FT SPECIAL REPORT

Latin American Brands

F or the best part of a decade thepopularity of premium brandshas been one of the most strik-ing features of Latin America’srapidly growing consumer

economy.But in the last couple of years, a differ-

ent trend has started to emerge. Witheconomies slowing, unemployment anddebt burdens rising, many householdsare under financial pressure and shop-persarestartingtorein inspending.

Families that may have freely spenton an Apple iPhone or L’Oréal facecream are looking at cheaper alterna-tives.

“More and more people are worriedfor their jobs, and are economising,”saysLucianaHope,a43-year-oldhouse-wife who lives in an upmarket district ofSalvador inBrazil’snorth-east.

In the past few months, she hasswapped her tried and tested Omowashing powder for discounted Ariel,used Ypê fabric conditioner instead ofComfort and Seda shampoo rather thanthemorecostlyTRESemmé.

When Ms Hope’s friends and neigh-bours go out, they are choosing cheapertrendy Skol beer rather than the moreexpensivespiritsorcocktails theymightrecentlyhavepreferred.

The trend is particularly strong inBrazil’s economy which is expected tocontract by about 2 per cent in 2015.However, the region as a whole is set tostagnate this year, so confidence is sub-

dued elsewhere too. Regular surveys of6,500 consumers in six Latin Americancountries conducted in recent months by FT Confidential Research, show con-fidence edging lower even in countriessuch as Colombia and Peru that are

expected to grow by more than 3 percent thisyear.

Across the region, the research showsa steady increase in the number of con-sumers who are attaching more impor-tance to price than to quality. In June

2015, for example, 19 per cent ofrespondents said price was the mostimportant consideration when buyingfood compared with 16.4 per cent ninemonths previously. Price was also amore influential factor when it came to

Slowdown hits spending powerEconomy products dowell as consumers reinin premium spending,writesRichard Lapper

buying clothes and personal care prod-ucts, becoming the main concern for41.5 per cent (up from 38.8 per cent)and 34.4 per cent (up from 31.1 percent)ofrespondentsrespectively.

“We are seeing depremiumisation asLatin America passes through amoment of crisis,” says EduardoTomiya, managing director for SouthAmerica at Millward Brown Vermeer, amarketingconsultancy inSãoPaulo.

Inthegroup’s latestcompilationof thetop 50 most valuable Latin Americanbrands, five relatively cheaper beers,four of which are made by AB InBev, thebeer giant of which Brazil’s AmBevforms a significant part, are in the top 10(see ranking on page 4). Skol heads thetable for the first time, taking over topposition from Corona, which was theregion’s most valuable brand in 2013and2014.

The calculations — based on the dif-ference between an estimated marketvalue and a brand’s tangible assets —shows economy products gaininggroundinotherareas too.

In the food sector, growing numbersof consumers are preferring to shop atcash and carry outlets or discountsupermarkets. Bodega Aurrerá andLider, respectively the Mexican andChilean discount operations of the USsupermarket group Walmart, both rankhighly in the Millward table, with Bod-ega up six places to 14th and Lider upeight to17th.

“Cash and carry has been expandingvery aggressively,” says Mr Tomiya. Thelocal operations of two internationalgroups: Brazil’s Atacadão, owned byFrance’s Carrefour, and the Argentineand Brazilian operations of Spain’s ElDía, illustrate thesametendency.

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Global corporationsEconomic volatility maysee some big namesattempting to increasetheir market sharePage 4

www.ft.com/reports | @ftreportsWednesday September 23 2015

Inside

Global retailers stepup their exposureTraditional outlets loseout as the shoppingmall becomes kingPage 2

The US marketAs the number ofLatinos grows, so doestheir spending powerPage 3

Creaming profits in aworld of luxurySome of the biggestbeauty brands areflocking to MexicoPage 3

Super tequila attractsa celebrity followingRap starP Diddyhas ashare inDeLeón,a primetipplePage 4

2 ★ FINANCIAL TIMES Wednesday 23 September 2015

Latin American Brands

Many Brazilians still put a priority onupmarket shampoos, face creams andother personal care items and cosmet-ics, but recent research by FT Confiden-tial showed that economy brands havebeendoingwell thisyear.

Brands doing well in its most recentsurvey include Bic of France’s cheapdisposable razors and Risque, a main-stream nail varnish made by Hyper-marcas, a Brazilian consumer groupknown for its slick marketing cam-paigns.

This trend has also been very clear intheelectronicssector,wheretheupmar-ket mobile phones, tablets and laptopsof international manufacturers such asApple and Samsung are still hugely pop-ular,but lesssothaninrecentyears.

Latin Americans remain big fans ofthesmartphoneandenthusiasticpartic-ipants in social media but they are lesslikely to splash out on the most expen-siveequipment.

In June 2015, only 41.8 per cent of the1,500 Brazilian respondents in the Con-fidential survey said they intended tobuyanAppleorSamsungtabletover thenext six months. When the survey wasfirst conducted in December 2012, 59.7per cent of respondents said theyplannedtodoso.

The Millward Brown BrandZ survey,part of the broader group’s global sur-vey, illustratesmoregeneralpoints.

First, Latin American brands are rela-tively small compared with the largestglobal brands. None of the leading LatinAmerican brands is big enough to figurein Millward Brown’s table of the top 100global brands. Skol’s brand value is esti-mated at $8.5bn in the research. By con-trast, Scotiabank, the 100th largest glo-bal brand, is judged to be worth$11.04bn.

Second, some of the most successfulbrands in the Latin American table areonly partly Latin American. Ambev ispart of the giant AB InBev combine,formed first by the 2004 merger of Bel-gium’s Interbrew and Brazil’s Ambevinto InBev and then by Inbev’s 2008takeover of Anheuser-Busch of the US.Aguila, the Colombian beer brandjudged ninth most valuable, is owned byanotherdrinksgiant,SABMiller.

