HISPANIC CONVERSION

ELLIOT ZWIEBACH

ONTARIO, Calif. -- Mike Provenzano doesn't speak Spanish, but his stores do.

Provenzano, who is president and chief executive officer of Pro & Sons here, understands enough about Hispanic marketing to have developed a six-store operation that's attracting $100 million worth of business annually.

Five of the stores are in Southern California and the sixth is in Phoenix, with a second Phoenix store scheduled to open at the beginning of January. Provenzano's company does business at all but one of the stores under the Ranch Market banner, preceded by the name of the community in which each is located.

"We open stores in low-income Hispanic areas -- areas [where] the chains don't want to go," Provenzano told SN. "But we consider our stores upscale Hispanic markets, and we spend a lot of money to give our customers what they deserve.

"For most Hispanics, the supermarket is a gathering place for families, and grocery shopping is a family event. Our goal is to treat our customers like I'm treated when I go shopping -- to give them clean, well-managed and well-merchandised stores with the kind of quality, freshness and service they deserve."

Provenzano said he tries to make the stores as authentically Mexican as possible by attempting to create a festival-like atmosphere similar to an outdoor marketplace in Mexico, with perimeter departments representing different shops in a small Mexican village where people can stroll from one to the next, surrounded by the sounds of traditional Latin music.

The stores' design -- similar to upscale fresh stores being opened by conventional operators all over the United States -- feature strong perimeter departments that cater exclusively to Hispanic tastes: a bakery (panaderia) up front, with traditional Mexican rolls (bolillos) sold off cooling racks; a produce department with massive displays of traditional items plus Mexican specialties; a fast-food area (La Cocina) offering carnitas, chicherones and a variety of hot foods; a tortilleria featuring tortillas made in-store from fresh corn; a delicatessen (salchichoneria) with three varieties of hanging chorizo sausage made on the premises; a meat counter (carniceria) featuring thin-cut steaks and marinated items; and a separate fish counter (pescaderia).

In an effort to keep his stores "on the front end of Hispanic marketing in the U.S.," Provenzano said he travels around the country looking at stores like H-E-B, Fiesta, Central Market, Harris Teeter, Wegmans and Eatzi's. "Among other things, we look at the food courts at those operations, and we simply change the food from upscale and expensive to Hispanic."

When Pro & Sons opens its next store, it will incorporate a sandwich shop -- "an idea we picked up from Eatzi's," he said -- and a service salad bar.

According to Michael Provenzano 3rd, vice president, chief financial officer and director of new-store development, "Our challenge is to take a 12-foot sandwich case and give it more of a Hispanic feel by substituting queso fresco for American cheese and jalapeno and other salsas for mayonnaise and mustard."

The key to everything Pro & Sons does is freshness, the elder Provenzano said. "We still offer a complete conventional grocery store -- we're not forgetting about that, and groceries still dominate our ads -- but fresh is the key to where we're going as we try to build our business."

Cultural Immersion

When father and son became partners in a single store in 1992, the demographics around that store were changing, Michael Provenzano said, "and we realized we were losing sales to the small mom-and-pop bakeries, produce stores, butcher shops and restaurants nearby that were run by people who knew the culture and the language. And we realized that, the more we tried to cater to our non-Hispanic customers, the more share we were losing, and that inspired us to move more toward Hispanic merchandising."

That move involved a steep learning curve, he said, that led father and son to travel around Southern California to figure out who made the best fresh products in each category, "so we could offer the best in our stores," the elder Provenzano recalled.

"Because we were dealing with a specific culture, specific tastes and a language barrier, it often got pretty challenging," the younger Provenzano added. "But we just decided to really jump in and do it."

"And we're still learning the Hispanic business every day," Provenzano told SN.

Provenzano, 60, worked for three different Southern California chains during the 1960s and 1970s, then left retail for two years to work at a less time-consuming job so he could spend time with his family, he said. But he found he missed the retail business, and in 1978 he and a business partner bought a 10,000-square-foot store in the Los Angeles area.

Twelve years later they bought a second store, also 10,000 square feet, which they named Southland Market. When Michael Provenzano asked to join his father in the business in 1992, Provenzano and his business partner decided to split the stores, with Provenzano keeping Southland Market here.

