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.
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.
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.”
Cubans are spending 50 percent of their limited incomes on basic goods, compared to about 20 percent in the U.S.
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
BCG study statement
“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.”