Third, with the partial exception ofbeers, Latin American brands remainlocally or regionally focused. Bradesco(number four in the Millward survey)and Itaú (number seven), Brazil’s two biggestbanks,areminorplayersoutsidetheir home country. Retailers such asChile’s Falabella (number five) haveextended their business abroad but onlyinto relatively small regional marketssuchasColombiaandPeru.

In the telecoms sector Mexico’s Telceland Telmex are ranked third and 11th,but largely by virtue of their dominanceof the highly concentrated local market.The same is true in the media sector ofTelevisa, themediacompany.

Experiencesuggestscautionisadvisa-ble in assessing the global potential ofLatin American brands. Brazil’s Petro-bras, the state controlled oil companythat was judged the most valuable LatinAmerican brand in 2012, has droppedoutof theregional top50.

continued frompage1

Slowdownhitsspendingpower

ContributorsRichard LapperRob WalkerFT contributors

John Paul RathboneLatin America editor

Jude WebberMexico correspondent

Lucinda ElliottFT Confidential Research

Andres SchipaniAndes correspondent

Amy StillmanFT contributor

Aban ContractorCommissioning editorSteven BirdDesignerAndy MearsPicture editorFor advertising contact Ian Edwards on+44 (0)20 7873 3272 orian.edwards@ft.com, or your usual FTrepresentative.All editorial content in this report isproduced by the FT. Our advertisers haveno influence over or prior sight of thearticles.

19%The portion ofpeople who thinkprice is importantwhen buying food

$8.5bnThe brand valueof Skol, Brazil’smost popularbeer

In the departure lounges at Lisbon air-port, international brands such asHeineken, Lacoste and Vodafone facecompetition for passengers’ attentionfromanunexpectedsource.

Bright purple, yellow and scarlethoardings for Blue, Angola’s largest softdrinks manufacturer, await travellersmaking their way towards their flights.A trolley containing a selection oftrendy sunglasses and watches by ChilliBeans, a Brazilian design company, isanother lastminutedistraction.

Both companies see their presence inthe Portuguese capital as part of a driveto expand beyond their limited homemarkets. And, in both cases, the attrac-tionsof thewideningPortuguese-speak-ing market is the first step in a broaderinternationalstrategy.

Some 250m people live in Brazil, Por-tugal and Portugal’s former African andAsiancolonies.Andgrowingnumbersofthese Portuguese speakers have becomeactive consumers in the past 15 years.Higher wages, social welfare, morewidely available credit and — untilrecently at least — falling unemploy-ment have allowed millions of Brazil-ians to buy the kind of affordable luxuryitems made by São Paulo-based ChilliBeans.

Since the end of Angola’s civil war in2002, markets for consumer goods suchasthetropical fruit flavouredsoftdrinksmade by Blue have increased at a rapidpace. Portugal’s smaller but moresophisticated consumer markets are anobvious first step for businesses fromeithercountry lookingtodiversify.

At the same time, for Portuguesecompanies faced with slumpingdemand at home since the onset of theeuro crisis half a dozen years ago, Brazil,Angola and Mozambique are a logicalareatoexpand.

“The Portuguese-speaking markethas become a lot larger and it can be aplatform for global brands,” says Rui

Gomes Araújo, a Portuguese marketingspecialist.

Cultural affinities — as well as eco-nomic logic — underpin the potentialattractions. Brazilian soap operas arepopular in Portugal, Angola andMozambique. Angolans use their satel-lite dishes to watch Brazilian champion-ship matches, rather than the Englishgames popular elsewhere in Africa. AndAngolan traders travel regularly to São

Paulo to buy cheap clothes that they sellonmarketstalls inLuanda.

Existing trade patterns suggest thereis potential in areas such as foods andcosmetics. Portugal’s Gallo is Brazil’smost popular brand of olive oil, forexample. Portuguese wines also sell wellin Brazil, while Brazil’s big cosmeticscompanies such as O Boticário havemade their first ventures abroad in

Angola and Portugal. The problem isthat Brazil so overshadows other Portu-guese speaking markets that it limitspotential for their lusophonic productsinthemassmarket.

Although Brazil’s consumer goodscompanies have built up strong localbrands, market dynamics leave the bulkof them heavily focused on opportuni-ties at home. For example, Hypermar-cas, a local conglomerate frequentlycompared with Procter & Gamble(P&G), is a leader in sectors rangingfrom cold remedies and condoms to nailvarnish and shampoo. But it has had itswork cut out to defend domestic marketshare in the face of fierce competitionfrom international rivals such as P&GandUnilever.

Businesses seeking to grow organi-cally find that Brazil’s less developednorth, north-east and centre westregions offers ample opportunities.Expansion abroad has tended to focuson the developed markets of EuropeandNorthAmerica.

Havaianas, the flip-flop sandal madeby Alpargatas and one of Brazil’s mostsuccessful exports, opened its first over-

seas stores in New York, Paris, Londonand Rome. Brahma, a Brazilian beerthat is gaining an international profileseems to be doing so by virtue of themarketing clout of AB InBev, formedthrough the successive integration firstof Ambev with Belgium’s Interbrew andthenthetakeoverofAnheuserBusch.

For these reasons, Mr Gomes Araújothinks the best opportunities are in theluxury sector. Clients of the IMPERIVMconsultancy — of which he is president— range from Pinhais, a Portugueseupmarket brand of canned sardines, toGranado, a Brazilian cosmetics com-pany, and Chocolate Q, a high-end choc-olate maker from Rio de Janeiro whichopenedits firstLisbonoutlet inMay.

All tend to put a big emphasis on qual-ity rather than quantity. Chocolate Q,for example, makes high cocoa contentchocolate from forasteiro beans care-fully grown on the group’s own planta-tion intheBrazilianstateofBahia.

Mr Gomes Araújo says: “The globalmarket is really demanding, but wethink it is worthwhile betting on prod-ucts that have a real link with the landanditshistory.”

Limited home markets force companies further afieldExpansion

Portuguese-speaking statesoffer room for growth in abroader internationalstrategy, says Richard Lapper

Almost a decade ago, some 400 mousta-chioed candidates sporting leather bags,ponchos and cowboy hats appeared on amisty hillside of Colombia. For some500,000 coffee growers in one of theworld’s top producers of Arabica beans,itwasamomentofhighsymbolism.

