From The August/Sepember 2003 Issue of Natural Grocery Buyer

Expanding Ethnic Markets

Multicultural Merchandising in America

Figuring out your neighborhood's ethnic mix is key to figuring out a profitable SKU mix

Lisa Everitt

It's just another morning in an American supermarket.

Note the seven brands of chai on the top shelf next to Celestial Seasonings' Morning Thunder. One aisle over, three face-outs of Hormel pigs' feet nestle between Sell's Liver Pate and Armour Potted Meat.

You'll find bok choy and daikon on the wet rack in produce, right next to the fresh bagged collard greens and 11 different kinds of peppers, from tiny dried chilies for Szechuan to glossy poblanos for chile rellenos.

The hot sauce display really proves the point of diversity: Jamaican Pickapeppa sauce pops up next to Tapatío Salsa Picante. Paul Prudhomme's Cajun marinades appear with Rick Bayless' Frontera brand and Emeril Lagasse products kicking it up a notch. It's the Great American melting pot in center-store sets.

Indeed, its greatness is also its challenge, as retailers in every category try to figure out how to market to the new American consumer.

U.S. Census data show that the Hispanic population more than doubled to 35.3 million between 1980 and 2000. Asian and Pacific Islanders increased to more than 10.6 million. The number of foreign-born people living in the United States is at an all-time high—32.5 million, or 11.5 percent of the population in 2002, which is a 64 percent increase since 1990.

The image of a "melting pot" in which cultures dissolve and blend into a homogenized American stew has been replaced by the "salad bowl" concept, in which flavors mingle and combine in interesting counterpoint, if not beautiful harmony. And thus taco filling, falafel and sloppy joe mixes from Fantastic Foods are displayed on the same shelf with Simply Organic Cheeseburger Macaroni, Tasty Bite Chicken Moglai and Annie Chun's Noodles and Sauce.

So how to reach the multicultural market? Plan, listen and innovate.

"The way you dominate is not through muscle, but through knowledge—knowledge and experience," says Tom Livingston, marketing director at FoodSource Inc., a produce distributor in Monterey, Calif. "The major chains are mainly still trying to figure out, 'How the heck do I make this profitable?'"

Who Does It Right?
At H-E-B stores in south Texas, produce is priced by the piece to make it easier for Mexican immigrant shoppers, who are used to buying in kilos, not pounds. ShopRite offers the "Kosher Experience" store-within-a-store across the Northeast. The Cleveland Heights, Ohio, Wal-Mart stocks dolls with African-American features; in Laredo, Texas, Wal-Mart stocks religious candles and "household goods with an angel motif," according to Retail Merchandising magazine.

The newly remodeled 37,000-square-foot Super Mercado Mexico in Fresno, Calif., boasts a taquería and a tequila bar with at least 80 varieties. In Dearborn, Mich., which has the highest concentration of ethnic Arabs outside the Middle East, the Kroger store sells halal meats prepared according to Islamic law.

Ethnic communities generate $142 billion a year in supermarket purchases, including $54.4 billion by Hispanics, $51.5 billion by African-Americans and $25.3 billion by Asians, according to a study by About Marketing Solutions and Cultural Access Group of Los Angeles. The kosher food industry is a $5.5 billion business, bought by 10.5 million Americans—not all of them Jewish, says trade publication Kosher Today. Eight million Muslims live in North America, according to the Islamic Food and Nutrition Council of America.

Just about every supermarket in America is chasing that $142 billion. It's forcing a new look at both overall shopping patterns and neighborhood micro-marketing.

Albertsons, based in Boise, Idaho, told shareholders at its annual meeting that it increased sales 20 percent to 30 percent in three underperforming stores in Southern California by closing them and ripping out every trace of Albertsons branding. They reopened as Super Savers, entirely focused on the needs of Hispanic shoppers, with a 48-foot service meat counter, Mexican brands, bilingual clerks, and red, white and green balloons. They sell Jarritos soda next to Coke, and Gansitos along with Twinkies. "Not being an Albertsons frees us to do things that we wouldn't normally do," Director of Ethnic Marketing Andrew Kramer told the Associated Press.

