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CASE 10

Lola’s Market: Capturing

A New Generation

Katherine Gonzalez Armand Gilinsky

MBA Student, Sonoma State University Sonoma State University

Sergio Canavati
Sonoma State University

“Our core is Latinos, try to trigger them, try to get every single Latino in our
store. . .what’s hard are the young ones; they are more focused with what is on
their phone.”
—David Ortega, Owner, Lola’s Market

“B
efore I used to tell them, ‘Put those phones the millennials in their language—businesses that uti-
away’ now I just let it go, it happens so lize social media and online shopping experiences to
much.  .  .they do not listen.”1 As David appease the tech savvy culture. Regardless of where
Ortega, owner of Lola’s Market takes a break from he stands amongst his competitors, David’s outlook
replacing wallpaper and making repairs to his long- on the possibilities Lola’s has is inspiring and will
standing business in Santa Rosa, California, he sur- facilitate Lola’s capacity to gain this new genera-
veys his store and watches as his millennial employees tion: “Never say you can’t, you always have to be
are fully invested in the tweets2 and hashtags3 that positive.”5 With this mindset, it is no surprise that
flood their notification screens. David contemplates David Ortega has been recognized by the North Bay
on how he can engage these employees, and even Business Journal as one of the first honorees of the
further, how he can engage this generation. David is Latino Business Leadership Awards for outstanding
a man rooted in tradition and he believes that the leadership throughout the North Bay.6 With this type
traditions of good business and good customer ser- of leadership, Lola’s can potentially reposition them-
vice need to be passed down to the new generation, selves as the sought-out center for the Latino millen-
but how? Situated in Sonoma County, California, nial consumer and workforce.
Lola’s Market has five locations, each targeting the
Latino consumer, each filled with generations of INDUSTRY OVERVIEW
customers who have shopped at their various loca-
tions since their doors first opened in Santa Rosa. When looking at the Supermarket Industry as
David is inspired to make changes for his business whole—including markets who offer specialty ser-
and knows that engaging the younger generation—the vices, such as Lola’s bakery and restaurant—there
millennials4—will strengthen Lola’s future business are key success factors that will give a particular
for years to come. David is at risk of losing this new
coveted consumer base to retailers that “speak” to Copyright ©2018 by Armand Gilinksy. All rights reserved.

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C-102 PART 2  Cases in Crafting and Executing Strategy

organization a competitive advantage. These key fac- Amazon is also implementing an additional ship-
tors include proximity to key markets, access to a ping option utilizing its Prime delivery service for
multiskilled and flexible workforce, the ability to con- customers who choose to shop with Whole Foods.12
trol stock on hand, close monitoring of competition, Amazon is a company that has already created a
and access to the latest available and most efficient strong relationship with the millennial generation,
technology and techniques.7 Alongside these key suc- as a majority of Amazon Prime users are a part
cess factors is evolution with the consumer: the new of this generation (see Exhibit 1). Since millenni-
target consumer amongst industries is the millennial als already have ties with Amazon, which has the
­consumer—the millennial generation interests mar- strong online presence and convenience that this
keters due to its size and growing market influence.8 customer base prefers, it will be even more difficult
This generation is one of the largest generations in for smaller, family-owned businesses like Lola’s to
history and is about to move into its prime spending attain this consumer base.
years—millennials are positioned to reshape the econ- When it comes to supermarkets in California,
omy.9 Millennial consumers want to engage with specifically the North Bay, there are various competi-
brands on social media; about 62 percent of millen- tors who have their own takes on how to generate
nials say that if a brand engages with them on social this technological change and brand advancement.
networks, they are likely to become a loyal customer Sonoma County is one of the most competitive food
and with 87 percent of millennials using between two markets in the country, thanks to an array of strong
and three tech devices on a daily basis—brands must local and national grocery businesses vying for cus-
stay relevant by appealing to and engaging millenni- tomers’ time and money.13 In 2016, one of the largest
als on these tech platforms.10 competitors in the North Bay market, Oliver’s Market
In 2017, Amazon’s acquisition of Whole expanded its doors and rebranded itself with a more
Foods, took the online retailer into the brick and modern appeal and even including the addition of in-
mortar setting and Amazon is now driving down store Wi-Fi available to its customers.14 To capture the
Whole Food’s prices across the board—this is caus- millennial generation, specifically in the supermarket
ing supermarket competitors to raise the stakes.11 sector of the retail industry, companies need to take

