Hispanic foods are heating up in the United States, and it’s not just the habaneros talking. U.S. sales for Hispanic foods and beverages are expected to hit $11 billion in 2017, up from more than $8 billion in 2012, according to Packaged Facts.
The Hispanic population continues to grow in the U.S. As of July 2014, it had grown to 55.4 million -- or about 17.4% of the total U.S. population -- a 2.1% increase from the previous year, according to the U.S. Census Bureau.
More Americans are interested in eating and cooking with the ingredients and flavors in traditional cultural cuisine. Manufacturers large and small have responded with products targeted at this burgeoning demographic.
Growth of the Hispanic foods industry in the U.S.
Hispanic and Mexican products are becoming a larger focus for manufacturers, ranging from startups like Molli to major food companies.
Last July, Goya, the leading Hispanic food brand in the U.S., expanded its portfolio to include more organic offerings as part of a multiyear, $500 million strategy to encourage familiarity and cultural ties with the brand among the U.S. Hispanic population. General Mills announced in its latest earnings report a plan to focus on brands and segments with the “strongest profitable growth potential” in fiscal 2017 and fiscal 2018, which included the Old El Paso brand.
However, the definition of Mexican and Hispanic food can vary among studies and consumers. What's commonly considered Mexican food and what's seen in the store may reflect only a fraction of the cuisine's expansion potential.
“Sometimes studies define Mexican food as Tostitos chips and salsa,” said Rodrigo Salas, CEO and cofounder of Mexican sauce startup Molli. "Those are very much the markets, and they are going to continue growing, but not at the same pace.”
Tortillas and taco kits are seeing record purchases, with Americans buying more than 1 billion units in 2016. Sales in the category grew at a steady rate of above 5% in 2014 and 2015 before slowing to 3.4% over the 52 weeks ended May 15, according to IRI. General Mills’ tortilla sales rose 4% in that time, thanks in part to a 16% jump in sales of Old El Paso Stand ‘N Stuff taco shells.
Real talk, amigos. #tacos pic.twitter.com/TB5z4bX3H5— Old El Paso (@oldelpaso) July 10, 2016
However, Salas believes the real promise for the Hispanic and Mexican food categories lies in products that “can bring those real, authentic flavors and help people make a great-tasting meal in less time — so cooking sauces, marinades, rubs, mixes of spices,” said Salas. “Those are the ones that are grabbing the attention of consumers today.”
Success with this type of regional focus can be seen across the food and beverage industry. Kraft Heinz recently released its own lineup of premium regional BBQ sauces, such as Memphis and Kansas City, and Thai cooking sauces, seasoning blends, and packaged meals were a standout trend at the Summer Fancy Food Show earlier this month.
Why grocery stores haven’t kept up
The growth of the Hispanic population hasn’t been reflected in the variety of foods and beverages on store shelves.
Hispanic foods tend to be relegated to a portion of one aisle along with other “international” foods. Even there, Salas said that consumers can’t always find authentic Mexican or other Hispanic flavors.
“A lot of people still want to go with what’s familiar,” said Salas. “That is one of the challenges that we have. We know that the moment people try our products, they realize that it’s not anything that they have had before — only if they’ve been to Mexico and tried it in Mexico have they tasted something like that. It’s more about familiarity and being safe than lack of interest.”
Still, the U.S. Hispanic population is not only a growing demographic but also one with steadily increasing purchasing power. As labor market conditions improve and increase the demographic’s disposable income, Hispanic purchasing power is projected to grow from $1.25 trillion in 2014 to $1.7 trillion by 2019, according to Mintel.
And while areas like California or Texas, primarily find a Mexican-dominant Hispanic population, others like South Florida are home to nearly two dozen different Hispanic nationalities, Luis Lacal, general manager of Bakery Corp. in Miami, told Food Business News. This means homogeneity in “Hispanic” foods and beverages may not be as noticeable to non-Hispanic Americans, but for marketers trying to appeal specifically to this demographic, especially Hispanic millennials, authenticity and regional flavors are key.
The future of Hispanic and Mexican foods
While major established brands in the Mexican and Hispanic food category will continue to have a commanding presence in grocery stores, startups and companies like Teasdale Foods are solidifying their role in the growth of this segment.
Last month, Teasdale acquired Mesa Foods, maker of private label tortillas, flatbreads, taco shells, taco kits and chips, expanding the company’s portfolio of branded and private label Hispanic foods. Teasdale has acquired two other Hispanic food companies since October as it continues to build its “unique consolidation platform” in this category, according to management at Snow Phipps Group, the private equity firm that acquired Teasdale in 2014.
However, while growth may come from a wide range of Hispanic and Mexican food manufacturers, Salas believes that startups will be integral to the growth and diversification of this category.
“At the end of the day, the ingredients and the processes and the passion are what makes food taste the way it does, so I think [startups are] going to play a big role in the Mexican category here in America,” said Salas.
Startup spotlight: Molli
A Mexican food startup -- and part of Food-X’s spring 2016 cohort -- with a regional flavor profile
What Molli makes: Cooking sauces and marinades for quick, convenient meals inspired by authentic flavors from different regions of Mexico, like Acapulco, Oaxaca, and Veracruz.
Inspiration: “A lack of authentic Mexican food in America,” said Salas. He and his wife moved to Texas from Mexico City for school in 2003, but quickly realized they couldn’t find authentic Mexican foods and flavors outside of their own kitchen.
“You go to grocery aisles looking for sauces that can help you make an authentic Mexican dish, and there are a few that are kind of generic Mexican flavors, like salsa verde, salsa roja,” said Salas. “But nothing with the flavors that we were trying to get from all the different ingredients that we’re used to eating in Mexico City.”
Authentic Mexican flavors, gigantic demo day banners via @MolliSaucesSOS #acceleratefood pic.twitter.com/6YBUJgG8nO— FOOD-X (@foodXhealth) June 2, 2016
How Molli serves a market need: “The growth of these Hispanic populations has brought all these what used to be very Hispanic-centric flavors to the more general market,” said Salas. “People are more open than ever to find those authentic flavors — people that are not Hispanic. They’re looking for more authentic flavors and foods, and they’re more willing than ever to find, make, and use them.”
Milestones: After launching about two years ago, Molli has become the second-largest Mexican brand at the Central Market gourmet grocery store chain in Texas, selling more than 10,000 jars in a year and a half. The company has started selling its products at Southern Season gourmet food and gift shops in North Carolina and South Carolina earlier this year, and Molli has begun receiving orders from smaller gourmet shops in California and other parts of the U.S.
What distinguishes Molli from similar startups: Salas said that as far as he’s seen, Molli is one of the few in its category of Mexican cooking sauces. The others tend to focus on “fusion flavor with Asian and more American flavors,” rather than Molli’s focus on “regional flavors, regional ingredients, and regional recipes from Mexico,” said Salas.
Why Molli disrupts the Mexican/Hispanic food industry: “The major manufacturers basically put all these ingredients in a blender and put them in a jar,” said Salas. “And the truth is that if you really want to get a home flavor, you need to go through a few processes that these guys skip. … Those processes that make it a little more time-consuming and then therefore more costly for them because they’re mass produced. … We do it the way a home cook in Mexico would do it from scratch.”
Such processes include deseeding chile peppers and then soaking them before using them in the recipes, Salas said. This process replaces the mass-produced method of grinding entire chile peppers, including the seeds and stems, which can leave a bitter flavor that manufacturers have to balance out by adding sugar or other flavor ingredients. Molli’s process takes more time but produces a more authentic, home-cooked flavor and keeps the ingredient list clean and simple.