BOSTON -- A recent study here found that inner-city residents strongly prefer national brand groceries, and are willing to pay a little more for these items because they trust them.
The study, called "Catalyzing Private Sector Inner-City Retail Investment and Services," presents a business case for pursuing retail opportunities in the inner city. According to the report, densely populated urban areas can possess up to six times as much buying power per square mile as surrounding neighborhoods.
Lorn Davis, vice president of the Initiative for a Competitive Inner City, the organization that conducted the study, cited as an example of brand preference a focus group in Harlem, N.Y., that identified Green Giant as synonymous with top quality in the peas category.
"There's a huge amount of brand loyalty," Davis noted, "whether it's from [an immigrant's] old country or a recognized American brand."
Davis's data was gathered from focus groups, as well as a national survey of 1,200 consumers. He said that urban consumers prefer brands because they don't have a lot of money and they want to "buy right the first time." Thus, brand choice becomes a form of insurance.
America's inner cities possess more than $85 billion in annual retail spending power, according to the ICIC study, and more than 25% of retail demand in urban areas remains unmet. The research focused on six inner city markets -- Atlanta, Boston, Chicago, Harlem, Miami and Oakland, Calif. -- and looked at supermarkets, as well as other retail businesses.
Despite the ICIC's finding that inner-city customers prefer national brands, Rich Savner, director of public affairs for Pathmark Stores, Woodbridge, N.J., said that his store brand of grocery items, such as cereal, do very well.
But Savner did agree that developing stores in the inner city is good business. Pathmark is scheduled to open a new store in Harlem this December, and recently opened a new unit in Camden, N.J., another urban neighborhood.
The units in Newark's Central Ward and Brooklyn's Bedford-Stuyvesant sections are "better-than-average performers in terms of sales per square foot," Savner pointed out. "
Some other findings of the ICIC study: In the inner city, consumers will buy large sizes of Center Store items such as rice, which are a staple at every meal, and they have certain preferences that differ from the mainstream.
For example, New Englanders prefer maple-based pancake syrup, while in the South and in certain Latino communities, sugar-based syrups, particularly a brand made by Tennessee-based Alaga, are preferred, Davis said.
"I visited a market in Boston last week that caters to African-Americans and Latinos, and I was struck by the number of facings they had of this syrup. I could go into 10 other stores in Boston and not find any," he said.
ICIC is a nonprofit organization headed by Harvard Business School Professor Michael Porter. Research for the study was conducted by The Boston Consulting Group and Price Waterhouse, here.
