December 13, 2006
GHQ Cover Story 12/06: Ethnic Education
By Jessie Male
Through special arrangement, what follows is an excerpt of a current cover story from Grocery Headquarters magazine, presented here for discussion.
If a consumer lives in Arizona, she can go to her local Food City for groceries, but she may find plenty to distract her on the way to the front door.
Pulling into the parking lot, she might come face to face with a mariachi band. Or she might get there on a Sunday and find a fiesta, complete with games, clowns. On another day there might be A Su Salud (To Your Health), a fair where medical practitioners offer services like pregnancy tests, mammograms, free child immunizations and advice on low-cost health care.
Operated by Bashas’, Food City’s 63 stores are representative of the boom in supermarket chains oriented around ethnic foods. For these stores, the mission is not only to provide diverse products, but also become immersed in the communities they serve.
The key, said Thom Blischok, president, retail solutions, strategic consulting and integrated solutions at Information Resources, Inc. (IRI), is to convey the message, “your store, your way, your culture.”
The question many retailers are facing is when is it appropriate to open an ethnic supermarket.
When executives at Minyard Food Stores were planning the chain’s new flagship Carnival Super Market, they began six months of extensive research into the local Hispanic market. “The thing that was important was to go out and make sure we knew what our customers’ needs were,” said president/chief executive officer Mike Byars.
Many ethnic communities put a tremendous focus on fresh produce. In Caribbean markets, large breadfruits tumble over grapefruits and cherimoyas lie next to mangos. In Chinese-oriented stores, bok choy, a vegetable which has been appropriated into American cuisine, can be found near durian, a round, spiked fruit with a distinctly unpleasant smell.
Jim Hertel, senior vice president at Willard Bishop Consulting, notes that whereas traditional supermarkets generally have a 50/50 mix in sales between center store and produce, successful ethnic supermarkets may have 70 percent fresh.
An ethnic supermarket is still, at its core, a store providing food for its community. The diversity of its offerings, however, is imperative to success. “Go through the trouble of ordering brands from the country of origin in order to make sure people are seeing things they would characterize as familiar,” he said.
He adds a significant factor in growing share is to understand what food to promote at what price. In Chicago, he said, mainstream retailers treat mangos as a specialty item, whereas in many cultures they are a staple. “Mainstream stores might price them at $1.79, but they will be $1.19 every day in an ethnic grocery.”
Ethnic food has the capability to evoke powerful reactions from consumers. For some, a bite can bring about unusual textures and flavors and the sensations of being transported to exotic lands. For others, it can resonate the familiar, the feeling of coming home. The possibility of expanding a chain to include ethnic stores should not be discounted.
“It is not much of a risk at all,” Mr. Hertel said. “In some ways it is only an extension of what you should do all the time in the sense of knowing who your shopper is and how you identify their needs. That is probably the single biggest trick that most retailers miss.”
Discussion Questions: Which grocery stores serving specific ethnic populations would you say are doing the best job? Is there a commonality among these
companies? Which broad ethnic groupings, aside from various Latino segments, do you think offer the greatest opportunity for grocery store growth?
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Jim Hertel’s point about pricing is critical: ethnic stores often run much lower prices than mainstream stores that “feature” ethnic specialties. Sometimes the independents buy better and often their gross margins are much lower. Most metro areas have ethnic neighborhoods with specialty grocers promoting outstanding prices. The biggest consumers are certainly very price-conscious.
You’ve hit the two largest and among the best-developed ethnic retailers focused on the Hispanic market, but there are many others who also do an excellent job, including Ranch Markets in Southern California.
The common best practices across excellent ethnic retailers can be found in the Coca-Cola Retailing Research Council study, “Grow With America: Best Practices in Ethnic Marketing and Merchandising,” and include:
>Defining a clear ethnic look in organizing the store to execute it.
>Providing an authentic, in-store experience and connecting with the community.
>Recruiting and retaining diverse staff.
Anyone interested in more detail can pull down a copy of the report, free of charge, at http://www.ccrrc.org, under the North American tab.
Bashas’ and Kroger in Phoenix and H-E-B in Texas do a fine job with ethnic marketing. Each of the listed ethnic minority groups represents new potential for existing retailers. The trick is tuning into the hearts and minds of these consumers and the type of sense of theater they expect from their store.
