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Este informe no está disponible en español. CARIBBEAN BUSINESS ‘A taste of Puerto Rico’... Stateside supermarkets import Puerto Rican food products to cater to Hispanic households BY TAINA ROSA of Caribbean Business June 23, 2005 Exporting Puerto Rican groceries Local food exporters add flavor to U.S. Hispanics’ cuisine Thanks to the rapidly growing Hispanic population on the U.S. mainland, gone are the days when the supermarket industry could afford to overlook the needs of this market segment. Back then, Goya Foods (established in 1936 as Unanue & Sons) went the opposite direction, catering to Hispanics and becoming the third-largest Hispanic-owned company and the largest Hispanic-owned food company in the U.S., reporting $850 million in revenue for 2004. With the Hispanic population becoming the largest minority group on the U.S. mainland, many Puerto Rico food producers have begun giving Goya some competition as they strive to capture the Hispanic market, which buys more food than any other demographic group in the States. Certainly, stateside supermarkets have taken note of the importance of serving Hispanics and are networking with many grocery providers in Latin America–including some in Puerto Rico–to give their Hispanic clients a taste of home. Puerto Rican food exporters and manufacturers noticed a great business opportunity in catering to mainland Hispanics and are going after a piece of the market share. Although some local products have been sent to stateside supermarkets for over 20 years, interest is booming, in synch with the Hispanic population’s upward spiral. Local products such as Coloso canned seafood and juices, Arroz Rico rice, Kikuet fritters, and Malta India malt beverage are widely available in supermarkets catering to Hispanics in the States. Stateside distributors that have picked up Puerto Rican products are seeing sales increase year by year. Also, the Hispanic population boom has prompted a few locals to move north and set up distribution companies that send Puerto Rican products to bodegas (stateside Hispanics’ equivalent to a mom ’n pop grocery store), independent supermarkets, and supermarket chains. This shouldn’t come as a surprise. Of Puerto Rico’s total exports to the U.S. mainland–which added up to over $55 million in 2004–7.7% is food products, according to the Puerto Rico Commerce & Export Co. In addition, the U.S. Hispanic population’s buying power is expected to jump from $686 billion in 2004 to $992 billion in 2009, according to the Selig Center for Economic Growth at the University of Georgia. A study HispanTelligence–the research division of Hispanic Business Inc.–performed this year shows similar results, revealing Hispanics’ buying power will surpass the trillion-dollar mark by 2010. Moreover, a Food Marketing Institute (FMI) study published in May 2002, revealed U.S. Hispanics in general spend an average of $117 on groceries each week, while other shoppers spend $87. It also shows U.S. Hispanics who speak Spanish most of the time spend even more, at $121 per week. HispanTelligence’s results show the same pattern. "Hispanic expenditures for food consumed at home [64.4% of the food budget] were 18 percentage points higher than the U.S. average," reads the report. It also points out that "Hispanics consume more food at home and less outside the home than the average of all consumer groups." In 2001, the report reveals, Hispanic households spent more than $3,600 on average per year for food consumed at home, compared to the $3,000 average all consumer-group households spent. Also, according to the U.S. Census, Hispanics make up the fastest-growing consumer segment in the U.S. and account for over 40% of all U.S. population growth over the past decade. Representing more than 41 million people (plus some four million in Puerto Rico), Hispanics are now the largest minority population in the U.S. Combined, the Hispanic middle and upper classes have a purchasing power of $333.3 billion. Local foods in stateside supermarkets Goya is definitely the best-known brand catering to Hispanics in the States. This is because the company was a pioneer in targeting the Hispanic community’s taste buds. In the 1940s, Spanish immigrant Prudencio Unanue–who had been importing Spanish foods to New York for about a decade–took notice of the immigration wave taking place between Puerto Rico and New York. He traveled to Puerto Rico and set up a small plant in Río Piedras where he would can gandules (pigeon peas), a staple of Caribbean cuisine, and sell them in New York. Today, New Jersey-based Goya goes way beyond just canning gandules. Its products range from fruit juices to meat products. The company has plants in the Dominican Republic, the U.S., Spain, and Puerto Rico. The brand is so well-known in the States that, in many cases, it is North Americans’ first contact with Hispanic foods. "Of all the 77 food products Goya processes in Puerto Rico, 40% are exported to the U.S. to be sold in Hispanic markets," Ivelisse Rivera, public relations director for Goya, indicated. Now, with the Hispanic population booming in many stateside markets, supermarkets have gone beyond having just a Goya aisle to satisfy this community. Kikuet, Arroz Rico, Coloso, and Bohío are only a few Puerto Rican brands bringing some tough competition to Goya’s dominance in many food categories. Of course, that isn’t an easy feat since Goya’s financial muscle allows it to advertise in all media to constantly promote its products. Canóvanas-based Kikuet, a fritter manufacturer, has