According to a report from the Boston Consulting Group, some U.S. consumer goods firms see Cuba as the last true white-space market for opportunity over the next five to 10 years.
But just how much opportunity is really viable remains to be seen. In part one of the BCG study released earlier this year, it noted the need to upgrade the country’s infrastructure. Then there’s still the issue of how most of the citizens work for the government and have little money to spend. For those who do have access to fund, they spend a high portion of their income on basic needs.
Marguerite Fitzgerald, a BCG partner who is a coauthor of the latest study, said, “If you are a consumer goods company, the market [opportunity] is such that you want to be thinking about your strategy now because over time it is definitely likely to grow.”
She said that in the last few weeks, the country’s congress said it would continue to support the growth of small- and medium-sized businesses, and open up its wholesale market. Even though many small business entrepreneurs buy through the government-operated retail network, opening up the wholesale channel allows one to buy “direct” from international suppliers. While the government could still regulate the supply chain and who could be part of it, Fitzgerald said it is a step in the right direction. She also explained that many European brands are working with distributors approved by the government, and that is how they have built their brand presence in the country — a hint to American brands that perhaps they can grow their presence faster by following the same pattern as their overseas counterparts.
The study surveyed 326 Cuban respondents in Havana, and an additional 114 in Santiago, a smaller city in the poorer, eastern part of the country.
One conclusion emerged — there is clearly a correlation between those who are entrepreneurs and those who receive “remittances” from friends and family outside of Cuba. Those who do have a better shot of having access to funds to start businesses — such as salons and restaurants — within Cuba. And although many are able to support themselves, a good number still get partial subsidies from the government.
Fitzgerald also said remittances aren’t limited to funds but can be in the form of goods sent home as gifts. That means that brands that have a strong presence in Florida, where many Cuban emigrants have settled, could possibly be the ones that are better known to Cuban citizens.
She also said because the citizenship in Cuba is relatively young and well-educated, as Internet access improves, many of the newer businesses might be Internet-based. But the catch is that many of the younger generation also aspire to leave Cuba and head to the U.S., leaving fewer young people contributing to the growth of the Cuban economy. That can only happen if they eventually are able to run businesses in the U.S. and then head back to Cuba to operate businesses there as well, Fitzgerald said.
The big unknown right now is the political situation in the U.S. President Obama has been championing changes. There’s also been activity in Cuba on the travel and tourism front. Fitzgerald said cruises are starting between the U.S. and Cuba, and the next step is air travel. The question is whether a new president might want to change the policy toward Cuba, she said.
Even if that happens, brands still need to start thinking about how to build a longer-term game plan in Cuba. The first step could be building up brand momentum with the Cuban expat community, so that once the retail market inside Cuba grows and picks up momentum, companies will be well positioned to gain market share from lesser-known brand competitors, she concluded.