Tapatio-flavored chips, Dulce de Leche Cheerios and the apple beverage Manzanita Sol are just three new items attempting to lure consumers with the familiar. Yet, even these types of products are becoming more mainstream in the American marketplace.

In an interview with The Financial Times, Tony Vernon, soon-to-be CEO at Kraft Foods, says his company plans double-digit spending increases for Hispanic advertising in 2012. This follows a 2011 in which Kraft tripled its investment in marketing to the segment and added seven new Latino-focused campaigns. “They are the largest group that we should be targeting,” Vernon notes.

Likewise, General Mills chief executive officer Ken Powell says he regards Hispanics as especially valuable because of their greater propensity for cooking and preparing meals at home.

New American Dimensions surveyed 1,003 Hispanic consumers in May and June of 2009 and found 88% cited lower price as a factor in their grocery purchasing decisions. Next, 86% considered the quality and healthiness of the ingredients in food products; with three in four interested in stores’ “green” or environmentally safe products. And, 73% hoped to assure the groceries purchased helped with the “needs of their children.”

New American Dimensions also delved into the grocery spending habits of these consumers. It noted the average American family, a 2.6-person household, spends $186.80 on groceries every two weeks. New American Dimensions found U.S.-born Hispanic households are notably larger (4.3 persons) and spend sizably more on groceries ($261.80)—just shy of the 4.6-person, foreign-born Hispanic family, which spends $269.90 on groceries every two weeks (37% more than the general market).

For its part, Credit Suisse estimates Hispanic household spending will rise 5.7% during the next 10 years, compared with 2.5% for non-Hispanic households.

The 2010 U.S. Census finds Hispanics comprise 16% of the U.S. population, making it the fastest growing demographic group in the country; predictions indicate the group will account for 23% of the country by 2030. Another factor to consider when marketing to Hispanics is the source of that growth; in 2009, more than 60% of the Hispanic population was born in the U.S., with almost 90% of the overall group under the age of 18. Furthermore, the 48 million Hispanics in the U.S. wield a buying power in excess of $1 trillion, reports Vertical Edge Ltd.’s study: “Latino Consumers: Demographic Patterns and Spending Trends among Hispanic Americans.”

This fact is not lost on marketers.

 According to the Association of Hispanic Advertising Agencies, the top 500 U.S. advertisers boosted their spending on ads targeting Hispanics by 14% in 2010, to the tune of $4.3 billion. Consumer and food companies spent $707 million on marketing to the group; restaurants increased their marketing to Hispanics by 30%, to reach $301 million.

Credit Suisse analyst Robert Moskow says companies need to be careful, because Hispanics’ consumption habits change as they become wealthier and more bicultural.

“The profile of the Hispanic consumer will evolve,” he says. “The companies that are just starting to do the work to understand the consumers are going to have the toughest time adjusting to their evolving tastes.”

Marketing Challenges

Speaking at the 2012 American Wholesale Marketers Association (AWMA) Conference, Procter & Gamble’s Alexandra Vegas, director of Multi-Cultural Business Development Organization, identified a number of challenges in marketing to the United States’ diverse and evolving Hispanic market.

Even though 78% of U.S. Hispanic consumers speak English, she relates, “…A Hispanic consumer wants to know she is understood and respected. Even though she sees a product advertised in English, she also likes to see it in Spanish. She wants to be able to say, ‘This company understands me. They get me and appreciate me as a customer.’”

 Part of that understanding has to involve an appreciation for these consumers’ preferred sizes and products. Jim Hachtel, senior category manager for BP/ARCO/ampm, notes his company’s ampm c-store concepts have had particular success in reaching Hispanic consumers with packaged beverages, milk, salty snacks, alcohol and water, in smaller sizes as well as gallons.

“Foodservice, alcohol and salty snacks are categories you must win when it comes to Hispanic consumers,” Hachtel maintains.

To win those consumers, authentic foods and beverages are key, research shows, but authenticity will win not only Hispanic shoppers. Mintel has discovered two thirds of all respondents who eat ethnic food at home regard authentic or traditional flavors as the most important factors when purchasing or consuming such foods.

Sarah Crowley, Kayem Foods’ senior brand manager for al fresco All Natural, a chicken sausage, explains, “Not only is the Hispanic community the largest and fastest growing ethnic segment of the U.S. population, but al fresco consumers overall are seeking out international flavors and cuisine to spice up the meals they prepare at home.”

David Browne, a senior analyst with Mintel, adds, “If flavor fanatics are going to spend their hard-earned money and time visiting an ethnic restaurant or buying international foods to prepare at home, increasingly, they want it to be the real deal. Therefore, products positioned as such have a greater likelihood of finding favor with consumers.”

Mintel noted almost two thirds of respondents in a recent survey had made Mexican food within the past 30 days, with 81% indicating they had eaten ethnic food away from home in the month prior to the survey (a 6-point jump from a 2010 survey and a statistic which includes such other ethnic foods as Italian, Chinese, Pan-Asian and Japanese).

