April 2018

Feature

The Diversity of Retail

A growing multicultural population wields sizeable buying power.
Terri Allan

The foresight that John Benda had more than 20 years ago is still paying big dividends today.

Back in the mid-1990s, the Dallas-Fort Worth area convenience store operator noticed his stores were attracting a number of Hispanic consumers. But while the area boasted many fast-food restaurants, none offered authentic Mexican food. So he erected a taco stand in front of one of the stores. “Demand kept increasing and we kept keeping the store open later and later, so that eventually it became a 24-hour taco stand,” recalled Joseph Bickham, Benda’s son-in-law and current president of the Fuel City chain of convenience stores.

Today, each of the four Fuel City locations features a detached taqueria—selling tacos, burritos and quesadillas—while drinks and other items are sold in the convenience stores. “The taco stands definitely drive traffic into the stores,” Bickham said.

Using diverse imagery in [point of sale] and digital advertising signals that your stores welcome all shoppers.

Benda was fortunate to get a jumpstart on targeting Hispanics, who are among the fast-growing multicultural consumer demographic that is rapidly changing how suppliers and retailers market their products. Multiculturals—composed of several different race categories, including black, Hispanic, American Indian, Asian and two or more races, according to the U.S. Census—represent more than 120 million Americans, or some 38% of the U.S. population, and growing. By 2044, they’re projected to account for more than half of the U.S. population.

“This is one of the largest demographic changes we’ve ever gone through,” said David Norse, president and CEO of New American Dimension—a marketing research firm—who has been studying and writing about multiculturals for the last 15 years and who consults for consumer product companies and retailers.

Moreover, these consumers wield enormous buying power, and suppliers are focused on understanding the changing dynamics they bring to the marketplace. “Our research highlights how each generation is becoming more multicultural, and that the explosive population growth is accompanied by expanded buying power,” said Todd Strand, associate director, confectionary insights, North America, at Mondelēz International. “This consumer group is not only driving growth in our key categories today but is poised to drive even more growth tomorrow.”

According to Vanna Tran, director, multicultural growth and strategy at Nielsen, convenience stores stand to benefit dramatically from the changing population. Due to their convenient location and accessibility, c-stores are already the “go-to” store for many multiculturals, she said. To continue to gain, operators must understand the makeup of their community, Tran remarked, and tailor products and assortments to meet the demands of multiculturals. She advised retailers to “do the research. Know your local community. Have a welcoming environment. Make your stores engaging.”

Lean Into Latins

Hispanic Americans are a big driver of the multicultural boom. “U.S. Hispanic consumers are essential to the future growth of our company and our industry,” says Marissa Solis, vice president/general manager, Hispanic, PepsiCo North America Beverages. Pointing to the demographic’s $1.4 trillion in purchasing power, Solis said, “Hispanics spend on average 10% more per shopping trip than non-Hispanics—whether it’s stocking up on groceries or eating away from home.”

Convenience retailers are seeing this firsthand. Roland Foss, owner of the three-unit Mission Market chain in southern California, said Hispanics “play a big role” at his downtown Los Angeles store, “and we’ve been responsive to their requests for new products.” He pointed to items like horchata, the ready-to-drink rice-based sweet beverage, and pastry items distributed by Core-Mark, including pan de queso and concha.

Similarly, Michael Mendez, the owner of the five-store Mendez Fuel chain in Miami, said offerings like empanadas and plantain chips are popular with his Hispanic customers. “We’d be foolish not to have some type of Latin offering,” the retailer said, noting, “In Miami, it’s expected that you can find Latin food at convenience stores.” But he added that Latin fare can often be “heavy,” and he’s seeing increased interest from his customers in the healthier fare the shops promote. Both Mendez and Foss added that Cuban and Cuban-inspired coffees are popular with Hispanics.

Fuel City’s Bickham noted that the tacos served up at his stores aren’t Tex-Mex-style tacos, but more traditional street tacos. “That type of authentic taco had been hard for our primary Mexican customers to find,” he said, noting that his stores additionally stock Mexi-Snack items, Joritas Mexican candy and Coca-Cola bottled in Mexico. The Texas retailer also tries to please his African-American customers by carrying items like sweet potato pies, pork rinds and pickled items.

In Los Angeles, Mission Market carries items that are popular with Asian Americans, such as sakura rice balls, shrimp chips, spicy tuna bowls and restaurant-grade sushi. Foss explained that one of his L.A. stores had previously been a Famima!! store, and so “we had a built-in Asian-American customer base, and we maintained our supplier.”

