Cultural Diversity and its Impact on Global Consumer Markets

March 2015

Strong migration flows, combined with higher birth rates among minority populations, have led to an unprecedented level of ethnic, cultural and religious diversity in developed markets. This, along with ethnic minority consumers’ rising incomes, is profoundly impacting lifestyles and shopping behaviour within Western societies. This global report identifies the new opportunities open to marketers and the shift from traditional ethnic marketing to “marketing in a multicultural world”.

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Ethnic change as a market driver

The changing ethnic, cultural and religious mix within Western societies is having a profound impact on consumer lifestyles, shopping behaviour and company strategies.

Minority communities often identify with one another on the basis of a boundary that distinguishes them from the majority of the population or other minorities, for example common ancestry or elements of cultural, language or religion.

The key factors affecting the ethnic and cultural mix of populations include people moving more between countries for purposes of work, leisure or study; migration and asylum; and generally higher birth rates among ethnic communities.

From an economic point of view, migrants contribute to the prosperity of their host countries, helping fill employment gaps when necessary and rejuvenating ageing populations and workforces.

Migration is also contributing strongly to the growth of urbanisation and to overall population growth in markets where birth rates are stagnant.

US has the largest number of foreign citizens

The US had the highest number of foreign citizens among developed markets, at over 22 million in 2013. Most of the growth in people of ethnic backgrounds has come from higher birth rates among naturalised or second-generation Hispanics.

Asian communities are growing strongly in countries such as the US, Australia and Canada. Asians recently surpassed Hispanics as the largest wave of new immigrants to the US, with increased border enforcement suppressing illegal immigration via Mexico.

Other developed markets with substantial foreign populations include Australia (8 million foreign-born citizens), and Germany (8 million foreign residents).

Australia has the most diverse population

Australia has become the most diverse nation in the world, with foreign-born people accounting for 31% of its total population and a net migration rate of 9.8 per 1,000 population in 2013.

Immigration flows in Europe have continued apace. In Italy, the number of foreign citizens rocketed by 51% between 2008 and 2013. Italy was once a country of mass emigration but it is now Europe’s first port of call for economic migrants sailing over the Mediterranean from Africa.

Other key markets in which foreign populations grew strongly over the review period include the UK (24%) and Canada (11%). The Syrian crisis brought thousands of refugees to Turkey, causing its foreign population to soar by 131% over the review period.

Switzerland is a very popular destination for émigrés, due to its wealth, employment opportunities and high wages. However, its strict laws place barriers on naturalisation and in 2013, as much as 23% of its population was foreign.

The proportion of foreign citizens residing in Japan and South Korea is still very low, at less than 2% of their populations. This may change in the coming years, as Japan, faced with low birth rates and an ageing population, looks to bring in high-skilled workers from overseas.

Spain witnessed a spectacular decline in immigration over the review period, as its unemployment rate skyrocketed after the recession hit in 2008. In 2013 alone, over half a million people left Spain, causing net migration to fall to -152,000.

Economic migration and Refugees are the main drivers

For many economic migrants, the main reason for travelling abroad for work is to be able to send money home to their families. Developing countries like India, Pakistan and the Philippines have long experienced a “brain drain” of skilled workers to richer countries.

According to the United Nations High Commissioner for Refugees (UNHCR), there were some 17.9 million refugees/asylum seekers fleeing persecution, conflict, violence or human rights violations in 2013.

Younger, better educated and richer

An increasing number of young people are choosing to study or work abroad – especially in English-speaking countries. China sends the largest number of overseas students, while the US is the largest host nation for international students.

Migrants tend to be younger than the general population and have larger families. They tend to cluster in large cities, although second and third generation migrants seem to be shifting towards suburbs and semi-rural locations.

Poverty rates among migrants are declining in some countries, and studies show that minority groups are more economically empowered than ever before, as they become more highly educated. This is contributing to their greater purchasing power.

In the US, Asian-Americans are the highest income and best educated racial group in the country, with 61% of those who have come from Asia in recent years having at least a bachelor’s degree.

