Courting Ethnic Customers

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.