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Consumers are acquiring a stronger taste for the exotic. Retailers report sales of ethnic foods, particularly foods from Thailand and India, as well as Mexico and other Hispanic cultures, are on the rise, with no crest in sight.Plus, the ingredients used in ethnic foods are increasingly becoming mainstream. For example, traditional Thai foods such as coconut milk, peanut sauce, jasmine rice and lemon

Consumers are acquiring a stronger taste for the exotic. Retailers report sales of ethnic foods, particularly foods from Thailand and India, as well as Mexico and other Hispanic cultures, are on the rise, with no crest in sight.

Plus, the ingredients used in ethnic foods are increasingly becoming mainstream. For example, traditional Thai foods such as coconut milk, peanut sauce, jasmine rice and lemon grass are now being incorporated into American dishes like pizza and grilled chicken.

The sales of Thai and Hispanic foods are highest on the coasts, where new immigrants are settling and the general populace is more willing to experiment with new cuisines. Further helping the growth of ethnic foods is the general trend toward healthier eating, coupled with more cookbooks on the subject and a slew of ethnic cooking programs on television.

"Ethnic food sections have evolved dramatically in the past two years," said Mike Shultz, senior vice president at Hughes Family Markets, Irwindale, Calif. "The 'cookie cutter' approach to ethnic merchandising is a thing of the past. Every ethnic group needs to be analyzed for the regional differences in their diets and preferences.

"It is important to determine just who your customer is. Do you want to cater to the very traditional, first generation of your chosen ethnicity, or the second or third generation? The product selection will be as different as night and day," Shultz explained.

"Thai is pretty hot right now and Mexican food has been constantly strong here in California," said Richard Baltierra, senior buyer at Trader Joe Co., Pasadena, Calif., a specialty foods chain that operates more than 75 Trader Joe's stores, primarily in California.

"All ethnic food trends are on the rise, including Mexican, standard Chinese and different divisions of Asian foods, like Vietnamese and Thai," said Jeff Savage, category manager at Randalls Food Markets, Houston.

Savage said Randalls is stocking additional ethnic items to take advantage of new offerings from different cultures.

"Before, we really didn't look at it; it was all called Chinese food. Now we're more inclined to look at it as Asian and try to break it down into its subcomponents, because that is really how it is selling," he said.

"The real surprise is who is buying the ethnic foods," Savage said. "Yes, there is a demand for these foods within the ethnic groups themselves. However, the majority of the sales are coming from the mainline consumers."

"We have seen both our Thai and Mexican categories expand over the last couple of years," said Dean Allen, a merchandiser at Petrini Markets, San Rafael, Calif. "We have been adding more items to both categories. We have a basic schematic and the stores have the flexibility to add to that to adjust their customer preference," he said.

According to Seth Jacobson, president of Epicurean International, a Berkeley, Calif.-based importer of Thai Kitchen products, Thai food is the fastest growing segment of the $1.05 billion Asian food category, exhibiting an annual growth rate of about 25%.

"Thai food tends to sell better when it is merchandised in a set, instead of being integrated with other foods. For example, jasmine rice will sell better with other Thai foods, rather than being sold with the regular rices. When merchandised as a group, instead of buying one item, people will buy five or six items so that they can make an entire meal," he explained.

Retailers contacted by SN find Thai food has been increasing in popularity for the last few years. As a result, several have begun to pay more attention to the category.

"I would say that Thai is the fastest growing of the Oriental foods. We carry a large selection of sauces and canned goods," said Allen of Petrini.

"Thai is becoming popular. In fact, we're going to add an extensive line of Thai foods into our stores, including sauces," said Curt Lerew, senior vice president and director of the Food division of Fred Meyer Inc., Portland, Ore. "We're not sure, but I think we're going to merchandise Thai like we do Chinese or Japanese foods, in its own section in the ethnic foods aisle," he added.

Shultz of Hughes Markets said Thai food is increasingly becoming Americanized.

"Thai food has become a yuppie buzzword, but the mass market version of Thai food is very much a toned-down version of the real thing. The spices and textures have been made much more mild than the traditional foods of Thailand," he said, adding that manufacturers of ethnic foods are now making packaging more "trendy and hip."

Trader Joe's Baltierra also finds Thai food becoming altered for American taste buds.

"We have been increasing the number of Thai items we carry. We are consistently looking at Thai restaurants and searching for the new trends. Here in California a lot of the foods have been changed to California-style. We purchase from one of the better known Thai restaurants in town, Tommy Tang's, and he produces products for us," he said.

Hughes' Shultz finds micromarketing is key to a successful ethnic foods aisle.

"The largest-growing segment in southern California is our Asian community, followed closely by our Latino community. These two groups have to be further broken down. For example, Asian could be Chinese, Japanese, Taiwanese, Vietnamese. The list goes on and on and similar breakdowns apply to the Latino community," he said.

