CASE 5 PANTRY MARKETS Pantry Markets is a medium-sized southeastern grocery chain head- quartered in Tampa, Florida. Sales for the chain have been growing at an average rate of 20% per annum; the chain opened four new stores last year. Although Mr. Carl Royal, president of Pantry Markets, is modest about his achievements, the grocery chain has been increas ingly recognized as a strong competitor in several markets. "In a nutshell," Mr. Royal says, "our marketing strategy over the years has been to give our customers value for their money and known quality products. We are not like these modern discount supermarkets or warehouse grocers. We provide a nice self-service supermarket atmosphere. Being a small chain is not easy. We have to strive for a concentrated strategy among segments of the market where Pantry Markets can satisfy customer needs better than anybody else. We're looking for markets where we have a competitive advan- tage. So far we have found our market segment among the 'middles'; middle class, middle aged, and the middle stages of the family life cycle." Copyright © 1987 by Hughn Mithin com A "new" market awakening Five months ago, Mr. Royal attended a Latin Market Seminar in Miami which generated some serious thinking. In his own words: "The seminar was an awakening event. I knew these Spanish people were out there in many of my markets, but never realized how impor- tant they were. I guess I had Spanish market myopia." This case was prepared by Bert Valencia and Danny Bellenger, Texas Tech University
42 Case 5 PAPEL LECHE 29 Gelen CAFE Kirby PICO RUOLTO Peter Menzel/Stock, Boston Some of the key facts that made Mr. Royal reappraise Pantry Mar. kets' marketing strategy toward Hispanics were as follows: 1. Latin households in Dade County, Miami, spent 30% more per week on groceries than Anglos. In 1980 the median weekly grocery expenditure among Latins was $87.23, whereas the same figure for Anglos was $69.99.1 2. In 1980 about one-fourth of all Latin households spent more than $100 on groceries per week, whereas only 15% of Anglo house- holds did. 3. Six out of seven Latin households had patronized, at least once, an American chain supermarket during the past month." Strategy Research Corporation, The Dade Latin Market 1980. Miami: Strategy Research Corporation, 1980
43 Pantry Markets 4. The Miami area had 767,000 Latins. The Tampa-St. Petersburg area itself had 133,200 Latins.? Altogether there are nearly one half million Latin households or 1.5 million Latin people in the Southeast In the past, Pantry Markets had in a sense neglected the Latin market. Top executives, including Mr. Royal, perceived that Latins were not an essential part of their customer base. They thought that Latins tended to buy their groceries from the Cuban bodegas (small mom-and-pop neighborhood stores) that cater to their ethnic taste. Any efforts to reach Latins had come from store managers who had to deal with the Latin presence in their stores. Managers of stores located in Latin enclaves typically tried to recruit Spanish-speaking clerks and cashiers, and they bought some ethnic products (e.g. black beans and Cuban coffee) from local Cuban wholesalers. Over the five months following the Latin Market Seminar several things took place. First, a top management meeting was called by Mr. Royal to discuss the key facts about the Latin market and to plan a strategy for taking advantage of this market opportunity. In the meet- ing it was decided that the Latin market was definitely worth explor- ing and that Ms. Linda Guzman should develop an action plan. Ms. Guzman suggested that she should interview store managers in the affected areas and that a secondary data search be undertaken. If things looked good after these two steps, a study would be commis- sioned to fill in the information gaps and provide a basis for a formal strategy. Top management was supportive of this action plan. The store managers' input Store managers from the locations with heavy Latin traffic were inter- viewed by Ms. Guzman. They were all very pleased to see that top management was willing to research the Latin market, a market that they had been dealing with in their own ways. Each store manager volunteered to do a Latin traffic count to find out how many Latins shopped in their stores. However, they were all in agreement that they knew very little about the way Latins shopped for groceries. They could not answer such questions as, What are the general shop- ping orientations of Latins? Are they brand-name shoppers? Are they impulsive shoppers? Are they quality conscious shoppers? Marc Watanabe, "Hispanic Marketing: A Profile Grows to New Heights," Advertising Age (April 6, 1981). Section 2. pp. 5, 22-24.
