Hispanics will soon surpass millennials as the group with the most spending power in the U.S., MarketWatch reported Monday. Morgan Stanley analysts found that income and population growth among Hispanics of all ages will push the group past millennials in terms of consumer spending in just four years.
By 2020, retail spending among Hispanics will grow 1.6 percent compared with millennial growth of 0.6 percent, Morgan Stanley said in a research report. In contrast to these two fast growing groups, white people over age 65 will grow their share of the consumer wallet by just 0.4 percent.
“Income progress” has shot up among Hispanics in recent years. In 2013 and 2014, Hispanics saw more growth in their incomes than any other group, the bank said. This is expected to translate into increases in spending on areas such as food eaten at home, apparel and health care.
“The aging of the population and the rise of millennials will continue to impact the consumer landscape over the next five years,” the report said. “However, the share of consumer wallet controlled by the Hispanic population will experience the fastest pace of growth, driven by the addition of 8.2 million people — 52% of total U.S. population growth — and above-average per capita income growth.”
The Hispanic population in the U.S. hit 55.4 million in 2014, accounting for 17.4 percent of the country’s total population, according to data from the Census Bureau. While fewer Hispanics are immigrating to the U.S. than in the past, their population is still projected to reach 106 million by 2050.
Hispanics are also one of the youngest groups of any racial or ethnic demographic with a median age of 29. Unlike other groups, nearly 60 percent of Hispanics in the U.S. are millennials or younger, the Pew Research Center said in April.
Millennials, which are typically defined as anyone between 18 and 34 years old, recently passed baby boomers with a population of 75.4 million, but Pew Research projected their numbers will peak at 81.1 million in 2036.
With Hispanics set to take over as the biggest shoppers in the U.S., the Morgan Stanley report said companies that stand to benefit include Burlington Stores, Ross Stores, Apple, AutoNation, Starbucks, Panera Bread, Wingstop and Jack in the Box. However, Hispanics also have a tendency to eat at home more often than other groups, MarketWatch reported.
“[T]his could create a greater-than-expected long-term headwind for restaurant spending, but we think that 1) it will unfold over time, allowing restaurants to react, 2) we think the response will include a move toward greater convenience, growth in meals to go and investment in delivery, and 3) a large swath of brands, including many limited service brands, will be net beneficiaries of this rise in Hispanic population,” the report said.
Other restaurants that rely on older customers, such as Darden Restaurants, Olive Garden and Outback Steakhouse, could be in some trouble, the research noted. As the demographics of America’s consumers change, these restaurants and others will likely need to adapt to the spending power Hispanics will soon wield.