An Outlook on Hispanic Business
It’s time to review your paradigms about the Hispanic Market

by Luis Alejandro Bernal

It has become fashionable for magazines and periodicals to devote their October issues to Hispanic/Latino topics. No wonder: this month is “Hispanic Heritage Month”, therefore it is deemed to be interesting, nice and even “politically correct” to publish an article about Hispanic music, food, fashion, sports, history or culture - or even dare to address “hot topics” like immigration, partisanship or voting.

Since less attention is usually granted to the US Hispanic economy and markets, this edition of Business Currents will delve into the facts, figures, trends and analysis of the Latino/Hispanic market to make reader fully aware of the degree to which Hispanics/Latinos are creating opportunities for your business in the current market and will for years to come.

First, however, a little digression to recognize the Greater Naples Chamber of Commerce for being aware of the important role of Hispanics in our community and, therefore, creating and supporting the Council for Hispanic Business Professionals (CHBP), a volunteer organization affiliated with the Chamber. The CHBP’s purpose is to “bridge the gap between Hispanic Professionals and the mainstream business community in our region”. This columnist feels honored to be the President of the CHBP.

In this article, the word “business” is used in its broadest sense to include not only the economics of the primary sector, commerce, industry or services, but also the activity of government programs and the nonprofit sector. All, in one way or another, are and will be influenced by the ongoing evolution of US Hispanic demographic trends.

Hispanic/Latino Defined
For the sake of brevity, it can be stated that a Hispanic or Latino is a person who has their roots from a Spanish-speaking country. This definition will require additional thought whenever it is used for marketing and business purposes in general. A few caveats:

• The words Hispanic or Latino do not refer to race. They can be of any race from Caucasian to Black. More accurately, these terms have an ethnic and cultural connotation.
• Oftentimes, people wonder why Hispanics are also called Latinos and vice versa. Certainly the answer goes beyond this article’s limits and won’t be debate-free. But for business purposes, it is enough to say that even though many would not care to be named one or the other, when targeting certain markets with certain products or services, you have to be careful choosing the right one, according to your customer’s preferences.
• The US Hispanic Market is made largely of Americans, not immigrants.
• For most US Hispanics or Latinos, English is their native language.
• Hispanic/Latino refers primarily to a culture. This culture, while evolving in America, is driven by a myriad of acculturation processes but keeps identifiable values and ties to at least twenty foreign countries and their markets, with Mexico being the largest and most important.

Why does the Hispanic Market matter?
As a business owner, marketer or policy maker, you may wonder why you need to pay attention to the Hispanic market. After all, they are a minority; marketing to them requires a costly and difficult learning curve and they are “poor”. Well, it’s not that simple, you had better keep reading.

Despite the fact that the media largely depicts Hispanics/Latinos as relevant primarily in regards to immigration, crime, sports and soap operas, studying the Hispanic market’s size and growth, their purchasing power, entrepreneurial activity and media consumption can teach us significant things about a segment that might be critical for business growth and future competitiveness.

Hispanic Market Size and Demographics
Hispanics are now the largest ethnic minority in the United States, numbering 45.5 million. They account for 15.1 percent of the US population, 20.2 percent of Florida’s population, 21.9 percent in Southwest Florida and 25.2 percent in Collier County. By 2050, the US Census projects the US Hispanic population soaring to 24.44 percent or about 102.6 million people.

Hispanic/Latinos are the fastest growing of any ethnic group in America - and the youngest. Immigrants are gradually becoming a minority among them.

Between 1990 and 2006, the number of US Hispanics increased by 97.8 percent while the national growth rate was 19.8 percent. With an average of 3.4 persons, Hispanic households are much larger than non-Hispanic households with an average of 2.4 persons.

Median age for Hispanics was 27.3 years old in 2006, compared with 36.4 for the overall U.S. population. While the overall U.S. median age continues to rise, from 35.3 years in 2000, the median age of Hispanics remains the lowest of all groups. Among Hispanics, the oldest segment is Cuban and the youngest segment is Mexican.

By 2020, the Pew Hispanic Center says 47 percent of the growth in the US Hispanic population will come from the second generation, born within the US, and another 27.5 percent from the third generation. With the ascent of the second generation, immigrants will account for only a quarter of all new US Hispanics by 2020.

