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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.

That, of course, is exactly what's given Espinoza pause. While some entrepreneurs might fantasize about, say, a national Kroger rollout, to Espinoza that dream looks more like a huge headache. Not that he doesn't recognize the logic of growth. "The whole key to this business is volume," he says.


If Inca Quality Foods had continued as it started -- as a cash-and-carry supplier for small Hispanic neighborhood markets -- Espinoza would be sleeping easier today.


But he also realizes how much work that volume entails. "To run a company growing that fast," he acknowledges, "you need passion." Not only that, you need capital. You need to act before someone else steps in or before stores decide they can take the concept in-house. You also need to spend all your waking hours at it, at least in the beginning. And there's the rub: the not-so-small matter of Espinoza's satisfying full-time job at I/N Tek with that pension only three years away.

But is it all or nothing? In Espinoza's mind, at least, not quite. Before he started Inca Quality Foods he had another idea of what he might do after he was eligible to collect his pension. Like so many others in these boom times, he'd leave the large corporation and become a consultant to other companies in his area of expertise: preventive maintenance.

He hasn't totally closed that door. But the notion of consulting has also wrapped itself around his newly found food-industry expertise: why not advise national chains like Kroger and Kmart on the purchase and display of foods that would appeal to Hispanic customers? Then he could concentrate on the real value that he brings to the party. Let somebody else take on the buying, the warehousing, the distribution, the maintenance.

At the moment, Espinoza admits, he's at a "crossroads" -- although maybe a "cloverleaf" would be more like it. His enthusiasm sprouts out in all directions: toward his coworkers and what he is learning at I/N Tek; toward his community and his role in it; toward his children and their strivings; and toward Inca Quality Foods and the progress it has made.

With just 24 hours in a day, Luis Espinoza has some hard decisions ahead of him. Perhaps they are no better illustrated than by meeting the man himself. He is wearing a tan shirt with the Inca Quality Foods logo embroidered in bright green, red, and yellow stitching on the left side. And he hands you a business card: I/N Tek, Luis J. Espinoza, Process Electrical Systems Technician, Customer Product Representative.

Nancy J. Lyons is a senior editor at Inc.

Read the complete Start-Up Diaries series.


Executive Summary

COMPANY: Inca Quality Foods

FOUNDER: Luis J. Espinoza, 48

FAMILY: Married with four grown children, three sons and a daughter

EDUCATION: Electrical-engineering technology certificate from Purdue University

TYPICAL WORKWEEK: 40 to 50 hours at I/N Tek; 35 hours at Inca

CONCEPT: Distribute and sell Hispanic food products in grocery stores, including chains such as Kroger

FINANCING: About $25,000 from one investor/partner (with a commitment for an additional $30,000)

PROJECTIONS: Planned to break even by year-end 1999 with $450,000 to $500,000 in revenues

HURDLES: Balancing his commitment to his satisfying full-time job and taking advantage of current growth opportunities; finding growth capital

PERSONAL FUNDS INVESTED: About $25,000

EQUITY HELD: 70%

SALARY: None from start-up; $70,000 to $80,000 a year at regular job

PREVIOUS JOBS: Has been with the same company for 27 years and is currently a process electrical systems technician there; owned a Mexican restaurant, which he ran with his four children for two years and sold in 1998

OUTSIDE BOARD OF ADVISERS: No board. Advisers include SCORE mentor Jerry Marchetti, a former Sears executive; team members at I/N Tek; students in two M.B.A. classes at University of Notre Dame that took Inca on as a class project

LAST VACATION: Three years ago, one week (stayed around the house)

DREAM VACATION: A trip down the Amazon

FAVORITE HOBBY: Tournament pool

WHAT HE LOSES SLEEP OVER: "Inca is growing faster than I can handle," Espinoza says.

SOURCE OF INSPIRATION: Og Mandino, author of The Greatest Salesman in the World; Napoleon Hill, author of Think and Grow Rich; Stephen Covey, author of The Seven Habits of Highly Effective People

ROLE MODEL: His mother, who with only a fourth-grade education always believed, "You can do it."




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