In an innovative approach, the Vons Companies built a marketplace with bilingual signs and employees, instead of a typical grocery store, to fulfill the needs of Spanish-speaking customers.
When extensive research into customer demographics revealed that a large portion of its clientele in Southern California were Spanish speakers, the Vons Companies, Incorporated, created Tianguis (the Spanish word for marketplace), a new type of grocery store. All the signs in the store were in Spanish, with English translations, and all the employees spoke both Spanish and English. These innovations were at least part of the reason that Vons gained the largest share in Southern California’s supermarket industry.
Tianguis was not the first Vons grocery store to target a specific clientele. Earlier, Vons had introduced five stores under the name Pavilions. Although the Pavilions stores
Pavilions stores expanded on the regular Vons selection to include many expensive novelty items that most grocery stores do not provide. Most of the products were name brands; Pavilions stores stocked very few generic items. The stores featured a constant supply of fresh fish as well as shrimp, crab, oysters, clams, and even live lobsters. Pavilions stores also had extensive selections of fresh fruits and vegetables, something that more-affluent Vons customers had reported as lacking in other stores. The stores’ liquor departments included more than fifteen hundred choices of wines.
Vons’s specific targeting of the affluent market resulted in phenomenal sales. The Pavilions stores proved to have strong drawing power: Most grocery store customers travel less than one mile to shop, whereas less than half of all Pavilions customers live within three miles of the store. The success of Pavilions and its specific targeting of a clientele prompted Vons to create Tianguis.
In 1985, Vons formed a team made up of both company executives and outside experts to conduct and analyze research. Vons conducted in-store surveys, demographic studies, and studies of computer-generated sales and inventory data. The results of this research indicated that nearly one-third of all inhabitants of Southern California spoke Spanish. The research team concluded that these 4.5 million Latinos were being poorly served by typical grocery stores. Vons decided to create a food store especially designed for the Latino customer.
Another team was formed consisting of several Vons managers. This team was sent to Mexico to study traditional Mexican methods of food shopping. The team paid particular attention to the social interactions that occurred while Mexicans were buying food. During their time in Mexico, the team members discovered that the traditional Mexican marketplace is not only a place to purchase food; shopping is an important social event. The Mexican concept of a marketplace is very different from the American concept of a grocery store. The team discovered that the marketplace is very important to Mexicans, who often go there in groups and socialize during and after shopping. The Mexican marketplace also emphasizes providing quality products at affordable prices.
Vons chose the name Tianguis to establish immediate recognition of the store as a marketplace among members of the Latino community in the Los Angeles area. The word tianguis alone helped create a very specific image, as Latinos tend to associate high quality with the term. It also implied that this new store was the center of the community.
Vons examined more than thirty thousand items carried in most of its stores. Of these, the company deleted five thousand items from Tianguis inventories while adding twenty-five hundred. The items that were not included tended to be among the most expensive; the twenty-five hundred that were added included many generic brands as well as Mexican specialties. Vons also tried to make Tianguis look similar to a Mexican marketplace.
On January 15, 1987, in Montebello, California, the first Tianguis opened. Piñatas hung overhead, and many typical Mexican items were offered for sale. Melons were displayed on the back of a pickup truck, as at a traditional Mexican marketplace. Coconuts were served with straws inserted, and tortillas could be purchased straight out of the in-store oven. Eight different types of chili peppers were available.
Tianguis offered more than food items; the marketplace had many items not found at typical American grocery stores, including clothing, handmade crafts, and many household necessities. Ponchos and lightweight cotton shirts were offered, and hammocks and Mexican rugs proved to be popular. Tianguis also offered many services not offered in a traditional grocery store, such as assistance to customers in cashing checks, purchasing bus tokens, and paying bills. These services were more than enough to convince many of the customers who did not speak English to do all of their shopping at Tianguis.
Vons revamped its typical store design to create Tianguis. The new color scheme was black, white, and red. Food and other items were accented by different colors to make them more noticeable. Lighting was changed to give more of an authentic marketplace look while highlighting many of the in-store food-preparation areas, such as the tortilla line. The deli section, which offered ready-to-eat items, highlighted the displays with lighting and a black-and-white color scheme.
