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The General Market Is Tanking? No Problema
October 26, 2008
By Jim Edwards, Brandweek
While the stock market continued its journey to hell in a handbasket for a fourth straight week, executives in the Hispanic marketing world were mostly blase, considering themselves fairly insulated from the economy’s gyrations.
Because the market is still growing—the U.S. Latino population is expected to rise from 41.7 million in 2008 to 43.4 million in 2009—and because the media targeting them is magnitudes cheaper than traditional vehicles, execs say they are well-placed to get through the maelstrom.
At the halfway point of the year, spend across all Spanish-language media was running ahead of 2007 by 1.5% (excluding online initiatives), according to Nielsen Monitor-Plus, putting it on course to arrive at somewhere near the $5.2 billion mark for 2008. That compares to a shortfall of 1.4% for the same period in the general market.
Nevertheless, some marketers are pulling back on their Spanish-language spend. Telemunco last week cut 85 jobs because of a slowdown in ad spending led by auto and financial services. Domestic automotive brands in particular have slashed dollars they previously directed toward Spanish-language TV. And some execs said cuts may come later, in 2009, as the recession filters through clients’ budgeting process. But right now, for every budget heading south, there’s a new one popping up, they say.
An example: General Motors recently called a sales exec at Fox Sports en Español to say that his fourth-quarter budget would be cut by 50%. As the man put the phone down it rang again, with a call from Prudential, the insurer, placing a new budget with the channel. “It completely offset the money,” said Tom Maney, the channel’s svp-sales.
Most execs expect 2008 and 2009 to see either flat or low single-digit growth. On the TV side, it is too early to gauge the effect of the crisis. Upfront deals are contracted through the second and third quarter of the fiscal year, so cancellation options will not mature until 2009. “Everybody is looking at the second half of the fiscal year to see whether they can cut costs,” Maney said.
There are three other reasons why the Hispanic market may be relatively insulated against the downturn:
• The categories remaining strong are comparatively nondiscretionary for Hispanics: wireless, food and cars. People cannot give up talking, eating or driving to work, execs say. Thus those dollars are protected.
• Hispanics under-index in terms of stock market holdings and income, and their finances have not been impacted the way the general market has.
• Hispanic marketing budgets are already so small that cutting them doesn’t really have a significant impact on most company’s expense lines.
The automotive part of that is counterintuitive. While domestic brands have pulled back because their low-mileage vehicles and high overhead have made them uncompetitive, foreign brands like Honda and Nissan have maintained or increased spending on Hispanic media.
“There’s a 59% growth in the Hispanic car-buying market. On the non-Hispanic side there’s a 32% decline,” said Raul Vazquez, CEO of direct response shop Focus Inc. in Tampa, Fla. Unlike their white counterparts, Latinos are also buying larger cars. “The Spanish household is far bigger, it’s a person-and-a-half bigger than a non-Hispanic household.”
Cell phones also have lower penetration among Hispanics, at just 75%, to the mainstream market’s 85% according to Al Cruz, partner/communications strategy director at Mediaedge:cia Bravo in New York. Thus companies like Verizon Wireless, AT&T, Sprint and T-Mobile are not pulling back their Hispanic budgets, as they see growth (Note: AT&T is a Cruz client).
Of course, it’s not all rosy. Most execs hedged their positive outlooks by noting that they did not know what would happen after the fourth quarter of this year. The arrival of a new president may also have unforeseen effects. If cuts come, “the Hispanic market will suffer sooner or a little bit faster when it comes to pulling dollars out,” said MEC Bravo’s Cruz.
“Because our budgets are significantly smaller we may see it sooner or faster than the general market will.”
In 2009, “in some cases budgets are being cut. The growth of the budgets is a little slower, so we’re staying even rather than increasing,” said Hector Orci, CEO of La Agencia de Orci in Los Angeles, which handles Honda and Johnson & Johnson’s Splenda and Lactaid brands.
When asked, given the steep slide in the nation’s economy, whether all this optimism among Hispanic marketers wasn’t in some way delusional, Orci replied: “Being Hispanic means you’re optimistic, by the way.”
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