HOW DEMOGRAPHICS ARE CHANGING FOOD DISTRIBUTION

David Merrefield

Those of us who work in or near the food-distribution business have long heard how changing demographics will change the business.

Although it's manifestly true, it remains quite instructive to take a look at how one company in a region that's leading demographic change has been transformed. That company is Unified Western Grocers, Los Angeles. As you'll see on the front page, that wholesaler is profiled in this week's SN.

Let's take a quick look at the numbers to see the degree to which demographics changed Unified. As recently as 1990, 70% of Southern California retailers supplied by Unified were merchandised for a nonspecific demographic. In 1995, that shrunk to 39%, and today it's at just 10%. What happened? Let's turn the numbers around. In 1990, 14% of Southern California stores supplied by Unified catered to a largely Hispanic clientele. In 1995, that rose to 36%, and today it's a huge 74%.

This is a sea change that carries with it heavy implications. In the case of United, it has included a significant shift toward Latino ownership of the stores it supplies. Also, sales distribution at retail changes dramatically: 75% of sales in the Southern California stores that cater to Hispanic shoppers are generated from perimeter departments. So the shift to fresh is on at those stores.

Why the shift to fresh? On Page 37 of this issue, you'll see a news article on another topic that points out that consumers of Hispanic heritage are motivated by the "four Fs": family, fresh, flavor and friendliness. These factors illustrate about as succinctly as is possible why the distribution of United's affiliate stores in Southern California has tipped toward perimeter departments.

As the news article points out, Hispanic homemakers tend to spend protracted periods in daily meal preparation and consider that activity to be central to family life. Moreover, it's considered to be an unacceptable shortcut to use prepared or frozen food, even as ingredients in cooking, which means fresh is central to meal preparation.

It's been observed, though, that as people of Hispanic heritage become more acculturated, the tendency to eschew other than strictly fresh ingredients decreases, implying the potential of a marketing win for many mainstream product categories at the end of the day.

All of this illustrates vividly the challenge traditional supermarket operators face when they awaken to the changing composition of the population and decide to cater to a different clientele. For instance, it may take quite a bit of time and marketing effort to convince Hispanic shoppers that frozen items are made from fresh ingredients, and that they have quite acceptable taste properties when properly prepared.

We've all seen the numbers that make the case that the effort involved in marketing to Hispanics promises to be well invested, but let's review. In the decade from 1990 to 2000, the number of Hispanics in this country increased 58%, to 35.3 million. By 2010, that number is expected to reach 43.7 million and by 2020, 55.2 million.

Clearly, this is a demographic that must become central to the food-distribution business sooner rather than later.