Thank you for inviting me here today. I am delighted to be joining such distinguished educators and MBA students to discuss a topic that is very important to me – the emergence of U.S.-Hispanic market brands. But first allow me to thank Dr. Barbara Kahn, Dean of the MBA program, for this invitation, as well as Dr. Arun Sharma, Chairman of the marketing department and Professor Ben Recarey, all of whom have made significant contributions to their respective fields and are true assets to the University of Miami.
The U.S.-Hispanic market of today -- is exactly the vibrant, fast-growing market we envisioned more than 20 years ago when we bought the Univision network. Today Univision is one of the largest Hispanic networks in the world, and the major Spanish-language media company in the country serving that market.
As you may be aware, the Cisneros Group has been deeply committed to investment in Latin America for 80 years. More recently we have been following the growth of the Hispanic market as it spreads rapidly across the globe. Of all the investment opportunities we see today – and there are many -- none seems more encouraging than the exciting potential we see in the fast-growing U.S. Hispanic market.
The U.S.-Hispanic Market Today
U.S. Hispanics are now widely recognized as America’s largest, and fastest-growing minority-group market. There are several facts to observe.
- The sheer numbers.
- The rapid growth.
- The emergence of Hispanic brands.
We are proud to say that the Cisneros group has been able to capitalize on the business opportunities presented by this fast-growing market. Admittedly we have a long history of bringing Latin American products to the U.S., so we had a big head start.
You probably know us best for our investment in Univision – which was a bankrupt company in 1992 when the partners – Jerry Perenchio, Emilio Azcarraga, and I – bought it for $110 million in cash, and which we recently sold for $13.7 billion, a twelve thousand, three hundred fifty-four percent (12,354%) return on investment. Not bad, even in the days of the super hedge funds!
It is this experience -- pioneered by our global media and entertainment ventures – that has helped us offer many new services aimed at U.S.-Hispanics.
As I said, there are many reasons why Latin American businesses should be paying attention to the Hispanic market here in the U.S. As you can see – the first points are the very attractive demographics. Let me provide some details.
The U.S. Census finds that Hispanics have become the largest minority group in the U.S. -- there are almost 45 million Hispanics in the U.S. now -- approximately 14% of the U.S. population.
By 2010, there will be an estimated 48 million Hispanics here.
By 2050 that number will grow to around 103 million -- nearly one-quarter of the U.S. population by the time your student generation is of retirement age.
And those figures do not include Puerto Rico!
What is fueling this growth? Immigration.
Today half of all immigrants to the U.S. are Hispanic. One million arrive per year. In great majorities they are willing to work hard, learn fast and play by the rules. They believe in the American dream and their Latin American dream, too.
And regardless of the wall some want to build on the Mexican border, I believe calmer heads will pass a fair immigration law to let Hispanics make their contribution to America.
Let’s look at Hispanic-American demographics.
- They have larger households compared with non-Hispanics.
- They are younger: approximately 60% of them are under 30 compared with 60% over 30 among the rest of Americans.
- They produced about $800 billion of income in 2006 – that’s almost equivalent to Spain’s annual income.
- Their income is growing at a rate nearly three times greater than the U.S. average (eight percent versus two point nine percent), and is comparable to China’s growth of nine percent.
- They are high school graduates in 66% of the cases, up 10% from ten years ago.
- Their household income rose 20% from 1994 to 2006 to $38,000 per household.
- And their skilled blue collar jobs doubled in the same period as all other Americans declined or stayed the same in that skilled job area.
What I’m describing is a marketer’s dream, but to reach out to this population, you have to understand it.
The stereotype of the U.S.-Hispanic is grossly out of whack with reality.
Our image of Spain and Portugal is of a modern, progressive, liberal, first-world social economy. And our image of Hispanics in the U.S. is of the worker in the garden or the kitchen. Well Iberia’s 52 million people produce about the same GDP as the 45 million Hispanics in the U.S. We’ve got Iberia pictured right but U.S. Hispanics pictured wrong.
U.S. Hispanic Market
Where are the opportunities for Latin American companies and how do you take advantage of them?
Let’s start with language -- Spanish is the second most commonly spoken language in the United States. And 86% of U.S. Hispanics report they regularly speak Spanish every day.
- Language connects to culture.
- Culture connects to identity.
- Identity connects to relationships.
- Relationships connect to brands.
