U.S. Hispanic Market: The Power of More!

U.S. Hispanic Market: The Power of More!

T he country s fastest growing ethnic group, the U.S. Hispanic market, presents a key growth opportunity for retailers and consumer packaged goods (CPG) companies, as much for its attractive household characteristics and unique shopping habits as for its sheer size. Numbering approximately 52 million, U.S. Hispanics currently account for nearly 17% of the total U.S. population. This issue of The Why? Behind The Buy Hispanic Market 2013 report provides actionable insights into this valuable market. U.S. Hispanic shoppers spend more on groceries than the total U.S. population: +15% on routine trips +9% on stock-up trips When comparing the total U.S. population with U.S. Hispanics, the word more is a key differentiating descriptor. Compared to the total U.S. population, U.S. Hispanics are more connected via technology, more likely to cook family-focused meals at home, more brand loyal, and typically spend more time and more money on their grocery trips. U.S. Hispanic households also differ from total U.S. population households by a factor of more - there are more Hispanic family households, more multigenerational households and more children. The Power of More is making the U.S. Hispanic population one of the most important strategic markets for retailers and CPG companies. Hispanics buying power is projected to skyrocket to $1.5 trillion by 2015 a 50% increase from just a few years ago. Household Snapshot (Among respondents with children in the household) Total U.S. Population VS U.S. Hispanic Population Total U.S. average household size is 2.6 Bigger Households U.S. Hispanic average household size is 3.4 66% of U.S. households are family households More Families 78% of U.S. Hispanic households are family households 5.6% of U.S. households are multigenerational More Multigenerational Households (Includes 3 or more generations living in the same household) 10.3% of Hispanic households are multigenerational 24% of the Total U.S. population is under age 18 More Children 34% of the U.S Hispanic population is under age 18 U.S. Census Bureau; 2010 Study Data & American Community Survey, 2009-2011 2 The Power of More!

U.S. Hispanic Shoppers Make More Grocery Trips and Spend More Across Grocery Trip Types 4.1 3.8 Average Reported # of Monthly Grocery Trips by Type 3.1 2.3 3.5 3.4 3.9 3.0 3.3 2.6 2.7 2.0 $110 $95 Average Reported Spending by Grocery Trip Type $124 $114 $74 $63 $51 $42 $35 $26 $71 $57 Routine Stock-up Fill-in Last Minute Specialty Occasion Routine Stock-up Fill-in Last Minute Specialty Occasion Based Based U.S. Hispanic Shoppers U.S. Hispanic Shoppers Family First Mealtime is a priority in the U.S. Hispanic household and more U.S. Hispanic shoppers cook at home than total U.S. shoppers, often spending more on ingredients to prepare healthier meals. When the Hispanic shopper heads to the store, she is probably accompanied by her children and focused on the needs of her family. In fact, U.S. Hispanic children wield great influence over what makes it into the shopping cart. Shopping Attitudes & Habits (Please indicate how much you agree with the following statements) Cook More Frequently at Home* Select Products to Create More Meals at the Lowest Total Cost 52% 68% 67% 63% % of Households Where Children Have Most Influence on Purchase (Among respondents with children in the household) 19% 17% 18% 13% 34% 22% 37% 27% 30% 30% Bring Snacks / Food From Home to Work / School Eat Healthy Foods Even Though it s More Expensive U.S. Hispanic Shoppers 47% 40% 59% 55% *How well does this statement describe your shopping habits over the past year? Baking Mixes Inc. Cakes Brownies, Etc. Canned Soup Crackers U.S. Hispanic Shoppers Frozen Desserts Shelf Stable Juice / Drinks RECOMMENDED ACTIONS: To engage with the U.S. Hispanic shopper, retailers and CPG companies need to communicate meal solutions to the Hispanic family in a way that interests both mother and child. Meals must be engaging and entertaining. Since Hispanic children have a lot of influence on purchase decisions while in the store, retailers and CPG companies should consider engaging children with placement of items and in-store promotional materials especially in key categories. The Power of More! 3

