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5/29/2003

Latino firms in U.S. cater to hometown

By Krissah Williams
The Washington Post

Cervecería La Constancia SA was founded in 1906 by Rafael Meza Ayau in his small home in the city of Santa Ana, El Salvador. Over the years, the brewery, owned by several families, grew into one of the country’s largest companies, and it eventually decided to try to sell its products in the United States, home to the largest community of Salvadorans outside of El Salvador.

To break into the United States, La Constancia embraced the doctrine of “Sanchez to Sanchez to Smith.” There are many variations, but generally it is described like this: Latin American companies (Sanchez) first target this country’s Hispanics (Sanchez) or try to work with Hispanic-American entrepreneurs. Later, the Latin American firms use the accumulated expertise and infrastructure to go after mainstream U.S. customers (Smith).

For La Constancia, that meant first selling its traditional pilsener beers in Hispanic stores here and then designing products, like Cerveza Arriba, which is now sold at Safeway stores and aimed at non-Hispanic-Americans looking for trendy imports. La Constancia has been able to capitalize on the surging Latino population and the growing influence of its culture here, said Harry Snyder, the company’s head of North American sales.

Companies from other continents also try to use ties to ethnic groups to find a way into the rich U.S. market. But Hispanics are the fastest-growing minority in the United States, which creates special opportunities, say Latin American executives and trade experts.

“The Hispanic community here is an automatic test market for Latin American companies,” said David Fernandez, a Washington-based international trade lawyer. According to a recent study by the University of Georgia’s Selig Center for Economic Growth, the Hispanic community has an estimated disposable income of nearly $600 billion.

This strategy has been particularly critical for small and medium-size companies with limited resources and overseas selling experience. The Mexican border city of Ciudad Juarez next month is scheduled to hold its first “Sanchez, Sanchez to Smith” Expo to tell Hispanic small-business owners how to maximize their “Sanchez to Sanchez” relations to attract non-Hispanic-American dollars and consumers.

“We started off marketing to Central Americans and Salvadorans who know the brands,” Snyder said. “Now, we’re not just going after the (Hispanic-American) — we’re going after the person who enjoys Latin products.”

In 1993, La Constancia launched its U.S. business, selling its “core” Salvadoran beers, Pilsener, Suprema and Regia, in Hispanic grocery stores and restaurants throughout the United States. The beer, which has a long tradition in El Salvador, sold well to Hispanics nostalgic for their hometown brew.

Targeting the Hispanic community enabled La Constancia to establish a distribution system in the United States, but Pilsener and other traditional Salvadoran beers, like Suprema and Regia, did not sell well to non-Hispanic-Americans.

“There wasn’t as much crossover” as the company had hoped, said Snyder. So in 1999, La Constancia hired Snyder, a U.S. businessman working for import beer distributor Labatt U.S.A., a subsidiary of the world’s third-largest brewer, Belgian Interbrew SA.

Noticing the huge popularity of the gold-colored, long-necked Corona, Snyder’s team designed a product it thought could compete with the Mexican beer. The company dropped its dark bottles and orange boxes, replacing them with clear bottles and splashy labels. For names, they tried to pick Spanish words that Americans are familiar with and can easily pronounce. For example, they chose the name Arriba for the Safeway beer, because they figured Americans remember the cartoon mouse Speedy Gonzalez, who used to say, “Arriba! Arriba!”

La Constancia now has deals to brew corporate-label Latin American beer with a dozen major food retailers, including Cerveza Arriba for Safeway Inc., Cerveza Caguama (slang for big turtle) for Kroger Co. and Cerveza San Lucas for Albertsons Inc.

“We saw an opportunity to offer our customers a value against the leading Latin-style brand,” a Safeway spokesman said.

The corporate-label approach is a less costly way for La Constancia to enter the mainstream U.S. market, because the stores that own the corporate labels pay for the brunt of the marketing and distribution costs.

La Constancia would not release sales figures for its American beers. They are still a small part of total sales, a spokesman said. To extend its reach, the company is designing a proprietary label called Cerveza Cantina that it will distribute this year to mom-and-pop grocers and chains that have not inked corporate-label agreements. And next month, 7-Eleven will begin carrying Cerveza Santiago, a corporate-label beer made exclusively for 7-Eleven’s U.S. convenience stores by La Constancia.

La Constancia executives are approaching other continents in a different way, said Snyder. To speed their global distribution efforts, the company’s executives sold just over 50 percent of the families’ interest in La Constancia to London-based SABMiller PLC, which came into being as the world’s second-largest brewer with the 2002 merger of South African Breweries and Miller Brewing Co. La Constancia hopes joining the beer conglomerate will expand the company’s distribution to other continents, Snyder said. In the United States, he said, their predominant strategy remains “Sanchez, Sanchez to Smith.”

Latin American food companies such as La Constancia have been particularly successful at using the model, according to research by Hispanic Business Magazine economist Juan Solana, because Hispanic-Americans hold on to their food traditions and long for flavors from their home countries. And, in general, Americans are open to foods from other countries, said Gary Bamossy, director of the global business program at the University of Utah, who has studied food diffusion across cultures.

That is what Guatemalan restaurant chain Pollo Campero has found. Campero, founded in 1971, is one of the most popular fast-food chains in Central America. The company — which is best known for its fried chicken and its mascot, a smiling yellow chicken named Pollito Campero — has 150 locations throughout Latin America. Last year, the company made headlines when it drew thousands of Hispanics to its openings in Houston and Los Angeles. The buzz spread first among Central American immigrants, who for years have been bringing bags of the fragrant, spicy chicken to the United States on flights from Latin America.

It was the huge sales at its Central American airport locations that got the company interested in the United States, but the company worried about the cost of expanding in North America, said company spokesman Rodolfo Jimenez. So Pollo Campero sold franchise licenses to Hispanic businessmen living in the United States.

The privately held Pollo Campero will not release sales figures for its U.S. stores. But it says its first Los Angeles restaurant had sales of $1 million in its first seven weeks, about 30 percent of those sales coming from non-Hispanics, said Jimenez. In Los Angeles, Asians have become a fairly substantial part of the customer mix, and the Houston store is attracting blacks and whites, he said.