The Mainstreaming of Ethnic Markets

Apr 14, 2004

By David Morse

The Southern California labor dispute is over, but the story of its ultimate impact on the grocery business has yet to be written. The fact that so many consumers
— ethnic and mainstream — effortlessly maneuvered their way through the strike, finding new destinations with barely a peep, has exposed the tenuous ground held by supermarkets.

Complicating the situation from a national perspective are the nearly 85 million African Americans, Hispanics and Asian Americans who have already demonstrated
a predilection to buying their food in non-traditional stores. Studies conducted by FMI, for example, show that, although supermarkets are the preferred grocery shopping destination
for ethnic consumers, they also spend a great deal at alternative locations like butcher shops, seafood stores, bakeries and produce vendors. In other words, neighborhood shops
offering fresh goods they can’t find in supermarkets.

Far more than most native-born Americans, immigrants have always sought freshness and a familiar, comfortable shopping experience. Despite the stereotype of the
wide-eyed foreigner ogling row after row of merchandise on their first trip to the supermarket, what immigrants really crave are recognizable products from home. In today’s market,
ethnic retailers such as Vallarta, Avanza and 99 Ranch markets are rising to the occasion, creating a user-friendly store environment with the right assortment of products, merchandised
in the way these shoppers are accustomed.

How well major supermarkets fare in this new milieu remains to be seen. But there are many stepping up to the plate. According to Ken Green, Corporate Vice President
at The Great Atlantic and Pacific Tea Company, a chain of more than 750 stores, “We know ethnic marketing is very important and we are trying to do a better job all the time,
realizing it is much more complex than what it looks. We have the right product for the neighborhood, consumer-driven on a store-by-store basis.”

They’re not alone. Other big chains such as Stop & Shop, Pathmark, Winn-Dixie, and Albertsons are taking similar steps to capture a greater share of ethnic
consumer expenditures.

Yet, supermarkets possibly face an unexpected threat from another direction. An interesting byproduct of the California labor dispute was the convergence of non-immigrant,
general market shoppers to ethnic shopping venues—what my colleague Thomas Tseng calls “reverse-ethnic merchandising.”

According to a recent article in the Los Angeles Times, King Ranch, an independent retailer traditionally focused on the Hispanic market, saw their sales grow
by a 25% during the strike, attributed predominantly to the influx of non-Hispanic shoppers. In addition to stocking 100 new items and remodeling, the small chain “replaced the
Spanish pop music that used to play,” and changed employee uniforms from “red golf shirts to more formal wear” to accommodate the changing demographics of the store. “We want
to keep these customers,” says William Miguel, VP of E&T Foods, which owns King Ranch.

Moderator’s Comment: How active should big chain retail presently be in shifting marketing and merchandising
to reflect immigrant and acculturated consumer preferences? Will we see the rise of small, regional ethnic chains to national prominence as a result of expanding multicultural

As the impact of immigrants on the American consumer landscape is felt more and more, mainstream tastes will also change as a result. The
fact that salsa outsells catsup in the U.S. has already become established common lore. One of the prime drivers of this crossbreeding of tastes is a new generation of young people
who are the children of immigrants, and there are more of them now than at any point in our history. These bilingual, bicultural Americans act as dual ambassadors, navigating
American culture for their parents, and conveying the culture of their parents’ to their peers.

Though traditional ethnic stores certainly have the upper hand when it comes to attracting recent arrival immigrants, the ultimate spoils
will go to those retailers who are able to cater to the demands of what will be the country’s largest sector — shoppers looking for the right combination of ethnic and general
merchandise. They include acculturated immigrants who have lived in the U.S. for a number of years, their offspring, and the burgeoning number of mainstream shoppers whose tastes
are becoming increasingly multicultural in their outlook, tastes and shopping habits.

David Morse – Moderator

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