Rising incomes, rising expectations
Understanding the Latin American Consumer
Economic prospects in Latin America have improved dramatically in the last decade, leading to growth and upward mobility across the region. The size of the middle class has doubled since 2001 and is expected to grow to 313 million, more than half of Latin America’s current population, in the next 15 years.1
To examine what impact this will have on brand owners in the food and beverage industry, IN spoke to the Research Director of the Coca-Cola Retailing Research Councils of North and Latin America, Michael Sansolo, who works with grocery and convenience store businesses to analyze industry issues across the two regions.
A huge market opportunity for convenience foods
As consumers become wealthier, they increasingly expect higher quality products. “As soon as people have secured their basic need for food, their focus shifts to bringing quality into their life. Our recent study clearly shows that the upper classes and socially mobile consumers in Latin America now want healthier food and want to know what goes into their food. For brand owners, there is an opportunity to convey the quality message and educate consumers on what makes for better foods,” stated Sansolo.
There is less time for meal preparation when there are more people in the workforce with increased buying power. In fact, a recent study by the Coca-Cola Latin America Retailing Research Council titled “The Changing World of Shopper Needs and Values in Latin America” showed that 72 percent of consumers in lower classes said that they tend to cook from scratch most of the time compared to 60 percent of upper classes.2
These figures indicate that there is a huge market opportunity within the emerging middle class and upper class for prepared and packaged foods. “For Latin American consumers who have income to spend, convenience products can really work because their lives are so busy and their commutes to work tend to be long due to the infrastructure problems across the region,” Sansolo comments.
While packaged foods in North America have been part of the food culture since the 1950’s, Latin America is still tied to a more traditional food culture based on its agrarian roots. “One of the most surprising findings from our study was that most people we questioned had empty fridges,” said Sansolo. “The lower classes don’t have money to buy food to freeze for later and in general, Latin American consumers have no ingrained experience of how tasty and convenient frozen foods are. Consequently, even those that can afford to buy frozen products tend not to."
Sansolo suggests, “Brands must find a way to educate consumers about the taste and time benefits of prepared and packaged foods and stress the ease and convenience these products can bring. If they manage to do this, there is a real chance for success.”
Coca-Cola Latin America Retailing Research Council recently published their report “The Changing World of Shopper Needs and Values in Latin America” which analyzes how changes in economic status, new technologies and even daily challenges impact how consumers across Latin America make shopping decisions. The report is available for free at: http://www.ccrrc.org/.
So how can brands reach Latin American consumers? Social media could be one answer. As a result, of growing incomes, Latin America’s young adult population has embraced mobile technology and sales of smartphones have skyrocketed. Latin America is already home to 155.9 million smartphone users and by 2019, an expected 245.6 million will be using smartphones.3 “This growing interconnectedness allows consumers to see what products other people are shopping for, enabling brand owners to influence buying behavior and introduce new products in Latin America,” said Sansolo.
An unprecedented boom in consumer products?
Latin America’s favorable economic and demographic conditions could lead to an unprecedented boom in consumer products, but there are some marketplace fundamentals that will need to be addressed first.
“Unfortunately, instability and corruption still exists in the region, creating a lot of distrust which can hold back consumer spending,” explained Sansolo. “As a result many people still tend to shop in traditional patterns. People prefer to know the people they do business with. A lot of beautiful new supermarkets have failed while the informal markets nearby continue to thrive because of the trust and heritage associated with them.”
Furthermore, Latin America has tremendous infrastructure problems. The “new” middle class has a strong desire to shop at modern stores, they are often located further away and traffic prevents these consumers from making frequent trips. According to the study, it takes consumers half as long to reach a traditional retail channel (12 minutes) as it does a modern one (23 minutes).4
Brand owners wishing to tap into the Latin American market should consider the region’s challenges and develop their understanding of consumer needs across the countries. “The region is gigantic, with tremendous diversity both within the countries and the region. Brand owners should make no assumptions, but go down there and gain an understanding of the situation. All the building blocks for tremendous success are there but it is not a simple process to get there. Improving infrastructure to travel easily and creating a culture of trust takes time and a lot of energy,” concluded Sansolo.
1Brookings, 2015 http://www.brookings.edu/research/articles/2015/02/10-latin-america-middle-classprospects and Today Online, http://www.todayonline.com/business/growing-middle-class-latin-americaoffers-opportunities-ie-spore
2"The Changing World of Shopper Needs and Values in Latin America”, Coca-Cola Latin America Retailing Research Council Report
3“Latin America Home to 155.9 Million Smartphone Users”, eMarketer, http://www.emarketer.com/Article/Latin-America-Home-1559-Million-Smartphone-Users/1012794
4“The Changing World of Shopper Needs and Values in Latin America”, Coca-Cola Latin America Retailing Research Council Report
5“The Changing World of Shopper Needs and Values in Latin America”, Coca-Cola Latin America Retailing Research Council Report
6“The Future of Grocery”, Nielsen, https://www.nielsen.com/content/dam/nielsenglobal/vn/docs/Reports/2015/Nielsen%20Global%20E-Commerce%20and%20The%20New%20Retail%20Report%20APRIL%202015%20(Digital).pdf