In a bold move that has the industry buzzing, IBP,

In a bold move that has the industry buzzing, IBP, the $15 billion, Iowa-based beef purveyor, is making an aggressive play for the fast-growing ethnic foods market. The company is throwing its formidable distribution power and resources behind the creation of a new, national brand of Mexican food called José Olé, marketed by the Riverside, Calif.-based Specialty Brands unit it acquired three years ago. Conservative estimates put José Olé's launch marketing budget at $20 million.

José Olé was conceived of in 1997 as a $3 million revamp of Foodbrands' former Marquez line, mostly hand-held Mexican frozen products like burritos. In the hands of IBP and Specialty Brands, that has evolved into 26 SKUs that the companies aim to establish as the first nationally distributed, full line of Mexican entrees by the end of 2001. Not necessarily a bad market to target, given that ACNielsen values the ethnic frozen entrees market at about $2.2 billion.

Given the category's track record of slow growth, industry observers say IBP's unusually aggressive run at the category is one to watch, especially given the company's considerable war chest.

"As a general trend, ethnic food has been an area that big manufacturers were slow to get into. And there hasn't been a strong track record of the smaller, regional ethnic food companies expanding their reach nationally," says Jon Hauptman, a director with Willard Bishop Consulting in Barrington, Ill.

Yet he believes that IBP's move will prove more anticipatory and not just bold. "I think IBP's strategy signals the beginning of a big trend of large companies supporting growth of what had been regional ethnic brands," he says. "They're not trying to create demand; the demand is there."

IBP is bankrolling a national launch budget estimated at $20 million to secure distribution. José Olé will appear in a national TV ad schedule running September through November this year, and in January and March of 2001. Driving traffic and trial at retail will be in-store merchandising via floor graphics, instant-coupon machines delivering 75-cents-off values, direct-mail coupons, and in-store demos during September, December, and February. Rounding out the marketing package will be radio promotions, seven months of mobile product sampling, and six months of in-pack coupons.

The blitz showcases a 26-SKU line that includes meal-sized portions of frozen burritos, chimichangas, and fajitas at suggested retail prices ranging from 49 cents for a burrito to $9.99 for a pack of taquitos (see box on page 60.) Compared with the usual snack-size products dominating the category, the extensive José Olé line, says Hauptman, "absolutely is a gamble."

Specialty Brands, which got IBP to commit to developing and marketing the new brand almost simultaneously with its acquisition, isn't flinching at rolling the dice. "The Mexican foods category is sorely underdeveloped," says Neil Ritchey, vice president of sales and marketing for Specialty Brands. "And the quickest measure of that is Mexican restaurants' growth."



Restaurants' Role

Mexican-themed restaurants are growing at a fast clip, according to Technomic, Inc. in Chicago. Last year the growth rate for full-service Mexican restaurants was 8.3 percent over the rate of growth in 1998. That's a higher annual percentage increase than the 6-percent jump in the same period for the overall, full-service restaurant growth rate. Mexican restaurant growth also far outpaced the 5.9-percent total restaurant growth (including quick-service restaurants like Taco Bell and McDonald's).

"We found that consumers we surveyed are interested in Mexican food, but the last place they look is supermarkets," says Ritchey, adding, "That's why we started our campaign."

Now Specialty Brands is jockeying for a full freezer door that typically may hold 24 items. José Olé is selling in about 20-plus SKUs on average at chains, a much better debut than the 10 or 12 SKUs the company had planned for in initial retail programs. The orders have unexpectedly sapped the company's inventory. "It's not just the Hispanic population buying this. It's a mainstream item," Ritchey says.

And others are catching on. The José Olé debut coincides with a flurry of slightly more cautious expansion moves at other Mexican food specialty companies. Ruiz Food Products is pouring $4 million into automation, packaging, and freezing operations to meet anticipated demand. Meanwhile, Delimex is planning to introduce its taquitos, quesadillas, and Wrapidos to four new markets.

Even Redmond, Wash.-based Calzone & Co.?a maker of, yes, frozen Italian calzones?is branching out by adding a Cuban-style empanada, not wanting to miss out on the category's growth.

"We felt bold enough to go forward because the empanada [a meat-filled turnover] goes well with our existing line of calzones in terms of product and packaging," says Calzone & Co. president Mark Peters, explaining why he chose this month to introduce the empanadas. "Even Taco Bell has expanded its line of food dramatically."

Kraft Foods, which has marketed the Taco Bell line of grocery products since acquiring it from Frito-Lay in 1997, last year debuted a Kool Aid drink mix flavor in a bilingual package called Mandarina Tangerine, a flavor developed with the Latino palate profile in mind. Still, none of these efforts equals the aggressive José Olé rollout. "We spend the most time trying to make our current portfolio of products relevant to Hispanic consumers," says Jill Rahman, Kraft's director of ethnic marketing and external relations.

That's the opposite focus of Specialty Brands and the likes of frozen food rivals like Delimex, which are banking on the Americanization of Mexican foods to lure consumers, and that's a smarter move on their part, says Ken Greenberg, marketing director for ACNielsen's Homescan Consumer Panel services. "Companies have more to gain from targeting Latin food sales to non-Hispanics than to Latinos."

Who better to bear out that philosophy than a former Campbell Soup executive with the name of Kathleen Macdonnell. Macdonnell, CEO of San Diego-based Delimex, says her company is testing the Anglo market with a 28-week, four-market push highlighted by radio advertising. "Mexican food has become an all-American kind of food," says Macdonnell. "The old Ortega dry taco kits?we ate those all the time when I was a kid."



The Ricky Martin Factor

How is it that Mexican is becoming mainstream? Even though he is Puerto Rican, singing sensation Ricky Martin may have something to do with it, according to M. Isabel Valdes, an in-culture consultant to companies including Kraft and author of the book Marketing to American Latinos.

"Over the past decade, because of the success of Taco Bell and celebrities like Ricky Martin, there's been growth in the general population's awareness of Latin culture," Valdes explains. Explosive population growth among Hispanic Americans helps. In New Mexico, California, and Texas this year, Hispanics comprised 45 percent, 35 percent and 33 percent of the population, respectively.

Clearly, Specialty Brands isn't waiting for final population figures to come in. The company's philosophy might be summed up as "Lure them or lose them to the drive-through." It hopes to have supermarket executives dancing in their own frozen food aisles. The Hat Dance, of course. Olé!