FIESTA: A TASTE OF MEXICO AND BEYOND

Mark Hamstra

HOUSTON -- At a time when the major food retailers are busy consolidating and creating cookie-cutter stores, Fiesta Mart has remained the quintessential neighborhood supermarket.

The 50-unit chain, based here, provides this city's Hispanic community with a store they can call their own. The brightly decorated stores, which average 63,000 square feet, feature expansive assortments of affordably priced Latin American perishables and prepared foods and plenty of authentic ethnic ambience.

"Other people have to study the Hispanic market, but Fiesta is the Hispanic market," said Ed Blair, professor of marketing at the University of Houston. "My hunch would be that they just have a better feel for the business."

Founded in 1972 as a festive shopping venue for Hispanic consumers, the chain has evolved with the city to appeal to other ethnicities as well, especially Houston's burgeoning Asian population. But it has been Fiesta's dedication to serving Hispanic consumers, who comprise nearly a third of Houston's populace, that has helped Fiesta remain among the top grocery players in the market.

While Kroger, H.E. Butt Grocery and Randalls capture a larger share of Houston's grocery spending, Fiesta remains by far the more popular shopping venue for Hispanic consumers, according to International Demographics, Houston, which found in a recent poll that 42.4% of Hispanic adults shopped at Fiesta in the past week. Annual sales at Fiesta, which is privately owned, totaled $1.05 billion last year, the company said. Fiesta executives declined to comment for this article.

Several observers pointed out that both Kroger, Cincinnati, and H-E-B, San Antonio, have made strong inroads with Hispanic and Asian consumers in Houston by offering such fare as store-made tortillas and conducting targeted advertising.

Blair, however, said Fiesta's 30-year history of marketing to Hispanics -- including advertising in Spanish-language media and staffing its stores with Hispanic managers and Spanish-speaking personnel, have given it a strong advantage over the other players in the market.

"When other people were promoting hamburger, they were promoting skirt steak," he said.

Blair said Fiesta has gained such a strong reputation that Hispanics moving into the city have been known to seek out neighborhoods that include a Fiesta store.

Fiesta's transformation into a destination for consumers of other ethnicities appears to have happened by accident, he noted. As shoppers from foreign countries were drawn in by Fiesta's exotic offerings -- especially the live fish, a strong lure for many Asians -- Fiesta capitalized by adding more and more specialty items, based on the individual neighborhoods it serves. It's not unusual to find 8-foot gondolas of Thai or Pakistani offerings in some stores, Blair said.

"Fiesta has really migrated to be an international kind of supermarket," agreed Lisa Cartwright, an analyst with Salomon Smith Barney, New York, who hails from Fiesta's home market. "You can go there and get all kinds of fresh fish, meat and produce from all over the world."

At one of the company's stores in a neighborhood with a large Vietnamese population, Fiesta has tailored its assortment to meet the needs of those shoppers, she pointed out.

Houston's Hispanics hail not only from Mexico but also from various regions of Central and South America, and Fiesta's merchandising reflects that diversity as well.

Larry Lueckemeyer, the Houston market manager for the Crossmark sales agency, said Fiesta's approach is to make all its customers feel equally welcome.

"If you're Asian, they've got all kinds of sauces and rice flours, and all the things that you would find in an Asian market," he said. "They know their customer better than anybody else. When Fiesta looks at their customers in Houston, they are varied, but there are things that can be zeroed in on for each of those ethnic groups that make them feel very comfortable in their stores."

Fiesta also is closely involved in community activities in the Hispanic and African American neighborhoods where its stores are located, Lueckemeyer said. For example, the chain offers a fund-raising vehicle called Sports Club, which allows local community athletic teams to collect labels from certain products and redeem them for cash as a way to help finance their programs.

Inside Fiesta's stores is where the chain truly differentiates itself from its competitors, however.

"You walk in and there might be a Mariachi band playing, and there's usually lots of colorful decor and high ceilings, and pinatas hanging," said Cartwright of Salomon Smith Barney. "It's a very theatrical presentation."

At many of the stores, Fiesta allows vendors to set up booths hawking various items like jewelry and other items, which help give the store a more authentic Mexican feel. The company also continuously seeks in-and-out general merchandise that it can offer at bargain prices in jumbled piles around the stores.

Lueckemeyer of Crossmark also noted that Fiesta also seems to go out of its way to have employees walking the floor to provide service to customers.

He credits Lewis Katipodis, president and chief executive officer, Fiesta Mart, for motivating his employees to execute the company's strategy.

"He is very in tune with the business," Lueckemeyer said. "The organization is very community-oriented. They do a lot of things with the Hispanic community and the black community, which is kind of the way supermarkets used to operate."

Fiesta Mart

Market Position: No. 4

Main Competitors: Kroger, H-E-B, Randalls

Distinguishing Features: authentic Hispanic offerings

Biggest Challenge: creating broader appeal