Hispanics drive food, beverage and restaurant sales

by Bryan Salvage
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NEW YORK – Hispanics are now the most important U.S. demographic growth-driver in the food, beverage and restaurant sectors, according to data presented by Latinum Network during the Sanford C. Bernstein Investor Conference Call on April 8.

Between 2005 and 2008, the U.S. Hispanic segment made up more than 50% of real growth in the midst of a stagnant U.S. consumer economy, with $52 billion of new inflation-adjusted Hispanic spending outpacing $40 billion of new spending by non-Hispanics. This growth is attributed primarily to an increase in the number of U.S. Hispanic households, and secondly to an increase in consumer spending among U.S. Hispanics. In the food, beverage and restaurant business, this new spending offset most (84%) of the real decline in demand across the entire $1 trillion sector.

This divergence in demand is driven mainly by differences in ethnic preferences, economic and cultural integration, and demographics.

Latinum's key findings include:

• More than $9 billion of new value in food and beverage was created by Hispanics in otherwise dormant or declining categories, such as fish and seafood, fresh fruit juice and dairy products between 2005 and 2008.

• $5.9 billion of new value was created by Hispanics in growing categories where they represent approximately 20% of the growth such as vegetable juices and fruit drinks; meats including pork, ham and mutton; and frozen meals, which represent the highest-growth food category among Hispanics. Busy Hispanic professionals are apparently increasingly turning to frozen meals to feed their children.

• While health and wellness trends reduced non-Hispanic consumption of beef, ethnic preferences buoyed Hispanic buying of beef.

• Hispanics are eating out more while others are cutting back, driving growth in fast-food and full-service. Hispanics are increasingly likely to eat out during the work day, driving new sales in fast-food breakfasts and full-service lunches.

"With total U.S. Hispanic household spending expected to top $1 trillion by 2013, and emerging markets around the world [such as China or India] fraught with political risk and hidden costs, institutional investors have a unique opportunity to look homeward,” said Alexia Howard, senior research analyst-US Foods at Sanford C. Bernstein. “We see the growth in food, beverage and restaurants here as a particularly interesting opportunity for our investors. Especially with the relative stability of Hispanic demographics, this growth can be reliably predicted through 2050."

U.S. Hispanics represent a growing market in the midst of a mature U.S. consumer economy, but in order to win over this important demo, brands must make an authentic appeal to the unique behaviors and tastes of U.S. Hispanics through distinct products, channels, messaging and marketing strategies, added David Wellisch, co-founder and principal of Latinum Network.

Spanish usage and preference remain high as consumers acculturate, giving companies expanded options for in-language and multichannel advertising and marketing strategies, which appeal to a broader portion of the market.

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