Key Hispanic Categories and Brand Loyalty Dynamics The U.S. Hispanic market shows slightly divergent trends from the total U.S. population when it comes to brand loyalty and frequently purchased product categories. Hispanic shoppers show more loyalty for national brands, and national CPG brands are more likely to show up on the shopping lists of U.S. Hispanics by specific brand name. However, gaining Hispanics brand loyalty is not an easy task, especially for grocery retailers. The top 10 Hispanic categories tend to be categories with the highest leakage for grocery retailers. For example, at one major grocery chain, 77% of their Hispanic shoppers buying hair care products do NOT buy in their store but rather at other outlets such as supercenters, mass merchandisers and drug stores. At the same time, Hispanics are often the biggest buyers of some of these categories 74% of the new households buying hair care products are Hispanic while the total U.S. population has declined in households buying the category. Top 10 Most Developed Categories Amongst Hispanics (Index) Dried Vegetables & Grains 230 Men s Toiletries 175 Baby Food 171 Fragrances (Women) 160 Hair Care 149 Shortening / Oil 145 Disposable Diapers 142 Baby Needs 134 Juices & Drinks (Shelf Stable) 131 Sanitary Protection 129 Top 10 Categories in Hispanic Household Penetration (% HH Penetration) Juice & Drinks (Shelf Stable) 94.9 Prepared Foods* 93.0 Eggs (Fresh) 92.4 Spices / Seasonings / Extract 91.8 Personal Soap / Bath Needs 90.7 Hair Care 90.6 Laundry Supplies 89.5 Shortening / Oil 86.7 Bottled Water 85.8 Packaged Milks & Modifiers 82.8 *Includes Ethnic Meal Kits, Dry Mixes, Tortillas Nielsen Homescan (UPC coded products), Total US, 52 weeks ending 12/29/2012 RECOMMENDED ACTIONS: Retailers and manufacturers will need to work together to reduce leakage by leveraging these key Hispanic categories as gateway categories to larger shopping baskets, and ensuring the right assortment mix within the high indexing Hispanic categories. 4 The Power of More!

The Diversity of the U.S. Hispanic Market U.S. Hispanic shoppers acculturation into the United States, as well as their place of birth, significantly impacts their grocery shopping behavior. When retailers and CPG companies understand the diversity of the U.S. Hispanic market, they can more effectively create and deploy product and sales strategies to target this dynamic and diverse market. The incentive to invest time and resources understanding the U.S. Hispanic market is simple: financial. U.S. Hispanics spend more on groceries on average than the total U.S. population, but that higher spending is driven by non-u.s. born, less acculturated Hispanics. Additionally, non-u.s. born Hispanics are more likely to shop for groceries at outlets other than a supermarket and they are less likely to make stock-up grocery trips. In the store, the non-u.s. born Hispanic shopper is more likely to employ strategies to stretch their grocery budgets, including responding to store flyers and instore coupons. 54% of non-u.s. born Hispanics shopped more at supercenters and club stores in the past year Based on changes in the last year, how well does each of the following describe your grocery shopping habits over the past year? 32% 48% 33% 54% 37% 48% 49% 46% 46% 42% 43% 40% 40% 35% 36% 45% 32% 36% 18% 23% Shop More at Supercenters / Club Stores Buy More Store Brands to Save Money Switch to Less Expensive Brands Shop Around to get Better Deals Spend Less on Each Shopping Trip, but Make More Trips U.S. Hispanic Shoppers U.S. Hispanic Shoppers - U.S. Born U.S. Hispanic Shoppers - Non-U.S. Born The Power of More! 5

