Private Label Buyer

RETAILERS GETTING IT RIGHT WITH HISPANICS

December 22, 2010


RETAILERS GETTING IT RIGHT WITH HISPANICS

Selling to Hispanics means knowing the tastes and marketing messages that will connect with the Hispanic subgroups in your area. 


Some retailers already have figured out their winning formulas. One truism they’ve found is that on both the food and the non-food sides, value is a key driver of Hispanic shopping decisions, according to Sean Seitzinger, senior vice president, innovation and consulting for Chicago, Ill.-based SymphonyIRI.

 

“Now, I think for retailers that have done well with Hispanics and private label, they understand that concept and I think that private label works for Hispanics when you can execute value well, where value is the main decision criteria,” he says.


 “We talk about what retailers are doing that uniquely well and a company like Kroger has done a lot in its good, better and best strategy to dissect what value means in good and they’ve been able to pay special attention to the Hispanic consumer by understanding which categories are kind of more commodity-based and developing very value-oriented solutions with bilingual language targeted to Hispanics around providing low-cost value in a non-differentiating category.”


Lakeland, Fla.-based supermarket chain Publix also has been effective in marketing to Hispanic consumers as have Food Lion, Stop & Shop, Food City, Food 4 Less, Publix, Nash Finch and H-E-B.

Publix uses techniques such as Hispanic packaging, in-store Hispanic promotions and Hispanic advertising, according to Maria Brous, director of media and community relations.


“At Publix, we’ve developed various authentic Hispanic private label products and created bilingual packaging with a special graphics design treatment that is very appealing to the Hispanic consumer. 


Examples of authentic Hispanic private label items that have been very successful for us include frozen yucca, sweet potatoes, white Spanish cheeses, malta beverages, Cuban crackers, seasoned black beans, Spanish bean soup, mojo marinades and white cooking wine.”


Publix continuously focuses on changing area demographics to ensure that it has the right products at the right stores, she explains. and never deviates from its’ core standards and customer service values. It also tries to keep a pulse on what the competition is doing.


Other retailers that do a great job at marketing their private label products to Hispanics include many of the chains in California, New Mexico, Arizona and Texas, says Mark Singleton, vice president, sales and marketing for Lima, Ohio-based Rudolph Foods, the country’s leading producer of pork rinds.


“You could go across the south and just see some great examples of people who do great jobs with their private label such as San Antonio, Texas-based H-E-B, San Bernardino, Calif.-based Stator Bros. 


Markets, Phoenix, Ariz.-based Pro’s Ranch Markets and Houston, Texas-based Fiesta Marts do a great job with their private label programs.”

Pro’s Ranch Markets, along with several of the other retailers Singleton mentions, use both English and Spanish in weekly sales advertisements.


A critical success factor among Hispanics, especially first generation, is being able to check off a list of a pretty tailored assortment and also merchandising of perishables, according to Terry J. Soto, president and chief executive officer of Burbank, Calif.-based About Marketing Solutions, Inc., a management 


consulting firm specializing in the U.S. Hispanic market.

“A relevant perishables assortment at the right price is paramount to Hispanic consumers,” she says. 


“It’s a serious undertaking and one which few chain retailers get right.”

Soto says when it comes to their Hispanic offerings retailers need to:

 

• Offer the meat preferences of your Hispanic customers

• Carry authentic freshly baked goods and freshly made tortillas

• Provide a Hispanic produce assortment merchandised relevantly in large mass displays that say fresh and at a good value

• Include Hispanic deli items - from cold cuts to cheeses, yogurts and creams sold in bulk

• Sell authentically prepared hot foods by the pound as well as beverages

 

In general, chain and big-box retailers which have adopted and/or expanded their ethnic mix and assortment have done so with an emphasis on center store and packaged “ethnic” groceries, which have been adapted by large CPG companies for American palates.


 “For the most part these products are purchased by non-Hispanic consumers who’ve developed a taste for ethnic foods and who want to prepare them at home and also to some extent, second and third generation Hispanics,” Soto says.


