When it comes to private label ethnic foods, retailers are starting to move beyond just the basics.
The internationalization of the American palate has begun to inspire private label offerings in Mexican, Asian, and other ethnic cuisines to compete with established brands.
Overall sales growth in the ethnic food category hit 3.5 percent in 2011, according to a January 2012 report from Mintel International, Ltd. Chicago, the slowest growth in five years. Mintel predicts 5 to 6 percent growth annually through 2016, reaching $4 billion; while 93 percent of respondents to a consumer survey said they consumed ethnic food either at home or in a restaurant in the past month.
Retail sales should continue to grow as immigration continues, native-born Americans further diversify their palates, and the slow-growth economy keeps families eating at home more and eating out less, Mintel says. Mexican/Hispanic and Asian brands such as Tostitos, Pace and Kikkoman dominate the category, while private label earned only 6.8 percent of sales during 2011, but that could change if consumers became more convinced of its authenticity, according to the Mintel report.
Younger households, families with children, and those earning more than $75,000 represented especially promising targets for private label ethnic brands, Mintel says. The report suggests that ethnic food be moved out of generic-sounding “international” aisles and introduced more appealingly to a broader range of consumers through signage, in-store education, cooking classes, and sampling efforts.
For private label Hispanic products, Jim Wisner, president of Wisner Marketing Group in Libertyville, Ill., says they need to be directed to a retailer’s entire audience, not just Hispanics.
“When you typically talk about private label, people say Hispanics don’t buy private label. That’s not true at all,” says Wisner, whose company conducted a large-scale study with Nielsen on multicultural marketing a few years ago. “Acculturated Hispanics, particularly as you move up the income scale, actually tend to spend at a higher rate on private brands than does the population at large.”
Euromonitor International also believes that younger Americans who make up the Millennial generation comprise a promising target for ethnic foods, given that more of them have Hispanic and Asian backgrounds, as well as more adventurous eating habits and a desire for healthier options provided by food cooked in spices rather than fats and oils.
Euromonitor predicts that consumers will move beyond more established Chinese and Mexican offerings, which are not seen as much more “ethnic” than Italian food, to other ethnic and regional cuisines such as Indian, Korean and Vietnamese. Private label players such as Whole Foods and Trader Joe’s have entered this space already through ethnic frozen ready meals like Korean bulgogi—a barbecued beef dish, Eurmonitor says.
Mintel’s and Euromonitor’s findings about Americans under age 34 were mirrored in research firm Consumer Science’s findings in an exclusive survey for PLBuyer (see the October 2011 issue). Of those who responded, 69 percent said they were buying about the same amount of private label ethnic foods as the year prior, while 26 percent said they were buying more.
Hispanic, Italian and Chinese private label items were the most popular, in that order, Consumer Science found, although younger consumers also reported interest in Japanese and Indian private label foods. Most consumers cited price as their main motivator for buying private label ethnic foods, although younger consumers were somewhat more likely to cite quality rather than price.
But retailers that segregate Hispanic products into a “Hispanic products section” potentially will lose otherwise interested Anglo consumers, Wisner says.
“Unless it is products that nobody in the United States would typically buy, it doesn’t make sense” to segregate, he says. “Better-selling items that appeal to a broad base of people ought to be marketed where they belong,” which leads to “reverse acculturation,” he says. “The United States is learning to be more Hispanic.”
Private label ethnic food need not be “ethnic as in cheap ethnic,” says Ann Stettner of Wild Thymes Farm, Greenville, N.Y. “It’s high-quality ethnic at a cheaper price.”
Her company started with Chinese food and has expanded to Thai, Indian and Moroccan, food from “places most people haven’t physically been.” In some cases, with curries and chutneys that are “very, very, very spicy,” it’s best to adapt them somewhat to the American palate.
“First and foremost, you have to be able to come up with something that has an interesting flavor profile,” says Stettner, whose company has developed a line of barbecue sauces that range from cinnamon-spiced Moroccan sauce to “Thai One On,” to the Mexican-inspired “Smoking Hot Mamacita.” “They want to appeal to as many people as possible and not be too, too niche. You have to deliver a good product and have good business practices.”
Wixon, a flavor and seasoning company based in Francis, Wis., sees private label ethnic food companies as becoming much more likely to lead flavor trends, where they once “were a fast follower, and sometimes not even that fast,” says Kim Holman, director of marketing. “We see private label introducing their own flavor profiles and not waiting for the branded products to drive awareness—and if they do follow, they do so very quickly.”
The most popular cuisine is Asian, Holman says, with Italian, Mexican, Thai, Greek and Spanish also high on the list. She adds that bold spices and healthier offerings are especially popular with consumers.
“We are developing ethnic flavors on a quarterly basis for our consumers,” she says. “We want to make sure that our customers understand how ethnic flavors and cuisines can drive sales for their business. Thus, we provide industry and consumer insights on ethnic flavor trends and then provide flavor profiles that would fit their business—and target consumer.”