Front End Guidance - PORK

Front End Guidance for
Value-Added Networks
-- Marketing Pork to the Mexican Consumer in the United States.
National Pork
Board
P.O. Box 5277
Des Moines, IA 50306 USA
PHONE: (515) 223-2600
FAX: (515) 223-2646
E-MAIL: porkboard@porkboard.org
WORLD WIDE WEB: http://www.porkboard.org/
© 1997 National Pork Board. All rights reserved.
No portion of this manual may be reproduced without the written permission of the National Pork Board.
F R O N T E N D G U I D A N C E F O R I N T R O D U C T I O N i
V A L U E - A D D E D N E T W O R K S
Introduction and Acknowledgments

Since the National Symposia on Networking in 1993 and 1994, networked investments by producers have proliferated. They
have primarily focused on lowering production cost through accessing technology not available with the resources of individual
producers. Many successful examples exist and are models for continuing interdependent investment. This effort extends the
strategy of networking as not only a means to lower cost but to also add value.
As the strategic environment for producers continued to evolve, we began to focus our efforts on marketing for networks. As we
considered the question of access to markets, an effort was made to investigate export opportunities for producer groups. Al
Tank, then NPPC Vice President for International Trade and Policy suggested we explore the “international” markets within the
United States as a means to both expand U.S. demand and to give entrée to international markets abroad. We credit Al Tank
with the idea and take responsibility for the material that follows.
We believe, like many others, knowledge will be the key element of competition and success in the new swine industry.
Knowledge has been extensively focused on production efficiency in the last decade. However, knowledge of our consumers
has not been as thoroughly developed. We believe such knowledge will increasingly create wealth and opportunities for
success in the twenty-first century swine industry.
The individuals and firms who interact directly with consumers will have the greatest potential to develop knowledge of consumer
demands and ability to pay. Consumer preferences are enlarging beyond interest in the physical characteristics of the product,
such as lean, color and taste, to such things as safety, humane growing conditions and organic production methods. As this
occurs, the information flow from consumers necessary to drive investment, will need to reach through the chain all the way back
to pork producers and their input suppliers. Feedback stopping at the local meat case manager will not be sufficient to guide
future investment.
While it is not clear which mechanisms will arise to accomplish the necessary knowledge-sharing and information transfer, it is
clear commodity price determination mechanisms are unlikely to be effective in conveying demands for specific, identity-
preserved products or attributes. The response will increasingly be to seek and develop vertical relationships to augment price
signals.
What Front-End Guidance IS
This front-end guidance material is an illustration of how value-added market development and implementation might
be investigated. It is the initial briefing for networks interested in serving special or segmented markets. It contains
information which can guide the development of an actual business and marketing plan to assess the viability of an
investment.
It is organized to follow the principles for successfully entering value added markets. Everything begins with the
consumer because it is the consumer who defines the business. So, it is with the consumer that our effort
began and is now presented, beginning with a case study of Hispanic consumers of pork products. Commensurate
with the importance of consumer analysis in a total marketing plan, a large share of this front-end guidance material is
devoted to the consumer market analysis. It was also our perception that this is the least understood and least familiar
territory for market channel players due to their traditional focus on production rather than consumption and market
analysis.
Only after carefully examining the characteristics of the target market does the material move on to consider the issues
and pitfalls of effectively coordinating a value producing market channel. Less time is devoted to the mechanics of
each segment, but more is committed to relationships. Again, this is due to the current status of the industry -- those
involved in a particular segment of a market channel are well schooled in the functionality of that segment - swine
producers know hog production, hog slaughterers know slaughtering, and so on. They are unlikely to possess the
knowledge of how to effectively align and coordinate with others along the channel.
This is front-end guidance to the challenges and opportunities for food providers. Put simply, it is a whole new way of
thinking.
F R O N T E N D G U I D A N C E F O R I N T R O D U C T I O N ii
What Front-End Guidance IS NOT
This is not a ‘how-to’ manual for entering ethnic markets for pork in particular. The knowledge of how to enter those
markets resides in the unique circumstances of a particular market segment. Just as there are a thousand different
ways to strategically and technically design a production system, there are a thousand ways to strategically develop
markets. The ingredients needed for success in El Paso, Texas may be different from those necessary in St. Paul,
Minnesota. In contrast to the commodity paradigm which is the icon of generality, the food product paradigm relies
on specificity. The Hispanic market in the U.S. was chosen as a model because it is the most rapidly growing segment
of the U.S. population. It is sixty percent Mexican-American, so we have further focused on this important sub-segment
for this effort.
Looking further down the market channel, this is not a 'how to' manual for buying a packing plant, processing facility
or distribution center or forming alliances with these groups. We discuss these segments of the industry because they
are obviously critical components to accessing knowledge and delivering food products to the consumer. Individual
assessment of opportunities will be required to properly justify attracting capital and taking the risks associated with
any business opportunity.
Acknowledgments
It would be difficult to name each person who made a significant contribution to this effort. We will inevitably leave some out.
Nevertheless, we are especially indebted to the dozens of store owners, meat managers, jobbers and packing plant personnel
who discussed their strategies, gave us tours and assisted us in understanding the Hispanic market. Because we promised them
confidentiality, we believe it is best not to mention any firm or person by name.
We would also like to give special recognition to Ken Horton, Executive Vice President of the Texas Pork Producers, his personal
assistance and the assistance of his office were both freely given and invaluable. Cooperation and assistance from the Texas
Department of Agriculture, Marketing Division was always beyond our best expectations. Although many TDA personnel
assisted us, Robert Maggiani and Jack Stallings, marketing specialists from San Antonio and El Paso, Texas respectively, spent
many hours of their time to insure the success of our efforts.
Others who helped us include Kristie Bray, NPPC intern and student at the University of Missouri and David Heilig of Land ‘O
Lakes who reviewed the manuscript, gave good criticism and helped us understand the Mexican pork chain. Also, we would
like to thanks John and José Hernandez of José’s Mexican Restaurant for preparing the dishes photographed in the Market
Analysis section. Lastly we acknowledge Earl Dotson, NPPC Vice President of Education and Production Research whose
commitment to a profitable future for the pork producers of this country is without peer.
Brian Buhr Dennis DiPietre

Associate Professor Associate Professor
and Extension Livestock Economist and Leader, Swine-Focus Team
University of Minnesota Extension Commercial Agriculture Program
St. Paul, Minnesota University of Missouri-Columbia
© 1997 National Pork Producers Council in cooperation with the National Pork Board. All rights reserved.
No portion of this manual may be reproduced without the written permission of the National Pork Producers Council.
F R O N T E N D G U I D A N C E F O R S T R A T E G I C 1
V A L U E - A D D E D N E T W O R K S E N V I R O N M E N T
THE STRATEGIC ENVIRONMENT
Knowledge simply by purchase (hiring).

Knowledge, Workers The work environment and the
the Premier Input satisfaction of the employee
Knowledge-workers bring are crucial factors in realizing
Perhaps the most fundamental change in industrialized information, intuition, the value of the knowledge-
society this century has been its evolution from a labor- expertise and synthesizing worker. Witness the rise in
based to a knowledge-based economy. One way to skills to the production human resource management
understand this change is a substitution of knowledge process. They create value programming and the
for labor in production processes. by correctly interpreting data popularity of the phrase,
and information and “anyone can manage the
In the classic production equation, the inputs necessary formulating plans to add pigs, it’s managing the
to produce output have been categorized as land, value. These skills are people that is the challenge.”
labor, capital and management. Noted management combined with capital and
expert, Peter Drucker observes we have witnessed in other resources to create Knowledge-workers are
this century “the virtual disappearance of labor as a value. Value in the mobile and can transfer their
factor of production and a redefinition of the role of marketplace can be value-creating capacity
capital.” At the same time, knowledge has become, described as the cost-effective quickly between firms. This is
“the premier input in every production system”. satisfaction of demand. The readily observable in the
evolution in the role of capital current pork production
Drucker and many others note the work-force in is it has become dependent industry. The shortage of
developed countries is segregating rapidly into on the knowledge-worker to skilled production managers
knowledge-workers and service-workers. There is no create value. Technology by has resulted in a rapid
reason to believe this progression will be any different itself is only a tool. increase in average
in the U.S. pork chain. As this evolution occurs, the management salaries and an
real returns to labor are decreasing while the returns to Service workers bring skills equally rapid turnover in
knowledge are increasing. In free markets, each input which are more abundantly management among most of
receives a fair return for its contribution or addition to available and therefore the largest firms throughout
value in the final product. primarily implement rather the pork chain.
than formulate plans and
processes which create value. In addition, the knowledge-
For instance, they often worker does not always need
provide pure labor functions to be physically present, like
like moving things from one laborers, to add value.
place to another or cleaning. Witness the increasing
The world-wide supply of movement to home-based or
unskilled, low-skilled or home-officed employees who
irrelevantly skilled labor link to their employer
outstrips its demand, though primarily by telecommuni-
local shortages sometimes cation devices like modems.
exist. Therefore on a global
basis, the return to unskilled Knowledge-based production
or marginally skilled labor systems have the objective to
can be expected to continue create value, which enables
its decline. The world-wide profitability. Creating real
supply of knowledge-workers value produces wealth.
and innovators who add Labor-based production
significant value is relatively systems carry out necessary
scarce. Their share of functions but add limited
increasing returns will consumer value.
continue to rise.
Unlike other inputs, the

productive capacity of the
knowledge-worker is their
property, gained by
education and experience. It
is not automatically yielded
Historical characterized by low have emerged over the last substantially improve asset
Limitations to investment, diverse and 15 years has created a efficiency, sporadic or
Investment in extensive methods until very stratification in the production seasonal production, low
Agriculture recently. This has been subtly industry. A leading edge value ratio (ratio of high value
changing for several decades emerged from traditional to low value products
On the production side, high but the pace of the transition producers. This group has obtained from the finished
variance of outcome has been relentless in the last employed leaner genetics, carcass) and little or no
introduced by factors outside 10 to 20 years. Lowering the more precise nutrition, distinguishable improvement
management control (such as risks associated with housing and ventilation trend in the quality of output
weather and disease) have biological production designed to optimize cost- over time.
limited large-scale investment processes through the efficient gain, pig-flow
until very recently. In application of knowledge has management, strategic health These operations are task-
addition, the limitations contributed to the changes management and scale. This driven. The functional
imposed by biology on asset we observe today. stratification can be requirements of the animals
efficiency has dampened characterized according to dictate the labor schedule
investor interest. The nature These changes primarily three typical mind-sets or and the minimal investments
of biological production manifest themselves in the paradigms of production, all in capital necessary to
thwarts efforts to substantially spectacular capacities to of which still exist in the engage production. Very
alter or improve asset supply the burgeoning United States industry. little risk management outside
turnover (gross sales/total population of the world. of diversification is employed.
assets), a critical measure of Ultimately, this has resulted in Paradigms of When profits disappear from
effective asset employment. the rapid growth of a world- Production… the industry on a cyclical
wide middle class, freed to basis, these producers have
While there are notable pursue other objectives than The Pig Producer tended to cease production,
exceptions, such as aircraft the production of food for resuming it when profits
manufacturing, consider that survival. Knowledge creation We can identify three distinct returned. Low investments in
many manufacturing and implementation will be paradigms of production capital and knowledge permit
industries can control supply critical for maintaining this within the U.S. industry. The this entry and exit
almost instantaneously by balance in the future. first and oldest existing phenomenon.
adding or halting a paradigm of production is the
production line. Agricultural Historical agrarian model or pig The financial focus of pig
production currently locks Limitations to producer. Swine production producers has been income
producers into fixed and/or Investment in of this type is characterized tax avoidance and the
seasonal production (e.g. one Swine Industry by its place in a diversified achievement of net cash flow.
corn crop per year in Iowa, farming operation. This Although operations which
114 day gestation period for In the swine industry, the production is guided by two keep no records except for
swine). ability to house large principal motives. The first is income tax can be
numbers of animals in to provide productive use of characterized as pig
Just as non-agricultural confinement without continual labor when cropping producers, the same can be
manufacturing has employed catastrophic disease demands pass through said for any production
just-in-time (JIT) methods to outcomes is perhaps the seasonal periods of low labor company, large or small
reduce the incidence of single greatest production requirements. This situates which keeps elaborate
activities not adding advance opening the door to the primacy of the motive as records but makes no
measurable consumer value increased investment. All-in adding labor. Second, effective use of the
(such as holding excess all-out, multi-site technologies grains produced on the farm information. Since they have
inventory) modern agriculture and other bio-security can be fed through the limited their knowledge of the
is driving controllable methods have combined with animals adding value when basic production process on
processes to new levels of improvements in swine grain prices are low. This their farm(s), they are unable
efficiency. Metrics like non- management and medicine to common strategy has been to make informed changes to
productive sow days provide make possible larger-scale characterized as “walking the position their production
the information necessary to confinement. Economies of grain off the farm”. system to create wealth. In
monitor and control variation scale and the application of addition, these producers are
and preventable asset knowledge-based production Outdoor, labor-intensive making a product for a
inefficiency. and financial management production methods commodity market which is
bring dramatic reductions in characterize this paradigm gradually disappearing. Pig
Biology rather than cost of production through but are not a rigid definer of producers will not enjoy a
technological advance has to- increased efficiency and the class. Other attributes profitable position in a
date been the ultimate quality. include, minimal record- twenty-first century industry.
constraint on productivity. keeping, high variability of
Because of this, agriculture at Responding to the cost product, low management In February of 1997, the
the farm level remained reduction strategies which requirements, inability to Chicago Mercantile
Exchange discontinued the projects and established it as many of the industrial model safety, shelf-life, texture,
live hog futures contract, its own enterprise. As a production methods are used, appearance (including color),
substituting a lean-carcass result, steady gains were the system is broader and taste/flavor, water-holding
contract. Protecting pig made in the efficiency of more complex. As distinct capacity, size of cut,
prices using the futures production. These gains from the industrial paradigm tenderness etc. In addition,
market now entails a “cross- were made possible by which focuses heavily on low responsiveness to the
hedge”. A cross hedge is intensive management cost commodity production, changing demands of target
hedge which seeks to cover practices and by focusing on the post-industrial producer is customers is rapid. Executing
the value relationship of one understanding the basic targeting product effectively within this model
product in the futures contract needs of the animals and characteristics which are requires high
for another. Packer pricing in providing for them. multi-dimensional and directly management/knowledge and
the meat and the loss of a related to known tastes and capital requirements and
futures market for pigs are Attributes of this style of preferences of final relatively low labor.
signs of the end of pig production are increased consumers.
production in the United capital requirements, Food producers shift from a
States. moderate to high leverage, Within the post-industrial profit focus to financial
demand for specialized, high- motive, the focus changes efficiency. Return on
Meat Producers quality and uniform inputs from least cost production of investment and return on
(especially feed), detailed lean to cost and quality equity are the common profit
In the last ten to fifteen years record-keeping and controlled production of efficiency measures which
we have seen the emergence information management, food made from pork. guide investment decisions
of a new class of producers bench-marking and The focus is both process and and determine successful
which can be characterized systematic, continuous product quality. Production in achievement of goals.
as meat producers. These production. The focus of this this paradigm broadens the
producers have mastered model is the efficient, notion of “system” to include Cost Reduction:
record-keeping and can least cost production of the community in which The Dominant
share with you detailed lean meat. production takes place all the Strategy in
information regarding way through to the final Commodity
“pounds out the door”. Their Because of their ability to consumer of the end-products. Markets
focus is on producing lean flexibly respond to current
meat (sometimes described as packer pricing incentives Attributes of this system of In a market channel
“lean muscle tissue”) at least focused on lean and size of production are high characterized by a large
cost. This group has arisen in carcass, these producers are investment requirements number of commodity
response to a reward system pushing efficiency to the point driven by the marketing producers, there is little
at the packer level which where quality, as defined by decision, very specific input incentive to acquire or control
encourages leaner meat a global, segmented requirements, trading back different levels of the chain
production. These producers marketplace, is becoming some of the efficiency gained since free market price signals
are making a differentiated degraded. Their mix of by industrial methods in coordinate the chain well. In
product which is assessed at production contains return for quality this setting, each level of the
the carcass level and priced characteristics which characteristics demanded by channel takes on the
in the meat. Meat producers disqualify the meat from customers, and modeling characteristics of functional
can quote their kill sheet many high-value export production and profitability production (vs. value
statistics as well as their cost markets. Characteristics such as a means to change. innovation) and differences in
of production within a few as pale, soft and exudative Instead of “walking the grain profitability between firms at
cents. pork has increased along off the farm”, this group is the same level of the channel
with the functional “center of the plate” focused. are fully attributable to cost
Meat producers are part of a application of leaner, more In addition, there is an differences (since all face the
second paradigm of efficient genetics. awareness and commitment same price for the finished
production which can be to manage within the social product). Operational
called the industrial model. Food Producers and environmental climate efficiency, benchmarking and
This set of methods within which the production outsourcing are the key goals
introduced capital as a This third paradigm of takes place to achieve a of competitive positioning in
replacement for labor and production is now emerging. win/win relationship with the commodity markets.
brought a systematic process It is a post-industrial model of community. Long-term
which is specialized and production. Yet the focus of commitments to the The most profitable firms are
throughput-oriented. this model is to produce a community are part of the the firms most adept at cutting
Specialization of production differentiated pork product investment. cost without lowering
separated the pork within a highly controlled, standard or sacrificing
production process from the responsive and flexible Multi-goal quality attributes acceptable and standardized
demands of the cropping system of production. While for products include food quality grades. Because of
the separation between each The End of Until very recently the U.S. Education and its practical
level of the channel, each Commodity swine industry could be realization in increased
level produces its contribution Production in U.S. considered, like most of the efficiency, quality and the
to the final product and in the Agriculture rest of agricultural satisfaction of customer
long run achieves normal production, a commodity demand at lower real cost
profit. While individual firms Whereas technical industry. Commodity will be the driving force
may receive losses or excess breakthroughs have led to industries are characterized producing profitability and
profits in the short run, market reduced cost, especially on a by a large number of creating value in the twenty-
forces either pressure them to per unit basis, gains which participants producing a first century. Knowledge will
expand (profitable firms) or arise from matching product homogenous product for a both assist and cause the
contract (loss firms) until characteristics to the competitive market. Each entire agriculture sector to
normal profits are received particular quality bundle function or level in the reinvent itself in light of the
on average. desired by global consumers channel such as producer, final consumers of its
are just now beginning to be packer, processor and products. Those consumers
Enough homogeneity tapped. Quality is defined as distributor carried out its own bring a diverse set of tastes
(similarity or lack of the proximal match between operation largely and preferences from a large
substantive difference) exists actual product characteristics independent of the other level set of global locations.
so that brand development, and those for which except for purchase and sales Organizing to meet those
recognition and persistence consumers are both willing linkages to acquire product, demands will be the new
are not yet achievable for the and able to pay. Meeting the add value and sell to the next definition of creating value in
fresh cuts of pork. Even qualitative demands of level. As illustrated by the left agriculture and a new supply
though this appears ready to domestic and global side of Figure 1 the consumer chain will be created. This is
change rapidly, the industry consumers seems likely to directs the final sale of the illustrated in the right side of
today at the U.S. retail level provide profit opportunities at product. They can only Figure 1. The consumer’s
is still largely a commodity least as large as the cost choose to consume what is preferences and desires are
industry. This prevents reduction achievements offered at the current price or integral to the decision and
separate markets from related to scale. not buy. This is changing. production process of every
developing (for instance for phase of the market channel.
PIC vs. DeKalb pork chops in
the U.S. meat case) and price
discrimination (different
Figure 1. Pork Market Channels
prices for PIC Vs DeKalb pork
chops) cannot be effectively
practiced in the U.S fresh CONSUMER
meat arena.
RETAIL COMMODITY HRI RETAIL SPECIALTY
(ETHNIC)
The recent introduction of
“Lean Generation” pork
DISCOUNT JOBBERS/BROKER FURTHER
produced from high lean CARCASS PROCESSING
genetics by Smithfield Foods
and Premium97 pork from
Premium Standard Farms are MEAT PROCESSING SPECIALTY SLAUGHTER JOBBER/BROKER
examples of challenges to OPERATIONS (ETHNIC)
traditional commodity sales HOG SLAUGHTER SPECIALTY
and presentation in the meat OPERATIONS SLAUGHTER
case. Several previous
attempts to create COMMODITY HOG SPECIALTY HOG SWINE
differentiated products in the CROP NUTRIENT
PRODUCTION PRODUCTION GENETICS
fresh meat case have been
largely unsuccessful. Time
will tell whether income levels MILLING SERVICES
and differences in fresh meat INGREDIENTS
(ID PRESERVE)
brands are sufficient to create
successful branded products COMMODITY CROP SPECIALTY CROP
capable of sustaining a PRODUCTION PRODUCTION
higher price.
CROP NUTRIENT CROP GENETICS
INPUTS IMPUTS
COMMODITY PORK CHANNEL SPECIALTY PORK CHANNEL