46 Case 5 The second Secondary research input The secondary data search had two purposes. The first was to pro- duce a demographic profile of the Latin market. The second was to find examples of how other supermarkets had been successful in reaching this ethnic market. Demographic profile The most relevant characteristic of Latins in the Southeast is that they are Cuban. Roughly seven out of eight Latins in this area are of Cuban origin. The rest are from Spain, Puerto Rico, Mexico, and other Cen- tral and South American countries. They are geographically clustered particularly in Miami, and to a lesser extent in Tampa-St. Petersburg, Atlanta, Orlando, and Jacksonville. The Cuban influence in Miami is so pervasive that a section of the downtown is called "Little Havana." Local shops in this part of "Cuba in exile" often have signs in the front entrance reading "We speak English." Thus, it is not unusual for tourists in Miami to feel that they are in a foreign country, though on American soil. The summary profile for Latins compared to Anglos in Miami for 1980 is presented below. Latins Anglos Average household size 3.6 persons 2.6 persons Median age 34.7 years 36.1 years HOH Occupation Blue collar 379 43% White collar 35% Other 22% Median education 11.4 years 11.8 years Household income per year $22,356 $26,928 Source: Strategy Research Corporation, The Dade Latin Market 1980. Miami: Strategy Research Corporation, 1980 44% 1897 Strategic examples Two examples are relevant: A&P's promotional strategy and E&B supermarkets in New York A&P is known to many Hispanics as Amigo del Pueblo (friend of the people). The promotional campaign stressed friendliness, backed by community involvement in ethnic events and minority scholarships. E&B supermarkets in New York had grown from a small grocery store to an eight-store chain by targeting Hispanics. They accom- plished this success by meeting the demand for Spanish ethnic prod- ucts and staffing stores with Spanish-speaking personnel. The man-
45 Pantry Markets ager or assistant manager in each store had to be fluent in Spanish. E&B was also supportive of the Latin community. In summary, the secondary research indicated to Ms. Guzman that the Latin market fits in well with Pantry Markets' original market segment, the "middles" (middle class, middle aged, and middle stages of the family life cycle). It also indicated the need for Spanish- language promotion, Spanish-speaking personnel, and Spanish- oriented community involvement. Perhaps even a Spanish term to stand for Pantry Markets could be developed. Ms. Guzman was not satisfied. She felt a market research study of Latin shopping orientations was needed. Such a study was conducted and the details are provided below. The Latin shopping orientations study From a practical standpoint, shopping orientations help the retailer in several ways. Shopping orientations can be used by retailers as a basis for retail planning. The merchandise mix, retail service mix, pricing mix, promotional mix, and other retail decisions can be based on the shopping orientations. Research methodology A total of 220 mall intercept interviews were conducted with an equal number of Latins and Anglos. To ensure adequate representation of working women, interviews were conducted after 4 P.M. on weekdays and on Saturdays. The Latin sample was interviewed in either Span- ish or English according to the intervieweest wishes. Overall, the researchers felt that the sample demographics were in general agree ment with the population demographics. The shopping styles were measured on twenty different orientation dimensions using a five-point Likert scale. Respondents were asked to indicate whether they strongly agree, agree, are indifferent or don't know, disagree, or strongly disagree with each of the statements read to them. Responses were coded from 1 to 5, respectively, and an average was computed for each ethnic group. Details are provided in Exhibit 5-1. Developing a strategy Ms. Guzman is now faced with the task of developing a strategy for Pantry Markets to capture the Latin market. A top-level management meeting is set for next week where she has been asked to present her recommendation.
46 Case 5 Exhibit 5-1 Latin versus Anglo shopping orientations Strongly Agree Disagree Strongly Disagree I enjoy trying new products before then de (Venturesome shopper Ike shopping at discount stores because the clerks leave me alone (Discount shopper FF FF I would rather browse than buy browser You get what you pay for Quality shopper LLLL LLL Shopping is a terrible waste of time Apathetic shopper) Big chains offer better harga (Big chain shopper) The big stores have no heart or soul. Personalining shopper) You have to give the indepen dent merchant a chance to earn a living Support local retailer) Local merchants take more interest in you (Small store oriented) I do most of my shopping in one store One-store shopper L-Latine: A-Anglos static is significant at the level or lower statistici significant at the 10 level or lower
47 Pantry Markets Exhibit 5-1 (cont.) Strongly Strongly Don't Disagree Disagree Agree Arne Ishop around a lot to take advantage of specials or bargains. Economy-minded shopper) I do not buy unknown brands merely to save money. Cautious shopper) When in the store. I often buy an item on the spur of the moment. Impulsive shopper) I like to change brands often for the sake of variety and novelty. Experimenter) I always look for the name of the manufacturer on the package Brand preference) I prefer to buy things that my friends or neighbors would approve of Conformist shopper In general, advertising repre- sents a true picture of the products of well-known companies. Persuadable shopper I try to keep abreast of changes in styles and fashions. Style-conscious shopper) I generally plan far ahead to buy expensive items such as automobiles. Planner) All products that pollute the environment should be banned. Ecologist) L-Latins: A-Anglos "statistic is significant at the.os level or lower. statistic is significant at the. 10 level or lower.
Pantry Markets Case Questions 1. On the basis of the available data, what are the primary shopping differences between Hispanics and Anglos? 2. What similarities can be presumed from the research data? 3. What retail strategy alterations are suggested by the research findings? 4. Is it reasonable to segment the market by ethnic origin? 5. What steps should be taken to remedy the Spanish market myopia?