Hispanic grocery stores find booming market in Valley.

Hispanic grocery stores — with their vast arrays of peppers and Mexican sweet breads — are steadily opening across the Valley, driven by an explosion in the population they cater to.

Garcia’s Market opened Thursday in Kerman. And just this spring, Sylmar-based Vallarta Supermarkets opened its fifth store in the central San Joaquin Valley, this one in Tulare.

“I’m sure there’s going to be more,” said Shane Anderson, a Commercial Retail Associates retail broker who helps landlords sign with retailers.

“Several of them we’re talking to have been up touring the Central Valley. It’s a matter of time before they start making deals.”

The interest from Hispanic grocers is far greater than that expressed by conventional grocery stores, he said. Traditional stores, which typically like to locate near new housing tracts, are waiting on the sidelines for building to bounce back, he said.

But Hispanic supermarket chains both big and small are realizing there is money to be made as the Hispanic population explodes.

Rapid growth

Hispanics are the majority in the Valley, according to census data released this spring, fueled by a big jump in the under-18 population.

The buying power of Hispanics nationwide is expected to grow by 50% between 2010 and 2015 to $1.5 trillion — a rate that eclipses all other racial and ethnic groups and overall spending growth, according to a yearly study by the Selig Center for Economic Growth at the University of Georgia.

Although many Valley Hispanics have lower incomes than their non-Hispanic counterparts, they spend a greater percentage of their income on food, according to Mintel, a national market research company.

That’s because Hispanics tend to have larger families, said Leylha Ahuile, a Mintel senior analyst.

Rebeca Garcia of Fresno, for example, shops for her family of six at El Super at Tulare and First streets in Fresno. Last week, she left with a cart piled high with food, including canned jalapeños, a large bag of apples and two trays holding 24 eggs each.

All that food will last one week, she said.

“It’s cheaper than other places,” Garcia said of El Super. “They have good specials.”

Anderson, the retail broker, says the Hispanic niche of customers still is underserved in the Valley.

Vallarta has opened stores in Fresno, Porterville and Visalia in recent years, and it opened its first Tulare store in April

. An executive has said that Vallarta plans to open more stores in the Valley. Chief Financial Officer John Marquis declined to comment last week on specific plans for the area.

“The company plans to continue to expand,” he said, noting that there is room for growth of Hispanic supermarkets in the Central Valley.

Kerman’s Garcia’s Market opened in the space Save Mart pulled out of last fall, citing the economy. It’s the Garcia family’s fourth store in the Valley. They also run stores in Modesto, nearby Riverbank and Mendota.

The family is planning to open more stores, possibly including one in Merced County, said Jesus Garcia, owner of the Kerman Garcia’s Market.

“The people in Kerman, they’re waiting for something,” he said, noting that the city has one other supermarket. “They want more options … to do their grocery shopping.”

Other Hispanic grocers, including El Super and Rancho San Miguel, also have established a presence in the Valley.

The stores sell many of the same products as traditional grocery stores, but some departments are vastly different.

Produce sections carry a much larger and varied selection of peppers. They also carry products that aren’t common in traditional supermarkets, including verdolagas, a Mexican parsley, or the Mexican green huazontle.

Meat counters are larger, carrying cuts of meat preferred in Mexico, and deli-style servings of queso fresco cheese.

And the larger supermarkets serve up fresh food like tacos and tamales, along with every flavor of “aguas frescas” drinks, and have large seating areas.

Ethel Rodriguez of Fresno shops at several stores, but buys Mexican sweet bread and canned enchilada sauces at Vallarta at Cedar and Dakota avenues in Fresno.

“They have all that type of stuff, more so than others,” she said.

The stores appeal to non-Hispanic customers, too, like Dianna Mangione of Fresno, who regularly shops the meat counter at El Super.

“It’s not necessarily because it’s Hispanic; it’s because it’s a better quality of meat,” she said.

A shifting marketplace

The Valley has always had a strong Hispanic population, and for years it’s been catered to by small mom-and-pop shops. But now, larger grocers are beginning to take over that role.

Walmart and other more traditional supermarkets also are trying to appeal to Hispanic customers, though on a smaller scale.

There have been some bumps along the way.

The Fiesta Foods Warehouse that opened at Kings Canyon Road and Willow Avenue is now empty and boarded up — but that had more to do with business decisions than a lack of customers.

Ontario-based Fiesta Foods wanted to own a store instead of rent, said Rick Amerine, a retail broker at Commercial West Associates. When the space at First and Tulare streets came up for sale, Fiesta bought it and opened a second store there.

But two Fiesta stores so close to each other was too many in a corridor saturated with grocery stores and a Walmart, Amerine said. The company closed the Kings Canyon store. El Super bought Fiesta and converted the Tulare Street store.

