“DreamWaters” Case Study: 7 Strategic Choices for Entering the Hispanic Market

August 15, 2011

by Miguel Winebrenner

In the past decade or so I’ve had the opportunity to be a part of several Hispanic market opportunity assessments. The purpose of these studies has mainly been to determine how pre-existing (general market inspired) brands can enter the Hispanic market. Every case has been different, and all have been highly complex. However, I believe the strategic decisions for entering the market can be simplified and categorized. To explain this I created a fictitious case study called “DreamWaters” which I shared at last week’s Hispanic Retail 360 Conference.

General Overview:
An American beverage company called ”DreamWaters Inc.” has a general-market-inspired brand called “Rain Water.” The company has a few other brands, but 95% of their business is “Rain Water,” and it was created with genpop insights and health trends only. However, the CEO’s golf buddies have convinced him of the importance of the Hispanic market so he tasks another high level exec (CMO) with figuring out how to win the Hispanic market. The CEO asks the CMO to have options ready in 1 week. After lots of analysis (with the help of outside consultants) the CMO figures the company has at least 7 options, or a combination of them.

Company:
DreamWaters Inc (publicly held)
Sales: USD $7 Billion (90% US/10% Latin America)
Headquarters: Dallas, TX
Main Brand: “Rain Water”

Major Stakeholders in the Market Assessment:
CEO: Martin
CFO: Glenn
CMO: Courtney
COO: Chang
CIO: Karen
Management Consultant: Larry, Boston Consulting Group
Multicultural Strategy Consultant: Carlos, Cheskin Added Value

7 Strategic Choices:

After much deliberation with the different stakeholders, Courtney decides the company has at least 7 choices for entering the marketplace. All of them require further action (research, business analysis, etc.) but she feels confident that this is the right starting point. She goes to the CEO’s office with Larry and Carlos, and proceeds to lay out the different options as follows:

1. Tropicalization: basically, we keep Rain Water as is (no re-formulation) and just adapt the brand name to Spanish (“Agua del Cielo”)
• Other brand examples: Kellogg’s Frosted Flakes a.k.a. “Zucaritas”
• Pros: limited efforts and resources to enter the market
• Cons: Hispanics may not be enticed by the product or the positioning- it was developed with another target in mind
• Required actions: would have to test different names, trademark the desired name, design the label, generate a distribution plan to target high Hispanic density retailers (possibly have new distribution channels to independents and bodegas), and create/buy Hispanic advertising/media

2. Persuasion: convince Hispanics to consume our product in its current form, and continue using Rain Water’s current name and positioning
• Other brand examples: McDonald’s (they sell cheeseburgers and fries to lots of Hispanics)
• Pros: don’t have to reinvent the wheel
• Cons: Hispanics may not be enticed by the product or the positioning- it was developed with another target in mind
• Required actions: generate a distribution plan to target high Hispanic density retailers (possibly have new distribution channels to independents and bodegas), and create/buy Hispanic advertising/media

3. Cultural Extension: re-formulation of Rain Water that meets the Hispanic taste profile. Ex: add a hint of lime
• Other brand examples: Miller Chilada (they added a hint of lime to the formulation)
• Pros: not a total reinvention of the wheel, but it is a product created for Hispanic taste profiles in mind. Plus, the product was a hit with the general market as well so there was a positive cross-over effect
• Cons: could come off as condescending if not done appropriately
• Required actions: exploratory research, concept testing, trademark the desired name, design the label, generate a distribution plan to target high Hispanic density retailers (possibly have new distribution channels to independents and bodegas), and create/buy Hispanic advertising/media

4. Acquisition: buy a competitive product that is already a hit with Hispanics (“Aguitas” is pretty much the same as Rain Water but they have traction in the Hispanic market with brand loyalty, distribution, Hispanic shelf placement, etc)
• Other brand examples: would be like Pepsi purchasing Jarritos (the popular Mexican soft drink)
• Pros: acquire know how, established brand equity, distribution partners, market credibility
• Cons: those of any M&A- integration aches and pains, management responsibilities, pressure to recoup the large dollar purchase prices, etc
• Required actions: exploratory research, concept testing, retain legal and investment banking counsel, integration, portfolio alignment, etc

5. Innovation: start from scratch and come up with a Hispanic-specific brand based on Hispanic market insights
• Other brand examples: Kmart created the “Thalia” brand in order to target unacculturated Hispanics
• Pros: would be creating a truly Hispanic-inspired product
• Cons: costly and timely to go through the full innovation process- the returns on that investment could take several years
• Required actions: exploratory research to determine if this is necessary/can be done, followed by a full scale innovation process

6. Importation: bring a successful Latin American brand to the serve the U.S. Hispanic market
• Other brand examples: Nestle imported Abuelita (hot chocolate) and La Lechera (sweet condensed milk) from Mexico
• Pros: established brand equity, retailer and market credibility, tap into “nostalgia”
• Cons: product may not be relevant to the trajectory of Hispanics in the U.S.- it could seem outdated or retro
• Required actions: exploratory research, concept testing, generate a distribution plan to target high Hispanic density retailers (possibly have new distribution channels to independents and bodegas), and create/buy Hispanic advertising/media

7. Disqualification: decide the Hispanic market is not worth pursuing
• Other brand examples: unknown
• Pros: zero direct risk
• Cons: may miss the boat
• Required actions: none

End of case study.

The above is a CPG case study, but it applies to other industries as well. For example, Walt Disney World seems to have successfully embraced “Persuasion”- their core offering is the same, and they attract Hispanics with the same pillars of magic, meaning, and memories. Their execution of that strategy may be different for Hispanics (their ads may be in Spanish and they advertise in Spanish media) but their overall offering is the same.

Regardless of which choice you’ve made or will make, know that many brands- like Nescafe Clasico- may adopt different strategic paths depending on their trajectory in the Hispanic market. At first, a brand may decide to persuade, then extend, then innovate. Ultimately, the selection of choice depends upon circumstance- there is no “categorically correct” way to successfully enter the Hispanic market; however, it is advisable to understand, research, and analyze the seven options before action or inaction is decided upon.

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  • Antonio Flores

    As a former Coca-Cola and RJR executive, your marketing paper has merits; it’s a doable concept with strong capabilities to launch into selective Hispanic markets. The marketplace has its various trade channels to introduce Rain Water. FEI…”Aguitas” is also the nickname for natural flavored drinks served in Mexican Taqueria. In closing think, mango tropical flavor to enhance projected sales in both Hispanic and Asian consumer segments.