In its report, “Hispanic Food and Beverages in the U.S.: Market and Consumer Trends in Latino Cuisine,” Packaged Facts noted the diversity of the Hispanic market. “Hispanics have distinct differences from the non-Hispanic population, which is why it is so important for food and beverage marketers to gain a better understanding of the Hispanic consumer. . . It is also important for marketers to understand that if they are targeting Hispanics, they must go beyond the term ‘Hispanic’ to recognize that there are some 20 different nationalities among the overall Hispanic population.” Regardless, the impact of Hispanic cuisine on mainstream American culture cannot be denied. Such traditionally Hispanic foods as nachos, tortilla chips and salsa are so ingrained in American diets, they are considered mainstream. As Packaged Facts noted, “The mainstream has taken to Hispanic foods over the years, starting with a taste for salsa and chips, Mexican beers, chili and nachos, and they are expanding to include burritos, enchiladas, tacos and quesadillas.”

Not a Homogenous Group

When choosing a restaurant, Hispanic consumers hold authenticity in high regard, but Technomic research finds this demand may abate in successive generations.

First- and second-generation Hispanic consumers place a greater importance on such authenticity than third-generation Hispanic consumers, likely a reflection of the fact that more members of these first and second generations experienced traditional foods—and their preparation—in their youth. However, by that same token, those later generations may present an opportunity: Their relative inexperience and lack of familiarity with traditional cooking techniques and procedures leaves them longing for similarly authentic experiences, but without the ability to create them on their own.

However, this is not simply a siren call for yet another take on the burrito or empanada.

Packaged Facts has identified such opportunities as “Authentic Hispanic,” i.e., products imported from Hispanic countries or made domestically from traditional recipes. These products vary in regional influence and flavors, and include:

• pupusas from El Salvador feature a thick maize tortilla usually filled with a blend of cheese, ground pork and refried beans or queso con loroco;

• arepa from Venezuela is a dish made of ground corn dough or cooked flour and filled with meat, eggs, tomatoes, salad, cheese, shrimp or fish;

• alfajores are confections found in various Latin American countries, including the Argentinean version, which consists of two round cookies joined with mousse, dulce de leche or jam, and coated with dark or white chocolate.

In fact, this demand for even greater authenticity is not solely a consideration for reaching Hispanic consumers. Alexandra Smith is Mintel’s director of consumer trends. “This interest in genuine ethnic fare aligns with a broader consumer trend—‘The Real Thing’—where we see consumers continually set a higher bar for what they consider authentic,” she says. “Today’s American has much greater exposure to diverse cultures than an American 20 years ago, and as once-exotic things like sushi or yoga become mainstream, (Americans of all demographics) seek new, more niche markers of cultural authenticity.”

So, with greater demand for authenticity, what are the most important attributes impacting Hispanic consumers’ restaurant choices? Technomic finds quality and freshness are, far and away, the leading factors in both limited- (LSR) and full-service restaurants (FSR). The Chicago firm notes, “The fact that consumers say both are equally important at LSRs and FSRs shows that consumers expect high-quality ingredients and freshly made food when dining away from home, regardless of the restaurant’s format.”

Vertical Edge’s “Latino Foodservice Trends in the U.S.” report also eyes the importance of this demographic upon the foodservice industry. “Hispanic consumers are central to restaurant industry growth; Hispanic share of consumer-driven restaurant sales is on the upswing, with growth of 4.7% in 2011, almost double that of the U.S. consumers generally.”

Hispanic Habits

New American Dimensions found Hispanic consumers regard store brands as “a great value for the money” (73%), and 67% view these store brands as good alternatives to national or international brands (64% regard them as on par with those brands).

What is the prevalent factor in the Hispanic consumer’s decision to try a store brand? According to 81% of respondents, it boils down to the “quality/healthy ingredients in food products,” with roughly three quarters citing price concerns and just over two thirds (68%) seeking store brands that have the same ingredients as their national counterpart. New American Dimensions also found Hispanic consumers are significantly more likely to purchase store-brand dairy products than any other grocery segment (54%), with 34% purchasing store-brand versions of cold/hot cereals, carbonated beverages/bottled water and shortening/cooking oils.

Javier Farfan, PepsiCo’s senior director of cultural branding, notes Hispanic consumer marketing is not simply a matter of rebranding an existing line with a Spanish name or translating existing product literature and marketing into the language. To reach this population, he has said companies must develop products that appeal to both Hispanics and mainstream Americans—or create advertising and marketing campaigns that can similarly cross over.

He adds that even this approach should bear in mind that the second- and third-generation Hispanic population is not merely one homogenous group. Rather, this demographic is diverse in and of itself, with some sharing the same or nearly identical sentiments as mainstream Americans, while others have views and demands closer to their heritage. pf