NASH FINCH'S AVANZA: ON THE MOVE IN THE MIDWEST

Christina Veiders

MINNEAPOLIS -- Nash Finch here is advancing its Hispanic format.

Last year the distributor opened three Avanza (Spanish for "advance") stores in Denver; a fourth unit will open in June in Pueblo, Colo. Chicago is next with two stores slated later this year in Cook County (South Chicago), an area with over 1 million Hispanics.

Avanza is a pet project and priority of Ron Marshall, Nash Finch's chief executive officer. He voiced enthusiasm about the format and its sales to date. He declined to give specific financial figures, but said it gives Nash Finch a competitive edge against the deep discounters.

With Hispanics now the largest minority demographic, representing about 13% of the population, Marshall said the company is nicely positioned to capitalize on this growing segment.

"We believe it's a concept that can extend throughout our existing trade areas and perhaps even beyond," he told SN.

Meredith Adler, analyst, Lehman Bros., New York, said, "The key is that the Hispanic population has grown tremendously in the traditional Midwest markets, but it hasn't been served very well. So Nash Finch is tapping into an underserved market and is trying to meet the unmet needs of this segment."

Besides allowing Nash Finch to grow its retail business outside of conventional supermarkets, Avanza provides a testing ground for products and allows the company to design sets to be rolled out to its other corporate stores in neighborhoods with dense Hispanic populations.

Nash Finch operates 111 corporate-owned stores under various banners throughout the Midwest. Avanza has spawned Hispanic sets at these stores in Nebraska, Iowa and the Dakotas, said Marshall.

What Nash Finch has learned about Hispanic marketing can also be offered to the retailers on the food-distribution side of the business.

Three years in development and targeted to first- and second-generation Mexican Americans, Avanza is a well-executed concept, said Neil Stern, senior partner, McMillan Doolittle, Chicago. "They have done a fabulous job on the stores. They are bright and colorful. They've covered all the basis in terms of bilingual signing," he said.

Marshall described the "cultural impact" of the shopping experience. The decor comprises elements reminiscent of Mexican artist Chucho Reyes and the architecture of Luis Barragan. Colors in hot pink, yellow, orange and turquoise are vibrant. Wall murals depict Mexican-American immigrants and their cultural values. Papel picado (cut paper) also reflects the Mexican culture in the decor of the store.

Music, both periodic live performances and piped in, is authentic mariachi and Hispanic bands, which creates a festive atmosphere.

"Fresh [produce and meats] leads the presentation," noted Stern. A store contains about 13,000 stockkeeping units, with 25% of those items devoted to products appealing to Mexican Americans. Sixteen different types of peppers from orange habaneros to yellow chiles caribe are featured and make up some of the over 200 assorted produce items. There are over 200 meat cuts, some specially prepared to meet the needs of the Mexican-American customer. The bakery features pan dulce (a popular sweet bread), empanadas and churros. In the center aisle, there is a broad range of marinades and sauces with brands familiar to Hispanic shoppers like La Sabrosa, Goya, Herdez, Costena and Pace.

In-store services include check-cashing and money orders. The store symbol is Paco, a red rooster, used in branding the store. Marshall said a challenge has been sourcing products popular with Mexican Americans that don't necessarily have U.S. distribution, and procuring those items at the right prices. Marshall has participated in U.S.-Mexican trade missions to help facilitate distribution opportunities. The company has developed sufficient critical mass to develop a private-label Avanza line of over 100 items.

A lot of attention has gone into building a value-pricing strategy, said Marshall, in order to pull this low-income segment. While prices need to remain sharp, the average Hispanic shopper's basket is higher than the average U.S. grocery shopper. According to the Food Marketing Institute Study, "U.S. Hispanics: Insight Into Grocery Shopping Preferences and Attitudes, 2002," the self-reported total expenditures on groceries in a typical week was $117 for Hispanic grocery shoppers vs. $87 for all U.S. grocery shoppers.

"We've learned a lot about how the community shops," said Marshall. "These are people who prepare three meals a day at home. HMR [Home, Meal, Replacement] is not a concept popular with this community. Food preparation is an integral part of their society and culture."

Another challenge is finding the inner-city real estate with the optimal store space, about 45,000 square feet. With inner-city real estate sometimes limited in size, Nash Finch has learned to be flexible with its space and planograms. Stores in inner-city locations range from 25,000 to 45,000 square feet. The Chicago stores will range from 35,000 to 40,000 square feet.

By far the biggest hurdle, said Marshall, was making sure Avanza "hit the right tone. We wanted to make sure we connected with the hopes, dreams and aspirations of our customer base."

Said Adler, "I think you need a dedicated format with Spanish-language signs and Spanish-speaking employees. It is not just dry grocery. It is a mix in the produce and meat. Hispanics eat differently. You'll do better if you have something that is targeted towards them, and that isn't necessarily easy to execute."

Adler mentioned that Safeway's Vons launched a dedicated Hispanic format that didn't work. However, she pointed to the success Kroger has had in pulling Hispanic shoppers to its Food 4 Less warehouse that offers value pricing and quality perishables.

Besides designing stores for cultural impact, Nash Finch has built awareness on a grassroots level by involving the community -- schools, church and soccer -- and its leaders. "They have done a lot of things from the community standpoint in terms of involving community leaders with in-store events and making the store a community gathering point," said Stern.