Still, many large companies based in Southern California and the Bay Area are expected to begin growing into the center of the state, Anderson said.

And at least one heavy hitter is in the early stages of finalizing new store locations, Amerine said. He declined to say who, but said the company is “a force to be reckoned with.”

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Big bazaars score over kiranas

EARLYthis year, when escalating prices were crunching household budgets, modern retailers were more responsive in cutting or holding prices of day-to-day products than traditional retailers, thanks to their ability to check operational costs bargain hard with suppliers and launch private labels.

According to a study by The Nielsen Company, modern retail dropped prices by more, or increased them by less, for more product categories than traditional retailers, or kiranas, between the last quarter of 2009 (Oct-Dec) and the first quarter of 2010 (Jan-Mar).

“The power of modern retail lies in the scale and efficiencies which we have built over the years,” says Kishore Biyani, CEO of Future Group that operates retail formats such as Food Bazaar, Big Bazaar, Pantaloon and KB’s Fairprice stores.

The Nielsen Shop Census study compared prices of 47 commonly used items including toothpastes, washing powder and confectionery. Modern retail dropped prices by more, or increased them by less, than traditional retailers for 29 product categories while traditional retailers did better in 18 categories.

It collected data from 16,000 stores (11,000 urban and 5,000 rural, in both modern and traditional retail) in 462 towns and 1,427 villages.

During this period, the rate of inflation, as measured by the Wholesale Price index, was hovering around 10% and food inflation was more than 12%.
In the past two years, modern retail has been able to significantly cut operational costs related to real estate rentals, energy costs and increase persquare-feet productivity of employees leading to savings in people costs.
They also launched private labels to get a better grip on selling prices and profit margins, and some savings were passed onto customers.

Higher collaboration with small and medium suppliers as well as distributors of large FMCG companies helped them cut costs in transportation and logistics.

Efficiencies of scale helps one source the goods closer to the manufacturer says Mr Biyani. In 2009, Big Bazaar sourced 26,000 tonnes of rice, 4 crore pieces of clothing, 20 lakh suitcases, 36 lakh mixer-grinders, 45,000 manufactured beds, 20 lakh bedsheets and 19,000 LCD TVs. Each of these figures will be higher by a minimum of 30% for the year 2010, he says. “Such large sourcing allows us to get better prices directly from manufacturers and producers.”

Big Bazaar is the largest player in the segment contributing over 33% of modern retail sales. Other top retail formats competing with traditional kirana for essential purchases include Reliance Retail, Aditya Birla Retail’s More and Spencer’s Retail.

Kumar Rajagopalan, CEO, Retail Association of India, says strong sourcing power helps modern formats offer better prices. “They have done away with the extra level of intermediaries,” he says.

Meanwhile, grocers too are working on protecting their turf by leveraging on their strengths such as customer relationships, home delivery, credit facilities and expanding their product portfolio.

Top FMCG companies such as Hindustan Unilever, Procter & Gamble Marico and Godrej have begun adopting kiranas, teaching them category management and effective merchandising to counter big retailers and their private labels.

Bharatiya Udyog Vyapar Mandal (BUVM), the biggest national-level association of mom-and-pop stores, has formed city-centric associations that negotiate directly with manufacturers such as Unilever and P&G and do away with any middlemen.

This helped kiranas offer 5-20% discounts on MRP of branded products like detergents, shampoos soaps, oil and atta.

“When prices rose due to inflation some kirana stores offered customers the option of paying in instalments apart from extending them credit for a month,” says Vijay Prakash Jain, secretary general of BUVM that comprises 17,000 state and district-level associations across 27 states.

Interestingly, kiranas managed the prices of items such as detergent bars toilet soaps, shampoo, packaged tea and iodised salt better than modern retail, according to the Nielsen study.

Currently, traditional retail, both grocers & chemists, constitute over 95% of total sales in the country.

Modern trade at just 3-5% of the total national industry sales, had grown aggressively at over 35-40% contributing to over 15-25% sales for most consumer goods companies last year.

Why Wal-Mart’s First India Store Isn’t A Wal-Mart.

After years of controversy and opposition from local retailers, Wal-Mart this month is poised to open its first store in India, launching an expansion that will include 10 more big-box outlets in the potentially vast Indian market over the next two years.

But Indian consumers won’t be able to partake of Wal-Mart’s everyday low prices. India’s restrictive commercial laws prohibit most foreign companies from setting up shop to compete with domestic retailers. So Wal-Mart’s debut outlet, which will open in the city of Amritsar in northern India later this month, is a wholesale-only operation that will sell mainly to vegetable vendors, hospitals, hotels, restaurants and other companies. The Amritsar outlet won’t even carry the familiar Wal-Mart brand. To deflect the attention of politicians and activists who oppose the entry of foreign multi-brand retailers, the Little Rock, Ark., company has named its Indian outlets BestPrice Modern Wholesale.

