5 Companies Profiting from a Huge U.S. Market

The Hispanic market in the U.S. would be one of the top ten economies in the world if it was a country, according to The Huffington Post. As one of the fastest-growing U.S. populations and with more purchasing power every year, the 50-million-strong U.S. Hispanic demographic is one of the last frontiers in which companies can increase market share and brand loyalty. With an expected 100 million U.S. Hispanics by 2050, it's imperative that companies gain their brand loyalty now.

According to Nielsen, U.S. Hispanic buying will top $1.5 trillion by 2015, having increased 347% in 10 years. The Hispanic demographic trends younger than non-Hispanic whites, especially in the Millennial ages 15-34 segment.

Tech-savvy market
Google
(NASDAQ: GOOGL  )  is already poised to benefit from this market, as Hispanics not only spend more time and are more social online but are also more engaged on mobile platforms than other demographics. 22% of polled Hispanics told YouGov that they would be more interested in a brand if it offered a Spanish app. Google makes 68% of it apps available in Spanish.

Google would benefit from the Hispanic love of tech regardless as it covers tablets, search, Android, and smartphones. Google has already won Hispanics' eyeballs with YouTube earning a no. 1 comScor online video ranking.

As a conduit for search ads in this burgeoning ad market and with its proprietary targeted algorithms, Google has had a "specialist team" in place since 2011 to help its advertisers connect with Hispanics. Google is currently trading at a 26.66 trailing earnings multiple. In fact, Google is so dominant in search it is a verb even in Spanish--Guglear.

The biggest Hispanic advertiser
The company that markets to Hispanics the most, spending $246.2 million in 2012, is Procter & Gamble (NYSE: PG  ) . Marketing Charts wrote in 2012 that "Procter & Gamble, the leading advertiser, maintained its top-ranked position in Hispanic spending, allocating 73% of its $225.6 million in spending to Spanish language network TV." The company remained no. 1 among the Ad Age Top 50 Hispanic Media Advertisers in 2013 as well.

Procter & Gamble's Baby Care segment benefits from a U.S. Hispanic birthrate that has been four times higher than the general population's from 2000-2010. Its mass-market cosmetics and grooming segment also benefit. Marketing Charts notes, "For health and beauty products they (Hispanics) spend 10% more on name brands ($326 vs. $297) and 9% less on private label ($69 vs. $75)."  More importantly, according to Forbes contributor Glenn Llopis, "Hispanic families tend to be brand loyal once brand relationships are established (national, regional and/or store brand alike)."

Another interesting initiative is Procter & Gamble's head-to-toe Latina beauty and household solution brand, Orgullosa (Proud), which features its own website, Orgullosa.com. Hispanics spend more than the non-Hispanic population on the company's five main segments: Baby and Family Care, Fabric and Home Care, Grooming, Health Care, and Beauty.

Procter & Gamble offers a yield of 3.10% and is a Dividend Aristocrat, consecutively raising its dividend for 57 years. Quarterly revenue growth has been anemic at 2.20%, so marketing to Hispanics is the right move to grow considerable market share and create generations of brand loyalty.

Brand loyalty that money can't buy
McDonald's (NYSE: MCD  ) is another Hispanic spending heavyweight and devotes a company website, MeEncanta.com (I'm loving it), to this market, featuring music, sweepstakes, online futbol, and scholarships. McDonald's also offers college application workshops for Hispanic teens. Bob Garfield of Advertising Age told QSR that he considers this McDonald's scholarship initiative a potent driver of brand loyalty.

McDonald's is a Dividend Aristocrat with a 3.20% yield and a 17.74 trailing earnings multiple. Second-quarter U.S. comps were only up 1%, and operating income was flat. CEO Don Thompson has characterized the U.S. as a "market share battle."

Building brand loyalty in the Hispanic market is key for the company's U.S. sales. On building Hispanic loyalty, Thompson said,

"It's about establishing customer loyalty versus being aggressive for one or two months. We need long-term loyalty. We want a strong customer base." 

A 2012 Univision survey concluded that Hispanics visit quick-serve restaurants more frequently and with larger parties (2.9 guests vs. 2.1 non-Hispanic guests per visit) than non-Hispanics and are more likely to choose a quick serve chain.

Vive Hoy!
The third company at the forefront of reaching out to Hispanics is PepsiCo (NYSE: PEP  ) . At an ad sales presentation, Univision exec VP Steve Mandala said that "100% of beverage marketers' growth will come from the Hispanic market."

PepsiCo is split almost evenly between food and beverage sales, with 51% of revenue coming from the U.S.. Since 2003, the company has advertised to the Hispanic market, starting with its El Renton de Sabor campaign, which earned 80%+ brand awareness. This whetted PepsiCo's appetite for more campaigns, including last year's "Vive Hoy" (Live Today) and this year's Brisk Bodega campaign aimed at Hispanic urban youth.

PepsiCo Senior Director of Cultural Branding Javier Farfán told Hispanic advertisers how "cool" content, cultural fluency, and forward initiatives like introducing reggaetón (a Latin-Caribbean music genre) and engaging soccer player Lionel Messi for Pepsi and Lay's commercials are key to PepsiCo's U.S. Hispanic strategy.

PepsiCo offers a 2.80% yield at a 19.04 trailing earnings multiple. It needs this edge with Hispanics to overcome a multi-decade trend of declining U.S. soda consumption and to boost revenues.

Viva Movil
Verizon (NYSE: VZ  )  is no slouch at marketing to Hispanics. The company offers Spanish-language and interest-targeted FIOS packages, and is also now targeting Hispanics for the smartphone market. A Pew research study in March found that 49% of Hispanics own a smartphone and that overall mobile phone adoption has increased sharply among Hispanics.

In an innovative partnership, Verizon has teamed up with superstar Jennifer Lopez, founder of Viva Movil, for 15 Viva Movil retail locations in concentrated Hispanic urban areas nationwide to sell phones and Verizon service. All 15 locations should be open by the year's end.

Verizon offers a 4.50% yield, but it is the most expensive stock in the Dow with a P/E ratio of 86.

The Foolish takeaway
Ramon Pineda of Univision summed it up best: "The U.S. Hispanic market is in our backyard and you don't have to travel to sell it. There are no issues with tariffs, imports or other regulations."

These companies are leaders in marketing to U.S. Hispanics. They will eventually reap the harvest of their efforts over other competitors that hang back.

The retail space is in the midst of the biggest paradigm shift since mail order took off at the turn of last century. Only those most forward-looking and capable companies will survive, and they'll handsomely reward those investors who understand the landscape. You can read about the 3 Companies Ready to Rule Retail in The Motley Fool's special report. Uncovering these top picks is free today; just click here to read more.


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