After all, they were electing the newJuan Valdez, the fictional coffee farmerwho has embodied Colombia’s coffee initsadvertisementssince1959.

He is one of advertising’s most suc-cessful fictional characters, created byDoyle Dane Bernbach, now known asDDBWorldwide,onMadisonAvenue.

The winning candidate, CarlosCastañeda — unlike his two predeces-sors who were both actors — is a real cof-fee grower. During the past nine years,he and his mule Conchita have toured

the world as the face of a global market-ing campaign, first launched to educatetheUSaboutColombiancoffee.

Procafecol, the holding company forthe Juan Valdez Café brand, is 84 percent owned by the Colombian CoffeeGrowers Federation, which started in1927. Moreover, more than 18,000 cof-fee farmersarenowdirectshareholders,owning 4 per cent of thebrand, with the Inter-national FinanceCorporation holdinganother12percent.

Hernán Méndez,chief executive officerof Procafecol, says:“We aim at a consumerwho recognises that ourbrand is a premiumcoffee that directly bene-fits Colombia’s coffeeproducers.”

Procafecol not only buys itscoffee from members of thefederation but also pays royalties

to Colombia’s National Coffee Fund. MrMéndez says the company has pouredsome $22m into the fund to help withsocial ventures in coffee-growingregions as well as research and develop-mentoncoffeebeans.

Juan Valdez Café now has more than320 stores worldwide, from Colombiaand other parts of Latin America toMalaysia, but for a time, it was touch

and go. Procafecol started in 2002 aftercoffee experts, officials and the govern-ment gathered to devise a plan to cush-ion the effects of plunging prices. It wasa radical move from having a decades-long strategy focused on the coffee itself—withJuanValdezwithinthetriangularlogo of Café de Colombia — to makinghim the focus of a coffee chain con-sumerbrand.

Mr Méndez says: “Given the popular-ity coffee shops were enjoying aroundthe world, one of the recommendationswas to try that business model, takingadvantage of the Juan Valdez icon,which was already highly valued andrecognised.”

But the initial aggressive move intoglobal markets backfired. The companyexpanded rapidly, opening more than100 stores in Colombia, Spain and theUS. These included two flagships in veryhigh-end locations — Times Square inNew York and Serrano Avenue inMadrid — which dug a hole in the com-pany’s budget. Procafecol was thenforcedtoretreat.

After closing shops and cutting costs,Cornell-educated Mr Méndez took the

company’s reins in 2010. Two yearslater, Procafecol produced its first profitin a decade — albeit a meagre $775,000—afterreachingsalesof$67m.

Although the company still owns itsColombian locations, and a handfuloverseas, it has mainly moved to a fran-chise model to avoid committing capitalin advance. It is still cashing in a per-centage of sales while ensuring that itspartners — such as retailer Falabella inChile—buytheircoffee fromColombia’scoffee federation.

Even with Starbucks’ arrival inColombia last year and a slowdown inLatin America’s expanding economies,where the Juan Valdez brand now has astrong presence, the strategy is yieldingresults. Sales have grown from $74m in2013 to $85m in 2014. In the first half of2015, the company made $37.6m insales. That was a 25 per cent increaseoverthesameperiodthepreviousyear.

“It is hard not to associate good qual-ity coffee with the name and the imageof JuanValdez,”saysMrMéndez.

“After all these years in the spotlight,and millions poured into marketing, heis theonewhodeserves thecredit.”

Coffee co-operative puts its faith in Juan Valdez figureMarketing

The advertising icon hasserved Colombian growerswell over the years,reports Andres Schipani

Promotional tour: Coffee growerCarlos Castañeda as Juan Valdez

‘The Portuguese-speakingmarket . . . can be a platformfor global brands’

C entro Andino shoppingcentre in Colombia’s capitalBogotá is brimming withbrands. Switzerland’s Nes-presso, maker of coffee shot

capsules, sits comfortably alongsideboth high-end and fast fashion clothesretailers, from Italy’s Dolce & GabbanatotheUK’sBurberry.

The mall — which opened in the 1990s— is now full, so international retailersare choosing to plant themselves out-side the legendary building just to beassociated with those who have made itinside.

Poor urban planning and high levelsof crime in many Latin Americancities have meant the shopping mall,rather than the traditional high street, isleading the way for global fashionbrands to step up their exposure in theregion.

“Destination malls”, such as Andino,are prime places to home in on targetconsumers, unlike downtown shoppingareas overseas such as New York’s FifthAvenueandParis’Champs-Élysées.

With more than 1,800 malls acrossLatin America and a further 150 underconstruction, choosing the right spot iscrucial.

For Inditex Group, the world’s largestclothing retailer, with 178 of its flagshipZara stores dotted across 16 countries inSouth and Central America, opening an

outletnext to theAndinoMall inColom-biawasanimportantdecision.

“So far in 2015, we’ve opened 15 storesin Latin America under the Inditex fam-ily — most of them in malls,” says a rep-resentative.“Weplantoopenmorethan30shopsbytheendof thisyear.”

American Eagle Outfitters and Gap,both of the US, are following suit,aggressively moving south beyond the US and Mexico to Chile, Colombia andPeru to compensate for sluggish salesgrowthathome.Colombia iscertainly inthe vanguard of a regional shoppingmall trend.

Of six Latin American markets sur-veyed by FT Confidential Research lastyear, 73.2 per cent of Colombians visitedmalls to shop for clothes compared witharegionalaverageof66.4percent.

“For us, being in Centro Andino sendsthe correct message to our clients,” saysRodolfo Chiari, who runs Mac Center,one of the region’s premium resellers ofApple technology products. “It housesthe top names under one roof, un-matched by other shopping malls inColombia,orevenLatinAmerica.”

Moreover, these international corpo-rations have good negotiating powerinside the shopping centres, says JorgeLizan, managing director of Lizan RetailAdvisors, a consultancy. Especially ifthey have a string of brands they canbringwiththem.