EXHIBIT 1   Amazon Prime User Demographics

Share of online consumers in the United States who are Amazon

Prime members as of August 2016, by generation
80%
71%
Share of respondents

60%
54%
47%

40%
34%
31%

20%

0%
Total Millennial Generation X Boomers Retirees
Additional information:
United States; Socratic technology; August 2016; 498
Respondents; 25 years and older

Source: Statista, “U.S. Amazon Prime Reach by Generation 2016,” August 2016, https://www.statista.com/statistics/609991/
amazon-prime-reach-usa-generation/.

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Case 10  Lola’s Market: Capturing A New Generation C-103

advantage of the latest technology and implement it Lola’s Market is operated with David Ortega
within in-store and online (if applicable) IT systems, as President; General Manager, Mario Lozano; and
such as their points of sale processing. This will lead Controller, Carlos Salvatierra directly under him.
to increased productivity and higher profit margins.15 His General Manager, Mario Lozano, oversaw the
chain’s POS Supervisor, Safety Coordinator, and
LOLA’S STORY HR Coordinator, as well as all managers at the five
store locations. Mario is the eyes and ears of Lola’s
on the employee level—he is key to helping David
“I’d go over to look at the bakery
understand what the needs are from the employee–­
and think, one day I am going to management perspective, as well as consumer needs.
open up something like this.” In doing so, Mario was able to provide the most
insight as to what worked within the store structure
—David Ortega
and what ultimately drove same-store sales. When
As a 15-year-old young man working at Perez Family David first opened Lola’s his marketing tactics
Restaurant in Santa Rosa, California, David Ortega included creating promotional flyers that he would
had vast aspirations for his future and the future place on windshields in local church parking lots
of his family. David recalls countlessly seeing the on Sunday mornings. This worked for him initially
bakery next door from the restaurant in which he as it did bring in new Hispanic customers looking
worked and dreaming that one day he would have a to enjoying traditional Mexican food after a Sunday
business of his own—a business that provided qual- service, or buy fresh produce and tortillas20 to cook
ity products, produced with the love and attention Sunday dinner for their family.
that the bakery he gazed upon provided. Along with In 2016, 24 years after its first doors opened
having quality products, David wanted to offer the in Santa Rosa, Lola’s was performing overall at a
Latino consumer a taste of home by offering authen- 30 percent gross margin, which was a 0.7 percent
tic Mexican bread and ready-to-eat food. In addition increase from the previous year. Even with the
to authentic Mexican food, David paid tribute to his improvement in performance, Lola’s was still expe­
mother Dolores, by naming his dream business after riencing a decrease in profitability of (0.8 percent).
her—from a ­cost-effective play on her name,16 Lola’s Lola’s decrease in cost of goods sold from 71 percent
Market was born. in 2015 to 70 percent in 2016 demonstrated that Lola’s
On February 8, 1992, with his mother Dolores had the potential to boost its profitability for the
and father at his side, David achieved his dream. coming year if it continued to trend with a decrease
With the smell of fresh Pan Dulce17 in the air, the in its cost of goods sold ratio—as a decrease in this
first Lola’s opened on Dutton Avenue in Santa Rosa. ratio identifies improvements in Lola’s cost controls.
It stood at about 1,000 square Feet, filled with the The implementation of new technology and possibly
promise of growing tradition and quality goods and new marketing methods that had the potential to
services. Today, Lola’s Market has expanded to five boost Lola’s customer base might also decrease this
stores; each Lola’s store still has its famous fresh bak- ratio and result in an increase in gross profit (see
ery and restaurant, as well as a produce department Exhibit 2). Along with tactics toward technological
and deli section. Lola’s Market has two locations in improvement, David believes Lola’s commitment to
Santa Rosa—one in Napa, one in Healdsburg—and its freshness and tradition will continue to boost sales
newest location in Petaluma, which opened in 2013. create high levels of customer satisfaction. “People
Lola’s believes they can “compete with anybody”18 know our commitment to freshness is the key. The
and with the quality of goods and services they pro- secret to stay true to your roots and serve everything
vide, they do have the potential to outgrow and stand fresh.”21
ahead of their local competitors. David believes that
Lola’s is known for its service, quality meats and pro-
duce and the comfort that the markets provide for its
ALTERNATIVES FOR LOLA’S
Spanish-speaking customers: “Hispanics like to com- David Ortega is a man rooted in tradition and quality,
municate in their own language, that’s probably why but he is also a creative business man who has plans
they shop here.”19 to remodel Lola’s Dutton Ave location in Santa Rosa.