How often does each of the following impact what you buy on your grocery shopping trip and/or which specific products you eventually decide to buy? (% Indicating Often ) FPO Graphic Total U.S. Shoppers Hispanic Shoppers Fully Acculturated Hispanic Shoppers Fully Unacculturated Coupons you got in the Mail Coupons you Print out from Manufacturer or Product Websites Coupons you get from the Store Flyer Instantly Redeemable Coupons Attached to a Product Coupons Available at the Shelf Coupons you Download to your Smartphone or iphone Displays in the Aisle End of Aisle Displays Product Tastings or Demonstrations 27% 30% 26% 22% 24% 18% 30% 27% 22% 28% 29% 21% 19% 19% 23% 7% 11% 12% 10% 13% 18% 9% 10% 20% 9% 9% 16% Unacculturated Hispanic shoppers are more likely to be impacted by in-store promotions than acculturated or total U.S. shoppers. Coupons at the shelf, displays in the aisle and product tastings/demonstrations are more popular with unacculturated Hispanics while coupons in the mail or from websites resonate more with acculturated Hispanic shoppers. Spanish Language Keeps Cultural Ties Strong U.S. Hispanics relate with two identities - American culture and Hispanic culture. Language is a strong connector for preserving culture and generational traditions. Most of those we surveyed preferred to speak at least some Spanish at home, and that preference was true across generations. Young shoppers, ages 18 to 34, also indicated a preference for Spanish language media, from broadcast to print. However, the majority of U.S. Hispanics understand English. RECOMMENDED ACTIONS: Retailers and manufacturers that win with U.S. Hispanic shoppers will have highly tailored in-store marketing strategies based on the unique demographics of each local market. Strategies for engaging the unacculturated shoppers will look very different than the strategies for engaging the acculturated shoppers. In particular, unacculturated shoppers will respond better to in-store deals and interactive in-store demonstrations. 6 The Power of More!

Technology Adoption & HyperConnectivity U.S. Hispanic shoppers embrace technology and utilize digital tools as part of their shopping strategy at higher levels than total U.S. shoppers. With higher usage of both mobile technology and social media (Facebook) for shopping, U.S. Hispanics are more connected while in store and rely more heavily on social interactions during their shopping planning and in-store shopping experience. A closer look at the digital tactics used by shoppers shows that the tactics employed vary in popularity, with U.S. Hispanics more likely to use digital tools for informational reasons. 69% of U.S. Hispanics reported using technology devices in their grocery shopping planning, compared to 61% of the total U.S. population. U.S. Hispanics also surpass the total U.S. population in smartphone use 59% versus 48%. How often do you do each of the following for any type of grocery item, whether before, during or after your shopping trip? (% Indicating I Regularly Do ) Total U.S. Shoppers Hispanic Shoppers U.S. Born Hispanic Shoppers Non-U.S. Born INFORMATIONAL Visit a Store Website to Learn More about Products or Deals Use Computer / Smartphone to Look up Products Health/Nutrition Information Use Computer / Smartphone to Compare Prices on Specific Products Use your Mobile Phone to Search for a Grocery Store Location Look up Product Information on your Mobile Phone (like Reviews, Prices) 18% 12% 20% 10% 13% 19% 12% 12% 17% 7% 13% 16% 8% 11% 16% COUPONS / PROMOTIONS Print a Coupon from a Website 28% 19% 21% Load a Coupon Onto your Shopper Card from a Website Sign up for Texts and Emails that Provide Coupons that you can Print out Sign up Online for a Product or Store Sweepstakes, Contest or Game Buy a Daily Deal from a Daily Deal Site (like Groupon, Living Social, Etc.) 19% 16% 14% 17% 15% 15% 19% 15% 14% 10% 12% 14% The Power of More! 7

MOBILE MOTIVATION Young Hispanic adults use their mobile phones as personal computers. Since many of them live with their families, mobile devices offer more privacy than the shared family computer. About 1 in 5 use their phones most often to access the internet.* Hispanic adults are 70% more likely than white non-hispanics to feel that apps are very important to their mobile experiences and to report watching videos always or often on their phones. According to a 2012 Hispanic Mobile Consumer Trends Study (Zpryme Research & Consulting), more than half (53%) of Hispanics prefer mobile devices as their primary source for entertainment, with 4 out of 10 on their mobile phone three hours or more per day. *Note: Insight Tr3s as Hispanic and Mobile Phones ; April 3, 2013, and Pew Research Hispanic Center, Closing the Digital Divide: Latinos and Technology Adoption, March 2013. Connecting on Facebook appears to play a more significant role for U.S. Hispanics than the total U.S. population when it comes to interacting with CPG brands. More than 8 in 10 Hispanic shoppers are using Facebook and the majority report liking or following brand pages on Facebook. The story for CPG companies goes deeper than U.S. Hispanic shoppers simply liking brand pages more. U.S. Hispanic shoppers more often have personal connections with brands, indicating the importance of following brands that support similar causes, help tell a story of what products I like, and as a way to connect with others, whereas the total U.S. shoppers motivations were more financial and more pragmatic, with those total U.S. shoppers stating their engagement with the brand page on Facebook was primarily to get coupons and special offers. Why do you follow brands on Facebook? 83% of Hispanic Facebook users like or follow brands compared to 79% of the total U.S. population Supports Similar Causes Helps Tell a Story of What Products I Like Way to Connect with Others 18% Coupons and Special Offers 21% 25% 37% 33% 31% 24% 56% Shows I am a Loyal Customer 10% 18% U.S. Hispanic Shoppers RECOMMENDED ACTIONS: Successful retailers and manufacturers will invest in digital strategies customized for the U.S. Hispanic shopper. They will reinforce the more emotive components of the brand through digital media, in addition to the more pragmatic deals and special coupons. Using digital media to reinforce brand imagery and to educate the shopper about the brand and the brand lifestyle is an effective way to connect with the Hispanic consumer. 8 The Power of More!