The walk-in cooler had beer for sale by the keg. The meat department offered lamb’s head, an unusual product for American grocery stores but not for a Mexican marketplace. The live fish tank contained catfish rather than the lobsters typically found in a Pavilions store. Vons thus created a store that had food items as well as nonfood products and services that specifically catered to the surrounding neighborhood’s needs and desires. Because Vons did this while no other grocery stores did, the first Tianguis store generated customer satisfaction and loyalty as well as sales.
Both Tianguis and Pavilions were created to satisfy niche markets, and, like Pavilions, Tianguis proved to be very profitable. In 1987, the Tianguis and Pavilions locations were the highest-grossing stores that Vons owned. Vons had 190 stores in the Southern California area and had a 17 percent share of the supermarket industry, the largest share of all grocery store chains in the region. A few years earlier, Vons had been fourth in the supermarket industry in Southern California.
Each of the five Pavilions stores and Tianguis sold at least $35 million in products in 1987. They were more profitable than other Vons stores because they charged 5 to 10 percent more than the average grocery store markup of 20 to 25 percent on many goods and services. Customers were willing to pay more because of the services, products, and appearance these stores offered. Tianguis and Pavilions were two to three times the size of typical grocery stores, but sales were $700 per square foot per year, compared with the average of $440. The size was filled profitably.
Other corporations followed Vons’s lead in providing for the particular needs and desires of the Latino shopper. Kmart, for example, approved a plan to start playing Spanish radio stations in certain stores. The demonstrated profitability of marketing to the Latino community ensured that businesses of all types would join in.
The chief executive officer of Vons Companies, Roger Stangeland, was instrumental in the company’s growth. He and several other investors bought a conglomerate including the Vons stores for $750 million and proceeded to sell off all the companies except Vons. In 1986, Vons had 177 stores. Largely as a result of Stangeland’s efforts, by 1991 the chain had nearly doubled the number of its stores; its growth leveled off in subsequent years. The largest acquisition of stores came in 1988, when Vons bought 162 stores from Safeway. With this purchase, Vons bought out all the Safeway stores in the Southern California region. This transaction gave Vons many more stores but also forced Vons to increase its debt. Vons also gave up 31 percent of the controlling interest to Safeway, which sold this interest to Kohlberg Kravis Roberts in a leveraged buyout. Kohlberg Kravis Roberts agreed not to buy any more Vons shares through 1993.
Vons immediately started to integrate the Safeway stores, concentrating on remodeling them instead of opening entirely new stores. A top analyst for Gruntal & Company, Frank Podbelsek, noted that Vons stores were located in the fastest-growing regions of the United States, including Southern California. Podbelsek projected growth for Vons as it continued to spend money on remodeling and because of the locations of its stores.
Vons did grow, and rapidly, largely because of its innovative approaches to merchandising and marketing. The company also reduced spending and improved worker productivity. These methods, along with niche marketing, led to great success for the Vons Companies.
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Byrne, Harlan S. “Vons Cos.: Supermarket Chain Takes a Swipe at Its Debt Load.” Barron’s 71 (July 15, 1991): 37-38. Describes how Vons turned losses into profits and discusses the value of Vons stock. Also describes the ownership history and acquisitions of the Vons Companies. -
Erdman, Andrew. “CEO Shakes Pots, Pans.” Fortune, December 2, 1991, 174. Discusses how Roger Stangeland and other investors acquired Vons. Describes how the number of stores increased along with profits. -
Klein, Carrie. “ADVO: Micromarketing to the Max.” Financial World 161 (September 1, 1992): 18-19. Describes micromarketing and how Vons turned from newspaper advertising to direct mail. -
Marcial, Gene G. “A Supermarket Special for Bargain Shoppers.” Business Week, August 19, 1991, 102. Discusses the acquisition of 162 Safeway supermarkets by Vons. Describes Vons’s profits and the possibility of a takeover. -
Weiner, Steve, and Ellen Paris. “Food as Fashion.” Forbes, September 7, 1987, 106-107. Article aimed at students of target marketing discusses Vons’s specialized food outlets and drugstores. Includes illustrations of the interiors of Tianguis and Pavilions stores.
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