Windows of Opportunity and Winning Strategies for Latin Markets

ch08.qxd 7/10/2002 1:24 PM Page 299 WINDOWS OF OPPORTUNITY 8 AND WINNING STRATEGIES FOR LATIN MARKETS chapter The last decade of the twentieth century was a time of profound economic transformation in Latin America. We began this book with an identification of key drivers of such transformation: global financial systems, regulatory reforms, regional integration, market transformation, and technology (see Figure 1.1). With different levels of intensity and at different times, these drivers have had a profound impact on all Latin American countries, without excep- tion. The impact has transformed industry and business strategy. In Chapters 3 to 7, we analyzed the impact of these drivers on the in- frastructure, consumer markets, banking, and health sectors. In this chapter we revisit our initial framework, assess the strategy of adapters and shapers introduced in Chapter 1, and provide recom- mendations on how firms may continue to operate in Latin markets. Any strategy for Latin markets must recognize the importance of the U.S. Latin market. The 34 million people of Latin American descent in the United States represent the fourth largest Latin 299 ch08.qxd 7/10/2002 1:24 PM Page 300 300 Winning Strategies for the New Latin Markets American nation and the third largest in buying power. The future of any large multinational firm in Latin America will be decided by its ability to lead in the Brazilian, Mexican, and U.S. Latin markets. This golden triangle represents about 67% of the $1.6 trillion market power (see Table 2.1) and total number of households. A strategy that focuses on market dominance in only one or two of these three large Latin markets will not be enough to achieve regional market predominance. The make up of the markets in the golden triangle could not be more different. Because of geographic distance and the fact that about 60% of the Latin population in the United States is of Mexican origin, the U.S. Latin and Mexican markets are relatively closer than they are to Brazil. The challenge for any firm is to formulate strategies that are effective for all three market cultures. The key to start- ing such a formulation is to gain a grasp of the Latin market identity. The New Latin Market: Latin American or American Latin? In his comprehensive analysis of the people and culture of the Americas, Peter Wynn once referred to Latin America as an inven- tion devised in the nineteenth century by a French geographer to describe the nations colonized by Latin Europe. The resulting out- come of migration has shaped a region of diverse races, ethnicities, cultures, and languages sharing a common historical experience.1 Based on racial mixing alone, a variety of Latin identities emerge: European-Latin, Afro-Latin, Asian-Latin, and Indo-Latin. The diversity of the Latin market has challenged the popular vision shared by many firms of a single Pan-American market. Advertising agencies in particular have attempted to develop regionwide campaigns only to find substantial cultural, demographic, literacy, and language dialect differences even in countries that speak the same language. Accord- ing to the advertising industry’s most representative information source, Ad Age, “the so-called Latin market is a lazy description for a complex region of consumers.”2 Is there a single Latin market? In a strict sense, there are as many Latin markets as nations created out of the Latin European colonization. Argentines are different from Brazilians, and Chileans are different from Mexicans. Furthermore, within large markets like Brazil and Mexico, there are several ethnic markets. Thus, what characterizes the Latin market? At the risk of generalization, ch08.qxd 7/10/2002 1:24 PM Page 301 Chapter 8 • Windows of Opportunity 301 Latin markets may be grouped either by their demographic transformation (see Figure 2.1) or by the subregional corridors mentioned in Chapter 5 (Andean, Southern Cone, Mexican-Central American, Caribbean, and Brazilian). Additionally, about 34 million Latin consumers are part of the large U.S. market. The key to understanding Latin markets is to define the core of the Latin identity. The Latin identity is only an issue from the per- spective of another culture. When the Latin consumer is in his or her cultural milieu, identity is unambiguously national in character. When the Latin consumer is outside his or her cultural context, in the United States, for instance, the Latin identity is ambiguous. Thus, the answer to identifying the Latin core can be found by ex- amining Latin consumers in the United States. When Latin Americans travel or emigrate to the United States, they are grouped under the single label of Latin. Individually, the Latin person perceives himself or herself as a member of one of the Latin American nations with little in common with other Latin Americans. The immersion in the large American culture results in two adaptation processes. The first is the assimilation to the large dominant American culture. The second one, which is less under- stood, is the exposure to many other Latin American national cultures, a process that may be referred to as the Latinization or cross-fertilization of the Latin American cultures. This second process holds the key to the Latin core, as it is only in the United States that a true melting pot of diverse Latin American cultures takes place. As these Latin American emigrants socialize, work, or intermarry with others from the same group, the fusion of their cultures produces a new synthetic Latino identity and syncretic popular culture.3 In this process of discovery of a new Latin identity, it is not clear what aspect of the new Latin identity replaces the national culture and how much of the new American way is assimilated. The level of fusion of these three cultural identities (national, Latin, and American) depends on the level of education, socioeconomic level in the native country, and other traits. A related process that also influences the Latin core identity is the reverse process of Latinization of the larger American culture. As Americans look for more diversity and new experiences, espe- cially in food and music, they may embrace Latin expressions or gestures and explore Latin products. This process of Latinization of the large U.S. market is of great interest to U.S. firms targeting this ethnic market segment. The potential ethnic crossover of Latin products and culture to the general market is five to ten times more attractive than just targeting the Latin market alone. For instance, ch08.qxd 7/10/2002 1:24 PM Page 302 302 Winning Strategies for the New Latin Markets the crossover of the traditional Latin flavor dulce de leche in food products such as ice creams and candies has a much greater impact than positioning this flavor only as an ethnic concept. The dulce de leche flavor is now part of Häagen-Daz’s global ice cream product line. Mars has tested the dulce de leche flavor in its popular M&Ms. The firm tested the flavor first in the U.S. Latin market, but the ex- pectation is to introduce it into the large U.S. consumer market.4 Mars could eventually introduce the new flavor to the rest of Latin America and perhaps the world. The change in flavors or colors in the M&M product offering is not a trivial decision for this company. As a result of assimilation and cross-fertilization of Latin Ameri- cans in the United States, three groups emerge. The first group consists of the unassimilated immigrant that retains a strong national culture. This group exhibits little of Latinization or assimilation to the American way. A second group consists of foreign-born assimilated and Latinized persons. This group is fully bilingual and bicultural. The degree of Latinization and assimilation may range from bicultural (American-national culture dominant with little Latiniza- tion) to tricultural (all three levels of culture are equally dominant). The third group consists of fully assimilated foreign-born Latin Americans and first- or second-generation U.S.-born Latins. In terms of consumer culture, this group is indistinguishable from the main- stream U.S. culture. The third group of fully assimilated or U.S.-born Latins operates well in all three cultures. For the U.S.-born, the Latin culture is im- portant because this is what makes them different from the general population. Encouraged by the recent process of Latinization of the U.S. market, Latin youth have rediscovered their heritage as a source of pride.5 In reaching the Latin market, firms need to understand that Latin-ness is a continuum that ranges from the purely national to the fusion of two or three similar or different cultures (national, Latin, and non-Latin). The degree and relevance of the three cultural com- ponents depend on the geographic location of the consumer. For Latin Americans in their own country, the relevant culture, and perhaps the only aspect to appeal to, is the national culture. In itself, the national culture may be a blend of many local cultures resulting from the complex processes of colonization of native populations and waves of immigration. For Latin Americans outside their own cultural milieu, the approach depends on degrees of assimilation and cross-fertilization mentioned before. In reaching the complex Latin market, the following market- based strategies may be considered: ch08.qxd 7/10/2002 1:24 PM Page 303 Chapter 8 • Windows of Opportunity 303 1. Local national strategy. Ideally, the best strategy is to develop a differentiated approach for each Latin American nation.

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