Hispanic beverages at Texas’ Carnival
stores used to be stocked alongside foods
popular among Hispanics. But recognizing
the changing demographics of many of
its stores, merchandisers relocated them to
the beverage section.
“Beverages meant so much that we pulled
them out of the ethnic-Mexican aisle and put
them with regular soft drinks in 24-foot to 36-
foot sections,” says Bob Highsmith,
Senior Vice President of Merchandising
at Minyard Food Stores/Carnival
Supermarkets. “Sales have
mushroomed,” leading the retailer
to expand the strategy.
Such success stories are mounting
as retailers respond to the increasing
diversity of the US population. By
2040, half the US population will
be Hispanic, Asian-American or
African-American; some markets
are already there. Stocking the right
assortment of beverage brands,
flavors and sizes is key to both attracting
ethnic shopper and satisfying
the broadening palates of the mainstream
consumers they influence.
Many retailers are thriving by creating environments
that make ethnic customers feel comfortable
by catering to their tastes and lifestyles
and offering authentic products and assortments.
Beverages are critical to that formula.
Among Hispanics, for example, beverages “are
a category the Latino consumer buys every time
they come into the store,” says Mario Chavez,
VP of Latino Merchandising at Minyard Food
Stores/Carnival Super Market, Coppell, Texas,
which serves the chain’s largely Mexican consumers.
“There is a group of items any store must
have” he says, to satisfy the Hispanic consumer
the chain targets, including juices, nectars, mineral
water and authentic soft drinks.
Generally speaking, mainstream retailers tend
to be lower on the learning curve in figuring
out how to win ethnic customers. Those failing
to fully embrace these groups, however, risk losing
sales to those who those who do.
Diversity Wake-Up Call
Manufacturers devote significant resources to
learning about customers, using syndicated
data to shape ethnic marketing programs with
point-of-purchase materials, promotion and ad
dollars, and events sponsorship to create excitement
around their products.
Many retailers have been less comprehensive.
According to the Coca-Cola Research Council’s
2002 report, Grow with America, Best Practices
in Ethnic Marketing and Merchandising, retailers’
ethnic marketing is driven at the local level rather
than by the entire organization, and programs
lack continuity and are based on short-term
promotions and events. Their investment in
ethnic marketing tends to be limited and typically
focuses on advertising and promotions, rather
than on understanding cultures. Yet
it’s only from a true understanding
of the customer that retailers'
courting of ethnic customers comes
off as truly authentic.
That’s starting to change, however,
as retailers realize the potential
upside of courting ethnic consumers
more comprehensively. According
to the Coca-Cola report, market
baskets of ethnic customers are
20 percent larger than those of
non-ethnic consumers, and they
shop more often—two to three times
per week.
“Manufacturers used to come in with programs
that were Hispanic-oriented and retailers
would look and listen,” says Paul Castillo,
executive vice president of ViVA Partnership, a
Miami consultancy. “Now retailers go to manufacturers
and say, ‘here is what I want in my Hispanic
plan, how do you fit in?’”
Walgreens, for example, customizes stores to
match the demographics of the neighborhood,
creating a program that has won widespread
admiration. It includes bilingual associates and the stocking of stores with products
that index highly to African-American or
Hispanic consumers, focusing on the value of
those products in its ads.
Data is fueling such efforts. “We’re getting
more and more requests from retailers to
subscribe or buy data,” says Thomas Neal,
Nielsen product manager for ACNielsen’s Target
Track. “It’s always been a financial issue, but
now they see a cost/benefit.”
Target Track decomposes sales transactions
into non-ethnic and ethnic sales. A sister service,
Spectra Marketing Systems’ HispanIQ, breaks
down this data by brand. Syndicated data, for
example, detected the successful entry of Grupo
Industrial Lala SA’s LaLa milk products from
Mexico into U.S. regions with large Mexican
populations, likely displacing domestic brand
purchases in favor of a long-familiar name from
south of the border.
A Rising Tide
Ethnic customers aren’t the only ones at stake.
