Armed with Census data, local demographic information and other insights, retailers are well aware of how important Hispanic marketing is. The challenge is how to do it.
Is it more important to focus on first-generation, or second- and third-generation Hispanics? Is it better to have an integrated or segregated merchandising approach? Has the recession affected Hispanics differently than other population segments?
To get answers to these and other questions, SN partnered with ECRM (Efficient Collaborative Retail Marketing) for a roundtable discussion on the nation's largest minority group.
Called “New Directions in Hispanic Marketing,” the roundtable was held at ECRM's “Hispanic, International & Ethnic Foods Efficient Program Planning Session” in Houston.
While retailers are also catering to other ethnic groups, Hispanics hold special significance being that they account for 15% of the population and will have about $1.2 trillion in buying power by next year.
For the roundtable, SN and ECRM assembled a group that could address the market from different sides of the business, including supermarkets, limited-assortment concepts and convenience stores.
Participants were Ed Reilly, ECRM's vice president of grocery; Sidney Hopper, chief operating officer, United Supermarkets' Amigo's United division; Juan Enchinton, manager of Hispanic innovation, United Supermarkets; Adonis Paseiro, ethnic foods category manager, Winn-Dixie; Irene Sibaja, senior director, Hispanic marketing, 7-Eleven; Hector Alejandro, purchasing director, Aldi's Denton, Texas, division; Maria Reyes, senior category manager, Hispanic, specialty food distributor Tree of Life; Hector Muniz, Hispanic category manager, UNFI Specialty Distribution Services; and Michael Hahn, general manager, Diversified Marketing, a convenience store consultancy. David Orgel, SN's editor-in-chief, moderated.
Following are excerpts from the roundtable:
SN: How has the recession impacted the Hispanic market in terms of shopping behavior?
UNITED'S HOPPER: Our guests are coming in more frequently since they aren't dining out as much. We're catering to them by putting together easy meal solutions that take a lot of the guesswork out of meal planning. They can get a complete meal — including dessert — for a family of four to six for $12 to $13.
7-ELEVEN'S SIBAJA: The Hispanic who tends to shop our store is the blue-collar Hispanic male. While unemployment is over 10% in the country, it runs four points higher for the Hispanic male, and an additional three points higher for Hispanic males who are in the construction field.
Over 1 million construction jobs have been lost around our country. This has hurt the frequency with which that individual is shopping our store. We're trying to hang on to the guy who's still shopping our store and do whatever we can to keep him coming back and increase the average transaction while he's there.
A lot of yard workers will bring in meals from home and heat them in 7-Eleven microwaves. So I try to bring in products that will aggregate their meals, like yogurts and cheeses from Latin America. We want to be seen as a home-away-from-home for that consumer.
SN: Are Hispanics somewhat more sheltered from the recession compared with other population groups?
SIBAJA: Construction was probably the first to be hit by the economy, more so than the middle and upper-middle classes.
But Hispanics tend to own property less, are less credit-card dependent and are more cash solvent, so they haven't cut back their food spending as much as others. They're still shopping. It's just a matter of where and how they're shopping.
DIVERSIFIED MARKETING'S HAHN: Hispanics reacted quicker to the economy because it affected lawn services early on.
HOPPER: The Hispanic [food retail] business has been fragmented for years in that they do some shopping at panaderias (Mexican bakeries) and other places. It's common for them to make four or five stops to fulfill their needs. But they are price-conscious and would like a one-stop solution.
We're seeing increased purchases and shopping frequency in our stores. Even though we have mom-and-pop stores in our area, our stores are seen as an alternative to making four or five stops.
UNITED'S ENCHINTON: Because Hispanics live paycheck to paycheck, they saw the impact instantly. But as the economy improves, we have to react because they're going to react faster that way, too.
WINN-DIXIE'S PASEIRO: A lot of our [Hispanic] consumers have cut back on perks like movies. But their meal occasions have stayed. That's because Hispanics celebrate around food. This has generated a lot of sales. Most Hispanic mothers are most proud of the meals they prepare. They feel that if they can give their family a great meal, they have accomplished something. So the economy has actually helped us.
TREE OF LIFE'S REYES: What we're seeing is that they're switching from brands they grew up with to private label, which is not as costly. What they're doing is not so much trading down on quality, but on price.
SN: What can be done to increase private-label penetration among Hispanics?
ALDI'S ALEJANDRO: You have to show that private label will be a good product and that it will be a good substitution to brands they bought at home.
UNFI'S MUNIZ: Hispanics are brand loyal because they have limited incomes and don't want to risk spending money on something that they may not like, even if it's cheaper. They go with what's familiar because they know what they're getting for their dollar. That's why sampling is so important. Sampling shows that the quality of private label can be as good as the quality of national brands. Without sampling, private label will suffer.