Historical Profit consumer satisfaction with the single most important criteria respond with the unique
Centers Become final product is signaled separating profitable quality bundles demanded by
Cost Centers through the purchase quantity producers from those who a diverse set of domestic and
and price to the entity lose the privilege to profitably global consumers. To achieve
Historically, each level of the managing the entire set of participate in the future this, communication of
U.S. market channel for pork processes required to deliver industry. Access to scale information and coordination
could be considered a profit the quality bundle in demand. advantages can sometimes and control of product is
center. A profit center is a set be obtained through required. Control of both
of related functions or Intermediate product horizontal networking or joint product and flow must be
activities such as pig producers (producers of venture rather than simply possible from the production
production, packing, boning, products and providers of growth. Neither adding of inputs used in the
warehousing or distribution services who do not interface value nor reducing cost production processes through
which results in the creation or sell to final consumers) should be dismissed or pitted each intermediate product all
of revenue by a sale. Each reorganized as cost centers, against the other as an the way to the final offering to
profit center in the market can expect their “either/or” choice. consumers.
channel generates a product compensation to be reduced
or service which is sold to to average cost for the As we look to the future, This coordination and control
another level of the channel functions they provide. This some are predicting a supply which leads to the effective
or to final consumers. A average cost becomes the chain which is optimized differentiation of products
profit center is sufficiently transfer price. around scale and by “driving requires chain-wide
distinct from other sets of the cost out”. Scale will organization, control,
functions to warrant it’s own Phases of the production and certainly be a powerful factor management and a focus on
management, control, market chain which do not re-shaping the market continuous improvement. It is
sometimes its own culture and add value can be expected to channel. Firms which focus not efficient to achieve this
market. Since product become cost centers. Cost one-dimensionally on cost through a diverse set of
innovation does not centers operate in a risk- reduction or value innovation individual profit centers
characterize commodity reduced environment and rarely succeed in the long- focused on their own cost
markets, functionality and their contributions are run. The path which marks functions instead of the real
cost reduction are the essentially labor and the most successful firms takes goal: satisfaction of the tastes
dominant strategies of these functional activities. Since them through cycles of value and preferences of the final
profit centers. This is profits are the reward to risk- innovation followed by rapid consumer.
changing. taking, knowledge and cost reduction through
management, cost centers do operational efficiency in new For instance, a U.S.
Management, guided by the not participate in profits. product processes. distribution house may want
final price/value of the end Rather, they receive a fair to respond to the demand for
product, instead of return to labor and the In the past five years, very strong food safety
intermediate prices, functions they provide. horizontal networking in the guarantees which a
coordinates both the level of production area of the chain segmented market in another
production and the Organizing to achieve long- has grown dramatically. This country would be willing to
characteristics of production. term profitability, to remain a has occurred as producers pay high premiums. If the
The sale of intermediate profit center in the new pork sought ways to lower cost by chain is organized around
products between levels of chain, will require access to working with others. commodity production, it is
the channel is likely to knowledge. This includes not Networking has gained impossible to recognize,
decrease and a transfer of only knowledge of one’s own access to information, segregate and assure a
product will occur instead. production process and how financing, markets and low consistent supply of pork
Instead of a sale, a to improve it but a cost technology for many meeting those rigid criteria.
reimbursement of costs takes comprehensive knowledge of producers and producer Even by offering to pay more,
place. Each of the separate the entire market channel and groups. In the next five the distributor would find it
processes which were the consumer to be served. years, networking up the difficult to communicate these
organized as profit centers chain, or vertical networking price signals effectively down
historically, become cost The New to add value seems like a the channel since standard
centers. Cost centers are a Pork Chain: natural progression. This operating procedures,
set of related activities which Cost Control and process is a form of supply unavailability of detection
accrue costs but do not Value Added chain optimization. methods and unique grading
generate a cash sale. The schemes etc. would most
profit center relocates to the Understanding these changes The market is gearing up to likely make realizing the
interface between the and organizing to create continuously monitor opportunity to serve this
coordinated channel and the value through the application consumer preference special market impossible.
consumer. In this way, of knowledge will be the information, interpret this and
Given the persistence of regional markets. Positioning growth rate, through and cultural barriers, a part
demand for special of products to serve these continued immigration and of the international supply
characteristics, the markets will require natural birth rate will continue chain, do not exist. Pathways
availability of the technology relationship, knowledge and to expand their share of the and relationships may
and methods necessary to specific investments driven by total population mix. naturally progress to create
produce those demands and the marketing decisions. opportunities and invitations
the willingness to pay by Ethnic populations tend to to supply international
consumers, an incentive Ethnic Markets in locate and grow on a markets leading to expanded
develops for firms. This the United States: regional basis. Los Angeles export trade and the tackling
incentive is to vertically Globalism Comes is reported to have the of international supply chain
integrate or coordinate other Home second largest population of optimization.
functions in the chain to Mexicans (and several Asian
realize the opportunity. The Globalism refers to the free races) of any city in the There are many ethnic
fundamental change which movement of inputs world. By the year 2050, segments in the United States,
occurs is each intermediate (especially capital) on a the United States Census in addition, there are other
level (or a set of levels) in the world-wide basis to organize Bureau forecasts almost 50% segments defined in
channel comes under the production according to the of the U.S. population will be categories other than
organization, management comparative advantages of comprised of African-, Asian- ethnicity. The popular ones
and control of a single firm or each country or region. and Hispanic- include age, income level,
joint venture. Regionalism, a reduced form Americans.
of globalism, describes the Hispanic-
It seems equally likely trading alliances and free Americans
regional chains which movement of capital between will be the
combine appropriate scale adjoining countries. Clear largest
and create value through differences exist between ethnic
satisfying unique quality country’s markets and this group in the
bundles will be a substantial drive towards globalization U.S.
component of the coming has been manifested by
market landscape. The key dramatically increasing trade Discovering the
will be developing a set of flows. unique quality bundles
value added activities which demanded by ethnic
uniquely add consumer value Looking inwardly, the United minorities in the U.S. and region of the country etc. In
and defy easy imitation. States has never been a then making the appropriate this effort we focus on the
country dominated by a investments to serve it will potential for developing a
The New single culture or ethnic create profit opportunities. In regional chain to serve the
Meaning of the population. Waves of some cases, simply Hispanic (and especially the
Demand for Pork immigrants created a repositioning existing Mexican-American consumer)
“melting pot” culture where products and quality by in the U.S.
It may be time to sharply diversity was always present changing the style of
modify our use of the term, but many times hidden or de- promotion, advertising and Remember, this study is a
“The U.S. demand for pork”. emphasized to avoid service will be sufficient to prototype. It is meant to
The term suggests a discrimination. Today, the increase sales. In other suggest possibilities not
summation of the individual ethnic diversity and cases, substantial change in provide a complete market
demands to achieve a market proportions in the U.S. is product fabrication to support plan. Since most ethnic
demand. This is more again rapidly changing. The traditional cooking styles will markets are characterized by
appropriate for a commodity ethnic diversity of the United be required. In further cases, high relationship
market with a homogeneous States has changed more changes all the way back to requirements, simply having a
supply. It is more revealing to rapidly since 1980 than at the genetic and input level of plan, regardless of how well
think of the U.S. demand for any other time in its history. production will be required to thought-out, will not be
pork as the total of a large A kind of regionalism is meet quality bundle enough to be successful. This
number of segmented developing within the United characteristics of ethnic material is offered as a means
demands, each with its own States. demanders. to begin the conversation, to
unique quality and tied-in pique curiosity and
service bundles. Organizing We will see in the next Supply chain optimization encourage networks to
to meet these segmented section the age of immigrant will be much easier to consider the opportunity of
demands will most likely populations, especially achieve in the domestic marketing to ethnic consumers
result in the development of Hispanics are much younger market where factors such as of all kinds in the United
regional chains within the than the existing population currency exchange, policy States.
U.S. specifically targeting in the U.S. This means their and regulatory differences,
F R O N T E N D G U I D A N C E F O R M A R K E T A N A L Y S I S 7
UNDERSTANDING THE MARKET:

THE CASE OF THE HISPANIC CONSUMER IN THE UNITED STATES
Food Markets
Food markets are becoming increasingly segmented. Consumers’ desires are becoming more specific and in most
cases they’re willing and able to pay for what they want. This means food is becoming a product with very distinct
attributes rather than a commodity where one type of product such as ham is indistinguishable from ham in the next
market. Fresh pork in major retail stores is generally
considered a commodity. Lloyd’s Barbecued Ribs
are a product.
In this changing market, the first question a marketer will

To understand what the consumer
ask is: "What does the consumer want?” However, wants, you must first understand
before it is possible to answer that question, the more
fundamental inquiry is: "Who is the consumer ?". who the consumer is.
This question recognizes that the inherent differences
among consumers result in different desires for product
attributes. Consumers can be identified by a variety of
factors including location, nationality or race, gender, age, religion and income level among others. These
characteristics are demographic factors.
In this section, publicly available data are used to provide insight into the nature of the Hispanic consumer in the
U.S. Similar techniques and identification standards can be applied to any segment of the U.S. population (age,
gender, etc.) where a value-adding network sees potential.
Who Are to the region and sub-region Immigration vs. From immigration statistics
Hispanics in coupled with the racial Census Data and projections of
the U.S.? background of the population undocumented immigration,
in the region. While there Immigration statistics do it’s evident that Hispanics of
To begin to identify the U.S. are sometimes similarities, it reflect country of origin Mexican origin comprise the
Hispanic market, it is first is important to recognize information and provide a largest share of the segment
necessary to have a working consumer groups often resist more accurate representation in the U.S. It is logical to
definition of the term easy categorization. of new entrants into the U.S. focus on this sub-segment of
“Hispanic”. The U.S. Bureau compared to Census data. the Hispanic population. This
of the Census is the primary Careful Research However, immigration has the added advantage of
data source for all population Required statistics ignore anyone of providing a market control
estimates and projections. Hispanic background population of Mexico itself.
Therefore, the Census It should be mentioned many (especially Spanish or Native That is, comparison of the
Bureau’s definition of people of Spanish descent American descent) born in the U.S. population of Mexican
Hispanic is adopted. For reject the term Hispanic and U.S., and this may be the origin with the Mexican
purposes of the census, prefer Latino. This is most rapidly growing segment population may provide a
Hispanic is defined as a: especially true in southern of the Hispanic-American cross check of market and
California and New York. population. Recall, the preference observations.
"person of Mexican, This underscores the necessity current focus is on cultural
Puerto Rican, Cuban, to do careful market research attributes (tastes and
Central or South in the precise region under preferences) which are not
American or other consideration. Other group necessarily defined by race,
Spanish culture or names commonly used by but more likely by
origin regardless of Mexican-Americans are environment—so perhaps
race." 1 Chicano, Mexican-American simply identifying the country
and La Raza. The use of a of origin for Hispanics is
This is actually a very term well accepted in one sufficient. Consider that
imprecise but revealing area of the country may carry Caucasian British and
definition, determined by racist or demeaning Caucasian Americans are of
geography rather than culture characteristics in another. the same race, but have
or race. Mexico alone widely different customs and
consists of at least three The publicly available data preferences: tea and crumpets
distinct cultures: Native may lump groups in such a versus coffee houses are a
American, European (mainly way as to reduce the value of ready example.
Spanish), and Mestizo the information in creating an
(Spanish and Native effective marketing plan. For
American mix). In addition, instance, persons of Hispanic
there are by one estimate, origin are self-reporting for
over 70 established cooking the census, which may further
styles in Mexico alone related bias population definitions
and projections. Careful local
assessment of the population
and ethnic group being
targeted will be critical to
success.
National Scope of
the Hispanic- Figure 1. Distribution of the U.S. Population, 2000
American
Population
The 2000 Census of the U.S.
estimates there were more
than 35 million people of
Hispanic origin in the U.S. in
2000. The total resident
population of the U.S. in 200
was estimated at just over
281 million. Hispanics
accounted for 12.5 percent
of the U.S. population
breakdown. Figure 1 shows
a breakdown of the U.S.
population by race.
Bureau of Census population

projections predict that by the
year 2010, the Hispanic
population will have grown to
more than 14 percent of the
U.S. population and by 2020
will have grown to 17 Figure 2. Population Growth Trend, 2000-2050
percent of the population.
Figure 2 compares the
projected growth path of the
Hispanic population in the
U.S. relative to the White
population. Figure 2
Population (thousands)
compares the projected

growth path of the Hispanic
population in the U.S. relative
to the White populationa.
Americans of Hispanic origin
will represent an increasingly
important segment of the
economy over the coming
half-century. It will be
important to widen our
knowledge beyond total
number of persons since
income and purchasing
power are also key
determinants of demand. We
will consider income and
expenditure data in the next
section.
a
These projections correspond to the "middle series projections described in bureau of Census publication, Population Projections of the United
States by Age, Sex, Race, Hispanic Origin, and Nativity: 1999 to 2100. Low series projections and high series projections are also provided, and
differ based on assumptions about birth rates, death rates, and immigration patterns.
Location of the Figure 3. Regional Distribution of the U.S. Hispanic Population

