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Akron Beacon Journal

Tortillas Are Rolling Up Sales; Hispanic Population Growth, Changing U.S. Palate Among Factors

By Barry Shlachter

16 November 2003
Copyright ©2003
Akron Beacon Journal. All rights reserved.

Watch out, Wonder Bread.

Sales of the unassuming but versatile tortilla are catching up to white bread, reflecting the growth of the nation's Hispanic population and the broadening of the American palate.

``Tortillas have had steady growth 10 to 15 percent a year seemingly forever,'' said Irwin Steinberg, the founding president of the 14-year-old Tortilla Industry Association, which is based in Dallas.

The popularity of wraps -- remonikered flour tortillas that are sometimes flavored -- also helped boost the round, flat bread's share to 32 percent of the combined retail and food service market for bread, just behind white loaves at 34 percent, according to a report from market researcher Mintel for the association.

``I think people are bored with white bread, but tortillas and ethnic breads have caught their imagination,'' Steinberg said.

And how.

In Fort Worth, Texas, Leo's Foods not only bakes millions of corn and flour tortillas for food service accounts throughout the continental United States, Puerto Rico and Brazil, but also produces such exotic flavors as pineapple and chocolate for a client in South Florida.

``I don't know what they use them for, but people love them,'' an amused company president Leo Jimenez, 73, said of chocolate tortillas. ``We try to give customers what they want -- within reason.''

Steinberg said small tortillas are used by some Chinese restaurants as wraps for moo shu dishes.

Although there are areas where tortillas remain unfamiliar, the greatest sales growth has been in the upper Midwest and Northeast, where Hispanic communities are not large, according to Baking & Snack. In New England, demand has been stimulated by selling them as wraps, Heidi Hartung of Harbar Corp., a Massachusetts-based tortilla maker, told the industry journal.

White bread sales dip According to market research company IRI, supermarket sales of white bread dropped 0.6 percent in 2002 from the year before, while tortilla sales grew 11 percent. Private-label tortilla sales jumped a whopping 26 percent.

In dollar terms, retail and food-service sales of tortillas have nearly doubled in a six-year period to $5.2 billion in 2002, up from $2.8 billion in 1996, said the association, which predicts $6.1 billion in sales in 2004.

Thirty years ago, annual sales were just about $300 million when tortillas were considered a narrow, ethnic food item.

Manufacturers range from numerous mom-and-pop operations to industry giants, such as Irving, Texas-based Mission, the No. 2 maker with $130 million in sales and a 20 percent market share, according to IRI.

Fort Worth-based Bimbo Bakeries USA, owned by Bimbo of Mexico, ranks fourth with $35 million in name-brand tortilla sales for a 5.5 percent share.

The word tortilla comes from the Spanish word torta, which means round cake. What we know today as the corn tortilla was, according to an ancient Mayan legend, invented by a peasant as a gift for his monarch. The flour tortilla originated either in Texas as a convenient food during roundups, or in northern Mexico to form burritos for people working in mines or fields.

Until the 1970s, most tortillas were made by small mom-and-pop bakeries or operations at the back of Hispanic groceries.

From the start, Leo Jimenez wanted to cater to the institutional market and left his brother Raul's Jimenez Foods to start his own tortilla plant in 1978 with two full-time employees -- himself and his wife Sule -- and two part-timers.

With $30,000 lent by the local Coors beer distributor, the late John McMillan, who also helped him secure a $75,000 commercial loan, Jimenez snapped up nearly new equipment from a failed tortilleria in Oyster Bay, N.Y., and began production.

Accounts soon ranged from small, family-owned restaurants to national accounts. Today, sales top $20 million a year, and Leo's employs 280 people who produce chips and tortillas in many varieties for customers as far-flung as Idaho, Maine and South America. Major accounts are with Tex-Mex restaurant chains.

Although Leo's sells its Juarez-brand tortillas to small, ethnic supermarkets, it has refrained from scrambling for shelf space at large retail chains, whose business is dominated by such industry behemoths as Mission and Bimbo.

``I wasn't going to play that game,'' Jimenez said. ``The biggest growth is in food service. There's just too much competition in retail.''

Azteca's different path Chicago's Azteca Foods has taken a different approach.

The company was born in 1970 when 10 members of the Hispanic-oriented Azteca Lion's Club ponied up $80,000 to launch a tortilleria run like a modern business. To manage the enterprise, they selected from their ranks a man named Art Velasquez, who studied engineering at Notre Dame and then earned an MBA from the University of Chicago.

``The only demand in the Midwest then was in Mexican neighborhoods,'' he said. ``Our vision was to bring tortillas to the general market, selling through the food broker system to supermarket chains.

``We had to redo the tortilla,'' he said, referring to a new recipe that extended shelf life from three days to 60, if kept refrigerated.

Thirty-three years ago, Windy City supermarket executives couldn't even pronounce the product. ``They called them `tor-teh-LAHZ,' '' he said.

But they began ordering, and Azteca caught the attention of Pillsbury, which bought the company for ``under $10 million'' in 1984.

``It was very difficult to sell,'' Velasquez said. But other large food processors, including Beatrice, Lawry's, ConAgra and Tyson, were getting into the tortilla trade, and Velasquez thought Azteca didn't have the resources to compete head on.

Pillsbury developed an innovative research-and-development department for Azteca, creating the first bake-at-home salad shell. It built a more efficient die-cut line that produced thinner tortillas and devised a formula that used fewer preservatives. Velasquez and a partner later bought Azteca back for ``more than $10 million'' and have kept the company growing ever since.

According to IRI, Azteca nationally ranks second -- behind Mission -- in refrigerated tortilla sales to supermarkets, $34.9 million for the year that ended July 13. Total sales, including food service accounts and exports to southeast Asia, are in the ``neighborhood of $40 million,'' Velasquez said.

While foreign sales are growing, Velasquez said U.S. producers are positioned to profit from changing tastes and diet concerns of American consumers.

``They'll be in more places in the supermarket -- in the deli section, the refrigerated section, bakery, Mexican food section and the bread aisle,'' he said.

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