been selling its goods to supermarket chains in Florida for over a decade, said Sales Director José Cestero, adding that export sales increase an average 15% each year. "Orlando’s Santana Enterprises distributes products from the Kikuet line; the same products you see here [Puerto Rico] are sold in Florida. We sell 15 to 16 full-container loads each year," he explained. Kikuet’s stateside sales of such items as empanadillas, tacos, and guanimes are expected to increase up to 25% in less than two years, as soon as the company finds distributors for the Hispanic markets in New York, Boston, New Jersey, Chicago, and Philadelphia, according to President Enrique "Kike" Mangual, adding that stateside sales account for about 7% of Kikuet’s total sales of about $10 million. Cestero said the company already is in negotiations with some distributors, but didn’t disclose their names. Kikuet is investing more than $1 million on a plant in Carolina–expected to open in March 2006–to meet the growing demand for its products on the island and in stateside markets. Pan American Grain’s business with stateside supermarkets also is booming. In March, only three months into the year, company President José González told CARIBBEAN BUSINESS that sales stateside had increased 100% compared with the 12 months of 2004. "Our sales already were growing 100% every year, and our products are available at 90% of supermarkets in the Tri-State [New Jersey, New York, and Connecticut] area," he said (CB March 31). Pan American Grain’s best-known products are Arroz Rico and Space Gang juices. In fact, sources close to Winn-Dixie supermarkets in Florida said Arroz Rico is one of the best-selling products. Cataño-based Colón Bros.’ Coloso line, which includes seafood, natural juices, and adobo seasoning, also has a healthy presence in stateside supermarket chains in Florida and the northeastern U.S. Wallace Schoettelkotte, a representative for Coloso in Central Florida (covering Tampa to Orlando), told CARIBBEAN BUSINESS that about 150 Coloso products are available in some 50 independent supermarkets in the region. He expects the company to introduce 10 to 15 new products in different categories to the market he covers and to get the brand into more stores. "Coloso does exceptionally well in Central Florida," he said. Freiría & Co., the producer of the Bohío brand of seasonings and food items, began exporting products to Winn-Dixie in Florida in 1980, said President Enrique Freiría. "Among the products we export are adobo, sofrito, sazón [seasoning], beans in water and salt, and dry beans," he said, adding that stateside sales increase about 5% each year. He also revealed he is negotiating to export the brand to more supermarket chains, but didn’t want to say their names yet. Some of the stateside supermarket chains already carrying Puerto Rican food items, besides Winn-Dixie, are Publix, Cousin’s, Supremo, Associated, Pioneer, Met Food, C-Town, Aim, Fine Fare, Bravo, Key Foods, and Albertson’s. Wal-Mart and Wal-Mart Supercenters also are participating. In fact, Pan American Grain’s products are available at almost 4,000 Supercenters in the U.S. Stateside distributors benefit, too The great demand for Hispanic products is a win-win situation for Puerto Rican brands and stateside distributors. It is no wonder distributors are looking to increase the number of Puerto Rican products they place in stateside supermarkets. New Jersey’s White Rose has been distributing Pan American Grain’s products stateside since late 2004 and is on the lookout to do business with more local brands. "We are looking for long-term relationships with Puerto Rico food processors and packers to supply U.S. East Coast supermarkets and processors to produce products for our private label," said George Conklin, White Rose vice president of Logistics & Administration. A consistent supply is the top requirement for a successful partnership, Conklin added. "We don’t ask food processors to send us full-container loads of merchandise because we consolidate products from different manufacturers," White Rose President Steve Bokser said. This means smaller producers and packers also can do business with White Rose and continue growing from there. CARIBBEAN BUSINESS learned the company will begin conversations later this month with a local food exporter. Stateside distribution companies headed by Puerto Rican entrepreneurs also have grown by doing business with local food companies. Two examples, those of Beverage Kicks and Santana Enterprises, stand out. José Valdez, president & CEO of Beverage Kicks, intended to set up the company to help Coloso develop and distribute energy drinks. In fact, before founding the company, he was vice president of G & J Wholesale Corp., a company marketing Nice energy drink, which almost was introduced in the local market about two years ago. However, Valdez went on to establish his own company and decided to focus on importing and distributing Coloso’s canned seafood, beans, and other primarily Spanish cultural food products to make the brand as best-known as possible, Valdez said. Still, plans for new beverages under the Coloso brand are alive. "The Beverage Kicks Inc. is planning for the Coloso brand to take market share from its major competitors, Goya–in the food market–and Red Bull in the beverage market," Valdez revealed. Connecticut, Massachusetts, Pennsylvania, and New Jersey are among Beverage Kicks’ principal markets, with the city of Philadelphia being the strongest of all, thanks to its large Puerto Rican population, Valdez said. He estimated Coloso sales in