Who — among any of us here today — wants to shop in a store that seems unfamiliar, or doesn’t consider food products and assortments in the same way as we do, or a store that makes one feel uncomfortable? The answer: Not millions of Caucasians, not millions of African-Americans and not millions of the growing number of other ethnic American groups.
Though not a direct answer to the question asked, unlocking this mystery of “who is my shopper and what does she want?” continues to baffle and befuddle the industry. Of course, one can look at “Loyalty Card” data, but those of us on this site and in the industry know that the information is only as good as the person analyzing it and, as of now, few retailers have the “horsepower” analytically to do justice to that. (Yes, it is improving and we can all point out the exceptions, but in general this is an area that needs more focus.)
I am reminded of a story I heard from a former Category Manager who commented that the local stores were responsible for keeping the wine section properly stocked with the appropriate assortment. One particular store manager fancied himself as a wine aficionado and ordered wines based on his personal tastes and the fact that the store was in close proximity to a series of office parks and buildings where higher income people worked, so assumed that the clientele would support the higher end wines. Instead, what was uncovered is that the manager worked the “day shift” when the store was frequented by office workers, but at night — given that it was located on a bus line and non-residential — derelicts were coming into the store to purchase lower end wines and that they represented the greater share of sales. The store manager did not “see” those customers and did not select the assortment with them in mind.
While it is not the exact same situation as the ethnic discussion above, it is similar in the vein of knowing your customer and what she seeks within your stores.
I am just about to finish writing a white paper about reaching the Hispanic consumer. In the paper I take a look a Kroger’s Mercado concept. Kroger has done its homework on the Phoenix market. Mercado is the prototype for all of Kroger’s Fry’s locations in the area and the stores are targeting the Mexican demographic of the Hispanic population. The Hispanic population makes up almost 30 percent of the Phoenix CBSA, and of that 30, over 80 percent is of Mexican origin. Kroger is in a good position.
I think the Asian market has yet to be really tapped by most supermarkets. The exception is independents that specifically serve this segment.
However, the real opportunity within this group is the Indian and Pakistani consumers who are sometimes called the “new Hispanics” because of their burgeoning economic influence. The Indian Diaspora in the U.S. is creating a new and upwardly mobile middle class of higher income, higher spending households. This is a ground floor opportunity for many retailers.
I’m lucky to live in Southern Arizona where Bashas’ operates several Food City units. My number one observation about the store nearest me is that it does not cater exclusively to Mexican Americans. Due to its location between a major Air Force base, a major University, and a major Hispanic-dominated section of the city, this store caters to a mix of shoppers.
What trait do these three groups share? They all appreciate Mexican cuisine. Here in Tucson, even most Anglos can distinguish between Mexico City, Sonoran, and Tex-Mex styles of cooking. (It’s like New Yorkers knowing their Szechwan Chinese food from Hunan or Cantonese.)
Food City has plastic bags of pre-cut nopalitos (prickly pear cactus) prominently displayed in the produce department, alongside attractively-priced avocados, chilies, mangos, plantains and papayas. The meat counter features cuts less likely to be found at the Bashas’ a few miles away – including various offal like the stomach lining used in the traditional dish menudo. On the packaged foods aisle, Mexican and American brands are mixed side-by-side, and the tortilla aisle is several times larger than the display of bread (the reverse of most conventional stores around here).
Food City stores in Phoenix, 120 miles north of here, may be less likely to cater to this kind of cross-section of population. This underscores an important caveat for grocers who contemplate an “ethnic” prototype: All retailing is ultimately local. The approach that works in one neighborhood may be a little different from that which is optimal in another.
The Latino retail stores certainly dominate in terms of knowing their consumers. Everything from bodegas to the Gigantes to the independents like Superior, Vallarta and others.
Asian focused retail is growing, as well. There certainly are opportunities to customize by trading area.
Jons market just outside of West Hollywood has responded to the growing Russian population in the area. The ability of a retailer to adapt to trading area change and reflect the ethnic demographics and psychographics of those shoppers is critical to success.
Know your customer. Cater to your customer. Think like your customer. The “ethnic” aisle is a thing of the past. It’s time to focus on the entire environment and engagement of shoppers on their terms.
