CHICAGO -- Supermarkets need to merchandise their stores individually to meet the needs of customers, including ethnic customers, according to a study scheduled for presentation May 7 at the annual Food Marketing Institute convention here.
SN interviewed the three retailers who comprised the steering committee of The Coca-Cola Retailing Research Council that commissioned the study, which was conducted by the Los Angeles-based Cultural Access Group/About Marketing Solutions.
Scott McClelland, chief merchandising officer for H.E. Butt Grocery Co., San Antonio, said it no longer makes sense for the industry to merchandise to an average customer. "There's no such thing as an 'average American customer,' and to the extent we learn more about how people of different ethnic origins eat, we will all do a better job meeting their needs," he said.
"When you look at census data, you realize the makeup of America is changing from one of assimilation to one of acculturation. Assimilation is more like a soup, where different groups try to become Americans, while acculturation is more like a salad, where each group tries to keep what's unique about its culture along with what it means to be American."
Independents compete with chains by tailoring their assortment to local neighborhoods, McClelland pointed out, "and the big companies are slowly realizing this is an opportunity for them and a way to fulfill the needs of consumers. So to the extent we can carry items that meet the needs of specific demographic groups, we can do a better job fulfilling the customers' expectations."
Bobby Ukrop, president and chief executive officer of Ukrop's Super Markets, Richmond, Va., acknowledged that the industry, as well as his company, has room for improvement in reaching ethnic customers.
"The supermarket is where life in the community comes together, but we haven't done as good a job as we can to customize our stores to meet the needs of certain customers because we don't know what we don't know. But the study will help us learn what we don't know," Ukrop explained.
He said the Coca-Cola study represents the first time the industry has had "really good research that talks about how to address different types of customers. It says people want to hold onto the culture and traditions they grew up with, even as they become assimilated.
"Some neighborhoods are changing, and no store serves a single ethnic group. But at Ukrop's we're committed to racial harmony, so it's not just about product -- it's about the opportunity to help people who have been shut out."
Ric Jurgens, president and chief administrative officer of Hy-Vee, Des Moines, Iowa, said his company sees ethnic merchandising as a growth opportunity. "We don't have as diverse an ethnic population in the Upper Midwest as some operators do elsewhere, but it's starting to develop and evolve, and we see some real marketing opportunities," he told SN.
"While we might not lose much business if we didn't have an ethnic program, we'd certainly lose the opportunity to capture some of that business. And we know that if you're the first and the best, you can get more of the business you want."
What's essential to a good ethnic merchandising program, Jurgens said, is having the right product selection, "and there's only one way to know what you need, and that's to talk to your customers and your store staff.
"You can play with item selection on your own or talk to vendors, but vendors have product lines to sell. What you need to do is talk to the people shopping your stores about what kind of products they want to buy. They know what brands are more traditional back home, and they can direct you to the right products.
"We've also found that stores that do best [with ethnic merchandising] are those staffed from the assistant manager level up with the ethnic group the store serves, and those people have also been very helpful to us in learning what people eat and what they want."
A New Experience for Hy-Vee
Ethnic merchandising is a new experience for Hy-Vee, Jurgens said. "Hispanics have begun moving into the area only in the last three to five years, and those populations are still somewhat limited to a few isolated areas in a couple of dozen towns. But they're growing rapidly, and they're getting significant enough that we've been able to expand sections and product offerings, as well as promotions and advertising, and we offer cards in Spanish to direct people to different aisles."
Along with African-American consumers, Hispanic shoppers are more traditional in their buying habits, Jurgens said. "Both groups tend to buy more ingredients, and shopping for meals plays a big part in their lives, rather than a last-second afterthought, and they make a big deal out of eating at home rather than eating on the run."
He said he believes the study will prompt some changes at Hy-Vee "once we make our executives and store directors aware of the findings.
"But instead of simply telling them what to do, we'll have someone from the research team come to us and present the findings to our store directors and executive staff, and then we'll make changes from the bottom up instead of the top down, with merchandising ideas coming from things that have worked in individual stores and then sharing those ideas with other locations."
Jurgens hopes the study will raise the industry's consciousness about ethnic merchandising. "At Hy-Vee we've believed for years in continuing education for industry leaders. It's important for the industry to learn as much as it can about all the facts connected with this business, and anytime research is available that enlightens us about the wants, needs and desires of our customers, we must take advantage of that.
"We all steal ideas from each other, so the more people learn, the more we can all learn and the better we can all get."
Reaching Out From a Suburban Base
Ukrop's stores tend to be in suburban locations, Ukrop told SN, with only a handful on the edges of urban areas, "so we haven't done as good a job merchandising to African-Americans, Hispanics and Asians as we should have. We've made some strides, but the study is driving home the point that it's important that we do more.
"The study makes clear that you need to tailor your offerings and merchandise mix to the neighborhoods you serve on a store-by-store basis. And that's more than just having the right products.
"It involves what we as a society can do to best utilize the talents of people who don't look like us. We need more ethnic representation in leadership positions because that's just good business, and each leader can influence decisions throughout the company, so the more store managers and executives we have from minority groups, the more understanding we as a company will have."
Having the right people as employees will also help a company develop the right product mix, Ukrop added, but companies must listen to what they say. "When we've asked our people what they need that they can't buy at our stores, we haven't always listened to what they're saying, so that information hasn't been getting into our system," he explained.
"But over the long haul, I believe the Coke study will put legs under the ideas people have so we can put those ideas into practice and make them part of our system. Ukrop's doesn't have all those systems in place, but we will do it.
"Right now, we don't have the variety we should have. So we've talked to our associates, and we've also talked with Hispanic and African-American groups to find out what we need to do better."
At the same time Ukrop's is merchandising the produce section at certain stores to cater to ethnic shoppers and adding more stockkeeping units the communities want, "so we're putting our toe in the water," Ukrop said.
Deep in the Heart of Texas
Given the demographics in south Texas, H-E-B has considerably more experience catering to ethnic populations, particularly Hispanics, than either Hy-Vee or Ukrop's. "Just by the nature of our trade area, ethnic merchandise is the water we swim in," McClelland told SN.
"San Antonio is 58% Hispanic, and there are some stores near the Mexican border that have virtually no Anglo customers. So we've developed a competency over time out of necessity."
One thing H-E-B has learned is that it's better to price produce by the piece rather than by the pound, he said. "In Mexico consumers buy in kilos, so when they come here, they don't relate to a price by the pound but they know what a price-per-piece means.
"So it's a matter of getting to that level of understanding of what customers want and then delivering it to them."
Since H-E-B expanded into Houston a few years ago, "we've found a difference between Hispanic customers there and those in San Antonio in terms of acculturation," McClelland said. "In Houston there are more first-generation Hispanics, whereas in south Texas, the people are more acculturated.
"The first-generation people make their own tortillas, which means we have to carry lard, whereas the people in San Antonio are more likely to be third generation who use tortillas only on special occasions and who buy packaged or store-fresh tortillas."