Dolores Valdes-Zacky still remembers the question.
It was several years ago, when she was head of a new Latino advertising division at J. Walter Thompson's Los Angeles office. The agency was about to make a pitch to create ads for Arrowhead Drinking Water Co., and she suggested presenting some ads in Spanish for Latino customers.
An executive asked her point blank: "Do Hispanics drink bottled water?" Instead of answering right then, Valdes-Zacky spent the next few days at some area shopping malls with a video camera. She asked a number of Latinos if they drink bottled water and videotaped their answers. When she returned, her bosses came to realize that Latinos are indeed good customers for bottled water. The agency followed Valdes-Zacky's advice and not only won the Arrowhead account but also persuaded the company to start making ads aimed specifically at Latinos.
At that time, only a few Los Angeles ad firms knew much about creating ads in Spanish. And of those that did, most just dubbed Spanish translations into English commercials.
But no more. To its credit, J. Walter Thompson is one of the only mainstream ad agencies in Los Angeles with a division that produces Latino ads. For her part, Valdes-Zacky has left J. Walter Thompson and last year opened her own agency. Other specialists as well are setting up shop in Los Angeles, joining several independent Latino ad agencies that have been around since the 1970s.
In less than two years, the number of Latino ad firms with big-name clients in Los Angeles has almost doubled. "Los Angeles has become the national headquarters for Hispanic advertising in the U.S." said Hector Orci, president of La Agencia de Orci y Asociados. "This is where the Hispanic market is."
Indeed, 31.3% of the U.S. Latino population lives in California, according to a recent Census Bureau report. Texas ranks second with 20.2%, and New York is a distant third with 11.1%.
"It used to be tokenism to advertise to Latinos," said Richard E. Dillon, whose 10-year-old Newport Beach-based specialty ad firm, Mendoza, Dillon & Asociados Inc., is the biggest Latino ad agency in the nation. "But now, some advertisers sense that reaching this market is not just an opportunity, it's a necessity."
Perhaps that explains why three big California advertisers--GTE, Levi and Disneyland--are all in the midst of deciding which agencies will handle their Latino advertising. Disney will spend $1 million this year advertising to Latinos, and other national advertisers, like McDonald's and Pepsi, will spend many times that.
These advertisers all know that they'll have more talent to choose from than ever before, since the number of Latino ad firms continues to grow--especially in Los Angeles. And that comes at a time when several mainstream New York ad agencies have closed their Los Angeles offices. While general advertising spending in the United States grew about 7% in 1987, money spent on Latino advertising last year jumped 23%, according to the publication Hispanic Business.
As a result, it is no longer just mom-and-pop ad shops that specialize in developing ads for the Latino market. Two international advertising holding companies--WPP Group and Saatchi & Saatchi--have purchased Latino ad firms. But at the same time, some entrepreneurs have recently left the Latino divisions they ran at large U.S. ad firms and started their own specialty ad agencies.
All are attracted by the same growth projections. By 1991, advertisers are expected to spend more than $1 billion to reach the Hispanic market, compared to about $510 million spent in 1987, Hispanic Business estimates. And an estimated 54% of the nation's overall population growth over the next 25 years will be Latino, the Census Bureau says. "Hispanics can make the major difference in the success of a brand," said Kevin R. Rogers, vice president of Research Resources, a Westlake Village research firm that tracks the Latino market.
It wasn't until the 1980 Census projected big growth for the nation's Latino population that some major advertisers began paying greater attention to Latinos. Some still ignore the market, and Latino ad executives claim that mainstream ad firms are partly to blame for that. After all, no matter how fast the growth rate of Latino advertising, the money that big advertisers spend on it will always fall far short of mainstream advertising. Besides, it requires extra expenses to set up a Latino division, and many agency executives are still unconvinced that they will see any of that money back. "The only reason that most major agencies are now sitting up and taking notice of the Hispanic market is because their clients are forcing them to," said Valdes-Zacky.