It’s said that on St. Patrick’s Day, everyone is Irish. The same goes for Cinco de Mayo, the unofficial May 5 holiday commemorating the Mexican army’s victory over France in the Battle of Puebla in 1862. But it has evolved to celebrate Mexican culture and heritage, especially through food and drink.
Statista reports Mexican/Hispanic food accounts for the largest share of spending in the ethnic food market. And Mexican food is second only to American in the dining sector, accounting for 11% of all U.S. restaurants. To go with all that food is Mexican beer, holding five of the top ten slots on the list of the most popular imported beers, including number one Corona and number two Modelo.
But while Americans have embraced Mexican food and beverages, American businesses have a long way to go to understand Hispanic and Latino consumers and their $2+ trillion spending power, according to Claritas.
In addition, McKinsey estimates businesses are leaving $100 billion on the table by failing to meet their current needs, and it could grow six-fold if companies leaned into their real potential.
Growing Fast, Growing Strong
Latinos are the fastest-growing consumer segment by far, expected to account for 52% of all U.S. population growth from 2020 to 2023 to total 66.5 million consumers and 20% of the U.S. population.
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More consumers mean more money spent. McKinsey estimates they have contributed a 6% compound annual growth to the nation’s GDP over the last decade compared with 3% for the non-Latino white population.
“U.S. Latinos account for the fastest-growing portion of U.S. GDP,” the McKinsey report stated. “If we considered U.S. Latinos as their own country, it would be third only to the GDP growth rate of China and India over the past decade.”
Given Latino-Americans’ relative youth – median age of 29.8 years compared to 38.5 years for the U.S. overall – and the fact that Latino households are larger on average than others, their lifetime value is huge, most especially for food at home, food in quick-service restaurants and clothing.
The American Dream Lives In Latino Communities
Given the turmoil and divisiveness we see all around us, it would be easy to assume the traditional red-white-and-blue American Dream is dead, far from it. In fact, the American Dream is a powerful unifying concept drawing people here because they want to make it their own.
“The American Dream is alive and well, especially among Hispanic-Americans and Asian-Americans, the segments with the closest ties to recent immigration,” Jack Mackinnon, senior director of cultural insights at Collage Group, and co-author of “America Now 2022” and accompanying “Drive Brand Relevance with 21+ Hispanic Consumer Essentials” reports.
Specifically, some 81% of Latino-Americans said they’ve already achieved the American Dream (21%) or believe that they will (60%), and virtually an equal share of Asian-Americans are on the same track, though a slightly higher percentage have crossed the finish line (25%).
This compares with 73% of Black Americans and 69% of white, both of which are the most disaffected segments, with 20% of each saying the American dream will never be achieved no matter how hard they work.
What’s particularly interesting about Latino’s belief in the American Dream is how far they need to climb to reach it. If household income is a proxy for its achievement, linked to career success and home ownership, their median household income is only $66k, compared with $120k for Asian-Americans and $91k overall.
Nonetheless, Latino-American adults are optimistic – 79% said, “I’m confident my life will continue to get better.” They are ambitious – 63% agreed, “I’m always trying to be the best and make it to the top. And they are disciplined – 67% said, “I tend to follow my goal and not let temptations get me off track.”
With attitudes like that, these are the kind of Americans our workforce and business communities need.
One avenue Latinos are increasingly taking to reach their American Dream goal is entrepreneurship. McKinsey reported that the number of Latinos starting their own companies has been increasing by 3.1% each year since 2001, nearly twice the rate (1.6%) as non-Latino whites. It has resulted in an 86% increase in new Latino entrepreneurs between 2001 and 2021.
Yet, despite their rapid entrepreneurial growth, the number of Latino-owned businesses remains low. They own only 6% of the 5.8 million employer businesses and 15% of the 26 million sole proprietors and non-employer firms.
“An accurate demographic representation would see Latinos owning at least three times the number of current firms and creating about 750,000 new employer firms,” the report stated.
But one thing is for sure, Latino-owned businesses have a leg up in navigating the intricacies built into the Latino market: the level of the consumers’ acculturation.
