Cuba Opens to Outsiders, and Consumer Goods Companies Recognize an Opportunity

Cuba Opens to Outsiders, and Consumer Goods Companies Recognize an
Opportunity

As Cuba Liberalizes Its Economy and the US Eases Trade and Travel
Restrictions, Consumer Goods Companies Are Intrigued; A BCG Report
Identifies the Country's Promising Demographic Segments and Highlights Risks

MIAMI, FL--(Marketwired - Jun 2, 2016) - President Obama, Pope Francis,
and the Rolling Stones have all visited Cuba in the past year, and many
US consumer goods companies want to be next. As Cuba begins to
liberalize its economy, the country's population of 11 million people
and GDP of $82 billion are increasingly attractive. The Boston
Consulting Group (BCG) analyzed the country's market for consumer goods
and found that it will present a growing opportunity over the next five
to ten years. The results of the analysis are being released today in a
report titled Understanding the Evolving Cuban Consumer.
The report summarizes findings from a survey of more than 400 Cuban
consumers in Havana (Cuba's capital) and Santiago (a smaller city in the
less developed, eastern part of the country). In addition to conducting
the survey, the authors spoke to experts in the US, Cuba, and Latin
America, as well as Cubans who had recently left the island nation for
the US. The result is one of the first quantitative and qualitative
studies of Cuban consumers, who have relatively little exposure to
consumer products and brands. As a result, the country remains one of
the last true white-space markets on the planet.
"Executives are excited by Cuba's population, proximity to the US, and
potential for growth, but it's still largely a closed economy, and many
company leaders don't know enough to be able to assess the opportunity,"
says Marguerite Fitzgerald, a BCG partner and coauthor of the report.
"We wanted to demystify the country and help consumer companies
determine whether to consider expanding there in the future."
Varying Levels of Purchasing Power
Among the central findings of the report is that Cuban consumers vary
widely in their ability to make discretionary purchases. Roughly half
the population lives with a median household income of $300 to $400 per
year. However, roughly 20% of Cuban consumers -- primarily in urban
areas -- have a household income of $1,800 to $2,000 a year, enabling
them to purchase aspirational goods. These are primarily cuentapropistas
(entrepreneurs) and tourism workers who have access to income beyond the
standard government salary.
In addition, remittances -- money, clothing, and other gifts sent to
Cubans by friends and family in the US -- are a large and growing
component of the country's economy. Such remittances have increased 15%
annually from 2010 through 2014 and now total $3 billion, with
projections calling for that number to reach $6 billion by 2020. By
comparison, Cuba's net exports in 2014 were less than $4 billion.
"As the number of cuentapropistas continues to grow, along with rising
remittances and increased tourism, more Cubans are receiving income from
outside formal government channels, which gives them greater purchasing
power," says Jim Brennan, a BCG partner and coauthor of the report.
Persistent Challenges and Creative Solutions
Foreign companies seeking to establish operations on the island will
face clear challenges. Cuba's distribution infrastructure is limited,
and most products are sold through the government, which sets prices and
bans most advertising and promotions. Although the country is slowly
deregulating some industries, it will retain control over the
distribution and retail sale of consumer goods for the foreseeable future.
However, some consumer companies are applying unconventional tactics to
reach Cuban consumers. For example, Heineken is building relationships
with the Cuban government and adopting a long-term view. It has brought
refrigerated trucks to the island and allows the country's Ministry of
Trade to use them according to its priorities, while Heineken
establishes its brand among consumers.
"Cuba is an undeveloped market for consumer goods, which means companies
can't apply the conventional tactics that have worked elsewhere," says
Russell Stokes, a BCG partner and coauthor of the report. "As the
opportunity grows over the next several years, Cuba will be a turbulent
ride. But it will ultimately reward companies that can ride out the bumps."
A copy of the report can be downloaded at www.bcgperspectives.com.
To arrange an interview with one of the authors, please contact Eric
Gregoire at +1 617 850 3783 or gregoire.eric@bcg.com.
About The Boston Consulting Group
The Boston Consulting Group (BCG) is a global management consulting firm
and the world's leading advisor on business strategy. We partner with
clients from the private, public, and not-for-profit sectors in all
regions to identify their highest-value opportunities, address their
most critical challenges, and transform their enterprises. Our
customized approach combines deep insight into the dynamics of companies
and markets with close collaboration at all levels of the client
organization. This ensures that our clients achieve sustainable
competitive advantage, build more capable organizations, and secure
lasting results. Founded in 1963, BCG is a private company with 85
offices in 48 countries. For more information, please visit bcg.com.

Source: Cuba Opens to Outsiders, and Consumer Goods Companies Recognize
an Opportunity -
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