March 4, 2012 7:12 pm

US food groups tailor recipes to Hispanics

Food companies are increasingly targeting Hispanics as a local “emerging market” as they look for new ways to increase sales in the sluggish US.

Products such as spicy “Tapatio” flavoured crisps, “Dulce de Leche” Cheerios and Manzanita Sol, a sparkling apple drink, are meant to lure Hispanic customers with familiar flavours. Meanwhile, analysts say these products, which are usually tested in regional markets, are becoming more mainstream in the general market and expanding the range of American palates.

Executives at groups such as Kraft, General Mills and PepsiCo said during a recent industry conference that they were stepping up their efforts to reach Hispanics with tailored products and additional advertising investment. Companies are seeking to bring their experience driving fast revenue growth overseas to the US.

Tony Vernon, who will take over as chief executive at Kraft, told the Financial Times that the US grocery company will increase its spending on Hispanic advertising by “double-digits” this year, after tripling its investment in 2011. He says Kraft launched seven new Latino campaigns last year and that most of the advertising budget for Kool-Aid was directed at Hispanics.

“They are the largest group that we should be targeting,” Mr Vernon says, referring to the growing Hispanic population.

Ken Powell, chief executive of General Mills, the US cereal company, says that Hispanics are especially valuable because of their greater propensity for cooking and eating at home.

He projects that 40 per cent of US households will be “multicultural” by 2020, making Hispanics an important target.

“We’re introducing these consumers to our brands and they are rewarding us with very strong growth,” Mr Powell says.

Hispanics are the fastest growing demographic group in the US, accounting for 16 per cent of the population, according to the 2010 US census. The Association of Hispanic Advertising Agencies says the top 500 US advertisers increased spending targeted at Hispanics by 14 per cent to $4.3bn in 2010, the most recent year that data were available.

Consumer and food companies were among the biggest spenders, increasing their overall Hispanic advertising to $707m. Restaurants and fast-food chains also increased their targeting of Hispanics, raising their spending 30 per cent to $301m.

Credit Suisse recently found that Hispanic consumers represent an especially rich vein because their household food spending is projected to rise by 5.7 per cent during the next decade, compared with just 2.5 per cent for non-Hispanic households.

“This demographic group is a marketer’s dream because Hispanic per capita income is growing, the consumers tend to be very brand loyal and they are very engaged shoppers,” says Robert Moskow, analyst at Credit Suisse.

Companies such as Coca-Cola, General Mills and Kellogg, which have been dedicating the most significant resources to Hispanic marketing, have reaped the biggest benefits. Credit Suisse finds that Hispanic marketing “leaders” have outperformed “laggards” by 270 basis points in terms of organic US sales growth in the last three years.

Many of those laggards are now trying to make up lost ground. PepsiCo, which spent 1 per cent of its advertising budget on Hispanic marketing in 2010, hired a new cultural branding specialist and doubled its spending on Hispanic programmes last year.

“We’re putting a huge amount of resources and attention into the actual marketplace,” says Javier Farfan, PepsiCo’s director of cultural branding. “You have to start investing to speak to the community, and with the right products in place.”

PepsiCo chose Sofia Vergara, the Colombian actress, as the new face of Diet Pepsi and featured her in a Super Bowl commercial. It has also recently been sponsoring programming on Univision, a top Latino television station, and has launched Spanish soccer-themed ads.

According to Mr Moskow, companies need to be careful because as Hispanics become wealthier and more bicultural, their consumption habits change.

“The profile of the Hispanic consumer will evolve,” he says. “The companies that are just starting to do the work to understand the consumers are going to have the toughest time adjusting to their evolving tastes.”

Additional reporting by David Gelles

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