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C-104 PART 2  Cases in Crafting and Executing Strategy

EXHIBIT 2 Lola’s Combined Statement specialty food store industry that Lola’s is a part of,
accounting for about 37.3 percent of this market (see
of Income
Exhibit 3) so to differentiate itself with its competi-
Lola’s Market, Inc. and Affiliates tors Lola’s can align remodeling with a repositioning
Combined Statement of Income effort to be an engaging brand on social networks.
Years Ended December 31, 2016 Globally millennials are considered to be the “first
and December 31, 2015
digital natives”23 and as a consumer they offer the
Profitability potential of a long-term customer.
A company’s strategy rests on its unique activi-
2016 2015 ties,24 and David Ortega’s plans for remodel are
Net Sales 100% 100% distinguished from his competitors by their ­offering—
COGS 69.97% 71% traditional, nostalgic, homemade food. What will
Gross Margin 30.03% 29.31% further distinguish this strategy are the marketing
Direct Store Expenses 20.43% 18.75% activities taken to promote the new changes in the
Administrative Expenses 4.43% 4.09% store. Also, David is hoping that the remodels at
Income from Operations 5.17% 6.47% Lola’s will set them apart from other Hispanic mar-
Total Other Income −0.67% −0.72% kets; so that everything is not so jam packed. David
 (Expenses) sees too many of his competitors put too much out
Net Income Before 4.50% 5.75% on the floor and it is not shoppable. He understands
  Income Taxes one of the key metrics of the industry is dollars
Liquidity
earned per square foot, and agrees it is better to have
a smaller space and bringing in more money (the
Working Capital $ 000 $ 2,337 $ 2,389 Trader Joe’s model) than to have a large store bring-
Current Ratio 1.98% 2.01% ing in less money per square foot.
Quick Ratio 1.43% 1.46% Millennials are interested in specialty food stores
as they have an adequate source of living and are
Year-on-Year likely to use a significant share of their income for
Growth Rates, %
discretionary spending.25 Millennials keep up with
Total Revenue −0.76% current health and diet trends; in order to retain this
Gross Margin 0.72%
Operating Expenses 8.14% EXHIBIT 3  Specialty Food Stores:
Consumer Base
Source: Lola’s Market, Inc. and Affiliates.

Major market segmentation (2017)

This remodel is intended to fit consumer needs as
it will offer a buffet style, self-serve setting similar
to what is seen at large competitors such as Whole 12.4%
Foods. With this remodel, Lola’s will have freshly
prepared, authentic Mexican food with a breakfast, 37.3% Millennials
lunch and dinner menu. Customers can serve them- 21.1% Generation X
selves and will be charged based on the weight of Baby boomers
their meal. David understands the need to capture Swing generation
the interest of the younger market base and on a 29.2%
global level the millennial consumer is seeking a fast
meal that does not sacrifice health.22 Implementing
this self-serve option will offer the young Latino con-
Total $9.5bn
sumer the access to authentic meals that are healthy
and require little-to-no excess effort on their part. The Source: Guattery, M., IBISWorld Industry Report 44529, Specialty
millennial consumer is already shopping within the Food Stores in the U.S., 2017, retrieved from IBISWorld database.