In the Chicago suburb of Highland Park, a newly renovated kosher Jewel/ Osco pulls in traffic from as far away as Milwaukee, 80 miles north, by selling kosher vitamins and wine, deli trays and bagels baked on the premises. Parent company Albertsons recruited experienced staff from other kosher stores and relied on local rabbinical authorities to guide it. One key principle, notes Kosher Today, is parnosseh, or livelihood. By siting the kosher store in the suburbs, it serves a growing segment of the Jewish community without harming established kosher markets in Chicago proper.

Sell What Shoppers Want To Buy
One person's specialty item is another person's staple food. Smart supermarketers do the research to discover what brands their customers are pining for and do the (sometimes substantial) legwork to get them into the store.

Recent arrivals—or transplants from one coast to the other—speak of the jarring experience of discovering that what they consider to be a staple, like Ibarra chocolate mix, Calrose rice or lemongrass, is nowhere to be found.

An approach that has worked for some chains is to create a store concept aimed specifically at the Hispanic community, from bilingual signage and personnel to the asada steak at the meat counter and the pop Mexican music over the sound system.

Coppell, Texas-based Minyard Food Stores now has almost as many Carnival stores (26) dedicated to serving Hispanic consumers as original Minyard locations (29), including some stores that have converted to the Carnival format as their neighborhoods have changed. Larger Carnival stores sell appliances and Dickies-brand workwear as well as Western Union money transfers, bus passes and international phone cards.

Hispanic grocery shoppers pay close attention to a store's produce, its customer service and whether it stocks Hispanic products, says David Morse of New American Dimensions, a Los Angeles consulting firm. Traditional culture values cooking from scratch as an expression of a woman's love for her family; in a more acculturated household, women see easier meals as a way to spend more time actually with family and less time in the kitchen. But the love of traditional flavors remains.

"They spend so much more on produce than Anglos that it's not even funny," says Livingston of FoodSource.

Mainstream food manufacturers are figuring out the velocity of ethnic ingredient trends. So Campbell's is introducing a three-item line of Asian soup bases, including Vietnamese pho. Gatorade's new Xtremo sports drink comes in mango flavor, as does Pepsico's SoBe Fuerte. "They tend to have one foot in each world," both the familiar and the exotic, says consultant Eleanor Hanson of Food Watch, in River Forest, Ill. Thus: lemongrass iced tea, or barbecue beef empanadas.

A Future For Healthy Ethnic Cuisine
At the intersection of "natural" and "ethnic," most of what you'll find has an Asian flavor. And that's OK with merchants.

"It feels now more than ever that Asian food is on the retailer's mind," with both authentic flavor and natural ingredients, says Stephen Broad, president of Annie Chun's Inc., San Rafael, Calif. "The third wheel—convenience—can be a daunting test."

SuperTarget chose Annie Chun's as one of a handful of ethnic brands it showcases, Broad says. Natalie Loomis of the Koyo division of Affinity Foods reports that Shaw's Supermarkets in New England has plans to add Asian sets in its natural category, and the Fred Meyer unit of Kroger has considered doing the same in the Pacific Northwest.

But interest among other ethnic specialists is growing. Wiley Mullins of Wiley's Healthy Southern Classics in Fairfield, Conn., promotes his seasoning blends as a way to create authentic soul-food flavors without adding fat. Mullins endorses the National Cancer Institute's campaign for men to eat nine servings of fruit and vegetables a day, offering Sweet Potato and Yam Seasoning without butter, and Greens Seasoning without ham or bacon.

Across ethnicities, young professionals "don't necessarily learn how to make the foods they grew up eating," Broad notes.

Healthy-cooking promotions aimed at cutting obesity and diabetes in Hispanic communities offer recipes that substitute baked tortillas, grilled meats and whole beans for high-fat traditional Northern Mexican cooking. The UCLA Center for Health Policy Research said in April that nearly a quarter of retirement-age Hispanics in California have diabetes.

On the opposite coast, there's a growing movement to supply sustainably raised vegetables, lamb and goat meat to inner-city ethnic markets like Williamsburg, Brooklyn, where goat is a festive food for Middle Eastern, Chinese, South Asian, Jamaican, Mexican and Puerto Rican customers. And manufacturers of Middle Eastern specialties are working with supermarkets to let consumers know the health benefits of the grain- and fruit-rich Mediterranean diet.