His company helps foreign namesentertheLatinAmericanmarketandhehas noticed a trend of big groups payinglower rents than local names that tendtohaveasmallercustomerbase.

“Latin American shoppers are verydemanding today and are increasinglyendorsing global brands as they travelmore widely and want access to differ-ent products,” he says. “[And] thedevelopers are doing what the custom-ers want, supporting the big brands andbringingthemtotheirmalls.”

But foreign companies cannot ignorethe regional retail downturn. LatinAmerican currencies have fallen hardand fast this year against the US dollar.Consumer confidence and retail saleshavealreadytakenasignificanthit.

In the region’s largest economy, Bra-zil, which boasts the highest number ofshopping malls per capita, retail sales inreal terms fell 2.7 per cent year-on-yearin June, but for clothing and footwearthat figure was even higher, dropping4.6 per cent compared with the sameperiod in2014.

Ghosts of lost shoppers are starting tohaunt a number of second and third tierBrazilian cities. Itapecerica da Serra,about 20 miles south-west of São Pauloand home to some 165,000 people, isone example. As unemployment rises(up 2.2 per cent already this year) andinflation bites, lower income families

from the satellite town who are not inthehabitofspendingthedayatthemall,no longer have the purchasing powershopping centre developers anticipated.

More than 130 malls have opened inBrazil since 2010, and about half areoutside big metropolitan areas, says theBrazilian unit of Cushman & Wakefield,acommercial realestateconsultant.

However, there is a strong convictionthat the secular change among LatinAmerican shoppers will ride out thecyclical downturn. Much like the cen-tral squares or plazas of Hispanic towns,malls or “lifestyle centres” are becom-ingthecentres forsocialgathering.

They are more than just traditionalretail outlets with a food court — theyalso offer play areas for children, art gal-leries, banks and even indoor parks andoffice blocks. Shoppers are thereforeencouraged to spend time in the mallbeyond making purchases and the long-termtrendformalls ispositive.

“The minute they’ve got a bit ofmoney to spend, the mall will be wherethey’ll choose to part with their cashbecause that’s where they’re spendingtime,” says Alexis Frick, research ana-lyst at Euromonitor International basedinSãoPaulo.

Andrea Abrams from Time RetailPartners in New York adds: “Today isabout getting the right merchandise andweatheringthestorm.”

Traditionaloutlets loseout as the mallbecomes kingShopping Global retailers are stepping up theirexposure, write Lucinda Elliott andAndres Schipani

Brand power:Centro Andinomall attractshigh-end andfast fashionclothes retailers

‘Developers[are]supportingthe bigbrands andbringingthem totheir malls’

Wednesday 23 September 2015 ★ FINANCIAL TIMES 3

revolution, Havana Club was only aminor brand. But as it is now actuallyproduced in Cuba, while Bacardi’s rumsare largely produced in Puerto Rico, theclaimtoauthenticity iscredible.

“In our experience, consumers areattracted to authentic brands,” saysCharlie Rudd, chief operating officer ofBBH London, the advertising and crea-tive agency. “That is why advertisersinvest time and energy to demonstratewhere they came from and what makesthem special. With this in mind, it looksas though Pernod Ricard has a trumpcard.”

But what is Cuban culture — giventhat some 2m Cubans live outside theisland—whichhasapopulationof11m?

Bacardi’s campaign locates it in theeternal Cuba of yesteryear. Pernod, onthe other hand, leans towards today’spost-ideologicalCuba.

To project that image, as well as itsrum, Pernod has invested in promotingCuban music. It has made stylish CDsproduced by jazz maestro Gilles Peter-son and co-financed a feature film,scripted by Cuban novelist LeonardoPadura, called Seven Days in Havana, anoften poignant series of contemporaryvignettes, only some of which have thefeelofanadvert.

“The old Cuba of vintage cars hasits charm,” says Mr Cottin-Bizonne.“But in the film we wanted to look tothefuture.”

A further complication lies in thecompanies’ battle over the “HavanaClub” marque — which Pernodowns, except in the US, where Bac-ardihastherights.Thecontestwillsurely escalate should the USembargo finally end, and Pernodcan then sell its “Havana Club”in the US, in competition withBacardi rum and its own“HavanaClub”.

The brand battle for“authenticity” goes on,although there is no correctfinal answer — just as there isno “real Scotch” — and in theend it boils down to questionsof personal taste and marketaccess.

Still, the clash is a measure ofchanging times. A revolutionthat once won internationalfollowers with its global imagehas now partly resolved downto the rival marketing strate-gies of two very capitalistcompanies.

“Would the ‘real’ brand please standup?” That is a complicated question atthe best of times. But when the brand isCuban, itgetsmorecomplexstill.

Cuba produced the most charismaticrevolution of the 20th century. But, withthe socialist island slowly re-embracingcapitalism and seeking rapprochementwith its arch-enemy, the US, the “realCuba” is inastateof transition.

That transition, in turn, sets thestage for one of the most colourfulmarketingclashesofmoderntimes,the battle for the “soul” of trueCuban rum, a contest that pits Bac-ardi, the Bermuda-based company,against Pernod Ricard, the Frenchdistiller.

Both drinks groups claim topurvey the “real” thing. Butboth, perforce, have takendifferent routes to buttressthatclaim.

Bacardi, which has its rootsin 19th century Cuba and isowned by an exiled family,extols its heritage and Cuba’spre-revolutionarydays.

“Bacardi — untameablesince 1862” runs the companyslogan, a true enough com-ment. Bacardi was Cuba’sbest-selling rum before the1959 revolution and, in exile,has become the world’s largestprivately owned drinks com-pany.

“Nobodymarkets therevo-lution any more,” saysEnrique Fernandez, a culturalcritic and author of a forthcomingbook on Cuban food, The cortadito: myjourney throughCuba’smutilated but resil-ient cuisine. He says: “Cuba’s marketingpull lies more in old music, old Havanaanditsoldways. Its charmis innostalgia— so Bacardi probably has the upperhandthere.”