Bill Bishop referenced a study done several years ago entitled Grow with America – Best Practices in Ethnic Marketing which I also feel is an excellent reference point. Shoppers tend to go where they feel at home, where they can find the various food items that are part of their cultural heritage, where they and their family are respected. My observation is that independent stores (private, non-chain owned) are generally doing the best job at reaching recent arrivals and 1st generation ethnic shoppers. This is not to belittle the very strong efforts being made by the likes of Publix with their Sabor concept or Minyard’s with their Carnival stores. But I find that retailers such as Superior, Northgate, Ranch markets (Asian) in SoCal, Provenzano’s Ranch Markets in Phoenix, Avanza in Denver and Del Rey Farms in Chicago have a more authentic “feel.” They do a great job of being close in the community since ownership lives there (e.g. involvement in soccer leagues, health fairs or church fundraisers); they have a more authentic store set & ambiance — piñatas and papel picado hanging from the ceilings, in-store taquerias and bakeries; local radio stations playing on the PA system, kiosks around the store periphery for money transfer or notary public services, a meat/seafood and produce area that is fresh and extensive, e.g. pallets of nopal (cactus) for Lent. I was in Ranch Market in Orange Co. yesterday and was reminded again of what constitutes a great Asian ethnic store with their expanse of aquariums filled with live lobster and fresh fish, a huge set of ready-to-go sushi and probably 16 linear feet of Kim Chee. This is would be my choice of where to shop if I came from Korea, Japan or Vietnam.
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Jim Hertel’s point about pricing is critical: ethnic stores often run much lower prices than mainstream stores that “feature” ethnic specialties. Sometimes the independents buy better and often their gross margins are much lower. Most metro areas have ethnic neighborhoods with specialty grocers promoting outstanding prices. The biggest consumers are certainly very price-conscious.
You’ve hit the two largest and among the best-developed ethnic retailers focused on the Hispanic market, but there are many others who also do an excellent job, including Ranch Markets in Southern California.
The common best practices across excellent ethnic retailers can be found in the Coca-Cola Retailing Research Council study, “Grow With America: Best Practices in Ethnic Marketing and Merchandising,” and include:
>Defining a clear ethnic look in organizing the store to execute it.
>Providing an authentic, in-store experience and connecting with the community.
>Recruiting and retaining diverse staff.
Anyone interested in more detail can pull down a copy of the report, free of charge, at http://www.ccrrc.org, under the North American tab.
Bashas’ and Kroger in Phoenix and H-E-B in Texas do a fine job with ethnic marketing. Each of the listed ethnic minority groups represents new potential for existing retailers. The trick is tuning into the hearts and minds of these consumers and the type of sense of theater they expect from their store.
Who — among any of us here today — wants to shop in a store that seems unfamiliar, or doesn’t consider food products and assortments in the same way as we do, or a store that makes one feel uncomfortable? The answer: Not millions of Caucasians, not millions of African-Americans and not millions of the growing number of other ethnic American groups.
Though not a direct answer to the question asked, unlocking this mystery of “who is my shopper and what does she want?” continues to baffle and befuddle the industry. Of course, one can look at “Loyalty Card” data, but those of us on this site and in the industry know that the information is only as good as the person analyzing it and, as of now, few retailers have the “horsepower” analytically to do justice to that. (Yes, it is improving and we can all point out the exceptions, but in general this is an area that needs more focus.)
I am reminded of a story I heard from a former Category Manager who commented that the local stores were responsible for keeping the wine section properly stocked with the appropriate assortment. One particular store manager fancied himself as a wine aficionado and ordered wines based on his personal tastes and the fact that the store was in close proximity to a series of office parks and buildings where higher income people worked, so assumed that the clientele would support the higher end wines. Instead, what was uncovered is that the manager worked the “day shift” when the store was frequented by office workers, but at night — given that it was located on a bus line and non-residential — derelicts were coming into the store to purchase lower end wines and that they represented the greater share of sales. The store manager did not “see” those customers and did not select the assortment with them in mind.
While it is not the exact same situation as the ethnic discussion above, it is similar in the vein of knowing your customer and what she seeks within your stores.
