Baltimore Sun

Minorities' buying power on rise

The buying power of minorities is growing at a faster rate than that of white Americans.

The increase is due to a surge in population, rising levels of education and heightened entrepreneurial activity, a study released Thursday by the University of Georgia found.

The study, based on U.S. government data from 1990 through May, demonstrates that despite the recent economic downturn, minorities from all of the country's major ethnic groups--including African-Americans, Hispanics, Asian-Americans and Native Americans--made significant gains during the boom years of the 1990s. And those advancements, the author of the study predicted, will continue at least through 2008.

"Minorities' buying power is gradually reshaping the commercial and retail landscape of America," said Jeffrey Humphreys, who directs the Simon S. Selig Center for Economic Growth at the university.

Humphreys attributed minorities' increased buying power, which is after-tax disposable income, to several factors.

Population growth, particularly among Hispanics, has been key, he said. So has the long economic expansion that all Americans enjoyed during the 1990s.

At the same time, Humphreys found that Hispanics and African-Americans have started businesses at a rate four times faster than the overall population. And African-Americans in particular, he said, have attained higher levels of education.

Mike Rogers, president of the board of the African-American Chamber of Commerce, which focuses on Chicago's western suburbs, said there has been a spike in the last 10 years in the number of new black-owned businesses.

"People are trying to control their own destinies," Rogers said. "Credit used to not be a possibility in the minority community at all. But creditworthiness among African-Americans has gotten much better, and lenders realize they can't ignore minorities, so being able to borrow is creating a lot of opportunities."

The University of Georgia study predicts that by 2008, the combined buying power of minorities in the United States will exceed $1.5 trillion, which is more than triple the 1990 level of $456 billion.

Also significant, the report projects that Hispanic buying power will exceed African-American buying power by 2005.

This year, white Americans commanded $6.67 trillion in disposable income, a 14 percent jump from 2000.

Minorities, meanwhile, saw their buying power expand by 22 percent during the same three-year period, to $1.46 trillion this year, the study found.

Part of the reason minorities' buying power is increasing at such a fast pace is because they started the 1990s with far less disposable income than their white counterparts, Humphreys said. White households still control about 85 percent of the nation's total buying power.

Even so, minorities' buying power is forcing corporate America to market its products accordingly.

"You have companies bringing imported products to this market, and you also have very traditional companies from the U.S. developing products just for this market, from cereal to snacks to soft drinks to everything else," said Gustavo de Mello, a vice president at advertising firm Leo Burnett.

Frito Lay, for instance, makes guacamole chips, and California's Disneyland is sponsoring Fiesta Latina, a September festival offering Latino food, dance, arts and crafts.

De Mello did caution, though, that advertisers don't always take the Hispanic market as seriously as they should.

"From the advertising perspective, 2 percent goes to Hispanics while we represent 14 percent of the entire population. So there's still a long way to go, but you see more and more commitment," he said.