Hispanic
Population
in the U.S.
Transportation and
distribution are significant New-England
Pacific 6.29%
parts of the marketing
problem, the location of the 26.22%
Hispanic population is critical Mid-Atlantic
Midwest
to estimating the logistics for Mountain 10.12%
serving this market. Pork is a 3.36% East North
19.51%
bulky and perishable product Central
and serving a consumer close 5.49%
to the base of production will S. Atlantic
likely have competitive East South 8.72%
advantages. In addition,
Central
freshness and perceived West Central
freshness are key 22.40% 1.76%
considerations to Mexican
consumers in the U.S.
Figures 3-7 provide maps of

the national location and
distribution of the U.S.
Hispanic population2. These SOURCE: ATLAS OF THE 1990 CENSUS
maps are arranged in order
of increasing specificity; from
regional population estimates
(Figure 3) to state population
estimates (Figure 4) to county Figure 4. State Distribution of the U.S. Hispanic Population
population estimates (Figures
5-7). 2000 - 35 Million Hispanics
Not surprisingly, the
Mexicans, Puerto Ricans, Cubans,
Southwest region of the U.S. Central Americans and Others
is a majorPacific
Hispanic
population20.74%
center. According
to Mattson2, most of the
Southwest region is
comprised of Hispanics of
Mexican or South American
Origin. Meanwhile, much of
the Northeast region’s
population is comprised of
Puerto Ricans2. Hispanics of
Puerto Rican origin are the
second largest Hispanic
ethnic group in Chicago,
comprising about 10 percent
of the Hispanic population, to
Hispanics of Mexican origin,
comprising about 75 percent.
12.32 - 42.10% Hispanic
Florida is comprised mainly
of Hispanics of Cuban,
6.40 - 9.41% Hispanic
Mexican, Puerto Rican, 4.30 - 5.52% Hispanic
SOURCE: ATLAS OF THE 1990 CENSUS
Jamaican and Haitian origin.
Figure 5. County Distribution of the U.S. Hispanic Population, SOURCE: ATLAS OF THE 1990 CENSUS
Southcentral
Southwest
Northwest
To refine these location

estimates even further, Table
1 provides a summary of
Demographics QuikFax
Hispanic population by major • In 1990, 22.5 million Hispanics lived in the U.S. By 2000, this number had grown to 35.3 million.
cities3. In Table 1, the cities • Hispanics include Mexicans, Puerto Ricans, Central and South Americans, but Hispanics of
are ranked from the highest Mexican origin account for almost 60% of the total.
total number of Hispanics • Hispanics are the single largest minority ethnic group. By 2020 Hispanics will count for 17
rather than percent of total percent of the U.S. population - by 2050 they will account for nearly 25 percent.
population. There are • Mexican-Americans are concentrated in border regions and in major metropolitan areas.
several smaller cities with • Most of the expected growth in the Mexican-American population will be in the U.S. born
very high percentages of rather than immigrant segments, not accounting for undocumented immigrants.
Hispanics (e.g., Garden City, • In 2000, the Hispanic population is younger than the general population with a median
Kansas), however, these truly age of 26 compared to 36.
represent distinct and isolated • Hispanic income levels are lower than Whites. However, Hispanic Household income
markets rather than general growth has been from $14,712 in 1980 to $31,663 in 1999.
regional trends.
Table 1. Cities with Greater than 100,000 Hispanics, 1990a
Total Hispanic Percent

City Population Population Hispanic
(1,000)
New York, NY 8,008,278 2,160,554 26.98%

Los Angeles, CA 3,694,820 1,719,073 46.53%
Chicago, IL 2,896,016 753,644 26.02%
Houston, TX 1,953,631 730,865 37.41%
San Antonio, TX 1,144,646 671,394 58.66%
Bronx Borough 1,332,650 644,705 48.38%
Queens Borough 2,229,379 556,605 24.97%
Brooklyn Borough 2,465,326 487,878 19.79%
Phoenix, AZ 1,321,045 449,972 34.06%
El Paso, TX 563,662 431,875 76.62%
Dallas, TX 1,188,580 422,587 35.55%
Manhattan Borough 1,537,195 417,816 27.18%
San Diego, CA 1,223,400 310,572 25.39%
San Jose, CA 894,943 269,989 30.17%
Santa Ana, CA 337,977 257,097 76.07%
Miami, FL 362,470 238,351 65.76%
Hialeah, FL 226,419 204,543 90.34%
Austin, TX 656,562 200,579 30.55%
Albuquerque, NM 448,607 179,075 39.92%
Denver, CO 554,636 175,704 31.68%
Tucson, AZ 486,699 173,868 35.72%
Fresno, CA 427,652 170,520 39.87%
Laredo, TX 176,576 166,216 94.13%
Long Beach, CA 461,522 165,092 35.77%
Corpus Christi, TX 277,454 150,737 54.33%
Brownsville, TX 139,772 127,535 91.25%
San Francisco, CA 776,733 109,504 14.10%
a
Includes only cities with greater than 100,000 total population and greater than 10 percent of the population of Hispanic
origin.
Immigration Figure 8. Components of Hispanic Population Growth, 1995-2020

Rates and U.S.
Born Growth
It is generally accepted
Hispanic preferences differ
from the non-Hispanic U.S.
population’s preferences
because of cultural
differences. However, while
Hispanics newly arrived from
Mexico would be expected to
exhibit traditional
preferences, it is possible
second and third generation
Hispanics could have cultural
preferences no different from
anyone else born in the U.S.
Adopting the preferences of
the dominant culture in a
country or region is called
acculturation. All things
being equal, acculturation
begins to weaken distinct and
traditional preferences over
time. New influxes of
immigration however may
keep a particular strata of
characteristics and
preferences constantly
“refreshed”.
Figure 8 shows the

assumptions of the Bureau of In 2000, 171,748 legal The rate of legal immigration Birth Rate Begins
the Census of the components immigrants were admitted has declined markedly in the to Dominate
of change for the Hispanic from Mexico, 85,875 were 1990’s. To illustrate this Immigration
population in the U.S. As admitted from the Caribbean decline, in 1991 (the peak
expected, the birth rate of (Cuba, Dominican Republic, year of Mexican immigration In summary, prior to about
Hispanics in the U.S. begins Haiti, and Jamaica), 62,708 to the U.S.), 947,923 1994, Hispanics entering the
to become a more important were admitted from Central Mexicans entered the U.S.4 U.S. from their home country
component than immigration. American countries and Immigration restrictions in the dominated the natural birth
As time progresses, the 55,392 were admitted from U.S. have been much stricter rate of Hispanics in the U.S.
proportion of foreign born South American countries2. since 1990. The Immigration in total segment population
Hispanics who are expected Holding at 350,000, the Act of 1990 created an growth. In the future, the
to have strong home culture Census Bureau is expecting annual flexible cap on greatest growth in the U.S.
preferences is likely to this rate of Hispanic immigration of 700,000 Hispanic market is likely to
decline. This has implications immigration to the U.S. to during the transition fiscal come from the birth rates of
in defining and tracing this remain constant. However, it years of 1992-94, and Hispanics already residing in
segment of the market. is estimated there are 675,000 thereafter4. In the U.S. This suggests that
225,000 undocumented addition the Immigration pork marketers should
immigrants every year.1 Service has employed carefully consider how
Including undocumented additional border agents and second and third generation
immigrants suggests foreign- a policy of Adeterrence Hispanics’ consumption
born immigrants will have a through prevention” to control patterns will develop rather
much heavier influence in the illegal immigration across the than focusing exclusively on
total preference weighting. Southwest border. Hispanic’s home country
consumption patterns.
Age Distribution Figure 9. Age Distribution of the U.S. Population, by Race and Origin
of the U.S.
Hispanic 60%
Population
As evidenced by recent
discussions of the future
50%
Black
viability of social security, the
U.S. population is becoming
older. Older people have 40%
lower caloric requirements White
than younger people and
commensurately have lower
caloric intake. Put simply, the 30% Hispanics
elderly eat less meat. Any
future meat marketing
program must consider the
age distribution of the 20%
population to provide insight
into consumption potential.
Figure 9 provides age
distribution information3. 10%
The most striking feature is

the Hispanic population in
the U.S. is skewed to a much 0% < 5 yrs. 5-14 yrs. 15-44 yrs 45-65 yrs. > 65 yrs.
younger average age than
either the White or Black Age
populations. This graph also
illustrates the White portion
of the U.S. population is
skewed toward a much older
average age compared to
any major racial group. This
illustrates two important
points, (1) it corroborates
evidence the share of the
total population will switch
more to Hispanics and Black.
This means these group’s
preferences will have greater
influence on the market and
(2) the relative meat intake is
likely to remain strong for the
younger Hispanic population.
Income Levels Figure 10. Income Distribution of the U.S. Population, by Race and Origin
Other than relative prices of
products, income is the other
core economic factor 40
affecting consumption
patterns. Food consumption
tends to be subject to Engel’s 35 Black
law. This law of economics
observes as income
increases, food becomes a 30
smaller share of the White
consumer’s total budget. This
makes sense since there is 25
only so much food a person Hispanics
can consume. On the other
hand, people with lower
20
incomes tend to spend a
higher portion of their income
15
on food because it is a
necessity.
10
At the same time, because
there are different types of
food and different prices for 5
food, people will allocate
their money differently across
foods. Meat, being a 0
relatively expensive form of < $5k $10k-15k $25k-$35k > $50k
food, is generally a luxury to $5k-10k $15k-$25k $35k-$50k
low-income populations.
Therefore, poor people tend Family Income
to eat a diet higher in
starches (e.g., potatoes and
rice) and lower in meat
proteins (meat, eggs, dairy).
Wealthier people tend to eat
diets higher in meat protein
and lower in starch. Given its
importance, Figure 10 shows
the distribution of income by
ethnic origin3b .
b
Family income is based on a surveyed sample of the respective ethnic groups. therefore, sampling bias may affect the
accuracy of this distribution.
Income Figure 11. Percentage of Hispanic Households with Incomes above $50,000
Distribution by
Race
Pacific of the
Higher percentages
White population
20.74%are in the
higher income level
categories. Hispanic and
Black populations in the U.S.
tend to have peak population
representation in the
$15,000-$25,000 income
per year category. As
income categories increase
beyond this level,
percentages of Black and
Hispanic persons decrease.
Hispanics have a higher
proportion of their population
in the upper income
categories than do Blacks.
As a further indication of the

distribution of Hispanic 18.1% - 32.4 % 14.8% - 18.1% 11.7% - 14.8% 9.6% - 11.7% 4.7% - 9.6%
income levels, Figure 11
shows a map of the
Source: Valdes and Seoane
percentage of Hispanics in
the U.S. with incomes greater
than $50,000 per year.
Viewing this map two points
are immediately apparent: (1)
there are a significant
number of affluent Hispanics
and (2) incomes are higher in
regions with less
concentrated Hispanic
populations (refer to
figures 3-7).
Psychographic
Information
(Lifestyles) Table 2. Psychographic Profile of the Hispanic Customer
The previous demographic

description focused on the • Strong Identification with American Traditional Values
quantitative measures
identifying Hispanic • Strong Commitment to Family, Religion and Heritage
consumers. A second form
of descriptive information is • Adherence to the Familiar
often termed psychographic.
Psychographic information • Strong Work Ethic/Belief You Can Make it Through Hard Work
considers behavior and
lifestyles of consumers and is • Success is Measured Monetarily and with Image Enhancers
typically qualitative in nature.
Some of the characteristics of • Luck and Fate Have Strong Influences on the Future
the Hispanic market as
described by marketing • High Level of Loyalty to Hispanic Spokespersons, Celebrities and Sponsors
agencies are included in
Table 2. • United by Being a Minority and Experiencing Political, Religious or
This form of stereo-typing can Economic Pressures in Their Home Land

be useful in understanding a
market segment. However, Source: Rodriguez Communications
care must be taken not to
over-generalize preferences.
In general, psychographic
information requires direct
access to the sample
population. These are
characteristics which are
often not readily apparent by
outward appearances. Focus
group studies where
representative groups of a
population are intensively
questioned regarding their
preferences is one way these
attributes can be ascertained.
Targeted mail or telephone
surveys are also familiar and
effective methods.
Summary Information Sources

This demographic 1
Day, Jennifer Cheeseman, Population Projections of the United States by Age, Sex, Race, and
overview is provided as Hispanic Origin: 1995 to 2050, U.S. Bureau of the Census, Current Population Reports, P25-
a template for the types 1130, U.S. Government Printing Office, Washington, DC, 1996.
of information necessary
when considering market U.S. Immigration and Naturalization Service, Statistical Yearbook of the Immigration and
4
development. This is by Naturalization Service, 1994, U.S. Government Printing Office: Washington D.C.
no means
comprehensive. Key U.S. Bureau of the Census. County and City Databook. Data User Services Division,
factors such as Washington D.C. 1994.
educational attainment,
housing characteristics, Rossman, Marlene, Multicultural Marketing, AMACOM, American Management Association,
occupation and others New York, New York, 1994
have been omitted for
brevity. U.S. Bureau of the Census, Statistical Abstract of the United States: 2000 (121st edition).
Washington, DC, 2002.
To this point there is
sufficient evidence to U.S Bureau of the Census, Census 2000 Summary Files, <www.census.gov/ Press-
conclude the Hispanic Release/www/2001/ sumfile1.html>, 2001.
market in the United
States is a true segment. U.S Bureau of the Census, County and City Data Book: 2000: A Statistical Abstract
A picture has emerged Supplement. Economics and Statistics Administration, Washington, DC, 2001.
helping to begin to
answer the primary U.S. Bureau of the Census, Population Projections of the United States by Age, Sex, Race,
marketing question: Hispanic Origin, and Nativity: 1999 to 2100,
“Who is the customer?”. <www.census.gov/population/www/projections/natsum-T3.html>,Population Division,
The next step is to Washington, DC, 2000.
determine what are there
preferences? How much U.S Immigration and Naturalization Service, Statistical Yearbook of the Immigration and
2
pork do they consume? Naturalization Service, 2000, Washington, DC, 2001.

What share of income do
they spend on food?
What are the attributes of
pork they prefer? What
are the cultural behaviors
associated with food and
with pork in particular
(holidays, celebrations,
etc.)? This will be the
focus of subsequent
investigation.
Meat Expenditure Survey of Food Intakes by As with the census data, it is income groups may spend
and Consumption Individuals (CSFII) conducted worth repeating, the more on additional food
Patterns for by the U.S. Department of definition of “Hispanic” is processing, pre-preparation
Hispanic Agriculture’s Agricultural very broad, and a person or convenience.
Consumers Research Service. who claims to be of Hispanic
origin can cite their race as Household Size
The potential scope of the The CES is unique in it either Black or White. The
Hispanic market has been provides an economic context categories of Hispanic origin, A second important
established with the use of which other consumption Black (race) and White (race) consideration is the fact the
demographic data. There is surveys do not. By providing are not mutually exclusive. consumer diaries of the CES
a significant and growing information on expenditures, However, only 3 percent of are based on “consumer
Hispanic population in the it gives us some insight to the people identifying themselves units”. These consumer units
U.S., indicating their total market value potential. as Hispanic also identified are defined as all people
tremendous market potential. However, because it does not themselves as being Black, associated directly with the
Now the question is refined contain quantities and prices, while 97 percent identified primary food purchaser
to help determine the specific it is not possible to tell if the themselves as being White. surveyed. Generally, this is
potential of the Hispanic expenditures are due to closely related to family size.
market for pork products. consumption of high Income Levels Whites and Blacks have very
quantities of low priced similar consumer unit sizes of
Sources of products or of low quantities In addition to expenditure 2.5 and 2.6 people per
Information on of high priced products, (or information, the CES provides consumer unit (household),
Consumption of some other combination of information on the general respectively. Hispanics have
Pork quantity and price). characteristics of larger consumer units with
respondents in the CES diary 3.5 people associated with
There are two types of data On the other hand, the CSFII database. One important each primary food purchaser.
which can be used to assess is concerned only with piece of information is the Hence, one might loosely
this information. One is quantities of food consumed. reported income levels of the infer Hispanics tend to have
primary data, collected It provides us with very little consumers. Income is larger families than their
directly from individuals economic insight, but again generally associated with the Black or White counterparts.
through surveys, food diaries, is useful for gaining insight ability of consumers to buy This is reinforced by
food taste panels or on general preferences and is any particular product. secondary marketing data.
consumer experiments. The much more detailed in the According to respondents in What is not known is the
second is secondary data types of foods consumed. the CES survey, Whites had composition of these families
already in existence through average income after taxes of in this particular survey. For
government sources such as The Consumer $35,347 per year. Blacks example, lower income levels
the data on population Expenditure had average income after might be expected to be
demographics. Survey taxes of $24,087 per year. associated with single parent
Hispanics had average households, and this can
Secondary data is readily Data was obtained from the income after taxes of have an impact on
available, but is typically not Diary component of the 1995 $26,706 per year. On the expenditures.
refined enough to identify the Consumer Expenditure Survey basis of this, it might be
specific preferences and (CES) of the Bureau of Labor hypothesized Hispanics and Other demographic variables
attributes necessary for target Statistics (United States Blacks would have overall include home ownership and
marketing. However, as a Department of Labor). The lower consumption levels than education levels, which can
starting point it’s an CES collects information on Whites because of their lower be useful for cross-checking
economically efficient way to expenditures by respondents average income. with the census data to
utilize existing information to during a particular survey establish if the sample of
determine if the market week. The total number of Remember, according to respondents to the food diary
warrants further investment sample diaries in the 1995 Engel’s Law, it is often is similar to the overall
and development. survey was 9,846 of which observed as income population represented in the
714 identified themselves as increases, the percentage of U.S. census data.
Following is a summary of being of Hispanic origin. income spent on food
findings from two secondary Note this representation is decreases. In other words,
government data sources. slightly less (7 percent) than absolute levels of food
One is the Consumer the representation of expenditures could be
Expenditure Survey (CES) Hispanics in the general expected to be relatively
conducted by the Bureau of population (9 percent, constant across income
Labor Statistics and the Figure 1). categories of consumers. This
second is the Continuing is due to the nature of food
being a necessity. Higher
Food Expenditure To account for this, the Figure 1. Food Expenditures, % of after tax income
Patterns by Race expenditure-per-person data per person in household
and Origin was divided by the average
income level for the consumer
This section summarizes the group. In the case of
consumption expenditures by Hispanic consumers, this
race and Hispanic origin. It meant dividing expenditures
will provide some idea of the per person by $513.58. The
levels of differences $513.58 figure is the
observed, and this overview average weekly income of
of the data will stimulate Hispanics arrived at by
questions which might be dividing the annual after tax
further investigated with the income for Hispanics by 52
use of surveys, food panels or weeks. Figure 1 shows the
interviews. At this point, tests percent of income spent per
for significant differences in person, per week for total
variables are not completed food, by race.
but are possible with this Blacks spend the most on
data set. food per person, while
Hispanics and Whites are
The original data is reported very similar. Because Figure 2. Food-at-Home expenditures
as weekly expenditures for Hispanics have lower income
the “consumer unit”. The levels than Whites, they are % of after tax income per person in household
differences in consumer unit generally spending less
size will obviously influence absolute levels on food than
total expenditures for that others. In fact, Hispanics
consumer unit. All weekly spend on average $24.33/
expenditure data was first person/week on food
divided by the average compared to Whites
number of persons in the spending $32.34/person/
consumer unit. In the case of week on food. This may be
Hispanics, this meant dividing due to the general dietary
expenditures by 3.5. The mix and cooking styles or
resulting expenditure value is alternatively, it may the case
loosely defined as Whites eat food more often
expenditures per person. away from home than do
However, there are large Hispanics and pay higher
differences in overall income prices for added value items.
levels and this is also an Figure 2 shows the
important factor in adjusting expenditures on food eaten at
expenditures. It may be home. Clearly, it is evident
possible relatively low income Hispanics have a higher
consumers expend as much tendency to eat at home. It
or more on food than their may be possible to infer the
wealthier counterparts. quantity of food purchased by
Hispanics is higher than
Whites. The hypothesis is
Whites are likely to pay
higher in total because of
increased value-added
components of food
purchases away from home.
Expenditures for Figure 3. Meat, Poultry and Fish Expenditures, % ATI, per person in household
Meat by Race
Figure 3 shows average
expenditures per person in
the household as a
percentage of after tax
income for all meat, poultry,
fish and eggs. Hispanics and
Blacks, spend a much larger
percent of income on meats
than their White counterparts.
Hispanics spend about 25
percent of their food dollars
on meat, poultry and fish,
compared to Whites
spending about 18 percent.
This observation is contrary
to the idea that meat
consumption tends to be
higher among consumers with
higher incomes. This has
been observed on a global
basis since meat tends to be
a higher priced item than
other food items. Keep in
mind 97 percent of Hispanics
consider themselves to be
White by race, so the White
expenditure data is inflated
by the inclusion of Hispanics.
Pork, Beef As evidence of this price Figure 4. Pork expenditures, % of after tax income
and Poultry effect, for the 1995 period of per person in household per week
Expenditures the Consumer Expenditure
by Race Survey, BLS reports the
average pork price was
Refining the analysis further, 194.79 cents per pound
Figures 4 and 5 show the while the average beef price
expenditures for pork and was 276 cents per pound.
beef as a percentage of after Using these prices to divide
tax income. As might be the expenditures we arrive at
expected, Hispanics spend a a rough approximation for
greater share of their income quantities, showing Hispanics
on both pork and beef than consume 0.647 lb./person/
do Whites. Also, it is clear week of pork and 0.659
Hispanics spend a greater lb./person/week of beef,
share of their income on beef suggesting the consumption
products than on pork levels are similar even while
products. This is true for both expenditures differ
Whites and Blacks as well. substantially. This is only a
This is likely due to a rough approximation
combination of price and because the actual prices Figure 5. Beef Expenditures, % of after tax income per
consumption effects, because paid by the respondents are
beef is typically higher priced not known and because the person in household per week
than pork. In addition, there mix of products purchased
appear to be other (e.g., loins, hams, bacon,
explanatory variables etc.) can dramatically affect
regarding the preference of the aggregate price paid and
beef to pork which we will quantity consumed.
address later. Applying this same logic to
Whites reveals they consume
0.587 lb./person/week of
pork and 0.636 lb./person/
week of beef.
Poultry’s expenditure share of

