Latin American Consumer Profile (Suarez + Rey)

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Profile of Latin American Consumers and the implications for CPG Supply Chains

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Waist line problems… : 

Waist line problems… Latin America has problems…

Latin Americans : 

Latin Americans Brazil = 188m inhabitants Mexico = 107 millions Colombia = Third largest country in the region with 44.2m inhabitants These 3 largest countries represent 5.8% of world’s population. 40% lives in poverty and 15% under extreme poverty conditions ECLAC 2008) Central America = 35 millions South America (without Brazil) = 185m Caribbean = 39 millions

Latinos – Grade 7 JWT : 

Latinos – Grade 7 JWT A sociological view “…in general terms, we, Latinos, share similar ways to see the world and live in it, …” “…we share perceptions and general mechanisms to relate to different products, services and discourses, and above all we share the meaning we assign to any given product, the way we purchase it, how to prepare it, consume it and ultimately how we identify with it… “

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Through product consumption, personal identification with advertising and communication media, and the appropriation of brands and campaigns, Latin American consumers satisfy their emotional needs that in essence are more alike than we think. Latinos – Grade 7 JWT

Latinos – Grade 7 JWT : 

From the Rio Bravo to the Patagonia, there is a need to evade and mitigate “frustration”. This is a motivator and a common thread for the region. Frustration levels, higher in populations with lower income levels, can be explained by different reasons: daily efforts to go by, daily purchases, the impossibility to save for a “rainy day” or splurges, discrimination, difficult working conditions, and perceived social injustice, ... Latinos – Grade 7 JWT

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How do Latin Americans evade frustration? Abundant food, large groups of friends and family, entertainment, television, and … MAGICAL THINKING! These are mechanisms to mitigate frustration and make life bearable. All of these are key components of the DNA of the low-income Latin American consumer (the large majority!) Latinos – Grade 7 JWT

EMERGING CONSUMERS (MARKET BELLY!)The largest Latin American demographic group : 

EMERGING CONSUMERS (MARKET BELLY!)The largest Latin American demographic group *Assumes the same ration of middle class consumers from sample countries to the rest of Latin American countries Sources: Target Marketing, SIGMA ICCOM, INDEC, Napoleon Franco, Viewswire

Understanding the Value of Emergent Consumers in Emerging Markets : 

Understanding the Value of Emergent Consumers in Emerging Markets Brazil México Argentina Colombia Chile Costa Rica % Population % Purchasing Power % Income Devoted to Consumer Goods % Population % Purchasing Power % Income Devoted to Consumer Goods % Population % Purchasing Power % Income Devoted to Consumer Goods % Population % Purchasing Power % Income Devoted to Consumer Goods % Population % Purchasing Power % Income Devoted to Consumer Goods

Who Are They? : 

Who Are They? I am a simple woman. I am a fighter who overcame a childhood with many limitations. I grew up in a very poor neighborhood but I had some opportunities and I am taking advantage of them I am Reyna (Homemaker D+, Querétaro, Mexico)

Who Are They? : 

Who Are They? “My opportunity is a stable job, that allows me to finance purchases of durable goods and housing” We are normal people, plain and hard working. (Head of household, D+, San Juan del Rio Querétaro)

How do they live? : 

How do they live? “We live comfortably, without luxuries but we do not lack much. We are proud of living better than our parents. We have improved our lives” I have a house (pay rent), I have a job… We buy the things we need. (Married couple D+, Cuajimalpa)

How do they live? : 

How do they live? FIRST OF ALL, THEY DO NOT SEE THEMSELVES AS POOR We have a good live. Better than I ever thought. Poor? No, we were poor before. Now we have a good live. (Padre de Familia D+, Cuajimalpa)

Their Real Dream… : 

Their Real Dream… IT IS PLACED ON THEIR CHILDREN “The kids have to study to get a better live” My dream is to support my children’s schooling, and to make sure they make the effort to continue studying. I’m willing to sacrifice everything to see my children graduate. This is my dream! (Madre de Familia D+, Tlanepantla)

THEY ALREADY DID THE BEST THEY COULD : 

THEY ALREADY DID THE BEST THEY COULD With hard work and focus they have achieved some better standard of living that is enjoyable and pleasurable. Now their effort is to stay there! Their challenge IS NOT CLIMBING HIGHER. It is NOT FALLING DOWN! So… STABILITY IS THEIR GOAL The ideal ecosystem is a country with low prices and stable labor markets…

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MYTHS and REALITIES ABOUT LATIN AMERICA’S “BELLY”

MYTHS : 

MYTHS “Lower Classes” MYTH 1 Poor people don’t have money to spend. REALITY If true that their income is lower that in other segments, emerging consumers dedicate a larger part of their income to buy consumer goods. As a group they have a large purchasing power.