Pernod Ricard, by contrast, is a rela-tive newcomer. For two decades, it hasproduced Havana Club rum with itsjoint venture partner, state-owned Cuba

Ron, and sold it around the world,except in the US. It calls Havana Club“thegenuine, iconicCubanrum”.

“The brand is an icon,” says JérômeCottin-Bizonne, chief executive of Per-nod’s Havana Club. “It is an expressionofCubanculture.”

That is half true. Before the

Battle for authenticity plays outon post-revolutionary islandCuban rum

A French distiller and theworld’s largest privatelyowned drinks companyvie for supremacy,reports John Paul Rathbone

Latin American Brands

A vocados from Mex-ee-co!That jaunty little jingle,aired in February, wrappedup one of the boldest LatinAmerican brand-building

exercisesseenintheUS.The US marketing arm of Mexico’s

avocado production industry paid anestimated $4.5m to screen an amusing30-second spot during this year’s SuperBowl Sunday, alongside householdnames such as Coca-Cola, BudweiserandDoritos.

Did it pay off? The president of Avoca-dos from Mexico says the brand is now“onadifferent level”.

Most Latin American brands haveneither the budget to splurge on a SuperBowl ad, nor the commanding nation-wide presence that Avocados from Mex-icohas.

Indeed, aside from a handful of com-panies, such as Bimbo, a baker, andCorona, a brewer — both from Mexico —Brazil’s flip-flop group Havaianas andGoya, a US-based company selling His-panic food specialities, many marquesfrom beyond the Rio Grande are stillconfined to regional niches. This isbecause the US market is an expensiveonetofail in.

But Hispanics are the fastest-growingdemographic in the US, and the secondlargest ethnic group behind whites.Some 54m Hispanics now make up17.1 per cent of the US population. Withtheir number forecast more than todouble to 119m by 2060, when theywill represent nearly 29 per cent of the

population, the scope for Latin brandsto play up their cultural credentials towin a bigger share of the world’s biggestconsumermarket isvast,expertssay.

Hispanic purchasing power in the USis also enormous — an estimated $1.5tna year, advertisers say — and Hispanichouseholds spend more a month thanthe US average, according to online sta-tisticsportalStatista.

“Hispanic households overspend in‘fresh’ [seafood, bakery, produce, meatand deli], giving marketers an opportu-nity to capture Latinos in this space,”says Mónica Gil, a senior vice-presidentand general manager of multiculturalgrowth and strategy at consumer con-sultancyNielsen.

Many Latin brands, especially in thefood and drinks sector, have trodden atried-and-tested route: targeting first-and second-generation US Hispanics, tosell them what Linda Lane González,chair-elect of the Association of His-panic Advertising Agencies, calls “com-fort foodandthecomfortzone”.

Such products often sell in specialistLatin supermarkets or with dedicatedHispanic foodstuff sections where, MsGonzález says, the open crate producelayout and cuts of meat are more famil-iar toHispanics.

US population trends confirm that,while Los Angeles, New York, Houstonand Miami have long been Latino, othercities, including Seattle, Denver,Minneapolis, Detroit and Raleigh, areseeingfastHispanicgrowth.

But they risk missing an opportunity

if they focus exclusively on Latin shop-pers. “What makes this market sodynamic is that a lot of Americans arebuying Latin brands,” says Ms González,naming Mexican soda maker Jarritos,Bimbo and Mexican juice companyJumexamongthem.

Bimbo took a roundabout route totargeting mainstream shoppers. First, itbought up local US brands to gain scaleand only then started to push its ownBimbo range of buns and tortillas, withtheircuddlywhitebearsymbol.

As the company says on its website,the Bimbo name has played second-fiddle to better-known US brands in itsstable: “Not everyone is familiar withthe Bimbo Bakeries USA name. How-ever, everyone in the US has likelyenjoyed at least one of our many prod-uctsatonetimeoranother”.

Now, as Joel Muñiz, a partner at theBostonConsultingGroupinMexicoCity,

says: “The focus is to launch the Bimbobrandfromamainstreamperspective”.

The group’s non-Mexican brands,which include Sara Lee and Oroweat,already give it the largest market sharein the US. But, Mr Muñiz says, theBimbo brand is the fastest-growingbrandinthecompany’sportfolio, gener-atinggrowthofcloseto15percentayearfor thepast fiveyears.

It is not just Bimbo. Increasingly,Latin brands do not have Latin consum-ers to thank for growth. Ms Gil says oneof the biggest drivers of Latin productsare non-Hispanic “ethnic explorers”lured by things like jalapeño peppers,avocados and jícama, a crunchy Mexi-canrootvegetable.

“Ethnic explorers are an increasinglyimportant group to understand,accounting for nearly 40 per cent oftotal store sales [of fresh Latin pro-duce],”shesays.

Huge scope togain a largershare of world’sbiggest marketUS growth As the number of Latinos rises,so does their spending power, writes JudeWebber

Growth spurt: Bimbo Bakeries has the largest market share in the US — Bloomberg

A smile spreads across MaritzaBarquet’s face as she sniffs a perfumetest card in the upmarket Palacio deHierrodepartmentstore inMexicoCity.

“I have seen this fragrance in maga-zines,” says the 56-year old optician,drawing a credit card from her purse.“You cannot put a price on this level ofquality.”

Mexico’s beauty market is arguablyone of the most attractive in LatinAmerica, with a large and open econ-omy luring some of the world’s biggestbeauty brands and pockets of urbanwealthdrivingdemand.

Javier San Juan, the chief executive ofL’Oréal in Mexico, says sales of beautyproducts in the country rose by 3.4-3.8per cent in the first half of 2015. At thesame time, he says, L’Oréal grew 1.5timesabovethemarketaverage.

“It’s been a very good year [for us],”saysthesmilingMrSanJuan.

The beauty sector is among the topfive categories leading Mexico’s fast-moving luxury goods market, whichrose 11 per cent last year to $14bn, over-takingBrazil.

