The Hispanic Market is Set to Soar   - November 1, 2009

The 2010 Census will radically alter the demographic map and the rules of engagement between Hispanic and general-market shops

ADWEEK - November 1, 2009 -- Hispanic Americans continue to grow in number at a rate four times that of the general population, with the 2010 Census expected to show their total rising to nearly 50 million, from 38 million in 2000. And second-generation Hispanics are fast becoming the driver of the group's growth, with 88 percent of Hispanic children born in America, versus 61 percent of adults.

As a result, agencies that market to this segment are finding themselves in a strong position, armed with the skills and techniques to take on general assignments from bigname clients. Meanwhile, in a tight business environment, general agencies are starting to compete for work previously reserved for specialist shops.

Is an already competitive agency landscape set to become even more so?

"In the 2010 Census, we'll see confirmation of a shift from Hispanic consumers who are first generation, where Spanish is the dominant language, to second-generation, bilingual, bicultural consumers. It totally transforms how we market," says Cynthia McFarlane, chair of Publicis Groupe's Conill, a Latino agency. "These are consumers who are as influenced by American culture as the country of origin of their families. There is a new American culture forming, and these consumers are having a tremendous impact on mainstream America."

McDonald's, which sees higher brand loyalty among its Hispanic consumers, has added offerings like breakfast burritos to its national menu. In further evidence of the growing bilingual voice of Hispanic consumers, McDonald's runs ads with Spanish taglines in general-market media, and earlier this year used "Spanglish" in general-market advertising for the Quarter Pounder.

"We know the general market has become increasingly multicultural, with Hispanic music, Hispanic tastes, the Hispanic palate influencing a lot of general-market initiatives," says Cristina Vilella, director of marketing at McDonald's USA. "We lead with Hispanic insights but make sure they appeal to the general market."

That blurring of distinctions within the Hispanic marketplace hints at the changes ahead for agencies and media firms. Hispanics now have about $863 billion in discretionary annual income, more than any other minority group in the country. (As of the third quarter, Americans overall had disposable income of $10.8 trillion.) Agencies argue that spending power is still underestimated and that upcoming Census findings -- expected to be released beginning in early 2011 -- will deliver a wake-up call to marketers.

"It will be a huge eye-opener when we see the growing affluence of the Hispanic marketplace, not just in buying power but also in household wealth," says Conill's McFarlane.

"We have 15 percent of the market but only 5 percent of the marketing dollars," says Ingrid Otero-Smart, CEO of Interpublic Group's Casanova Pendrill. "You're going to see more general-market agencies pursue Hispanic accounts. They didn't care when our budgets were $10 million or less, but now that we are dealing with more robust budgets and theirs are being cut, it's a different story."

Already, Hispanic agencies are extending their reach beyond Spanish-language media. Casanova Pendrill's recent California Lottery TV spots were used in the general market, while San Antonio-based independent Creative Civilization is lead agency for the San Antonio Express News and the San Antonio Spurs. Last year, Omnicom Group's Alma DDB, which also handles urban and general assignments for McDonald's, launched Clorox's environmentally friendly Green Works line into the general market. In 2006,> Toyota liked a Conill TV concept for the Camry so well, it turned it into a Super Bowl spot.

"There are certain categories, geographies, brands where the Hispanic market is now the general market and the Hispanic marketing strategy will be the overriding strategy," says Alex Lopez Negrete, CCO at independent Lopez Negrete Communications in Houston. "The Census will confirm the cultural pervasiveness of Hispanics. When general-market assignments start going to Hispanic agencies, it will manifest itself regionally first and then move to categories."

And Hispanic agencies have to catch up to their ever savvier consumers: Earlier this year, Forrester Research said Hispanic Gen Y consumers 18-28 are "outpacing" their non- Hispanic peers in the amount of mobile activity and use of features in which they engage. Those young Hispanics are also more interested in technology; Forrester found 72 percent of them said it is important, compared to 44 percent of non-Hispanics. Mark Gibson, vp of advertising at State Farm, says the insurer's Hispanic marketing is an area of innovation.