REVISING MYTHS : 

REVISING MYTHS MYTH 2 At the “Base of the Pyramid”, needs are simple and the most important thing is low price (value brands and discount retailing) REALITY Emerging consumers are sensitive to prices – however they are focused on minimizing “total purchasing cost”. “Lower Classes”

ISSUES : 

ISSUES It is worth paying more to buy close It is worth paying more to buy fast In most categories it is important to pay more to get better quality They spend more if they shop with their kids They are influenced by other in their shopping trips 40% 35% 45% 50%

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MYTH 3 Emerging consumers are “poor” “working classes” REALITY Emerging consumers do not behave exactly the same: They show differences in their shopping habits, store selection routines, income stability, attitudes, brand loyalty and store loyalty. REVISING MYTHS “Lower Classes”

FIVE ATTITUDES THAT DEFINE CONSUMERS IN LATIN AMERICA : 

Retail Shoppers in Latin America FIVE ATTITUDES THAT DEFINE CONSUMERS IN LATIN AMERICA

SEGMENTING SHOPPERSMap of Benefits – Shopping Attitudes / SEL : 

SEGMENTING SHOPPERSMap of Benefits – Shopping Attitudes / SEL

SEGMENTING SHOPPERSMap of Benefits – Shopping Attitudes / SEL : 

SEGMENTING SHOPPERSMap of Benefits – Shopping Attitudes / SEL

SEGMENTING SHOPPERSMap of Benefits – Shopping Attitudes / SEL : 

SEGMENTING SHOPPERSMap of Benefits – Shopping Attitudes / SEL

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MYTH 4 Poor consumers cannot act based on their natural preferences. (ej.: lack of car, financing needs) “It is just a matter of time” before emerging consumers start buying in large retail formats! REALITY Beyond their low income limitations and lack of transportation there are other barriers to attract consumers to modern retail formats. REVISING MYTHS “Lower Classes”

RETAIL NEEDS INNOVATION TO ATTRACT EMERGING CONSUMERS : 

RETAIL NEEDS INNOVATION TO ATTRACT EMERGING CONSUMERS

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NEW SHOPPING MALLS: MODERN AND PROFESSIONAL

THE REALITY OF EMERGING CONSUMERS : 

THE REALITY OF EMERGING CONSUMERS There is plenty of income Strong brand valuation Complex access to emerging markets: risk levels, rural locations, congested urban markets Increasing connectivity Technology adopters They want “more” and “better” Quality Assortment Access They want an attractive shopping experience Trust Dignity

THE INNOVATION CHALLENGE TO ATTRACT EMERGING CONSUMERS : 

THE INNOVATION CHALLENGE TO ATTRACT EMERGING CONSUMERS Emerging consumers pose the key question: How do we provide low total cost, good quality, sustainability and profitability at the same time? Uncovering a market. How to see an attractive market when REALITY shows just poverty. The key task is to increase access to quality, creating a market with a different structure than those serving high purchasing power levels.

Slide 47: 

Finding latent markets … hidden. Multiply sales. Creating new markets at the Base of the Pyramid. Improving poverty conditions. Finally…

Remember the demographic “Belly” : 

Remember the demographic “Belly” But… Just them?

Slide 49: 

NUEVA YORK. Durante aproximadamente una generación, Estados Unidos navegó sobre una creciente ola de deudas. La proporción entre deuda e ingreso disponible personal era de 55% en 1960. Desde entonces, ha aumentado más del doble, alcanzando 133% en 2007. La deuda del mercado de crédito total —tomando en cuenta el endeudamiento corporativo, financiero y otros— se ha elevado a la par, pasando de 143% del producto interno bruto en 1951 a 350% del PBI el año pasado. Hay un nivel de deuda constante durante la mayor parte del siglo XX, hasta mediados de los años 80. En ese momento hay un pronunciado ascenso en aceleración hasta los niveles épicos de hoy. Este aumento en la deuda avivó un atracón de consumo. A lo largo de los próximos años, los estadounidenses tendrán que ahorrar más y pedir prestado menos. Un país que se ha llegado a acostumbrar a un crecimiento razonablemente rápido y una riqueza efervescente probablemente tendrá que adaptarse a un crecimiento más lento y menos efervescencia minorista. Los retos económicos serán difíciles. Reuven Glick y Kevin J. Lansing de la Universidad Federal de San Francisco, estiman que los estadounidenses tendrán que incrementar su tasa de ahorros familiares de 4% a 10% para el 2018 para restablecer el equilibrio. Eso, escriben, producirá “un lastre a corto plazo sobre la actividad económica general”. CHALLENGES OF NEW TIMES Economic Crisis Forces Americans to Change Shopping Patterns They will have to adapt to a less effervescent growth

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Hey… what’s this goat doing in the clouds?

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Waist line Opportunities… Latin America has…

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