Hispanic demography shows us new generations of US born Hispanics are gradually becoming responsible for rejuvenating the overall aging population of the country. This will determine changes in every area of US life, ranging from the economy, culture, media and politics.

Hispanics’ Economic Power
According to the Selig Center at the University of Georgia, the buying power of Hispanic consumers continues to fuel the nation’s market. Its projections show Hispanics will control about $862 billion in spending power in 2007 after having grown 307 percent since 1990, a gain far greater than the 134 percent increase in the buying power of all consumers.

In 2012, with over $1.2 trillion in purchasing power, Hispanics will account for 9.7 percent of all U.S. buying power, up from only 5 percent in 1990. In Florida, 14.9 percent of the state’s purchasing power is in Hispanics’ pockets.

Hispanics contributed nearly a third of the increase in the U.S. labor force during the period of 1980-2006. Since 34.3 percent of US Hispanics are younger than 18 years old, the near future will see large numbers of young Hispanics entering the labor market and they will be for years the most active consumer segment.

Do not think of US Hispanics as mostly farm workers. Over the 2000-2006 period, Hispanics represented more than a fourth (26.5 percent) of the 41.85 percent growth in “management, business, and financial operations occupations”. In 2006, median earnings for Hispanic males with bachelor’s degrees reached $45,917, while Hispanic men with master’s degrees had median earnings of $68,167.

Household income reached $38,747, or 80 percent of the overall U.S. median household income. Those of Puerto Rican origin reported the lowest median family income among US Hispanics of $35,899, while the highest median income of $48,037 was reported for Hispanics of South American origin.

According to the Consumer Expenditure Survey 2006 (US Department of Labor), nearly one quarter of the $592.2 billion that Hispanics spent on consumer expenditures in 2006 went to just two categories: food and vehicles.

Hispanic households spent more on groceries, telephone services, furniture, gasoline and motor oil, clothing, and footwear. Also, Hispanics spent a higher proportion of their money on housing.

They spent about the same proportion as non-Hispanics on alcoholic beverages, natural gas and electricity, housekeeping supplies, floor coverings, appliances, household textiles, public transportation, personal care products and services, and reading materials.

Compared to non-Hispanics, they spent substantially smaller proportions on health care, entertainment, education and personal insurance and pensions.

U.S. Hispanics have also increased their aggregate financial assets. From 2000 to 2005, the value of Hispanics’ financial assets expanded at a compound annual growth rate of 4.4 percent, well above the 0.6 percent annual increase in value reported for all U.S. households.

Among U.S. Hispanics, 61.0 percent of net worth was concentrated in homeownership, compared with 38.5 percent for whites in 2002. Hispanics also tend to invest more in their own businesses. In 2006, the mean net worth for Hispanic households reached $72,862.

Entrepreneurial Hispanics
According to the 2002 Survey of Business Owners (2007) out of 23 million US firms, 6.8% were Hispanic-owned, which is to say 1.573.60, an increase of 273 percent compared to 1980. The number of Hispanic-owned firms is estimated at 2.8 million in 2007,and projected at 4.3 million businesses by 2012.

An outlook of entrepreneurship in the US shows Hispanics/Latinos as the most active entrepreneurs above any other ethnic group. They tend to base their businesses in those states with the largest Hispanic population, with services being the prevalent economic sector among Hispanic businesses.

Hispanic women stand out as business creators. The Center for Women’s Business Research declared that for 2004, out of all minority women-owned business, 38% were owned by Hispanic/Latino women.

As to the Hispanic Business’ geographic distribution, by 2002, Florida ranked 3rd, with 266,727 Hispanic-owned business, after California and Texas. There are projections that placed Florida in the second place by 2006 with more than 600,000 businesses.

Contrary to the popular belief that immigrants tend to be a burden for the US economy, the Index of Entrepreneurial activity studied by the Kauffman Foundation finds that the rate of entrepreneurship is substantially higher for immigrants than for native-born residents.

Service activities predominate among Hispanic-owned firms. The largest single sector, as classified by the US Census, was “Other Services,” accounting for 15.8 percent of all Hispanic-owned firms, followed by “Administrative and Support”, “Waste Management”, and “Remediation Services,” “Professional, Scientific, and Technical Services,” as well as “Accommodation and Food”.

