Honda sales suggest “recession proof” Hispanic spending patterns

Current research and data from the last recession in the 90’s indicates that Latinos are not as affected by recessionary trends as the general market.

Hispanics’ income continued to increase, as did their spending, during economic downturns, says Hector Orci, co-chairman of La Agencia de Orci, American Honda’s Hispanic ad agency of record for 12 years.

He says that, while in the middle of a business slowdown, it is important to question what role an economic contraction is playing in marketing to various multicultural market segments, such as Latinos.

Evidence suggests that when the economy is sluggish, lower unemployment rates for Hispanics correlate with increasing spending levels compared with the general market. In the 90’s, some savvy marketers at Fortune 500 companies began to note the trend, and began increasing Hispanic marketing budgets, even while decreasing general marketing budgets. This resulted in continued growth in sales for companies, such as American Honda, who marketed to Hispanics.

Case Study: American Honda

The automobile industry illustrates, in particular, realized incremental bottom-line profits from such a strategy. La Agencia de Orcí has worked with American Honda since 1989. During this relationship, Hispanic Honda sales have increased 270%. Each year Hispanic Honda sales continuously increased, even through the last recession in the early 90’s, when Honda sales to the general market slowed.

Honda Historical Sales

Total Honda Sales/Hispanic Honda Sales/Hispanic % of Total Sales

1990 716,495 22,867 3.2%

1991 659,659 24,622 3.7%

1992 648,745 29,667 4.6%

1993 608,255 32,243 5.3%

1994 676,093 34,920 5.2%

1995 697,228 45,141 6.5%

1996 735,920 50,835 6.9%

1997 832,243 55,530 6.7%

1998 899,208 62,280 6.9%

1999 958,887 68,345 7.1%

2000 1,016,179 79,219 7.8%

* Source - Ward Automotive Light Vehicle Sales

**Source – R.L. Polk Database

Below are some important reasons why Latinos are not usually as affected by recessionary trends as the general market.

Consistently Low Unemployment

Hispanics have enjoyed a relatively low unemployment rate vis-à-vis the population at large. In fact, the Hispanic unemployment rate has fallen faster than the overall rate. While total U.S. employment declined by .8% between 1990 and 1992, employment of Hispanics increased by 1.9%. (Bureau of Labor Statistics, Employment and Earnings, Current Population Survey)

Service Industries More Secure

The industries in which many Hispanics are employed tend to be “recession proof” or, in other words, not as affected by economic slowdowns. During the last recession, between 1990 and 1992, Hispanic employment in clerical and service occupations increased more than five times faster than the overall employment in these occupations. (Bureau of the Census, Current Population Survey, Standard and Poor’s DRI analysis of public-use data file.) Finding work and remaining employed is very important to Hispanics and they are flexible as to the kind of work they will take on in order to remain employed.

More Employed People Per Household

In addition, more family members are employed in Hispanic families than in the general population, so when one member of the family is out of work it does not have as much of a financial impact on the family’s overall spending. (Bureau of the Census, Money Income in the United States) According to the Bureau of Labor Statistics, the percentage of Hispanic families with employed member(s) remains consistently higher than families in the general populous: in 1998-99 84.7% of Hispanic families had an employed member (s) compared to 82.6% of all American homes. (Bureau of Labor Statistics, Labor Force Statistics for the Current Population Survey)