Berstein - US Consumer Package Goods - Hispanic Population

• published: 05 Mar 2015
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DECEMBER 2010 The U.S. Hispanic market represents an emerging opportunity in the U.S. U.S. Hispanics represent 16% of the population and 10% of consumer spending today, but this looks set to grow to 30% of the population and 23% of spending by 2050; as such, U.S. Hispanics look set to represent ~59% of the real growth in spending in the next 40 years It appears that U.S. HPP and Beverage companies (especially AVP, KMB and CL) are best positioned with the U.S. Hispanic population, perhaps because these companies are well penetrated in Latin America, and their brands are already familiar to Hispanics in the U.S. Conversely, U.S. Packaged Food companies appear worst positioned, most likely because U.S. Hispanics eat plenty of fresh meats, fresh fruits and vegetables; additionally, U.S. Packaged Food companies do not offer many brands targeting Hispanics specifically For Hispanic households, lower restaurant spend is consistent with lower overall spending, suggesting rising restaurant spending as income grows; U.S. Hispanic consumers over-index to restaurants located in the West or Southwest, reflecting the group’s geographic concentration. Portfolio Manager's Summary The growing U.S. Hispanic population presents a meaningful growth opportunity for U.S. Packaged Food, Household and Personal Products, Beverages and Snacks and Restaurant companies. While U.S. Hispanics are only 16% of the population today, the U.S. Census predicts that the Hispanic population will grow at 2.5% per year over the next 40 years (versus just 0.4% for non-Hispanics). Ultimately, the U.S. Hispanic population looks set to reach 30% of the population by 2050, and represent ~59% of the real growth in consumer spending over the next 40 years. While the average U.S. Hispanic household spends 16% less on personal consumption than non-Hispanics annually, the way it spends is somewhat different. Our analysis suggests that U.S. HPP companies are best positioned to benefit from increased U.S. Hispanic spending, followed by U.S. Beverages and Snacks and U.S. Restaurants. Finally, U.S. Food companies are worst positioned. U.S. HPP companies look best positioned, because even though U.S. Hispanics spend 15% less than non-Hispanics on HPP products, the average U.S. Hispanic household is 14% more likely than households across the general population (on a weighted average basis across key brands belonging to each company) to use brands from the U.S. HPP companies within our coverage. U.S. HPP companies are fairly well penetrated in Latin America (especially Avon, Colgate-Palmolive, and Kimberly-Clark), and we suspect that this enables greater familiarity with U.S. HPP brands among U.S. Hispanics. Similarly, U.S. Beverages and Snacks companies are also well-positioned, as U.S. Hispanics are 8% more likely than the general population to have used beverage/snacks brands from the companies under coverage, and spend 3% more on beverages overall. U.S. Restaurants seem somewhat less well positioned than HPP and Beverages companies, though only because relatively lower spending on public restaurants more closely approximates the degree of relatively lower spending overall. U.S. Hispanics spend 13% less than non-Hispanics on food away from home; by comparison, U.S. Hispanics are 10% less likely than the general population to have eaten at restaurants in our coverage in the last six months. The 10% gap for our coverage restaurants is modestly better than the 13% gap in overall restaurant spending, but far from the strong preferences for the products of the HPP companies. Of covered U.S. Restaurants, Starbucks, Yum! and McDonald's fare the best, but, even then, U.S. Hispanics frequent the restaurants in nearly the same proportions as non-Hispanics. Finally, U.S. Packaged Food companies have not cracked this opportunity as of yet. While U.S. Hispanics actually spend 1% more than non-Hispanics on food at home, they are -17% less likely than the general population to have used packaged food brands from the U.S. Food companies within our coverage in the past six months. This may be because U.S. Hispanics eat more fresh meats, fresh fruits and vegetables which are not offered by the packaged food companies in our coverage. While no one U.S. Food company stands out as the best, General Mills and Kellogg rank "least bad" with the Hispanic population. Looking forward, incremental opportunities with the U.S. Hispanic population for U.S. Consumer Packaged Goods companies appear to come from focusing on products for the young given that U.S. Hispanics have younger households than the general population. In terms of the opportunity for U.S. Restaurants, it appears that an increased focus in the southwest and western parts of the country, where the U.S Hispanic population tends to be concentrated, may be the key.