Ethnic Merchandising: Building your Bottom Line An Interactive Workshop

1
Ethnic Merchandising Building your Bottom
LineAn Interactive Workshop

• Prepared for
• May Convention
• May 3, 2004

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Quote from the Report

• Most supermarkets dont realize the power of
  these markets, and they want to target the middle
  class. When I look at some of our stores that are
  up 15 to 18, its strictly because of the
  impact of the ethnic business.
• Supermarket President

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Study Resources

• About Marketing Solutions, Inc.
• and
• Cultural Access Group

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Objectives

• Offer actionable ideas that will help you drive
  additional sales by merchandising and marketing
  more successfully to your ethnic shoppers.
• Opportunity to clarify and discuss ideas
• Opportunity to hear retailers and a manufacturer
  share ethnic merchandising experiences

But remember, that the value you take away will
be directly related to your level of
participation.
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Workshop Resources

• Panel Members
• Leonard Harris
• Chatham Foods
• Jeff Lim
• Pacific Island Supermarkets
• Brian Numainville
• Nash Finch
• Mike Pence
• Kraft Foods

• Workshop Leaders
• Bill Bishop
• Willard Bishop Consulting
• Terry Soto
• About Marketing Solutions, Inc.
• David Morse
• New American Dimensions

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What Well Cover

• Six successful practices for merchandising and
  marketing to ethnic shoppers
• Learning more about your ethnic shoppers
• Defining your ethnic merchandising look
• Tailoring your offer
• Enhancing the in-store experience
• Recruiting a diverse staff
• Communicating value at all points of contact

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Interactive Session Flow

• These six best practices will broken down into
  six lab sections that will include
• A video or research overview
• Presentation
• Questions and discussion

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Workshop Timing

• Introduction 815AM
• Best Practice 1-3 825 950 AM
• 10 Min Break 950 1000 AM
• Best Practice 4-6 1000 AM 1100AM
• 5 Minute Video or Research Overview Hearing It
  From the Consumer
• Presented by David Morse
• 12 Minutes per Best Practice
• Presented by Terry Soto and Select Panel Members
• 10 minute panel and audience discussion
• Moderated by Bill Bishop

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Best Practice 1Think like your ethnic
customers so you canserve them better.
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A NEW AMERICA
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The number of Foreign-Born in America is at an
all time high
The Foreign-Born Population
64 Increase
U.S. Census Bureau, 2000
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Hispanics Now Account for Over Half of US
Immigration
Region of origin of total immigrants in percent
U.S. Census Bureau, 2000
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Mexicans Accounted for almost a Third of 1990s
Immigrants
U.S. Census Bureau, 2000
14
The Hispanic Population will Approach Whites by
the End of the Century
U.S. Census Bureau, 2000
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However, Largest Growth has been in
Non-Traditional Areas
U.S. Census Bureau, 2000
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Younger Hispanics tend to be Native Born Older
Hispanics tend to be Immigrants
TOTAL Foreign Born 44 2nd Generation
30 3rd Generation 26
Current Population Survey, US Census Bureau,
February 2002
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Asians as well
TOTAL Foreign Born 65 2nd Generation
26 3rd Generation 9
Current Population Survey, US Census Bureau, July
2003
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Spanish Language Use Across Generations
1st Generation Spanish Dominant 2nd Generation
Bilingual 3rd Generation English Dominant
Pew Hispanic Center, 2002 National Survey of
Latinos
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English Preference of 2nd Generation is Clear and
Improves Over Time
of 2nd Generation Preferring English
Source Legacies by A. Portes and R. Rumbaut,
Children of Immigrants Longitudinal Study
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However, Foreign Language Usage Remains Strong
2nd Generation Speaks Spanish - 1996
Source Legacies by A. Portes and R. Rumbaut,
Children of Immigrants Longitudinal Study
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Key Takeaways

• Develop a clear understanding of the ethnic
  make-up of your customers around your stores
• Culture
• History
• Nationality

Think like your ethnic customers so you canserve
them better.
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Key Takeaways
Asian Americans