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Case 10  Lola’s Market: Capturing A New Generation C-105

demographic, Lola’s must show the consumer that using this type of software will create a congru-
despite the stigma that authentic Mexican food is ency and consistency amongst Lola’s social media
inherently unhealthy, Lola’s offers healthy options— pages. Consistency amongst the platforms is key as
even options for the vegetarian consumer. As leaders, all the content being pushed must be in alignment
David Ortega and his management team must ensure with Lola’s mission statement and company cul-
that all the changes and efforts toward rebranding ture. Overall, utilizing social media can potentially
are met with support and understanding by Lola’s eliminate the number of flyers distributed weekly
employees at all levels. When Lola’s does launch and some excessive marketing costs, while allow-
their new remodeling at their Dutton Ave. location, ing Lola’s to give its customers real-time updates on
employees must understand and adhere to the new their new services, products, and promotions.
store dynamic. All new roles and responsibilities that
may be placed upon employees needs to be addressed
clearly and implemented with proper training.
FUTURE DIRECTIONS
To tighten its fit and truly target the millen- The focus on the millennial consumer is exciting as it
nial Latino consumer there are some additional will bring in a new market; but Lola’s must not forget
resources Lola’s may need. Though there are about its original consumer and employees who are
employees at Lola’s who are part of the millennial part of the earlier generations. Companywide Lola’s
generation, but none of them currently possess the must ensure that the implementation of social media
experience in social media marketing. No one on coincides with Lola’s value on quality, customer ser-
the Lola’s team has a background in this type of vice, and authentic Mexican food. Only then will
promotional marketing tactic, as the most current they distinguish themselves from every other com-
marketing methods include monthly radio sound pany marketing themselves on these platforms. By
bites and weekly flyers distributed to neighbor- implementing social media into their brand dynamic,
hoods near all five store locations. To be strategic in Lola’s is taking a global risk seen among many busi-
its industry Lola’s must take advantage of the new ness situations— the potential loss of integrity a
industry change and utilize that to their ­benefit— brand can face when delving into those platforms.
social media allows for direct access to customers The Internet creates an unknown place where users
and direct access to customer feedback through have the option to freely voice their opinions, both
applications such as Yelp. Instead of taking on the good and bad, behind an anonymous mask. If Lola’s
cost of hiring someone as a social media marketing is going to place itself in a position to be promoted
specialist, Lola’s can create a position for a college for the better, it also needs to be prepared to expose
intern who would handle social media marketing in itself to the potential of critique and feedback from
exchange for school credit. This type of relationship its customers. If Lola’s actively chooses to listen to
would give Lola’s access to someone with insights the constructive criticism and reviews that its con-
to the platform and accountability for the work he sumers offer, it can positively manipulate the nega-
or she is producing. As another alternative, David tive side effects and utilize that data to its benefit—as
can implement HootSuite into his stores and train they are receiving up-to-date consumer feedback at
store managers on running this software. HootSuite no financial cost. Lola’s must focus on keeping its
is a free, easy-to-use software that allows content integrity in light of new changes and challenges it
management across all social media platforms and may face with its coming business efforts.

