CATALYST: PepsiCo is looking for a new agency to handle marketing aimed at African Americans.

The rise of ethnic marketing was one of the hottest marketing trends of the 1990s. In fact, it was so quick that some companies have already been left behind. With expertise in the area developing rapidly, the best companies are already taking the next step: viewing ethnic advertising not a minority issue, but integral to overall marketing strategies.

PepsiCo's search for a new marketing partner exemplifies the rise of ethnic marketing: in 1999, US advertisers spent an estimated US$1.1 billion on advertising to ethnic minorities. While that was less than 1% of the US$215.2 billion total spend, it was an increase of 112% in just four years.

Corporate America's sudden pursuit of the ethnic dollar has been fueled by massive demographic, economic and cultural changes, spurred on by findings in the 2000 census.

The proportion of ethnic consumers is growing - today, everyone in California is a minority, with no group forming over 50% of the population. Ethnic consumers' spending is also on the rise - in 2001, Latino consumers had an estimated buying power of US$452 billion. Perhaps most profoundly, ethnic trends increasingly form the cultural cutting edge, especially in the all important youth market.

Food and beverage producers learned quickly that ethnic advertising means more than simply rewriting current campaigns in foreign languages. When Mars launched its Dulce de Leche flavour M&Ms in 2001, it backed the product with a US$5m advertising campaign aimed specifically at Latino customers.

As ethnic marketing evolves at a dizzying pace, however, the next step is already being taken. While more producers are developing campaigns for ethnic markets, the most insightful, like Pepsi, are tapping trends among minorities to fuel their mainstream marketing.

Through rap, hip hop and urban fashion, African Americans and Latinos are defining youth culture for a generation of American teenagers. At US$10 million, Pepsi's budget for its new partner is relatively modest - but it is money wisely spent. Producers that see ethnic advertising not as a minority issue but integral to their overall marketing strategies, will gain both market share and inspiration.

Related research: Datamonitor, "The American Ethnic Consumer in CPG 2002" (DMCM0095)

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