• Describes people from 15 ethnic groups and
  nationalities
• Nine in ten are accounted for by 6 nationalities
  Chinese, Filipino, Asian Indian, Vietnamese,
  Korean and Japanese
• Chinese influence is a common foundation for much
  of East Asian culture, yet Asian countries retain
  a cultural distinctiveness
• Philippines - influenced by colonialism Spain
  and the U.S.
• Vietnam - influenced by French and U.S. culture,
  and many Vietnamese are ethnically Chinese
• Japan and Korea least influenced by
  colonialism among the most homogeneous in Asia

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Key Takeaways
African Americans

• Most established ethnic group in the U.S.
• The first Africans brought to the Americas in the
  1500s by colonial governments
• Distinct cultural characteristics and diets
  developed
• Louisiana - influenced by the Acadians (French
  colonials)
• In Southeast - Spaniards
• In Northeast - British
• Caribbean - Dutch, Belgian, Danish, Spanish
• Today, African-origin consumers bring their own
  set of food culture
• Distinct cuisines influenced by their own
  histories and colonialism

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Key Takeaways
Hispanics/Latinos

• Hispanic originates from Hispania Latin for
  Spain and defines any person of Latin American
  descent in the U.S.
• Hispanics cultural characteristics have
  developed through a fusion of indigenous,
  European and African heritage
• Mexicans and Central Americans - heavily
  influenced by Spanish culture through mestizaje
  mixing of indigenous and European blood through
  400 years of colonization
• South Americans - significantly influenced by
  Spain - less mestizaje especially in southern
  cone
• Italy, Germany and Scandinavia influences
• African influence in Brazil, Ecuador, Peru,
  Columbia and Venezuela mulato mixing of
  African, indigenous and European blood
• Cubans, Puerto Ricans and Dominicans were
  significantly influenced by the African and
  Spanish cultures

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Key Takeaways

• When building an ethnic food assortment, begin
  with the dietary pillars of each culture then add
  to this foundation by learning more about the
  cuisines from each country

• Hispanic
• Corn
• Legumes
• Rice
• Chilies
• Vegetables
• Fruits
• Poultry
• Pork
• Seafood

• Asian American
• Rice
• Noodles
• Sauces
• Vegetables
• Fruits
• Seafood
• Poultry
• Pork

• African American
• Greens
• Roots
• Legumes
• Corn
• Rice
• Seafood
• Poultry
• Pork

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Key Takeaways
Think like your ethnic customers so you canserve
them better.

• Demographics
• US Census
• Claritas
• Sales Information
• AC Nielsen
• IRI
• Product Usage Behavior
• Simmons Market Research
• Scarborough

• Attitudes and Values
• Yankelovich Monitor
• Primary Research
• Focus Groups
• Surveys
• Customer interviews
• Employee interviews
• Store director interviews

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Key Takeaways
Think like your ethnic customers so you canserve
them better.

• Find out more about product preferences and
  shopping behavior.
• Surf the Internet and look through cookbooks
• Beautiful Cookbook series
• www.sallys-place.com
• Bring ethnic products to merchandising meetings
• Test ethnic restaurants with ethnic employees
• Watch the shopping experience in ethnic
  supermarkets
• Tap experience and research of national and
  ethnic vendors

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Key Takeaways

• Multinational manufacturers like Kraft have lead
  in their ability to conduct in-depth qualitative
  research
• Extensive use of ethnographic capabilities
• Pioneer of using longitudinal consumer panels
• We have done breakthrough survey research to
  understand retail-related attitudes and channel
  used by Hispanics
• We employ leading-edge analytic techniques to
  model and mine syndicated data to deliver better
  category management capabilities
• Kraft uses all of these tools to develop more
  appealing programming for our key retail partners

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Hispanic Markets Reflect Character of Country of
Origin, Percent of Hispanics in the Market

• We can tailor programs to meet the needs of the
  Hispanic shoppers in your market

United States

• Key
• City Name
• Hispanic Population
• Percent of market that is Hispanic

Cuba
Mexico
Puerto Rico
Source Synovates 2004 U.S. Hispanic Market
Report
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Key Takeaways
Think like your ethnic customers so you canserve
them better.

