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    Supermarket GROCERY Business: Ethnic evolution

    The Hispanic aisle continues to progress as manufacturers target the country's largest minority group.

    By Jenny McTaggart

    If Charles Darwin were to walk the ethnic aisles of today's supermarkets, he might be surprised to see his theory of evolution at work, particularly among offerings for Hispanic consumers. The signs of change are all around, from bilingual packaging on grocery items to tropical flavors in the juice aisle to authentic cheese varieties in the dairy section. What began decades ago as a small section with just a few Spanish brand names is now turning into a storewide phenomenon, albeit at a gradual pace.

    The change is most evident in markets like Los Angeles, New York, and Miami, where the densest Hispanic population resides. Yet anyone following the growth of Hispanics throughout the United States would agree that the trend is still evolving, with much room to grow. Recent figures from the U.S. Census Bureau suggest that the Hispanic population already has increased by nearly 10 percent in the first two years of the century. Pegged at 38.8 million as of July 2002, this powerful group is growing even faster than some had predicted, and has now officially been named the largest minority group in the United States.

    Savvy food and beverage manufacturers know a trend when they see it, and the Hispanic boom is no exception. Research shows that on average, Hispanics shop for groceries more often, spend more when they shop, cook more at home, and have larger families—making them ideal supermarket customers. As a result, small and large companies alike are considering how they can make connections via their products and, ultimately, their brands.

    One of the predominant trends is among the larger food manufacturers that already have a long track record of argeting the Hispanic consumer segment, notes Jennifer Woods, e.v.p. of The San Jose Group, a Chicago-based marketing firm. "These companies are at a place now where they have such strong equity with this segment, and they've established such strong indexing with their core products, that they can reap the benefits of research and development," she says.

    Kraft Foods developed Kool-Aid Aguas Frescas Soft Drink Mix after learning that Hispanic consumers were over-indexing on its Kool-Aid mixes. The new line, being launched this year in selected markets, features Jamaica and Tamarindo flavors, which specifically appeal to Latin American tastes. Other new Hispanic products from Kraft include Imperio and Morelianas Sandwich Cookies, two authentic Mexican treats.

    International ventures

    Good Humor-Breyers Ice Cream has launched two new products for Hispanics, also in selected markets: Popsicle Carnaval de Frutas, frozen novelties that come in lemon-lime, coconut, and strawberry flavors; and Breyers All Natural Fresa Banana, a creamy banana ice cream with a strawberry swirl. Both feature bilingual packaging.

    Other manufacturers have taken more of a fast-track approach to reaching the Hispanic market by partnering directly with companies from Hispanic countries. Hormel Foods, for instance, in 1995 entered into a joint venture with Grupo Herdez, one of Mexico's largest producers of canned and bottled food products. Under the agreement, Hormel handles the sales, marketing, and distribution for several authentic Mexican brands, primarily Herdez, Doña Maria, and Bufalo, in the United States. There are more than 45 SKUs in the line, which includes shelf-stable staple items like chilies, salsas, mole, and nopalitos (cactus).

    "We are very well positioned to deliver to the Mexican consumer with an authentic brand they already know about," says Hormel Foods product manager Chris K. Durren. Hormel, like Kraft, has tracked the items in its core portfolio that over-index among Hispanics. "With Hormel chili and Spam, there's an opportunity not only with Mexicans, but also Caribbeans," he says. Armed with that insight, Hormel can cater its promotions to specific demographic groups. Going forward, the company is looking at new product development, as well.

    'Delicate balancing act'

    At the other end of the spectrum are smaller companies that don't necessarily have a history of targeting the Hispanic segment, but are looking for ways to gain ground. Some have decided to begin by introducing new products specifically tailored to the segment. The snack foods category has seen a lot of that development, according to The San Jose Group's Woods.

    Unfortunately for some of those companies, there have been misfires. Too often, manufacturers skip the time and effort involved in research, which can result in a product that few people need—or, even worse, one with an offensive or misleading name. "There's a delicate balancing act you have to take into consideration as a food manufacturer thinking about doing a line," Woods suggests.