Despite the stealth approach, industry experts expect Wal-Mart, known for squeezing efficiencies out of suppliers and supply chains, to have an impact on India’s $375 billion retail market, which is dominated by mom-and-pop businesses and outmoded distribution networks. “We can learn the science of retailing, how to build scale and efficiencies,” says Kishore Biyani, chairman of Pantaloon Retail, India’s largest homegrown retailer with 114 hypermarkets.

The world’s largest retailer isn’t new to India. For the past decade, the country has been an important Wal-Mart supplier of textiles, apparel, home products and jewelry. But in anticipation of its India launch, Wal-Mart for the last three years has been developing a network of suppliers to stock its stores with fresh produce and staples like lentils, wheat and rice — all with an appreciation for variations in local cultures and tastes. “India is not a homogenous market, so ours is not a cookie-cutter approach from the U.S.,” says Raj Jain, president of Wal-Mart India.

Although it is restricted to wholesale operations in its wholly owned stores, Wal-Mart has a small retail presence in India through a fledgling joint venture with New Delhi-based Bharti Enterprises. The U.S. company provides back-end support for Bharti’s chain of 25 Easy Day grocery stores that opened last year.

Although other foreign hypermarket chains are entering the country — British retail group Tesco has a joint venture with India’s giant Tata conglomerate, while France’s Carrefour is said to be in talks with Reliance — Jain says Wal-Mart is in no hurry to unfurl the Wal-Mart flag nationally. “The easiest thing is to roll out stores, but the most difficult is to sustain and feed them,” he says.

Indeed, Indian mass-merchandisers over the last several years expanded frenetically, trying to get a jump on foreign chains should Indian politicians eventually decide to open up the market to direct competition from overseas. Reliance Industries built 940 stores across the country in 18 months. Aditya Birla group has opened 548 stores since 2007. Today, with India’s economy slowing and with losses piling up, the domestic retailers have shut some outlets and laid off employees, partly because of difficulties in keeping large chains supplied with goods. “When you start opening stores and then work backwards, even we get scared,” says Mahadeo Pawar, a vegetable grower from Karjat, 31 miles (50 kms) north of Mumbai.

Caution in India may be a watchword considering the global recession and Wal-Mart’s blemished track record overseas. In 2006, the company pulled out of Germany and South Korea in the face of stiff competition and poor sales. Still, Wal-Mart has been weathering the economic crisis better than most. The company on May 14 announced it earned $3.02 billion in the three months ended April 30, about equal to the profit it made in the same period in 2008. Revenue fell 0.6% to $93.47 billion from $94.04 billion a year earlier. Highlighting the growing importance of markets such as India, nearly one-fourth of Wal-Mart’s sales for the quarter — 22.7% — came from its international division.

FreshDirect Will Limit Idling Time for Trucks.

FreshDirect, which uses 150 diesel-powered trucks to deliver groceries that customers order over the Internet, is outfitting its fleet with shutoff systems that will keep the trucks from idling longer than permitted by city law.

But a FreshDirect senior vice president said the upgrade would not affect the equipment that has led to occasional complaints about the company — a smaller motor that runs refrigeration equipment to keep the food fresh. The new equipment will shut off only the engine that powers the drive train. The two operate separately.

The state attorney general, Andrew M. Cuomo, announced Friday that his office and FreshDirect, based in Long Island City, Queens, had reached an agreement on installing the shutoff equipment after an investigation into consumer complaints that FreshDirect trucks were violating anti-idling laws.

A statement from Mr. Cuomo said the investigation documented at least 30 cases of illegal idling by FreshDirect trucks. Under state law, trucks and buses cannot idle for more than five minutes at a time. New York City limits idling time to three minutes, and in areas near schools, it is no more than 60 seconds.

FreshDirect, which averages 7,000 deliveries a day, has agreed to pay a $50,000 penalty for violating state and city anti-idling laws, the statement said. It said the penalty had been $120,000, but $70,000 had been suspended contingent on the company’s compliance.

Mr. Cuomo said that besides affecting public health and the environment, idling wastes fuel: an average of 30,000 gallons of gasoline and 20,000 gallons of diesel fuel in the city every day.

Jim Moore, FreshDirect’s senior vice president for business affairs, said the company has had experience with engine-control technology. It has the equipment on 20 to 25 trucks, the newest in its fleet. The engine turns off if the vehicle remains in park for more than three minutes.

The company promised that any new trucks would come with the equipment.

Mr. Moore said the company had received complaints about idling since its trucks hit the streets in 2002. He said the company had looked into those complaints and concluded that they stemmed from noise made by the refrigeration engines. Those are not covered by the agreement with Mr. Cuomo.

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