Consumer markets in Latin America have undergone a major transformation over the past decade.
Changes in Latin America’s retail sector provide a robust picture of the dynamics of the region. Ten years ago, most markets across the region were largely closed to international commerce and dominated by local businesses. In many Latin American economies, inflation was high and currency values fluctuated widely; financial margins were high and operating margins were low. Today, with inflation controlled and currencies stable in most markets, retail companies are making substantial money in consumer financing.
In grocery retail in Latin America, there have been one or two large multinational players per country that have been in the region for quite some time.
But the past few years have seen significant consolidation as these players acquired locally-owned, typically family-run businesses. In non-grocery retailing, local companies still tend to dominate and in several cases multinational companies have actually failed in their attempts to enter this market.
The greatest challenge that multinational companies face in the region is understanding and adapting to the region’s unique consumer habits.
As social mobility has increased in the region in recent years, consumer habits have changed dramatically. Consumers (primarily those in the lower and middle classes) now enjoy both more income and more access to credit, which has helped drive market growth.
For example, in Brazil an additional 13.8 million consumers now have access to consumer products, ranging from basic food and personal products to electronics, mobile phones and cars.
The rising purchasing power of this group of consumers has led to increased market segmentation and in particular has led to the growth of different store formats – from neighborhood and convenience stores to hypermarkets and specialty stores.
Consumer companies have had to develop new merchandising strategies and product lines to cater to these growing segments. For many companies, understanding the true purchasing power and interests of these “new” consumer groups has been a process of trial and error. Regional issues are at play here as well, as adjustments that work in Brazil might not work in Peru.
The luxury market has also blossomed in Latin America, with high-end global firms finding a ready market for luxury goods, from Louis Vuitton leather goods to Tiffany & Co jewelry. In the past, most luxury goods companies were represented here by licensees or local entrepreneurs who operated almost as franchisees. As the sector has grown, however, many global companies have opened their own outlets, some of which are among the top-performing locations for these companies worldwide, resulting in a keen interest in local executives who can manage these businesses.
The confluence of these trends has led to a significant increase in demand for talent. Both locally-based companies and global companies doing business in the region now face significant executive recruiting challenges. Until recently, most recruiting was done locally and searches were often conducted internally, particularly in family-owned businesses. But the supply of talent has not kept pace with the demand for broad, experienced executives and companies must now approach the recruiting process much more aggressively.
Companies are increasingly looking for top talent regionally rather than nationally – a major change in Latin American talent searches, driven largely by globalization. This presents other challenges, including navigating different cultures and languages. Nevertheless, companies are now more willing to consider candidates from other countries, especially as the race for talent has intensified. The key is to recruit executives who have direct experience in multiple countries in the region and true sensitivity to the challenges of managing a team and a business at the regional, national and local levels.
Executive recruitment will remain challenging for Latin American consumer businesses for many years to come. The short supply and strong demand will take years to balance out.
For the short-term, the global economic turmoil has complicated the equation by introducing two important factors: uncertainty and fear. As a result, many companies are postponing or even canceling investments and hiring plans.
Nevertheless, the current scenario provides a great opportunity for local companies that are searching for talent.
Demand remains strong for key positions like financial officers and senior marketing roles, as companies look to hire experienced professionals who are accustomed to dealing with financial crises in the region. And there continues to be opportunity for global consumer and retail companies that are interested in expanding into Latin America.
For companies with solid financials and confidence in their long-term strategy and the sustainability of their business, it is a favorable time to invest in attracting and developing talent.