his markets have jumped 50% compared to last year. Among the supermarkets he does business with are Western Beef, Cousins, Twin City, X-tra, Super Super, C-Town, Bravo, Pioneer, Met Food, Food Bazaar, and Food Dimension. Beverage Kicks is in negotiations with Stop & Shop and Shop Rite, which potentially would add 650 stores. The company also is negotiating with the National Supermarkets Association, which is comprised of more than 450 Hispanic (mostly Dominican)-owned independent supermarkets in New York, New Jersey, and Connecticut. Osmel Santana’s company, Santana Enterprises, also has become very successful. "[Some 17 years ago,] I went to Orlando on vacation. The hotel room in which I was staying had a kitchenette, so I set out to buy some food," Santana remembered. "On my way, I noticed there was a small shop called ‘Bodega Hispana.’ It caught my attention, so I went in, but to my dismay, the store didn’t have any Hispanic foods at all! "I introduced myself to the owner, who happened to be Puerto Rican, and complained about him not having anything Hispanic. He responded, saying that whoever decided to start bringing Hispanic products to Florida would become a millionaire," Santana continued. The word "millionaire" was music to Santana’s ears, and he decided to do just that: open a distribution company that supplied supermarkets and bodegas with Hispanic foods. That’s how Santana Enterprises was born. Shortly after establishing the company, Santana returned to Bodega Hispana to let the owner know about his new company. Right there, the owner made his first purchase and recommended other bodegas Santana should visit. Thanks to this word of mouth, Santana Enterprises now rakes in $7 million a year and employs 30 people in a 30,000-square-foot warehouse. "We expect our sales to increase by $3 million in one year," he revealed. Moving to Orlando is probably the best business decision Santana ever made. His success has been triggered in large part by the exceptional growth the area’s Hispanic population has experienced. According to a report research firm Fishkind & Associates did for the Orlando Regional Chamber of Commerce, the Hispanic population of Central Florida makes up almost 20% of the total population, up almost 12% since 1990. The study also forecasts the purchasing power of the Hispanic community in the region–which has reached $6.9 billion–will increase to $8.2 billion by 2007. It looks like Santana and the other 130 Hispanic-owned and -operated businesses in the region are bound to see their hard work wonderfully rewarded. How can more locals get their products to the States? Kikuet’s Mangual, who was and is among Santana Enterprise’s most important clients, has some words of wisdom for other companies in Puerto Rico wanting to export food products to the States. "To enter the stateside market, you need to find highly responsible and trustworthy people who can help you distribute your product," he said. José Colón, president of Coloso parent company Colón Bros., warned that finding the right distributor in the States isn’t easy. "It is difficult to find distributors who are as efficient as those we have here in Puerto Rico." Once a good distributor is found, a loyal business relationship should be established. "Most importantly, when you find that distributor, you should remain loyal to it and protect its market," Mangual explained. He added that other distribution companies have tried to snatch the Kikuet account from Santana Enterprises, but he has remained loyal and both companies have been able to flourish. It should be no surprise Santana Enterprises’ president considers Mangual to be like a father to him. Meanwhile, Santana recommends that companies wanting to export take care of the product’s packaging and labels and focus on the importance of the products’ presentation. Some time ago, he said, he agreed to distribute a brand of food products but, since the presentation wasn’t of the best quality, the products didn’t sell as well as expected. Unfortunately, the supermarket chains decided not to buy those products anymore. Among other recommendations for exporting are to make the necessary investments in local plants to ensure a consistent supply at a consistent high-quality level. Commerce & Export Co. Offers insight to potential exporters If you are interested in selling your goods in stateside supermarkets, you should follow the advice of Ricardo Rivera, executive director of the Puerto Rico Commerce & Export Co. (CEC). His four main recommendations are: ensuring your company has the capacity to supply supermarkets consistently, adapting to different packaging and labeling requirements, researching and familiarizing yourself with the markets to which you want to export, and having a financially sound, solid operation. "First, you need to see if your company has the capacity to go beyond supplying local businesses. Only after you are able to fully satisfy your local clients’ demands should you consider doing business outside of Puerto Rico," Rivera explained. "There are many businesses interested in exporting, but if they can’t offer a consistent supply locally, they aren’t going to be able to do so for nonlocal clients." "You also need to be able to adapt your packaging, labeling, and probably even the name of your product to the market to which you want to export," Rivera indicated. He stressed it is very important to know that an item that is very successful in Puerto Rico may not be received as well in other markets and thus must be adapted to the tastes of each market. In addition, he said there are