SIBAJA: They may be more willing to buy private label for items that aren't as high risk, like chips. But candy and soda are more expensive, so they're considered higher risk. It's best to win them over on lower-risk items, then build up their trust and get them to buy more-expensive items.
PASEIRO: It's all about loyalty and trust. They're less likely to buy a private-label spice because they fear it may ruin the entire dinner. So you need to prove the quality of private label. Value doesn't mean cheap to Hispanics. It means quality.
HOPPER: We used to segregate ethnic foods in one part of the store. The thought behind it was that Hispanic consumers would have everything they need in one place. But after we started integrating, we saw a switchover from national brands to private label.
What happened was that Hispanic guests were seeing options they never saw before.
SIBAJA: We've found that integrating, particularly in a small-format store, is better. By segregating, say, a 3-foot section of Hispanic food, you're telling Hispanics that this is where they should shop. You're saying to them, “We don't want you in the rest of our store.”
SN: What are some misconceptions about the Hispanic consumer?
SIBAJA: One misconception is that Hispanic equals Mexican. Another misconception is that they all live here illegally. Also, people think they all don't speak English. Second and third generation represents 60% to 65% of Hispanics, and they're a huge bicultural population.
REYES: We need to understand that not all Hispanics are first generation.
MUNIZ: The biggest opportunity lies with second and third generation. That's the consumer we should be chasing.
PASEIRO: There's a misconception that all Hispanics cook from scratch. I'm second generation and I like to keep my traditions alive, but I don't have time and my wife doesn't have time to cook traditional foods every day like my mother did. I'm looking for heat-and-eat foods or easy recipes.
So, yes, we want to go back to our roots, but we want an easy way to do it.
ECRM'S REILLY: Manufacturers tell me they try to bring in upscale more authentic Mexican product that have higher dollar rings, but run into roadblocks from retailers who say Hispanic consumers only want value products. Are you seeing that?
MUNIZ: If they're targeting the authentic consumer [first generation], retailers may not know where to place it. If the target is second or third generation, and it's a mainstream item, it needs to be positioned as a mainstream item. Sure, it has Hispanic flair, but it's still a mainstream item.
SN: Are retailers and manufacturers on the same page in terms of the Hispanic consumer?
PASEIRO: Retailers today are ahead of the curve, while manufacturers are still trying to catch up. Manufacturers say they want to be part of the Hispanic movement, but most are only doing so with bilingual packaging. And a lot of times, they don't do bilingual packaging right. When you read their translation, it doesn't make sense.
REYES: Manufacturers are not up to where a lot of retailers are, but they want to play ball and stay in the game. We have to help them get there.
SN: Supermercado de Walmart is a new Hispanic-focused food concept from Wal-Mart. Other mainstream supermarkets are also opening Hispanic-concept stores. What kind of impact does this have?
MUNIZ: It's basically the same thing everyone else is doing, only it's Wal-Mart. I'm a true believer that Hispanic will eventually become mainstream just like Italian. We can't focus only on first generation. My parents have gone to the same bodega for years, but I don't and my kids don't.
SIBAJA: The Publix Sabor model is phenomenal. It's a beautiful store that does a good job of integrating mainstream supermarket with ethnic products. They've got it right.
Because more retailers are getting involved, manufacturers will start to do more. They'll be more insightful.
SN: In Canada, Loblaw Cos. purchased T&T Supermarkets, the most respected Asian retailer in Canada, to get a ready-made Asian format. Do you think that's a viable strategy in U.S. with Hispanic chains?
PASEIRO: Few Hispanic stores are chains in my area, other than Sedano's. Will someone buy them in the future? Yes, it could happen.
CLEVELAND — SN partnered with ECRM (Efficient Collaborative Retail Marketing) to hold the “New Directions in Hispanic Marketing” Hispanic-marketing roundtable.
Each year, ECRM hosts about 100 “efficient program planning sessions (EPPS),” or meetings during which retailers and manufacturers meet to discuss ways to improve sales, reduce expenses, and go to market faster and more efficiently.
The EPPS events focus on one-on-one planning sessions scheduled between buyers and sellers to review new items, marketing initiatives and strategic direction. Each meeting lasts for 20 to 40 minutes. EPPS events also feature general session presentations, and some include expo halls.
ECRM offers attendees Internet-based software, called MarketGate Application Suite, to help prepare for EPPS meetings and follow-ups.
The roundtable was held recently at ECRM's “Hispanic, International & Ethnic Foods” EPPS in Houston. The event was open to all retail channels.