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Bloomberg Línea — Within the US economy, Latinos are the fastest-growing ethnic group in economic terms, according to a study by McKinsey & Company that analyzed the economic growth of that ethnic group in the country.
According to 2020 US Census data, Latinos in the US number 62.6 million, although only 23% consider themselves financially healthy. However, over the last 10 years, Latinos represent the fastest growing portion of the population in terms of contribution to US GDP, and if they were to represent a country, they would be the third-fastest growing after India and China.
While in 1990, some 10.7 million Latinos were part of the US labor force, in 2020 that number had risen to 29 million, while for 2030 the number if expected to rise to 35.9 million, according to the US Bureau of Labor Statistics.
This has a direct impact on households, where $1 billion was consumed in 2021, and which has grown annually by 6% over the past 10 years. Latino households tend to be larger in terms of the number of family members, compared to the US average.
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At the same time, as McKinsey & Company reports, Latinos’ net wealth is increasing at a faster rate (9%), compared to 4% for non-Latino whites, and while that gap is narrowing, nearly half of Latinos in the US have little or no retirement funds or savings.
For Lucy Pérez, a senior partner at McKinsey, closing the gap could have a multi-billion-dollar impact, with more than a million more Latinos moving into the middle class. In addition, $109 billion in revenue is at stake for corporations thanks to Latino consumers, and 744,000 more businesses created by Latinos, together generating 6.3 million new jobs.
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What brands are missing out on
While the wealth of Latinos and their businesses is slowly increasing, so is their consumption. Despite this, however, mass consumer brands are still not speaking to this portion of society, according to the report.
Spending more than other groups at a similar income level, Latinos spend more on food and rent and are more cost-conscious than other US citizens.
“Brands are not very aware of how crucial it is to understand the Latino consumer,” according to Pérez. Most companies are not investing in a customized strategy focused on better meeting the needs and preferences of Latino consumers, she says.
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A different case is that of Latino artists such as JLo, who launched JLo Beauty, a brand that focuses on the Latino public, and created make-up for different skin tones, or Target, which promotes Latino brands seeking to generate solid ties with this community.
The Latino consumer base with unmet needs currently totals $100 billion, and this could increase six-fold to $660 billion if parity with non-Latino whites is addressed, according to the McKinsey & Company report.
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