Boys Finds Niche in Urban Market : Grocery Chain Treads Where Others Fear to Go, Succeeds by Catering to Ethnic Tastes

At a market on Pacific Boulevard in heavily Latino Huntington Park, the accent is on 25-pound bags of La Pina flour, containers of masa harina and votive candles, with festive pinatas overhead .

In a Koreatown store at Eighth Street and Western Avenue, shoppers browse displays of dried fish, Japanese beer, sake and soy sauce, many with signs in English, Spanish, Korean and Japanese.

At a grocery 100 yards from moored yachts in Marina del Rey, customers prepare their own takeout meals at a salad bar and buy sushi to go, while patrons at 103rd and Compton in Watts stroll aisles stocked with black-eyed peas in bulk and a large variety of pork products.

What is noteworthy about these four, seemingly unrelated stores is that they are all operated by Boys Markets, a Highland Park company that began nearly 67 years ago as a door-to-door produce vendor and has built a successful mini-empire in the minority neighborhoods of Southern California that most major competitors have abandoned or ignored.

Of Boys’ 55 stores, about 80% are in predominantly Asian, black or Latino neighborhoods in Los Angeles County. The rest are scattered in primarily Anglo communities, with a couple of newer locations catering to Santa Ana’s Latino population.

In a few communities, particularly Watts, some residents contend that the company exploits them by charging high prices, and recent surveys by a Southern California consumer group appear to prove that Boys prices are indeed higher than those at most chains.

Because of these higher prices, Boys is “not my store of choice, they are my store of convenience,” said Barbara Thomas, a leader of the South Central Organizing Committee, a grass-roots organization of urban residents in areas such as Watts.

Nonetheless, she and other inner-city shoppers applaud the company for just being there. Typical Americans “put a priority on convenience, and Boys is there right at your back door,” said Thomas, who frequently buys food for her church’s functions at the Watts store.

Investment analysts who have started to study the company after its recent initial public offering admire Boys’ convenience orientation and ethnic push. “(Supermarkets are) a very slow-growth business, (and) they have a unique niche,” said Fran Blechman Bernstein, a vice president at Merrill Lynch Capital Markets in New York. “They know their customer,” noted Su-Moon Paik, an analyst at the L. H. Alton institutional brokerage in San Francisco.

Boys’ policy of marketing to ethnic communities evolved slowly through the decades, then became a full-blown strategy about 1980, said Peter J. Sodini, who was named president in 1978 and is now also chief executive.

By the time Sodini was brought in, the family-run company had stopped adding locations and was “losing out in the numbers game” to larger chains that got first crack at choice sites, particularly in the fast-growing suburbs, Sodini said. About the only places available were urban spots that had been passed over by others.

So Boys made the decision about 1980 to concentrate on the urban areas which other chains were forsaking. “We took what was offered and went on an extensive remodeling program,” Sodini, 46, said in an interview at the company’s headquarters, a converted Highland Park grocery store.

“We recognized that there was tremendous population growth. We concluded that if you’re going to be successful, you have to run stores comparable in quality to (those in) suburbia.”

Demographics would indicate that Boys is now clearly “aligned with the growth segment, which is Hispanic,” Sodini said.

“More and more of the locations that at one time were predominantly black now have significant (Latino) populations,” he said. The Compton store, for example, which had served primarily black customers, now sells to a mix that is about 50% Latino, he said.

Since 1980, the population of Los Angeles County alone has grown nearly 10%, to more than 8.1 million, with Latinos accounting for perhaps 70% of that growth, according to reports cited by Boys. The Center for Continuing Study of the California Economy, a research group in Palo Alto, said the Latino population is expected to grow to 33.7% of the county’s population in 1995, up from 30.5% now.

Tailored Merchandise

With stores as diverse as those in the Marina and Koreatown, however, it’s clear that the company strategy geared to inner-city minorities is not entirely consistent. But Sodini noted that the Marina store, opened in 1968 and recently remodeled, was one that had been passed over “by virtually everyone” because the area had not yet developed. For the first five years of Boys’ ownership, the store was an “abject failure.” Then the Marina took off, and so did the store.

The merchandise in each Boys store is geared toward the tastes of a particular area, usually with an emphasis on fresh produce, ethnic items and nationally advertised brands. Managers are given particularly broad latitude to order products that will appeal to shoppers in their areas.