Higher levels of education among African-American consumers has led to increases in household income, with 44% of all African-American households now earning US$50,000 or more, and 23% earning above US$75,000.

In the UK, the average British Indian man is now reported to be on a higher income than his white counterpart, and research shows that the spending power of the black and minority ethnic (BME) community shot up from just £32 million in 2001 to £300 billion in 2011.

In Germany, Turkish consumers are estimated to spend some €2.3 billion on consumer goods annually, but the more recent wave of immigrants from Poland are now the best educated minority in Germany. Two thirds of Polish immigrants have secondary or higher education.

As a result of continuous immigration into developed markets, and higher birth rates among existing minorities, religious diversity is growing. In particular, there has been a significant rise in the number of Muslims throughout Europe, North America and Australasia.

Growing religious diversity

According to the website islamicpopulation.com, Europe (including Russia) is now home to around 51 million Muslims, while a further 7 million live in North America.

France has Western Europe’s largest Muslim population, equal to over 7% of the total population, while over 5% of the populations is Muslim in Austria, Germany, Greece, Netherlands and Switzerland.

There were estimated to be some 13.9 million Jews in the world in 2013, equal to just 0.2% of the global population. Many countries have a small Jewish population, but as much as 82% of the Jewish community is concentrated in Israel and the US.


EXECUTIVE SUMMARY

Market drivers
Chart 1 Leading Countries for Net Migration in 2013
Impact on consumer markets
Marketing strategy
Outlook
Chart 2 Forecast Numbers of Foreign Citizens in Developed Markets 2018

INTRODUCTION AND DEFINITIONS

Overview
Shared values People on the move The rise of bi-culturalism
Definitions
Ethnicity Migration Asylum seekers

MARKET DRIVERS

Increase in foreign citizens
Greater mobility The US melting pot Australia and Germany are desirable destinations Italy sees rapid growth Table 1 Number of Foreign Citizens Residing in Developed Markets 2008/2013 Australia has highest penetration of foreign citizens Switzerland’s wealth attracts foreign professionals Japan and South Korea lag behind Chart 3 Proportion of Foreign Citizens Residing in Developed Markets 2013
Migration trends
The search for a better life EU enlargement led to surge in movement between states Net migration highest in the US Spain’s downturn leads to an exodus of migrants Table 2 Net Migration by Country 2008/2013 Table 3 Net Migration by Country 2008/2013 Mixed attitudes towards immigration Economic and cultural benefits
Remittance flows
Chart 4 Top 10 Countries by Remittance Inflows 2013 Chart 5 Top 10 Countries by Remittance Outflows 2013
Refugees/Asylum Seekers
Numbers continue to rise Germany is largest recipient of asylum applications Syrians flock to Turkey to escape crisis Australia toughens up Table 4 Number of Refugees/Asylum Seekers in Selected Markets 2008/2013
Foreign study
Strong demand from China Overseas students contribute to economic growth Table 5 Number of Foreign Students in Selected Host Countries 2008/2013
Influence on demographics
Ethnic minorities have generally youthful populations Chart 6 Age Structure of Hispanic Population in the US 2013 ...And bigger families Concentration in urban areas Regenerating American cities
Growing purchasing power of ethnic consumers
Minorities gain economic clout Asian-Americans have above average incomes African Americans shop frequently Chart 7 Median Household Incomes in the US by Race/Ethnicity, June 2014 UK Asians are high earners
Religious diversity
United by faith Muslim communities grow US has largest Jewish community outside Israel Table 6 Selected Religions by Country in 2010