Euromonitor International, theLondon-based market intelligence firm,predicts that Mexico will be among thetop 10 growth markets for luxury goods,withsalesrising34percentby2019.

Shopping centres such as Palacio deHierro, the third largest mall in Mexicoin terms of sales, are also expandingsteadily. The luxury mall group isspending $300m to revamp its flagshipdepartment store in the upscale MexicoCity district of Polanco, tripling the shopfloor to 60,000 square metres byNovember.

“The Mexican luxury market hasbecome much more sophisticated,” saysAbelardo Marcondes, founder of Lux-

ury Lab, a Latin America-focused com-municationsagency.

He adds: “You can see that by theincrease in the number of shoppingmalls and the fact that wealthy Mexi-cans are now spending their moneyhere, whereas they used to have totravel to theUS.”

Nevertheless, the development ofMexico’sbeautymarket isuneven.

Only 53 per cent of Mexicans haveaccess to “modern trade”, includingsupermarkets and department stores.The remaining 47 per cent mostly shopin the 800,000 or so changarros, orkiosksthatdot thecountry.

About 46 per cent of Mexicans live inpoverty, and current economic shockscould lead this group to spend less —particularly as the sharp depreciation ofthe Mexican peso threatens to push upconsumerprices.

A survey by FT Confidential

Research, the Financial Times researchservice, conducted in the second quar-ter of 2015 found that for the first timein nine months, the number of Mexi-cans who ranked “price” as their mainconsideration when buying personalcare items rose during the quarter com-pared to the previous one. The numberthat chose “quality”, meanwhile, fellduringtheperiod.

Mr San Juan admits that localcurrencyvolatilitycouldforceL’Oréal tobring fewer imported beauty productsintothecountry.

But he also sees an “opportunity” totarget lower income groups with goodsmadebyL’Oréal locally.

In the next five years, L’Oréal hopes toreach 40m Mexicans, or about one-third of the population, which willrequire netting an additional 11mcustomers, mostly from poor back-grounds.

Creaming profits ina world of luxuryBeauty products

Some of the world’s biggestbrands are flocking toMexico but it is not all plainsailing, says Amy Stillman

Javier San Juan,chief executive ofL’Oréal in Mexicosays: ‘It’s been avery good year[for us]’

‘Cuba’s marketing pull liesmore in old music, oldHavana and its old ways’

Battle lines: Bacardiand Havana Clubare fighting forthe ‘soul’ of trueCuba rum

4 ★ FINANCIAL TIMES Wednesday 23 September 2015

Latin American Brands

Rank2015

Rank2014 Change Brand

4,423

4,315

4,185

3,672

3,604

3,554

3,476

3,107

3,091

3,039

3,008

2,845

2,795

2,758

2,757

Televisa

Itaú

Brahma

Aguila

Modelo

Telmex

Bancolombia

Sodimac

Bodega Aurrera

Cemex

Claro

Lider

Bimbo

Copec

Sadia

Brand value2015 ($m)

3,625

3,376

3,585

3,565

3,477

3,097

3,006

4,107

2,804

2,748

3,426

2,486

2,608

3,181

2,466

Brand value2014 ($m)

Value change2015 vs 14

22%

28%

17%

3%

4%

15%

16%

-24%

10%

11%

-12%

14%

7%

-13%

12%

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

7

13

8

9

10

17

19

6

20

21

12

25

23

15

26

1

6

0

0

0

6

7

-7

6

6

-4

8

5

-4

6

Rank2015

Rank2014 Change Brand

2,595

2,557

2,436

2,398

2,207

2,198

2,017

1,940

1,867

1,859

1,808

1,700

1,678

1,636

1,575

Banco de Chile

Liverpool

Poker

LAN

Banorte

Banco de Bogota

Ecopetrol

Inbursa

Banco Popular

Antarctica

BCP

Natura

Cristal

Davivienda

YPF

Brand value2015 ($m)

3,175

2,687

2,365

3,058

2,494

2,457

3,446

1,759

2,084

1,145

1,540

2,236

1,630

1,379

1,545

Brand value2014 ($m)

Value change2015 vs 14

-18%

-5%

3%

-22%

-12%

-11%

-41%

10%

-10%

62%

17%

-24%

3%

19%

2%

21

22

23

24

25

26

27

28

29

30

31

32

33

34

35

16

22

28

18

24

27

11

31

30

38

34

29

32

35

33

-5

0

5

-6

-1

1

-16

3

1

8

3

-3

-1

1

-2

Rank2015

Rank2014 Change Brand

1,533

1,479

1,411

1,309

1,236

1,197

1,118

1,108

1,107

1,072

1,069

1,042

1,039

997

985

Azteca

Interbank

Oxxo

Bohemia

Banamex

Tecate

BTG Pactual

Pilsen Callao

Sanborns

Ipiranga

Personal Telecom

Marinela

Une

Sura

Almacenes Paris

Brand value2015 ($m)

n.a.

1,037

n.a.

1,094

969

n.a.

n.a.

1,076

1,058

1,103

n.a.

1,182

931

n.a.

1,262

Brand value2014 ($m)

Value change2015 vs 14

n.a.

43%

n/a

20%

28%

n.a.

n.a.

3%

5%

-3%

n.a.

-12%

12%

n.a.

-22%

36

37

38

39

40

41

42

43

44

45

46

47

48

49

50

New

44

New

41

48

New

New

42

43

40

New

37

50

New

36

n.a.

7

n.a.

2

8

n.a.

n.a.

-1

-1

-5

n.a.

-10

2

n.a.

-14

Latin American brands Top 50

FT graphic Source: Millward Brown/BrandZ

1 25%

Brand value ($m)

2014

4

5 20155,202 4,177

1 16%

Brand value ($m)

2014

3

4 20156,174 5,308

-1 6%

Brand value ($m)

2014

2

1 20158,476 8,025

Rank 2015

Rank2014

Change 1 20%

Brand value ($m)

2014

Value change 2015 vs 2014

1

2 20158,500 7,055

-2 -23%

Brand value ($m)

2014

5

3 20154,709 6,084

Formanyofus thetequila-fuelledmem-ories of youth are enough to put us offfor life. But now, Mexico’s signaturetipple is enjoying a sophisticated come-back.

