Cincinnati is far from a hotbed of Hispanic immigrants. But the doyenne of that Midwestern city -- Procter & Gamble Co. -- is perhaps the premiere Hispanic marketer in Corporate America today. Buoyed by Latinos' fondness for P&G (PG ) brands from Gain to Downy, the company sank some $90 million into Hispanic advertising last year, about 10% of the ad budget for P&G's top 12 brands and a 28% increase over 2002.
The dynamic growth of the U.S. Hispanic population, now numbering some 38.8 million, is driving an ever-bolder Hispanic strategy at the consumer-goods giant: In early 2000, P&G formed a multicultural marketing unit split between Cincinnati and Puerto Rico, and dedicated to Hispanic marketing. One example of the new push: At last year's Grammy Awards, P&G ran a Spanish-language ad for Crest on CBS, a company first.
In early February, BusinessWeek Correspondent Brian Grow spoke with Graciela Eleta, 41, vice-president and general manager of P&G's multicultural-marketing team, about why the company is ramping up efforts to capture the Hispanic market and whether Hispanics are changing the way America does business. Following are edited excerpts from their conversation:
Q: You've said Hispanics are a key cornerstone of future growth in North America for Procter & Gamble. Why?
A:It's obvious -- the changing face of North America. Today, the ratio of people over 70 years old is one to five [for Caucasians] vs. people of ethnic origin. In the less-than-29-years-old category, the ratio is one to one. So, you can expect that a full one of every two consumers in North America will be of ethnic origin -- and about a quarter will be Hispanic.
We're looking at the multicultural arena as the wave of the future. Not participating in this growing demographic is no longer an option. And the Hispanic is a valuable consumer. Look at categories like shampoo -- we're significantly over-indexed among Hispanic at a rate of 290. In baby care, it's an index of 304. For fabric conditioners, it's 212. Deodorants and colognes, it's 194.
Q: What does over-indexing mean?
A:The dollars spent by Hispanics vs. the dollars spent by the general market consumer. I'm indexing Hispanics over Caucasians.
Q: Those numbers vividly show Hispanic influence. Was that realization the genesis for the creation of the multicultural-marketing unit at P&G?
A:Yes, it was the combination of the demographics and value of the [Hispanic] consumer that prompted P&G to call me into leading this unit. I also believe there was discontent from senior management about the way that we had been attacking this opportunity in the past. All of us believe we needed a horizontal process that captured all of the knowledge and learning and capabilities to attack [the Hispanic market] in North America.
Q: Since 57% of Hispanics, according to your research, are so-called "high scent seekers," does that mean the positioning of Gain as "the scent of clean" in the general market fell out of research regarding Hispanics?
A:It doesn't only fall out of that finding. It falls out of the fact that Gain is already significantly overdeveloped as a franchise with Hispanics -- our market share is significantly higher in Hispanic markets than it is in the general market.
Once you understand that, then you start to ask: Why is it so overdeveloped? The answer is that scent is such an important thing for Hispanics. So then you think, "How do I grow my franchise? I grow my franchise by bringing different, high-impact character and intensity scents that are appealing to Hispanics." And then you produce advertising that speaks to the Hispanic consumer, vs. just airing the [general] U.S. advertising.
Q: You've said that P&G wouldn't dream of launching a product without first testing it with Hispanics, right?
A:Don't use the word "dream." We're at a point where in several categories we are testing our product launches with Hispanics because we believe that it's important.
Q: How significant of a change is that from the early 1990s?
A:It's still the reality for most small brands in this company that we test our products almost uniquely with general market consumers. Those panels did include, in some instances, English-speaking Hispanics. As our unit came in, and as the demographics in the U.S. began to change, it became obvious that those groups were not representative of the changing face of North America.
We have influenced the [company] -- and it's not everywhere yet -- to test with Spanish-dominant Hispanics. The next phase is testing whether we're winning with Spanish-dominant Hispanics -- and we already have that testing in diapers. That's a big change from what we were doing in the early 1990s.
Q: What will be the next category where testing with Spanish-dominant Hispanics will begin?
A:The next logical move is all the top-10 brands in the company. We're already making inroads across [skin] care, dish towels, laundry. It's not just one brand -- it's improvement across all of those brands.
Q: What are the key requirements for effective marketing to Hispanics in the U.S.?
A:Spending the time, effort, money, and resources to really understand the competition, the consumer, and the shopper. You have to make sure you have availability and assortment at the store. You can do all the marketing you want, but if, at the moment of truth, the consumer doesn't find the right assortment, your efforts are wasted.
Then, you make sure that you have the right message -- including the right language and copy. So, the process is: understanding, assortment, relevance.
Q: Are Hispanics changing the way America does business?
A:Yes. They are forcing companies to come to grips with marketing as we have known it in the past. The era of efficient marketing -- where you blanketed America with one, generic, white-bread message -- is gone. With fragmentation -- cable TV, the Internet, Hispanics, African Americans -- you really are faced with the challenge of how to touch that consumer in a cost-efficient, relevant, and timely way.
I think Hispanics are one of those many, many changes. Companies like ours are faced with adapting to this new world. We're being successful because we acknowledge that the world out there has changed. We're anticipating those changes and reacting to them.
Q: Are Hispanics a critical part of that fragmentation?
A:Yes, absolutely. First, you had media fragmentation. Then, you had Hispanics, African Americans, and ethnic minorities becoming a quarter of the population. So it was no longer acceptable not to market to them specifically. We can no longer assume that we can do mass marketing and effectively reach these targets. All of that put together has really shaken the industry.
If you rate Hispanics and Caucasians on certain attributes, it's interesting:
1) I need to find excitement and sensation in my life: Hispanics rate an 80, Caucasians are at a 51;
2) I need to get more pleasure out of my life: Hispanics rate a 78, Caucasians are a 73.
You ask if Hispanics are changing the way America does business, and if so, how? We all need to wake up the fact that Hispanics are seeking different kinds of pleasures, sensations and new experiences.