Hughes, which merchandises its ethnic foods in separate, in-line sections in the ethnic aisle, also uses advertising to court Asian shoppers and the general populace.

"We advertise in the area Asian paper every week, and we feature Asian specials in our weekly chain ad. We advertise for all major ethnic holidays and tailor our ads to the traditions of those holidays," he said.

Like many retailers, Hughes also tailors its stores to its specific neighborhoods.

"We try to carry a wide array of products that are specifically tailored to the neighborhood we are serving. We always source items to specific customer requests and maintain a hands-on rapport with community leaders wherever possible," he said.

John Schweska, buyer-merchandiser of specialty foods, wine, liquor and beer at Andronico's Market, Albany, Calif., an upscale independent that operates five stores in the San Francisco Bay area, also finds Thai foods to be attracting a cross section of the population.

"In Berkeley, with the University of California at Berkeley, the Asian population is very high. But our San Francisco store is in an Asian neighborhood, and most of the sales come from the regular shoppers. In the Asian neighborhoods there are a lot of little Oriental markets. We tried stocking the real authentic items like those shops carry, and they did not do that well, so we went back to the 'gringo' versions," he said.

Schweska said Andronico's stocks the A Taste of Thai and Thai Kitchen brands and is planning on adding more SKUs. Andronico's merchandises Thai products by brand in a Thai subsection in the Asian food section of the ethnic aisle.

"The Thai products are a steady seller. The sales of Thai foods are up in our stores and they are selling much better than they were five years ago. Thai Kitchen has a few new items, like dinner mixes, which we are adding in. A Taste of Thai also has a dinner kit that we are looking at," he said.

99 Ranch Market, a 14-unit Asian supermarket chain with outposts in California, Nevada, Georgia and Canada, stocks several Thai products, including Thai noodles, drinks and a sour-tasting peanut-based paste, according to George Wu, manager of the company's superstore in the Atlanta suburb of Doraville, Ga.

"We mostly cater to an Oriental clientele and most of our Thai products are mixed in with our other groceries. Thai food is similar to Vietnamese and we have a large group of Vietnamese customers in the Atlanta area," he said.

The popularity of Thai is beginning to catch the attention of some U.S. grocery manufacturers. For instance, Hormel Foods, Austin, Minn., manufactures the line of House of Tsang Oriental sauces, one of which is a Thai sauce.

While A.C. Nielsen, Schaumburg, Ill., does not track Thai food as a separate category, it reports sales of Indian and Middle Eastern foods, which are often similar in flavor and ingredients, are on the rise. The Casbah, Marrakesh Express and Sahara brands all posted double-digit sales gains for the 52-week period ended March 11.

Allen of Petrini Markets said his chain merchandises Indian and Thai foods in close proximity.

"We also find Indian to be growing, and we consider Indian to be in the same category as Thai. We consider it Indian/Thai foods because of the similar ingredients," he said.

Randalls is another chain that has been paying more attention to Indian cuisine.

"In our flagship stores we've just put in a large section of Indian foods with the Patak line. It seems to be doing really well for us. In some of those stores we have a large British clientele and they are really into Indian cuisine," Savage said.

According to Nielsen, Mexican food also has been on an explosive growth curve. The number of tortillas moving off of store shelves increased by more than 96 million during the five-year period from March 1990 to March 1995. Sales of refried beans increased by more than 37 million 16-ounce units, Mexican dinner kits increased by 4.9 million units and Mexican specialty products increased by 2.8 million units during the same five-year span, Nielsen reports.

"In ethnic foods we do a good job with Spanish and Mexican products," said Bob Kopplin, head buyer at Dan's Supreme Super Markets, Hempstead, N.Y.

"The big gunner is still Mexican, which continues to grow," said Lerew of Fred Meyer, adding that Mexican has become a year-round staple.

"You can advertise Mexican food around ethnic holidays, and that makes for great press, but really these things are selling day-in and day-out. People aren't waiting for Cinco de Mayo to buy the Mexican foods," he said.

Roger Burks, senior vice president of retail operations at The Mad Butcher, Pine Bluff, Ark., said an influx of Mexican migrant workers has caused his nine-unit operation to re-examine how it markets its Mexican foods.

"Mexican is probably the fastest-growing category in the store. We just expanded our Mexican line about three months ago", he said.

"We had a lot of Mexicans who came in and saw items like Mexican soft drinks, cereals, cookies, candies, and they just could not believe that we carry these items. We have a complete line. A lot of these people just started jumping up and down and hollering when they saw this line of foods from home.

"These Mexican foods have exceeded what we thought it would do. It is unbelievable," Burks said.