Bravo Group Chairman Daisy Exposito-Ulla gestures toward her ad agency's nifty new digs -- still unpainted and cluttered with unpacked boxes -- at the edge of New York's trendy East Village. She's taking a break from her struggle to fill dozens of open staff positions, needed to handle an expanding workload. "What's wrong with this picture?" she wonders. "Is this real or a fantasy?"
To most Madison Avenue execs in these austere times, the notion of doubling office space and staffing up is sheer fantasy, a throwback to the heady days of the late '90s. But Exposito-Ulla and many of her peers at other Hispanic-targeted agencies are buried in work, confirmation that they've finally earned a significant share of big corporate marketing budgets.
Chalk it up to the 2000 Census report released last year, which jolted marketers with the realization that Hispanic Americans constitute a bigger, more widely dispersed, and more affluent market than many had imagined. The survey showed that the number of U.S. Hispanics grew by 58% in the past decade, to 35.3 million. Moreover, Hispanics' buying power increased 118%, to $452 billion, from 1990 and 2001, according to the University of Georgia's Selig Center for Economic Growth. That far outpaced the 68% growth in non-Hispanic buying power, to $6.6 trillion.
Such data have made it hard for marketers to ignore this segment, recession or not. "The Census was the saving grace for the marketplace," says Exposito-Ulla, whose agency, owned by the giant holding company WPP Group, is the largest Hispanic specialist.
As a result, although they may be economizing elsewhere, many companies are initiating their first Hispanic marketing programs or boosting existing budgets and taking regional efforts national. Such giants as Procter & Gamble, AT&T, and General Motors all increased their Hispanic marketing budgets more than 20% in 2001. Bravo Group harnessed the star power of the Univision cable-TV network's morning-show host Fernando Arau to tout AT&T's 10-10-345 dial-around service in direct-response ads, with the resulting call volume providing an immediate measure of the ads' effectiveness.
Familiar brands such as KFC and Heineken are going national, launching campaigns to reach the surging ranks of Hispanic Americans they had previously overlooked with efforts concentrated in major cities like New York and Miami. The ad growth, even though it has tapered off lately, is striking at a time when the rest of the industry has slammed on the brakes. Spanish-language media spending rose by as much as 7% in 2001, to about $2.6 billion, after growing an average of 19% in each of the prior three years, according to the Association of Hispanic Advertising Agencies.
By contrast, ad spending overall was down a sharp 9.4% in 2001, to $94.6 billion, according to ad tracker CMR, which projects a tepid 1.5% rise in 2002. "Just look at Census 2000," says Dan Roselli, head of brand and communications at Bank of America. "The idea that these people are not affluent is an increasingly outmoded stereotype." His ethnic-marketing budget, most of it targeted at Hispanics in California, Texas, and Florida, will more than double this year, to $30 million.
From Bravo's New York headquarters to Texas, Florida, and California, Hispanic-oriented agencies are expanding their offices and scrambling to fill new positions at a time that cutbacks at other agencies have left a glut of talent available. In a survey by Hispanic Business magazine, all but two of the top 25 Hispanic agencies say their billings grew in 2001. "All of our clients have increased their budgets," says Roberto Orci of Los Angeles-based La Agencia de Orci & Asociados, which saw billings from clients like Honda, Verizon, and Washington Mutual grow by 20% last year. "Our growth is unaffected by economic problems."
While de Orci remains independent, many Hispanic agencies have been scarfed up by the major holding companies in recent years -- investments that are looking a lot smarter today than, say, the big-ticket dot-com acquisitions the holding companies were making at the same time. Meanwhile, Spanish-language TV options are expanding to absorb the ad influx. On Jan. 14, Univision Communications, the dominant Spanish-language broadcaster in the U.S., launched a 24-hour channel called Telefutura, with Sears, Anheuser-Busch, Pfizer, and Gillette among the initial sponsors.
A joint venture between Mexico's TV Azteca and Pappas Telecasting is working to broaden its Azteca America network to a national scope. New magazines are also flourishing. Even Telemundo, a distant No. 2 player that has been recovering from what many analysts say were a series of marketing and programming miscues in recent years, is enjoying boom times. NBC acquired it in October for $2.7 billion and, on the strength of new advertisers like Gillette, Nestle, Minute Maid, and Del Monte, expects to come close to matching last year's 40% surge in ad spending, says Sales Vice-President Steven J. Levin.
The changes are visible in more than just the raw numbers. One sign of the market's evolution is that marketers now seem better informed about Hispanics' potential, putting prospective agencies to work on speculative assignments rather than simply asking for primers on why Hispanics should be targeted, says Bravo's Exposito-Ulla. And as Hispanic culture becomes more familiar to mainstream Americans, Latin-inflected ads are finding their way into English-language media.
Anheuser-Busch has adapted several Spanish-language Bud Light ads created by Ornelas & Associates for the general market, says agency CEO Victor Ornelas, who adds that more Hispanic spots are in the pipeline. Not that Hispanic agencies have been completely insulated from the broader economic environment: While many general-market agencies would be thrilled with any revenue gain, growth for the Hispanic agencies has been slowing, with a modest 5% to 10% gain likely in 2002.
Further, a study by the Pew Hispanic Center, a Washington think tank supported by the Pew Charitable Trusts, warns that the recession's fallout could erase the recent income and employment gains scored by Hispanics. That may temper some marketers' newfound enthusiasm.
Even at more sedate growth rates, though, Hispanic marketing programs "are now part of the total communications budget," not just an oddity at risk of being lopped off, argues Manny Vidal, CEO of New York's Vidal Partnership. If he's right, then the tag line of ads that pitch Tecate beer to Mexican Americans may just sum it up: Latino marketing "has arrived, and is here to stay."
Aixa M. Pascual and Gerry Khermouch, BusinessWeek online. February 19, 2002
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