certain legal regulations that may require a product be packaged or labeled a specific way. "You must know the peculiarities of the market," Rivera added. "You must know about customs regulations, taxes, distribution vehicles, and even political and economic issues affecting the market. You need to do your homework." Companies also must take a good look at their own financial situation before doing business outside of Puerto Rico. "You must have a financially sound operation that is able to remain strong despite cash-flow swings and delays in logistics," Rivera disclosed. In addition to this advice, the CEC can offer valuable insight to businesses wishing to export not only to the States, but anywhere in the world. For instance, the company constantly organizes trips to different trade shows, such as the Food Marketing Institute show in Chicago and Alimentaria in Barcelona, Spain. "In September, we plan to participate in Expo Comida Latina in New York," Rivera revealed. The CEC also offers courses so more businesspeople can learn the intricacies of exporting. Its Foreign Commerce & Entrepreneurial Institute offers certifications in export and finance, insurance, and foreign commerce, among other topics, throughout the year. Courses can vary in length from 10 hours to two or three months, Rivera indicated. Stateside supermarkets battle for Hispanics’ business Publix, Winn-Dixie, Albertson’s, and Safeway all implementing strategies With Hispanics’ purchasing power expected to surpass the trillion-dollar mark by 2010, it is no wonder many stateside supermarket chains are beginning to cater to this demographic group. Already, chains like Publix, Winn-Dixie, Albertson’s, and Safeway, are launching different marketing strategies to convince Hispanic households to shop at their stores. In fact, 58% of grocery stores, 48% of convenience retailers, and 41% of drug, mass-market, and specialty stores have increased efforts to attract Hispanic consumers, according to a study by VNU Business Media, parent company of supermarket trade magazine Progressive Grocer, released in February. Evidence is plenty. For instance, about two months ago, Florida’s Publix converted two of its 850 supermarkets in the southeastern U.S.–one in Kissimmee and another in Hialeah, Fla.–to a new concept it baptized "Publix Sabor." Obviously catering to Hispanic households in those cities, the stores feature a variety of tropical fruits, a juice bar, seafood rice, and chicken fricassee, among other goodies. "The total number of Hispanic products we carry has increased steadily over the past decade," disclosed María Brous, media & community relations director, although she couldn’t offer exact numbers. California-based Safeway Inc., with more than 2,000 supermarkets in the U.S., has set up Hispanic food sections–dubbed Mercados (markets)–in some stores. The sections carry as many as 1,000 brands, including Goya, Café Bustelo, Chifles plantain chips, Sabrosas crackers, rice, beans, and religious candles. This chain also is hiring more bilingual workers and adding many Hispanic brands–from chips to detergents–to its shelves. Albertson’s, headquartered in Idaho, is no stranger to Hispanics either. To create awareness of its stores within Hispanic communities, it is sponsoring Hispanic holidays and festivals. Better yet, it is rolling out a new store format called Super Saver, which specifically targets Hispanic communities. It already has opened three of these supermarkets in Los Angeles and another in San Ysidro, a city in California where Hispanics (mostly Mexicans) are 70% of the population. Winn-Dixie, with 920 locations, began making its store signs in English and Spanish in 1998, as reported in company information. The Florida-based company also launched a Spanish-language advertising campaign in 2002. The campaign’s slogan was El sabor de tu país (The Flavor of Your Country). Still, good intentions sometimes pave the road to hell, and supermarkets’ marketing teams must know the dos and don’ts of targeting Hispanics. One of the biggest blunders being committed is thinking Hispanics are a homogeneous group and failing to address each Hispanic subgroup in its own dialect. A study Hispanic OmniTel Retail performed in February stresses that marketers should realize the Hispanic-American market isn’t a single market, but rather a diverse set of consumers who speak differently (although using the same language), and come from different countries with diverse cultures. If marketers don’t understand this, they could miss the mark and waste efforts. One of the biggest mistakes made, for example, is assuming all Hispanics eat burritos and tacos. Although Mexicans make up 60% of U.S. Hispanics, the remaining 40% generally prefer other meals. "Hispanics of Mexican, Puerto Rican, and Cuban descent rarely identify with each others’ nationalities and like being spoken to in their own dialects," wrote Texas-based international marketing consultant Paul Herbig. "One [common mistake] is to believe the same campaigns will work with all Hispanics. Creating a generic ad that appeals to all segments of the Hispanic market can be difficult. For example, Mexicans and most Central and South Americans are avid soccer enthusiasts while Cubans and Caribbean Hispanics follow baseball." A close look at the Hispanic group that a supermarket wants to target–and learning its food preferences and dialect(s)–is essential for developing appropriate marketing strategies. This Caribbean Business article appears courtesy of Casiano Communications. or
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