Translating Hispanic Marketing
into Shareholder Value

With shareholders demanding higher and better returns, companies are examining all facets of their strategy to see what delivers. A new study released by Santiago Solutions Group (SSG), found that companies might want to take a harder look at their Hispanic marketing strategy to see how it translates into bottom-line profitability.

The study of 180 top national advertisers, Translating Shareholder Value: An Examination of Well-Resourced Hispanic Corporate Strategies, reveals that the top 25 percent of companies that lead in their allocations to Hispanic marketing generated 2.1 times higher bottom-line profitability (net income) than companies who did not provide adequate resources to their Hispanic marketing strategies.

Other findings of the study include:

-- The top quartile of companies investing in Hispanic marketing generated higher cumulative shareholder value for 2000-2004 than the remaining 75 percent of companies. Each $1 invested in Hispanic marketing by these top 25 percent of companies returned $4.

-- The top quartile of companies allocating to Hispanic marketing, during this same time period, generated 1.5 times higher operating income margins than the remaining companies.

-- There is a positive correlation between Hispanic marketing allocations and EBITDA (earnings before interest, taxes, depreciation and amortization) with the top 25 percent of companies allocating to their Hispanic marketing generating 1.3 times higher EBITDA than the others in the study.

-- Of the companies in the study, those in the consumer packaged goods category (CPG) led all other industries in their percent of marketing budget spent on targeting Hispanics with 5.5 percent of budget to Hispanic marketing; Following on the list were entertainment (4.7%), retail (4.4%) and automotive manufacturers (4.1%).

-- Companies leading the pack in Hispanic marketing investment and shareholder value include: AutoZone, Kellogg, Anheuser-Busch, Colgate-Palmolive, PepsiCo, TJ Maxx, Radio Shack and Procter & Gamble.

The data demonstrates that properly investing in Hispanic marketing is an integral component of the winning DNA of companies that generate superior returns for their shareholders.

"The findings of this study are consistent with our own point of view that well-honed and well-supported marketing to Hispanic consumers pays off in all of our performance metrics. I expect that allocations to Hispanic marketing will be better justified as a result of these findings," said Al Carey, president and CEO, Frito-Lay, a division of PepsiCo.

"In our experience, companies that translate their Hispanic market investment into superior shareholder value do not merely throw money at the Hispanic market," said Carlos Santiago, president and CEO, Santiago Solutions Group. "More often, these leading companies adopt new allocation paradigms matched to the specific growth opportunity, have solid executive leadership, have passionate "doers" at all levels, a solid strategic direction, and flawless action with accurate quantitative metrics. In short -- the bottom-line value is so clear to these companies, they do it right and they reap the financial rewards."

The 180 companies evaluated in this study were carefully selected based on strict criteria from an original list from TNS Media Intelligence of the 684 top advertisers (based on average TV, print expenditures for 2000-2004). Using financial data from ValueLine and Mergent for the same time period, SSG was able to examine key profitability metrics for shareholder value creation. SSG decomposed ROE to examine the most important profitability metrics as they are key components of companies' valuations and shareholder value creation. The work by Santiago Solutions Group was supported and reviewed by Dr. Karl Schmedders, associate professor of managerial economics and decision sciences at the Kellogg School of Management at Northwestern University.


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