• Build working relationships with distributors
• Work back from brands in ethnic stores
• Develop clear understanding of the ethnic make-up
  of your customers
• Use distributors to fill out variety
• However, have a foundation of knowledge first

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Key Takeaways
Think like your ethnic customers so you canserve
them better.

• Proactively educate your organization.
• Know who your ethnic customers are
• Cultural knowledge is critical to being authentic
• Avoid cosmetic or superficial changes or
  retrofits.
• Do the homework - No quick solutions or answers.
• Being ethnic does not automatically make one an
  expert
• Segment, segment, segment, segment.
• Invest in the resources and tools
• Sales data will not show you missed opportunities
  - get out into the marketplace.

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Best Practice 2 Define your ethnic
merchandising look and organize to execute it.
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ADVO FMI New American Dimensions
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Methodology

• 1,650 30 minute telephone interviews done in
  March 2004
• The interviews were conducted in the top 10
  Hispanic markets, representing 62 of total
  Hispanics
• Los Angeles 300 New York City 150
• Miami 150 Chicago 150
• San Francisco Bay Area 150 Houston 150
• Dallas 150 Phoenix 150
• San Antonio 150 San Diego 150

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Hispanics are Huge Grocery Spenders
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Hispanics Spend Less at Primary Store
Secondary Stores
Primary Store
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Hispanics Shop Multiple Channels
Visited at Least Once in the Past Month

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Hispanics Make 26 Grocery Shopping Visits per
Month
Average Number of Visits Per Outlet
Bodegas/Corner Stores
Convenience Stores
Bakeries/Panaderias
Supermarkets
Meat Shops/Carnicerias
Limited Assortment Stores
Drug Stores/Pharmacies
Discount Superstores
Specialty Grocery Stores
Club Stores
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Unaculturated Hispanics Primary Store is an
Ethnic Format, while Acculturated Hispanics
Primary Store is a Chain Supermarket
Top Primary Grocery Store Type In Each U.S. Market
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A Clean, Friendly Store with Lots of Fresh Meat
and Produce is What Most Hispanics Want
Answered Very Important
A clean/neat store
Has fresh, high quality fruits and vegetables
Courteous friendly employees
Has fresh, high quality meats and poultry
Low Prices
Has fast checkout
Convenient Location

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Hispanic Elements Are Also Important,
Particularly with the Less Acculturated
Answered Very Important
Bilingual Employees
Sells Hispanic Products
Bilingual Store Signs
Bilingual Packaging on Food Products
Store active in local community
Carries products from Latin America
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Hispanics Consume Media in English and Spanish
Acculturated
Unacculturated
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Coupon Usage Increases With The Number of Years
Spent in the United States
Non-US Born, That Use Coupons, Answered
Everytime or Fairly Often
0-4 Years
5-9 Years
10-15 Years
16 Years

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FOOD CONVENIENCE

• convenience \k?n-?ven-y?n(t)s\ n
• something conducive to comfort or ease

The meaning of convenience changes depending on
ones level of acculturation
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Acculturation and Food

• Less Acculturated
• Traditional dishes
• Cook from scratch daily
• Shopping is social
• Seldom eat out
• Large mental cookbooks

• More Acculturated
• Traditional American dishes
• Prepared foods
• Shopping is utilitarian
• Eat out often
• Cookbooks help for special occasions

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THE PREPARED FOOD MODEL
Anglo
Acculturated
Value Orientation
Traditional
Anglo
Convenience Orientation
Traditional
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Key Takeaways
Define your ethnic merchandising look and
organize to execute it.

• Some supermarkets have dedicated Hispanic store
  formats
• Minyards Carnival
• Nash Finch Avanza

• Albertsons Super Saver
• Bashas Food City

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Key Takeaways

• Define your ethnic merchandising look and
  organize to execute it.

• Demonstrate commitment through product display
• Display products at the beginning of the shopping
  trip
• Segregate and integrate some products

We dont beat people over the head with how
ethnic we are. We just recognize the differences
and make it part of our merchandising philosophy
Senior V.P. Marketing and Sales
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Key Takeaways
Define your ethnic merchandising look and
organize to execute it.