The retailers that are doing it right are spending time learning about the consumer, says Paul Bryan, vice president and director of account planning for San Antonio, Texas-based Bromley Communications, a major Hispanic advertising agency.


 “They understand not just what message to craft, but also the when’s and where’s of receptivity to those messages and how to best move consumers along the path to purchase. Shopper insights, shopper insights, shopper insights.”


Several leading retailers have opened specific Hispanic-focused food concept stores. Walmart has Supermercado de Walmart stores and Mas Club stores, Publix operations three Publix Sabor Markets and H-E-B in Texas opened a Mi Tienda store in Houston in 2006.


WHAT CAN BE DONE


There are several tactics that will increase private label sales to Hispanic consumers.

“One of the things we keep seeing, and this is another thing that kind of surprises me, is that even the English-dominant Hispanic wants to see more products with bilingual packaging,” says Leylha Ahuile, senior analyst of multicultural reports with Mintel International, Ltd.


“Chances are they don’t even read in Spanish. What happens is often consumers are reacting to this thing of oh, they are targeting us, they recognize us, and they are marketing to us. It’s a way for the manufacturer to say I acknowledge you and I respect you enough to make an attempt to try to reach you.”


Another thing that works with Hispanic consumers is sampling, she says.

“Having someone talk to them about the product in their language of choice and not just handing them a flyer can go a long way with Hispanic consumers.


” By allowing people to try out a product, retailers can take away that risk factor associated with something new, Ahuile adds. “People want to be able to ask questions, they want to know why that store brand peanut butter is different from the national brand peanut butter and they want to be able to taste it.”


Manufacturers also can appeal to Hispanic consumers by using symbols and language that are relevant to them, says Singleton.

“For example, on our pork rinds, Hispanics are the number one consumer so often times and especially in the south and southwest we put the Spanish word for pork rinds, Chicharrones, on the bag.”


Crafting your flavor profiles around the Hispanic consumer also is very important, Singleton adds. “Flavors that work extremely well among the general population may just be okay with the Hispanic consumer.”

 

DECISIONS, DECISIONS


When considering private label purchases, Hispanics appear to consider a three-pronged value equation including low price (sticker/coupon/special), quality ingredients or same ingredients as national brand, and how the store brand gives to the community, says Bryan.


According a recent Mintel report, The Hispanic Grocery Cart, when purchasing shelf-stable and household products, 65 percent of Hispanics consider price the most important factor. 


Regardless of household income, Hispanics are keeping an eye on prices and approximately half of all Hispanics are using more coupons for shelf-stable products. 


This presents a significant opportunity for retailers to attract Hispanic consumers through money-saving options like sales and private label products.


Hispanic shoppers show few signs of slowing their hunt for better bargains and feel that the best bargains come from store brands, according to a recent special report of The Checkout on Hispanic shoppers from The Integer Group.


Over two-thirds of Hispanics agree that: store brands are a great value for the money; they feel good serving store brands to their families; store brands are as good as national or international brands and store brands are as good as national/international brands, according to a New Dimensions Hispanic Grocery Study.


TRADING DOWN CATEGORIES


“Hispanics have been affected deeply by the recession and some of the ramifications of that include a greater degree of consideration for private label brands,” says Stephen Palacios, executive vice president,

consumer goods business, for Redwood Shores, Calif.-based Cheskin, a retail consulting

firm. 


By comparison, Hispanics are still more brand loyal, but, relative to data over time, they are more likely to consider private label today versus previous years.


Agrees Ahuile, “With the recession what we’re seeing in quite a few categories is that Hispanics are shopping much more private label.”


Store brands continue to gain strength with shoppers and their families. Though most shoppers continue to consider name brands as offering greater variety and innovation (at a higher cost), among Hispanics, that figure is much smaller. 


Significantly more Hispanic shoppers perceive less difference in product quality, and their families are becoming more used to having store brands in the shopping basket. Surprisingly, this is even more pronounced at higher income levels ($75,000+).