income (Figure 6) for
Hispanics is 0.22 percent,
only slightly below pork.
Whites are similarly
positioned, spending
approximately 0.15 percent
of their after tax income on Figure 6. Poultry Expenditures, % of after tax income
poultry, while Blacks spend per person in household per week
0.27 percent on poultry.
Pork Product Mix similar relationship holds for Figure 7. Pork Chop Expenditures, % of after tax
For Hispanic Blacks and Whites. income per person in household per week
Consumers
Figure 9 illustrates the
The previous analysis complete mix of expenditures
demonstrates pork is an for pork by the Hispanic
important portion of Hispanic consumers surveyed. Note
food expenditures. To refine these values are reported as
this picture, the focus will weekly expenditures on
now be on the specific pork various pork products per
products consumed. Figures household. They are not
7 and 8 show the respective adjusted for household size
share of expenditures for or income because this is
pork chops and ham, by strictly within the Hispanic
race. Pork chops and hams category. These figures can
represent the highest share of be compared to figures 10
expenditures within the pork and 11 for Whites and
group for Hispanics. A Blacks.
Figure 8. Ham Expenditures, % of after tax income Figure 9. Type of Pork Expenditures by Hispanic
per person in household per week households per week
Figure 10. Type of Pork Expenditures by White Figure 11. Type of Pork Expenditures by Black
households per week households per week
Previous figures have been represented in a Hispanic As an example, Hispanics purchase decisions are made
adjusted for income, making household than in a White or have 2.5 adults per child in by an individual reflecting the
it impossible to compare Black household. With more the household, while Blacks overall demand for the
household expenditures on persons in the household it have 2.9 and Whites have household.
pork. Figures 12-15 illustrate seems reasonable to expect 3.7. With more children per
the household expenditure higher expenditure levels. household coupled with the Another interesting aspect of
levels for various pork These figures are shown assumption children consume this information is Hispanic
products and by ethnic because in dividing by less, adult Hispanics may in expenditures tend to be
group. Hispanic households household size, the fact be consuming as much or highest for the highest value
spend more on pork than assumption is made each more than their White pork in the form of pork
either White or Black person in the household counterparts with smaller chops. This means even
households. Keep in mind, consumes the same amount. households. An argument though they are at relatively
this may be due to the fact can also be made the lower income levels, they
there are more people household is the relevant level maintain consumption of high
for consideration since most value products.
Figure 12. Weekly Pork Expenditures by Household Figure 13. Weekly Pork Chop Expenditures by
Household
Figure 14. Weekly Bacon Expenditures by Household Figure 15. Weekly Ham Expenditures by Household
A final interesting piece of Figure 16. Percent of respondents reporting pork expenditures during the week,
information contained in the by race and origin
expenditure data reports is
the frequency of response for
any particular product.
Figure 16 shows that
Hispanics had a dramatically
higher frequency of reporting
pork expenditures. 46
percent of the Hispanic
households reported pork
expenditures during the week
compared to 37 percent for
Whites. There are several
hypotheses of the significance
of this number. Hispanics are
reported to value freshness as
an important food attribute,
which would require more
frequent purchases. Income
level differences may also
limit Blacks and Hispanics
from stocking up on food
items. Hispanics purchased
all meats more frequently
than their Black or White
counterparts, so this is not
simply isolated to pork.
Expenditure QuikFax
• Hispanic households average 3.5 members compared to 2.5 members for non-
Hispanics
• Hispanic household income averages $26,706 compared to $35,347 for Whites
• Hispanic households spend 9 percent more than non-Hispanic households on food,
and these expenditures are more likely to be for at-home food consumption.
• Hispanic households spend 52 percent more than non-Hispanic households on meat,
poultry and fish.
• Hispanic households spend 53 percent more than non-Hispanic households on pork.
• Pork chops lead pork expenditures by Hispanics, followed by other pork, non-canned
ham sausage (chorizo) and bacon.
Table 1 provides the raw

data used to create the
Table 1. Consumer Expenditure Survey Data, 1995
figures presented in this
chapter. It also contains ALL
information on other meat ITEM CONSUMER WHITE BLACK HISPANIC
products not included in the UNITS
charts for brevity.
Demographic Information
Continuing Survey
of Food Intake by Number of Sample Diaries 9,846 8,727 1,119 714
Individuals (CSFII) Income After Taxes $34,001 $35,347 $24,087 $26,706
Average Number of Consumer Units 2.5 2.5 2.6 3.5
The Continuing Survey of
Food Intake by Individuals Race of Reference Person
(CSFII) offers additional Black 12 0 100 3
insight into the meat
White and other 88 100 0 97
consumption patterns of
individuals. This survey is
conducted by the United Dollars
States Department of
Agriculture. It is a one-day Expenditure Information
recall survey of items Average Weekly Expenditures:
consumed. The surveyor asks Food 78.64 80.86 62.75 85.16
the respondent to recall all
that was eaten in the previous Food at Home 53.04 53.93 46.68 64.28
day, including quantities and Meats, poultry, fish and eggs 14.47 14.17 16.65 21.09
brand names when possible.
Beef 4.38 4.39 4.26 6.37
In general the large sample
size of the survey (5,311 Ground beef 1.62 1.63 1.56 2.32
sample persons (~2,813 Roast 0.77 0.78 0.70 0.92
households)) allows analysts
Steak 1.67 1.67 1.68 2.63
to extrapolate the results to a
more aggregate level. Other beef 0.31 0.31 0.31 0.51
However, in the case of Pork 3.00 2.86 3.99 4.41
individual groups, (e.g.,
Hispanics or Mexicans), the Bacon 0.39 0.35 0.66 0.49
sample may become quite Pork chops 0.76 0.73 1.00 1.23
small (295 Hispanics and Ham 0.71 0.71 0.75 0.99
118 Mexicans) and the
results are not as robust or Ham, not canned 0.67 0.66 0.71 0.93
stable as for a larger sample Canned ham 0.04 0.05 0.04 0.06
of the population.
Sausage 0.43 0.39 0.67 0.55
Other Pork 0.71 0.68 0.91 1.14
Frankfurters 0.43 0.41 0.52 0.45
Lunch meats (cold cuts) 1.34 1.37 1.16 1.39
Bologna, liverwurst, salami 0.49 0.48 0.54 0.60
Poultry 2.65 2.56 3.30 3.93
Consumption of Figure 1. Meat, Poultry and Fish Consumption, grams per household per day
Meat by Race
First, comparing the
consumption quantities of
meat poultry and fish (Figure
1), Hispanics reported an
average of 1,145.25 grams
per household per day,
compared to Whites who
consumed only 999.74
grams per day and Blacks
who consumed 1,085.83
grams per day. Note that an
additional benefit of the CSFII
is that we can determine
Hispanic consumption by
country of origin, so it is
possible to further break the
Hispanic origin category into
Mexican, Puerto Rican or
Cuban. For brevity, we have
included only ‘Mexican’
which is of current interest.
From this information,
Mexican-Americans have a
slightly lower total meat
consumption than the overall
Hispanic sample.
Although the CSFII focuses on Households in the sample survey, Hispanics also have survey. Hence, as with the
consumption levels, it also have an average income of the largest average CES data, which was
includes some cursory $25,153.98 compared to household size, averaging adjusted for income and
demographic data which can Whites with an average 3.94 persons per household, household size, the CSFII
be cross-referenced with the income of $37,330.48 and while Whites only average data is also adjusted for
Consumer Expenditure Survey Blacks with an average 2.83 people per household household size and income.
(CES) data. The CSFII reports income of $23,429.81. and Blacks average 3.03
the 295 unique Hispanic Consistent with the CES people per household in the
Pork Consumption for their respectively lower Figure 2. Pork Consumption, Grams/Household/Day
by Race and income levels. This can be
Origin interpreted as meaning if
additional income is provided
Figure 2 (unadjusted for to all three types of
household size or income households, consumption of
levels) shows Hispanic pork should increase the most
households consume almost in Hispanic and Black
exactly the same amount of households. Finally, Figure 4
pork as do White shows Hispanics consume
households, but both Whites approximately equivalent
and Hispanics consume amounts of pork as Whites
considerably less pork than upon adjusting for both
Blacks. Figure 3 shows by household and income
adjusting for the lower differences, but Blacks far
income levels of Hispanics exceed either of the other two
and Blacks they consume groups’ consumption levels.
higher levels of pork products
Figure 3. Pork Consumption, Grams/Household/Day/ Figure 4. Pork Consumption, Grams/Person/Day/

Annual Income Annual Income
Pork Consumption Figure 5. Pork Consumption by Region

Among Hispanic
Groups
Figure 5 provides a summary
view of the differences
between aggregate Hispanic
pork consumption levels,
Mexican-American pork
consumption levels as well as
regional differences. The
values in Figure 5 are directly
in terms of grams per day per
household. At the national
level, Hispanics consume a
higher level of pork than the
Mexican-American subset.
Other Hispanic categories
(Puerto Rican and Cuban)
potentially offer at least as
great consumption potential
as the Mexican-American
share of the Hispanic
population. Only in the
Southern region and the
Midwestern region do
Mexican-American Hispanics
exceed Hispanics overall.
Also notable is there are initial observation however there are only 60, 25, 9, and respectively. With this small
regional differences in requires additional testing 24 Mexican Households sample size there is the
consumption for aggregate because of small sample size represented in the West, possibility the observed
Hispanics, the variation of problems. Attributing too South, Midwest and differences are heavily
Mexican-Americans across much significance to these Northeast regions, biased.
regions is much greater. This results is unwarranted as
Pork Product It is not surprising the major shown in this table, there is a definition of cooked is boiled
Consumption by pork cuts (spareribs, roasts , much greater refinement of or steamed. This is likely
Race chops, steaks) occupy the these product categories as related to the ultimate dish
leading products consumed well and these results show prepared, where Whites
An additional benefit of CSFII by both Whites and subtle differences in commonly eat pork products
is that it provides information Hispanics. However, it is preferences and cooking as a stand alone main entree,
on individual meat product evident Hispanics are more styles. For example, most of but Hispanics are more likely
consumption. However, as a likely to also consume the commonly eaten pork to serve as a mixed dish with
caveat, this breakdown also products such as feet, ears, products by Whites are fried, beans or rice.
is potentially biased because snouts than are their White while for Hispanic’s they are
of the small sample size as counterparts. Although not most often cooked. The
categories are narrowed.
For example, there may be
only one observation for a
product. Of the 295 Hispanic Table 2. Daily Recall Survey: Pork Product Type consumption, Whites and Hispanics
households represented in the
survey, 171 (58 percent)
consumed pork products. Of Item Amount/Serving Total Servings
the 2,050 White households, (grams) Amount (grams)
1,328 (65 percent)
consumed pork products. Hispanic Consumers
Table 2 shows the breakdown Pork Spareribs 131 1,572 12
of pork products consumed Pork Roast 100 1,207 12
by Hispanics and Whites.
Pork Chop 86 3,678 43
‘Servings’ represents the
number of times a particular Pork, not specified 83 1,073 13
pork product was consumed Ears, Tail, Snout, etc. 67 67 1
by the households in the
Ham 53 2,060 39
survey. ‘Total Amount’
represents the total amount (in Pigs feet 41 83 2
grams) of that pork product Pork Steak 38 3 1
consumed by the
respondents, and Pork Skins 32 158 5
‘Amount/Serving’ represents Bacon 21 882 43
the average amount that was
eaten per response (in
grams). The pork products White Consumers
are ranked by Pork Steak 113 6,090 54
‘Amount/Serving’ which
Pork Spareribs 107 5,237 49
should represent the most
popular pork product. Bacon Pork Chop 102 23,757 233
is the most frequently Pork, ground or ns 83 826 10
consumed product by both
Pork Roast or Roll 77 3,910 51
Whites and Hispanics, but is
consumed in small amounts Ham 67 21,812 325
by both, so you should look Pork Rinds 49 295 8
carefully at all rankings.
Neckbones, Hocks 39 274 7
Canadian Bacon 36 322 9
Bacon 20 11,810 582
Source: USDA, Continuing Survey of Food Intake by Individuals.

As a final piece of information, the figures for other meat groups (figures A.1 - A.12) are presented in the same format as the
pork consumption figures presented previously. Much of the interpretation and comparison should be straight forward.
Figure A.1 - Beef Consumption Figure A.2 - Chicken Consumption

grams/day/household
grams/day/household
Figure A.3 - Meat Mixtures Figure A.4 - Beef consumption, Adjusted for Income
grams/day/household
grams/$ income
Figure A.5 - Chicken Consumption, Adjusted for Income Figure A.6 - Meat Mixtures, Adjusted for Income
grams/$ income
grams/$ income
Figure A.7 - Beef Consumption Figure A.8 - Chicken Consumption

Adjusted for HH Size and Income Adjusted for HH Size and Income
grams/person/$ income
Figure A.9 - Meat Mixture Figure A.10 - Regional Beef Consumption
Adjusted for HH Size and Income
grams/day/household
Figure A.11 - Regional Chicken Consumption Figure A.12 - Regional Mixed Meat Consumption
grams/day/household
Summary
This overview provides
Consumption QuikFax
insight into the pork and • Consistent with expenditures, Hispanic households consume the most meat per
meat consumption patterns household.
of Hispanics compared to • Household pork consumption levels of Hispanics are about equal to Whites, but
Whites and Blacks. It much lower than Blacks.
provides a starting point to • Mexican-American households consume 52 grams of pork per day compared to 54
establish there is a grams of pork per day for all Hispanic households.
significant Hispanic market • There are regional differences in pork consumption by Hispanics and Mexican-
for pork. It also establishes Americans.
even with lower average • Beef consumption is greater than other meats in all racial and origin categories.
incomes than their White • Hispanic households are more likely to consume variety meats than are White
counterparts, Hispanics households.
spend a higher portion on
pork products. The
consumption section verifies
there are also likely pork
product type differences
between Hispanics and Information Sources
Whites and there are likely
regional differences as United States Department of Agriculture. 1994 Continuing Survey of Food Intakes by
well. These two factors Individuals. Washington DC: Agricultural Research Service. January 1996. CD-ROM.
may imply some needs of
the Hispanic market are United States Department of Labor. Consumer Expenditures in 1995. Washington DC: Bureau
currently under-served. of Labor Statistics. April 1996.
In a broader sense, this

provides a template of the
necessary market analysis
which must occur when
considering a value added
market. Unfortunately, this
information is not refined
enough to answer more
specific and relevant
questions such as: are
Hispanic female heads of
households more or less
likely than their White
cohorts to work outside the
home? This may have
implications for marketing
pre-prepared pork products
and the demand and ability
to pay for convenience.
What is the composition of
the household? Also, we
are unable to link price
quantity data to establish
the overall demand
response to pork products.
For example, if pork supply
were to increase in
Hispanic markets, how
would prices respond?
These types of questions
require more refined market
analysis targeted to the
prospective customer base.
Marketing to the Hispanic Household
Typical Mexican representing the entire

