Latino Grocery Chain Profits With Changing Demographics

By Jill Replogle
February 20, 2013

Latino Grocery Chain Profits With Changing Demographics

SAN DIEGO -- Customers are raving about the recently opened Northgate Gonzalez supermarket in San Diego’s Barrio Logan.

“I bring my aunt here to get all the Mexican products,” Pati Chavez said in Spanish as she packed her shopping cart with the day’s purchases.

Trapped between a shipyard and one of California’s busiest highways, Barrio Logan residents used to have almost nowhere nearby to purchase fresh fruits, meats and vegetables. So neighbors were ecstatic when the Anaheim-based supermarket chain decided to build a big, airy store on an empty lot here.

As the Latino and Asian populations in the United States grow, supermarkets that carry the products they want are growing with them.

Photo by Katie Euphrat
Many of Northgate's customers come specifically for the large selection of speciality products from Latin America.

The family-owned Northgate Gonzalez chain currently includes 37 stores in Orange, Los Angeles and San Diego counties, and the company plans to open three to five new stores a year.

The so-called ethnic supermarket industry has seen its revenues grow around 2 percent annually during the past five years, while the supermarket industry as a whole has been losing money, according to Nikoleta Panteva, senior analyst at the market research firm IBISWorld.

Northgate Gonzalez Markets has something else going for it: the strategy of opening stores in low-income and minority neighborhoods aligns with a national health initiative spearheaded by none other than First Lady Michelle Obama.

The chain’s success is a classic tale of the entrepreneurial immigrant. Miguel Gonzalez and his late father, also Miguel, migrated to the U.S. from a small town in Jalisco, Mexico in the late 1960s.

Photo by Katie Euphrat
Miguel Gonzalez recruited his 12 brothers and sisters to get the first Northgate market going in 1980. Most of them still work in the company, along with dozens of their children.

They both worked in a wire factory before opening the first Northgate Gonzalez Market in Latino-heavy downtown Anaheim in 1980.

Miguel Jr. said they knew nothing about grocery stores when they started. After he sold his house and his father refinanced his to open their first store, they had $240 left to run it.

Miguel enlisted his 12 brothers and sisters to help out.

“For, I think it was about a year a half, we only used the family to work,” he said.

His father, who was a good cook, made the hot carnitas and chicharrones their customers loved. A couple of brothers ran the meat counter while the sisters worked the cash registers.

Now, the chain employs close to 5,000 people, the majority of them Latinos.

The newer Northgate Gonzalez stores have bulk food sections, like you find in health food stores. They sell a wide selection of prepared foods — carnitas, ceviches, salsas and aguas frescas.

Cumbia plays over the speaker system and television screens in the meat department show soccer games and Mexican talk shows.

Many of the family’s stores are located in underserved neighborhoods where more mainstream supermarkets have either failed or never showed an interest in opening.

That strategy has paid off, and recently caught the eye of Michelle Obama. Last year, she spoke at a Northgate Gonzalez store in Los Angeles to promote a new California loan fund designed to entice supermarkets to open in areas with little access to fresh food.

Northgate Gonzalez was the first recipient of loans from the California FreshWorks Fund, to the tune of $20 million.

“We just think they're a phenomenal operator,” said Tina Castro, director of impact investing for The California Endowment, one of the health advocacy groups behind the fund.

“Their stores are beautiful, they offer a tremendous selection of produce and they really care about their consumers and engage with the communities that they're based in,” Castro said.

Northgate Gonzalez’s efforts to improve their customers' health include in-store cooking demonstrations and a line of foods identified for shoppers as healthy choices.

Back in Barrio Logan, customers say the love the beautiful produce, huge selection of meats, prepared Mexican dishes and tortillas made in-store from scratch.

A reviewer on Yelp called Northgate Gonzalez, “Whole Foods Market for the working class Latinos.”

One shopper said what he loves most is when he hits his local Northgate Gonzalez market on the weekend, it’s like being in Mexico.