New Flavor

JON SPRINGER

The second generation to lead Sedano's Supermarkets has its eye on second-generation Hispanic consumers.

For Sedano's, the 47-year-old, Miami-based retailer recognized as the largest independent Hispanic food retailer in the U.S., the generational progression is a natural one: They are the sons and daughters of the chain's loyal customers. But in targeting that shopper — younger, more assimilated to mainstream society and bilingual — Sedano's finds itself joined in battle with conventional chains like Publix Super Markets and Winn-Dixie, which have created programs and even specific vehicles for the very same purpose.

Indeed, retailers nationwide are devoting attention and resources to the Hispanic shopper. In places like Florida, Hispanics not only account for tremendous growth but also exert a societal influence that's impossible to ignore.

“Retailers are all looking to understand this growing population better,” Dana Joffe, a retail client advisor for Geoscape/Latin Force, a Miami-based consultant that helps companies develop meaningful customer connections in a multicultural society. “Because they know this is where it's at — this is where the growth is.

“Companies are just starting to understand this can be a whole new area of revenue growth for them and they need help serving that customer better,” Joffe added.

For Sedano's, which last week was scheduled to open its 30th store in a new shopping center just outside Miami, serving the Hispanic customer is an area of expertise it needs little assistance with.

Sedano's traces its history to 1962, when Armando Guerra purchased a small store called Sedano's in the Miami suburb of Hialeah. Guerra, who was a successful businessman in his native Cuba before immigrating to the U.S. in 1961, kept the name and began to grow the business, hiring a cutlery salesman named Manuel Herrán in 1971. Herrán was born in Spain, went to Cuba as a teenager, and arrived in the United States in 1967. Herrán, who would marry a niece of Guerra, took over the company after Guerra died in 1979.

Today, the descendants and other relatives of Guerra and Herrán have assumed prominent roles in the company and associated businesses. Tino Herrán founded General Real Estate, which in addition to investing in residential properties around Miami is currently seeking out sites for new Sedano's locations in Orlando and Tampa. Javier Herrán is director of marketing for Sedano's, and Jose Herrán Jr. is vice president and chief operations officer.

In a recent interview with SN, Javier Herrán said Sedano's new advertising campaign, which launched in a series of radio and television ads last month, was a “first step” in positioning Sedano's for its next customer base.

“Basically, what we've decided is that we've got to start targeting a new market,” he said. “Our generation is coming into play now in the company. And it was pretty clear to us that we had to target market ourselves. Us, our friends, our peers.

“We are trying to get that younger crowd that's still Hispanic, but second-generation Hispanic, who loves to eat the food that we sell, but is just used to their parents buying it.”

The ad campaign, created by Sedano's new agency, Republica of Miami, features interviews with actual Sedano's customers gathered at a Miami store earlier in the summer. The customers share their personal stories of why they choose to shop at Sedano's.

The first two commercials feature two Miami residents, Amanda and Rolando, both of whom state that they enjoy shopping at Sedano's because it offers the best-quality products at the best prices. When asked, “Why do you shop at Sedano's?” Amanda replies, “Because I'm searching for the best deals and I always find them at Sedano's.” Rolando cited “the best products of the freshest and highest quality,” as well as “the best deals.”

Amanda is pictured in the produce aisle at a Sedano's store with her arms full of avocados, highlighting the chain's selection of local fruit. Testimony about price and selection highlights Sedano's advantages vs. competitors, Javier Herrán said.

“We are always going to focus on price, which drives our business — that's always been our main focus — but this campaign also puts a light on our customers,” he said. “That's the official title of the campaign: ‘Where the customer is the star.’ This highlights the people who shop here and lets them tell in their words why they come to Sedano's and what their favorite items are. It makes them the driver of the business.”

While the spots reach out to a younger, bilingual customer, Herrán said the chain was careful to cherish the history of the brand and its loyal shoppers.

“Our main concern with the campaign was not to isolate our customer who tends to be a little older, but I think overall it will work for us. And we'll focus on our newer model stores, our newer layouts and our newer designs and hopefully get [newer customers] in here.”

Around 90% of the shoppers at Sedano's are Hispanic, and the company will continue to pursue that niche, Herrán said. But at the same time, Sedano's has worked to make its stores welcoming to all shoppers.

“We don't necessarily consider the Anglo market a secondary market, but we are a Hispanic niche market and that's what we target,” Herrán said. “That's what our chain is built around. The Anglo market loves our food, and we welcome them to the store. We may eventually target them a little more but we are mainly targeted on our core consumer.”

