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Center Store is becoming a melting pot for spicy specialty products.Such foods, along with ethnic sauces and beverages from the Mexican, Latin American, Indian, Jamaican and Thai cultures, are quickly gaining in popularity, according to retailers."We've really expanded on our specialty foods category within the last two to three years," Craig McKenzie, operations manager at Region VII for Charlotte,

Center Store is becoming a melting pot for spicy specialty products.

Such foods, along with ethnic sauces and beverages from the Mexican, Latin American, Indian, Jamaican and Thai cultures, are quickly gaining in popularity, according to retailers.

"We've really expanded on our specialty foods category within the last two to three years," Craig McKenzie, operations manager at Region VII for Charlotte, N.C.-based Harris Teeter, told SN from his Atlanta office.

"We've had great success. Specialty foods do extremely well in the Atlanta area," he said. "It probably does better in the Atlanta market percentage-wise than any other market that we have." Retailers find the growth driven in part by an influx of new immigrants who are opening restaurants and assimilating into the community. At the same time, there's a desire by the native population to try new foods.

In New York City, for example, Food Emporium, an upscale division of A&P, recently ran an "Authentic Caribbean" promotion, in conjunction with Caribbean Export, the export development agency, that featured imported West Indian specialties, such as Busha Browne's spicy jerk sauce from Jamaica, Bello Special Pepper Sauce from Dominica and Baron Green Seasoning from St. Lucia.

Harris Teeter offers a vast array of specialty and gourmet foods in its Atlanta stores. In addition to the national Kraft, Hidden Valley, Wish-Bone, Pfeiffer, Seven Seas, Hellmann's and Ken's Steakhouse brands, it stocks 27 different brands of gourmet salad dressings, including Harris Teeter Premier Selection private label, which retails for $3.99 a 12-ounce bottle.

Retailers told SN they vary their ethnic food sections according to the ethnic populations in the areas near their stores and requests from the general populace. Some retailers merchandise ethnic foods in their own special sections, while others meld them in-aisle with their mainstream counterparts.

Merchandising specialty products next to their national brand counterparts works best at building sales, McKenzie said.

"We did have a specialty aisle when the store opened three years ago. But we did several testing surveys and came to the conclusion that the consumers preferred going to one aisle," he said, noting that the strategy also helps build impulse sales.

Harris Teeter also cross-merchandises specialty foods with perishables. Various President's Choice gourmet cookies, South Australian wines, bread dipping sauces, marinades and vinegars, including a large glass bottle (almost 2 gallons) of The Royers Italian vinegar that retails for $169, are merchandised over the chicken walk-around coffin case, while others are merchandised around the prepared foods department.

"Instead of just selling one item, we are making a more conscious effort at trying to sell two items," McKenzie said.

Other retailers also are tinkering with how they merchandise their specialty foods.

"We are merchandising specialty foods both in their own section and with the mainline grocery to see which sells better," said Roger Burks, senior vice president of The Mad Butcher, Pine Bluff, Ark. "But we're finding the store with the biggest section, set off to the side where we can say 'this is a little special' is where we will get the better results."

The Mad Butcher heavily emphasizes Mexican foods, Burks said. To make its specialty foods department look better, it reset the aisle, pulling Mexican foods out from their domestic counterparts.

"We made the department twice as big in the process," Burks added.

Phill Schneider, director of grocery sales and procurement at Big Y Foods, Springfield, Mass., said the best way to merchandise specialty foods is with the regular groceries. "It makes it easier for the customer to shop and the variety is at their fingertips," he said.

A&P also prefers in-aisle merchandising, according to Rich Flaherty, vice president of sales and merchandising for the Montvale, N.J.-based chain's Southeast group in Atlanta.

"In our larger stores we do a particularly good job of carrying as many specialty foods and gourmet foods as are available," Flaherty said. "For the most part we have the product displayed and available for the customer in the store."

To meet a growing Hispanic population in the Atlanta market, Super Discount Markets, Lithia Springs, Ga., has placed a greater emphasis on Hispanic foods in its Cub Foods stores.

"We're creating special sections within our stores on a demographic store profile to try and cater to those customer needs better. If we have a store that is 20% or 30% Hispanic, we'll try to add more square footage and create separate sections in those stores. That's been working out real well," Paul Sides, director of grocery merchandising, told SN.

Sides said Cub has been increasing its offerings of Hispanic-oriented sauces, condiments and other dry grocery items.

"While these items have relatively low turns, the high margins justify the shelf space because it is usually only one facing of product and they are usually smaller items," he said.

Some retailers advertise specialty and gourmet foods frequently, while others, citing low turnover and appeal to a relatively minor part of their customer base, let the specialty foods sell themselves.

"Advertising is done weekly," said Big Y's Schneider. "Specialty foods are included in our regular sales plan with all categories considered, and we also use recipes and sampling."

"We advertise specialty foods through our roto, as we do anything. We try to advertise somewhere between two and six items per week of pure specialty items," said Harris Teeter's McKenzie.

However, Cub Foods prefers to take a different approach. Though it doesn't advertise its specialty foods frequently, it tries to fulfill customer requests through its specialty food supplier, Fine Distributing, said Sides.

"If it is a specialty item from New York, California or even Mexico, we can usually get it through [Fine Distributing]," Sides said. "If there is any specialty item that they carry, we'll put it in our stores and give it a try. We'll then look at movement, just like on any other item, and if the movement is not there we will drop it."

And while many specialty items have relatively low turns, the profits they provide justify the shelf space, he said.

"The markup is always better on specialty foods. Depending on the chain, it can average between a 25% and 40% markup," Sides said.

Specialty foods allow independent retailers to carve out a niche and better compete against large supermarket chains, said Jim Dorcy, vice president of advertising and marketing for Bozzuto's, a Cheshire, Conn.-based wholesaler that supplies many New England IGA stores.

"One of the benefits of being independent is that you can conduct micromarketing better and more efficiently than a chain store can," Dorcy said. "If there's a specific ethnic demographic in a nearby neighborhood, you can respond with a big selection of ethnic foods. If you're in a town where there's a demand for organic produce or natural foods, you can provide that."

Dorcy said Bozzuto's specializes in providing natural and organic specialty foods to its retailers, along with imported ethnic foods, such as the La Delizia line of desserts that are imported from Italy.

"Because our IGA retailers are independents, we at Bozzuto's have a distinct opportunity to provide them with advertising and promotions and marketing tools that allow them to differentiate themselves -- not just from their closest competitor down the street, but from the IGA store in the next town," he added.

Schneider said that in Big Y various forms of rice are becoming more popular, along with hot and spicy condiments, Cajun and Indian cuisine.

"In this area Indian cuisine is getting more popular as more Indian restaurants appear. However, the most popular specialty foods in our region of the country are Italian, Spanish, Oriental and Mexican," he said.

"As specialty foods change and new ones are introduced, the older ones evolve into the mainstream food line. With one-fourth of the category updated, we give the customers what they are looking for.

"In terms of changes in specialty foods, we are planning to handle those through our regular category management procedure, which looks at sales volume, share of market, etc.," he said.