The ROI from DEI: How brands can better meet Black consumers' needs

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The ROI from DEI: How brands can better meet Black consumers’ needs

25 May 2022

Jordan Winter

Jordan Winter is a journalist who wants to learn more and teach others about the world through storytelling. Dedicated to positive social change, her reporting is informed by years of experience writing, designing, and producing multimedia content for mission-driven publications and nonprofits.

As the creative director for Commercial Baking, Jordan is bringing life to the stories of diversity and sustainability in the commercial baking industry.

NEW YORK — Black Americans comprise one of the fastest-growing consumer demographics, with their purchasing power expected to nearly double from $910 billion to $1.7 trillion by 2030. But brands have been overlooking this group for decades.

Black neighborhoods have historically been targeted with discriminatory practices like redlining, which hinders their ability to build generational wealth, have access to healthy foods and create thriving local economies. By passing over these communities as a key target audience, many consumer-facing companies have lost credibility with Black shoppers because their products just aren’t tailored to their needs.

A report from the McKinsey Institute for Black Economic Mobility suggests just how much these brands are missing out on … and how they can do better. Companies can tap into $300 billion of value annually by committing to racial equity goals and better serving the needs of Black communities.

“Brands should remember that commercial opportunity and racial equity are not a zero-sum game,” said Shelley Stewart III, partner at McKinsey and co-author of the report. “This is a powerful lever in advancing Black Americans’ overall economic mobility, and it presents a huge market opportunity.”

Addressing the needs of Black consumers means understanding them first. When choosing a brand to support, Black shoppers emphasize trustworthiness, stated social mission, and clean and healthy products.

In terms of access to healthy foods — especially for historically marginalized communities that live in food deserts — baked goods and snack companies have a big opportunity to position themselves as a solution.

“Baked goods producers can differentiate themselves by increasing accessibility of their products in Black neighborhoods through e-commerce and brick-and-mortar locations,” Stewart said. “They can also ensure their products are high-quality, affordable, and celebrate Black cultures and values.”

When looking at brands that outperform in this area, expect to see better-for-you options, a wider range of products and efforts to reflect Black consumers’ preferences. The McKinsey team found that Black shoppers are also eager to explore upmarket grocery options, including organic and specialty ingredients. Forty-three percent of Black survey respondents ranked availability of organic foods at the grocery store as important, compared with 36% of non-Black respondents.

“Done right, these efforts can create a lot of value by meeting Black consumers’ needs, earning their trust and loyalty, and unleashing economic value for historically marginalized communities.” —Shelley Stewart III | partner | McKinsey Institute for Black Economic Mobility

Black shoppers were also more likely to be excited to explore products that are new to them. Baking companies can appeal to this demographic with trends they’re already seeing: international, spicy flavors with baked-in functional benefits. These kinds of products may check all the boxes for Black consumers, but when it comes to brand loyalty, the playing field is competitive. With 81% of McKinsey’s Black survey respondents willing to switch brands, this signals that they are dissatisfied with the current options. According to the authors, the leading cause is brands’ lack of visible DEI initiatives.

“For organizations to truly serve an increasingly diverse consumer population, it’s critical to employ a workforce that is representative of, and personally and culturally connected to, the communities in which it operates,” Stewart said.

For companies that take an authentic approach to DEI, building a more diverse organization could lead to a larger share of Black consumers’ wallets. Nielsen research suggests that Black shoppers are 58% more likely to expect the brands they buy to speak up about social issues and are 37% more likely to buy from that brand when they do. But this work is easier said than done.

Stewart says companies can build a relationship with Black communities by understanding — and finding solutions for — their pain points. That requires ongoing investment in racial equity, inside and outside the organization. To ensure companies are authentic in their efforts to better serve Black consumers, Stewart suggested taking a more holistic approach.

“This goes beyond just having Black faces in your advertising, but also your hiring and retention of Black employees, how your organization is spending its philanthropic dollars to support Black communities, investing in R&D to develop more culturally resonant products and working with Black-owned suppliers,” he said. “These systemic changes will signal to consumers that you’re seriously and authentically investing to meet their social and cultural needs.”

When it comes to workforce, hiring from the communities in which your company operates is a good start, but the next step is employing decision makers, leaders and marketing professionals who can speak to those communities. Bringing Black workers into management roles with decision-making power can be transformative and help foster a company culture where employees from diverse backgrounds feel a sense of belonging. These are the kinds of values to show, not just tell.

Companies can champion their commitment to racial justice with products and supply chain, too. This could look like investments in R&D and product design to make sure you formulate the right products to meet Black consumers’ needs. Especially when considering issues of access and quality, a first step could be ensuring that the full range of products offers good value for the price. This could also include a deep dive into where you’re sourcing ingredients and other raw materials and choosing to support diverse suppliers.

McKinsey illustrated a direct relationship between diverse representation and spending power. And as the industry moves into the future of work, companies that celebrate diverse employees and consumers will always come out on top.

“Done right,” Stewart said, “these efforts can create a lot of value by meeting Black consumers’ needs, earning their trust and loyalty, and unleashing economic value for historically marginalized communities.”

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