All of these realities – language, culture, identity, relationships and brands -- are intangible realities – and thus intangible assets.
We know that among Hispanic-Americans, these realities are different.
And therefore, any company that understands these differences possesses an intangible asset of great value. The Brookings Institution’s studies on hard and soft assets remind us that most corporate profits derive from intangible assets and not from land, equipment or physical assets.
Therefore, new companies will predictably emerge in areas where U.S. Hispanics demonstrate above-average consumption:
- Food-at-home
- Home entertainment
- Clothing for men, boys and small children
- And telephone services.
And new companies will predictably emerge where U.S. Hispanics are clearly under-served:
- Basic banking services
- Financing for education
- Life insurance
- Retirement planning
- And healthcare for working adults.
And what about the $62.3 billion remittances business? I leave it to your imagination to reflect upon what could be done with respect to media advertising, telephone and banking.
These represent significant business opportunities for companies with the ability to target Hispanics, recognizing their differences as well as their needs.
Let me show you how this works in the media and entertainment industry. What we have learned may be helpful to any business seeking to enter the U.S. Hispanic market.
The Cisneros Group is one of the world’s three leading producers of that global Hispanic phenomenon – the telenovela – alongside my friends at Brazil’s Globo, and Mexico’s Televisa. Telenovelas require a high degree of investment, which is amortized over the length of their run. An engaging telenovela will collect a large following of viewers, who tune in each day. Since the series are finite, the pay-off for viewers is that the plotlines tie up in a satisfying way. They must resonate with the values, life, identity and stories of the Hispanic audience. A successful telenovela may run for 120 episodes, or six months. That can produce a very attractive – and reliable – audience.
Once it has paid for itself – the real profit of course is generated by reselling the production for broadcast in other national markets – like the U.S., as well as Latin America, Spain, and now Asia.
That’s right – Asians are watching Hispanic telenovelas. The world is no bigger than the Hispanic telenovela. Now exporting this kind of broadcast content has a very attractive cost structure – and is an obvious growth area for us. Our media and entertainment operations led us early into the U.S. Hispanic market.
I would identify the following as keys to our success in the U.S.:
- we know our strategic strengths
- we identified our tangible and intangible assets
- we had detailed knowledge of our target markets
- we formed appropriate U.S. business alliances, and finally
- we added local people with experience in the market.
Developing Related Businesses
Turning those keys in the doors to the U.S. Hispanic market, we developed new enterprises as well. Here are some examples:
- Vene Movies is the first pay-tv channel in the U.S. to offer contemporary Spanish-language movies around the clock.
- Venevision International Films markets and distributes Spanish-language movies on DVD in the U.S.
- The Vene Music label sells theme music from Cisneros TV productions, and is now signing artists from various Latin genres.
- FonoLibro Inc. produces and distributes audiobooks in Spanish, using the talents of our directors and actors.
- LatCel offers interactive services and Latin content for mobile phones.
The U.S.-Hispanic businesses that we built have proven to be among the Cisneros Group’s most successful recent investments.
Neglected Consumers
But how do we find new business opportunities in the U.S.?
As elsewhere, neglected consumers are a gold mine. If you can identify an area where Hispanic consumers are under-served -- where there is pent-up or even unrealized demand -- you may experience the kind of rapid growth that we experienced with our broadcast operations here.
Advertising Market
One thing we know for sure -- U.S. companies are still not fully capitalizing on opportunities to reach Hispanics. Spending on advertising aimed at U.S. Hispanics tells the story.
- While advertising in Hispanic media is growing faster than the national average -- ad spending hasn’t caught up yet. (it still lags by 30%.)
- It is clear that some of the difference in “ad spend” must be attributed to companies that remain unaware of U.S. Hispanics as a major market (or perhaps don’t know how to connect to them effectively).
The list of major advertisers on Hispanic media includes some top U.S. companies, but it is not comprehensive. But the U.S. companies’ loss is the Latin American companies’ gain. This fact might provide some motivation to members of this audience: It certainly motivates us!
After adjusting for the difference in purchasing power, a 30% difference in “ad spend” is significant. Across the board, U.S. companies are missing the opportunity presented by U.S. Hispanics. I don’t know whether they are too busy thinking about Hispanic immigrants as a problem or not thinking about them at all, but in either case, they are making a huge mistake.
Latin American Businesses in the U.S.
