The growing middle class in Latin America, a sound base for growth of luxury

Of the 171 million households in Latin America in 2013, 36.4 million had an annual disposable income below US $5,000 and 64.1 million had an annual disposable income below US $10,000, according to Euromonitor data. Although the individual spending power of these households is small, the lowest-earning 10% of households in 13 Latin American countries have a combined spending power of US $77 billion in 2013, making them a lucrative marketing target.

Despite the bottom of the pyramid (BoP) remaining a large segment, it is not the fastest growing market in Latin America. There are more than 87 million middle class homes with household incomes between US$10,000 and US$45,000– 60% of which are in Brazil and Mexico. Engaging with these consumers early on can produce long term benefits. These consumers, once won, can be transferred up the value chain from the initial low-priced purchases to high-margin products and services

According to Euromonitor’s Head of Countries and Consumers Research, Sarah Boumphrey, “To successfully serve both the BoP and the emerging middle classes, a detailed knowledge of income, expenditure and demographic trends is key, along with an understanding of local attitudes”.

For example, Latin American middle class households often prioritise education and health, but the prioritisation is not uniform from country to country. Middle class families budget 10.1% for health goods and medical services in Argentina, but in Mexico the proportion is 3.1%. The white paper outlines other nuances in budget priorities throughout the region.

Boumphrey adds, “Middle class consumers are interested in convenience and are increasingly willing and able to pay for it –good customer service, a wide product range of high quality goods with a nod to design will have broad appeal.”

Montblanc boutique Medellin, Colombia