A new generation of luxury brands isleading the way. Instead of the trade-mark throat-burning slammer, tequilahas reinvented itself as a premium andversatile spirit, says Alex Tomlin,vice-president of tequila marketing forDiageo, the world’s biggest spirits com-pany.

“These days, it’s sipped and savouredratherthanslammed,”hesays.

It is a renaissance brought about inpart by the involvement of the Holly-wood set. In recent years, big namecelebrities have developed a penchantfor super-premium tequila. So much sothey not only want to drink it. Theywanttoownit too.

US rap star and entrepreneur SeanCombs(akaPDiddy)tookashinetoonebrand, DeLeón, after spotting its popu-larity on the Los Angeles club scene. Heapproached Diageo’s North Americapresident, Larry Schwartz, aboutgetting together to buy it, and they did,in a 50-50 joint venture last year. It isnow one of Diageo’s fastest growingbrands in the US. DeLeón sells for asmuch as $850 a bottle. Even the cheap-estversioncosts$65.

Pop star Justin Timberlake saw anopportunity too, teaming up with BeamInc. to co-own the premium tequilaSauza 901. And, even George Clooney isat it. He and best friend Rande Gerberlaunched their brand, Casamigos, twoyears ago. They now believe it is Amer-ica’s fastest growing tequila, albeit fromalowbase.

All of this, of course, is a million milesfrom the tequila of Mexico’s back streetcantinas. But that is the point. Liketacos and burritos, Americans haveswooped on tequila and made it theirown.

Unlike cachaça in Brazil, Mexicantequila now sells more abroadthan it does at home, and consump-tion is higher in the US than inMexico.

According to the National Cham-ber of the Tequila Industry,exports hit a record $1.1bnlast year, fuelled by surgingdemand for the top price 100 per centblue agave brands (fermented usingonlyagavesugar).

Jonny Forsyth, a drinks analystat Mintel, a market researcher,says: “It’s the ultra premiumbrands that have driventhe category in the pastfew years, and celebshave come in onthe back of thatgrowth. Tequila isnow so cool, thecelebrities all wantto get on the gravytrain.”

Keen to cash in,Diageo this yearacquired theremaining 50 percent of Don Julio that itdid not own. The brand

already enjoys double-digit annual salesgrowth and Diageo says it sees “signifi-cant potential”, now that it has full con-trol of production and worldwide distri-bution.

In its latest results to the end of June2015, global sales of Diageo’s tequilaportfolio were up 14 per cent, driven byDonJulioandDeLeón.

It is a success that is mirrored world-wide.

According to Nielsen, a marketresearch group, tequila’s 7 per centannual growth now outpaces therest of the spirits market combined,which is growing at 5 per cent. Andtequila is poised to dethrone rum as thethird largest spirit category, by revenue,intheUS.

Undoubtedly, the big drivers are theluxury brands, where sales are up80 per cent in the past 12 monthsalone.

Speaking in his Malibu bar CaféHabana, Mr Gerber says the success ofthe product was down to its smooth, dis-tinct flavour, with none of the throat-burnandhangoversof thepast.

“Once you try a premium brand, itreally changes the way you thinkof tequila,” he says. In the past month,he and Mr Clooney have startedpromoting Casamigos in Europe,where dozens of premium tequilasare now hitting the market too. The UKis leading the way. Will de-Ferry Foster,owner of the Casita bar in London’sShoreditch, believes people inBritain are gradually coming roundto tequila’s new image as a “sophisti-cated”tipple.

“We’re getting more people coming injust asking for sipping tequilas. Andthey drink it like they would a good maltwhisky,”hesays.

It helps too that tequila has aninteresting cultural heritage, says MrForsyth. “There are lots of nuances intequila and a lot of craftsmanship and

old production methods — thisis all tapping into a growing

market for craft spiritsat themoment.”

A super premiumtipple embodiesthe celebrity spiritTequila

Rob Walker discovers a drinkthat is no longer athroat-burning slammer

National identity is a common threadamong the region’s top selling brands.

Take Argentina’s oil company YPF.The government renationalised it in2012, ousting the Spanish group Repsol.In its subsequent rebranding, a smallArgentine flag was placed in the top leftof its logo. The aim, unashamedly, is toproject the image that YPF is moreArgentine now than it was before.

“To be successful in Latin America,the big national brands have to catchthe mood of society in any given period.

“They have to come up with newproducts and advertisements all thetime, while retaining the DNA of theirtradition and heritage”, says GuillermoOliveto, director of the W consultancy(and author of Argenchip, a book aboutArgentine consumer culture).

A Quilmes beer commercial running inArgentina does just that. It features a

young man waiting for a job interview.He has no work experience, but hedoes have “street cred”. He speaksPortuguese, French and Japanese bymashing them with Spanish. And he’s agood guy. He looks after his granddad,helps his neighbour. You get the idea.

He lands the job and celebrates witha Quilmes, but has to borrow the cash

because his first pay cheque is not duefor another month. It has been a hit,because the character’s predicamentresonates in a country where youthunemployment is about 20 per cent butaspiration is still high.

“Quilmes has a knack of tapping intowhat makes an Argentine ‘Argentine’,”says Gustavo Koniszcer, Latin Americandirector of FutureBrands, a consultancy.

The irony is that Quilmes, for the pastdecade, has been owned by Anheuser-Busch InBev, a Belgium-Brazilian brewerthat also owns some of Latin America’sother biggest beer brands, includingSkol, Corona and Brahma.

“If Quilmes lost its Argentine-ness, itwould be brand suicide. It’s in foreignhands but it has to keep reflectingnational attributes”, says Mr Koniszcer.

Brands that do not have muchheritage to shout about, yet are fast

becoming key influencers in LatinAmerica, are Google and Facebook.What they have in common with thenational brands, though, is their culturalrelevance. Indeed, without having toadapt to fit Latin American society thelikes of Facebook inherently tap intowhat underpins it.