• Reconcile ethnic merchandising and category
  management
• Assign at senior level
• Dont go just by the numbers
• Monitor your environment
• Analyze ethnic sales numbers as a subset of total
  movement

We look at category management as the map of
where to go. But if we measured strictly by
category management, we would probably throw out
some things that really appeal to our customers.
Its not enough to know what we are selling in
our stores. We want to know what our missing
opportunities are. In order to do that, we need
to get out there.
Senior Ethnic Buyer
Senior V.P. Marketing and Sales
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Key Takeaways
Define your ethnic merchandising look and
organize to execute it.

• Define who you want to be
• Establish strategic foundation first execution
  second
• Empower ethnic executives to impact the business.
• Too many are Consultants.
• Build the right infrastructure.
• Flexible category management models are critical
  to achieving the right ethnic assortments.
• Develop the right category management filters.
• Consider local input and expertise.
• As ethnic merchandising continues to evolve -
  Evolve with it.

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Best Practice 3 Tailor your offering to appeal
to your ethnic customers
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Key Takeaways

• Tailor your offering to appeal to your ethnic
  customers

• Use key merchandising triggers
• Price to reflect ethnic sales volume
• Highlight products included in daily cooking
• Cater to service preferences to offer more choice

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Key Takeaways

• Tailor your offering to appeal to your ethnic
  customers

• Lead with ethnic brands in key categories

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Key Takeaways

• Tailor your offering to appeal to your ethnic
  customers

• Leverage Multinational manufacturer brands
  strength in Latin America and Asia
• Include them in your assortment

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In Large Part Due to their Latin America
Presence, Many Kraft Brands Lead Their Categories
inTop-of-mind Awareness and Purchase

• Macaroni Cheese - Kraft Macaroni Cheese
• Cream Cheese - Philadelphia
• Powder Gelatin Mix - Jell-O
• Cheese Slices - Kraft Singles
• Shredded Cheese - Kraft Shreds
• Cookies - Nabisco (net)
• Crackers - Nabisco (net)
• Hot Dogs - Oscar Mayer
• Salad Dressings - Kraft Salad Dressing
• Mayonnaise - Kraft Mayo
• Lunch Meats - Oscar Mayer
• Frozen Pizza - Kraft (net)
• Powder Soft Drink - Kool Aid/Tang (net)
• Sour Cream - Knudsen/Breakstones (net)

Source Kraft Proprietary Research
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Retailers Should Consider Partnerships with
Manufacturers Like Kraft to Increase Hispanic
Volume

• Kraft is one of the best known food and beverage
  companies among Hispanic consumers

Source Kraft Proprietary Research
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Kraft is Emotionally Relevant, Equaling or
Leading Strong Hispanic Brands

• Kraft is a trusted partner for quality products,
  as well as information
• Retailers can leverage this relevance to improve
  its profile among these shoppers

Source Kraft Proprietary Research
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Key Takeaways

• Tailor your offering to appeal to your ethnic
  customers

• Produce
• Large departments, i.e., 20-40 more space
• Mass displays, e.g., bins, waterfalls, etc.
• Less basic variety, more ethnic assortment
• Strike a balance between price and grade

Well have all the basic produce, but we wont
have six types of apples like we do in our suburb
stores.
V.P., Marketing
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Key Takeaways
Tailor your offering to appeal to your ethnic
customers
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Key Takeaways

• Tailor your offering to appeal to your ethnic
  customers

• Meat
• Expand the service counter
• Cut to preference, e.g., thin cuts.
• Serve seasonal and holiday needs
• Carry marinated meat

We have seen an increase from 70 to 80 in our
meat department just by opening a carniceria
service meat department. We get instant,
double-digit growth when we open one.
V.P. Marketing
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Key Takeaways
Tailor your offering to appeal to your ethnic
customers
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Key Takeaways

• Tailor your offering to appeal to your ethnic
  customers

• Service Deli/Hot Foods
• Be authentic - Bring in ethnic cooks
• Counter-person should speak language
• For Hispanics, offer wide assortment of white
  cheese and creams
• Price hot foods by the pound

We offer fried catfish on Fridays and we cant
cook it quick enough--the wait is as long as two
hours sometimes, and people drive over 10 miles
to our stores to buy it.
President
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Key Takeaways

