Hispanics have become the most important U.S. demographic growth driver in the food, beverage and restaurant sectors, according to data from Hispanic market research firm Latinum Network.
Hispanics Outspend All Other Groups in Food
The U.S. Hispanic segment made up more than 50% of real U.S. food, beverage and restaurant growth between 2005 and 2008, generating $52 billion of new inflation-adjusted spending. In contrast, non-Hispanics generated $40 billion of new inflation adjusted spending during the same period. This means that between 2005 and 2008, Hispanics accounted for 57.7% of sales growth in the food, beverage and restaurant sector.
Latinum analysis indicates this growth can be attributed primarily to an increase in the number of U.S. Hispanic households, and secondly to an increase in consumer spending among U.S. Hispanics. In the food, beverage and restaurant business, this new spending offset most (84%) of the real decline in demand across the entire $1 trillion sector. Latinum attributes this divergence in demand mainly to differences in ethnic preferences, economic and cultural integration, and demographics.
Key Findings on Hispanic Food Spending Behavior
More than $9 billion of new value in food and beverage was created by Hispanics in otherwise dormant or declining categories such as fish and seafood, fresh fruit juice and dairy products between 2005 and 2008.
$5.9 billion of new value was created by Hispanics in growing categories where they represent approximately 20% of the growth, such as vegetable juices and fruit drinks, meats including pork, ham and mutton and frozen meals, which represent the highest-growth food category among Hispanics. It appears that busy Hispanic professionals are increasingly turning to frozen meals to feed their children.
While health & wellness trends reduced non-Hispanic consumption of beef, ethnic preferences buoyed Hispanic buying of beef.
Hispanics are eating out more while others are cutting back, driving growth in fast food and full-service. In particular, Hispanics are increasingly likely to eat out during the work day, driving new sales in fast-food breakfasts and full-service lunches.
The increasing rate of Hispanic home ownership is driving growth in household goods, while non-Hispanics are doing the opposite by reducing real estate holdings and their purchase of household goods.
Hispanic teens are driving the majority of new growth in deodorant and feminine hygiene and at least 20% of growth in cosmetics and shaving needs.
The Future Looks Bright
Demographic trends indicate Hispanics should continue to be the dominant consumer segment in the food, beverage and restaurant sector for years to come, according to Latinum. Total U.S. Hispanic household spending is expected to top $1 trillion by 2013, and with relatively stable birth rates, household spending in this demographic should continue climbing until 2050.
Latinum advises food/beverage/restaurant retailers and brands to offer distinct products, channels, messaging and marketing strategies to the Hispanic market, such as Spanish-language advertising campaigns.
Convenience and Discount Retailers Target Hispanics
At least three major convenience and discount retailers have launched CPG- and food-based efforts to attract Hispanic customers in the past year. As reported by Supermarket News, convenience retailer 7-Eleven is cooperating with sister chain 7-Eleven Mexico to develop private-label foods which appeal to Hispanic consumers. The products will be sold in all 7-Eleven Mexico stores and select U.S. 7-Eleven stores with a strong Hispanic customer segment.
In August 2009, discount warehouse club retailer Sam’s Club opened an Hispanic-targeted store called Mas Club in Houston, TX. Mas Club features about 4,000 items, including many goods favored by Hispanic consumers, and Spanish-speaking staff. In addition to selling grocery and CPG products, Mas Club features a financial services center, health clinic, and weekend outdoor market.
Sam’s Club parent company Wal-Mart reopened two former Wal-Mart Neighborhood Market locations under the Supermercado de Walmart banner in Q3 2009. The stores, one in Phoenix, AZ and one in Houston, TX, are located in predominantly Hispanic neighborhoods and staff speak both English and Spanish. Product assortment is geared toward Hispanic customers, as is signage and store layout.
