An upstart beer maker wants a specific piece of the big brewers’ market: Hispanics who are as comfortable speaking English as Spanish.
North American Latino Beer Industries Inc., currently in Chatsworth but on its way to Orange County, is looking to carve out a niche with Otra Beer.
The name is Spanish for another, as in “give me another.”
“I just felt that the beer industry needed a Latino brand,” said Johnny Hernandez, the company’s founder, chief executive and a former Hispanic marketing executive for Anheuser-Busch Cos.
Hernandez is targeting a lucrative segment of the growing Hispanic population: “First, second, third generation Latinos that have been here for a while, who can relate to a product of their own,” he said.
Hernandez said he specifically sought to call Otra a beer, and not cerveza. The goal is to appeal to young trendsetters who speak Spanish at home but English at work or at the nightclub, he said.
But, so far, Otra is just an idea that’s piqued interest, including from a local venture capitalist, grocers and restaurants.
North American Latino Beer Industries doesn’t have a distribution deal in place, something Hernandez and other executives said they are working on.
“As long as we come out before Cinco de Mayo, we’ll do fine,” Hernandez said.
Even if the company lands a distributor, its challenges will be just starting.
Hernandez and his colleagues are looking to carve out a piece of an industry dominated by Anheuser-Busch, Miller Brewing Co. and Molson Coors Brewing Co. With their massive marketing budgets, the big brewers have distribution, bar taps and store shelves tightly wrapped up, leaving just about 3% of the market for independents.
The risk for Otra is making a name for itself and then having the big brewers copy the company’s marketing strategy, said Paul Gatza, director of the Brewers Association trade group in Boulder, Colo. And the big guys have the money to do so, he said.
“That’s the thing that really drags on brewer startups,” Gatza said.
Of course, the big brewers also could be an exit strategy for Otra, Gatza said. In the past, the big players haven’t been active buyers, though that’s changed, he said.
Or Otra “might be attractive to a foreign company looking for a stake in the U.S. market,” Gatza said.
For now the big beer companies are competition. Like the rest of the population, Hispanics by and large opt for Budweiser, Miller and Coors. Except for recent arrivals, many shun beer from Mexico, according to Rick Palmer, the company’s OC-based president and chief operations officer.
Even Grupo Modelo SA de CV’s Corona, the best known Mexican beer, largely is a marketing creation for mainstream Americans.
Otra “goes down real smooth and it’s not filling,” Hernandez said. “It sure tastes better than a Corona.”
In terms of taste, Otra, brewed under contract in Wisconsin, fits somewhere between Budweiser and Mexico’s Tecate beer. It’s set to be priced comparably to Bud or other big domestic brews.
OC is a potentially large market for Otra with Mexican immigrants and their descendents in Santa Ana, Anaheim and other cities, Palmer said.
“Santa Ana is the best market for us,” he said.
Otra has a handful of workers now. The beer’s launch in OC is contingent on securing a distribution deal with one of the region’s major distributors, Hernandez said.
If Otra can’t get a major distribution deal, its other option is to ship independently in Southern California, Palmer said.
Kroger Co.’s Food 4 Less is one of the grocers that has agreed to sell the beer, he said.
Venture backer John Garcia of Tustin-based Angel Strategies LLC said he wants North American Latino Beer in OC, even if it costs more to do business here.
Only a few of Angel Strategies’ 34 portfolio companies are from OC, and Garcia said he wants to boost those numbers.
“There is a perception that the companies in Orange County aren’t as good,” he said. “That’s because OC doesn’t have a tight-knit entrepreneurial community compared to counties such as San Diego.”
Garcia also said he wants to increase the number of Hispanic businesses that have access to venture funding.
Angel Strategies was an early investor in Irvine-based Broadcom Corp. and Forest Hills, N.Y.-based JetBlue Airways Corp. The firm also is an investor in Laguna Niguel-based Why-RunOut.com, an online grocery service.
Garcia didn’t disclose his investment in Otra but he typically invests about $2 million in a company.
Otra won’t be promoted with croaking frogs or scantily-clad women, ac-cording to Palmer.
Instead, the company plans to get its name out at family events such as Mexican rodeos and Latino concerts.
Before Otra, Palmer spent 20 years in the Mexican food industry. He headed operations for La Victoria Foods, which later became Chino-based Authentic Specialty Foods Inc.
Palmer said he knows how to do business on both sides of the border after spending time in Mexico City.
Hernandez said he came up with the idea of a Latino American beer about five years ago. He said he toyed with tortillas but didn’t like the slim profits. He did have beer industry know-how.
“I’ve got a lot of training and education in the beer business,” Hernandez said of his time at Anheuser-Busch. “I worked there long enough to fall in love with the beer business.”
When Hernandez started at the brewer, no one was paying attention to Hispanics, he said. Anheuser-Busch got an early start, he said, by doing early research on Hispanic marketing.
“What we predicted back in 1979 has come true today,” he said.
