“THE HISPANIC MARKET OPPORTUNITY IS NOT HUGE!”

“The Hispanic market is a HUUUGE opportunity” is a statement that we still hear frequently at conferences, in business strategy presentations, in annual budget meetings, in blogs and articles. I have certainly heard it hundreds of times during the last 15 years since the 2000 Census revealed for the first time the size and growth rate of the US Hispanic population.

I contend here that the opportunity is NOT huge and that the overindulgence in communicating the Hispanic opportunity in this superlative way by its advocates, in order to convince the CMOs, CEOs, and business owners who "control the investment budgets and decisions”, has been and is a big problem.

 In the early 2000 many companies jumped at the opportunity, at that time mostly without a well defined strategy, to find little or no ROI in their investment. Even more strategic and integrated approaches in the recent past have yielded smaller than expected returns. This lack of huge returns in great part has created the ON and OFF Hispanic investment cycles that we have witnessed in many companies. 

I have personally avoided the HUGE approach (and discouraged my direct reports from even using that word) in favor of a more objective, data-driven and unemotional presentation of the true business opportunity presented by the US Hispanic population. Because despite the title of my writing, I do believe that there is growth to be had with a sound Hispanic strategy and investment and no reason to leave money on the table, especially in these times of hard-to-achieve top line growth. Even though the purchase data is not perfect (how do you accurately measure if a potato chip bag at a Walmart store is being purchased by a Hispanic, African-American, Asian or Non-Hispanic White consumer?), the algorithms created by the big data companies are good enough to estimate market share, growth contribution rates, current and forecasted market size assessments and other performance and business indicators coming from Hispanic consumers. 

When I have had the privilege and opportunity to lead Multicultural/Hispanic marketing teams at large and small companies I have implemented a very objective approach and have developed and followed a simple but effective framework to truly assess the business opportunity offered by the dramatic growth of the US Hispanic population. A good place to start is by answering the “How big is big?” question but in a detailed manner: by category, by brand, and if possible by sku.

Here is a real example at the category level (these are real numbers but the name of the company and even the categories have been masked for obvious confidentiality reasons). This is a very large CPG company that has been in the ON and OFF roller coaster of heavily investing for a while but then abandoning completely any support behind the Hispanic consumer. It competes and has a leadership position in most of its 15 categories. In this instance on the ON stage, the CMO had commanded that all brands needed to include the Hispanic market in their business plans convinced that there was a huge opportunity. As external consultants we had the opportunity to first do an assessment that significantly helped the company better allocate investment and resources where it made more sense, and as you will see, not all brands had a significant opportunity.

HISPANIC CONTRIBUTION TO CATEGORY GROWTH

 As this "Money Slide" shows, Hispanic CAGR was for the most part higher than the Total Market as expected. But then in terms of absolute dollars forecasted to come from Hispanic consumers in the next five years, the contribution varied widely in each category. Category A provides the largest opportunity for growth and most of it will come from Non-Hispanics. However, Hispanics will make a significant contribution to growth in the next five years even though today they only represent 9.1% of the sales, well below the population % (Hispanics are 17% of the US population and about 12% of US households). Prior to this analysis, the brand leaders of Category A were not excited about Hispanic consumers because they were "underdeveloped". In Category D the majority of the growth will come from Hispanics (65% of the growth). Other opportunities are not as clear. How much would a brand need to spend in Hispanic marketing to capture a portion of five-year growth of $29 million dollars?

Would you follow the CMOs command that all brands invest behind Hispanic marketing because Hispanics are a HUGE opportunity? Hopefully not. Would you ignore the money that is on the table that your brand can grab if you implemented and allocate resources to capture the Hispanic opportunity in some of these categories? Absolutely not.

By now, I hope you have understood and forgiven me for my sarcastic title, but I defend the point that a blanket approach and an emotionally-charged and subjective statement about how HUGE the opportunity is does not work. A disciplined, objective and data-driven approach and doing the right assessment and pre-work will allow for better allocation of resources and focus and hopefully better ROI.

More to come on the framework for Multicultural and Hispanic path to performance in future writings. - JUAN CARLOS DAVILA