We can say that the projections for Hispanic population growth, generational transitions, participation in the workforce, educational advancement, entrepreneurship, women’s economic role, among other forces, show the Hispanic marketplace emerging as a crucial consumer and producer segment. As small Hispanic companies grow into large enterprises, their financial needs will become increasingly complex, driving the economy in many aspects.

American non-Hispanic people, policy makers, marketers, philanthropists, might think: OK! Impressive, now what? A first step is to be aware of and stay away from the most common mistakes made whenever trying to reach Hispanics through advertising, programs, services or public policies.

Common Mistakes on Hispanic Marketing
It has been repeatedly said that American business practices are highly prone to “quick fixes”, stereotyping and easy paradigms. When attempting to outreach to Hispanics, a few instances go like this:

• “We just need to translate our advertising to reach Hispanics”
• “Thank God, all of them speak the same language - Spanish”
• “We will adapt our main advertising campaign to fit Hispanics”
• “We need to put a Hispanic model/actor in our advertising”
• “We need more Spanish-speaking employees”
• “Everybody knows: Hispanics are hot, let’s bring them something hot!”
• “They do not want to integrate into American Society, but want to get back to their countries”
• “They do not share American values, they don’t even speak English”

There are lots of misconceptions that can potentially cost lots of money to your marketing success.

Lost in Translation? From Spanglish to Hispanglics
Quite often, marketers want to please their Hispanic customers by saying something like: “I Speak Spanish, un poquito!!” and that’s nice, but not enough when your company wants to seriously reach a market that is emerging, not only in terms of size and economic potential, but also in terms of culture, values, ageand overall preferences. Just as with any other market, you need to research it, so as to recognize a profile of US Hispanics that is already or gradually will prove evident.

US Hispanics are:

• becoming primarily US born
• becoming primarily English speaking
• predominantly young
• gaining consuming power
• highly integrated with American culture
• fully articulated to American society and its institutions
• becoming the core of the workforce and rejuvenating it, pushing for training or education opportunities.
• entrepreneurial, hence making their way into the small business sector.
• Becoming closer to mainstream American values but are aware and mostly proud of their Hispanic background; we have made up a word for that that goes beyond language: Hispanglics.

Hispanic population is posing a deep challenge to American institutions. Their impact on government and economy will be profound and permanent. Moreover, the demographic wave will transform the established operations of education, media and healthcare. Neglecting these trends, which offer both opportunities and threats, will bring disaster for the complacent businessman or politician.

The Approach: A Culture-Based Hispanic Marketing Communication
US Hispanics constitute a massive case of cultural change determined by different degrees of acculturation between the predominantly Hispanic and the mostly Anglo that is shaping a unique bicultural identity with its own distinctive objective and subjective elements.

Those elements, for instance, require business to be careful when hiring Hispanics to be marketers. Being part of that culture does not mean that she or he is aware of the subjective elements of their culture - and that applies to any culture.

Fiascos in Hispanic marketing have occurred just because of this: a more “Americanized” marketer assumes most Hispanics are just like him/herself whereas a more Hispanic-dominant marketer assumes most Hispanics share her or his experiences or standpoints.

And finally some useful tips:

• Dodge stereotypes or assumptions about the relationship between Hispanics and the US mainstream culture.
• Sharpen your understanding of your Hispanic audience, depending of their level of acculturation.
• Be aware of the commonalities between Hispanic and American culture.
• Know that while Hispanics are mostly eager to succeed in US culture, they maintain pride in their own heritage.
• Hispanics are the largest minority in the United States. They are growing and spreading all over the country. In terms of business, it creates an opportunity for sensitive marketing communication from a cross-cultural perspective.

This article will have achieved its purpose if it was able to provide you with a business-oriented, politically discharged and more sensitive approach to Hispanics/Latinos in the United States. On behalf of them and to all of you I offer a “Happy Hispanic Heritage Month”. ›

Sources: US Census, American Community Survey, Consumer Expenditure Survey, Hispanic Business Magazine, Kauffman Foundation, Selig Center, Pew Hispanic Institute, Center for Women’s Business Research.

Luis Bernal specializes in Hispanic Marketing Communications. He runs Hispanicwise Consulting, his own company, providing assistance to Non-Hispanic Companies, Government Institutions and Non-Profits wanting outreach to the Hispanic Markets in the US or abroad. He can be reached at Luis@hispanicwise.com.