Among suppliers, PepsiCo’s Solis revealed, “In certain regions, we’re testing specially designed delivery routes that are comprised of entirely Hispanic-owned and staffed businesses to serve our Hispanic customers and communities. The teams on these routes understand the language, the culture, the flavors and the way food and beverage connect with these communities, which allows us to customize the product selections we provide for their consumers.” And Heineken USA is among c-store suppliers that provide merchandising materials in various languages. “We share the message of home at the most local level,” said Charles Littlefield, general manager of the company’s Five Points Trading Co. division.

Address Aspirations

Many in-store categories are expected to benefit from the continued growth of multiculturals, and suppliers encourage retailers to adapt, if they haven’t already. “Multicultural consumers seek brands that speak to their aspirations,” explained Dionysios Christou, vice president, marketing, Del Monte Fresh Produce. “As consumers become more health- and wellness-focused, the demand for fresh, nutritious products will surge.” He advises retailers to be mindful of seasonal demands and incorporate themed displays in their stores for holidays like Chinese New Year and Cinco de Mayo.

Foss has found that his Hispanic customers do more fill-in shopping for fresh produce than other demographics, and he has responded by adding items like ginger root, garlic bulbs, jalapenos and tomatoes in his fresh produce section.

According to Tran, multiculturals are driving much of the growth for salty snacks today, and as a result, flavors like wasabi and Sriracha are showing good growth. Strand from Mondelēz said that among the efforts his company is taking to target multiculturals is the testing of “trending flavor profiles” for its Teddy Soft Bakes launch and a dual-language ad campaign for the introduction of Sour Patch Kids Tropical candy last year. “Future flavor innovations, like the upcoming launch of Sour Patch Kids Fire, are also designed for the evolving taste preferences driven by the growing multicultural consumer,” he added.

Multiculturals represent more than 120 million americans, or some 38% of the U.S. population.

In the beverage aisle, multicultural consumers are just as important, suppliers remarked. Multicultural c-store shoppers “purchase immediate-consumption beverages from coolers near the checkout 43% more often than other guests,” reported Joe Davis, group director, marketplace and shopper insights, at The Coca-Cola Co.

Laura-Lynn Freck, senior manager, shopper and category insights for Red Bull, added that some multicultural segments over-index on consumption of energy drinks. “Hispanic consumers are more likely to consume Red Bull throughout daily routines and lifestyle activities,” she revealed, “making them a valuable and targetable group of consumers.” Heineken’s Littlefield said, “We match our brands to multicultural consumers who seek a ‘taste of home,’” such as Tiger to Asian Americans, Prestige to those of Haitian descent and Red Stripe to Jamaicans. PepsiCo, meanwhile, will test Aguas Frescas, a drink made with fresh fruit and water, in 2018, Solis reported.

Adapt to Change

The growth of multicultural consumers offers enormous opportunity to convenience retailers, suppliers said. To take advantage, it’s critical that stores stock the products that these consumers are looking for, at the right price points, and that they’re communicating these offerings appropriately. According to Littlefield, “In immigrant communities, where c-stores are an integral part of the channel mix, operators need to have an acute understanding of their customers’ needs, to service them with relevant and familiar products, often purchased with a specific occasion in mind.”

Red Bull’s Freck said, “Adding variety across food and beverage where it makes sense can have a positive effect. Using diverse imagery in POS and digital advertising signals that your stores welcome all shoppers.” She and Strand agreed that digital and mobile advertising targeted to multiculturals are important tools today and will be going forward. “Hispanic consumers over-index on mobile ownership and mobile video consumption,” Strand explained. “Consider leveraging mobile targeting and digital advertising with deals to engage multiculturals and attract them to your stores.”

There’s no question that the battle to win over and retain multicultural consumers is on. “‘Convenience’ is no longer just the purview of convenience stores,” said Coca-Cola’s Davis. “Many traditionally larger-format players are innovating into smaller footprints, offering more nimble assortments and executing precise marketing tactics that will challenge c-stores’ grip on the grab-and-go trip. The good news is that c-stores have the early advantage of being in these communities today.” But operators must remain committed to engaging with multiculturals to retain that lead in the years to come, he noted.

Indeed, according to Littlefield, “The demographics are changing. There is tremendous profit opportunity for c-stores that understand the changes occurring now and can anticipate the changes that are still to come.”

Terri Allan

Terri Allan is a New Jersey-based freelance writer, specializing in the beverage industry. She can be reached at terri4beer@aol.com, and on Twitter @terriallan.