The red-hot Hispanic market

June 14, 2006
Raymond Rodriguez is eager to dispel what he believes is a common myth: Hispanics operate on "mañana time." Hispanics may appear laid back, but Rodriguez, who emigrated from Cuba to the United States in 1980, promised that easygoing posture is deceptive.
"Let me tell you, they're always in a hurry like everybody else, they just don't look like they are," said Rodriguez, who oversees the operations of Rey's Pizza, a nine-unit chain his parents founded in Miami 21 years ago. "They do not like to wait, so we've got to serve them fast." (Read also The emperor's new pizzeria and From raft to riches.)
Pizza Patrón, a Hispanic-customer-centered chain operating in the southwest United States learned a similar lesson — the hard way. As Little Caesars units opened in neighborhoods already home to Pizza Patrón stores, those stores immediately saw their sales decline. Why? Because Little Caesars served customers faster with its Hot and Ready pizzas. The no-wait, large, pepperoni-only pies cost $5, perfect for busy, budget-conscious people.
"When we asked our regular customers why they were going to Little Caesars, the answer was simple: I don't want to call ahead and order, I just want to pick up my pizza," said Andy Gamm, director of brand development for Pizza Patrón. "That's what forced us to adapt our current model to offer our Pizza Lista, which means a 'ready now pizza.'"
According to the 2000 U.S. census, Hispanics make up nearly 13 percent of all Americans and constitute the largest and fastest-growing U.S. minority group. During the 1990s, the number of Hispanics grew from 22.4 million to 35.3 million, a 58 percent increase. Should that growth rate continue, the number of Hispanic Americans will climb to

All employees at Rey's Pizza in Miami are Hispanic, and most are bilingual.          Photo by Steve Coomes.

55 million by 2010.
Currently, Hispanic Americans spend about $800 billion a year, and that number is predicted to swell to $1 trillion by 2011.
What are pizza companies doing to attract this growing population? Chains like Pizza Patrón and Rey's are targeting them exclusively by opening stores in largely Hispanic communities and selling food at affordable prices.
Representatives of larger, general market players like Little Caesars and Domino's Pizza, said they're offering value-driven deals and devoting increased resources to targeted, Spanish-language advertising. Domino's alone retains two advertising firms — LatinWorks and Lopez Negrete — to propel its Hispanic initiatives.
But perhaps more importantly, those companies are working to ingratiate themselves to Hispanics by getting involved in their community events. For example, Domino's stores in Los Angeles sponsored the Chivas USA MLS soccer team there and brought Chivas players to stores to sign free soccer balls for kids. The event was a smashing success, said Teresa Iglesias-Solomon, Domino's Hispanic marketing director.
"It's not just about selling pizzas to customers, it's about becoming an active member of the Hispanic community," Iglesias-Solomon said.
Latino festivals of any size, be it Cinco de Mayo or a simple church carnival, are great opportunities for brand exposure and prime chances to demonstrate community support, said Gamm. "We want to have a very visible presence at these events because it shows we care about these people. Community involvement is key."
Familiarity breeds content
When it comes to menus, there is good news for pizza operations hoping to sell to Hispanics: Don't change much, if anything.
Ninety-percent of the food sold at Rey's is traditional pizza and spaghetti. The remaining 10 percent comes from a handful of traditional Hispanic dishes such as arroz con leche (rice pudding) and el sandwich Cubano (Cuban "smashed sandwich" made of pork, ham, cheese, mustard and onions). A handful of appropriate pizza toppings such as chorizo and plantains are offered, but not commonly chosen. Other than jalapenos, Pizza Patrón's toppings are strictly traditional, and the 20-year-old chain sells only a few side items.
Domino's is making small changes

start quoteSince we consider ourselves a neighborhood pizzeria, we can address the needs of Latinos, Indians, whatever the population there happens to be. The localization of the staff in the store and our marketing efforts are all important to that success.end quote