An important part of any culture is it’s Food carcass. There are many
celebrations, traditions, folklore, and styles of cooking in Mexico,
religious ties. Understanding these The following pages contain these dishes were selected
traditions provides insight into the examples of very typical because of their near
behavior and rituals of consumers. Mexican dishes which utilize universal appeal and
What follows is an illustration of pork. Each of the pictures recognition of as typical
holidays, traditions, recipes and show a very common dish cuisine of Mexico.
folklore which form the binding of a made from cuts of meat
culture and give insight into seasonal
demand patterns.
Specialty Meats:
POZOLE
(Pork Stew)
INGREDIENTS
Pigs Feet
Spice Flavoring:
chili powder
chiles
onion
garlic
oil
hominy
Serve With:
tortillas
Garnishes:
green onions
lettuce
radishes
jalapenos
oregano
Belly/Ribs:
GUISADO DE
PUERCO
(Savory Mexican
Pork Dish)
INGREDIENTS
Ribs, cut into riblets
Spice Flavoring:
salt
cumin
peppercorns
garlic
large chili pods
cooking oil
Shoulder/Butt:
TAMALES
INGREDIENTS
Pork Shoulder/Butt
Spice Flavoring:
chile powder
oregano
cumin
garlic
salt
Corn Husks
Masa Harina (corn meal)
Lard
Broth
Ham/Leg:
CARNITAS
INGREDIENTS
Boneless Pork, cubed
Spice Flavoring:
dried ground red chili
black pepper
salt
cumin
garlic
fresh cilantro
Loin:
CHULETAS DE
PUERCO
(Pork Chops)
INGREDIENTS
Pork Chops
Spice Flavoring:
salt
pepper
monosodium glutamate
garlic
onion
green pepper
olive oil
Can Be
Served With:
beans and rice
Head, Neck
Bones and
Trimmings:
CHORIZO
(Mexican Sausage)
INGREDIENTS
Lean Pork, ground
Spice Flavoring:
salt
chili powder
garlic
oregano
vinegar
POZOLE (feet) Traditional pork Christmas and All The many meatless
Holiday dishes that are served Kings Day dishes that are
Celebrations and at weddings and prepared characterize
Special Meals birthdays include Besides Christmas Day, the Lent. Mushrooms,
tamales, and roast of feast of postados symbolize chilies, and seafood
Bautismo leg of pork. the nine days leading up to are popular dishes
Christmas Eve. throughout this season
This is the celebration of of Lent.
baptism, usually carried out Breakfast All Kings Day is celebrated
in the Catholic Church and soon after the Christmas
signifying a new member of Although this event occurs festivities. January sixth Day of the Dead
the religious community. once a day, the significance marks Reyes (or King). On
There are several traditions of this family feast is just as many occasions we were told “El Dia de los Muertos” or
associated with baptism important as other holiday of seasonal demand for pork “The Day of the Dead” is a
which involve food. celebrations. There is a shoulders and butts greatly combination of cultures and
traditional Mexican saying outstripping supply during the religious traditions celebrating
Traditional pork which states, “Don’t make an month of December. the dead. Once known as
dishes that may be important decision without Throughout December it is “All Souls Day” the Mexicans
served at the bautismo first having eaten”. Many traditional for family groups renamed it to celebrate the
include tamales, business people schedule to get together to make large people who had gone before
enchiladas, and little meetings at restaurants so batches of tamales. All of the them. The feasts of the
tacos. they are still able to enjoy women work together to tradition include spicy,
breakfast while conducting a create these seasonal foods. colorful foods. The
meeting. It is not unusual and This cultural family bonding is celebration corresponds to
Weddings and often required to conduct very strong and very Halloween, or October 31st
Birthdays business over an extended important to the typical in the dominant U.S. culture.
meal with Hispanic business Mexican-American. Lots of
Weddings and birthdays are persons. stories were shared about Traditional pork dishes
major celebrations in “the best tamales in the that are prepared of
Hispanic culture. The focus Traditional pork world” and the incredible the Day of the Dead
on traditional values and the dishes that are served celebration over the entire include tamales.
centrality of the family are at breakfast include month of December. One
very evident in these chorizo sausage. neighborhood market in Los
celebrations. Following the Angeles reported lines in
ceremony, the celebration of December often extending out
continues through the Independence Day of the store and down for two
wedding feast. Guests are blocks waiting to purchase
served traditional foods such September fifteenth and butts and shoulders to make
as pueblo-style mole, a sixteenth mark the celebration tamales.
zacahuil (six-foot tamale) of Independence Day. This is
cactus paddles, red, yellow, time of great celebration of Traditional pork
and green rice and light and Mexicans. People flood the dishes that are served
dark beers along with the streets to take part in the during Christmas and
wedding cake. activities. Food plays an All King’s Day include
important role in this holiday. tamales, carnitas,
In honor of a birthday, the Green enchiladas and fried stewed pork, and
person being honored often tortillas just to name a few. roasted pork leg.
chooses the menu for the
celebration so the possibilities Traditional pork
are many. Stuffed chilies, dishes that are Lent
roast leg of pork, or pickled prepared for
meats are just a few of the Independence Day For the Mexican Catholics
favorites found at many include chorizo, Lent is the forty days between
birthday feasts. enchiladas and tacos. Ash Wednesday and Easter.
Use of Spices There is an increasing effort are also second, third and Mexican Culture than those
on the part of U.S. higher generations of migrating to Minneapolis.
Spices are very important government programs to Mexican-Americans living in
when preparing traditional provide nutritional counseling the U.S. who have likely On a similar vein,
Hispanic dishes. Spices to Hispanic people in the adopted a great deal of the segregation from or
commonly used include U.S. This should be carefully dominant U.S. culture. Table acceptance into the U.S.
onion, oregano, chili power, considered in developing a 1 shows estimates of the community will likely affect
lemon pepper, chili pods, marketing and education percentage of the Hispanic the rate of assimilation.
and cilantro. Thyme is used, campaign around pork and population falling into each Individual factors such as
but not as frequently as the pork products. While leaner generational category. education levels, economic
before mentioned spices. cuts are likely to be status, and the presence or
Complete aisles are proscribed in these While it is clear U.S. born absence of family ties already
dedicated to the different educational campaigns, the Hispanics may eventually in the U.S. may be additional
flavorings and spices that can cooking styles which become indistinguishable factors. As an example, it is
be used when preparing emphasize added fat are from U.S. culture, the foreign reported 33 percent of U.S.-
Hispanic dishes. Stores more traditional. born component of the total born Hispanics marry non-
specialize in garlic, chilies, group is increasing, Hispanics, whereas 80% of
and other spices. The Hispanic suggesting a major segment all Hispanics in the U.S.
importance of spices is Acculturation of the Hispanic population marry people of Hispanic
profound in this culture. will bring their country of background. This suggests
One of the key factors to origin customs and traditions U.S.-born Hispanics are more
Diabetes among consider in the U.S. Hispanic with them. likely to take on the custom
Hispanics market is the rate of and traditions of the general
acculturation. Acculturation There are many additional culture.
The risk of adult on-set is how quickly the original factors which may accelerate
diabetes is a growing threat culture adopts the dominant or reduce acculturation. If Another readily observable
among Hispanic people. It culture’s practices and the Hispanic population measure of acculturation is
has been found that Mexican- customs. Mexican density is high relative to the adoption of language.
Americans are five times acculturation is likely to be Anglos, it is more likely the Table 2 shows the majority of
more likely to develop the dynamic in the sense the rate of acculturation will be the Hispanics in the U.S. are
disease than non-Hispanic Mexican-American slowed. It is reasonable to still most comfortable
races in the U.S. This has population is constantly expect Mexican-Americans speaking Spanish, indicating
been traced back to factors “refreshed” by continued living in Los Angeles to that acculturation may be
such as heredity, diet, immigration. However, there maintain more of the slower than might be
obesity, and physical activity.
The primary drawbacks of
the Mexican-American diet
are the liberal uses of fat,
Table 1. Generational estimates of Hispanics in the U.S.
particularly lard, and a Generation 1990 2020
preference for meats that are Foreign Born 35% 43%
high in fat. Stovetop
Second Generation 35% 38%
cooking, pan frying, and
stewing also add to the fat Third Generation 8% 9%
content. Fourth Generation 22% 10%
According to the American

Diabetes Association (ADA), Source: Bureau of Census and Valdes & Seoane, 1995
more than one million of the
estimated twenty-two million
Hispanic-Americans in the
United States have diabetes.
Table 2. Language Usage by Hispanics in the U.S.
One in every ten adults is
Language Spanish English
diagnosed with this disease.
Studies show that women First Learned to Speak 89% 10%
with diabetes have a Most Comfortable Speaking 73% 23%
significantly higher death rate Most Frequently Used at Home 79% 20%
and complication rate during Most Frequently Used at Work 36% 48%
their pregnancies.
Source: Rodriguez Communications
expected and offering the

potential to segment the Table 2. Cultural Differences Between Hispanics and Average Americans
market even to U.S.-born
Hispanics. HISPANIC AMERICAN
Cultural Family and group oriented Individualization, even of youth

Comparisons High social stratification Equality
Elaborate food preparation Minimal preparation of food
Are there truly cultural Value highly personal or personalized service Value fast, efficient service at arm’s length
differences between Very decorative More casual/less decorative
Hispanics and ‘average’ Rely on mutual understanding Rely on explicit language
Americans? This has been
Prefer prestige brands Less likely to rely on prestige
the presumption so far. By
Stress cooperation, group welfare Stress competition, individual achievement
reviewing previous research
on Hispanic and U.S. Low reliance on institutions High reliance on institutions
customs, there do appear to
be some broad differences Source: Valdes & Seoane, 1995.
which can impact marketing
methods to Hispanics. Table
2 provides insights on some heads, snouts, stomachs, etc. markets (mercado) in Mexico.
of the key cultural differences. Product and This may provide a ready-
Packaging in the made value added market for In stores in Mexico, we often
Not much time will be spent Hispanic Market pork products which are observed store personnel
on explaining the significance difficult to merchandise featuring a section of the store
of these attributes here. The information on through the commodity through active displays
However, they will be woven expenditures and market channel serving involving festive music and in
into subsequent marketing consumption provides a good predominantly White some cases singing and
strategies where appropriate. deal of insight into pork markets. The cultural dancing. The traditional
product strategies in Hispanic preferences also indicate colors of Mexico (red, green,
Market Strategies markets. First, it is evident branding may be a very white and yellow) are
Hispanics tend to cook at effective merchandising tool prominently featured in
Classical marketing studies home rather than eating out because of brand loyalty promotions and packages.
often refer to the four P’s of as frequently as the general exhibited by Hispanics. They not only catch the eye,
marketing: Product/package, population. It is likely best to but cater to Mexican-
Price, Place and focus on pork products sold On visits to numerous Americans’ feelings of pride
Promotion/advertising. Each through the grocery and meat Hispanic markets, it was in their cultural homeland.
of these four factors must be market channels rather than observed coloration was an This aspect is consistent with
in place to successfully the HRI (hotel, restaurant and integral part of packaging the decorative theme
execute a marketing strategy institutional) channels of the products as well as store suggested in cultural
such as entering the Hispanic market chain. layouts. Stores with names differences.
market. Following is a brief such as Carnival and Fiesta
consideration of each of the It is evident Hispanics are are commonplace, denoting
four aspects of marketing, likely to utilize variety pork an upbeat shopping
again using the Hispanic products such as feet, skins, atmosphere typical of the
market as an example.
How to Target the Hispanic Market QuikFax

• Use creative communications, capturing the relevant emotional triggers.
• Depict setting as a realistic Hispanic lifestyle.
• Present product in simple, familiar and realistic background.
• Understand the customs and values of the unique demographic group targeted.
• Use the preferred language (Spanish), be aware of subtle variations in sub-segments.
• Be direct and to the point with one or two key product or service benefits.
• Use visuals with high coloration and eye appeal to imprint product use, quality
assurance and brand identification.
Pricing The closer the substitution also a commonly used guarantee consumers are
potential of the existing practice in industry. An even actually willing to pay an
One of the greatest difficulties product for your product, the simpler pricing method is to amount which will cover costs
of introducing a new product better guide it will serve in use cost plus pricing. In this every day. As an illustration
is determining an appropriate pricing and quantity sales case the price is established of prices, table 1 provides a
price. Setting a price too projections. If you are truly as a reasonable margin summary of fresh pork cuts
high discourages initial embarking on a different above the costs of production and their English and Spanish
purchases and keeps product, experimental with which the producer is names. The price provides a
customers form “trying it and marketing techniques are typically familiar. The relative comparison across
liking it”. For a new product, available which are useful for potential downfall to this product types but should not
it is extremely important to establishing consumers’ method is it is production be used to infer relative prices
gain market share at the willingness to pay for a driven and there is no across markets.
outset to establish a presence product. Test marketing is
and brand identity. Setting a
price too high will detract
from this potential. However,
setting a price too low, while
likely enticing people to Table 1. English and Spanish (primarily Mexican origin) Pork Product Equivalents
purchase your product, may
not provide sufficient revenue English Spanish Pricea
to cover expenses which are
likely to be highest during the Shoulder Pernil $1.39/lb.
start-up phase. This pricing Chorizo on pork steak Carne Adovada $1.99/lb
conundrum is why it is critical Pork cubes, (cushion meat) Carnitas $2.29/lb
to assess potential demand Boneless loin Lomo $2.29/lb
for your product before even Pork chop (bone in) Chuletas de Puerco $2.99/lb
entering a market. Spare ribs Costillas de Puerco $2.29/lb
Pork skin (fried) Chiceronies $4.99/lb
Assessing demand Pigs feet n/a n/a
means establishing Pickled Pork Skin Cueritos Freschos $0.99/lb
how much of your Neck Espinaso de Puerco $0.79/lb
product people will Center Loin Cuts Chuletas de Puerco Centro $3.79/lb
buy and at what Boneless Sirloin Chops Chuleta de Puerco sin Hueso $2.79/lb
price. Boston Butt Roast Trozo de Puerco sin Hueso $1.99/lb
Pork Steak Bistec de Puerco $1.89/lb
Many tools are available for
assessing demand. Data a
This is a spot price and is for illustrative purposes only. General market conditions will
may already be available for dramatically influence this price level.
similar products in the
market. In the case of pork,
there are well established
prices and consumption levels
which allow a very good
benchmark for pricing pork in
any market. For example, as
indicated earlier, the average
pork price was about
$1.95/pound in 1995.
Regardless of the market, it is
highly unlikely that you could
charge five dollars a pound
and expect to gain much
business.
Place Becoming even more refined, Promotion and Spanish as their main
category management is a Advertising language. It is expected
Location, location, location. critical part of placement in promotion should either be
The three most important food merchandising. There are two basic types of bilingual or completely in
words in real estate and Category management promotion. They are often Spanish when targeting those
product positioning. There simply refers to how you referred to as “push” and markets. Nuances in
are many levels of placement position a particular product “pull”. Push type promotion pronunciation and word use
in product merchandising. (or category of products) counts on a sales force or (especially slang etc.) are
Placement is as broad as the within a retail store format. distribution firm to create very important in
demographic information For example, meat products additional sales by bringing communicating to segment
provided earlier. Clearly, will often be placed in a the product to the buyer. Pull groups. The incorrect
attempting to market to single meat display area, and strategies use radio, pronunciation or word use
Hispanic-Americans is likely categorized by species. In television, the print media typical of a different Hispanic
to be most successful near the supermarkets catering to and the internet to attract the segment (such as Puerto
border of Mexico and in the Hispanics, corn husks purchaser to the product. Ricans when attempting to
major metropolitan areas displayed next to pork Each strategy has its own reach Mexicans) can
where concentrations are products during the tamale unique advantages and completely negate the
high. As will be noted later, season were observed– these potential effectiveness. Most effectiveness of the
placement can be refined to are the two key ingredients important however is to advertising.
store location. used in preparation of develop a
tamales and makes it marketing/promotion plan Similarly, products should be
Hispanics in general strongly convenient for customers to which is correctly and displayed in their best light,
prefer product freshness and pick them up together while effectively communicating to but with a reality base that
often prefer local shopping. Key spices and the segment you are hoping makes them attainable. In the
neighborhood markets to the ingredients were also often to reach. case of pork products,
supermarkets. One recent included with pork products Hispanics still prefer bone-in
study of Hispanic purchasing to make pork an obvious Professional assistance with a products over boneless
patterns in Los Angeles choice for meals. promotional plan is required. products in many traditional
indicates about one-third of Outsourcing these functions dishes. Boneless products are
Hispanic shoppers strongly brings you in touch with often preferred thin-sliced for
prefer small, ethnic markets professionals who have quick grilling. Advertisement
for food shopping. devoted the time necessary to portraying thick cut boneless
Placement in neighborhood become specialists in these pork products may eventually
markets may be necessary for very unique market segments. change preferences but do
successfully tapping the It is critical however, to not strike most Hispanic
Hispanic market. choose the appropriate buyers as familiar. It is both
professional agency, one realistic and appealing for
which has a depth of Hispanic customers to see
experience in dealing with bone-in products in ads.
the segment you are hoping There are numerous Spanish
to reach. language television, radio
stations, and newspapers, in
In all cases, promotions must the Southwest which already
appeal to the culture and cater to the Hispanic
values of your customer. In community. These offer
the current case, it has natural pathways for
already been established promotion.
Hispanics frequently use
Spanish in home settings and
are most comfortable with
Summary Information Sources

