Jeff Cole was marketing a brand of vitamins from Mexico that he wanted to sell to Mexican-American shoppers, but none of the big chain stores would buy.
At the time, Cole was an executive at Aliso Viejo’s Valeant Pharmaceuticals, which owned the Bedoyecta brand of vitamins in Mexico. Cole hired consultants Richard Phillips and Carlos Arambula to assist with distribution and marketing, but the trio also ran into resistance. The problem was that Bedoyecta sells for about 50 cents a pill, and the major chain stores didn’t believe Hispanics would pay that much for a vitamin.
They were wrong. Today Bedoyecta is sold in more than 7,000 stores, including the Wal-Mart, Target, Rite Aid and CVS chains.
Cole left Valeant, and together with Phillips and Arambula in 2009 formed MarcasUSA, an El Segundo company that brings over-the-counter health treatments from Mexico to Hispanic consumers in the United States and eventually to the larger U.S. market. The company signs licensing agreements with manufacturers for exclusive rights to sell the products.
The company bases its strategy on the success of Bedoyecta.
“We dispelled a dual myth: first that Hispanics cannot afford premium products and, second, that they won’t pay for a premium brand,” Phillips said. “We got a lot of pushback on that price point, but once we got the product in stores it started to move.”
The company’s latest launch is Syncol, a premenstrual pain pill that Phillips describes as the “Midol of Mexico.” The first shipments arrived from Mexico in mid-June, and it’s currently sold in ethnic markets and regional supermarkets.
In addition to Syncol, MarcasUSA has three other products: Conazol, an athlete’s foot treatment; Pasta de Lassar, a diaper rash ointment; and Cicloferon, a cold sore cream. Prices vary between $3.69 and $10 per tube or bottle.
Every launch follows the same steps. Distribution begins in independent neighborhood stores and Hispanic markets. When the product shows growing sales, MarcasUSA approaches major chain retailers that have stores in neighborhoods with large Hispanic populations. If sales data from the independents impresses the chains, they tend to agree to carry the product.
Cheaper advertising
Once the product is widely distributed, MarcasUSA begins advertising with commercials on Spanish-language TV, in-store displays and sampling programs, and social media campaigns. The entire process, from a brand’s first sale to wide distribution, takes about 24 months.
Cole said that 75 percent of U.S. Hispanics live in seven states: California, Texas, Florida, Illinois, Arizona, New York and Colorado. The geographic concentration keeps marketing costs low because MarcasUSA only buys TV time in about 12 cities.
Unlike the massive food or beverage categories, where big Mexican brands such as Bimbo, Maseca and Corona have established a presence in U.S. supermarkets, the health product sector is a niche where MarcasUSA’s expertise gives it a competitive edge, Phillips explained. He declined to provide any financial estimates or ranges on the cost of MarcasUSA’s product launches.
The company has seven employees and is majority owned by the three co-founders. Financing for the product launches comes from the trio and private investors, Cole said. He declined to provide revenue figures.
Jason Cieslak, managing director at brand consultancy Siegel & Gale in Westwood, said other brands have pursued the “land and expand” strategy of first selling to ethnic consumers and then expanding to the larger market. The danger is that they sometimes can’t make the last jump.
“The big challenge, not just for the first year or three, is finding a way to scale out of the original audience,” Cieslak said.
Phillips thinks cultural trends will help MarcasUSA brands make the transition to household names. He said that unlike previous immigrant groups that assimilated the U.S. lifestyle, the Hispanic culture has caused American culture to become more Hispanic.
The lesson MarcasUSA can teach other entrepreneurs is to concentrate on a lucrative niche that can grow over time, he said.
“We started this company in the worst financial recession in decades and we are growing significantly,” he said. “Look for that niche where there is growth even in the worst of times, because usually that growth is an indicator of the future.”
