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Guatemala: Demographics Change Consumption

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A youthful age structure and urban migration is helping to shape future consumption in Guatemala.

BY SEAN KREIDLER
Euromonitor International

With nearly half of the population comprised of children, manufacturers are beginning to take notice and take advantage of this trend, preparing for a new robust base of potential future loyal customers. Also, urbanization is increasing the number of women in the workforce and corresponding rising incomes are having a new impact on consumption habits.

As the primary shoppers, women are driving product segmentation for themselves and their children. In response, companies’ product portfolios are adapting to meet more specific demand. Furthermore, the expansion of modern grocery retail outlets serves as a catalyst to promote and satisfy rising demand. The current and shifting demographic situation in Guatemala presents promising scenarios for future development of the consumer goods market.

WOMEN AND CHILDREN

The most apparent characteristic of the Guatemalan population is its youth. As recent reports of developed countries’ ageing populations offer worrying scenarios for the future growth prospects of their economies, the far opposite is true for Guatemala where the youth largely outnumber the old nearly 9 to 1, according to Euromonitor International statistics. The youth population of Guatemala presents the potential for a growing economically active population, resulting in greater productivity, improved incomes and rising standard of living. This in turn should augment total future consumer demand. While the youth represent the future consumer base, at present women are the key shoppers and experiencing growth in their purchasing power.

Better urban labor opportunities are allowing Guatemalan women to become more financially empowered through increased employment. With just over forty percent of the population considered urban in 2000, this figure is expected to hit almost sixty percent by 2010. This astounding growth has advanced the number of economically active women in the workforce, which is projected to increase seventy percent between 2000 and 2010. These two variables’ correlation represents rising family incomes as well as changing consumer purchasing habits, noticeably in the grocery retail channel.

CHANGING GROCERY SHOPPING HABITS

Shifting living in provincial regions to urban centers is stimulating ‘aspirational demand’ among consumers. In short, more people with more money are driving the modern grocery retail channel in Guatemala. Rising incomes allow consumers to trade-up in the grocery retail channels they visit as well as the products they purchase. As a result, the traditional and ubiquitous tienda is becoming less frequented as consumers look toward large and modern supermarkets, and importantly discounters, that are rapidly expanding throughout the country.

Discounters are grocery outlets that serve as a stepping stone for this traditional to modern leap. Set-up similarly to a modern supermarket, these stores are characteristically large. The key to their success is the discounts offered through economies of scale, combining a modern yet no-frills shopping experience with economical private label brands. Urbanization exposes consumers to better prices, credit options, promotions and a wider variety of products than would otherwise be found in independent small grocers. These outlets are typically found in metropolitan areas as well as on the outskirts.

Proximity to shoppers is key, with stores strategically located along bus routes to cater to lower income families who do not own a car. With greater incomes, consumers aspire to better quality products that they are able to find through one-stop shopping at these modern outlets. Growing family budgets also allow consumers to spend on larger pack-sizes such as family packs or the jumbo 3.3 liter bottles of soda, working in their advantage to save on unit price. Discounters like Wal-Mart’s Despensa Familiar have been pivotal in exposing emerging middle income consumers to the benefits of modern shopping while economy supermarkets like Econo Super, La Barata and Super Elmar similarly serve as an introduction to the more upscale Paíz or La Torre supermarket chains.

SPECIALIZED DEMAND

Driven by rising incomes of an increasingly urban population, the transition from tiny traditional tiendas to large modern discounters and supermarkets has created demand shifts for consumer goods. Particularly interesting is the emphasis that demographics have played in this trend. More working women are allowed to benefit from added incomes with the discretion of where and how to spend it like never before.

Growing demand by women is creating new products and brand extensions to cater to this up-and-coming consumer base. The products aimed towards women tend to focus on light and healthy options. Probiotic yogurts like Danone’s Activia or Dos Pinos’ Bioplus have been on the rise, mainly as a healthy supplement on-the-go or as a possible meal replacement. Recently launched Sukrol Vigor Mujer multivitamin supplements specifically promote mental and physical health to keep up with a faster pace of urban living. Although these launches are relatively niche products aimed at upper income women, they hint at a sign of things to come in the future and the possible trickledown effect for similar products positioned for lower income segments.

