SALSA SAVVY

NANCY BRUMBACK

Since Hispanic-American consumers are a rapidly growing segment of the U.S. population, development of private-label products that specifically target them has a huge upside.

Almost every major chain in the country has a private-label salsa on its shelves, a tribute to the booming popularity of Mexican food in the mainstream American market. Beyond salsa, however, private labels on ingredients for authentic Mexican or other Latino cuisines aimed at Latino consumers are limited so far.

Among the reasons marketing executives cite are inertia, strong programs by distributors of brands popular in Mexico or the Caribbean, difficulties dealing with producers in Latin countries, and fear of alienating non-Hispanic consumers.

Retailers must also decide whether to develop a separate Hispanic brand or include Hispanic-oriented products within an established private-label line.

There are about 31 million Hispanic-Americans in the United States -- 11.4% of the population -- with an estimated buying power of $383 billion, reports Jeffrey Humphreys, director of economic forecasting for the University of Georgia's Terry College of Business, in a recent study. This population is also relatively young, with a larger-than-average size household, and spends a greater portion of after-tax income on food at home than the non-Hispanic population, 12.3% compared with 8%.

The Hispanic population is also concentrated, Humphreys wrote, within the five states with the largest Hispanic markets -- California, Texas, Florida, New York and Illinois -- accounting for 71% of total Hispanic buying power. And, "nationally, Hispanic consumers' share of the market will increase from 5% in 1990 to 5.9% in 1999," the report noted.

The growth prospects for private-label products appealing to this market "are extremely high," if not enormous. "Any retailer who does business with a large specialty-food distributor can look and see the volume on those items and see they are missing something," commented Bill Finicle, owner of Mercadotecnia Ole, Anaheim Hills, Calif., a marketing consultant specializing in Hispanic products, and vice president and partner in Grupo Excel, USA, a food broker for such products.

A few retailers have taken the plunge.

Houston-based Fiesta Mart, which sells primarily to a Mexican-American customer base, does have a Fiesta private-label line, but it encompasses the staples found in any private-label line -- paper products, detergents, basic dry groceries -- not just Mexican specialty foods.

Randall's Food Markets, also in Houston, caters to the upper end of the market, but does carry Hispanic specialty products in stores where the demographics warrant, said a chain executive who did not wish to be identified. Those authentic Mexican products are from a specialty distributor and are not private label, however.

"That's not to say Hispanic private label is not something we don't have our eye on and won't explore in the future," given the rapidly changing demographics in Houston, the executive added.

Furr's Supermarkets, Albuquerque, N.M., according to Finicle, bought an independent retailer, La Feria, in Anthony, Texas, near El Paso, that catered to a Mexican customer base. It plans to use the La Feria name for a new division that will include a former Albertson's and two Furr's stores in El Paso that will be converted. In conjunction with that move, Furr's plans to develop a complete private-label program under the La Feria name that can be used in its other stores as well.

Compton, Calif.-based Ralphs Grocery Co.'s Food 4 Less division has a private label, Buena Comida, targeting the Mexican-American market with authentic items such as sardines in tomato sauce.

Industry observers indicated that Kroger Co., Cincinnati, may add the Buena Comida label to its assortment where demographics justify such a move, following its acquisition of Ralphs.

Certified Grocers in southern California, which supplies a number of supermarkets serving the Latino community, is working on changes to its private-label line with Finicle's firm.

The wholesaler has a separate label for Hispanic products, La Corona, but, said Finicle, also does very well with its Springfield label in the Hispanic community. Products with the Springfield name have been sold in Mexico for about 25 years, he said, and so "are one of the most acceptable brands to Mexican consumers in California."

The wholesaler, Finicle said, is considering adapting the Springfield brand for Mexican products, perhaps changing the red, white and blue color scheme to red, white and green and adding an element of Spanish identity such as an Aztec-looking border.

Jay Milner, vice president of grocery, dairy and frozens for Super Center Concepts, Lynwood, Calif., which operates eight Superior Super Warehouse stores, is a Certified customer and uses the Springfield brand as the chain's private label.