• Tailor your offering to appeal to your ethnic
  customers

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Key Takeaways

• Tailor your offering to appeal to your ethnic
  customers

• Bakery and Tortillas
• Create extra space for ethnic bread and cakes
• Ensure that your assortment is authentic

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Key Takeaways
Heavy Emphasis on Party Cakes
Emphasis on Fresh Baked Bread
Tres Leches and Flans
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Key Takeaways
Tailor your offering to appeal to your ethnic
customers

• How you offer your assortment is as important as
  what you offer.
• Personal service in perishables is a key to
  success.
• Know that definitions of specialty and staple
  items will be different in the context of ethnic
  merchandising.
• Merchandise and price ethnic staples according to
  ethnic sales movement.
• The right ethnic brand assortment is key.
• Experts on flavor and preparation preferences
• Specialists and multinationals

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Best Practice 4Create a store culture that
enhances the store experience and connects with
the community.
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Key Takeaways
Create a store culture that enhances the store
experience and connects with the community.

• Provide several points of contact for your ethnic
  shoppers
• Authentic product assortment and merchandising
• Store cleanliness
• A diverse staffing mix
• In-language communications
• Relevant community outreach

In all the departments, we have at least one
person who can take calls and communicate in
Spanish.
VP, Human Resources
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Key Takeaways
Create a store culture that enhances the store
experience and connects with the community.

• Use in-language communication
• Bilingual signage
• Badges that identify bilingual employees
• Encourage in-language interaction with ethnic
  shoppers, especially in service departments
• Mix in ethnic music tracks
• Repeat intercom announcements in-language
• Train staff to understand that ethnic efforts
  enhance rather than compromise service to
  non-ethnic shoppers

You do get a little backlash, but you have to
be prepared for that. I think that for the most
part those are the exceptions, and I dont see
us changing the way we do business because of
it.
VP, Merchandising and Buying
70
Key Takeaways
Create a store culture that enhances the store
experience and connects with the community.

• Implement ethnic community relations program
• Educate staff on culture of ethnic shoppers
• Identify community-based organizations as
  potential partners
• Establish relationships with community leaders
• Engage in community activities
• Sponsor neighborhood cleanups
• Host community activity on parking lot

We really go out of our way to express how much
the company believes in that and how much we
appreciate employees who do that.
VP Human Resources
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Key Takeaways
Create a store culture that enhances the store
experience and connects with the community.

• Purchase from local ethnic suppliers
• Identify ethnic vendors who can supply products
  or services locally
• Establish ethnic purchasing quotas
• Ensure corporate process and procedures are
  workable
• Help them qualify
• Help them grow with you

When done appropriately, you can really help
rejuvenate economies in certain areasIf I make
sure I buy from a local manufacturer, he is
going to employ more individuals in that area.
VP Supplier Diversity
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Key Takeaways
Create a store culture that enhances the store
experience and connects with the community.

• Nothing will deliver a more positive store
  experience to ethnic customers than quantity and
  quality of interaction.
• Native language in store is critical in
  establishing a connection with this consumer.
• They must be able to ask questions, make requests
  and even complain in their own language
• Critical that store or customer service managers
  from the neighborhood lead local community
  relations efforts.
• Difficult to be and feel connected if they live
  in suburbs
• Procurement from local ethnic businesses will
  ensure credibility and support from ethnic
  community leaders.

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Best Practice 5 Recruit and retain a diverse
staff to help you successfully serve your target
customers.
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Key Takeaways
Recruit and retain a diverse staff to help you
successfully serve your target customers.

• Maintain a diversity philosophy
• Your staff should think like your ethnic
  customers not just think about them
• Ensures broad and creative thinking across all
  levels of the organization through diversity in
  middle and upper management positions

Clearly, the more employees you have who share
the cultural and historical background, the
better you are going to understandthe more
sources of information you have regarding
customers and their cultures.
VP Human Resources
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Key Takeaways
Recruit and retain a diverse staff to help you
successfully serve your target customers.

• Leverage community relations to strengthen
  recruiting
• Assign customer service manager to identify
  potential recruits
• Contact community-based organizations
• Recruit high schools
• Encourage employee referrals

In recruiting, not only do we hire from the
community, but we get involved in community
organizations When opening in a brand new area,
we seek out community organizations that may be
interested in helping. A lot of times we give
them priority.
Store Director
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Key Takeaways
Recruit and retain a diverse staff to help you
successfully serve your target customers.

