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Weekly UpdatesMATTHEW HELLER- LOS ANGELES
A few years ago, Gigante USA President Justo Frias was checking out a grocery store operated by one of his competitors in Southern California. While he was there, he overheard a young girl talking to her mother. "This is a Mexican store," the girl complained.
To Frias, the architect of Mexican retailer Grupo Gigante's ambitious move into California, the incident was an "unbelievable" eye-opener. "That little girl is our future,' he says. "I want customers who come to our stores to say, 'This is Gigante.'"
Frias' blueprint is to cater to the regional tastes of Latino consumers, offering the full-service meat SUPERMARKETS counter and wide
variety of products that a "Mexican store" would, but do so in large, airy showrooms that match the design and operating standards of the big U.S. chains in California like Vons, Ralphs, and Albertsons. "We teal very strongly there is nobody today other than Gigante with full-service, upscale Latino merchandise facilities," Frias says.
So far, the strategy seems to be paying off. Gigante just opened its sixth store in the Los Angeles area and, while Frias isn't disclosing any numbers, he says each of the stores is doing "above expectations."
Steven Soto, president of the Mexican-American Grocers Association in Los Angeles, says Gigante's master plan is to open 55 stores in California, which would make it the largest independent Latino grocery retailer in the United States. "[Company chairman] Angel Losada Gomez did not send Justo Frias to open up 20 to 30 stores," says Sore.
Frias would not confirm how many stores Gigante plans to open but did say that the U.S. operation aims to become "the leader in the Latino sector" of the Los Angeles area grocery market. "They'll be a major player," predicts George Whalin of Retail Management Consultants in San Marcos, California.
Grupo Gigante, a US$3 billion company in revenues, is going for booming Latin American migrant populations in the United States that spend generously on groceries. According to a recent Food Marketing Institute report, Latin Americans in the United States spend on average $117 per week on groceries, compared to a U.S. national average of $87. Gigante's own research shows that the company has very high name recognition among Hispanic consumers in the U.S. "We saw the potential for filling a niche," Frias says.
Starting in 1999 in Pico Rivera, California, a city of 53,000, Gigante opened stores in communities where Hispanics account for at least 40% of the population. The store in Santa Fe Springs is typical: 4,400 square meters of space with wide aisles and bright lighting, a far cry from the neighborhood bodega common in Latino neighborhoods. "It's assimilation," says Sore. To Hispanics, he says, a big store "is what America is all about."
Customers can find everything from three different kinds of fresh baked tortillas and multiple brands of Sangria to banana leaves and tres leches cake. Pricing on produce, a key area, is particularly aggressive. Behind the meat counter, a small army of butchers--part of a labor force employed under a union contract that took more than two years to negotiate-is hard at work.
Different markets. Other Latino independent grocers operating in the Los Angeles area include Vallarta Markets and Superior Super Warehouse. But Sore believes Gigante has been luring customers away mainly from the big chains, which have long struggled to satisfy ethnic customers. In the late 1980s, Vons opened nine Tianguis, a Spanish word meaning "marketplace," but, within seven years, had converted them all back to Vons stores. Albertsons in 2002 dosed three underperforming stores in largely Hispanic areas and reopened them as a Latino concept called Super Savers. Representatives of those two chains and of competitor Ralphs declined to comment on Gigante or did not return calls.
Like the big three chains, Gigante will be hard-pressed to avoid the looming shadow of Wal-Mart Supercenters. The giant retailer's grocery arm, which opened its first Southern California store in March, is non-union and could compete aggressively on price with Gigante. But Gigante may be at less of a disadvantage against Wal-Mart than the U.S. chains because, under its union contract, it pays workers at lower rates.
"Everybody has to worry about Wal-Mart," says Whalin. "But if Gigante defines their stores well enough and serves their customers well enough. I don't think they'll have a lot of competition. They understand that customer."
And would a Wal-Mart Supercenter ever fresh-bake three different kinds of tortillas?
MATTHEW HELLER * LOS ANGELES
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