Avanza’s Retreat
By David Morse
Avanza did everything right.
Their targeting was precise — just Mexicans. They picked a group with immense “bang for the buck,” making up two-thirds of the U.S. Hispanic population.
They put up bilingual signage, developed bilingual advertising and staffed bilingual personnel. They hired a prize-winning Mexican architect to give the stores an authentic Mexican feel both inside and outside.
They loaded the center aisles with hundreds of SKU’s from Mexico, integrating them side-by-side with American products. They had the right brands: Jarritos, La Consteña, Jumex, Bimbo. The in-store bakeries offered favorites like churros and bolillos. The produce department carried all the right fresh fruits and vegetables: nopales, chiles, tomatillos. The meat department carried meat cut just right – nice and thin. The deli specialized in authentic Mexican cheese and lots of bulk product.
“It is important to note that every aspect of our new Hispanic format is the product of ongoing market research, extensive focus group study and constant modification,” said Ron Marshall, Nash Finch CEO. Avanza means “advance” in Spanish. “By making sure that our approach remains current and appropriate, the partnership of Avanza stores and the Hispanic community nationwide will do just that,” he concluded.
Still, on May 19th, the Nash Finch Company announced it was closing or selling its six Avanza stores in Chicago and Colorado. The “prospects for improvement at these locations and formats within an acceptable time frame are not sufficient to justify continued investment,” they said.
So what went wrong? Consultant David Livingston of DJL Research (and fellow RetailWire BrainTrust panelist) was quoted in Hispanic Business Magazine as saying that one of the two Chicago stores was located in a Puerto Rican neighborhood. Not true. Both stores are in zip codes with a Hispanic population that is at least 89% Mexican. Livingston also called the formats “EconoFood stores with Hispanic music soundtracks,” based on his estimates that only 15 percent of the stores’ merchandise was of Hispanic origin or relevant to Hispanic customers.
Moderator’s Comment: What are the lessons to be learned from the retreat of Avanza? Did they make big mistakes, as
Mr. Livingston presumes? Or was their timeline simply too aggressive?
My own dos centavos. Denver is a tough market, as Supervalu found out when they pulled out last October. And the Chicago Hispanic market is among
the country’s most fragmented, as confirmed by our recent study with ADVO and FMI, “El Mercado.” The study found Jewel to be the top grocery destination for Chicago Hispanics,
but emerging just barely ahead of Hispanic format stores like “El Guero” and “CarnicerÃa Jimenez.”
Avanza did everything right. Except for underestimating the competition they faced from the little guys. And let’s not forget the big question that remains
to be answered. What will be the impact of Chicago’s new 150,000 square foot Wal-Mart store, approved by the city council just last week? –
David Morse – Moderator
The problem with Avanza is indicative of a larger, ongoing problem at Nash Finch. Ron Marshall has been looking for a “silver bullet” that would excite the investment community and create a wave of success. Before Avanza, Nash Finch was touting their Buy and Save limited assortment stores, their foray into “extreme value retailing.” At one time, they had a dozen or more of these stores, but with the recent announcement the few that were left will also be closed. Regardless of format, to be successful at retail takes a long term commitment to your market and your associates.