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THE WALL STREET JOURNAL
Hispanic Food Firm Goya Scores With All-in-One-Aisle Approach
By ALEJANDRO BIANCHI and GABRIEL SAMA
July 9, 2002
JERSEY CITY, N.J. -- At the Shop Rite supermarket here, most of the goods are organized as they are at any big U.S. grocery store -- by aisle, according to product type.
But there's one section that carries a variety of goods -- desserts, beans and sauces among them. Unusually, one company is in control: Hispanic-food powerhouse Goya .
"Our research has shown that that's the way that our consumer likes to buy," says Andy Unanue, 34 years old, chief operating officer of closely held Goya Foods Inc. and a grandson of company founder Prudencio Unanue. "They know that everything they need to cook is in that section."
Goya is at the forefront of a trend seen in neighborhoods across the land dominated by a specific ethnic group. At the Shop Rite, almost half the population within a half a mile is Latino. So, Goya has positioned itself as a kind of shop within a shop that offers everything a Hispanic consumer might want. Its products, which include basic ingredients like Spanish olive oil, seasonings like Mexican chiles and Caribbean fruit juices, are imported from all over Latin America and sold under the Goya brand.
With $715 million in revenue in 2001, up from $695 million in 2000, Goya , based in Secaucus, N.J., is now the fourth-largest Hispanic-owned company in the country, according to Hispanic Business Inc. The company, says Mr. Unanue, expects revenue growth of 7% this year.
Key to its approach are some 500 independent brokers -- out of about 2,300 employees it has in the U.S. They work directly with store managers to help them decide where and how to sell Goya products. The company strives to grab as much retail space as it can get, without occupying so much that the retailer loses money, says Mr. Unanue.
Typically, retailers charge a fee related to the space a product occupies within the store, called a "slotting fee." Industry observers say the fee helps retailers make a profit on products that might not be consistent sellers. "Retailers don't want to use shelf space for a product that isn't proven," says César Melgoza, president of Geoscape International Inc., a marketing company that specializes in Hispanic retailing strategy.
But given the skill of its sales team in gauging market demand, and the swelling Hispanic demographic, Goya "has never paid a slotting fee," Mr. Unanue says. Big retailers in particular aren't experts at serving the Hispanic market, while 66-year-old Goya has plenty of practice.
"The knowledge of who are your key consumers, where they live and where they buy, is the intellectual capital that can work as a substitute to slotting fees as well as an insurance against the risks of introducing new products in the market," Mr. Melgoza says.
Still, there's a downside to the all-in-one-aisle strategy that Goya pursues most of the time. Its products don't garner as many crossover sales as they could when people compare quality and prices of similar products from different makers, Mr. Unanue acknowledges. Although Goya has in the past made a big push toward serving the broader U.S. market, 75% of its clients remain Latinos, most of them recent immigrants or traditional families that eat Hispanic food at home. "What we may lose in the crossover market, we gain more in making our core clients happy," argues Mr. Unanue.
Other big Hispanic food makers are trying to follow a similar tack. Unilever unit Iberia Foods, which has about $40 million in annual sales, is one of them, as is closely held La Cena Fine Foods Ltd. of Saddle Brook, N.J., which sells about 400 different products under its brand.
"Latinos are very loyal to their brands," says Marino Roa, vice president of sales at La Fe Foods Inc. This Hispanic food company is currently targeting immigrants coming to the U.S. from Argentina, Brazil and Ecuador, importing popular brands from those countries. The closely held company, founded in 1968, based in Moonachie, N.J., and with operations in Miami, expects $100 million in sales this year.
These ethnic-brand merchandisers are increasingly pushing on an open door at the nation's most important retailers, who have taken notice of recent studies that highlight the attractiveness and loyalty of Latino shoppers. One of them, carried out at the end of last year by the Cultural Access Group Inc. for the Washington-based Food Marketing Institute, indicates that 85% of Latinos do most of their shopping in supermarkets and that 80% of them say brands are very important in deciding where they shop.
What's more, Latinos -- with an estimated buying power of $452 billion in 2001 -- visit grocery stores an average of 4.7 times a week, compared with 2.2 times for the average American. They also outspend other Americans $117 to $87 per week in grocery shopping, according to the study.
Given that, retailers are looking to "where the biggest marketing opportunity is," says Ken Greenberg, vice president of Consumer Marketing Services for ACNielsen Homescan.
Wal-Mart Stores Inc., for example, has its "Store of the Community" initiative. Managers at 2,800 Supercenters and Wal-Mart stores across the country have the authority to order products that best reflect local demographics. The initiative is "a reaction to the people who shop in your store," says Tom Williams, a Wal-Mart spokesman. Consequently, Wal-Mart's Hispanic food sales have grown in the past couple of years, reflecting the growth of the Hispanic population in the country, according to Mr. Williams.
And at Kmart Corp., where African-Americans and Hispanics account for 32% of total shoppers, sales of Hispanic food products grew 23% in 2001 from the year before, according to David Karraker, a company spokesman. In reflection, last March, Kmart launched an initiative that's similar to Wal-Mart's.
Supermarket chain Albertson's Inc. is exploring a possible launch of an all-Hispanic store in one of its markets with a strong Hispanic presence, says a company spokeswoman. The company has more than 2,200 stores, some of them dedicated to ethnic marketing but none fully catering to a specific ethnic group.