By Charles Day
Barack Obama’s success in the recent presidential election in the U.S. highlights the potential rewards for politicians who can successfully engage the Hispanic population, and this experience holds important lessons for the U.S. wine industry.
Hispanics are the largest and fastest growing minority in the U.S., but they drink less wine per capita than the average American. So it should not be a surprise that if the wine industry were to successfully target the market and influence Hispanics to increase their consumption, huge rewards would be in-store.
By Rabobank estimates, if the wine industry were able to bring Hispanic wine consumption up to the level of the typical consumer, annual wine consumption among Hispanics will increase by nearly 50 million cases over the next 20 years! That could be as much as 40 percent of the total growth in U.S. wine consumption over that period.
Successfully engaging the Hispanic market offers important potential growth opportunities, but failure to engage this demographic risks losing this future growth to the beer segment, which has been aggressively targeting this market.
Why target the Hispanic market
The growth of the Hispanic market in the U.S. is well-documented. In 2000, Hispanics in the U.S. numbered 34 million or roughly 12 percent of the total population. Due to both immigration as well as organic growth, in 2013 the Hispanic market is estimated to have grown to over 50 million and now represents nearly 16 percent of the total U.S. population.
In addition to the population growth, there are also encouraging trends in the household incomes for the Hispanic market as well. Although U.S. Census Bureau data shows the percentage of all households earning more than $75,000 per year grew from 12.7 percent of the Hispanic population in 2000 to 21.1 percent in 2010. The share of Hispanics in this affluent income segment still lags the rest of the population, but they are entering at a rate three times faster.
As a result, it may not make sense for small, boutique wineries that focus on the luxury wine segment to develop elaborate marketing plans for the Hispanic market in the near term for but it would be worthwhile to consider some basic initiatives. Making website information available in Spanish and hiring bilingual staff for tasting rooms are low-cost ways to make brands more accessible to the Hispanic market.
Marketing challenges, opportunities
Although a growing number of wine companies recognize the opportunity to target the Hispanic market, a wide range of challenges make this a complex task. There will be no universally applicable strategies to assure success, but following numerous discussions with wineries, distributors and several Hispanic marketing consultants, Rabobank has identified a number of key questions that brand owners should consider in approaching this promising market, such as:
Does the brand’s flavor profile match Hispanic tastes? Most wines on the market today are fairly dry in style, but Hispanic consumers tend to prefer sweeter wines. Marketers looking to target this market will have to adapt products to the consumers’ tastes.
How will the brand attract Hispanic millennial consumers? Research carried out by Texas Tech University on Hispanic wine consumers highlights an interesting phenomenon. Younger Hispanics, like other millennials, are drinking more wine, and they are introducing their parents to the category. Use of social media will likely be a critical component for reaching Hispanic millennials. Hispanics in general, and particularly Hispanic millennials, are tech savvy and more reliant on social media for purchasing decisions, according to a recent report.
How to align interests with the distributor? Even where the distributor has good access to Hispanic accounts — not all do — seeking orders for wine will require much more effort than selling beer or spirits and will naturally be a much lower priority for the sales rep. Unless the brand owner can convince the wholesaler salesperson of the potential long-term growth opportunity, or provide increased sales incentives, the salesperson may be unwilling to make the extra effort required to promote wine.
Although the Hispanic population in the U.S. has tended to have low engagement with wine in the past, the growth projections of the Hispanic population make it imperative for wine companies to improve their ability to reach this target group. The potential payoff of learning to engage this group is access to a market that is set to grow consumption by 50 million cases over the next 20 years, as well as insights about how to reach enormous potential markets in Latin America.
If the wine industry fails to engage this group, it risks losing the fastest growing segment of the population to the beer industry.
Charles Day is regional agribusiness manager for Rabobank, NA, serves the financial needs of the wine industry in Napa and Sonoma counties and elsewhere on the North Coast. Contact Mr. Day at 707-545-6887 or Charles.Day@rabobank.com.
This article first appeared Aug. 28 in the Wine Industry Report monthly email newsletter. To sign up for the newsletter, visit NorthBayBusinessJournal.com/stormpost_subscribe.
Copyright © 1988–2013 North Bay Business Journal
View the policy for linking to website content.