On a brisk morning recently in North Hollywood, Rocio Martinez made her way into the Vallarta Supermarket to look for items that she can't get at Ralphs.

She was prepared to pay higher prices for her preferred Mexican ingredients.

"Let's just say it's not that economical," she said, "but they have those Latino products not found in regular stores."

Martinez is an example of the millions of Latino consumers in Los Angeles County willing to pay a premium for food items that fit her cooking style, but aren't on the shelves of Ralphs, Vons and Albertsons. These customers have turbocharged the market for Mexican groceries, a lucrative and highly competitive niche that's been growing in Los Angeles for at least three decades.

However, a small part of the Mexican supermarket world may be presented in an unfavorable light beginning next week. That's because George Torres, former owner of the Numero Uno Mexican grocery chain, is set to go on trial on murder and drug charges.

The prosecution alleges that Torres and his Numero Uno stores were part of a criminal enterprise used for laundering drug money. Torres is accused of threatening competitors, employees and even customers. Prosecutors allege those who crossed him were killed. (See related article.)

But the Latino grocery segment, quite apart from Torres, is surprisingly big.

Steven Soto, president of the Mexican American Grocers Association in Los Angeles, estimates that the county has between 300 and 400 Mexican markets, from supermarkets to mom-and-pop operations.

Census data shows the county had 2,630 grocery stores in 2002; based on those numbers, Mexican markets would account for about 13 percent of all such stores in the county.

Jon Marquis, general manager of Sylmar-based Vallarta Supermarkets, said his chain and the Mexican market sector have grown in step with the population of its customer base. Since 2000, the county's Hispanic population has grown at around 1.4 percent a year.

The largest chain, Superior Grocers, has revenue of $1.1 billion. Several others, including Vallarta, Pro's Ranch Market and Gonzalez Northgate Markets have revenues that Soto estimates in the hundreds of millions of dollars. Most of the chains are family owned and operated.

A well-performing Mexican market can sell $1 million worth of merchandise per week, comparable with mainstream supermarkets.

"We were doing $1 million a week, and if you do enough volume, you're going to make money," said Morrie Notrica, founder of Notrica's 32nd Street Markets, a group of seven stores in the county that he sold to the Superior chain in 2005.

Since starting as a single meat shop in 1985, Vallarta has opened a store every year. At an awards ceremony last month, the National Grocers Association called Ontario-based Pro's Ranch Markets one of the fastest-growing supermarket companies in the U.S., having gone from a startup to 11 stores in 12 years.

Cutthroat competition

That's not to suggest that success is simple. In fact, just down the street from the busy Vallarta market in North Hollywood stands an abandoned El Cubano Food Bag, part of a two-store company that had revenues of $25 million in 2001.

El Cubano has filed for Chapter 7 bankruptcy; calls to the company's attorney were not returned.

The dilapidated market, now tagged over by vandals, is a reminder of the keen competition for Latino food dollars.

"The markets compete against each other," said Soto of the grocers association that's called Maga. "There's only so much real estate out there. The owners are all pretty good friends with each other, but business is business. If one opens up a market a block away from a competitor, it will impact both stores. But the pie is so lucrative, everybody wants a piece."

The competition isn't limited to other Mexican supermarkets.

"Our primary competitors are the other Hispanic markets and the Super Targets and Wal-Marts," said Marquis of Vallarta.

Hispanics "look for brand names from their country of origin and U.S. major brands. They will skip buying a category if their favorite brand is not available and may also skip the retailer if the store does not offer their favorite brands," said Carlos Santiago, president of Santiago Solutions, a Hispanic market research firm in Studio City. "While Mexican markets like Vallarta, Northgate Gonzalez and El Super are favorites of all Latinos regardless of acculturation level, price-driven warehouse retail chains that carry their favorite staples and brands, like Wal-Mart, Sam's Club and Food 4 Less, are even more popular among Hispanics."

Martinez, the shopper in North Hollywood, admits she only goes to a Hispanic market every two weeks she does some other shopping at Ralphs.

American chains have tried to cultivate shoppers like Martinez. But several large supermarket chains that have attempted to enter the Mexican market space eventually succumbed to the same competitive pressures as El Cubano.

In 1987, Vons opened several Tianguis stores specifically for Mexican consumers. (Tianguis is an Aztec word for market.) The stores had Spanish-language signage and their layouts were designed after extensive market research of Hispanic consumers.

But by 1994, Vons, now owned by Safeway Inc., had closed all nine Tianguis in Southern California because they weren't profitable.

Likewise, the Grupo Gigante supermarket chain from Mexico entered the region in 1999 and grew to seven stores, but sold them to El Super, a Commerce-based chain, in August. At the time, Soto said he believed that the chains failed because they underestimated the competition; he thinks they weren't flexible enough.

"They're so big they use a cookie-cutter concept for stores," he said.

Arturo Tresierras, president of Tresierras Bros. Corp. in San Fernando, which owns four markets, said neither Gigante nor Vons understood the L.A. consumer.

"Spanish-language retail requires a vast knowledge of nuance," he said. "People from Monterrey don't eat the same as people from Guadalajara, and it gets even more complicated for customers from Guatemala or Puerto Rico. Gigante ostensibly had a good knowledge of Mexican buying habits. But in my opinion the buying profile of the Southern California Latino is unique, and knowledge from Mexico is not transferable."

In the current economy, Soto said Mexican markets are showing declines in the single digits, similar to mainstream markets.

George Whalin, who follows supermarkets as president of Retail Management Consultants in San Marcos, said sales have declined in the current economy because shoppers only buy necessities and avoid impulse buys.

Whalin noted that Hispanic consumers tend to shop three or four times a week, compared with once a week for Anglos. So Mexican markets may have more transactions, but bring in less money per transaction than mainstream retailers.

Many of the chains belong to the same supply cooperative that distributes packaged goods to American grocery stores, Unified Grocers in Commerce. But they maintain separate suppliers for produce and meat. These are often family members in the United States who own farms or ranches, or growers with whom they have long-standing relationships.

Real estate riddle

Mexican market chains look for underserved locations, usually in low-income neighborhoods. That presents challenges ranging from security to massive shifts in clientele.

"A lot of times we go into blighted areas," said Tresierras. "We make a large-scale investment in the neighborhood. If we can rejuvenate a dilapidated shopping center, all of a sudden people pay a lot more attention to their community, including landlords, tenants, customers and even members of the city council."

Numero Uno's locations were in economically disadvantaged neighborhoods. Its former owner, Torres, is accused of killing a gang member in retaliation for the shooting of a security guard at one of his stores, among other allegations.

Mexican markets have another challenge that American chains don't: As generations of their customers change and immigrants assimilate, tastes evolve.

"When immigrants have been in the U.S. between 10 and 20 years, they start wanting the best of both worlds," said Santiago, the Hispanic market expert. "When their children go to school, they see what their peers are eating and it has a powerful effect on Hispanic moms. In their pantry, you'll see half of it filled with Mexican foods and half with non-Mexican stuff."

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