Que pasa in supermarkets across America?
The accent on ethnic merchandising is growing. The change is apparent in stores located in southern border states like California and Texas with big Hispanic populations. You see it in big cities like New York and Chicago with their mix of nationalities. Now there's even an ethnic flair in supermarkets in unlikely places like the areas around Syracuse in upstate New York
"Ethnic merchandising is very important to our business. I am constantly reviewing our ethnic mix and merchandising to ensure optimal sales," said Robertino Presta, chief executive officer, Caputo's Fresh Markets, Addison, Ill.
"We continue to examine opportunities for strategic product growth and expansion, as well as innovative ways to better serve our customers and meet and surpass their needs and expectations," said David Atkins, director of specialty, natural and organic goods, Giant Eagle, Pittsburgh.
Due to demographic changes throughout the country, these retailers and others are focusing on ethnic merchandising and changing their product assortments. They are catering more to ethnic shoppers, who are largely Hispanic and Asian American, but hardly confined to these groups. They are also positioning ethnic products to appeal to cross-over shoppers from other cultural backgrounds.
"Though retailers are certainly catering to the specific tastes of various ethnic groups, they also are creating special sections as a presentation of choice for all shoppers," said Doug Leeds, president, the Tori Group (see sidebar, page 30). "Just as the general public likes to go to restaurants of varying cultures, they also enjoy shopping the various ethnic sections for variety. If displayed properly, these different sections add to the enjoyment of shopping, and offer all consumers a wide choice of foods from around the world."
The Right Alignment
Today's shoppers are indeed from around the world. Hispanic Americans are the largest group, but their ethnic mix is diverse. Experts said the challenge for retailers is to maintain the right mix for local shoppers.
If retailers are able to deliver the right product to the right mix of ethnic customers, sales should increase by delivering what customers want to buy, according to Gary Levin, who advises retailers on ethnic programs and is a partner with the consulting arm of Deloitte & Touche, Chicago.
"This will force retailers to custom-stock each store based on that store's customer needs," he said. "This micro-marketing or micro-merchandising will prove to be critical in order to drive greater sales."
For example, he pointed out that Southern California has experienced significant growth in the Hispanic population, which has led food retailers to focus on their needs and strategize on how to get them in the front door and to the cash registers. "You don't want to be selling snow blowers," he said.
Caputo's Fresh Markets might be selling snow blowers though, considering the bitter winters in Chicagoland. Yet, the retailer also has a distinct focus on ethnic products.
"Our product assortment changes for our ethnic shoppers based upon customer requests and product availability," said Presta. "We have identified specific high-volume ethnic items; for example, imported Polish mineral water and dry soups are very popular. Our stores feature sections specific to a variety of ethnic demographics. We offer complete European, Hispanic, Asian, Middle Eastern and Italian sections in our grocery department. These sections are also reflected in our produce department by our diverse selection of fruits and vegetables."
Among the extensive selection are traditional Italian cakes called panettone, which are filled with dried fruits and liqueur. The retailer imports 50 varieties. The seafood department has been expanded for the year-end holidays with items such as sea urchins and live eels that are very popular for traditional Christmas Eve dinners.
In 50 of Giant Eagle's stores, unique Worldwide Food aisles enable customers to buy authentic items particular to Italian, Mexican, Hispanic, Cajun, Asian, kosher and Mediterranean cuisines. In addition, its Kitchens within prepared-foods departments offer hot Asian buffets and sushi bars.
The retailer also carves out space for items related to Passover and Chanukah.
''We allocate endcaps and utilize space management to identify other areas of the store that present strategic opportunities to offer ethnic food items," said Atkins. "In addition, we run special promotions in the circular that are devoted to the various holidays and events, such as Chanukah and Rosh Hashanah."
Point of Difference
Penn Traffic, the Syracuse, N.Y.-based retailer-wholesaler, is increasing the selection and number of ethnic goods from different countries in its different banners. While Hispanic and Asian products dominate, there is a growing selection of Arabic, Thai, Cambodian and Japanese items.
The company tailors the assortments to local shoppers, according to spokesman Joe Ramirez, so the mix changes from store to store. He added that such micro-merchandising provides a competitive advantage.
"It is one way that Penn Traffic can differentiate from Wal-Mart or other supermarkets that stress price above all, but won't go into depth in ethnic products," Ramirez said. "They're trying to sell to the lowest common denominator, and really reach the biggest mass market. For a traditional supermarket like Penn Traffic, offering wider selection of these products as well as high-quality ethnic produce can help us distinguish ourselves from the competition."
Penn Traffic is also planning to leverage its database of shopper purchase behavior gathered by the Wild Card, its frequent shopper program. It will enable the retailer to customize promotions for demographic targets.
Carlene Thissen, a technology consultant familiar with card-based loyalty programs, applauded Penn Traffic's use of shopper data for promotion and merchandising programs. "Supermarkets doing ethnic marketing obviously have to understand their customer base on a store-by-store basis, particularly in terms of the countries of origin, level of acculturation and income. This is much more important in ethnic areas than in stores with traditional U.S. demographics," said Thissen, president of Retail Systems Consulting, Naples, Fla.
Retailers also need to talk to their ethnic customers, and find out what products they want and can't buy in the United States, said Thissen, who has written a book called "Immokalee's Fields of Hope" that tells the histories of Mexican, Haitian and Guatemalan immigrants.
She gave the example of Haitians, a growing ethnic group in Florida. They want to buy skin care and hair care products from Paris. These products are available in Haiti and, because of trade deals, they are not expensive.
"There are Haitian people in southwest Florida who travel all the way to Miami to get those products," she said. "If a store in an area with a dominant Haitian population could carry even a few of them, they might attract more of these people.