"We're doing things in the Hispanic market that are driving things to other targets, platforms," he says. "Our Hispanic efforts are becoming a best-practices center at the company."

Given those new approaches to the marketplace and the threat of competition from general-market shops, many traditional Hispanic agencies will need to reinvent themselves to survive. Last year, after spending 29 years at Hispanic agencies, Simon El Hage joined IPG's Draftfcb in Chicago as group management director of multicultural marketing. "The old ethnic multicultural approach is passé," he warns. "We have to look at integration not just from a channel but from a segment point of view. The reality is that Hispanic agencies got used to working with less. We fell into our own trap, and the expectations marketers have for us, we set ourselves. We've underestimated the sophistication of our consumers."

And that provides opportunities for upstarts like MDC Partners' Adrenalina. The agency says it uses digital executions as a starting point and bases its strategies on a behavioral model. "We speak in culture, not language," says Manuel Wernicky, Adrenalina's president. "Old-school agencies just focus on Census numbers, which are used to divide the whole into granular pieces. We try to understand the complexity of that consumer and how they are changing, regardless of language, whether they're male or female, Mexican or Colombian."

Language does remain an important factor. Some 44 percent of Hispanic consumers say, at home, they speak Spanish only or more often than English; 25 percent say they are equally bilingual; and 31 percent use English only or more often than Spanish, according to research from Synovate and Nielsen. (That last number offers a glimpse of the future Hispanic marketplace: Among second-generation consumers, 93 percent say they are bilingual or English dominant.)

As general-market broadcasters continue to battle audience erosion, Univision, the country's No. 1 Spanish-language media company, posted a 5 percent gain last season. The company owns the most-watched single American TV station among adults 18-49 regardless of language -- KMEX-TV in Los Angeles. Univision also said last season it was consistently within the top five broadcast networks in the U.S., and on many nights it was within the top three.

"We're seeing a tipping point in Spanish-language media," says David Lawenda, Univision's president. "In our recently completed upfront, we saw shares shifting [from the general market] as we brought in new brands. The implications of the 2010 Census are huge. Marketers don't necessarily know the spending power of the U.S. Hispanic population. Their purchasing power makes them equivalent to the 15th-largest consumer marketplace in the world."

General broadcast networks posted a 22 percent decline in the last upfront, while Univision posted a 3 percent gain to $1.24 billion. In categories like quick-service restaurants, Univision posted a 25 percent gain, while consumer packaged goods rose 20 percent, Lawenda says.

Unlike general-market shops, many Hispanic agencies still maintain full-service media departments. That business is also under assault. Media agencies at big industry holding companies have created operations dedicated to multicultural planning and buying. The industry is also seeing more media-only agency reviews, which is not typical in the Hispanic sector.

"The competitive landscape will shift as more people compete for the money," says Danielle Gonzalez, managing director of Starcom MediaVest Group's Tapestry multicultural unit. "The general market has very good [media] buyers, but they might be lacking in strategic insights. You'll see traditional Spanish agencies positioning themselves as saying, 'You might have the [volume benefit of] dollars, but if you don't have the insights or are smart at buying, then what are you bringing to the process?'"

The stakes in those media plans have clearly changed over the past decade. While the 2010 survey is expected to show that two-thirds of Hispanics in the U.S. continue to live in four states -- California, Texas, Florida and New York -- there will be surprising new expansion of the population base.

"In the 2010 Census, we'll see dramatic growth east of the Mississippi in the Southeast corridor. This is going to be a profound game changer," says Don Browne, president of NBC Universal's Telemundo Spanish-language broadcast operations.

Luis Miguel Messianu, president and CCO at Alma DDB, concurs: "This Census will change the perception of what a national Hispanic marketing plan will look like. Now, it's the 15 top markets. The reality is that it has grown beyond that in recent years."