The Start-Up Diaries: Moonlight over Indiana

Luis Espinoza has been moonlighting for the past few years to build Inca Quality Foods, a Hispanic food-distribution business. But he would never dream of quitting his day job. What's a two-career guy to do?

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Luis Espinoza has been moonlighting for the past few years to build a Hispanic-food-distribution business. But there's no way that he wants to quit his day job. What's a two-career guy to do?

Luis Espinoza works full-time at I/N Tek, an Ispat Inland/Nippon steel-finishing plant in New Carlisle, Ind. He has been with the company for 27 years; during that time he has risen through the ranks to become a process electrical systems technician. In 3 years he'll be eligible for a full pension. But that's only where his story begins.

After his day job is over, Espinoza, 48, dons his CEO hat at Inca Quality Foods Inc., a Hispanic-food importer and distributor he founded in South Bend, Ind. Espinoza loves his regular job. And he loves his start-up. Therein lies his dilemma.

Espinoza's second job, as a company founder, has its roots in another of his passions: his Hispanic heritage.

He grew up in Laredo, Tex., where his father farmed a rented parcel and his mother was a seamstress. When he was a kid, he says, his family would go over the border to Mexico to buy their food, which was both cheaper and more to their liking than the U.S. fare. In 1972, when he was 21, Espinoza and his wife followed her father north in search of work at the steel mills in East Chicago, Ind.

For someone who'd grown up in a border town, the move was a culture shock of the highest order. It was the first time Espinoza had encountered prejudice against Hispanics, and it affected him deeply.

He decided that in order to shield his four children from the problems he had faced, he would allow only English to be spoken at home. His decision deprived his children of the chance to grow up bilingual, he says, and they are learning Spanish only now, as adults.

The major turning point in his life came in 1993, when Espinoza was transferred to I/N Tek's plant in New Carlisle. He and his family settled in nearby South Bend, where there is a burgeoning Hispanic community. Shortly after the move, he decided to come to grips with another serious problem that had plagued him: alcoholism. As is so often the case, his decision to seek treatment for his addiction brought about momentous changes in his attitude, his zest for life, and his sense of what he could accomplish.

As he began to immerse himself in his community, he got involved with several local groups, serving on the board of directors of United Way and Urban League and joining the Hispanic Chamber of Commerce. For two years he was president of a LULAC (League of United Latin American Citizens) council; he also volunteers at La Casa de Amistad, a local youth and community center. Walking with Espinoza through the building that houses several local small-business-development offices -- including SCORE, where he found his own business mentor -- is like trailing a small-town mayor along Main Street. Doors open, greetings are exchanged, introductions made.

Because of his thorough grounding in the Hispanic community, Espinoza knows the particular tastes of consumers who come from Mexico, the Caribbean, and Central America. That knowledge has given Inca Quality Foods an edge with its supermarket customers.

Espinoza calls his sales technique "micromerchandising." He loves to tell the story of the local supermarket chain that relied on a Texas consultant and ended up stocking its shelves with Mexican foods in a Puerto Rican neighborhood -- where most of the residents shun hot spices.

If Inca Quality Foods had continued as it started in 1997 -- as a cash-and-carry supplier for small Hispanic-neighborhood markets in South Bend -- Espinoza would be sleeping easier today. In the early days he made trips on the weekends to warehouses in Chicago to pick up canned goods and spices, which he stored in a spare room above El Taco Tpico, the South Bend restaurant he then owned. He pretty much could let his son Luis Jr. run Inca. The company wasn't making a profit on revenues of about $60,000 a year, but it was covering expenses. Just as important, it was serving the small neighborhood stores. And when cash flow was stretched, Espinoza could toss in $500 here and $1,000 there from his paying job.

But, truth be known, Espinoza had bigger ambitions for his company. And early in 1998 opportunity knocked at his restaurant door: a patron, who happened to be an assistant manager in a local Kroger store, complimented him on his food and inquired about the ingredients. Espinoza offered to make a presentation about Hispanic foods to the customer's boss, the store manager.

Impressed with the concept, the store manager agreed to start selling Hispanic products slowly, with a display of spices in front of the meat counter. Largely because of the interest of a Kroger district manager in Indianapolis who saw the potential for increased sales, Inca Quality Foods now has its own display cases in 20 Kroger stores -- 17 in Indiana, 2 in Michigan, and one in Illinois -- and has projected 1999 revenues of close to half a million dollars.

At the stores, Espinoza's displays pull in new customers who not only buy the Hispanic foods but also pick up some produce and paper goods while they're there. So how can supermarkets lose? The answer, of course, is that they can't. When students in two M.B.A. classes at University of Notre Dame took on Inca Quality Foods as a project last year, they cited Espinoza's relationship with Kroger as one of Inca's major strengths. They found that when Inca's displays went into a Kroger store, overall sales increased. James Davis, academic director of Notre Dame's Gigot Center for Entrepreneurial Studies, says that of the 30 companies that make presentations to his business class every semester, only about half are truly viable, fast-growth opportunities. And Inca Quality Foods is one of them.

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