• Achieving an authentic diversity position implies
  rigorous inquiry into corporate culture and
  openness to re-create it.
• Successful multicultural recruitment and
  retention strategies require willingness to adapt
  hiring criteria and training processes.
• HR must help your organization understand how
  culture and socio-economic background shape
  employee behavior.
• You are building the first generation of ethnic
  supermarket professionals - invest in the
  resources to succeed.

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Best Practice 6
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Key Takeaways
Develop a marketing plan to communicate value at
all points of customer contact.

• Use market vehicles that reach your target
  audience
• Bilingual versioned circulars
• Local in-language community newspapers
• Radio, especially for Hispanics and Asian
  Americans
• Outdoor media, e.g., billboards, bus cards and
  bus sides - depending on market
• Ensure that your in-language and your mainstream
  creative executions are relevant and inclusive

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Key Takeaways
Develop a marketing plan to communicate value at
all points of customer contact.

• Emphasize at-store and neighborhood events and
  de-emphasize participation in more commercial
  ethnic events and holidays
• Generate loyalty by focusing on activity that
  impacts the community within your trading area
• Schools
• Parks
• Development Centers

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Key Takeaways
Develop a marketing plan to communicate value at
all points of customer contact.

• Leverage manufacturer and broker partners the
  efforts
• Bilingual POS
• Bilingual media
• Bilingual promotions
• Bilingual labels

81
Manufacturers like Kraft can develop Integrated
Marketing Strategy to help Retailers Reach
Hispanic Consumers

• Hispanic efforts employ multiple marketing
  elements
• Significant television spending
• Proprietary publication, Comida y Familia
• Radio
• FSI coupons
• Grassroots events
• Kraft also partners extensively with retailers to
  execute
• Seasonal scale programs
• Customized marketing events

82
Comida y Familia Publication Links Kraft Brands
with Hispanic Lifestyle

• 4X a year publication, direct mailed to
  Spanish-speaking Hispanic consumers
• Seasonal themed content, product use

83
Kraft Partners with Univision to Create a
Successful Mothers Day Promotion

• Mothers Day sweepstakes promotion designed to
  drive volume and increase brand awareness at the
  retail level.
• The Grand Prize trip to a taping of Sábado
  Gigante allowing us to attract this targeted
  consumer (Mom).
• The program is supported through
• Ad-Slicks
• Point of Sale
• Television
• On-Line
• Comida y Familia

84
In-Store Elements Designed to Generate
Excitement, Speak to Hispanic Shopper
POS Example
Ad-Slick Example
85
Kraft Also Develops Culturally Relevant Programs
for Hispanic Heritage Month

• Hispanic Heritage Month celebration of Hispanic
  music, food and culture
• Supporting Materials
• Customized compilation CD Los Sonidos del Sabor
  (Sounds of Flavor)
• Free with purchase of three participating
  products
• CD was available in-store Comida y Familia
  branded booklet shipper
• Supported with radio

Shipper
CD cover/label
86
Key Takeaways
Develop a marketing plan to communicate value at
all points of customer contact.

• Ethnic marketing is not event marketing its
  365 days a year.
• Do the walk before you do the talk or risk
  losing credibility.
• Advertising, circulars and flyers should deliver
  relevant branding and value messages in-language.
• African Americans are an ethnic group -
  distinguish when and where to acknowledge unique
  cultural food preferences and needs.
• Do not follow the pack with Hallmark events
  Act locally. What you do in your own parking lot
  or neighborhood will speak volumes about your
  community commitment.

87
Conclusion
Successful retailers make ethnic marketing and
merchandising part of their operating philosophy.

• Develop a vision of success across their
  organization tied to revenue goals and reward
  structures
• Assign the responsibility at a senior level and
  prioritize horizontally and vertically
• Segment and think like their ethnic customers
  product and delivery
• Allow for tailored assortment and merchandising
  plans
• Create store environments that are comfortable
  and welcoming
• Market to these segments in ways that resonate