Seasonal demand related Valdes, M. Isabel and Marta H. Seoane. Hispanic Market Handbook: The Definitive Source for
to holidays, celebrations Reaching This Lucrative Segment of American Consumers. Gale Research Inc., Detroit, Michigan.
and cultural use of food 1995
and pork are very
important in Hispanic Rodriguez Communications, Alejandro Rodriguez, President.
markets. Many of the
seasonal demand patterns
are defined around
religious holidays. Perhaps
the most profound
association occurs during
the Christmas season when
the month of December is
characterized by tamale
making. Tamales require
pork and it is typically
shredded. The most
popular cuts used to create
tamale meat are butts and
shoulders but neck and
back bones are also used.
A high incidence of adult
on-set diabetes
characterizes the Mexican-
American population.
Government health care
efforts are targeting the
Mexican-American
population for dietary
counseling especially to
control weight. Hispanic
cooking techniques often
begin with lean meat but
use a lot of added fat in
frying. Lard is favored over
plant-based fats and oils.
The market has been
identified, and the
possibility for developing
Hispanic pork markets
offers potential. This does
not consider the actual
marketing problem which is
how to effectively enter and
serve the Hispanic market.
This section considers
directly the marketing
challenge.
Site Visits to Due to proprietary Chorizo seasoning was also Another striking attribute is
Hispanic Markets assurances, the names of the applied to fresh pork steaks pork chops and steaks are
markets visited are not and pork chops to create a very thin cut (< 1/4”), similar
Market analysis simply reported, but in most cases value-added product. to what are commonly called
cannot be done at arms this is not relevant to the breakfast chops. The reasons
length. Observation and discussion. Five major One supermarket chain had cited for this included cooking
interaction is key to providing supermarket chains (several begun to develop value- style (e.g., chops were
depth of understanding of a stores within each chain) added pre-packaged pork seared) and cultural, that pork
market and its behavior. specifically serving Hispanic products targeted at Hispanic was perceived as needing to
While this information is communities and 15 customers. These products be cooked very thoroughly
qualitative rather than neighborhood markets were marinated pork fajita and therefore it was better to
quantitative, it adds the operated and catering to products. As expected, the be thin cut.
nuance which is often the Hispanics were visited. Two marinated products were
difference between success major supermarkets in considerably more expensive In a typical full service case,
and failure of marketing Mexico and several than their fresh counterparts. pork cuts were pre-sliced and
plans. In an attempt to better neighborhood Mexican meat In discussions with the meat stacked in large piles.
understand the quantitative markets were also visited. product manager, it was Customers were observed
research information, explained this particular individually selecting cuts
Hispanic markets were visited Characteristics of chain based its philosophy on from the top or beneath the
in Los Angeles, Salt Lake City, Pork Products trying to introduce the top layer. Meat managers
San Antonio, Houston, El Hispanic customer to Anglo indicated a complete
Paso, Dallas, and Laredo in As expected, there is type products and purchasing willingness to custom cut on
the U.S. and Juarez in considerable product patterns in the hopes they the spot for individual
Mexico. During these visits, variation from store to store. would better fit the store’s preferences.
store owner’s, meat market This variation includes types merchandising and marketing
managers and butchers were of products offered, services operations. This example Characteristics
interviewed to learn more offered and cutting methods. provides an illustration of and Beliefs of
about the Hispanic customer. This section provides an attempting to “pull” the Hispanic
At this time further plans are overview of the pork product consumer out of their Customers
to visit more Mexican markets mix observed and general traditional preferences to
to gain greater understanding observations regarding the those which better fit the In interviews, extensive
of the parent culture and to product mix. store’s production goals. questions were asked
visit and document existing Other markets indicated this regarding the behavior and
firms already catering to In general, most meat approach had not worked characteristics of the Hispanic
ethnic markets in the U.S. to departments (or markets) well. consumers in their markets.
provide improved case carried predominantly fresh This includes cultural
studies. pork products with limited As shown in the consumer preferences as well as
prepackaged or processed expenditure and consumption purchasing patterns of the
products. The major data, there was little question customers.
processed/pre-packaged beef dominated the meat
product was Chorizo which is case. However, in all regions There was a consistent (across
a seasoned sausage used other than Laredo, pork was regions) cultural food safety
most commonly for breakfast prominently featured. In issue surrounding pork. The
and mixed with eggs. Some Laredo, we found both striking difference is the food
stores carried as many as ten supermarkets and local safety issue was more historic
different brands of chorizo, neighborhood meat markets and culturally based rather
including a fresh store brand had very limited pork than concerns as we’ve seen
which was often a drawing offerings and in some cases generally arise in the U.S.
card for customers. The none at all. In one case, a
large supermarket displayed
an entire (small) pig carcass
(head on) for purchase in the
meat case. The weight of the
carcass was approximately
75 lbs.
Wives Tales
Several respondents related a
Site Visit QuikFax
cultural story about pork. It is • Necessitated to observe first hand the nuances of the Mexican-American market in the
viewed as being dangerous Southwest.
to eat. For example, one • Freshness and thin cutting are two readily verifiable product characteristics.
respondent indicated it was • Complete meal preparation mitigates the demand for further processed products.
believed if you ate pork in the • Service is critical to Mexican-American consumers.
morning and became angry • Colorful displays and store formats are preferred.
in the afternoon, you would • There are some deep cultural aversions to pork related to children through folklore.
die that night --- we also • Mexican-Americans do their major shopping on weekends, primarily Sundays. There
heard variations suggesting is little of the “just-in-time” frequent purchasing observed in Anglo markets in Texas.
the consumers face would • There are significant market differences from city-to-city and region-to-region attributed
retain the angry look if pork to differences in the background of Mexican-Americans in the particular location.
had been recently consumed.
When further questioned,
these respondents indicated
this sprang from concerns These issues may have been relaying the healthful quantities on Monday through
about health and were linked borne out by observations in attributes of pork to Wednesday, but they began
to trichina in pork. Mexico where many pigs are counteract some of these to stock their cases for the
still garbage fed. In several seemingly deep- seated weekend by cutting much
It is interesting to note the use U.S. stores near the border, cultural biases against pork. more heavily on Thursday
of pork in the Hispanic products were often labeled and Friday. In one instance,
culture can be linked back as “American Quality Pork”. Another characteristic store they lost electrical power to a
through generations of wives When discussed with meat managers related was with store for Thursday and part of
tales that discourage its managers, they indicated this regard to timing of Friday and they were never
consumption. The traditions was due to the perception purchases. Universally in able to recover for the
of the culture place a great American pork was produced Texas, the managers weekend heavy sales. This
emphasis on the teachings of under more sanitary and indicated meat purchases weekend sale phenomenon
its elders, therefore when healthful conditions. and grocery shopping were carried over in our visits to
legends or myths are passed typically a once a week Mexican stores. In addition,
down they are regarded as Another respondent related event. In Los Angeles, some convenience packs
the truth. beef and milk were several markets catering to (larger quantities at small
traditionally viewed as newly arriving immigrant discounts) were prepared for
Some wives tales include: making children grow strong populations indicated daily the first week of the month
• You should not eat pork if and healthy, while pork was shopping was the norm. when monthly disposable
you are taking viewed less so. The whole of income is likely to be the
medication. these responses suggests in The heaviest meat sales were highest.
• You should not eat pork marketing to Hispanic reported to be on Sunday
for dinner (at night) or (Mexican) consumers, pork afternoons. One store
you will be sick. producers would likely gain manager in Dallas related
(This is also thought true value simply by focusing on their stores cut minimal
for bananas.)
• Pork is blamed for people
that have palsy.
• Pork will give you worms.
• Pork is too greasy and
heavy.
Preference for customers’ original homes. Value Added and Another difference in product
Full Service We visited a neighborhood Further Processing mix is while there has been a
Meat Cases market in south central Los tremendous move towards
Angeles which still Although a few supermarkets boneless products in typical
Hispanic customers also slaughtered chickens on were attempting to markets, Hispanic customers
preferred to have full service demand. As many as 700 merchandise further still preferred bone in
counters. In the smaller birds were purchased and processed pork products, products. This again was
neighborhood meat shops we processed per day on order. other supermarkets indicated linked to the cooking styles
visited, the stores had full The process from selecting the these further processed and with home cooking they
service meat counters with as bird to receiving the carcass products had been tried but tended to utilize bones and
many as 15 butchers on staff to take home took did not sell well enough to trimmings in stews and
during the weekend to meet approximately 15 minutes. warrant their continuation. secondary dishes.
the demand we spoke of This was carried out in a side Interestingly, the reason given
earlier. As another indication room adjacent to a large, full- was not income or price Many of the stores did have
of this preference one of the service, refrigerated meat differences, but contrary to fully cooked convenience
major Hispanic supermarkets case. Only seven the general demographic items (as opposed to
we spoke with had removed establishments in all of Los trend of women working marinated, pre-seasoned or
their full service meat Angeles were still “grand- outside the home, Mexican- partially cooked products).
counters in an attempt to cut fathered” permitting this American wives often These offerings included
costs. When they did so, arrangement. remained in the home and chicharonnes (fried fat and
they began to lose significant fully prepared meals. The skin), carnitas (deep fried
business in those stores to the Another reason for in-store need for convenience and pork shoulder or unprocessed
neighborhood markets who cutting rather than centralized time saving associated with ham cubes), fried or boiled
had full service meat cutting was product further processing was not as pigs feet and pork mole (pork
counters. They even found merchandising needs tended acute as in other markets. with a gravy of chili, oil and
neighborhood meat markets to differ by stores in attempts sesame).
moving near their stores to to meat the customer mix
attract customers who went to preference. Several stores
the supermarket for dry were serving multiple ethnic
goods but then came to the groups and in trying to meat
neighborhood market for their preferences required
meat products. In response, more specific cutting than
the supermarket has re- could be done centrally.
instituted full service meat
departments in their We visited stores in ethnic
supermarkets which serve transition in Los Angeles.
predominantly Hispanic Traditionally black
markets. The reason for this neighborhoods were being
preference for full service was replaced by Hispanic in-
relayed to be the full service migration. In many of these
implied greater freshness. markets, meat cases were
Freshness seemed to be a arranged by ethnic
major issue because of the preference and butchers of
lack of readily available each race of customer (Black,
refrigeration in many of the Hispanic and Asian) were
available to serve ethnic
clientele.
Store Layout
In some cases even the most
minute details of store layout
were adjusted to
accommodate Hispanic
customers. One supermarket
had gone to a warehouse
type format where the shelves
were stacked to the rafters.
However, they soon
discovered the Hispanic
women who did most of the
shopping, were too short to
reach the products on any
shelves over about six feet
high and were also often
timid to ask for assistance. In
response they removed the
warehouse format and
returned to a maximum shelf
height of six feet.
Many stores carried

associated food items
necessary to produce
traditional dishes such as
peppers, spices, corn shucks
for tamales, tortillas and
masa (ground corn and
shortening used to make
tortillas) and other items.
Additionally, cookware and
cooking supplies were
frequently carried even by
small meat markets as an
adjunct to the fresh meat
case.
Loyalty and he indicated shoppers will of a relationship other than a Summary

Protocol come to his store to buy meat customer. Sales people who
and go to the supermarket to enter the front door are often This anecdotal evidence can
As a final point, it was buy brand label dry goods rebuffed. be highly valuable for
emphasized in several which were cheaper. Over obtaining a feel for a
markets that Mexican time he had added a wider Los Angeles markets reported market that simple statistics
customers were extremely range of dry goods for the shortages of pork and pork cannot provide. While the
loyal if you provided them convenience of meat byproducts especially skin points are interesting and
with products and service customers. He indicated the and lard. Large chain stores valuable, they must be
they desired. As an pricing of dry goods had to are typically supplied first viewed with extreme
illustration, one be very competitive, equal or with remaining product caution. It is always
neighborhood market owner less than the adjacent entering the jobber tempting to expand to the
was housed in the same strip supermarket to move product distribution network. Local whole what is observed in a
mall as a major supermarket. but meat pricing did not packing is currently working few instances. However,
In comparison of meat require the same level of with jobbers to develop a information of this type can
product prices, the meat competitive pricing. better relationship, credit be extremely useful for
market prices were purchases and reduce designing more extensive
consistently higher than the Jobbers (local distributors) product outages, short falls and relevant market surveys
supermarket, yet he had a who introduced us to several and long waiting periods to and focus group methods if
higher sales volume mainly neighborhood markets in pick up products. the market looks promising.
because he provided a full south central Los Angeles led Already, these site visits
service fresh meat case with us through the back door to have corroborated much of
products cut to Mexican enter the stores. Access to what was presented in the
customer preferences. In fact, the back door was evidence “Marketing to Hispanics
section of the
documentation.
Fundamentally, it is an
integral part of getting to
know your customer in more
depth which is critical to
successful marketing.
Further Insights
An examination of the Mexican pork chain and the typical primary and secondary break-down on the carcass can give insight
into how the Mexican retailer and consumer receive fresh pork. The following photos were taken in U.S. stores which served
primarily Hispanic customers. The product brochure (in Spanish) and cut-outs are from a Mexican meat processor.
Mexican Pork Industry Market Chain
Import Live Hogs Large Efficient Small Pork Producer Rural Pig Producer
Pork Producer
Gatherer
Finisher
FI Slaughter Plant
Agent
Dealer
Carcass Importer
Municipal Slaughter Backyard Slaughter
Gatherer
Plant
Byproduct
Importer
Finish Product
Importer Processor Cutter
Butcher Shops
Processor Packer
Restaurants Supermarkets
Sausage Sales/
Taco Sell Points
Mini Marts
Consumers
Breakfast Pork
Chops
Boneless Pork
Sirloin
Pork Chops
Pork Buche
(stomach)
Pork Stomachs
Pigs Feet
Smoked Pork
Chops
Sliced Pork
Shoulder
Sliced Pork Leg
Pork Chop with

Belly Tail
Pork Steak
CAPOTE DE CERDO PRODUCTOS

2141 SECUNDARIOS
4124
4130
CORTES PRINCIPALES
4201
4140
4207 4142
4303 4206
4403
4309
4505
4701
4513
VISCERAS
3101
4514
3104
3111
CORTES ESPECIALES
4406 4144
PRODUCTOS
4507 ADICIONALES
6901
4512 6903
F R O N T E N D G U I D A N C E F O R T H E M A R K E T 62
V A L U E - A D D E D N E T W O R K S C H A N N E L
The Market Channel
As indicated in the introduction, this analysis is focused heavily on the consumer. Having spent considerable
effort understanding the Hispanic customer, the market and its attributes, we now turn attention back through the
market channel to consider how the production system utilizes this knowledge to meet consumer demand. We
believe marketing will drive investment in the new pork industry.
Competitiveness so is likely to require Cost Value