Mainstream Americans are drawn to new flavors,
natural and healthy ingredients and energy
drinks – all of which can be sated by crossmarketing
ethnic beverages.
Japanese green tea maker Ito En, for example,
entered the U.S. market in 2001 the way many
non-U.S. beverages do, in ethnic groceries, but
with an eye to the mainstream. “We felt with
changing lifestyles, there was more interest in
wellness, health, and Pacific cuisine,” says Rona
Tison, Ito En's Vice President of Corporate
Relations. Ito En next penetrated natural
foods chains, and today its unsweetened Teas’
Tea is sold everywhere from supermarkets to
Target. The takeaway: just because a beverage
is ethnic doesn’t mean that’s the only quality to
emphasize in promotions.
Similarly, with retailers’ help, Americans are
discovering coconut water as a natural sports
drink and aloe vera water as a digestive health
aide, says Richard Ross, vice president of marketing
at Tampico Beverages.
Another US trend is the desire to “trade up”
to high-end brands. Chinese brewer Tsingtao is
tapping this to extend beyond Chinese buyers,
aiming at the 35-and-over crowd with new packaging
and a line extension. Retail-level strategies
include promotions pairing the beer with highend
authentic Chinese foods.
Sampling events are a key strategy to introduce
mainstream customers to ethnic beverages.
Asian grocer H-Mart, a 22-unit chain operated
by the Hanahreum Group in Lyndhurst,
NJ, uses samplings heavily to promote Asian
juices and bottled teas, boosting purchases
by Asian and non-Asian shoppers alike, says
Jimmy Kim, manager.
Pairing beverages with complementary foods
not only drives sales, but enhances the retailer’s
reputation as a source of new tastes. At a Whole
Foods in Las Vegas, for example, chilled Teas’
Teas were paired with equally subtle Belgian
wafer cookies for a tasting. Integrating ethnic
goods with mainstream – such as bottled ethnic
drinks in the regular beverage aisle – supports
the cross-over effort.
Ethnic Marketing Best Practices
Retailers seeking to truly capitalize on the potential
sales boost of ethnic beverages can tap these
best practices honed by ethnic and mainstream
retailers alike:
1. Know and use demographics. Step one
to any ethnic marketing program is understanding
customers. Beyond gut feel, data can clarify
who is shopping in a trading area and how
a neighborhood is trending. Detail is essential;
knowing there are a high percentage of Asian
customers, for example, isn’t enough. Are they
primarily from China? Korea? Another key
is acculturation; first-generation immigrants
may have very different purchase patterns
than second or third.
For example, least acculturated Hispanics
prefer Modelo Especial, Carta Blanca and
Corona beer, according to ACNielsen, while
more acculturated prefer Sam Adams, Budweiser
and micro-brews.
Anheuser-Busch is addressing acculturation
by marketing to more Latinos in English in
2007, says Henry Dominguez, vice president
of Latino marketing, as well as creating advertising
aimed at the diverse countries of origin
in East coast urban areas. “Relevance is critical
as you get into different cultures and countries,” Dominguez notes. “You need to be respectful,” and make an emotional
and cultural connection.
Ongoing analysis is key to picking up on trends. For example, “many
areas in which African Americans live tend to be transitional,” with
growing Hispanic and Asian populations, says Sam Chisholm, veteran
marketer and president of Chisholm Consulting. Tastes change, too;
whereas once African Americans preferred sweeter, grape and red beverages,
“we’re tending to become closer in style to our mainstream
counterparts,” Chisholm says.
Syndicated data may not be enough, however; many ethnic markets
don’t participate, so results are skewed toward ethnic purchases in
mainstream stores. Another strategy is buying data about beverages in
customers’ countries of origin.
2. Observe. Ethnic market executives have their reasons for not sharing
this data; they thrive by understanding their customer and creating
an authentic experience, from the advertising to the in-store design
to the music to the assortments. Retailers need to shop ethnic markets
and urban, multicultural stores and note the beverage brands, presentation,
signage and in-store feel.