"Also, for Haitians, signage and instructions in French will attract them more than signage in English, even for those who are fluent in both languages."
According to Thissen, ethnic consumers are typically empathetic toward newcomers who are still struggling with the English language because they went through the transition themselves. They wish supermarkets would advertise the benefits of frequent shopper cards, for example, on Spanish radio stations. They sympathize with newer immigrants who are paying full price simply because they do not understand the nature of the program, she said.
"Newer immigrants automatically reach for the most recognized brand or product logo because it is what they have seen on television, or because that brand was a dominant international brand that was common in their home country," she said. "A less costly B or C brand, or even private label, might be right next to the A brand, but the immigrants will be afraid to buy it because they have not seen the label.
"For retailers, this is fine if their margins are higher on the A brand than the lower-priced brands," she said. "But they might make up for it in volume if they could sell more of the alternatives, or if they are interested in pushing private label. And the B and C brand manufacturers could allocate trade dollars toward ethnic labeling and signage."
Thissen also recommended talking with these ethnic shoppers in focus groups. Bring in the top ethnic shoppers, she urged, and ask them what they would like to see in the store.
MAINSTREAM SHOPPERS CROSS OVER
Are mainstream shoppers buying more ethnic products than in the past?
"Most definitely," said Joe Ramirez, spokesman for Penn-Traffic, Syracuse, N.Y. "That's one of the factors driving growth. It isn't always the people from an ethnic group [buying these products]. More mainstream customers are interested in trying them, too. Once they get accustomed to them and enjoy them, the demand increases as well."
Cuisines often become "hot" and even faddish, according to Ramirez. That leads to a spike in demand that is often sustained. For example, he pointed to the growing popularity of Mexican food in recent years.
"There's been a dramatic increase in the mass marketing of Mexican products, to the extent that traditional Mexican food manufacturers were bought up by bigger companies.
Nestle bought Ortega; Pillsbury bought Old El Paso. These brands were suddenly very exciting, and manufacturers saw a lot of growth potential," said Ramirez, who predicted that happening again with other ethnic cuisines that become hot.
At Pittsburgh-based Giant Eagle, kosher foods have "crossover appeal" as a result of the perceived health benefits that the food is pure. There has been growth in specialty pastas and sauces. Also, specialty salsas are growing well in comparison with national-brand salsas.
"One of the things we are trying to do with mainstream customers is to offer block promotions -- all-in-one kits -- promoting a particular group of ethnic products that work well together," said David Atkins, director of specialty, natural and organic foods. "That makes it easier for the customer who might not be as familiar with these foods. If there are specials on shells, salsa and refried beans at the same time, then you can put them together as a meal. Whether it's Chinese or some other Asian cuisine, you can do that. You get more success promoting products that way rather than one at a time. It helps the consumer out so they know what goes with what. They may not have that background from their own lives, but the store can help them that way."
Educating consumers is also practiced by Caputo's Fresh Markets, which is experiencing crossover purchases from mainstream shoppers.
"Our challenge is to inform -- that is, educate -- our customers on how to enjoy these products and incorporate these ideas or concepts in their daily meal planning," explained Robertino Presta, chief executive officer of the Addison, Ill., company. "We are well aware of the popularity of Hispanic restaurants in the food-service industry. Through our cooking classes and weekly product demonstrations, we are continuing their food education."
The most ambitious plan is a new learning concept called "Caputo University -- Where you learn more about food than the Food Network." The retailer will be offering cooking classes to teach mainstream customers how to prepare and enjoy ethnic foods.
HOW TO IMPROVE MERCHANDISING
Effective ethnic merchandising calls for attention to detail, according to Carlene Thissen, a Naples, Fla.-based supermarket technology consultant and expert on immigrants.
"Try to put yourself in their mind-sets," she suggested. "Imagine what it would be like if your family were transferred to a new country where you had yet to learn the language and where the products were not familiar. Imagine how confused you would be if you couldn't read any of the product labels. Imagine how positively you would react to seeing Idaho potatoes or Florida oranges or apple pie. Imagine how much more likely you would be to buy products with instructions in English instead of those you could not read."
To help retailers with their in-store ethnic merchandising, Thissen recommended the following:
Display signage in a foreign language.
"It is easier for any ethnic group to read in their first language, whether that be Spanish, French, Farsi, Arabic, Chinese or Korean," she said. "So if you want to attract their attention, you need to do it in their language." This rule also applies to instructions on fliers that sometimes accompany products.
Use ethnic products as loss leaders.
Authentic ethnic products are often very expensive, so promoting them occasionally will appeal to these shoppers. Cilantro, for example, is commonly used in most countries in Latin America where it costs 5 cents a bunch. In the U.S., it can cost $1.39 a bunch. "Using staple products such as cilantro as occasional loss leaders [perhaps with a purchase limit] helps bring Hispanics into stores," she said.
Look for opportunities for impulse purchases.
Ethnic shoppers will be attracted to stores that occasionally bring in, say, fresh produce from home countries. "Even though they may not have been looking for these products, immigrants who see them in a store or in a newspaper flier will buy these products because they remind them of home."
Explain the advantages of pre-prepared and packaged foods like cake mixes or frozen lasagna.
"Many people who come here from other countries make these products from scratch," she said. "They are used to doing that. Either it was less expensive that way at home or because pre-packaged foods were not available."
She suggested educating immigrants by sampling items like frozen lasagna and displaying a price-comparison in English and in the language of the ethnic shoppers who frequent the store. "Manufacturers could obviously help this effort by providing signage and information translated for the retailers," she said.