The Latin American middle class: attitudes, aspirations, and spending power
December 26, 2017
International and locally based companies need to understand the changing Latin American middle classes to optimise their product development and marketing strategies. One recommendation is that they should base their approach on market segmentation by age groups. A retail consumer markets survey by Nielsen segments the adult Latin American consumer market into four main groups: the Millennials (aged 21-34 in 2017 and representing 33.8% of the total); Generation X (aged 35-49, representing 31.4% of the total); the baby boomers (aged 50-64 years, 21.8%); and the ‘silent generation’ (aged 65-plus, accounting for 13.0% of the total). Across these age groups, the study say there is a comparatively strong demand for premium products. Millennials are particularly interested in hair care; Generation X in oral care products; baby boomers in dairy products; and the ‘silent generation’ in both dairy products and body care items.
Consumer preferences vary according to national characteristics and recent economic experience. Brazil has been marked by the deep recession of 2015 and 2016. A Nielsen analyst commented, “This recession is changing the type of consumption Brazilians are making in order to save money; however, they are more demanding than ever. Thirty-nine per cent of Brazilian families have a trendsetter housewife who is looking for innovations and the best products”. There are indications that the Brazilian recession triggered changes in lifestyles and spending patterns, in which some categories of products actually gained, rather than lost sales. One example: sales of alcoholic beverages rose by 8% in value during the recession year of 2016, attributed to the fact that many consumers stopped going out to restaurants and bars as much as they had in the past. Instead, more people went back to entertaining at home, which led to increased supermarket sales of beer and other alcoholic drinks. There were also signs that with lower purchasing power, some consumers were prepared to search out better value, ‘premium’ products.
In Mexico, Nielsen detected changes in the role of women consumers. More are said to be questioning traditional roles focused around bringing up children. “With the influence of fast-paced lifestyles and modern technology, traditional housewives are becoming modern housewives with a focus on being practical, healthy, informed, and cost conscious,” the report commented. Millennial women are seen as leading consumer decision-making in over one-third of Mexican households; Generation X housewives are having to return to work to help the family budget. Despite tight budgets both generations of women are seen as being more prepared to buy premium products for their children. In Colombia there were also indications that parents are prioritising their spending on premium products for their children, but are more prepared to ‘trade down’ to lower-priced items for their own use. There are also signs that Colombian women, who traditionally favour locally made products, are becoming more open to exploring global brands and trends.
A separate report by the Economist Intelligence Unit highlights the growth of the Latin American middle class in mega-cities, but also in the so-called ‘second tier’ cities. It forecasts that by 2030 the number of people in Latin America’s 122 largest cities earning over US$15,000 annually will have more than doubled to over 88m. The mega-cities are showing some signs of maturity: most growth and consumer concentration on the other hand, is expected to occur in the medium-sized cities which at present are starting from a lower base and are for the moment lagging behind in terms of infrastructure and service provision. This report sees the region as a whole on a moderate recovery path from 2017 onwards, although performance will vary from country to country. Despite a range of challenges, including corruption, weak public institutions, and poor quality public sector services, the report nevertheless highlights strong growth in the urbanised population and increased spending power indicating that there is “immense potential” in the both the region’s mature and in its emerging urban markets. By 2030 the region’s six mega-cities (Mexico City, São Paulo, Rio de Janeiro, Buenos Aires, Lima and Bogotá) are expected to add over 20.7m additional consumers.
However, size is not the only important factor. A smaller city like Montevideo, the capital of Uruguay, will offer the highest concentration of inhabitants earning over US$15,000 a year (73.1% by 2030). Other cities with a high concentration of affluent inhabitants in 2030 will include Hermosillo in Mexico and San José, the capital of Costa Rica. The fastest growth rates for consumers earning over US$15,000 per annum will be found in Bolivian, Ecuadorean, and Peruvian cities. Among them will be Santa Cruz, Cochabamba, and La Paz in Bolivia, Guayaquil in Ecuador, and Chiclayo, Arequipa, and Trujillo in Peru.
Latin American Newsletters (LatinNews) was founded in London in 1967 to provide expert political, economic, and security analysis on Latin America and the Caribbean. For nearly 50 years, it has been acknowledged as the foremost authority on the region.