Interestingly enough, Ahuile adds, while more than 40 percent of Hispanics say they are shopping more private label food products, when it comes to personal care products, that number drops to only 3-4 percent of Hispanics.


“Many Hispanics are willing to trade down to private label when it comes to food and household, but not personal care,” she says. “I think with every consumer group it works that same way, that we’re willing to trade down on certain things but just not others.


 According to our 2009 Personal Care Report, appearances are very important to Hispanics. No one’s going to see what brand of macaroni and cheese you’re eating at home, but you’re not going to walk around with bad hair.”


And while Hispanics may trend towards being more brand loyal in certain categories, that doesn’t mean they can’t be lured by a well-planned private label program.

I

n fact, a majority of Hispanics have positive feelings about store brands, according to a Yankelovich 2009 Multicultural Study.

 

BEWARE OF MISCONCEPTIONS


Retailers looking to attract the increasing purchasing power of Hispanic consumers to their private label products also need to avoid some of the persistent misconceptions about them.


Some of the misconceptions relate to the fact that there’s a monolific consumer base that can be lumped in as Hispanic, says Palacios. “Another often heard misconception is that Hispanics are brand loyal for life. 


Hispanics show a proclivity to be more brand loyal for a period of time which is variable relative to category and the product. 


Part of the reason behind that is they see authority and stability that correlates with the brand being large and well-known and that has deep roots into their belief systems and authority and cultural predisposition to authority, but that doesn’t mean that they will stay brand loyal forever.”

 

SIDEBAR 1:

 

Best of the Rest

 

The list below represents independents that excel in delivering what Hispanics look for in the perimeter of the store. Many of these stores have their own private labels in key categories.

 

• Vallarta’s Supermarket - 31 stores in central and southern California

 

• González Northgate - Hispanic supermarket in the Los Angeles, San Diego and Orange County areas

 

• Pro’s Ranch Market - Hispanic supermarket with locations in Arizona, California, New Mexico and Texas

 

• Rancho Liborio - Liborio operates 11 stores in three western states, California, Nevada and Colorado

 

• Superior Super Warehouse - Hispanic warehouse supermarket with 28 stores in southern California

 

• Cardenas Supermarkets - Hispanic supermarket chain in San Bernardino and Riverside CountyCalif.

 

• Fiesta Mart - Mexican-American, primarily in Texas

 

• Compare Foods - Largest Latino supermarket with more than 60 locations in the eastern United States

 

• Sedano’s - Hispanic chain in south Florida

 

• Big Saver Foods - Hispanic chain of 16 stores in Los Angeles area

 

• Rio Ranch Markets - Operates eight Hispanic supermarkets in southern California

 

• El Pueblo - Largest Latino supermarket in New Jersey. Located in Newark.

 

• Freshco - Located in the central Florida area

 

• Mariana’s - Located in the Las Vegas area

 

• Supermercado El Rancho - Hispanic supermarket chain in the Dallas area

 

• Mi Tenda - Hispanic supermarket division of H-E-B stores. Only location in HoustonTexas.

 

• El Rancho - Growing independent Hispanic chain in Dallas/Ft. Worth area

 

• Tenochtitlan Market - Utah chain with three soon to be four upscale Latin supermarkets

 

• Terry’s/El Mariachi Supermarkets - Independent Hispanic grocery store chain in Dallas/Ft. Worth and Oklahoma City

 

Source: Terry J. Soto, president and chief executive officer, About Marketing Solutions, Inc.

 

 

SIDEBAR 2:

 

Top 5 Factors That Move Hispanics

to Try a New PL Product

 

• Quality and healthy ingredients: 64 percent

 

• Price lower than the alternative national brand: 63 percent

 

• Discount coupons and sales: 59 percent

 

• Same ingredients and characteristics of the alternative national

brand: 49 percent

 

• The store would donate a percentage of private brand sales to the community: 48 percent