"Springfield carries the same weight as some of the national brands" with Superior's largely Hispanic customer base, he said. For authentic Mexican ingredients, Superior carries national brands from Mexico, he added, noting there are no private labels for those products.

Stater Bros. Markets, Colton, Calif., is also working with Finicle on a private-label program.

Finicle said he recommended that the chain not risk "turning off the broad base of their customers" by developing a totally Spanish identity for the line, but instead use the same private label it uses on other products for a line of "authentic Mexican products for people who like Mexican food."

Wholesaler Smart & Final, Vernon, Calif., offers bilingual labels on most of its private-label products, according to Finicle. He said Safeway is considering doing a line of Hispanic products, changing its Select private label to Selecto.

On the East Coast, where the Latino population comes from Cuba, Puerto Rico and other Caribbean countries, the large chains have generally not developed private-label products aimed at that market, according to Jay Rosengarten, president of Rosengarten Group, Rye, N.Y., a marketing consultant.

Those supermarkets tend to rely on the strong Goya brand, plus an alternative brand from a distributor, he said.

Krasdale Foods, a wholesaler based in White Plains, N.Y., does have a private-label line, Bravo, aimed at the inner-city Latino market, he added.

"The big chains don't think they have to treat the Latino market as a separate entity, and they don't do a very good job. I think they're wrong," said Rosengarten. "The independents do a far better job because they are community-based."

The Latino consumer, Rosengarten added, is receptive to private-label products for appropriate, high-demand items. As examples, he cited canned spaghetti (a popular staple in households with young children and limited income), varieties of canned meats such as Vienna sausages and corned beef, and large bags of frozen french fries and other vegetables.

The key, he added, is demonstrating the products in the stores. "Quality is very important to this customer. Once they are convinced the product is good, private label does well because it is priced well."

A second advantage to a private-label program that appeals to Latino shoppers is store loyalty, Rosengarten said. "When Latino shoppers have confidence in a store, they will stay with it and not cherry-pick."

Even in the face of the rapidly expanding Latino population, supermarket chains may find it better to rely on brands from manufacturers in the different regions rather than develop private labels, especially if the chains have only a limited number of stores serving a majority Latino population.

If a chain does want an Hispanic private label, "a separate Spanish brand is probably the best way to go at it," said David Dougherty, president and chief executive officer of Federated Group, Arlington Heights, Ill., a private-label sales and marketing company. Federated, he added, is studying doing something in that area "as that population continues to grow."

Among the problems, noted Finicle, is dealing with manufacturers in Mexico, both from a cultural and legal standpoint.

Historically, those manufacturers have not embraced the concept of private label, he said, particularly the idea of taking the marketing money out of the cost so that the private-label product is cheaper.

"They also don't want to own someone else's labels. They want the retailer to buy the labels and send them to the manufacturers." Many of those manufacturers are just unwilling to do private-label products for retailers, and many of their U.S. distributors already offer a brand of their own, he added.

Finally, the Latino market is not monolithic. The major divisions are Caribbean and Mexican, but there are also country-specific product preferences.

"From a retail point of view, the differences between Caribbean and Mexican are not as important on ingredients because the ingredients are largely the same, but the preparation may be different. For prepared foods, the region and even country are very important," Rosengarten said, noting the Mexican palate is hot, while the Caribbean tends to be sweet, and Cuban is a little spicier than other Caribbean.

The Spanish language also has different nuances in the different cultures, noted Finicle. The word "cacique," used as a brand for a cheese, carries the meaning of revered leader or chief in Caribbean Spanish, but has a more negative connotation, something like "landlord," in Mexican Spanish, he said. One of Federated's brands, Parade, was considered for use, translated as "Parada," he added, but that word is also a slang term for a staggering drunk.

And the same product may have different names -- a white cheese is known as queso fresco in Mexico and queso blanco in the Caribbean.

Finicle speculated that one reason Goya-brand products have not sold as well in the Mexican community as in the Caribbean is that the name is a negative term in many areas of Mexico.

"I would do nothing on names without double-checking with at least two or three people," Finicle said.