multicultural markets: Food for Thought
Despite strong potential, few packaged-goods companies tailor their products to Hispanics and Asians.
In 1997, when snack foods giant Frito-Lay introduced new flavors in its Doritos line, it targeted them primarily to the U.S. Hispanic market. By 1998, sales of the products had topped $100 million. The line extensions weren't much different than regular Doritos, except that they were available in zesty flavors such as Salsa Verde and Flamin' Hot Sabrositos. Sales of the new items underscored a valuable lesson: Tailoring products to specific consumers can have a whopping impact on a company's business.
Yet, few of America's marketers actually season their products according to their consumers' tastes - especially when it comes to the Hispanic and Asian markets. That's surprising considering the growth of both these groups. By 2005, Hispanics will make up 13.3 percent (or 38.2 million) of the total U.S. population, up from 11.7 percent in 1999. Asians and Pacific Islanders will comprise 4.6 percent of the population in five years, compared with 4.1 percent (or 11 million) last year.
As the number of Hispanic and Asian consumers swell, so does their ability to buy products. According to the Selig Center for Economic Growth at the University of Georgia, Hispanics spent an estimated $383 billion on goods and services last year, an increase of 84 percent since 1990. Disposable income among Asian Americans hit $229 billion in 1999, a rise of 102 percent in nine years, according to the Selig Center. The Hispanic market "absolutely needs more product," says Isabel Valdes, chairperson of Cultural Access Group, a marketing services company that's part of Access Worldwide Communications in Los Altos, California. "And this [group] is a magic business opportunity."
Despite such appetizing potential, lack of vital research remains a major barrier to new-product development in both the Asian and Hispanic markets. Language issues are an obvious challenge in conducting consumer research. Hispanic households may speak Spanish, English, or some combination of both, but Asian households speak in a range of languages - from Chinese to Japanese, Hindi to Korean - and dialects. Saul Gitlin, vice president of strategic services at advertising agency Kang & Lee in New York City, notes, "[Asians] are a population group that even the most savvy marketers in the country have no experience with. You're talking about some 10 million people, further subdivided by six major groups."
To be sure, some packaged-goods giants have tiptoed into this arena, and many others have begun to study it. Kraft Food's Kool-Aid Mandarina Tangerine Soft Drink Mix, for one, debuted early last year with bilingual labels and directions. While the company would not release sales figures, Mary Carroll, director of consumer insights and strategies for Kraft's beverages, desserts, and snacks division, says that distribution of the product has been double their expectations.
General Mills, too, has eyed the market, with the introduction of a cereal line called Para su Familia ("For your Family"). The line, launched last fall, includes Frosted Corn Flakes, Frutis, Cinnamon Corn Stars, and Raisin Bran, all with bilingual packaging. General Mills, like many manufacturers, has marketed to Hispanics in varying degrees for more than a decade, but Para su Familia marks a serious attempt to capitalize on the Hispanic interest in nutritious meals. (The company would not comment on sales results.)
Other manufacturers are dabbling in different ways. Consumer products powerhouse Procter & Gamble Company has yet to develop ethnic-specific brands or brand extensions, says Maria Malino, manager of external relations for the multicultural division of P&G. But last summer it formed a Multicultural Market Development Organization to create programs targeted to specific groups. One of its first legs is Avanzando con tu Familia ("Advancing with your Family"), which uses focus groups to research what's important to Hispanic women, such as family and education. Based on findings from the focus groups, P&G launched a bilingual magazine last fall. Distributed door-to-door to some 4.5 million households, the giveaway included coupons for such P&G products as Tide and Crest. As for product development, that's"possible in the future," says Malino. "If we can provide products that better meet their needs, then I would certainly hope so."
Companies interested in sales, if not actual product development, have been exploring ways to enter the multicultural market for years. Kraft, for example, called on Los Angeles-based ad agency cruz/kravetz:IDEAS to learn more about Hispanic tastes. As a result of the agency's work, Kraft developed recipes that allow Hispanic homemakers, who like to cook from scratch, to incorporate their own preparation into the packaged items. The recipes were printed on coupons distributed via newspapers and at store events.
Other manufacturers are renaming and repackaging existing brands to appeal to the multicultural marketplace. A few are bringing successful Latino brands across the border - the Colgate-Palmolive Company now sells its Fabuloso hard-surface cleaner in the United States, as well as in Mexico. And when House Foods America, a subsidiary of House Foods Corporation of Japan, wanted to grow its ethnic business in the United States two years ago, cruz/kravetz: IDEAS conducted extensive research to see if the company's Japanese-style curry would fly with Hispanics in Los Angeles. (It did.)
Soon, convincing marketers may not be necessary, thanks to the launch last year of ACNielsen's Homescan Hispanic panel in Los Angeles. Access Worldwide worked with ACNielsen to recruit and train more than 700 Hispanic households with varying degrees of acculturation. Participants scan the barcodes of every product they buy using a hand-held computer at home. The result is in-depth, longitudinal information on purchase behavior. Charter subscribers to the panel include General Mills, Kellogg Company, Kimberly-Clark Corporation, Kraft, P&G, Colgate, Univision, Telemundo, Lucky South, and Safeway, Inc. ACNielsen hopes to get client commitment for an expanded panel, and to enter a second, Caribbean-dominated market next year.
Already, the Homescan Panel has yielded insights about Hispanic households in Los Angeles. For example, while Hispanic households tend to spend more per shopping trip for barcoded products than non-Hispanic households ($34.40 versus $29.20), they take fewer trips to the store (55 over six months versus 81 among non-Hispanics). As a result, their total expenditures on barcoded products turn out to be less ($1,903 per household over six months versus $2,373 for a non-Hispanic household). Brand loyalty is particularly strong among households that prefer to or only speak Spanish (56 percent versus 48 percent among non-Hispanic households).
Reflecting the large family size of many of its households, the Hispanic market in Los Angeles spends more on infant formula, disposable diapers, and other baby necessities than the general market does. Compared to non-Hispanics, Hispanics also devote a greater proportion of their spending on barcoded products to things like liquid detergent, packaged rice, disposable razors, and mayonnaise. Ken Greenberg, director of marketing for ACNielsen's Homescan Consumer Panel, notes that "a lot of clients started to see that they couldn't ignore this business any longer. The reality was the opportunity was growing every year in the Hispanic market."
As for an Asian Homescan Panel, Greenberg adds that "it will definitely post a challenge because of real language differences between the groups. We'd like to do one in some future period." The absence of product development for the Asian market, says Wanla Cheng, principal of Asia Link Consulting Group in New York City, is not surprising since many manufacturers "haven't even gotten around to selling the brands they already have [to the market]."
But do Asian Americans even want or need new products or brand extensions targeted to them? "There's not one ethnic segment that doesn't want to be addressed in its own way [through advertising]," says Cheng. "But we do research among second- and third-generation Asians, and they don't necessarily want to be singled out; they want to be addressed as American."
All agree, however, that existing barriers must be overcome so that informed decisions can be made. And in addition to research challenges, psychological issues must be addressed as well."Creating a product for a consumer you do not know poses many additional barriers to the whole process of launching a product," says Valdes, who offers up a metaphor. "Unless you're really pressed by your CEO, why would you attempt to enter a dark cave?"