Summary

The discovery of America in 1492 by Cristóbal Colón, a trader, established the beginning of the Hispanic presence on the continent. Spaniards colonized mainly the Caribbean, Central and South America, and they also had a presence in the southern United States that extended from California to Florida. Currently, the demographics of the United States are changing and its population has become very diverse, composed of Whites (Caucasians), African Americans, Asians, Hispanics (Latinos), and other racial groups from around the world. Hispanics are shaping the diverse U.S. marketplace that is in a state of constant evolution.

The 2000 U.S. Census reported 281.4 million residents in the United States, from which 35.3 million were Hispanics, making the U.S. the third largest Hispanic speaking country in the world. It was predicted that by the year 2050, more than half of the U.S. population will be composed of ethnic minorities, and one fourth of the population will be of Hispanic origin. Humphreys (2003) reported that Hispanics, by 2008, will record $1,014.2 billion in purchasing power, an increase of 357% from $222 billion estimated in 1990. The simultaneous increase in population and income of Hispanics in the U.S. is attractive to food companies, and made more relevant the study of consumer behavior patterns for discovering market opportunities.

Nevaer (2004) expressed that U.S. Hispanics are a diverse market fragmented by demo- graphic, economic and social conditions; divided also by language, acculturation levels, and income levels ; nevertheless, they also present unlimited opportunities accompanied by a myriad of challenges that marketers need to address. The impact of Hispanics on the U.S. food market

has also been recognized in the scientific community (Kisilbash and Garman (1975); Fan and Solis (1994, 1998); Holcomb, Park and Capps (1995); Fan and Lewis (1999); Lanfranco (2001); Food Marketing Institute, (2002); Lanfranco et al. (2002a, 2002b); Perkins, (2004); Zamora (2004); Ford, (2005); Kasarda and Johnson (2006)).

Hispanics have their own culture, traditions and food consumption habits. The growth of the U.S. Hispanic market will have impacts on the demand for food, specifically on meats, one of the main components of their diet and share of total food expenditures.

This research project analyzed the demand for meats among various ethnic groups in the U.S., assessing differences in consumption of Hispanics when compared with that of other ethnic groups. The study is based on a system of censored demand equations of the LinQuad form for disaggregated meat products using data from the “2003 Consumer Expenditure Survey” released by the U.S. Department of Labor. In each demand system, consumption patterns were recognized by the computation of elasticities for each ethnic group and estimator evaluated.

This study has also prepared a comprehensive and extensive survey of literature on U.S. Hispanics, and it is depicted in chapter 2, this chapter focused on literature related to food consumption. Different sources of information useful in studying Hispanic consumers were documented. A strategic framework was utilized. Previous studies of the U.S. Hispanic market included scientific and popular literature. Lists of resources for understanding and researching the Hispanic food market are presented. It is divided into four lists that included books, commercial reports, marketing research companies, retailers and wholesalers of ethnic foods. Databases for potential use in consumer demand analysis for foods were described, and cross- sectiona l data was emphasized. Lastly, chapter 2 exposed the examination of demand analysis

for food products by ethnic groups, providing a comprehensive understanding of the consumer behavior for foods, emphasizing the consumption of meats by U.S. Hispanics.

The extracted dataset was divided by ethnicity, and the expenditures were aggregated at the household level. The sample contained 821 households of Hispanic origin, 4,118 Non- Hispanic White, 664 African American, and 316 households belonging to other minorities. The average values of the demographic variables are similar to those from the 2000 U.S. Census, thus, the extracted dataset closely represents the U.S. population; in fact, the objective of the Consumer Expenditure Survey is to represent the consumptio n patterns of the U.S. market as a whole. The average annual income for the households was $36,310.00, $45,209.00, $33,906.00, and $42,758.00 for Hispanics, Non-Hispanic White, African Americans, and households of other minorities, respectively.

More Hispanic households were located in the Western and Southern region, in contrast with White and African American households who were located mainly in the South and Midwest. Most households were located in urban areas, varying with the size of the population. More than 60% of Hispanics households were found in areas with a population greater than 1.2 million people. The same proportions were observed in African American households. Hispanic households had the biggest household size, on average they had 3.49 members followed by African Americans with 2.90 members per household. The household size had the same proportion in terms of the Amsterdam scale. Hispanic households had by far more younger members, in contrast with White households who had a greater number of older members. The average age of the reference person was 51.63 years for White households, in contrast with Hispanics, the average age was 43.79 years.

The average weekly expenditures on total food were $130.66 for Hispanics and $127.04 for White households. White households lead average weekly expenditures on food away from home, and Hispanics lead total food at home, spending on average $93.61 per week. Not surprisingly, Hispanics had the highest average weekly expenditures on meats followed by other minorities and trailed by African American households.

Average weekly budget shares reveal that Hispanics, Whites, African Americans and households of other minorities spend on average 18.71%, 14.61%, 15.61%, and 14.65% of the average weekly income in total food products, respectively. Hispanic households allocated in average 3.52% of the average weekly income in meat expenditures representing 18.82% of total food expenditures. Hispanics allocated 22.2% and 17% of meat expenditures on poultry and beef steak products respectively.

Differences in average weekly budget shares on meat expenditures illustrated that Hispanic households allocated less for bacon and ground beef products and more for beef steak products compared to White households. With respect to African American households, Hispanics spend less on bacon and pork chops and more on other beef and beef steak products. In comparison with other minorities, Hispanic households spend less on seafood and other pork and more on ham and beef products.

The estimation of censored demand equations of the LinQuad form required the estimation of Probit regressions that analyzed the decision to purchase meat items, thereafter, it allowed the calculation of the standard normal distribution and cumulative distribution function for each household. The new variables were used for eliminating selectivity bias when zero values appeared in the dependent variables, which it is a common problem in cross-sectional

data. The Probit regressions also allowed for performing calculations of marginal effect in the probability to consume meat items, the effects of income and household size were evaluated.

There was high demand for computing power when all the demographic variables are included in the censored LinQuad demand system. For example, when all the proposed demographic variables are included in the demand system, SAS® required 1.5 Gygabites of RAM memory for the case of the Hispanic dataset which contained records for 821 households. Hence, the number of variables was reduced in the demand systems. The first set of results consisted of demand systems that were estimated as a function of only price and income. The second set of results consisted of demand systems that were estimated as a function of price, income, and household size. The third set of results came from demand systems that are as a function of price, income and the complete set of demographics proposed in chapter four. Elasticities were calculated for each demand system that corresponded to each ethnic group (own, cross-price, income, and household size elasticities).

The third set of demand systems followed a different approach. Three approaches were followed for the first step of the estimation. In the first case, the Probit regressions were estimated with only household size and the logarithm of household income. In the second case, the Probit regressions were estimated as a function of household size, logarithm of household income, and the 10 price variables. In the last and third case, the Probit regressions were estimated with household size, logarithm of household income, the 10 price variables, and the complete set of demographic variables that were proposed in chapter four. Given the inconsistencies of the results from the second and third cases, results from the first case were discussed.