Study finds low brand awareness among Cubans — but they do know Adidas

Study finds low brand awareness among Cubans — but they do know Adidas

Fidel Castro's taste for Adidas tracksuits makes Adidas the most
recognizable brand in Cuba
Boston Consulting Group also finds Cuban purchasing power higher than
reported
Opportunities for consumer goods companies expected to grow over next
several years
BY MIMI WHITEFIELD
mwhitefield@miamiherald.com

A new study on Cuban consumers finds that their purchasing power is
about 25 percent higher than official statistics indicate, but they
still spend a high percentage of their income — 50 percent — on basic
needs such as food and clothing.

The Boston Consulting Group study, which was released Thursday, also
found that because there is little advertising in Cuba, Cubans have low
brand awareness — especially for home staples like cooking oil or
cleaning products.

Such items are sometimes sold in generic brown paper, and Cuban
consumers often buy what's available rather than choosing between
brands. No company had more than 30 percent brand recognition for such
basic goods.

Among the brands BCG tested with Cuban consumers, Adidas is the most
recognized. Even though its products aren't widely available in Cuba, it
enjoys a 55 percent brand awareness rate. That's "thanks largely to
Fidel Castro's preference for the company's tracksuits," which has
served as an implicit endorsement and raised Adidas' profile, according
to BCG.

In general, Cuban consumers show higher brand awareness when it comes to
discretionary purchases such as electronics, mobile phones and apparel.
Among the electronics brands with relatively high brand recognition were
Samsung, LG, Huawei — a Chinese mobile phone manufacturer, and BLU, a
Miami maker of low-cost unlocked phones.

BLU doesn't distribute its phones on the island, but it has become the
fourth-most recognized mobile phone brand in Cuba, because the phones
are purchased in South Florida and then sent or carried to Cuba by
family members and friends. BLU has 28 percent brand awareness in Cuba
and trails only Alcatel, Samsung and Nokia.

Heineken, another widely recognized brand, has taken a different
approach. BCG said it has essentially ceded distribution of its beer to
the Cuban government, brought refrigerated trucks to the island and
given them to Cuba's Ministry of Trade and uses point-of-sales displays
and branded events to build brand awareness.

The study, Understanding the Evolving Cuba Consumer, was based on 440
interviews in early December of Cubans responsible for making purchasing
decisions in their households. It focuses on urban consumers with 326
respondents in Havana and 114 in Santiago in eastern Cuba. It included
people who work for the state as well as those in Cuba's emerging
private sector.

The global consulting firm worked with University of Havana researchers
who conducted in-person interviews.

"This is the first proper consumer survey in Cuba," said Marguerite
Fitzgerald, a BCG partner and co-author of the study. "We wanted to
demystify the country and help consumer companies determine whether to
consider expanding there in the future."

Because Cubans have had so little exposure to consumer brands and
products, BCG said the island "remains one of the last true white-space
markets on the planet."

While Cubans are spending 50 percent of their limited incomes on basic
goods, compared to about 20 percent in the United States, the flip side
is that individual spending on highly subsidized housing, education and
healthcare is very low, according to the study.

Incomes are still quite low in Cuba and about half the Cuban population
lives with a median household income of $300 to $400 a year, but another
20 percent of Cuban consumers, who live mainly in urban areas, have a
household income of $1,000 to $2,000 a year, according to BCG.

They are mainly cuentapropistas — the self-employed, tourism workers
with access to tips and other perks and those who receive remittances
from abroad. Such remittances are a large and growing part of Cuba's
economy and increased 15 percent annually from 2010 through 2014. They
currently total around $3 billion annually, BCG said, and are expected
to rise to $6 billion by 2020.

Not only is Cuba's large informal economy not fully captured in Cuban
government statistics, but Cubans receiving income from outside of
formal government channels have greater purchasing power.

"The results of our research suggest that the opportunity for consumer
goods companies in Cuba will likely expand over the next five to 10
years, primarily because of a small but growing group of urban,
increasingly affluent consumers who have access to private income that
supplements their government salaries," BCG said.

As Cuba slowly reforms its economy, the U.S. eases trade and travel
restrictions and opportunity grows over the next several years, "Cuba
will be a turbulent ride," said Russell Stokes, a BCG partner and study
co-author. "But it will ultimately reward companies that can ride out
the bumps."

Source: Study finds low brand awareness among Cubans — but they do know
Adidas | Miami Herald -
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