Juan Tornoe, a consultant for Hispanic Trending, Austin, Texas, said the “Latinization” of society — particularly in Miami where style and tastes have been so heavily affected by Cuban, Caribbean and South American influences — has created the right atmosphere for retailers to widen their cultural appeal.

“It is a good moment for Sedano's to reach out,” Tornoe told SN. “One of the trends I am following is the Latinization of the entire market, where everyone is influenced by the whole Latino vibe. If they are intelligent enough to play that card and play it well, they are going to be very successful, especially in a city like Miami, which is so cosmopolitan and diverse.”

Companies that are successful marketing to multicultural customer bases tend to require skilled customer service representatives, Tornoe added.

“If you are going to be successful catering to the general market and the Hispanic market, you need to have a staff that is able to communicate with a white Anglo person and turn around and give a personal and familiar interaction with the Hispanic shopper. The key is being aware of the different cultures and the different ways people want to be treated,” Tornoe said. “That is the most important thing a company can do.

“You can have everything you need on the floor,” he added, “but if you don't have the human element, it won't work.”

Sedano's generated $442 million in sales last year. According to the Hispanic Business Journal, it ranks as the 13th largest Hispanic business in the U.S. and is the largest Hispanic retailer in the country. Its success has captured the attention of competitors in its market. In 2005, Publix debuted its Publix Sabor format catering specifically to Hispanic shoppers with a location in Sedano's birthplace of Hialeah. More recently, a revamped Hispanic neighborhood marketing program by Winn-Dixie is making certain the chain's stores in Hispanic areas carry authentic products.

Jose Herrán said the retailer is holding its own against the newcomers by relying on its equity with the customer, its depth of selection, and on price. Although independents in the Miami area have long catered to the Hispanic shopper, he identified chain stores to be Sedano's main competitors today.

“Some stores have made an effort to carry all the items that we have, but we still have a greater variety of key items you can't find anywhere else,” he said. “And our shoppers are comfortable coming in here finding those products at a good price, and in a friendly environment. So even though they've tried to take market share away from us, we're still going strong, opening new locations directly across the street from them, and doing well wherever we open up.”

John Crossman, a retail real estate developer with Crossman and Co., Orlando, in fact likened Sedano's appeal to its shoppers with that of Publix and its customers.

“The thing I always say is most important for grocers is one, to know who your customer is, and two, have your customers know who you are. It sounds simple, but a lot of times it doesn't happen. That's why Publix is so dominant is Florida. They make it abundantly clear who they are trying to reach. Sedano's is the exact same thing,” Crossman said. “They have a high level of quality and service, and have the products their consumers are looking for.”

Observers say Sedano's has particular expertise providing fresh and prepared foods, ranging from exotic-but-essential staples like papaya and chayote to hot foods like pork bellies. “They do very well with smoked meats, specialty meats and produce and imported products,” said Burt P. Flickinger III, managing director of the Strategic Resource Group, New York.

Certain stores — particularly three large former Albertsons stores Sedano's picked up when that retailer fled the Miami market several years ago — supplement food offerings with departments for music and small appliances, and amenities like barber shops, banks and check-cashing, Jose Herrán said.

“Albertsons couldn't make those stores work but Sedano's made them work just fine,” noted Paco Diaz, a retail real estate specialist for CB Richard Ellis in Miami. “That shows me that they know their market, and they know how to make it work.”

Jose Herrán described Sedano's as a “conservative” company that on average opens only one new store per year. He acknowledged the company was looking for sites beyond its Broward and Miami-Dade County home base, but was in no rush to expand. “We keep our eyes and ears peeled for any opportunity,” he said. “If the numbers make sense, we may make a run at it.”

Like many Florida businesses, Sedano's is operating in a bit of an economic headwind brought about in part by a real estate slowdown. Job growth in Florida has slowed, with Hispanics seeing larger increases in unemployment than the state overall, according to a study in the South Florida Business Journal recently.

The economic slowdown accompanied an exodus of undocumented workers returning to home countries in Central and South America, Flickinger added. “A good part of their consumer constituency is going through hard times with the slowdown in the construction sector, and the same time you have Publix and Wal-Mart putting together very credible formats targeting the Hispanic consumer,” he said. “Sedano's is a good company but they're facing some pretty strong temporary headwinds.”

Jose Herrán said a sharp focus on price, particularly on staple items, has helped Sedano's and its customers weather the times. Consumers are also cutting back on dining away from home, he said.

“Our staple items are priced with a very aggressive retail and I think consumers recognize that again,” he said. “Our first-quarter sales, and our sales for the last month, are trending upward double digits, so I think there is a situation where maybe there's not enough money to go to a restaurant and so they are going to our stores. We're hanging in there.”