Latin American companies in the food, beverage, or retail businesses, for example, may already have products and services relevant to these consumers -- or can rebrand them for this market. The opportunity awaits to bring product lines to the U.S. which U.S. companies are not now providing.
Economies of scale
Most Latin American companies large enough to consider expanding into the U.S. already enjoy substantial economies of scale. If they are efficiently run -- and willing to make an appropriate commitment in the U.S. -- they can compete. And as I indicated earlier, if a business offers “Hispanic-specific” products or services -- developed over time in other operating regions -- it should have a competitive advantage that will be difficult for U.S.-based companies to overcome.
Industry Experience
Making products available in the U.S. that has proven successful in Latin America is clearly an opportunity for Latin American companies. We rely on our global industry research and experience to know what content will work, which soundtracks have been popular, which stars to use in our productions.
Thanks to industry experience, when we took over Univision we saw that Mario Kreuzberger -- known to audiences as “Don Francisco” – was an under-exploited asset. Univision brought his variety show – “Sábado Gigante” -- to new heights. We knew to develop Cristina Saralegui’s popular talk show, and to create the news department that would bring Jorge Ramos to U.S. national attention.
Then as Univision began to expand its original programming, the network drew increasingly upon the reserves of talent and experience available from our Latin American operations.
Transferring Business Models
I have noted that industry experience and managerial excellence are valuable and transferable assets. To conclude these observations, I would like to mention one of the Cisneros Group’s newest initiatives which draws upon our experience in Latin American markets.
Movida is our wireless service provider in the United States. The company began in a brainstorming session in Aspen, Colorado, back in 2004. It was built on the idea that a mobile phone service could be designed specifically for U.S. Hispanics. The owner’s manuals, phone cards, and customer service are in Spanish. Telephones are available at Wal-Mart and other major retailers, but phone cards are also sold in neighborhood stores – local bodegas. The company’s marketing targets Hispanics: the tagline is “press one for Spanish, two for English”.
Above all, the service plans are based on the prepaid model that was pioneered by us in Latin America. That business model was transferred to the U.S. market, and is supported by Latin American executives with experience in telecommunications. Movida has been a notable success, and subscription rates are accelerating. We offer wireless Latin content to our customers – ring tones, soccer scores, games – and given new information technologies, Movida has the potential to become a media company in its own right.
Another example of a successful Latin American business in the U.S. Market is Brightstar – a procurement, logistics and distribution company for mobile phone carriers around the world. Brightstar’s president – Marcelo Claure – is a Bolivian citizen who started 10 years ago with a mobile phone store in Boston. Now Brightstar is a company with annual sales exceeding $2 billion. By the way, we have a strategic alliance with them.
And Brightstar has not only been successful in the U.S. It now has a presence in every Latin American economy – as well as other countries around the world. It is also promoting the very bright idea of one laptop per child in the developing countries of the world. That is the kind of initiative that can really impact poverty. Brightstar proves that a company can “do good” while “doing well” -- a lesson for all of us who want to be good citizens in our world while not going bankrupt.
Conclusion
There are 45 million people in the United States, 450 million in Latin America and 52 million in Portugal and Spain that are called Hispanic.
Every one of them is special, different and individual. But in the aggregate they share big pieces of language, culture, identity, and relationships that differentiate them from others also in the aggregate. Like all people, Hispanics are attracted to brands and products that connect to their lives, values, hopes and dreams. There’s nothing unusual in that. But what is unusual is that the Hispanics living in the U.S. have been largely ignored. I think the market needs a correction on that count. I am describing a great opportunity waiting for those who understand it. The U.S. Hispanic market provides a better return on investment than the U.S. market overall. And companies can benefit from this favorable trend. But to do so -- as I have discussed today -- they must:
- Work with U.S. Hispanic business owners and employees – benefit from their knowledge of the customer.
- Find underserved markets here in the U.S.
- And apply your own industry, knowledge, strength and management skills to make a success of new idea.
Based on our own experience here -- as owners, investors and entrepreneurs – the U.S.-Hispanic market offers almost unlimited opportunity for the right products, offered by the right companies -- at the right time. Be willing to take some risk. Stand by your firm convictions. And the future for Latin American companies in this market will be bright.
I am most grateful for having had the opportunity to share some of our experiences in this market with you here today. Thank you for having me here. And I look forward to your questions.