“There is a significant variety of canned and bottled juices made from
fruits one never sees in this country imported from Latin America or
manufactured in the U.S.,” says Soto. “You could fill up a 23-foot aisle,”
and ethnic markets often do. “Go to independent supermarkets, look at
the space that is dedicated to ethnic beverages, and you’ll quickly have
a sense of the potential volume movement these products have that
you’ll never see in the syndicated scanner data.”
Store visits can teach other lessons. For example, “often the shopper is
not who they expect,” says Chisholm. In African American communities,
for example, “It’s not necessarily the mother – it could be the daughter
or someone else doing the shopping,” whose brand and taste preferences
may be quite different.
Equally key is listening to customers and accommodating their
expressed needs, adds Poul Heilmann, Senior Vice President of Marketing and Strategic Planning for Minyard Food
Stores/Carnival Super Market.
3. Collaborate. The best ethnic marketing combines
the efforts of manufacturers and retailers
for better-funded, more impactful campaigns.
“We have a good pulse on what our customers
find exciting and interesting, and manufacturers
are interested in understanding and working
with us,” says Carnival’s Heilmann. “We work
with them under their objectives and our objectives,
and tailor programs to fit.” A campaign
with DelValle, for example, boosted the juice’s
sales among Latino and non-Latino consumers.
When retailers are more invested, “there’s still
an event, but you’ve also got the four weeks leading
up to it in the store, with TPRs [temporary
price reductions], displays. There is an authenticity
when it’s retailer driven,” says ViVA’s Castillo.
He urges retailers to create a playbook for
the year, creating in-store programs and sponsorships
around pertinent ethnic events.
Ethnic events successfully used by Tampico
include a mobile bus tour that visits retailer
lots, playing music and offering samples,
giveaways, and in-store displays and promotions.
Hispanic- or African-American “ambassadors”
and bilingual signage helped convey
the message, boosting Tampico sales. Multipacks
with bilingual coloring books and sales
contests have also worked, Ross adds.
Wholesalers and distributors can also recommend
shelf sets and facilitate events. UK
Imports, in Orlando, Fla., helps retailers shape
ethnic sections according to local demographics.
For example, the company has incorporated
mainstay Scottish soda Irn-Bru into ethnic
sets where there are ex-pats and high British tourism.
A recent tweaking moved Irn-Bru, famous
for its unique orange color, to the top shelf.
“It gets a little more attention for the product;
the light hits the bottle and it brings the item
out so customers notice it,” says Mike Darbyshire,
president.
4. Define and commit. There is no clear formula
matching level of penetration of a particular
ethnic group to the amount of play a store
should devote to ethnic beverages. But what
is clear is that whatever level is determined
appropriate requires 100 percent commitment
from management on down.
Carnival’s relocation of ethnic beverages is one
successful example of commitment throughout
the chain. Resetting a store to integrate ethnic and mainstream products is a hallmark of a more complete commitment
to embrace ethnic clientele. The move also addresses acculturation by accommodating
the range of beverage tastes in one place.
In the chain’s Minyard and Sackn’ Save banners, particularly those in primarily
African-American neighborhoods, Latino brands remain in an ethnic
aisle and assortments of Dr. Pepper, Coca-Cola and Pepsi are larger.
In three Carnival stores the retailer offers Fruterias mixing custom
blends of fresh fruits – an approach that complements, rather than
cannibalizes, bottled sales. “We would put them in every Carnival if we
could,” says Chavez.
Unfortunately, commitment has been a problem for many mainstream
grocers. “Ethnic budgets are still the first to get cut on an annual basis,”
says Kylee Hall, Nielsen product manager for Spectra’s HispanIQ.
It’s not uncommon for retailers to hire ethnic specialists without giving
them the power to implement changes or to integrate ethnic products
into category management. For example, “Bashas went in the direction
of creating their own division, Food City Stores, in order to bypass the
potential bureaucracy which might have limited their ability to implement
a true Hispanic strategy. That requires customization at a time when the
industry’s direction was achieving greater efficiencies through centralization
and deploying strategies on a mass level,” says Terry Soto, president
of About Marketing Solutions, a Burbank, Cal.-based Hispanic strategy
consultancy. For instance, smaller, minority vendors have limited capabilities
and it can be difficult for buyers and category managers to incorporate
them into day-to-day business processes. “For example, ethnic buyers
and merchandisers and large retailers don’t often see eye to eye on volume
measurement systems so it is difficult for these vendors to make the
case for product authorizations,” Soto adds. Successful ethnic marketing
means finding a way to overcome these barriers.