ENDNOTES
1 6
D. Ortega, personal communication, October a word or phrase that is preceded by a pound North Bay Business Journal, “17 North
03, 2017. sign (#) and signifies that the content adheres Bay Latino Business Leaders,” North Bay
2
Tweets: On the social media platform Twitter, to a specific topic or event. Business Journal, September 9, 2016,
4
a “tweet” is when a user creates a new posting The Millennial generation is comprised of http://www.northbaybusinessjournal.com/
on their page. individuals born between the years of 1980 events/6057702-181/north-bay-latino-business-
3
Hashtag: Utilized on all social media and 2000. leadership-awards-named?artslide=10.
5 7
platforms including—but not limited too— D. Ortega, personal communication, Guattery, M., Industry Report 44511,
Facebook, Instagram, and Twitter, a hashtag is November 21, 2017. Supermarkets and Grocery Stores in the U.S.,

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C-106 PART 2  Cases in Crafting and Executing Strategy

17
IBISWorld, retrieved October 31, 2017 from Recode, March 30, 2017, https:// Pan Dulce—translated into “Sweet Bread.”
IBISWorld database. www.recode.net/2017/3/30/14831602/ This term encompasses many rolls, cookies,
8
Moore, M., “Interactive Media Usage Among amazon-walmart-cpg-grocery-price-war. and Mexican pastries.
13 18
Millennial Consumers,” Journal of Consumer Swindell, B., “Oliver’s Debuts Store Lola’s Market Home Site, Lola’s Market,
Marketing, 29(6): 436–444, 2012. of the Future in Windsor,” North Bay 2017, https://www.lolasmarkets.com/.
9 19
Schawbel, D.,“10 New Findings About Business Journal, May 17, 2016, http:// Fletcher, J., “Mexican Food Flourishes in
the Millennial Consumer,” Forbes, January www.northbaybusinessjournal.com/ Sonoma County,” SFGATE, April 24, 2002,
20, 2015, https://www.forbes.com/ opinion/5627170-186/olivers-markets- http://www.sfgate.com/bayarea/article/
sites/danschawbel/2015/01/20/10- new-windsor-store?gallery=5627183&arts Mexican-food-flourishes-in-Sonoma-
new-findings-about-the-millennial- lide=0. County-2846114.php.
14 20
consumer/#1db62f776c8f. Swindell, B., “Oliver’s Debuts Store Tortilla: (In Mexican cooking) a very thin, flat
10
Schawbel, D., “10 New Findings About of the Future in Windsor,”North Bay pancake of cornmeal or flour; sometimes with
the Millennial Consumer,” Forbes, January Business Journal, May 17, 2016, http:// added spices or flavoring ingredients.
21
20, 2015, https://www.forbes.com/ www.northbaybusinessjournal.com/ D. Ortega, personal communication, October
sites/danschawbel/2015/01/20/10- opinion/5627170-186/olivers-markets- 03, 2017.
22
new-findings-about-the-millennial- new-windsor-store?gallery=5627183&arts Health & Wellness, Food Marketing
consumer/#1db62f776c8f lide=0. Institute, 2017, https://www.fmi.org/
11 15
Rey, J. D., “Amazon and Walmart Guattery, M., Industry Report 44511, GroceryRevolution/health-wellness/.
23
Are in an All-Out Price War That Is Supermarkets and Grocery Stores in the U.S., Millennials Infographic, Goldman Sachs, n.d.,
Terrifying America’s Biggest Brands,” IBISWorld, retrieved October 31, 2017 from http://www.goldmansachs.com/our-thinking/
Recode, March 30, 2017, https:// IBISWorld database. pages/millennials/.
16 24
www.recode.net/2017/3/30/14831602/ Originally when David opened Lola’s the Porter, M. E., What is strategy?, Harvard
amazon-walmart-cpg-grocery-price-war. cost for the signage above the store was about Business Review, 74 (6): 61–78, 1996.
12 25
Rey, J. D., “Amazon and Walmart $125/per letter. To save some money David Guattery, M., IBISWorld Industry Report
Are in an All-Out Price War That Is shortened his mother’s name from Dolores to 44529, Specialty Food Stores in the U.S.,
Terrifying America’s Biggest Brands,” her nickname “Lola.” 2017, retrieved from the IBISWorld database.

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