I am just about to finish writing a white paper about reaching the Hispanic consumer. In the paper I take a look a Kroger’s Mercado concept. Kroger has done its homework on the Phoenix market. Mercado is the prototype for all of Kroger’s Fry’s locations in the area and the stores are targeting the Mexican demographic of the Hispanic population. The Hispanic population makes up almost 30 percent of the Phoenix CBSA, and of that 30, over 80 percent is of Mexican origin. Kroger is in a good position.
I think the Asian market has yet to be really tapped by most supermarkets. The exception is independents that specifically serve this segment.
However, the real opportunity within this group is the Indian and Pakistani consumers who are sometimes called the “new Hispanics” because of their burgeoning economic influence. The Indian Diaspora in the U.S. is creating a new and upwardly mobile middle class of higher income, higher spending households. This is a ground floor opportunity for many retailers.
I’m lucky to live in Southern Arizona where Bashas’ operates several Food City units. My number one observation about the store nearest me is that it does not cater exclusively to Mexican Americans. Due to its location between a major Air Force base, a major University, and a major Hispanic-dominated section of the city, this store caters to a mix of shoppers.
What trait do these three groups share? They all appreciate Mexican cuisine. Here in Tucson, even most Anglos can distinguish between Mexico City, Sonoran, and Tex-Mex styles of cooking. (It’s like New Yorkers knowing their Szechwan Chinese food from Hunan or Cantonese.)
Food City has plastic bags of pre-cut nopalitos (prickly pear cactus) prominently displayed in the produce department, alongside attractively-priced avocados, chilies, mangos, plantains and papayas. The meat counter features cuts less likely to be found at the Bashas’ a few miles away – including various offal like the stomach lining used in the traditional dish menudo. On the packaged foods aisle, Mexican and American brands are mixed side-by-side, and the tortilla aisle is several times larger than the display of bread (the reverse of most conventional stores around here).
Food City stores in Phoenix, 120 miles north of here, may be less likely to cater to this kind of cross-section of population. This underscores an important caveat for grocers who contemplate an “ethnic” prototype: All retailing is ultimately local. The approach that works in one neighborhood may be a little different from that which is optimal in another.
The Latino retail stores certainly dominate in terms of knowing their consumers. Everything from bodegas to the Gigantes to the independents like Superior, Vallarta and others.
Asian focused retail is growing, as well. There certainly are opportunities to customize by trading area.
Jons market just outside of West Hollywood has responded to the growing Russian population in the area. The ability of a retailer to adapt to trading area change and reflect the ethnic demographics and psychographics of those shoppers is critical to success.
Know your customer. Cater to your customer. Think like your customer. The “ethnic” aisle is a thing of the past. It’s time to focus on the entire environment and engagement of shoppers on their terms.
Bill Bishop referenced a study done several years ago entitled Grow with America – Best Practices in Ethnic Marketing which I also feel is an excellent reference point. Shoppers tend to go where they feel at home, where they can find the various food items that are part of their cultural heritage, where they and their family are respected. My observation is that independent stores (private, non-chain owned) are generally doing the best job at reaching recent arrivals and 1st generation ethnic shoppers. This is not to belittle the very strong efforts being made by the likes of Publix with their Sabor concept or Minyard’s with their Carnival stores. But I find that retailers such as Superior, Northgate, Ranch markets (Asian) in SoCal, Provenzano’s Ranch Markets in Phoenix, Avanza in Denver and Del Rey Farms in Chicago have a more authentic “feel.” They do a great job of being close in the community since ownership lives there (e.g. involvement in soccer leagues, health fairs or church fundraisers); they have a more authentic store set & ambiance — piñatas and papel picado hanging from the ceilings, in-store taquerias and bakeries; local radio stations playing on the PA system, kiosks around the store periphery for money transfer or notary public services, a meat/seafood and produce area that is fresh and extensive, e.g. pallets of nopal (cactus) for Lent. I was in Ranch Market in Orange Co. yesterday and was reminded again of what constitutes a great Asian ethnic store with their expanse of aquariums filled with live lobster and fresh fish, a huge set of ready-to-go sushi and probably 16 linear feet of Kim Chee. This is would be my choice of where to shop if I came from Korea, Japan or Vietnam.