standardized methods of Competitiveness Competitiveness
One of the key aspects of manufacturing and
value-added marketing will production which can be Competitiveness is an elusive The alternative to cost
be determining the relative easily replicated and term. It can mean many competitiveness is value
level of competition in a specialized to squeeze all things in many different competitiveness. Value
particular market segment. economies of scale from the situations. Cost competitive- competitiveness implies there
In a competitive market, it is process. This mentality would ness is one level of is some product characteristic
assumed there are relatively be similar to Henry Ford’s competitiveness. At this level, which is seen as valuable by
few opportunities to make manufacturing paradigm the least cost producers of a the consumer and for which
extra profits in any given where he said “you can have particular product wins the the consumer is willing to pay.
market segment. If there is any color Model -T you want; competitiveness battle It’s important to note value is
money to be made in a as long as it’s black.” because they are able to related to consumer
segment, we expect someone Clearly, those individuals who charge a lower price for the preferences and therefore is
to already be attempting to truly preferred red cars were final product. In addition, based in both reality and
capture that profit. Although under- served and may have they are likely to sell more perceptions. Value may be
economists will often talk in offered an opportunity for product, and they can sell at added simply by convincing
this manner, it’s a little bit like higher cost manufacturers of the prevailing market price someone of a perceived
saying everything that can cars to compete for their for a higher profit margin. difference. This is why
possibly be invented has business by offering different This is largely the game advertising is such an
already been invented! colors. traditional production important component of
agriculture has played. adding value—it doesn’t
Market and profit This is essentially what has change the product itself, it
opportunities can exist for happened in much of the changes the product’s
many reasons - the market fresh pork market channel perceived value to the
simply may be unidentified as over the past two decades. It consumer.
a segment or more likely has relentlessly pursued
existing competitors strategies economies of size and scale
don’t allow them to enter and has only recently begun
those markets. For example, the process of focusing
a company’s strategy may be intently on meeting specific
to focus on least cost customer preferences.
production efficiency. To do
Cost and Value One firm makes desks from Firms become more add value a firm must
Competition composite wood and then competitive as they move on consider if adding that value
Compared applies a thin wood veneer a diagonal from upper-left to will entail greater costs than
for finishing and aesthetics. lower-right. However, if consumers are willing to pay.
The fundamental difference The desks are inexpensive, linear relationships are
between cost competitiveness but functional. assumed between cost and Naturally, to compete all firms
and value competitiveness is competitiveness tradeoffs, we will try to adopt those
cost competitiveness is The second firm hand crafts would find that Firm B in the technologies which minimize
focused on the production solid oak desks. The oak chart is equally competitive costs and similarly, adopt
process. Value desks serve the same with Firm A. Although Firm A those value added features
competitiveness is focused on function, but have a higher offers a lower cost which maximize price
the consumer. Cost cost of production and are alternative, Firm B incurs received (value). Therefore,
competitiveness requires higher priced. Both are able higher costs but provides a firms will tend to converge to
technological innovation and to compete in the desk market greater value. Keep in mind, a central least cost production
adaptation to compete - because some people are consumers must be willing to technology and a central
commonly referred to as the willing to pay for the higher pay this added value. product line. It is because of
technological treadmill. quality and aesthetics of the market dynamics (time lags,
Value competitiveness solid oak desk. Keep in changes in preferences and
involves a stair-master; mind, however, this analogy The trade-off exhibited above changes in technologies) that
continual market innovation implies an “either/or” context also raises the notion of a firms are able to gain
and adaptation to compete. to competitiveness—you can potential tradeoff within a competitive advantage for
either be a least cost firm between value and cost. periods of time.
Using this framework, there competitor or a high value It is generally expected by
are competitive tradeoffs competitor. However, it may adding value, costs are Therefore, to remain
across firms and within firms. be possible that a firm excels incurred. This seems competitive, firms must strive
Across firm tradeoffs include at both value and cost and reasonable in that some to maintain either radically
some firms may be value- hence is more competitive inputs (labor, capital, superior production
based and some may be cost- than either of the other two. materials) will be required to efficiency or radically
based, but both may compete Figure 1 provides an add even perceived value superior value than
on an equal level. Consider illustration of the competitive (e.g. advertising). When competing firms.
two desk manufacturing firms. tradeoff between firms. undertaking a decision to
Figure 1. Across Firms Value/Cost Tradeoff
Low Value High Value
1 2
High Cost
Least Competitive
3 4
Low Cost
Most Competitive
A
Current required of publicly traded Their reason for pursuing As with Smithfield, Hormel
Competition in pork production and differentiated pork products goes on to explain some of
Value-Added processing firms by the as a strategy is exemplified it’s logic or incentive for
Markets Securities Exchange by the following statement: pursuing further processed or
Commission. Following is a value added products in the
Given this context of brief overview of some of the The meat industry is following statement.
competition, the current key competitive strategies of generally characterized by
argument is that the pork the major publicly traded narrow margins; however, The Company for the past
industry has been most competitors, in their own profit margins on processed several years has been
successful to date pursuing words, in the industry today. meats are greater than concentrating on processed,
cost competitiveness. This is profit margins on fresh pork consumer branded products
perfectly consistent with the Smithfield and on other products. with year round demand to
commodity market paradigm. minimize the seasonal
The commodity market Smithfield foods is a relatively In essence, Smithfield foods variation experienced with
paradigm suggests the new major player in the hog is arguing their strategic commodity type products.
product is homogeneous—by and pork industry. Following future is linked to capturing Pork continues to be the
definition this excludes price are some key quotes from added value through product primary raw material for
enhancement and product their 10K statements which development, just as this Company products and
differentiation. The only way provide insight into their project has been arguing. although live pork
to compete is on a cost basis. competitive strategies. producers are moving
However, there has been a Hormel toward larger and year
consumer revolution in recent As consumers have become round confinement
years. Consumers are more more health conscious, pork Hormel was one of the operations, there is still a
often demanding particular producers and processors, earliest value added seasonal variation in the
product attributes, even in including the Company, merchandisers of pork supply of fresh pork
food products. have focused on providing products on a mass market materials. The expanding
leaner fresh pork products basis, beginning with SPAM line of processed items has
Demands for lean meat as well as fat-free, lower-fat during World War II. It reduced but not eliminated
products due to health and lower-salt processed stands to reason they may the sensitivity of Company
consciousness, demands for meats. also have a strategy geared results to raw material
further prepared products toward value enhancement of supply and price
(pre-cooked and marinated) This reveals Smithfield Foods pork products which is borne fluctuations.
to fit busy lifestyles and dual strategy of responding to out in statements from their
working families, and consumer desires by 10K. Again, Hormel believes
demands for organic developing leaner products. differentiating their products
products in response to They go further in the second Although pork remains the in the pork market can allow
residue concerns are among objective of five itemized major raw material for them to influence price
some of the more obvious strategic objectives: Hormel products, the behavior—this does not
value opportunities. Company has emphasized sound much like the
...(ii) use of the leanest for several years the commodity marketing
Evidence of firms responding genetics commercially manufacture and paradigm discussed earlier.
to these value demands is available to enable the distribution of branded,
provided by examining the Company to market highly consumer packaged items
10K financial reports differentiated pork rather than the commodity
products (emphasis added). fresh meat business closely
associated with the industry
in the past.
Earlier, value added Herdez has access to Price in this context is related IBP’s primary products
competitiveness was Hispanic areas in the U.S. to production efficiency include boxed beef and
described as a stair-master, such as Chicago through wherein lowering price is fresh pork which are
requiring continued Hormel. One of the possible by reducing costs. marketed mainly in the
innovation. There are often characteristics we have Notice the four other factors United States to grocery
significant costs incurred in previously described is the cited involve value added or chains, meat distributors,
value added investments. In tremendous brand loyalty product attributes and are wholesalers, retailers,
the following statement Hispanics tend to have with intended to influence the restaurant and hotel chains,
Hormel provides some insight trusted food companies. Joint demand side of the equation. and processors who
into the emphasis and costs venture to acquire access to produce cured and smoked
they incur in the name of established branded sales is IBP products, such as bacon,
product development. a very important strategic ham, luncheon meats and
position to consider. The four firms already sausage items.
Improving and developing examined indicate adopting
new products is the Farmland value added methods as a In 1994, the Consumer
responsibility of task forces key competitive strategy. IBP Products Division purchased
including personnel from Farmland Industries is a has long been considered a Prepared Foods, Inc. from
operations, marketing, member-owned cooperative least cost producer of fresh International Multifoods,
administration, engineering, with quite a different business pork and beef products, Inc. Prepared Foods, Inc. is
and research and structure than the previous therefore, the following a wholly-owned subsidiary
development. Research publicly traded corporations. comments are particularly of IBP with a plant in Santa
and development Although Farmland does not insightful. Teresa, New Mexico. In
expenditures for fiscal provide as much insight into 1995 the Consumer
1996, 1995 and 1994, their specific strategies, they Products Division purchased
respectively, were do reinforce the notion there and renovated a facility in
$8,022,000,$7,829,212 are many elements to the Columbia, South Carolina,
and $7,742,973. There competitive puzzle in swine for processing fresh meat
are 29 professional production. into value-added, consumer-
employees engaged in full ready items. The Santa
time research, 11 in the Pork marketing is a highly Teresa, New Mexico, plant,
area of improving existing competitive industry with the Columbia, South
products and 18 in many suppliers of fresh and Carolina, plant and the
developing new products. processed pork products cooked meats facility
competing for shelf space in connected to the Waterloo,
This is clearly a major area of retail food stores. Other Iowa, pork facility process
investment for Hormel and meat products such as beef, fresh meat into value-
suggests they expect to see poultry and fish also added, consumer-ready
real value created for their compete directly with pork items.
investment. Hormel has joint products. Competitive
venture relationships with methods in this segment Management believes that
several companies include price, product significant opportunities
internationally. In Mexico, quality, product exist for the sale of value-
Hormel has a relationship differentiation and customer added, consumer-ready
with Herdez. Herdez has service. products as consumer
several well established acceptance of such
brand names in Mexico. products grows and
Hormel markets products in packaging technology
Mexico through Herdez and improves. (emphasis added)
Currently, the Consumer
Products Division produces
cooked meats for food
service customers and other
consumer-ready products.
The Consumer Products
Division is continually
exploring the potential for
additional consumer-ready
products.
These comments serve to Size, Scale, necessary to achieve the Flexibility in production
solidify the notion there is a Flexibility and economies of size. This has through scope of
market for differentiated pork Competitiveness led to the primary Achilles knowledge and production
products. When one of the tendon of the packing capacity can be an effective
leading competitor on cost The current examples of value industry - excess capacity means of competing with
reveals a move to consumer added production focused and asset fixity. The size.
ready, value-added products primarily on large scale inflexibility created leaves the
as key to their growth, it production systems. This is industry vulnerable to cyclical Pork production, slaughter
indicates other firms in the due primarily to their supply and demand spoken and processing can be
industry aggressively prominence and ease of of in several of the firms’ viewed as a sequential
pursuing the value-added identification. However, one financial statements. manufacturing process with
strategy have been noticed. of the premises of value multiple split-off points. Split-
added marketing or niche Production off points are places where
From these real strategies marketing is it is possible to Flexibility as a product can either be
from leaders in the pork offset some of the cost Strategy retained for further processing
processing industry, it is clear competitiveness shortcomings or sold as by-products or
the pork market is entering with value enhancement. So, A relatively recent business partially processed products
the phase where declining to the extent there are concept has been to adopt to other processors. In these
margins on cost significant economies of size flexibility as a part of the types of manufacturing
competitiveness provide in pork production processing production operation to processes, there is flexibility
incentives for exploring value and distribution, this implies substitute for economies of at the split-off points to make
added competitive size and scale may be scale. A case in point is a a decision based on current
opportunities. One might be partially overcome by other small to medium size pork costs and expected revenues
overwhelmed by the idea value factors in the chain. producer we visited who also of further processing versus
these major players are controls a small packing sales. Creatively designing
beginning to enter the value- There are value enhancing operation and retail pork some flexibility is an
added markets. However, it practices which can be merchandising operations. important competitive strategy
is not clear what their cost traded off with costs and All personnel in the packing to simply going head-to-head
structure is in these markets size. and processing plant are on a daily basis with large
and it is not clear how trained in multiple phases of scale, low cost packer
narrowly they can define the operation. When processors.
markets of interest Value Chain production demand is low,
strategically. Flexibility personnel are shifted into In the case previously
marketing and sales or new mentioned, this firm makes
Economies of size are gained product development to the decision whether or not to
with specialization and attempt to increase future slaughter and further process
intensity by definition. demand. This system also on a weekly basis according
Economies of scope are maintains and creates to local competitiveness.
defined by the range of institutional knowledge by During the few weeks of the
activities a firm undertakes. keeping well trained and year when deep loss leader
To achieve economies of size, valued employees in place. pricing by competitors
the scope of activities tends to Obviously, this system defies prohibits slaughtering, the
be narrow – this allows for the economies of size model firm’s pigs are routed (split
the capital and input intensity or at least presents a potent off) into the commodity chain
competitive alternative. and workers go about
alternative duties. When
certain fresh cuts at retail are
deeply discounted by large
scale competitors, this firm
splits off these cuts into value
added, storable products such
as further processed ethnic
sausages, whole muscle
smoked products and the like.
Other Examples of Another case is a producer Marketing Drives A regional, producer-owned

Value we visited in Utah who was the Investment pork chain also promises to
Competitiveness marketing hogs to Hispanic Decision help stabilize income by
Strategies markets in Salt Lake City and stabilizing price. Large and
Los Angeles. In addition to a We hope we have regular fluctuations in the
The Hispanic case study itself growing Hispanic population demonstrated the importance price of hogs (hog cycle) has
leads one to think of mass in the Salt Lake City valley, it of information flow within the largely been due to the lack
markets – again including is estimated over 30,000 pork production chain. It is of both specialization and
size as a requirement to pacific islanders (Tongans, critical to success. Decision- production coordination.
access. This will certainly not Figi Islanders, Hawaiians makers, beginning with Wide differences in cost of
be true of entering the etc.) also live here as a result geneticists and including production among producers
Mexican-American market in of evangelization efforts of producers as well as has also contributed to cycles.
the Twin Cities of St. Paul and the Mormon Church. We producer networks, are These cost of production
Minneapolis, Minnesota. visited on the day of the first making long-term and often differences sometimes result in
Lindenfelsers’ Meat Market delivery of four hog irreversible decisions today, extended periods of
near Albertville, Minnesota is carcasses. The effort now based on information liquidation and temporary
the case of a small meat markets over one hundred a translated through the market exit as prices fall. Then,
processor serving regional week and the demand is channel via price signals. when sufficient liquidation of
ethnic markets, primarily of growing. The primary When each phase of the the sow herd has occurred
foreign born origin. product is whole or half chain is owned by separate and pork is in relatively short
carcasses which are and competing entities, the supply, ever-increasing
A report in the Minneapolis fabricated and merchandised chances of garbling these production and reentry
Star Tribune, notes 80 at ethnic specialty stores critical signals increases. begins as prices rebound.
percent of Lindenfelsers’ which are growing in number Marketing will drive the The magnitude of these
sales are to ethnic markets in the Salt Lake area. investment decision in the swings would be expected to
and that annual meat sales new pork industry. Persons eventually decrease in a
are over $1 million. Total Controlling investing in production coordinated production,
pork sales have averaged Product Flow systems must spend as much processing and marketing
about 4,000 head of hogs a time in the marketing chain.
year. Quoting a passage Controlling product flow is an evaluation as in the
from the article, “When important consideration in production system decision.
you’re in business, you do developing a regional chain
what the customer wants”. to supply ethnic demand. Gearing up correctly today,
This case illustrates From the production base, to profitably supply the future
competitiveness can be through packing and demands of consumers is only
achieved by following the processing to wholesalers or possible when information
value paradigm rather than jobbers and on to the final flow from consumers to
only the cost paradigm of consumer, each step requires producers is readily,
competitiveness. careful strategic planning immediately and accurately
guided by a marketing plan. available. Controlling the
There are various ways to entire chain or a significant
both acquire and control portion of it could facilitate
product flow. Some options this essential information flow.
include purchase, joint
venture, toll-processing, lease,
and cooperative networking.
Accessing the square feet. Combination meat products and the need success by building
Customer Through stores offer at least 25 percent for improved distribution and relationships with smaller
Retail general merchandise in inventory management Hispanic neighborhood
addition to food products. control. Incentives for butcher shops. This is a
Identifying the customer leads Warehouse clubs are a adopting case ready products somewhat less daunting task
to the first step back through rapidly growing segment have been reduced costs and than considering entering
the market channel: how to characterized by high volume economies of scale by supermarkets, and reinforces
actually get to the consumer. and low value/price markets eliminating duplicative cutting the notion that targeted and
This is the retail problem (Weiss and Corson; operations across stores in a flexible marketing and
vertically aligned value-added Progressive Grocer; Larson). chain. In the case of meat, distribution systems, including
producers will eventually face. supply reliability and retailing, may be potent
In all likelihood this does not Within the retail food market, distribution are likely to be as counter-measures to
mean acquiring retail stores or the meat case and fresh important as the product economies of size in the case
restaurants. However, it is produce department are often characteristics themselves in of value added markets. The
important to have some key attractants of customers determining success at the downside to serving smaller
understanding of this segment and are responsible for a retail level. and dispersed markets is that
and the customers’ shopping large degree of customer this will tend to stretch the
or purchasing habits. If a loyalty to stores. After all, In the case of Hispanic or limits of distribution and
network chooses to brand a manufactured foods (e.g., Mexican markets, our previous logistics channels which are
retail-ready product, it will be cereal, cosmetics, canned research indicates that critical in highly perishable
necessary to at least negotiate goods) are essentially the Hispanic customers prefer fresh meat products.
and partner with retailers. same regardless of store type product freshness and full
or outlet. However, the quality service meat cases. In As a final insight, it is
There are several different of meat, baked goods and addition, it was indicated that interesting to note that a major
retail food formats in the U.S.. produce is often a reflection of local or neighborhood meat initiative in the retail food
As a general categorization, the knowledge brought to the markets were highly successful industry is “Efficient Consumer
there are convenience stores, particular store by the and important parts of the Response” (ECR). It is
conventional grocery stores, butchers, bakers and Hispanic retail market. This predicated on the notion that
super stores, combination procurement personnel. evidence is corroborated by by identifying and serving
stores, and warehouse stores. research conducted by the consumer needs, retailers can
Convenience stores typically Recent trends in the meat case Food Marketing Institute which capture additional value in
focus on high frequency have been towards further shows that in Mexico, the what is one of the lowest profit
purchase items and dry processed and case ready primary source of meat margin on sales industries in
goods. Meat cases, if existing products which require little in- products for the Mexican the U.S. Our premise is that
at all, are limited in scale and store processing. The in store customer are “specialty stores” ECR cannot be fully achieved
variety. Conventional grocery butcher is increasingly rather than supermarkets. This without coordination of
stores are defined as full-line replaced by centralized cutting insight suggests that, rather knowledge throughout the
self-service food stores under and processing for a chain of than attempting to market vertical segments of the food
30,000 square feet. Super stores. The barrier to Hispanic pork products market channel.
stores are defined as food adopting centralized cutting is through major supermarkets, a
stores with over 30,000 the relatively short shelf-life of value-added network can find
References
Larson, Ronald B. “Key Developments in the Food Distribution System.” Working Paper 97-08 of the Retail Food Industry Center,
University of Minnesota, St. Paul, Minnesota. September 1997.
Food Marketing Institute. “Trends in Mexico, Consumer Attitudes and the Supermarket 1996.” Food Marketing Institute, Washington,
DC 1996.
Progressive Grocer. “64th Annual Report of the Grocery Industry.” Progressive Grocer Associates, Stamford, Connecticut. April 1997.
Weiss, David A. and Bruce N. Corson. “How to Get Your Product Into Supermarkets.” Packaged Facts, Inc., New York, NY. 1996.
Size and Table 1. Hogs Slaughtered by Plant Size