Healthy Eating In the case of healthy eating, there are more similarities than differences in the approach and behaviors between total U.S. shoppers and U.S. Hispanic shoppers. U.S. Hispanic shoppers consider themselves educated on the topic of healthy eating with three-quarters of U.S. Hispanic shoppers indicating that they are confident picking out healthy groceries at least most of the time. Confidence in selecting healthy food options is a sentiment shared by total U.S. shoppers with 7 in 10 agreeing that they are confident and typically know how to make healthy eating choices. For U.S. Hispanic shoppers, frequency of Cooking at Home More Often and Eating Meals with Family indicates their desire for health and wellness and their emphasis on family. % Of Shopper Respondents U.S. Hispanic Shoppers Being Physically Active 62% 58% Being Physically fit 66% 55% Feeling Good About Yourself 59% 55% Not Being Overweight 55% 52% Consuming Fresher Foods 46% 48% Cooking at Home More Often 36% 46% Quality of Work / Life Balance 44% 44% Portion Control 43% 40% Eating Meals With Family 25% 36% Buying Organic / Natural Products 20% 26% Consuming More Gluten-Free Foods 9% 14% Having a Hearty / Large Appetite 7% 13% Buying Local Products 17% 12% Please indicate how strongly you agree or disagree with the following statements regarding healthy food items. (% Top 2 Box Responses, Strongly/Somewhat Agree) I like to occasionally indulge in unhealthy foods 77% 86% Most snack foods people eat these days are not healthy I always try to eat healthy foods and maintain a balanced diet I often snack between meals I usually only snack on healthy snack foods 46% 79% 83% 76% 69% 68% 66% 62% I incorporate probiotics into my diet regularly 40% 50% U.S. Hispanic Shoppers The Power of More! 9

Diet Challenges Another seemingly universal challenge for both total U.S. shoppers and U.S. Hispanic shoppers is balancing a desire to eat healthy and maintain a healthy diet with cravings to snack and indulge in unhealthy foods. Even though most shoppers report confidence in their ability to make healthy food selections, there are opportunities for retailers and CPG companies to support shoppers desire to eat a balanced diet. U.S. Hispanic shoppers are more likely to use social media than the total U.S. shoppers with 51% of U.S. Hispanic shoppers reporting the Internet is their first source for information on healthy eating. According to the American Diabetes Association, diabetes impacts 11.8% of U.S. Hispanics compared to 8.3% of the total U.S. population. Providing shopper education and awareness of diabetes is an important strategy for retailers and manufacturers both in terms of building shopper loyalty and in providing a truly value added service to the community. Would you use a dietician for help on shopping for healthier foods, if your favorite supermarket offered an onsite dietician? If a dietician were available to you, what categories would you prefer to have direction/ guidance on? Please select all that apply. Cooking Healther 31% 44% 21% Yes 25% Not Sure 54% No Foods To Avoid Weight Loss Guidance Towards Health Goals 19% 25% 42% 34% 39% 31% Fitness Programs 17% 23% U.S. Hispanic Shoppers 42% Yes 21% Not Sure 37% No Nutritional Value vs. Dollar Value Health-Condition Specific Ingredients Organic / Natural Products 21% 21% 19% 16% 17% 13% 18% 19% None / Other 15% 28% U.S. Hispanic Shoppers RECOMMENDED ACTIONS: For retailers and CPG companies, understanding the dietary and health challenges faced by U.S. Hispanics can help inform a variety of product, education and marketing programs. It appears that U.S. Hispanic shoppers would welcome expert guidance on the topic of diet and healthy eating as they were more likely than the total U.S. shoppers to agree they would seek help from a dietician if one was made available to them at a grocery retailer. 10 The Power of More!