A number of Boys locations are open 24 hours a day, and--like most other inner-city retail outlets--are staffed with full-time security guards and equipped with electronic surveillance devices to detect theft of such items as cigarettes and liquor.

Of its 4,200 employees, 60% are black, Latino, Asian and other minorities. Among 100 mid- to upper-management personnel in the corporate office, 21 are Latino and 13 are black.

Ironically, despite its strategy of locating in urban minority neighborhoods, Boys has had no success finding new sites for stores in heavily Latino East Los Angeles. In 1984, the company enlisted the help of the United Neighborhood Organization, a Latino group, to help find locations and bilingual employees in East Los Angeles, but so far has had no results.

Complaints Over Pricing

In fact, Ralphs Grocery beat Boys to the punch last year by acquiring a former Zodys department store location in nearby Boyle Heights and reopening it as a Giant warehouse store that has become the area’s leading supermarket.

Despite the apparent success of Boys’ ethnic strategy, a recurring complaint concerns the company’s pricing, which some community groups contend amounts to gouging those who can least afford to pay. In a survey of eight major Southland chains taken July 11 by the California Public Interest Research Group, a consumer organization, Boys had the highest overall prices.

Someone paying $100 at Lucky, the low-price leader, would have paid $106.65 at Boys for the same products, said Nancy Rader, consumer program director of CalPIRG. So Boys’ prices are “higher, but not by all that much” compared to other chains, she added.

However, of the eight major chains, Boys had the largest pricing variation within its own stores, with Watts shoppers paying a particularly high premium, the CalPIRG study showed. Of four Boys stores surveyed, the San Fernando location had the lowest prices. A market basket of goods costing $100 at that store would have cost $100.34 in El Monte, $101.94 at the Marina del Rey store and $107.17 at 103rd and Compton.

Boys management defends its pricing policy, maintaining that the company’s costs are high because of security, theft and liability suits. “In a high-crime area, costs will be substantially higher if you’re going to provide the environment (shoppers) want,” Sodini said. The company is not inclined to spread such high costs throughout the chain.

Thomas of SCOC does, however, credit Boys for maintaining a clean, attractive store in Watts and for providing good security in the form of armed guards and a tall fence surrounding the shopping center, which she accepts “as a fact of life.” (Another fact of life: Shoppers walk the aisles under signs reading: “Honest shoppers save when shoplifting stops.”)

Before the 1965 riot, Thomas noted, “supermarkets were just barely” in Watts, and after the riots, some left and the rest did not go in. The redevelopment project at 103rd and Compton went through several developers before Alexander Haagen finally was able to pull together enough tenants.

To be sure, Boys is not alone among the chains in picking up on the shift to a large Latino populace. Vons Cos., which opened its first Tianguis store in January, and Ralphs, which has put an emphasis on Latino products at many of its Giant warehouse stores, also see Latino customers as a relatively untapped lode. Other stores also are increasingly stocking sections of ethnic products.

Early Resistance to Offering

Vons’ Tianguis (pronounced tee-ON-geese) store in Montebello offers fresh tortillas made in the store, as well as a wide variety of Latino foods from chorizo (sausage) to machaca (shredded beef). It is the prototype of what Vons expects to be a chain of 10 to 15 stores within four years. (Perhaps taking a cue from Vons, Boys may use the name Viva for a store planned in Lynwood.)

Banking on the allure of Boys’ ethnic, urban strategy, Riordan Freeman & Spogli, a Los Angeles merchant banking firm, and Boys management purchased the company in April, 1986, for about $83 million in a leveraged buyout. Soon after, members of the founding Goldstein family were ousted, and a legal battle ensued. The suit was settled in July, but neither side will discuss the outcome.

Last May, the company jumped on Wall Street’s bandwagon and launched an initial public stock offering that at first encountered some investor resistance. The shares hit the market at about $10 apiece, far below the expected price of $14 to $16. Since then, the stock has climbed in over-the-counter trading to a close last Friday of $18.875.

The company recently acquired the eight-store Foods Co. Market chain in Los Angeles, which should help boost Boys’ revenue this year to $550 million, up from $483 million last year. Sodini said other acquisitions are possible. Boys will spend $120 million during the next five years to remodel stores and build 23 new supermarkets.

“We’re looking for locations,” Sodini said, adding that the company is open to locations throughout greater Los Angeles. “Most stores will be in urban areas, but we’ve done well wherever we’ve gone.”