“Latin Americans like to be together,to talk, to meet with friends — andsocial media brands play into that”, saysMr Oliveto. Social media brands are setto install themselves much more in LatinAmerica over the next five years,carrying communication providers likeTelcel and Telmex along with them.

Their rise will also put pressure on thecurrent stock of billion dollar brands,which will have to align with a newworld of hyperconnectivity to maintaintheir status.Rob Walker

National identity Losing it can be commercial suicide— even if the company is foreign owned

T he good times have stalledin Latin America. Or havethey? It depends whom youtalk to. For global compa-nies, the current economic

volatilitycouldbeanopportunity.More than a decade of rising employ-

ment, wage rises and cheap creditspawned a new type of Latin Americanconsumer — brand-savvy, digitised andhungryfor innovation.

Big name global brands reaped therewards, in the process triggering a shiftin revenue power from North to SouthAmerica. Coca-Cola is a case in point. Asrecentlyas2005, its sales inLatinAmer-ica were $8.6bn lower than in NorthAmerica. Yet, according to Euromoni-tor, the research group, by 2014 theywere$17bnhigher.

Other groups experienced similarlyrapid Latin American growth, whiletheir sales stagnated in developed mar-kets. Unilever, Nestlé, Procter & Gam-ble, Danone, PepsiCo, Kimberly-Clark,Colgate-Palmolive, Nike, L’Oréal, Sam-sung, Apple, Microsoft, McDonald’s —all saw retail sales more than double (inUS dollars in Latin America over thedecade2005-2014).

Flush with cash, a new generationwanted the latest gadgets, the coolestsneakers and the most luxurious sham-poos. Latin America has become“extremely important”, says LaurentFreixe, executive vice-president andheadof theAmericasatNestlé,makerofNescafécoffeeandKitKatchocolate.

The region accounts for just under 9per cent of the world’s population but 15per cent of Nestlé’s sales. And that share

has been climbing year-on-year. “Thecommodity boom and the expansionrelated to it was a very good time forLatin American society. Now, it’s a bitmoredifficult”, saysMrFreixe.

It is difficult primarily because of thestrain on spending power in Brazil — byfar the region’s biggest market. But asthe country faces its worst recession in aquarter of a century, how difficult willthingsbecome?

Brazilians have a reputation as spend-ers more than savers. It is a throwback

in part to the high inflation of the 1980sand 1990s, when households did alltheir monthly shopping in one go, themomentpaychequesarrived.

Marcel Motta, a São Paulo-based ana-lyst for Euromonitor sees signs of acome back for one-stop “planned”shopping. “The problem is it leaves verylittle room for impulse buying, somanufacturers are having to adjust tothisnewreality inthestores.”

Mr Freixe accepts that Brazilians willtighten their belts, but he believes thatthe main impact will be on big-ticketitemssuchascars, fridgesandholidays.

For Nestlé, he sees the crisis in Brazilas a chance to bolster market share.“While some players will be reducinginvestments, we will continue to investsignificantly.Sothis iscertainlyatimeofopportunity.”

Consumer expectations have rampedup in Latin America over the past twodecades, and companies have had towork their brands much harder toobtain results. It will be harder still in adownturn, as they have to find ways ofmaking their products more affordable,but without undermining brand imageorputtingtoomuchstrainonmargins.

The big groups are experts at it. Uni-lever will push its economy shampoosand washing powders, Gillette will raisethe visibility of smaller size packs ofrazors.Coca-Colawill increase thepene-trationofcheaperreturnablebottles.

Mr Freixe says: “You will find Nescafébeing offered in any format from 2gramsto200gramsormore.Wewanttooffer options so that the consumer cantradeupordown.”

And that, perhaps, is the key. LatinAmerica’s new consumer class is notgoingtoretreat into the informalsectorsof the past. It will continue to shop in themalls, supermarkets and conveniencestores that have come to define shop-ping culture in the region. The differ-encenowis thatconsumerswilldemandfamiliarbrandsataccessibleprices.

Big names adjust to new realityGlobal corporationsEconomic volatilitymaysee some attempting toincreasemarket share,writesRobWalker

Retail rise: salesat McDonald’sdoubledbetween 2005and 2014Jenny Matthews /Alamy

‘We wantto offeroptions sothat theconsumercan trade upor down’

‘There are lots of nuancesin tequila and a lot ofcraftsmanship’

Sean Combs(aka P Diddy)Johnny Nunez/Wireimage

Image conscious: YPF rebranded

BrandZ uses a mixture of financialinformation and consumer surveys tocome up with its rankings for the 50most valuable Latin American brands.

The research covers 100,000consumers and 1,000 brands in 34categories. Three characteristics of abrand are subject to measurement.

First, how “meaningful” it is: thebrand’s appeal, its ability to generate“love” and meet the consumer’sexpectations and needs.

Second, how “different” it is: itsunique features and its ability to “setthe trends” for consumers.

Finally, the research measures how“salient” the brand is: that is, whetherit springs to mind as the consumer’sbrand of choice.

The financial information used as aninput to the valuation is based on whateach company earns. If the companyowns only one brand, all its earnings areattributed to that brand. For banks and

insurance companies, the earningsmetric used is net income; for all othercompanies it is operating profit.Otherwise, earnings are attributedacross the company’s portfolio ofbrands using information from annualreports and other sources.

The next step is to predict “brandearnings” using inputs, including marketcapitalisation (taken from Bloomberg)to derive a ratio similar to a currentprice/earnings ratio. Current “brand

earnings” are then multiplied by thisnumber to arrive at the brand’s“financial value”. BrandZ then usescustomer surveys to assess a brand’sability to stand out from the crowd,generate desire and cultivate loyalty.

The output from this research is thenmultiplied by the financial value toarrive at the brand value. Brand value isthe dollar amount BrandZ estimates abrand contributes to the overall value ofa company.

Methodology How the brands achieved their ranking