One of the earliest Asian entrants in the natural category, Thai Kitchen, samples its convenience noodle and soup products at fitness events. The San Francisco Bay to Breakers 10K and Chicago Marathon give Thai Kitchen a way to showcase its products among both mainstream and health-conscious consumers.

This spring, Thai Kitchen unveiled organic coconut milk in premium and lite formulations and placed its first free-standing coupon ad in August. It segments its consumers by their desire for convenience, rather than by ethnicity. "Most of our consumers fall into the 'adventurous cook' category," says Director of Marketing Judy Wong. "It gives them a tremendous sense of satisfaction and pleasure that they're doing something nice for their family."

Annie Chun's Broad agrees. "Our sense is that it breaks more along a socioeconomic than a race level. Probably the least frequent users of our product are the over-40, Asian, first-generation recent immigrant. They're going to go to the store on Clement Street in San Francisco and buy the things with the Chinese writing on the package."

But second- and third-generation Chinese-Americans are another story. "They don't cook from scratch, but they have an inclination for the flavor profile," Broad says. They like Annie Chun's meal kits with noodles and sauce because "we do all the hard stuff."

It should resonate with retailers, too, on the premise that a well-merchandised center store will sell the perimeter. Broad once did the math on a 48-count shipper and figured that if every consumer followed the instructions and added fresh chicken and vegetables, it would amount to a $500 ring. "We're driving the customer to buy the bok choy!" he notes.

Speak The Language
Providing native-language signs, advertisements and employees is a no-brainer. It's all the other things your store says—out loud, and more subtly—that influence shopper behavior.

As the National Pork Board, based in Des Moines, Iowa, discovered when it attempted to take "Pork: The Other White Meat" into Spanish-speaking communities, there's more to speaking the language than just ... speaking the language. "The Other White Meat" made no sense to Hispanic consumers. Instead, the Pork Board hired San Jose Group of Chicago to develop an alternative. "El Cerdo es Bueno" means "Pork is Good" and appealed to attributes found in research—that Hispanics love the taste of pork but worry about its safety. Awareness doubled and pork sales increased 14 percent after the campaign.

First-generation immigrants often have no supermarket experience to draw from. Used to shopping in street markets, greengrocers and butchers with ducks hanging in the window, recent arrivals find a typical American supermarket too big, too bright, too Anglo.

It's a conundrum that's been wrestled with for a while in places like Southern California. Vons, now a unit of Safeway Inc., opened a number of Tiangui stores to serve Hispanic consumers, says Pat Turpin, who tracks the food business for USBX Advisory Services, an investment bank in Santa Monica, Calif. "The store, when it opened, looked great," he recalls. "Perimeter department focus, lots of produce, very fresh. Then they would move that manager to another store and replace him with a regular Vons store manager. And it would slowly become less like a Tiangui and more like a Vons."

These days, Southern California supermarkets fight a different battle—with hard-core ethnic competitors like Gigante, a 220-store Mexican chain that has opened five stores in the United States since 1999. Like competitors Super Mercado, El Super and Superior, Gigante stores are Mexican through and through, from the Bimbo bread to the queso fresco. Competing will require mainstream supermarkets to micro-market as much as they can, Turpin says. "If you have a Gigante opening in your area, a few SKUs (of Mexican food) are not going to cut it."

Bill Bishop, founder of Willard Bishop Consulting in Barrington, Ill., advises retailers to tailor their marketing mix, as well as their product mix, to the bilingual community. Especially among Hispanics and Asians, native-language radio advertising and community newspapers speak well to a target audience, as do neighborhood billboards and bus advertising.

Meijer Stores, based in Grand Rapids, Mich., chose its Holland, Mich., location to pilot a Hispanic concept that opened in April. In Holland, where 25 percent of customers are Hispanic, Spanish-speaking employees wear distinctive buttons, and Spanish signage directs guests to new items in produce, meats and grocery. Even the pharmacy will translate prescription labels on request.

"They have a specific buyer who is focused on ethnic food, trying to buy more authentic items," Turpin says.

"The growth rates (for ethnic food) are phenomenal. It's starting to happen, and that creates even more opportunities," he adds.

"People vote with their feet."

Sidebars:
Know and Respect Your Ethnic Customers