5. Source authentically. While major U.S. manufacturers have deeper
pockets and more sophisticated information technology, it’s important
to source authentic brands from customers’ countries of origin as well.
Specialty and ethnic distributors can offer expertise here.
“In the past, retailers have welcomed with
open arms the big brands, and still do,” says
ViVA’s Castillo. “But now they’re talking also
to little brands to make a big impact.”
While it’s tempting to dabble in ethnic beverages
at first, that’s not always the best approach,
warns Ross. “We’ve faced a lot of retailers who
were skeptical at first, and wanted one or two
flavors, not ten. But as they add flavors, we’ve
never seen a decrease in the rest of the brand.
Flavors tend to be incremental,” tapping into
their target customers’ desire for variety.
In addition to ethnic brands, ethnic consumers
often prefer the flavor of international
formulations of some global brands. Carnival,
for example, has long stocked Mexican Coke,
a sweeter formulation.
6. Price correctly. Some retailers make the
mistake of pricing ethnic goods as specialty
products, failing to understand the role some
play as a staple of the diet. According to the
Coca-Cola study, for example, Hispanics typically
have larger families and often drink signifi
cant amounts of juice in a day, so selling a
wide variety of tropical flavors in gallon sizes and
pricing them for purchase in large quantities is
essential to winning that customer’s loyalty.
“Chains need to understand that when it
comes to the perimeter of the store, the Hispanic
opportunity is in volume, not margin – that’s one
thing independents understand well,” says Soto.
Stepping Up
Knowing best practices is one thing; reaching
them can be quite another. Retailers must overcome their reticence to extend ethnic marketing
past ethnic aisles and the occasional holiday
and commit at the level dictated by their customer
base.
“If your supermarket is in a trading area where
the ethnic population is at least twenty percent
higher than in the total market,” then it’s probably
time to step up efforts, says About’s Soto.
Retailers often start with ethnic sections and
specific events, but as the program grows and
ethnic traffic picks up, these strategies help take
them to the next level:
• integrating products with mainstream
categories
• bilingual signage
• hiring ethnic workers
• extended programs/events/tie-ins
• ethnic advertising, promotions
• resetting the store to emphasize qualities
the dominant ethnic group favors
• sponsoring community events and
supporting local ethnic organizations
Changing the feel of the store can be a hurdle
for many retailers. “This is where they shy off
because they don’t want to offend” mainstream customers, notes Linda Gonzalez, CEO and
president at ViVA Partnership.
Retailers who “get it” and make broad changes,
such as HEB, Carnival and Food City, are
winning business from those who do not.
Embracing Ethnic Opportunity
The need for ethnic marketing can no longer be
ignored. The good news is, many of the changes
retailers make to accommodate the preferences
of ethnic consumers will please the gamut of
customers, from broader assortments to fresh
juice bars to increased customer service. Some
beverages can help span the range; when Bookoo
Beverages created Jugo with 99 percent juice, for
example, they knew energy drinks were trending
well across most ethnic groups, and formulated
and named the drink accordingly.
“Jugo means juice, but it appeals to a number
of people,” says Paul Herrera, advertising manager.
“Even if you don’t know Spanish, it seems
like a word you should know.” Separate English
and Spanish advertising and promotional programs
are driving both groups to Jugo. Similarly,
Pepsi first introduced its Manzanita Sol in Mexico,
then brought it into the U.S..
Do ethnic marketing right, and it can boost
ethnic sales while pleasing mainstream customers
as well. “Retailers who compete effectively
for these customers will be in a position to profit
from this growth,” according to the Coca-Cola
report. “Those who ignore the changing makeup
of the marketplace—or make only token efforts—
will not find success.”