Stuart Degeus
V.P. of field marketing
Little Caesars
within its stores, Iglesias-Solomon said. Not only are Hispanic families larger, they often travel together, necessitating greater seating area and more chairs for people picking up pies. Stores in Hispanic communities also must have bilingual staffers on the phones and at the counter.
"When customers call our store in a highly Hispanic area, if we don't have bilingual staffing, the experience ends abruptly with a negative perception when they hang up," Iglesias-Solomon said.
Gamm said making Hispanic customers feel welcome is crucial to the entire experience. Since Pizza Patrón's business model is carryout-centered, "everything about our stores has to be inviting and welcoming. The environment in the store is distinctly Latin; contemporary Latin music is always playing and the colors used are reminiscent of what's seen in Latin America. It all works to create a very comfortable environment that's like home to our core customers."
Having stores in Hispanic communities makes it easier for immigrants to venture outside their residences, Gamm added.
"We've heard lots of stories about people just sticking their head in the door to look; they're too shy to actually come in," he said. "We've got to make them feel at home if we're going to have a shot a becoming part of their routine. We've got to provide that comfort level."
Most Pizza Patrón staffers are bilingual, and all its store operators must live in the neighborhood where their stores operate. Gamm said having a person who's in the store often — a person perceived as one who wants to serve the community, not just earn a living from it — is essential to building a long-term customer relationships. Rodriguez agreed that familiar faces are important.
"They like to see people they know, and we've been in the neighborhood since before some of our customers were born," he said. "But once you've got them, they're very faithful customers who come back and come back and keep on coming," he said.
Dine-in, not delivery, is far more important to Rey's deep Hispanic customer base, Rodriguez said. The chain used to deliver pizza, but few customers wanted the service.
"Latinos like going out and sitting around and having a good meal together," Rodriguez said. "We're social people, we love to talk. We love to be with our families."
They also love affordable meals. Not only are Hispanic workers lower-income earners, their families typically are larger than average American household's, and that requires further stretching of their food dollars. Consequently, Domino's 5-5-5 medium pizza deal and Little Caesars' Hot and Ready pizzas are popular with Hispanic audiences.
"We strive to reach families with the value we offer," said Stuart Degeus, vice president of field marketing for Little Caesars. "We've learned that moms are the dinner decision makers in Hispanic households, and they're looking for items that will feed all members of the family affordably."
Moving targets
Major metropolitan areas such as Miami, Los Angeles, Atlanta, Dallas and San Antonio are homes to enormous Hispanic communities, areas in which concepts like Rey's and Pizza Patron typically flourish. In Miami, it's not a matter of finding the right market for Rey's, Rodriguez said, it's a matter of being able to handle the business when they open a new store.
"We have people asking us

Hispanic families commonly are larger than non-Hispanic families, and operators say they tend to dine out as a group.     Photo above and cover photo courtesy of Pizza Patron.

all the time, 'When are you going to open a Rey's where I live?'" Rodriguez said. Rey's will begin licensing new units this year, and Rodriguez believes South Florida alone could handle at least 40 pizzerias. "We have so many people here within the Latin community who know Rey's, so (recognition) won't be a problem."
For now anyway. Hispanics, like many Americans, are moving away from cities to suburbs and exurbs. A Brookings Institution survey reported that 54 percent of all U.S. Latinos lived in the suburbs in 2000, and from 1990 to 2000, Hispanic population growth in the suburbs outpaced central-city growth by 18 percent.
That leaves little doubt, operators will have to become more adept at marketing via two languages in order to capture both audiences, a problem Degeus said companies like Little Caesars' have dealt with before.
"Since we consider ourselves a neighborhood pizzeria, we can address the needs of Latinos, Indians, whatever the population there happens to be," he said. "The localization of the staff in the store and our marketing efforts are all important to that success."
*This article also appears in the June 2006 issue of the PizzaMarketplace Report. To view the report and subscribe to it, click here.

Topics: Independent Operation , Operations Management

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