Do your products speak to Hispanics?

U.S. retailers that still are not factoring the Hispanic population into store brand product development and marketing efforts potentially could be giving up dollars to competitors. This fast-growing segment currently makes up approximately 17.2 percent of the U.S. population – and that number is expected to hit 18.6 percent by 2018.*

The wants, needs and shopping behaviors of this group of 54 million-plus people differ from those of non-Hispanics. Moreover, they vary within the Hispanic population itself, according to country of origin, age and acculturation level.

Not a homogenous bunch
"The Private Label Hispanic Consumer," an August 2012 study-based report from global market research firm Mintel, divides U.S. Hispanics into three main groups: those residing in bilingual households, those residing in English-dominant households, and those residing in Spanish-speaking-only households. Hispanic adults who reside in bilingual households are more likely than other U.S. Hispanics to purchase private brands at large national supermarket chains and club stores, the report notes. They also are more likely than other Hispanics to purchase store brand items at natural food grocers such as Whole Foods Market and Trader Joes.

Hispanic adults who reside in Spanish-speaking-only households, meanwhile, are the most likely group to purchase store brand products at Publix Supermarkets and at Kroger-owned supermarkets, the report notes. They also are more likely than those Hispanics residing in English-dominant households to purchase private brands in Winn-Dixie stores, Whole Foods Market and supermarkets owned by Safeway and Supervalu.

Although Hispanics have the most positive attitudes toward private brands among the four major ethnic groups in the United States, "they remain much stronger branded buyers than African-Americans and Asians based on respective dollar buying rates," says Eva Gonzalez, executive director, diverse consumer insights for Nielsen, New York. "That said, Hispanic name-brand loyalty prevails in three hotbed CPG categories with significant consumption: hair care, baby products and health and beauty. ... In hair care, Latino name-brand buying is 43 percent higher than the total market, while private label buying levels are comparable."

But Latinos spend more than the general population on baby care overall – 15 percent more on name-brand items and 10 percent more on private label items, Gonzalez says. Although they spend 10 percent more than the general population on name-brand health and beauty products, they spend 9 percent less on private label items here.

"In these very meaningful categories, Hispanic consumers say they buy store brands due to the economy, and not necessarily because of preference," she adds.

And less-acculturated Hispanics lean toward name-brand purchases, the Mintel report adds, "likely because of the prestige and quality these items represent compared to store brand items."

Navarro Discount Pharmacy, headquartered in Miami, developed the Vida Mia brand to be the first comprehensive bilingual store brand for Hispanic families.

But these shoppers can be swayed to purchase store brand items when they are convinced the quality is equal to that of the name-brand products. Therefore, retailers need to demonstrate that the quality of their store brand items is equal to or better than the name-brand alternatives if they are to win over less-acculturated Hispanics, the report says.

In general, Hispanic consumers also tend to shop less often than the rest of the U.S. population, but spend more per trip, Gonzalez notes. They also are less likely to purchase items on promotion.

"Fewer shopping trips among Hispanics make it critical for retailers to develop a strong connection to become the destination of choice," she says.

Sway them
Assuming their store brand offerings are on par with name-brand alternatives (when applicable), retailers could win the loyalty of U.S. Hispanic shoppers through packaging, merchandising and marketing efforts. On the packaging side, consumers desire for bilingual packaging is tied to their English-speaking skills, says Leyla Ahuile, senior multicultural analyst for Mintel.

"The less English they speak, the more likely they want bilingual packaging," she says. "But what is interesting is that even those who say they speak only English at home would also like bilingual packaging."

Nielsen Universe Estimates indicate that 56 percent of U.S. Hispanic adults speak primarily Spanish at home, Gonzalez notes, white 40 percent speak primarily English.

"These data underscore the importance of using Spanish to reach Latinos," she says.

Such packaging conveys to Hispanic shoppers that retailers acknowledge them and respect them, Ahuile says, adding that just one or two lines of Spanish to communicate what the packaging is or does often is enough.

On the marketing side, the more culturally relevant the message, the better, says Jennifer Goodrich, senior ethnographic analyst for the Hartman Group, Bellevue, Wash.

"The Hispanic community is looking for messaging that better reflects their identity," she says. "They are interested in seeing common everyday Hispanic individuals, families and activities in advertising."

Effective store brand marketing, therefore, might include imagery of family gatherings and other celebrations and use Spanish instead of or in addition to English in the message, Goodrich says.

"The use of appropriate cultural icons like certain soccer players has strong appeal, too," she adds, "but these icons should be popular in Latin America, not just America, in order to be relevant."

And sampling can be a very effective marketing tool among Hispanics, Ahuile says. They tend to have bigger families and tighter budgets, so sampling is one way to reduce the risk when it comes to trial of new store brand food and beverage items.

Merchandising, too, can go a long way in attracting Hispanic shoppers to the store brand side. Similar to the larger population, Hispanic shoppers gravitate toward quality and value, notes Greg Prang, senior ethnographic analyst for the Hartman Group.

"The key is to highlight certain quality and value cues that are particularly interesting to the Hispanic consumer," he says. "For example, fresh is a very important quality cue in Hispanic cuisine. To showcase this cue, store brands should focus on attributes such as made from scratch, less processed, short ingredient lists and authentic ingredients whenever possible."

* Source: Mintel/U.S. Census Bureau, interim population projections released in 2012.