That's when Provenzano established his company as Pro & Sons. Michael Provenzano, now 36, is a certified public accountant who spent a couple of years working as an auditor for Lucky Stores before joining his father in business.

Over the next few years Provenzano's three other sons also joined the company: Steve, 34, as director of produce and warehousing; Rick, 31, as director of operations; and Jeff, 28, as director of information technology.

By the early 1990s, Pro & Sons faced a major decision in its one-store operation as the neighborhood around it began to become more Hispanic. "As we looked at how we could grow the business, we decided to create a Hispanic format," Provenzano recalled.

"Initially we didn't want to scare off our non-Hispanic customers, so we began by creating areas catering to Hispanic tastes in certain parts of the store," Michael Provenzano added.

The first section they added was hot foods -- an assortment of tamales, tortas, carnitas, tacos, burritos, rice and beans. "The hot foods area is what separates us from other Hispanic operators," the elder Provenzano said. "We offer the same kind of quality and tastes as consumers can get in Mexico."

The Provenzanos also remerchandised the store's meat department, adding more thinner cuts and ethnic varieties, he said, and as the store's volume grew, "we decided we wanted to add more Hispanic foods to make a statement to the community that we were Hispanic operators."

Accordingly, they bought the drug store and liquor store next door and doubled the market's size to 20,000 square feet.

"We had considered using some of the additional space for more groceries," Michael Provenzano said, "but we realized that was not where we needed to grow. So we took out some of the grocery aisles to put in the bakery, and we concentrated on building that department for a year."

Fresh Difference

According to Alex Raffta, the company's bakery supervisor, Pro & Sons' commitment to fresh meant installing scratch bakeries. "As more supermarket bakeries have gone to using frozen dough, the quality of packaged goods, as well as what's sold in the service departments, has become the same because it's all made from the same ingredients in the same facilities," Raffta said. "As a result, consumers don't discern any difference in freshness, and that diminishes in-store bakery sales because the product loses its uniqueness.

"So all our bakeries are scratch because that creates uniqueness."

In addition to a variety of cakes and sweet goods, one of the company's bakery specialties is bolillos -- the French rolls that are a staple of Mexican life. At Pro & Sons, bolillos are baked throughout the day, usually every hour and a half beginning at 7 a.m., and then moved from a hot rack to a cool rack and wheeled onto the selling floor, still hot, Raffta said.

He estimated the company sells 1,500 bolillos an hour during peak weekend hours.

After spending a year developing its bakery section, Pro & Sons spent the following year developing a tortilleria, Provenzano told SN. The original tortilleria at Southland Market set the pattern for all subsequent stores -- buying corn kernels, steaming them and converting them into masa that is molded and baked to produce the tortillas, rather than using premade maseca flour.

According to Jay Milner, Pro & Sons' general manager, each store produces approximately 8,000 tortillas an hour, which are packaged right off the conveyor and put out for sale. "To Hispanic consumers, tortillas are like a loaf of bread," Milner said, "and corn tortillas are the preferred variety. While first-, second-, third- or fourth-generation Hispanics may not all agree on what they like to eat, corn tortillas is what binds all generations together.

"Now we're producing tortillas 24 hours a day -- with people standing in line 30 and 40 deep on weekends -- and we're selling 3 million tortillas a week."

Provenzano said the store scheduled to open early next year in Phoenix will add a second tortilla line to manufacture flour tortillas -- an offering that may be expanded to other stores, he added.

As Pro & Sons continued to develop its Hispanic business at its first store, it added a service fish section -- with no top on the counter, "like at an open-air market," Provenzano noted -- then added a deli section offering a variety of Mexican cheeses, yogurts and chorizos, which are made on-site and displayed on hanging fixtures behind the service counter.

The company next turned its attention to the produce section, where it began raising the quality of its offerings. "We realize there's a segment of Hispanic consumers that want cheaper, lower-quality produce, while others are willing to pay a fair price for better quality," Provenzano said. "So we tested it both ways.

"But when we brought in some lesser-quality produce that was cheap, it didn't sell as well as when we offered a better quality at a higher but fair price, and that's the direction we've gone."

Pro & Sons believes in huge produce displays, with wet-rack merchandise stacked higher than eye level and similarly massive displays on dry fixtures "because customers like big displays," George Solis, the company's produce manager, told SN. "If we stack merchandise only half as high, it doesn't attract their eyes."

