FOCUS REPORT: HISPANIC FOODS

In the words of Allen Lydick, partner, Mexigrocers, Raleigh, N.C., “The Hispanic market spends more against its stomach than the Anglo market does.”

Lydick’s view is typical of the manufacturers and consultants we interviewed. They collectively agree that strong sales of Hispanic foods are likely to continue despite the slow economy and food price inflation. And they agree that retailers who understand the market the best will profit the most.

This understanding begins with the recognition that there are two broad markets for Hispanic foods: the “authentic” — primarily for immigrants and second-generation Hispanics — and the “mainstream” — for consumers with other ethnic backgrounds. The favored dishes and cuisine of “authentic” consumers varies widely by country of origin. Lumping Dominicans, Puerto Ricans, Mexicans and Costa Ricans all together is altogether wrong. Further, in some urban U.S. markets, Anglos have also come to appreciate “authentic” Hispanic foods. “Mainstream” shoppers, meanwhile, can include both non-Hispanics and Hispanics. So your first step lies in knowing which Hispanic food consumer is shopping your stores.  

FOOD AS CULTURE

David Morse, president and CEO, New American Dimensions, Los Angeles, observes that “Hispanics pass on their culture through food.” He notes that as generations of these new Americans become acculturated to living in the U.S., “language goes away but food stays.” Pride in food goes along with pride in other cultural elements, such as music.

Mark Hannay, senior vp of sales, Ruiz Foods, Dinuba, Calif., suggests that the economic downturn might even benefit Hispanic food categories. He cites “the tremendous amount of food that consumers get for their money in Mexican foods versus most other frozen food entrees or appetizers,” as one of the main reasons consumers are drawn to these products, especially in family packs.

Recent data from The Nielsen Company (for 52 weeks ended March 22, food/drug/mass, excluding Wal-Mart) shows unit sales of frozen Mexican entrees up by 1.1% over the prior year, while the total frozen foods department was down by 1.1%. Similar strength for Hispanic products in a down market for frozen foods can be seen in data from Information Resources, Inc. For the 52 weeks ended March 23, supermarket unit sales of frozen tortillas skyrocketed 47.3% versus the year-ago period, according to IRI. Lydick says that refrigerated tortillas continue to grow in the Eastern U.S. by about 20% each year.

Tortillas are an important indicator of trends in Hispanic foods, especially for consumers interested in the authentic Mexican offerings. As Hannay observes “In Mexico, the tortilla is the holder for almost anything you can think of.” He notes that the concept of “What is Mexican food?” continues to spread across restaurants of various ethnicities. This exposes more people of different cultural food backgrounds to Mexican foods and gives chefs more options for experimentation and blending of flavors.

Ruiz’s new line of Tornados is also showing up on hot roller grills in convenience stores. The versatile products work for snacking, lunch, dinner and entertaining.

But the long-term appeal of Hispanic foods — which converts into staying-power in the “authentic” groups — is high quality and good taste. One way consumers judge quality in Hispanic food is by the “identifiable components that they see in the product,” according to Hannay. “The growth of the core business,” he says “is driven by the fact that items like family pack burritos hit all of the touch points that consumers are looking for — handheld, convenience, high-quality and good taste.”

GUILTLESS MOMS

Morse estimates that about three fourths of Hispanics in the U.S. are either immigrants or second generationals. He notes that as these people become acculturated to the U.S., two factors affecting their buying habits need to be understood and addressed by supermarkets.

The first factor is guilt, which occurs when a working mom worries that she is not providing the right amount of care for her family. The traditional Hispanic family centers on a stay-at-home mother. The working woman may not have the time to cook from scratch, but she can certainly provide foods made with fresh and healthy ingredients — including prepared frozen foods.

The second factor is tied to misconceptions these shoppers have as they are exposed to products that are different from what they knew in their country of origin. For example, there may be a belief that non-fat milk has all the vitamins taken out of it, too.

Retailers can help Hispanic women get over the “good moms cook from scratch” guilt trip and many product misconceptions by communicating about the fresh and natural ingredients in products. They can also merchandise fresh and convenient items that can be added to refrigerated or frozen products in the home kitchen. Morse suggests that “adding healthy ingredients is one way for mom to add a little love to the meal.”

Nielsen data show where some of these add-in products are being found by Hispanic food shoppers. While Mexican sauces, Mexican dry foods and Mexican canned foods are all down in unit sales from the prior year, indicating a move away from these not-so-authentic, shelf-stable products, beans (other canned) and canned red kidney beans are up 1.9% and 1.5% respectively in unit sales versus last year in the Nielsen data. Beans are traditional components of many Hispanic dishes and are a convenient add-in, which can be easily cross-merchandised with other fresh ingredients.

Another difference between Latino and Anglo shoppers can be found in their preferences for dairy products. Lydick observes that “about half of Hispanics have intolerance of lactose, a much higher incidence than Anglos.” However, they are buying increasing amounts of drinkable yogurts, probiotics, cheeses and Mexican gelatins from the dairy case.

Lydick recommends merchandising Hispanic refrigerated products in a clearly separate planogram. He would include cheeses, tortillas, chorizo, gelatins and beverages in this special section.

What Price is Right?

Hispanic products have certainly not been immune to pricing pressures. For example, the average unit price for all frozen food items sold increased year over year by 4.2% according to the Nielsen data. Nielsen’s frozen Mexican entrees increased 5.1% and IRI’s frozen tortillas jumped 6.7%.

Trouble could come in the form of reduced quality, if manufacturers try to skimp on ingredients as in “cost-adjusting the formula.” Hannay advises manufacturers to be very cautious here. He remembers an old axiom popularized by one of his former bosses, Jim Biggar, who was once chairman at Nestlé USA. Biggar espoused the “salami theory,” which postulates about what can happen to a product over time. “As each new marketing person takes a slice off the salami,” Hannay recalls the axiom going, “it changes imperceptibly. But after a succession of several new marketing people, the salami, which is still a salami, looks quite different than it did in the beginning.”

For retailers, the challenge is two-fold — keeping an eye on the changes that may be made to existing products and evaluating new products for taste and quality without letting price affect the evaluation more than it should.

Dan Raftery is president of Raftery Resource Network. He can be reached at Dan@RafteryNet.com.