Vying for a Slice of One State’s Growing Hispanic Consumer Market – North Carolina’s booming Latino population fuels economic growth

When Peoples Bancorp of North Carolina noticed explosive growth in the state’s Hispanic population — now nearly 600,000 strong and 7 percent of the state’s residents — it saw an opportunity.But rather than just put up some Spanish-language signs and hire a few bilingual tellers, the commercial bank established an entirely new subsidiary. That subsidiary — Banco de la Gente — targets Latino customers. With branches in the Charlotte and Raleigh-Durham areas of the state, where the numbers of Hispanic residents have been rising particularly fast, Banco de la Gente caters to special needs in Hispanic communities. It offers extended hours, a choice of remittance methods and accounts with disability insurance.

And no wonder. North Carolina’s Hispanic population — nearly three-quarters of which is Mexican in origin — contributed more than $9 billion to the state’s economy in 2004 through purchases, taxes and labor at a net cost to the state of $61 million, according to a 2006 study by the University of North Carolina. The study projects that Hispanics’ contribution to the state’s economy could jump to $18 billion in 2009.

John Kasarda, who co-authored the study, said Hispanic workers have become indispensable to North Carolina’s economy. “Without Hispanic workers, some industries would simply collapse or wouldn’t be as competitive as they are,” he said.

For example, if not for Hispanic workers, output of the North Carolina construction industry would have been significantly lower while annual labor costs would have been nearly $1 billion higher, according to Kasarda. He said some North Carolina companies that employ large numbers of Latinos are among the best in their industries. And all types of businesses benefit: “Even French restaurants have Mexican chefs,” Kasarda said.

North Carolina is just one state where Hispanics are contributing substantially to local economies and in return seeing their buying power soar. Similar trends are occurring across much of the United States, whetting business appetites for a bite of the $951 billion that represents the buying power, or disposable income, held by U.S. Hispanics in 2008.

Hispanic purchasing power is projected to continue its fast-paced growth. The University of Georgia’s Selig Center for Economic Growth predicts that Hispanics will possess disposable income of more than $1 trillion by 2010 and will continue seeing that buying power grow far into the future because the U.S. Hispanic community has the highest birth rate in the country.

Chiqui Cartagena, the author of Latino Boom, a book about the Hispanic market, said U.S. Hispanics will make up 40 percent of new home buyers over the next 20 years. (The National Association of Home Builders reported in its most recent 2007 American housing survey that Hispanics made up 10 percent of new home buyers.)

But the economic clout of Latinos is not just due to population growth. Latinos lead in small-business formation among all ethnic groups, and a majority of new Latino businesses are owned by women, according to the Kauffman Foundation, a nonprofit group that promotes entrepreneurship.

TAPPING INTO U.S. HISPANIC MARKET

Despite a major push into the Hispanic consumer market by mostly service companies, a considerable portion of that market lies untapped by U.S. businesses because of cultural barriers, according to one analyst.

“Not all companies are culturally competent enough to capture as much of the Hispanic consumer market as they could,” said Jim Estrada, president of Estrada Communications Group Inc. of Austin, Texas.

U.S. businesses have made great progress in reaching out to Hispanic consumers since the early 1970s, when businesses began translating their advertisements and marketing materials into Spanish, Estrada said. They have realized the need to better understand Hispanic cultural factors and have sought the services of specialized marketing firms such as Estrada’s to advise them on how to pitch their products and services to Latinos.

Nevertheless, there are still geographic areas and segments of the Hispanic market that are underserved, according to Estrada. Latino small businesses multiply quickly to fill the needs of the U.S. Hispanic community, especially in inner cities.

Mindful of the benefits that Hispanic entrepreneurs bring to the U.S. economy, the University of North Carolina study recommends vigorous support to help them overcome obstacles such as poor English-language ability and lack of a credit history. The growing business class among U.S. Hispanics will promote further economic growth in communities throughout the United States, according to analysts.

The full study (PDF, 3 MB) is available on the Web site of the University of North Carolina’s Kenan-Flagler Business School.”

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