PALM SPRINGS, Calif. -- Merchandising and advertising programs targeting Hispanic consumers can hoist sales and profits for chain retailers, panelists told attendees at the Mexican American Grocers Association's 12th annual marketing, sales and promotion conference here.
At Ralphs Grocery Co., Compton, Calif., sales at 10 core stores moved from a negative 25% to positive figures in the last few months after the chain instituted two-day weekend sales featuring staple items "at extraordinary prices that increased movement twentyfold in two days," said Mike Frank, vice president of merchandising. He added that Ralphs may expand the promotional program to 50 other Hispanic-dominant stores.
An effort at Vons Cos., Arcadia, Calif., to feature fixed prices on certain staple goods at 11 stores in Hispanic neighborhoods has lifted sales "in the double-digit range" and pushed those stores near profitability, said Bob Johnson, director of special marketing.
Lucky Stores' southern California division, based in Buena Park, Calif., has had stronger sales at Hispanic-dominant stores since it developed direct mailers targeting Hispanic consumers, said Doug Russo, senior vice president of sales and merchandising. All three spoke as part of a panel of chain and independent operators who discussed how they cater to Hispanic customers. Among independent operators:
· Dick Gordon, owner of El Tapatio Markets, a three-store group based in El Monte, Calif., said his stores "give something back to the community" by offering shuttle-bus service to drive customers from the stores to their homes.
· Morrie Notrica, owner of 32nd Street Markets, a group of six Los Angeles-based stores, said sales at one store rose by $7 million after it launched a radio ad program.
According to Frank, Ralphs' challenge in reaching Hispanic consumers was complicated by its image as an Anglo marketer. "But over the last two years, we've tried to overcome that image through target merchandising at new and existing stores," he explained.
From a single conventional-store prototype three years ago, Ralphs developed four prototypes based on demographics, Frank said. In the process, it identified 60 locations with Hispanic populations of 35% or more at which it set out to develop a stronger price and value image, he noted.
Ralphs sought to communicate value, Frank said, by eliminating canopies, wood fixtures and neon signs; adding self-service baked goods, tortilla machines and clothing; offering free fish-frying on the weekends; and removing a center gondola to make room for a big-buy area.
"And we integrated Latino foods to make the point that these items were not just an afterthought," Frank said. Integration of Hispanic products resulted in a sales increase of 5% compounded over the last three years, he added.
To communicate price, Ralphs removed the 60 stores from the chain's regular program and developed a special mailer program for those stores plus end displays that consistently feature items or multiple items priced at 99 cents.
At Vons, one of the newest features of its Hispanic marketing program is preciofijo todos los dios, or fixed prices every day, Johnson said. Besides shelf talkers, the program -- which maintains staple items at the same price all the time -- is reinforced by Spanish-language TV spots featuring Bill Davila, the chain's former president and longtime spokesman.
"The sales trends are very positive [at the core stores], and several are close to profitability," Johnson said. "But we're still babes in the woods in terms of understanding the Hispanic customers' needs and wants.
"A lot can be done in the boardroom, but success in the Hispanic community comes at street level," he explained. "You have to get out to the stores and the neighborhood and know what's special and unique. That's the key to the success of independent operators, who get in the trenches, listen to their customers and communicate back."
To a certain extent, supermarket chains can be too insulated from the demographic groups they serve, he noted. "The chain structure is our greatest enemy in that regard. We've got to break through that to accomplish what the independent does. And we often have to learn that one item at a time and one display at a time."
It's also important to stick to basics, Johnson added. "While a typical Vons produce department carries over 300 items, Hispanic stores need only 100 items to do a high tonnage. So you need to identify those items and drive them home over and over," he said. "Too often we try to get fancy. But the independent knows the value of sticking to basics, and that's what we've got to do. It's important to build a base that's rock solid, not paper thin."
Lucky is using direct-mail circulars in Hispanic areas "to really target the customers we're after and give us greater flexibility in adjusting our product mix to meet the needs of those neighborhoods," Russo said.
Lucky used to run its regular chain ad in Hispanic areas, with items geared to Hispanics on the front and back pages. "But now we're featuring more appropriate Hispanic items throughout the circulars, with a key emphasis on staple items," he said. The circulars also eliminate private-label items "in favor of items Hispanic consumers need" and give more space to produce, he added.
Russo noted that Lucky relies more heavily on electronic media geared to Hispanics more often than its competitors, with a 40% share-of-voice for Lucky in 1995, compared with 24% for Ralphs and 18% for Vons.
El Tapatio Markets uses 14 shuttle buses to take customers to front doors of its three stores, Gordon said. "It started when one customer on a bicycle couldn't get all his purchases into the basket on the front and a store manager offered to drive him home," he explained.
With Hispanics accounting for nearly 90% of his customer base, Gordon said his stores rely on beef from three company-owned cattle ranches. Full carcasses come into the stores and are cut to order by up to 20 butchers as individual customers make requests.
Gordon also uses coupons in his stores' weekly mailers. "Mailers are a good vehicle to reach Hispanic consumers with coupons because freestanding inserts don't get to them," he said.
He said his stores have had "a large amount of success" with price-point coupons -- for example, offering an item for 99 cents with a coupon -- "because the value of the coupon is not overshadowed by the product we're trying to sell."
At 32nd Street Markets' primary store, a 50,000-square-foot unit south of downtown Los Angeles near the University of Southern California, radio advertising boosted sales by $7 million, according to Notrica. He added that he advertises by calling Chef Piero, a local personality with a cooking show on the radio, twice a week.
A representative from Gillette Co. in the audience at the MAGA conference asked the panelists how a national manufacturer can promote his products in the ethnic market.
Lucky's Russo said manufacturer programs should have flexibility. "If your product indexes well with a particular ethnic or demographic market, develop a plan. Lucky is very flexible in that area, and we're anxious to grow our sales with special programs for special markets. But we need to know what your objectives are."
Vons has a separate management team that focuses on what's best for its ethnic stores, Johnson said. "We also ask national companies whether they're promoting their brands in Mexico, which is a good strategy long term that bears fruit down the road," he explained. "For example, Miller beer got into Mexico to position itself against Budweiser, and that helped improve its position with Hispanics in southern California."
In response to another question, 32nd Street Markets' Notrica said manufacturers from Mexico that want to be represented in U.S. supermarkets must have a Universal Product Code number on their packages, along with nutritional labels and an insurance policy.
Mexican companies that don't already have U.S. distribution should align themselves with a distributor like Mercado Latino, a Los Angeles-based distributor with which Lucky works, Russo said.