Flexibility in
Packing
Competitiveness Plant Size: Annual Slaughter
1,000- 10,000- 25,000- 50,000- 100,000-300,000-
One factor which helps TOTAL
Year <1,000 9,99924,99949,999 99,999 299,999 999,999 >1,000,000
determine cost competitiveness
Hogs Slaughtered (1,000 Head)
of packers is plant size.
Larger scale plants can drive 1974 30 830 1,152 1,444 1,908 8,153 38,452 25,646 77,615
down per unit cost of
1979 33 598 972 1,115 1,850 6,446 22,970 48,236 82,220
production as fixed costs are
spread over increased volume 1984 25 626 945 972 1,733 5,859 23,522 48,937 82,619
of production. Table 1 1989 18 450 611 1,167 1,717 3,250 12,287 63,687 83,187
provides a summary of the 1994 15 303 629 740 1,998 1,796 6,065 77,663 89,209
number of hogs slaughtered
according to plant size since
1974. As anticipated, the
largest size category of plants
have dramatically increased The trends in this table Plants smaller than 50,000 In general, this suggests that
market share, increasing 300 demonstrate the drift over time head slaughtered per year even in packing there appears
percent over the 21 years. to capture economies of size. compete in regions against to be more than one way to
How does one explain a other small plants. Within the compete. It’s encouraging to
However, it is interesting to medium-size category small plant categories there see that moderate size plants
note plants in the size range sustaining share while smaller seems to be an incentive to continue to hold market share,
50,000-99,999 head and larger plants (except for reach the 50,000-100,000 and that the the 50,000 -
slaughtered per year (1,000 - the largest size category) are head per year size range. 100,000 head size range is
2,000 head per week) have in decline? It is possible two There have been about 25 well within the capabilities of
managed to maintain a scales of plant exist which fit plants successfully competing networks or producers with as
relatively stable share of U.S. competitive segments of the in this size category over the few as 3,000 sows. Hence,
slaughter. They represent U.S. slaughter business. Two last 25 years. The individual while alliances are clearly the
about three percent of the total different technologies and plant flow required by only route to vertical
U.S. slaughter. markets may help explain slaughter plants in this size networking with mega-
persistence of these two size range could be supplied by packers, joint or complete
The size ranges experiencing categories. 3,000 - 6,000 sows farrow-to- ownership might be a viable
the greatest loss are the finish operating at high option for the smaller sized
medium to large size: efficiency. competitive plants.
100,000 - 1 million head per
year. This size appears to
compete very poorly with the
largest size plants. Small
plants (<1,000 - 50,000 head
per year) have also shown a
decline in share of total
Packer Competitiveness Comparison QuikFax
slaughter. The numbers
slaughtered in these sizes of
plant have been roughly cut in Mega Packers Moderate Size Packers
half between 1974 and 1994.
Low Cost Flexibility of Workforce
Strong Working Capital Flexibility of Workplace
Ability to Access Markets Kill Only When Product is Sold
Strong Merchandising Quality Control vs. Quantity
Volume Alternatives for Live Animals
Information System High Customer Service
Methods of packing by itself is a standard 8,000 head per place and a trained work-
Acquiring Packing relatively low margin shift capacity. Additional force is readily available.
and Processing business, processing and shifts per day normally only
Services marketing functions would be require added chill and The second means of
necessary to make much long cooler capacity. acquiring control over
There are at least two term difference in net price packing, processing and
methods which producers received for pork produced. Dated plants may be marketing functions is through
could use to acquire more There is an exception in the available for purchase at lease or toll-packing. In this
control over packer, case of some Asian and large discounts but method, producers pay an
processor and marketing Hispanic markets which reinvesting in modern existing packer and/or
services. One way would prefer the whole carcass and technology and product flow processor a fee/head or per
simply be to purchase it pay a premium for can be expensive. Despite shift for fixed asset services.
outright. In this scenario, a characteristics such as size, this there are several key This method avoids the
coalition of producers would color, freshness, service and factors which favor the tremendous investment in
either build a new safety. purchase of existing facilities fixed assets and the scale-up
packing/processing plant or where available. First, an time for a new plant which
acquire an existing plant by Estimates for new kill plant existing plant normally has can be extended and very
purchase. Further processing construction range from $8 - satisfied all local, state and costly. It is a form of
functions could be acquired $10 million for a 1,000 head federal regulations regarding networking.
in the same fashion by per day capacity. Medium- environmental issues. In
building new or acquiring sized plants cost from $50 - addition, utilities and local
existing capacity. Because $60 million for the more infrastructure are already in
Distribution of individual animals for direct have acquired packing and

Product ethnic buyers. In some cases processing services by the • Flexible (multi-species)
the animals are delivered for purchase and restoration of slaughter
At the present time, most slaughter to local processing existing small-scale locker • Flexible job description of
distribution to existing ethnic plants. This method of plants in the immediate area most workers
markets takes place either as distribution is only suitable for of production. • Targeted customer
a direct sale from a producer the very small scale market. segments (ethnic groups,
(live animal), These small scale packer ultra fresh, etc.)
slaughter/processor (carcass Some examples of small scale processors have a common • Very high service
or boxed) or through a integrated set of strategies designed to • Catering to individual
network of jobbers. Many slaughter/processing and offset the higher cost local demand for
producers located near urban sales of carcass or meat slaughter/processing and product/service
areas of the upper Midwest products exist successfully in distribution costs compared to combinations
and far West report ethnic the U.S. and Canada. Many the commodity channel. • Small order acceptability
sales of live animals directly of these operations are Some of those characteristics
from the farm. Some integrated to production but include:
producers supply and assist some rely on local producers
with slaughtering of for live animal sales. Most
Distribution Check Lists
Check List 1: Finding Potential Distributor Partners
Ask the end users of your products what distributors they prefer to buy from.
Ask current distributors if they’re interested in expanding their territories or know of other
distributors who might be available.
Find out what distributors your competitors are using.
Identify distributors of allied products.
Consult directories published by distributor associations. (Check your local public library for the
Encyclopedia of Associations published by Gale Research.)
Attend meetings and trade shows sponsored by industry associations.
Place ads in industry trade and association publications.
Post messages to news groups available on the Internet.
Source: Edward S. Stecki, President, Industrial Performance Group, Inc., Northfield, Illinois.
Check List 2: Evaluating Potential Distributors
Financial stability – credit history, timeliness of payments, etc.
Sales & marketing capabilities – size of outside and inside sales force, ability to generate
leads, selling skills, technical competence, etc.
Sales performance – past sales history for same or similar products.
Knowledge of the local market – ability to accurately forecast future sales and identify
changes in customer needs and expectations.
Product mix – types of products carried, including competitive, supplementary, and

complimentary items.
Growth potential – capability of distributor to keep pace with any anticipated growth in
the local market.
Inventory handling capabilities – warehouse space, ability to track turnover rates and
other important statistics.
Technology capabilities – possession of and familiarity with the technology required to do

business together most efficiently.
Management ability – distributor principals’ viewpoint on human resources, planning,

training, financial management, communication, etc.
Succession planning – arrangements in place to continue the distributorship in case of

retirement or death of distributor principal.
Overall fit – how well your goals, operating philosophies, and business practices mesh
with those of the distributor.
Check List 3: What to Expect from a Distributor
Maintenance of a well-qualified and well-trained sales force that is familiar with the
manufacturer’s products and is skilled in demonstrating the advantages of those products
to the customer.
Commitment of sufficient resources required for aggressive sales and marketing of the
manufacturer’s products.
Their best efforts to achieve market share and other sales goals in a specific geographical
or other area of responsibility.
A commitment to stock recommended inventories of products bases on the needs of the

local market.
Prompt payment of all financial obligations.
Prompt communication with the manufacturer regarding changes in the local market
and/or distributor’s own business (e.g., changes in management, other personnel, and/or
operating policies.)
A level of service that encourages long-term loyalty on the part of the customer toward the
manufacturer and its products.
Physical facilities and technology necessary to consistently perform the above functions.
The Challenge of The startup phase for a new The packing function has The processing and
Capital Acquisition packing plant (much like a historically operated as a wholesaling functions bring
new swine production facility) long-term, low margin additional income and control
Acquiring the capital to can be a very difficult period. business, with occasional of product flow. Value added
engage in either venture Normally, the plant must periods of extreme profits to meat through further
would be challenging. If the scale into capacity over an and losses. As a result, processing including smoking,
purchase of new or existing extended period of weeks or acquiring capital for new canning and the creation of
buildings was anticipated, a even months. Training plants is difficult unless there specialty meat products such
sizable amount of term debt workers, fine-tuning is a substantial amount of as sausages, lunch meats, hot
would be required for fixed equipment and glitches in equity brought to the table. dogs, etc. are examples. In
assets. In addition, working establishing a smooth flow of This helps explain why it is addition, ready to eat dinners
capital must be raised to high quality product all much easier for a large-scale, as well as “ready to
begin start-up and maintain conspire to extend the startup successful packer to add assemble” meals which
steady-state operations. period and increase working another plant compared to a require some cooking are
Once a plant reaches steady capital needs. The output of fledgling company examples of adding value
state flow, the average aging the plant is typically organizing to build their first and profits in the pork chain.
of accounts receivable is inconsistent in quality and off- venture. Substantial subsidy Providing case-ready products
usually about 13 -15 days standard for an extended from existing operations to supermarket chains
but can be longer. This portion of the startup phase. (either in packing or other eliminates costs and
means sufficient working This results in severe businesses) provide the potentially shifts some food
capital must be maintained to discounts in the wholesale cushion for startup losses that safety liability away from
purchase hogs and operate markets until the plant is up to would be viewed as too risky supermarket.
the plant for about two weeks standard. to cover by ordinary capital
before cash-inflows from the providers. Purchasing Because of the challenges
sale of product cover those smaller scale plants in good outlined above, it is very
acquisition and processing condition is potentially a unlikely that a single source of
costs. Current law requires more viable option. capital could be obtained to
producers to be paid build packing and processing
immediately while wholesale capability. The risk would
purchasers of meat are not need to be spread over a
held to the same “due upon variety or combination of
receipt” standard. sources. In addition, there
could be a different source or
coalition of sources for fixed
asset financing versus
working capital needs. In the
next section we turn our
attention to the most likely
sources of financing for a
packer/processing plant.
Sources of Funds investment bank acts as an Funding for The most likely scenario
agent for the producer group Cooperatives would involve formation of a
Most producers think of in dealing with the cooperative organization and
acquiring capital for fixed participating lenders. In that An additional source of accessing capital from either
assets by approaching their role, the investment bank funding is potentially COBank or the Bank of
local bank or farm credit proposes and negotiates the available to producer groups Cooperatives. Other forms of
association. In the case of a terms and conditions of the who organize under federal legal structure, may require a
packing and further loan and attempts to sell the and state laws as a two tiered plan. The first or
processing plant, a idea to interested parties. If cooperative. The Bank of startup phase could be
syndication or group of sufficient interest is expressed Coops and COBank are two funded by venture capital
lenders would usually be and the loan becomes sources of capital which often through direct loan, sale of
required. This is because no available, the investment firm provide funds to large bonds, or state backed
single lender could be is paid a fee for their services projects, including startups by industrial revenue bonds.
expected to be willing to in addition to a retainer coops. Traditionally, these When the startup is complete
bear the entire risk of such a which may be required credit sources have been and the operation achieves
venture. In the case of small regardless of success. cash flow oriented as steady state profitability, the
scale packing and opposed to collateral lenders. initial investors are taken out
processing, local banks, Such a coalition of This is not to say they ignore with traditional financing
depending on their size may commercial banks may only security, rather they carefully through a group or
be able to fund the project. be interested in funding the and critically examine the net syndication of traditional
When capital requirements working capital portion of the cash flow potential of projects capital providers such as
exceed five to ten million total needs. This is often the as a key loan approval banks.
dollars however, a case since the money is at criterion. Because of this,
participation of lenders in risk for a shorter period of these banks look favorably on Conceiving a convincing plan
usually required. time and is secured by projects able to demonstrate will require the efforts of
inventory (readily salable a reduced the variance and many players including
The process begins by commodity). Some lenders risk around net cash flow. producers, industry and
retaining the services of an require each Specifically they prefer university persons and
investment bank or banking lender/participant to have reduced price risk or members of the capital
group who would assist equal share in the term and contractual income coupled community. Developing a
producers in putting together the operating line to make with firm cost containment. prospectus and successfully
a reasonable and feasible certain each faces the risks Traditionally, they have negotiating the deal will
plan. If a suitable plan could and maintains the same funded cooperative grain require the services of a
be developed, the investment objectives. elevators and crop skilled and reputable
bank would invite other processing plants, which investment broker or bank.
lenders to a meeting in which when operated Successful models of capital
the plan would be conservatively, face little risk acquisition by pork producing
professionally presented. The of failure. companies accessing Wall
Street sources are already
In order to access these available. Producers
sources of capital, producers interested in committing
must be able to conceive and themselves to a carefully
demonstrate a plan which is conceived strategic plan may
convincing and workable. be able to use these models
Because packing by itself is a to gain the potential rewards
low margin business on of controlling their product
average, it will be more from the farm to the final
difficult to acquire capital consumer.
only for a packing plant. A
successful plan will require
adding value beyond the kill
and cut floor.
QuikFax Feasibility Audit of Successful Small-Scale Packers/Chains
I. Site Qualification, History and Maintenance

A. Water Use and Disposal
B. Transportation
C. Odor and Community Sensitivity
D. Effluent and Waste Management
II. Competitive Issues

A. Strategic History and Outlook
B. Identifying Availability of Suitable Live Animals
C. Acquisition Strategy
D. Acquisition Means
E. Availability of Reasonably Priced Labor
F. Financing Issues and Institutions
G. Products and Brand Development
H. Acquiring Management
III. Organizational Legal Issues

A. Private Corporation
B. Cooperative
C. LLC
IV. Fixed Asset Acquisition

A. Fixed Cost of Real Estate, Plant(s) and Buying Stations (?)
B. Remodeling/Retro-fitting Existing Plant(s)
C. Financial Structure and Requirements of Acquisition
D. Cash Flow Requirements of Acquisition/Remodeling
E. Cash Flow Requirements of Start Up and Ongoing Operations
F. Government Incentives/Taxation Issues
V. Ongoing Operations
A. Live Animal Acquisition Costs
B. Labor Costs and Management
C. Utility Costs
D. Other Production Costs
E. Marketing Costs
F. Accessing Processing and Marketing Channels
Other References and Readings
“American Pork Export Manual”, NPPC and the U.S. Meat Export Federation, Des Moines, Iowa, 1997
“Here Comes the Neighborhood”, PROMO: The Magazine of Promotion Marketing, January 1997 pps. 51-58
“International Pork Quality Audit: A Foreign Market Audit of U.S. Pork, January 1995”, U.S. Meat Export Federation and
Colorado State University, December 1994
“Make it in Texas: An Agribusiness Plan Guide”, Texas Department of Agriculture, Agribusiness Development Division, Austin,
Texas, no date
Modern Cost Management, Shim, Jae K. and Joel G. Siegel, Barron’s Business Library Series, Hauppage, New York, 1992
“Pork and the U.S. Consumer Conference”, Proceedings, NPPC, Des Moines, Iowa, March 28-29, 1995
“Pork Chain Quality Audit”, Progress Report, NPPC, Des Moines, Iowa April 1994
Post Capitalist Society, Peter F. Drucker, Harper Business, New York, 1993
“Quality Summit”, Proceedings, NPPC, Des Moines, Iowa, July, 8-9, 1997
Stecki, Edward, Industrial Performance Group, Inc, Northfield, Illinois, 1997
“Strategies for Controlling Product from Production to Consumption: The Swine and Co. Plant at St. Joseph, Missouri”, DiPietre,
Morehead and Duffy, University Extension Commercial Agriculture Program Publication, University of Missouri, Columbia,
Missouri, 1994
Supply Chain Optimization, Poirier, Charles and Stephen E. Reiter, Berret-Koehler Publishers, San Francisco, California, 1996
The Marketing Plan Workbook, Makens, James C., Prentice Hall, New Jersey, 1985
“The Meat Buyers Guide”, The North American Meat Processors Association, 1997

Front End Guidance - PORK

Загружено:

Сведения о документе

Авторское право

Доступные форматы

Поделиться этим документом

Поделиться или встроить документ

Параметры публикации

Этот документ был вам полезен?

Это неприемлемый материал?

Авторское право:

Доступные форматы

Front End Guidance - PORK

Загружено:

Авторское право:

Доступные форматы

Front End Guidance for

© 1997 National Pork Board. All rights reserved.

Introduction and Acknowledgments

What Front-End Guidance IS

What Front-End Guidance IS NOT

Brian Buhr Dennis DiPietre

THE STRATEGIC ENVIRONMENT

Knowledge simply by purchase (hiring).

Unlike other inputs, the

COMMODITY PORK CHANNEL SPECIALTY PORK CHANNEL

UNDERSTANDING THE MARKET:

In this changing market, the first question a marketer will

Bureau of Census population

compares the projected

Location of the Figure 3. Regional Distribution of the U.S. Hispanic Population

Figures 3-7 provide maps of

To refine these location

Table 1. Cities with Greater than 100,000 Hispanics, 1990a

Total Hispanic Percent

New York, NY 8,008,278 2,160,554 26.98%

Immigration Figure 8. Components of Hispanic Population Growth, 1995-2020

Figure 8 shows the

The most striking feature is

As a further indication of the

The previous demographic

This form of stereo-typing can Economic Pressures in Their Home Land

Summary Information Sources

pork do they consume? Naturalization Service, 2000, Washington, DC, 2001.

Poultry’s expenditure share of

Table 1 provides the raw

Figure 3. Pork Consumption, Grams/Household/Day/ Figure 4. Pork Consumption, Grams/Person/Day/

Pork Consumption Figure 5. Pork Consumption by Region

Source: USDA, Continuing Survey of Food Intake by Individuals.

Figure A.1 - Beef Consumption Figure A.2 - Chicken Consumption

Figure A.7 - Beef Consumption Figure A.8 - Chicken Consumption

In a broader sense, this

Marketing to the Hispanic Household

Typical Mexican representing the entire

Ribs, cut into riblets

Boneless Pork, cubed

Lean Pork, ground

According to the American

expected and offering the

Cultural Family and group oriented Individualization, even of youth

How to Target the Hispanic Market QuikFax

Summary Information Sources

Many stores carried

Loyalty and he indicated shoppers will of a relationship other than a Summary

Mexican Pork Industry Market Chain

Sliced Pork Leg

Pork Chop with

CAPOTE DE CERDO PRODUCTOS

The Market Channel

Competitiveness so is likely to require Cost Value

Figure 1. Across Firms Value/Cost Tradeoff

Low Value High Value

Other Examples of Another case is a producer Marketing Drives A regional, producer-owned

Size and Table 1. Hogs Slaughtered by Plant Size

Distribution of individual animals for direct have acquired packing and

Distribution Check Lists

Check List 1: Finding Potential Distributor Partners

Find out what distributors your competitors are using.

Identify distributors of allied products.

Attend meetings and trade shows sponsored by industry associations.