Working women are also often working mothers who have less time to spend at home preparing meals. Companies have picked up their innovation to fill this gap. Although packaged food products are often more expensive than home cooked meals, the added income from working women allows for the expenditure on creative and time-saving food options for the family. Local Alimentos Kern de Guatemala’s Ducal canned beans has been a big help for many working mothers with their Listos line of ready-to-eat seasoned refried beans with local flavors like jalapeño and cobanero chile. Also, international manufacturers like Nestlé are directing their efforts towards quick meal preparations with more elaborate dehydrated soup mixes such as the recently launched Maggi ‘Sopa de Casa´ variety that offers a homemade taste with healthy, quality ingredients.

Besides easy to prepare meal solutions, mothers also tend to spend more of their income directly on child-specific products. These products typically come at a more premium price than standard formats, but are gaining in popularity among the growing urban middle class. This is being realized through want-based products such as youthfully tailored packaging like juice drinks with sportcaps. Also, blurring the lines between essential and non-essential goods are higher value, specialized product formulas such as fruity flavored child-specific gummy multivitamins. Similarly, Bimbo’s recent wave of PlusVita fortified snack bars come in a variety of flavors that appeal to health-minded women as well as children, representing a nutritious snack for parents to pack in school lunches. Another new product aimed at children and that serves as a time saver for parents is an RTD version of Incaparina, a fortified corn and soy drink that has been in the market over 50 years and is used as a milk substitute. This presentation is more costly than preparing the drink from a powder concentrate, but works better on-the-go or to be easily sent with a child to school without the need for refrigeration. Parents with larger disposable incomes are increasingly more inclined to spend extra to provide their child with value-added child-specific products. Since adults are the primary shoppers, many new products for children are also cleverly appealing to parents to attract their purchase, ideally beginning to build brand loyalty to the time when the children themselves become direct consumers. 

Manufacturers of vice goods are also taking note at the potential bulge in the future consumer base as the youth population comes of age. In a way it could be argued that alcoholic drinks and tobacco products companies are already ramping up efforts to take advantage of this potential by prematurely targeting the underage segment. Recent years have seen a rapid increase in flavored or ‘light’ cigarettes that mainly center on menthol varieties, smoother blends of tobacco and low tar formats. Although this is primarily intended for the growing number of females in the consumer population, it may just as well serve as a segue to introducing young consumers to the products. Likewise, alcoholic drinks are following a parallel path with new launches of easier to drink products in sweet flavors. Spirit based RTDs are seeing stronger sales thanks to women and young adults preferring something unique. Moreover, light beers are on the rise and the first flavored beer brand STATS was launched this year in a green apple variety. Promoted to consumers 18-24 years old, it is likely that these new product offerings will grow in popularity through unregulated sales to minors.

OUTLOOK

Although the current demographic shift offers potential growth in the consumer goods market, the bulk of demand is concentrated in middle and upper income families. There is still worry about pressing issues like income inequality or malnutrition in the provinces. The hope is that with greater numbers entering urban centers, growth in the formal economy may spur increased tax revenue to overcome funding for these obstacles. Guatemala’s youth population will continue to age and enter the economically active population. With sufficient jobs, they will turn into productive members of the society rather than towards violence or gangs as is the case without better available opportunities. Potential exists for sustained rising standard of living in the future with a strong and more productive working age population moving into adulthood.

The massive youth demographic is linked with the progress of women in the workforce as together they continue to form a burgeoning consumer base in Guatemala. This offers an exciting potential for increasing consumer budgets through urbanization and demand for more specialized products in years to come.

Sean Kreidler is a research analyst at Euromonitor International. This article was written for Latin Business Chronicle.

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