latinos. That got the attention
of Puerto Ricans and other Latino groups, who often
go to the same clubs. As a result, JWB has been gaining share among those consumers as well.
Goya, the largest Latino-owned food company in the
United States, is one of the most successful third-
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generation marketers. The company was founded in
1936 by Prudencio and Carolina Unanue, immigrants
from Spain and Puerto Rico, respectively. They
imported authentic Spanish products such as olives,
olive oil, and sardines, and marketed them to New
York’s growing Latino population. Goya’s marketing
strategy centers on the importance in Latino culture
of mealtime for bringing together family and friends.
Advertising features images of multigenerational families eating together.
Today Goya’s popularity across the whole Latino market rests on its understanding of Latino subgroups
and its ability to sell different products to different
cultures: rice and beans for Caribbean descendants;
chilies, salsas, and refried beans for Mexicans. The
company offers more than 1,000 products for Latinos,
including 23 rice products and 30 types of peas and
beans, and it has grown to more than $700 million
in sales.
Goya also segments its market by degree of acculturation. Older Latinos, for instance, and Latinos who
have been in the United States for less than ten years
tend to make their meals from basic ingredients, such
as Goya’s dried beans. Latinos born in the United
States and those who have lived in the country for
over a decade are more likely to choose foods that are
easier to prepare. For them, Goya provides prepared
beans that taste “like you cooked for hours.” For
young, busy families that are thoroughly acculturated
but preserve old traditions, Goya offers microwave
and other easy-to-prepare meals. All of Goya’s labels
are in English and the most universal form of
Spanish. Recently, Goya has begun to exploit the
wider popularity of Latino culture with advertising
aimed at the general consumer.
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Latino Competition
Goya isn’t the only Latino-owned company with its
eyes on the U.S. Latino market. Many Latin American
companies with strong brands in their home countries are searching for growth opportunities north
of the border. And, like Goya, some of those competitors are looking beyond the Latino market and
creating platforms for success among the general
population.
Bimbo, the world’s third-largest bread maker and
Mexico’s leading bakery brand, is one example of
serious Latino competition making inroads in the
United States. With a 95 percent share of the bread
market in Mexico, the ambitious multibillion-dollar
company saw the U.S. market as an opportunity to
grow its sales of premium-priced breads, cakes, and
snack products. It recently acquired Orowheat (a division of George Weston Limited) and Mrs Baird’s (the
leading bakery in Texas) to provide a platform for
efficient and broad distribution of its Mexican brands
in the United States. Its presence in the U.S. Latino
markets should help popularize its non-Latino brands
in those markets as well.
The makers of Jarritos, a Mexican fruit-flavored soft
drink, are employing a similar strategy. The drink had
succumbed to competition from Coke and Pepsi and
had largely disappeared from Mexico; now it has
become a $50 million brand in the United States by
targeting Mexican immigrants who long for homecountry brands. Partly in response to Jarritos’ competition in its markets, Shasta launched a new line of flavors to appeal to Latino tastes: Guava Passionfruit,
Horchata, Jamaica, Mango, Manzana, Piña, Sangria,
Tamarindo, and Zázz.
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Organizational Impediments
Too often, companies that target the Latino market
fail to look for creative ways to reach its subgroups
and fall back on traditional marketing. That’s because
most marketing departments are organized around
brands and regions, not ethnic groups, so no one
“owns” the Latino market. If an ethnic-marketing
program exists, it is likely to have limited management involvement and few employees with diverse
backgrounds, particularly in management. And
such departments are often the first to be cut in a
downturn.
Yet despite the challenges and missteps, more and
more companies are recognizing that the rewards of
creative and aggressive marketing in the Latino community are too great to pass up. The onslaught of new
U.S. and Mexican players is forcing the more established companies to defend their market position.
They are struggling to learn how to distribute their
products more effectively, develop line extensions,
and capture value early as the brand of choice among
Latinos.
The secret to reaching the U.S. Latino market lies in
understanding the relationship between spending on
national advertising and local sales execution.
Because the target segments are local, execution
needs to be local as well. Central management can
create ideas for promotions, advertising, and event
sponsorship, but they must be adapted and implemented by the people responsible for individual local
markets. However, communication must flow the
other way as well: because local management is closer
to the market, it is in a better position to discover
what elements of the national campaign are working
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and what the new trends are—information that can
be fed back to the center to improve those programs.
Working at all levels of the organization, from central
marketing to regional sales forces, successful companies build a platform that ties local execution to the
national campaign. An auto dealership, for example,
might link a sales promotion to a local community’s
celebration of a holiday while still using Spanishlanguage advertising on national television and
in print.
Local involvement should include a commitment to
the Latino community in question. Event sponsorship
and on-premise promotions are not sufficient to
ensure brand loyalty. An investment in community
organizations, such as local charities and sports
teams, is essential. Latinos are more likely to adopt a
brand that is truly part of their community. The key
to a successful Latino marketing program lies in
embracing, rather than overlooking, the very differences that make the market so challenging. Analytical
rigor and strategic segmentation generate more value
than a one-size-fits-all approach.
Capturing the Latino Opportunity
Latinos are responsible for 8 percent of total spending in the United States, yet less than 3 percent of
spending on marketing is directed at them. Although
Latinos’ geographic concentration makes them relatively easy to target, their cultural diversity presents a
challenge. A few companies, however, have risen to
that challenge and launched new products and line
extensions, and created new demand in the United
States as well as in the home country. They’ve sought
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to understand the variations among the market’s
cultural groups, analyzed them closely, and found
creative new ways to leverage them. Here are five
guidelines for becoming a third-generation Latino
marketer:
• Segment your market by country of origin, age and
marital status, and degree of acculturation. Understand how and why different groups use particular products and services and where they might
overlap.
• Favor local marketing over mass advertising,
through focused media purchases and local tools
such as outdoor ads, radio commercials, promotions, direct marketing, and event sponsorships.
• Develop a rich understanding of Latinos’ lives and
behaviors, and resist taking the easy route of simply
translating English advertisements into Spanish.
Don’t be afraid to appeal to specific subgroups in
products, messages, and channel strategies.
• Make the brand’s Latino marketing program a priority for top-level management and develop a
comprehensive platform to address it. Invest in
long-term efforts and stay involved with communities. Use internal and external people who understand the community and the nuances of its many
segments.
• Track market share city by city and determine
where the next round of growth will occur.
As the disposable income of Latinos approaches
$1 trillion before the end of the decade, marketing
to this segment will become extremely competitive.
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What’s more, because other ethnic groups in the
United States are also growing rapidly, much of mainstream marketing will begin to emulate the strategies
of ethnic marketing. The brands that are first to capture specific groups within brand-loyal ethnic segments will win a generous market share. The time to
invest is now. Or, as Latinos might say, “El que pega
primero pega dos veces”—which, loosely translated,
means, “He who strikes first, strikes twice.”
James Lowry
Alex Ulanov
Thomas “Tigre” Wenrich
James Lowry is a vice president and director in the Chicago
office of The Boston Consulting Group. Alex Ulanov is a
project leader in the firm’s New York office. Tigre Wenrich is
a vice president and director in BCG’s Mexico City office.
You may contact the authors by e-mail at:
[email protected]
[email protected]
[email protected]
© The Boston Consulting Group, Inc. 2003. All rights reserved.
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