Armed with the 2000 Census, beverage marketers are ramping up R&D and fine-tuning marketing plans to court minority teens-a growing segment of the population that helps drive mainstream America's taste in everything from slang and body language to clothing and music.
While black teens remain leading trendsetters-and vital to soft-drink marketers even at just 2% of the population-companies are increasing their attention toward Latinos, who are booming in number and buying power. With Hispanics making up 13% of the U.S. population-and predicted to be 23% to 35% by 2050-large and small beverage sellers are trying to tap their taste buds with dedicated marketing, shifting ad dollars and tailored products.
"For many years, people have been talking about the importance of the ethnic market and how it is growing and the future. The future is now," said Charlee Taylor-Hines, director of urban and ethnic marketing at PepsiCo's Pepsi-Cola Co.
On tap are sweeter, fruit-flavored beverages with less carbonation and more heft as well as more targeted marketing programs. The epic shift has been likened to the Generation X swing to vodka from their grandparents' scotch and other brown spirits.
"The answer has to do m0re with overall change in a culture," said John Sicher, editor of Beverage Digest. "Each generation likes new and different things that it can call its own. Certain colas were the beverage of the baby boomers."
Higher-than-expected Hispanic growth in the Census has many marketers altering plans, said Tom Pirko, president of beverage consultantcy Bevmark. "A complete, accurate Census is a little like the genetic code. It gives us a blueprint on which to proceed. All planning is based on who the consumer is and what the consumer wants and needs."
About 25% of Americans are younger than 18; more than one-third of those youth are Hispanic or black. Soft drinks are more popular among minorities than Caucasians and among youth than their parents, so the demographic information can be good news for the $60 billion carbonated soft-drink industry, Mr. Pirko said.
If Pepsi-Cola Co., Coca-Cola Co. and Dr Pepper/Seven Up can cultivate minority consumers, the expectation is they'll have an easier time luring white youth who often are influenced by cultural trends among blacks and Hispanics.
Caralene Robinson, senior brand manager for multicultural marketing at Coca-Cola North America, said that while minority influence on pop culture doesn't translate to teen-age taste buds, it does transfer to the labels on the cans teens will carry. "In the popularity of brands, that's when you get the followers or the conformers," she said.
Representing about one-quarter of the carbonated soft-drink market, fruit-flavored beverages have grown almost 30% from 1990 to 2000, compared with a 15% drop for colas, a much larger category. That flavor advance likely will accelerate as the pipeline burbles with increasingly varied products including Amp energy drink from Pepsi-Cola's Mountain Dew; a possible U.S. test by Pepsi-Cola of a sweet Brazilian beverage, Guarana Antarctica; and additional emphasis on existing products. A few years back, Mountain Dew made a targeted push to blacks and Hispanics, a move that has paid dividends with the base brand as well as the Code Red line extension.
Flavors can help even moribund colas. Pepsi-Cola's Wild Cherry Pepsi convenience-store volume jumped 14% from January through mid-September, compared with a 0.4% increase for all soft drinks sold there, according to Beverage Digest. Pepsi-Cola spent $7 million on its cherry line in the first half of the year, almost triple 2000's full-year spending, according to Taylor Nelson Sofres' CMR.
The flavor push does not carry universally; Cherry Coke slid 8% during that time, though an initiative for that brand is expected next year, said one person close to the Atlanta company.
To tap into the Latin invasion, Coca-Cola has elevated Hispanics from its No. 6 priority to second after teens, Ms. Robinson said. She said that while Hispanic adults-many reared in Coca-Cola's Latino strongholds outside the U.S.-are loyal to Coca-Cola, their offspring are fickle. "Even though most volume comes from adults, teens are the real priority because they are the future consumers," Ms. Robinson said.
The world's largest soft-drink company has a tough row to hoe. Rival Pepsi-Cola appears to have an edge with its sweet flagship among minorities over the spicier Coca-Cola.
In an informal focus group by Ad Age at Boston Renaissance Charter School in Massachusetts, eight minority sixth- and eighth-graders unanimously said they preferred Pepsi-Cola over Coke. But Pepsi-Cola may not be the only choice of a new generation. The students, who consume two to five cans of soda per day, said their menu includes a lot of grape, orange and cherry soft drinks.
"I prefer flavors because they give you more variety. If you only have a regular [cola], you have no choice," said Latiaya Grooms, a 13-year-old black student. Hispanic kids at the school made similar comments.
Faith Popcorn, founder of Faith Popcorn's BrainReserve, a New York-based trend forecaster, suggested Latinos like sweet beverages because they complement spicy menus. Others suggest the fruit emphasis carries over from parents' tropical homelands.
To better its showing among Latinos, Coca-Cola has launched apple-flavored Manzana Mia soda in Texas and Los Angeles, and it's ramping up support for Fanta-a powerhouse internationally but virtually invisible domestically until this year. It also may import offerings hot in foreign markets and will test more flavors in addition to Fanta's current grape, orange, pineapple and strawberry. Coca-Cola also is said to be considering extensions of citrus soda Mello Yello.
"Before, the big companies would sit pat with their major brands and then do what they call innovation-brand extensions-and they'd laugh at the Snapples or bottled-water companies or juice companies and say `This is our business. We own this business.' That's all changed," Mr. Pirko said.
FEEDING FUTURE GROWTH
A Dr Pepper/Seven Up spokesman said his company's brands are undeveloped among minorities, so the Cadbury Schweppes unit will try to change that by making ads more appealing to minorities rather than developing products specifically targeting them. Late last month, the company unveiled its 2002 Dr Pepper commercials, with steamy salsa dancers and break dancers. WPP Group's Y&R Advertising, New York, handles.
Latino marketers say it's folly to scrimp on the ethnic market even though about 75% of consumers are white. "You need to put your resources where you see future growth," said Esperanza Carrion, marketing director at Goya Foods, a private company that markets Hispanic foods, juice and soft drinks.
With an estimated $770 million in overall sales, Goya poses no significant threat to the soft-drink behemoths. But its strategies are worth emulating-including segmenting the Latin market as is done for the general market. The product offering also is worth noting. Goya's "refrescos"-including ginger beer, cola champagne, tamarind and coconut-have been growing at double-digit rates for the past five years, and nectars-such as mango, pear and sugar cane-are doing well, too, Ms. Carrion said.
Ms. Popcorn said marketers wanting to boost ethnic sales must go beyond focus groups, flood their employee ranks with minorities and get into the barrio. "They need to infiltrate the community," she said. "How much does a [non-Latino] business-school marketer know about Hispanic households? How many Hispanic kids have they had over to dinner?"
One starting point is for companies to recognize the diversity of the Hispanic market. Though relatively quiet on the Latino front, Cadbury Schweppes' Snapple Beverage Group is coming out with flavors expected to be popular among Latinos. But Michael Sands, Snapple's chief marketing and operations officer, recognizes the complexity of the market.
"You've got differences in the Mexican population. You've got the Caribbean and Central America and Latin America. There's tons of territory, a ton of pride and [flavors] that are individual to different countries," he said. "You can't say `Gee, you speak Spanish. Here's a flavor.' That won't work."