Among adult Latinos, the plurality (38%) identify as Bicultural, comfortable speaking both English and Spanish, and identifying as both Hispanic and American, according to the Collage analysis.
Just over one-third (34%) are classified as Unacculturated, being primarily Spanish speakers who cling to their Hispanic identity over their American one.
The smallest share (27%) are Acculturated, being primarily English speakers and who identify as American over Hispanic.
But the Collage Group is quick to point out that acculturation does not equal assimilation. And it also finds that no matter their relative level of acculturation, Latinos are culturally fluid, able to synthesize their cultural heritage and their American identities.
“There’s a full embrace of the American Dream, yet they are also invested in their tradition and cultural heritage,” Dale Evans, Collage’s chief insights officer, said. “Hispanics can maintain two identities and navigate easily between them. They celebrate their uniqueness and individuality that comes from their heritage.”
Latino consumers are very comfortable holding and expressing the two sides of their identity, or even more depending upon their parents and grandparents’ countries of origin.
But that creates challenges for brands and retailers that want a one-size-fits-all way to classify and communicate with the Latino consumer segment.
Getting It Right
First things first, what should they be called? Collage asked them and found that both Hispanic (73%) and Latino/Latina (72%) are positively received, but the terms Latinx and Latine are only favored by about 40% each. Of note: I’ve chosen the term Latino here since it ranks slightly higher in Google Trends, overtaking Hispanic in early 2008.
Therefore Collage advises brands to choose either Hispanic, which tends to be associated more with language, or Latino/Latina, which is more focused on geography or country of family origin.
And since Latinx and Latine – a newly emerging gender-neutral term that most closely adheres to Spanish grammar – does not resonate with many in this segment, they should be used deliberately with a purpose.
Marketing to this community is further complicated by the way they are represented in advertising. Only 53% of Latinos are satisfied with their portrayals in advertising and marketing. And that figure is skewed by greater satisfaction among Bicultural (53%) and Unacculturated (58%) Latinos.
However, the fully Acculturated Latinos are far less satisfied (45%), which suggests marketers may be taking shortcuts by portraying stereotypes and cultural cliches. Authentic portrayals, storytelling and messages are required.
“Brands must demonstrate their understanding of cultural nuance and get very specific about telling a story that is true,” Mackinnon said. “Being nuanced and culturally sensitive will have a halo effect that consumers, both in and out of the community, will understand. It makes the ad a lot more interesting for everybody because the brand is inclusive.”
Brands must understand Latinos view their roles as cultural stewards, responsible for preserving their family of origin’s cultural traditions and heritage. All the while, they feel a strong personal connection with America, its values and traditions.
It can be hard for those outside the Latino community to understand the nuances, which is why Collage recommends companies look to hire Hispanic professionals to improve authentic representation and inclusion within the segment.
For example, Walmart WMT has reached near parity in its representation of Latinos in management (11%) and officer (6%) positions.
And its cultural sensitivity is rewarded by ranking as the number one brand among Latinos in Collage’s list of 252 brands surveyed. It also supports Spanish-language search on Walmart.com. For what it’s worth, Walmart chooses to call this segment Latinx.
Dual, Not Duelling, Identities
What may be a paradox for those outside the Latino community certainly is not for those within it. Collage’s Evans points to the Marvel Comics character America Chavez as exemplifying this dual dynamic.
Miss America, as she was first called, comes complete with all the usual superhero abilities, but her unique ability is to travel through time and space via self-generating star portals.
In some ways, today’s Latino customer does much the same thing, able to move in multiverse fashion between their cultural heritage and their American identity. Their strength comes from being firmly grounded in both and brands need to understand this duality and reflect it back to these consumers.
“America is becoming culturally complex,” Evans observed. “The idea that there is a single shared unifying American experience is certainly not the case anymore. There are many shared cases and shared experiences, but the melting pot concept of a homogeneous national identity that you can conveniently market to in some uniform way is long gone.
“We need to embrace and understand the cultures that are contributing to this new sense of diversity and increased complexity. If brands don’t, their competitors will and create strong bonds and affiliations within the community. Your brand will be doomed to extinction,” Evans concluded.