    There's also the risk of "Hispanisizing" food products, which can actually devalue a brand in some consumers' eyes, according to Woods. "Many foreign-born Latinos, which make up well over half of the segment, come to the United States with the aspiration of eating 'Made in the USA,'" she says. While they may appreciate bilingual packaging on, say, breakfast cereal, it doesn't mean that they want a Hispanic version of a U.S. brand they already like.

    Some companies from Hispanic countries have seen an opportunity to gain sales in the United States as more immigrants cross the borders. Encanto Snack Products, Ltd. originated in northern Mexico in the early 1940s and began testing its products in the U.S. market in 1996. The company, whose sales have increased by 70 percent each year since that time, now has a U.S. office in Harlingen, Texas and plans to eventually open a central distribution facility here. Its line of chips feature such authentic Mexican flavors as Papas Abobadas and Charrones packaged in bags with playful, colorful graphics.

    "Back in 1996, we intended to market these products to pockets of Hispanic communities in the United States. Now we're finding that a lot of the baby boomers, who used to be steak-and-potatoes kind of people, are looking to add a little spice to their life," says president and c.e.o. Randy Seitz. "They like the taste, texture, and packaging."

    That trend is echoed by other manufacturers. "Ethnic is hot, and the Hispanic foods trend is hot," Hormel's Durren says. "As the American palate continues to mature, people are looking for things to excite their taste buds. Authentic Mexican—not Tex Mex—is one thing they're turning to."

    As manufacturers learn more about Hispanic consumers, many are sharing their insight with retailers. "Our retail customers are clamoring for this information, and we're right there to give it to them. We're helping them build the right sets with the right products at the right stores," Durren says. As a result, Hormel has been given category captainship in the ethnic foods aisle in several large U.S. chains, he notes.

    Plenty of other manufacturers are joining Hormel in educating retailers on best practices in Hispanic merchandising. Perhaps one of the best known is Goya Foods, Inc., based in Secaucus, N.J. One of its most recent efforts is a brochure featuring planograms designed to address the different countries of origin within the Hispanic community—a factor that is often overlooked by retailers. Introduced at this year's FMI show, the brochure has generated a lot of interest among retailers, according to Goya's director of sales, John Hernandez.

    "It really captures the flexibility of our products, the breadth of our product line. We can address several market needs—Mexicans, Central South American, and Caribbean," Hernandez says. "Many of the needs cross over." Each planogram suggests product arrangement within 12 feet of space.

    Hernandez stresses the importance of merchandising store by store, instead of looking for a one-size-fits-all solution. "The cookie-cutter approach that many grocers take isn't going to yield the Hispanic business. We try to help them learn about their customer base and address their needs," he says.

    Another opportunity that many retailers have missed out on is in seasonal merchandising, Hernandez adds. "Think of what's done in center store, only drilled down in the ethnic aisle," he says. For example, during the summer, why not promote Hispanic beverages such as nectars, or jazz up your barbeque display with mojo, a marinade for grilling meats, and adobo, an all-purpose seasoning?

    Also, don't overlook the importance of holiday promotions—just make sure you know which ones resonate with Hispanics. "Cinco de Mayo is for Americans," notes Goya's Hernandez. Mexico's independence day is actually celebrated Sept. 16. September is also known as Hispanic Heritage Month.

    As is the nature of evolution, the ethnic aisle will look even more different a decade from now. By 2020, Hispanics are expected to make up 20 percent of the U.S. population. Chances are that by that time, you'll see many more formats like Nash Finch's Avanza that are specifically designed for Hispanic shoppers. In mainstream supermarkets "ethnic aisles" may expand to "Hispanic aisles," including a Mexican section, Caribbean section, Central American section, and so on.

    Observers agree, however, that now is the time to begin reaching out to this growing consumer group.

    By Jenny McTaggart
    • About Jenny McTaggart

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