Insights to Action for Retailers and Brands Hispanic households cook more frequently at home: Expand produce aisle in high-population Hispanic stores. Focus on fresh, natural, cook from scratch meal solutions. Educate Hispanic shoppers on relevant topics like healthy snacking and diabetes management. Hispanic children have influence: Expand kid friendly aisles such as crackers, snacks, and lunch box items. Create advertising/pos programs to include children. Focus on family-oriented marketing, like parking lot events or community events. Foreign-born Hispanics have some distinctly unique behaviors: Capitalize on the fact that foreign-born Hispanic shoppers will use smartphones and technology to pre-shop for deals and product information. Provide more in-store vehicles to foreign-born Hispanics. Use bilingual signage, coupons at the shelf and product demonstrations. In-store is an important opportunity to communicate with Hispanic shoppers: In high population Hispanic stores, cater the store experience to the entire family (kid carts, etc.). Provide bilingual employees in large population Hispanic stores. Target high Hispanic indexing and high Hispanic household penetration categories to expand categories /aisles to attract Hispanic shoppers. Stock and expand authentic Hispanic brands in high-traffic Hispanic stores. Hispanic shoppers surpass the total U.S. population in use of technology: Ensure the digital experience moves beyond coupons and deals. Use digital to reinforce the brand lifestyle and educate the shopper. Digital can be an effective way to reinforce brand emotive intangibles - increasing and reinforcing brand loyalty. 7 Steps to Developing a U.S. Hispanic Strategy 1 2 3 Define Your Growth Strategy Inclusive of Hispanic Insights, Habits & Practices Choose and Develop Products / Packages That are Most Relevant to Hispanics Customize Retail Distribution Assortment in High Hispanic Stores 4 Develop Culturally Relevant Creative 5 6 7 Support Concurrent Efforts With Sufficient and Consistent Funding Reach Your Consumer & Shoppers Through Culturally Relevant Mediums Define and Track Success Metrics Across Disciplines Univision Strategy & Insights Team The Power of More! 11

The Why? Behind The Buy Hispanic is an exclusive survey produced by AMG Strategic Advisors that provides valuable insights into U.S. Hispanic shopper behavior. This issue was fielded in April, 2013 with a sample of over 1,000 U.S. Hispanic shoppers and over 2,000 total U.S. shoppers via Acosta s proprietary ShopperF1st online and faceto-face survey. Retailers and CPG companies face a major opportunity to engage and connect with the U.S. Hispanic market. Acosta s AMG Strategic Advisors can help companies design an effective Hispanic market strategy and answer key questions, such as: How much growth can we expect from the Hispanic shopper? How should we think about segmenting the Hispanic shopper? How should we position our brand to grow with Hispanic shoppers? How do Hispanics perceive and define value? What kind of innovation do we need to reach Hispanic shoppers? How should we measure ROI on Hispanic marketing? What types of shopper marketing is most effective? How should we address Hispanic specialty retailers? For more information on The Why? Behind The Buy, U.S. Hispanic Market 2013, including customizing the research, contact: Carrie Shea at (847-778-5449), clshea@acosta.com. About AMG Strategic Advisors AMG Strategic Advisors is the growth strategy consulting unit of Acosta, assisting clients in accelerating profitable growth by leveraging insight driven strategies and advanced analytics. AMG Strategic Advisors leverages its seasoned consultants from leading strategy firms with proven industry expertise to provide best-in-class strategy consulting, brand positioning, shopper and marketing insights, and data analysis. For more information, visit Acosta.com. For more information about this report or other AMG Strategic Advisors research, contact Colin Stewart at cstewart@ acosta.com or Carrie Shea at clshea@acosta.com. 12 The Power of More!