IMPACT ON CONSUMER MARKETS

Islamic consumerism
A market worth US$2 trillion Halal food Challenges to overcome Case study: France’s halal market takes off Reputation for quality Lamb is the preferred meat Table 7 Global Sales of Meat by Type 2008/2013 Muslim-friendly restaurants Case study: UK foodservice companies go halal Anti-halal backlash Halal personal care makes an entrance Hair care products for veiled hair Halal health Islamic fashion Halal holidays Western destinations step up their Islamic services Islamic banking
The Kosher market
Food and drink
Ethnic consumers buy in large quantities Price is the overriding factor Table 8 Shopping Behaviour Among Canadian Ethnic Consumers 2014 Eating habits differ by community Supermarkets take up the challenge Asda widens its world food offer Morrisons supports world food events The Hispanic food market New product developments Mainstream consumers become more adventurous Influence on consumer foodservice The search for authenticity
Ethnic skin care
Segmenting the offer Addressing ethnic skin problems Asians drive skin whitening category Table 9 Skin Whitening Anti-Agers as a % Of All Anti-Agers 2008/2013 Matching skin tone Targeted advertising
Ethnic hair care
Addressing specific hair care needs Hair care a priority for black women Market continues to grow Trend towards natural ingredients Weave becomes more popular A fragmented market Summary 1 Selected Ethnic Hair Care Launches 2013-2014 Ethnic men’s grooming and sun protection – growing niches

MARKETING STRATEGY

Consumers from ethnic minorities still under-represented Varying techniques Multicultural marketing US companies invest heavily in Hispanic media Chart8 Largest Spenders in Hispanic Media in 2013 Case study: Kraft wins over the US Hispanic community Total market and cross cultural approaches
Communication preferences
Creating affinity Language barriers Supporting community causes Use of social media Younger, tech-savvy audiences
Celebrity endorsement
Universal appeal Launching ethnic beauty lines The power of black athletes Summary 2 Leading Multicultural Celebrity Brands
Acquisition of ethnic brands

KEY MARKET TRENDS

Australia
Almost a third of population born overseas 10 million consumers from ethnic minorities Chinese Australians among the country’s most educated Chart 8 Australia: Foreign Versus Native Population 2008/2013/2018 Chart 9 Australia: Top 10 Foreign-born Populations by Place of Birth 2008/2013 Small but growing Muslim community
Canada
Most new immigrants of Asian origin Chart 10 Canada: Foreign Versus Canada-born Population 2008/2013/2018 Chart 11 Canada: Top Five Foreign-born Populations by Place of Birth 2008/2013 Chart 12 Canada: Permanent Residents Admitted by Source Country 2012
France
A fifth of the population now first or second generation immigrants Maghreb remains largest source region for France’s minorities Chart 13 France: Foreign-born Versus France-born Population 2008/2013/2018 Chart 14 France: Top 10 Foreign-born Populations by Place of Birth 2008/2013 Ethnic tensions run high
Germany
Migrants support German economy Turks remain the dominant ethnic community 12% of population is of migrant background Attitudes towards German identity Chart 15 Germany: German Versus Foreign Citizens 2008/2013/2018 Chart 16 Germany: Top Five Foreign Populations by Citizenship 2008/2013 Adapting to the growing Muslim population
UK
BME groups account for 16% of population A new wave of immigrants from Romania and Bulgaria A popular destination for foreign students Chart 17 UK: Foreign-born Versus UK-born Population 2008/2013/2018 Chart 18 UK: Top 10 Foreign-born Populations by Place of Birth 2008/2013 Chart 19 UK: Non-White Population by Race/Ethnicity 2013 Islam is the UK’s fastest growing religion
US
Immigration policy favours diversity Hispanics straddle two cultures African-Americans place importance on heritage Asian-Americans are a lucrative consumer group Share of foreign-born population remains stable at 13% Chart 20 US: Foreign-born Versus US-born Population 2008/2013/2018 Chart 21 US: Top 10 Foreign-born Populations by Place of Birth 2008/2013 Chart 22 US: Total Population by Race/Ethnicity in 2013 Muslim and Jewish communities

FUTURE OUTLOOK

Trends to watch
Diversity is here to stay A critical market Ethnic beauty – room for development Expanding the world food offer Higher birth rates drive demand for baby products Targeting the Muslim dollar Specialist e-tailers Opportunities in the events market The shift towards cross-cultural marketing The power of the black celebrity
Forecasts
Immigration flows will continue But policies will become more stringent Table 10 Forecast Numbers of Foreign Citizens in Developed Markets 2013/2018 Table 11 Forecast Net Migration in Key Markets 2013/2018
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