Publish in Perspectives - Monday, February 25, 2013
Young Latin Americans, especially college graduates, are waiting longer to marry often till their early 30’s. (Photo: Government of Santos, Brazil)
Latin American population by age groups in 2010 and 2020. CLICK TO ENLARGE
A more affluent, consumption driven, aging and diverse Latin America will command a greater share of global marketing budgets going forward.
BY JOHN PRICE
Why did the US grow so quickly in the 1980’s and why has China grown so rapidly since 2000? The same reason why are Japan and Italy doomed to anemic growth over the next decade – demographics.
When societies begin to have fewer children, households can rise above the economic burden of feeding, clothing and educating the young. Having fewer children frees time up for mothers to pursue employment or start a business. Discretionary spending soars in such a household and a demographic dividend is born. For 2-3 decades society hums along with relatively few children and very little costs still associated with the elderly. At the end of this period of optimal demographics, those fewer children must now pay for the relatively large elderly population.
Latin America as a region is on the cusp of realizing its own demographic dividend thanks to plunging fertility rates, which in Brazil, Chile and Mexico are below the replacement rate of 2.1. The “oldest” societies in Latin America have already begun their generation of optimal demographics including: Argentina, Uruguay, Chile, and Cuba. From 2000 to 2020, the percentage of working age Latin Americans (16-65) is projected to rise from 42 percent to 53 percent. That will deliver an economic boost akin to dropping unemployment from 15 percent to 4 percent.
From 2010 to 2020, the number of 25-59 year olds will grow by 41 million people across the region while the number of children under 15 will actually shrink by about 11 million. There will be less demand for schools and more demand for discretionary spending items like computers, cars, travel. Car ownership in Latin America, which was enjoyed by only 3 percent of Latin Households in 1990 will penetrate 25 percent of households by 2020. An era of consumption is about to begin.
CHANGING HOUSEHOLD STRUCTURE
As Latin American society grows up, it is also breaking many of its stereotypical molds. Young Latin Americans, especially college graduates, are waiting longer to marry often till their early 30’s. “Ten years is a long time to spend as an adult living in your parents home”, remarked solo dwelling bachelor Salomon Cohen of Mexico City. Like many young professional adults, Mr. Cohen was relieved to break the mold of Mexican society and move out of his parent’s house in his mid-twenties. Households of young adults living alone or with other unmarried friends is one of the fastest growing segments in today’s modern Latin America. An even faster growing segment is the region’s first generation of “empty nesters”, older adults who have shed their home of independence seeking children. Instead of moving in with children and grandchildren, the better off classes of elderly Latin Americans are increasingly choosing to move into a smaller dwelling and pursue their own independence.
Other social taboos are rocking Latin American society today and reshaping the household landscape. In the 1970’s, only 20-25 percent of children were birthed by unmarried mothers. Today the figure is closer to 60 percent, higher than any region in the world. In the more socially conservative societies of Chile, Peru and Colombia, the figure is more than 70 percent, according to a groundbreaking study by the Social Trends Institute. While in post-modern societies like Sweden or Canada, unmarried mothers might likely cohabitate with their partner, in Latin America, most unmarried mothers live either with their parents, friends or alone, not with a spouse. The reasons for this trend are worrisome, stemming mostly for abandoning fathers, young men migrating to another country to work, or young fathers killed in gang violence, especially in Central America.
The declining role of church in Latin American society is one of the factors behind the region’s increasing abandonment of old social mores. Church attendance in Argentina, Chile, Uruguay, and Brazil is now below that of the comparatively secular Canada. A less socially and religiously conservative Latin America not only tolerates higher percentages of divorce and birth out of wedlock, it also increasingly encourages gays and lesbians to feel comfortable and accepted. Indeed, one of the fastest growing, though still small, household structures, is that of gay and lesbian couples cohabitating. With no kids to support, their disposable incomes are the targets of a growing number of marketers.
NEW MARKETING CONCEPTS
A more affluent, consumption driven, aging and diverse Latin America will command a greater share of global marketing budgets going forward. As middle income countries that have embraced urbanization, the expansion of credit and technology adoption, Latin Americans are ready to shop. Satisfying them, however, will be increasingly challenging. Gone are the days when showing up was half the battle. Suppliers of goods and services can no longer serve their Latin American customers with a small range of products. Increasingly robust product launches and wide product choices in Europe or the US are equally sought out by Latin Americans who want the latest and greatest thing as soon as it is available anywhere.
In the past, marketers looked at basic demographic metrics to divide the market: geography, age, gender, wealth level. Today, they must up their game and consider slicing and dicing the market by psychographic profiling, looking for lifestyle differences among consumers. The age of community is gone in Latin America. For better or for worse, the region is entering an époque of me, celebrating the individual.
Media channels are rapidly changing in Latin America as well. 2012 marks the first year that more Latin Americans are members of Facebook than they are readers of newspapers. Young Latin Americans have little faith in the veracity of traditional media. Bombarded with marketing messaging in a less regulated media landscape, Latin American consumers are increasingly immune to conventional branding approaches. Instead, young Latin consumers want 3rd party validation of brands and products published in social media by their friends, not an ad agency.
It’s a brave new world in Latin America. Marketers beware.
John Price is the Managing Director of Americas Market Intelligence, and a veteran of Latin American competitive intelligence and strategy consulting.