Refrigerated produce displays are replenished three or four times a day during the week and six to eight times a day on weekends, Solis said, and dry produce is restocked every three hours. Items are rotated around the section every four days so customers have to shop the entire section to find what they want, he added.

By the time Pro & Sons finished redesigning Southland Market to cater to Hispanic shoppers, it was doing $10 million in volume a year, Provenzano said.

In 1997 Provenzano's wholesaler, Unified Western Grocers, Los Angeles, helped the retailer acquire two more stores, both former chain locations in California's Central Valley -- a 30,000-square-foot store in Arvin and a 32,000-square-foot store in Delano, both heavily Hispanic areas.

Two years later the Provenzanos acquired their fourth store -- a 32,000-square-foot unit in Southgate, a few miles southeast of downtown Los Angeles. That store, which was previously operated by another independent, had been trying to cater to a variety of ethnic populations in an area that was 90% Hispanic, Provenzano said, "and the owner felt we would be more successful there than he was."

The previous owner allowed Provenzano to keep the old name on the store for six months while it was being remodeled to add fresh departments, "and when we were done, we were able to reopen with a new name and a new format," he said.

Pro & Sons acquired its fifth store two years ago -- a 24,000-square-foot former chain location in Bakersfield that had been closed for two years -- and late last year it acquired a sixth store, its first outside California -- a 24,000-square-foot unit in Phoenix, five hours from its home base here, which opened in April.

A new offering at the Phoenix store was fresh pizza, made on-site from scratch using Hispanic toppings like jalapenos, chorizos and Mexican cheeses.

Pro & Sons is leasing an abandoned 20,000-square-foot drug store adjacent to the Phoenix store, which it's using temporarily as a warehouse "until we can figure out what we want to do with it," Michael Provenzano said. "It made sense to lease it now because we know we'll need it long term."

Pro & Sons expects to open a second Phoenix Ranch Market in early January -- a 40,000-square-foot store 12 miles from the first one that will be the company's largest location. Besides the sandwich shop, salad bar and the second tortilla line, the store will also expand each department, Michael Provenzano said, "with produce getting the biggest increase because it seems like we're always too small in produce."

The produce section at the new store will be 350 square feet, instead of the company average of 200 square feet, to accommodate larger displays, he pointed out.

Expansion Mode

According to Michael Provenzano, the six Pro & Sons stores will record sales this year of slightly over $100 million, "and with a full year's operation in Phoenix and a second store opening there, plus some store expansions, we expect to do $140 million next year."

The elder Provenzano said the company is "on track" to add one or two new stores a year. "We really need to pick and choose our locations carefully, and we're talking with the chains about a lot of different locations," he said. "And we're not finished with California yet -- we're still looking at that market."

"But we're passionate about making sure each store gets our full attention," Michael Provenzano said, "so we stick to one at a time so we can grow the company at a nice pace.

"After we open the second Phoenix store, we want to go back and tweak our existing stores and expand some of them. For example, there's one store with an 8,000-square-foot pharmacy next door that we plan to buy, integrate into our store and then sublease part of the space to the pharmacist while we use the rest for additional merchandising."

Pro & Sons is also thinking beyond California and Arizona. "As we move forward with opportunities in Arizona, we see New Mexico as a natural progression," Michael Provenzano said. "There are a lot of Hispanic consumers there, but the state lacks population density, so it will require a lot of research and development before we make that move.

"And if we could get some redevelopment money in an area that meets our demographic goals, we'd like to build a store ourselves."

Pro & Sons got financing help from its wholesaler, Unified, for its first few stores and, more recently, from the National Cooperative Bank, he noted.

Provenzano said he gives a lot of credit for his company's success to his 1,200 employees. "None of us speaks Spanish, but they have pride in helping us and helping themselves," he said.

Although everyone below top management is fluent in Spanish, Pro & Sons tries to help its employees become bilingual by holding classes in the stores' back rooms where teachers come in to instruct them in English, Provenzano said.

"What's unique about our staff is its youth -- the average age at store level is the mid-30s," Michael Provenzano said, "and virtually all of the people in staff positions have come up from within."

As an added service, three of Pro & Sons' stores offer free shuttle service to customers who live within a four-mile radius of those stores. "Customers have to get to the stores on their own, but we take about 100 people per store home every day in the shuttle buses, which carry nine people at a time."