ETHNIC HBC SALES KICK IN

DAN ALAIMO

Once, ethnic Americans had to fight for their rights. But now mainstream American supermarkets are starting to fight for their dollars, and realizing that a good many of those dollars are being spent on specialized health and beauty care products.

Marketing effectively to ethnic populations requires a sociologist's knowledge and a merchant's skill. The wants and needs of different ethnic populations -- including African-Americans, Hispanics and Asians -- are as vast as the world itself. This is further complicated by younger generations that live by American media, eat American food and want American HBC products, yet maintain their cultural ties. Then there is a Hispanic population that is from several distinct countries, all with different product preferences.

With all that, is it worth going after? Ethnic HBC was a $1.56 billion business in 2001 and will be a $1.87 billion business by 2006, according to "The U.S. Market for Ethnic HBC," put out recently by Packaged Facts, a division of MarketResearch.com, New York. The 2000 U.S. Census found that in the decade 1990 to 2000, the number of Hispanics and Asians grew four times as fast as the population as a whole, while the number of African-Americans grew six times as fast. The size of the Hispanic and Asian-American population will increase more than 30% between 2001 and 2010 and the number of African-Americans will go up 12%, according to Packaged Facts.

"Ethnic is huge for us," said Larry Ishii, general manager, GM/HBC, Unified Western Grocers, Commerce, Calif.

"Our numbers are up across the board," said George Fiscus, vice president, general merchandise, Bashas', Chandler, Ariz.

"It's a growing category. It's going to grow at double-digits every year now," said Mike DeJulio, health and beauty care senior category manager, Price Chopper Supermarkets, Schenectady, N.Y.

So is it worth it? The answer clearly is yes.

While some retailers are enjoying great success in selling ethnic HBC products, national scan data shows ethnic HBC sales in supermarkets have been declining of late. Dollar volume for total ethnic products, comprised mostly of hair care items, was down 8.7% in supermarkets for the 52 weeks ending Sept. 7, 2002, according to the Strategic Planner of ACNielsen, Schaumburg, Ill. Sales were also down 1.3% for the year ending Sept. 8, 2001, and down 6.6% for the year ending Sept. 9, 2000.

Drug stores are faring better with sales rising 8.2% for the 52 weeks ending Sept. 7, according to the Strategic Planner. Meanwhile, Wal-Mart Stores, Bentonville, Ark., saw an 8.8% increase in ethnic HBC sales for the 52 weeks ending Sept. 7, reported ACNielsen's Wal-Mart Channel Service.

"It's still probably one of the biggest opportunities for supermarkets," said Pete Sutton, president, Sutton Consulting Group, Orange Park, Fla., and a former nonfood executive with a major Southeastern supermarket chain. "But in my experience, most supermarkets don't get it."

While drug stores and mass merchants are picking up some ethnic HBC sales, much of it is going to small specialty stores, especially among African-Americans who favor "B&B" -- for beauty and barber -- shops, Sutton said.

"For most supermarket people, it's not on their radar screen because there are a lot of products that will generate more volume than the ethnic items. And if you are a buyer, that's what you are responsible for," Sutton said. Dollar stores, and other retailers with a similar merchandising and pricing strategy, are also getting a significant piece of the ethnic HBC market, Sutton said.

A nonfood executive with a Texas retailer confirmed the trend of dollar stores getting more ethnic HBC business. "It seems like they are putting more and more items into that section and that is pulling more and more business from the mass merchants and definitely from the grocery stores," he said. That is forcing his chain to look at value-oriented "dollar" programs.

Many retailers are just getting going with ethnic HBC programs. K-VA-T Food Stores, Abingdon, Va., has one store with a significant number of African-American customers and devotes a small section there to HBC products, said Jeff Compton, HBC/GM category manager. "For us, the Hispanic trade is growing more. We are trying to get in some of the more heavily scented products that they buy," he said.

Sales of products appealing to African-Americans are up 30% over last year, said Robin Rodgers, corporate category manager, wholesale health and beauty care, Supervalu, Chanhassen, Minn. "We just finished a new set right after the first of the year," she said. Supervalu is looking into the Hispanic market, she added.

Gristede's Foods, New York, has one store in what it considers an ethnic neighborhood, said Bob Schwartz, executive vice president. "We are testing new merchandising and new [products] in that store. We are interested in knowing what to do with those categories."

Ingles Markets, Asheville, N.C., also is doing well with African-American products in certain stores, "and Hispanic is picking up in pockets," said Dan Spears, HBC/nonfood merchandiser. "We are trying to identify the Hispanic market, to be aware of it and to focus on that consumer."

But while other retailers and wholesalers are just experimenting with ethnic HBC products, it has long been a significant part of Unified Western Grocers' Southern California business, said Ishii. The Hispanic, African-American and Asian markets are each very different, he noted, and most of Unified's focus is on Hispanics and African-Americans. The Asians tend to be more assimilated.

"In the case of African-Americans, their purchases of HBC products are more driven by actual physiological differences that need to be addressed, such as dryness of the skin, hair or shaving. Whereas for the Hispanics, it's more the familiarity with certain types of products or brands, and less due to any physiological difference," Ishii said.

For African-Americans, the key categories are shaving, skin care and hair care products, Ishii said. The types of hair care products most important to this group include hair straighteners and hair relaxers, he said. For Hispanics, hair gels are very strong, as are medicinal products, such as an antacid called Saldepicot that "sells very well," he said.

Bashas' is well established in the Latino market with its Food City stores that devote 60% of their product mix to Hispanic products, said Fiscus. One key to success in that market is paying careful attention to the customers, he said. "We listen to the customers. We know what they love. We have been servicing them for six years now, so we build on that," he said.

At Merchants Distributors, Hickory, N.C., Helen Woy, health and beauty care buyer, said, "It's a growing, growing business. We had triple-digit growth for about five years and now it is probably double-digit, but it is a huge category for us."

Although Associated Wholesalers, York, Pa., is doing well with ethnic products, Charles Yahn, vice president, Non-Foods Division, said there is still much to learn. For example, Hispanics from places like Cuba, Mexico and Puerto Rico "are all different, with different needs and different wants. It gets tougher and tougher the more you learn about these ethnic groups because they are not all one big segment," he said. To serve them properly requires a store-specific approach to products, he said.

But while supermarkets need to pay closer attention to ethnic products, and particularly to the Hispanic market, they also need to be aware of the degree of acculturation among the second and third generations in this country, said Thomas Tseng, director of marketing, Cultural Access Group, Los Angeles. For example, a survey of young Hispanics, ages 14 to 24, in the L.A. area found that the majority preferred English over Spanish, and overwhelmingly favored English-language media over Spanish-language media, he said. While this impacts their preferences of consumer products, they also retain their ethnic identity and taste, he said.

It's true that the second and third generations of Hispanics are more acculturated than their parents, confirmed Don Montuori, acquisitions editor, Packaged Facts, a division of MarketResearch.com.

"However, with food and with HBC products, there is still a need to cater to the marketplace, and in the case of Hispanic shoppers, there remains a cultural tie and identification that affects shopping decisions," Montuori said.