The case for queso – an overview of the Hispanic cheese market
June 2024
Table of Contents:
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Overview & History
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Market Size, Growth, and Cyclicality
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Competitive Landscape
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Investment Considerations
Overview & History
IN kitchens and restaurants across the country, dishes featuring Hispanic or Latin American
cheeses are becoming more popular due to the ever-growing Hispanic population in the United States. Mexican, Caribbean, and South American-style authentic cheeses have been growing double digits for nearly two decades while the overall cheese category has been flat. Hispanics make up ~20% of the population, but Hispanic-style cheese represents just ~3% of the cheese produced in America.
Hispanic food in United States has been shaped by waves of immigration, resulting in a wide variety of Latin American cuisines built from — or in spite of — American ingredients and limitations. CPG leaders in carbonated beverages, snack foods, frozen foods, and packaged goods pounced on the Hispanic food trend starting in the 1960s, increasing sales with products specifically tailored to the unique taste and convenience needs of Hispanic consumers. Frito-Lay for example, has an extremely successful track record for introducing Hispanic-driven innovation to Hispanic-dominant populations, then pushing it out to the mainstream. Once upon a time in the early 60s, a brand called Doritos was sold only in California, specifically targeting Hispanics. Today, it’s a grocery and convenience store staple throughout the world.
As immigration continued through the back half of the century, professional and at-home chefs brought in their own traditions, even as they began to cook American dishes, resulting in a uniquely Mexican-American cuisine. Grilled cheese sandwich? It needs salsa. Lunch meat and Kraft singles? Through it in a tortilla. Government cheese made for some memorable quesadillas and those flavorless, industrial flour tortillas absolutely came alive with a little salsa, guac, and sour cream. Grated yellow "industrial cheese" soon became synonymous with Mexican American food – found on regional dishes ranging from Tex-Mex puffy tacos to the Midwest's walking tacos — and was cemented as America's taco cheese thanks to fast food chains like Taco Bell and Del Taco.
The addition of these cheeses, of course, reflects how these chefs — and many Hispanic American residents — cook at home. But the fact that these cheeses are more readily available also points to an increasing desire among American home cooks to have a "global pantry. " a term that Eater first described in 2020.
The “global pantry” phenomenon is why you now see dukkah on avocado toast, kimchi in grain bowls and sambal served with fried Brussels sprouts. It's a kind of polyglot internationalism presented under the New American umbrella, with the techniques and raw materials of non-Western cuisines used to wake up the staid, predictable flavors of familiar Americana.
Hispanic-style cheese is where Italian cheeses were 30 years ago. In the '90s cookbook authors and TV hosts like Mario Batali heralded an influx of interest from general audiences in authentic regional Italian cooking and Italian cheeses, which flowed into a massive diversification of the cheese isles in American grocery stores. While home cooks used to have to visit specialty stores for varieties like taleggio, fontina and burrata, these items are now often found at supermarkets alongside bagged shredded mozzarella and powdered "shaker" Parmesan. All signs point to a similar explosion in the coming decades for Hispanic-style cheeses like cotija, Oaxaca, panela, queso blanco, queso fresco, queso de freír, and queso quesadilla.
There are multiple secular trends contributing to this growth, all of which are underpinned by America’s shifting population demographics.
Growth in Total U.S. Hispanic Population – Since 2000, Hispanics in the U.S. have grown from just 35.2 million (~13% of population) to over 62.5 million (~20% of population). To put this in perspective, Hispanics accounted for over half of all the population growth in the U.S. over the last 20 years, growing 3% annually versus just shy of 0.5% for the rest of the country. While future projections are highly subjective and depend a multitude of factors that are impossible to predict, historical base rates suggest the U.S. Hispanic population in 2060 will be over 100 million people or one third of the entire U.S. population.
Descent Group Diversity – The growth of Hispanics in the U.S. has been incredibly diverse, with immigrants coming not just from Mexico (more the norm in the 20th century), but from a wide variety of Hispanic countries like Venezuela, Colombia, Cuba, El Salvador, and Guatemala, among others.
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Growth of Latino Population by Descent Group 2000-2020
Source: Pew Research
This population diversity has important implications for the cheese market – every ethnicity has different styles of cheese that are popular in each home country. While this is a generalization and is by no means comprehensive, the different styles of Hispanic cheeses from each major Hispanic region are as follows (ordered by overall size of current U.S. Hispanic population):
a. Mexico (64% of Hispanic population) – Queso fresco, quesadilla, cotija, panela, and Oaxaca.
b. Caribbean (Dominican Republic, Cuba, etc.) (18% of Hispanic population) – Queso de freír, queso blanco, queso cremita, queso cremita, queso criollo, queso de hoja, and queso del país.
c. Central American (Guatemala, El Salvador, etc.) (12% of Hispanic population) – Queso fresco, duro blando, and queso seco.
d. South American (Colombia, Venezuela, Argentina, etc.) (6% of Hispanic population) – Quesito Colombiano, queso Ecuatoriano, queso llanero, and queso para Pandebono.
As you can see below, primarily due to the size of the Mexican population in the U.S., queso fresco dominates the category. However, other types are beginning to take a larger share of the market as demographics shift as the Hispanic population has become more diverse in recent decades.
Specialty Cheese (Deli Section)
U.S. Retail Sales by Segment ($B)
Source: IRI Integrated Fresh and Food
To a Midwesterner like me, the names of these cheeses can be confusing, since varieties that have identical properties in terms of look and taste can have different names in different countries (cottage-type cheese made with fresh, skim milk is called Queso de Puna in Puerto Rico and Queso Fresco in El Salvador and Venezuela) but the important thing is that category overall is becoming increasingly less concentrated in just Mexican-style cheeses.
Buying Power of the Hispanic Consumer – The Hispanic consumer’s buying power has grown tremendously in the last 20 years at a 9% clip annually for the last decade. This outpaced general population growth by nearly 30% over that same period. Since 1990 Hispanic buying power has grown nearly 8x and shows no signs of slowing given the population is drastically younger than the general U.S. population.
Buying Power of Hispanic Population ($T)
% of Hispanic Population with a College Degree (%)
% Growth in Buying Power 2010 - 2020
Median Age
Source: U.S. Census Bureau, Pew Research, University of Georgia Selig Center for Economic Growth Hispanic Buying Power Report
Hispanic At-Home Food Purchasing Behavior – Total grocery spend per Hispanic household outpaces the general market in nearly every outlet and income level. Compared to the general population, Hispanics make frequent fill-in trips, which fulfill grocery shopping needs for products they’ll use that day like dairy, deli meats and cheeses, and bakery items. As a result, grocery shopping trips are more frequent, and baskets are often full of fresh ingredients. Roughly 20% of Hispanics’ routine shopping trips are for products they’ll use that day, versus virtually zero for the general market.
Average Food Spend per Month ($)
Average Food Spend per Visit by Income Level
Source: IRI Integrated Fresh and Food
Compared to the general population, Hispanics are much more likely to shop at smaller bodegas that sell familiar products and brands versus big box or traditional grocers, so having a wide breadth of distribution points is essential for Hispanic cheese producers.
Market Size, Growth & Cyclicality
The core U.S. Hispanic cheese market is ~$1.5B. Of the ~$1.5B addressable market, a little over half ($0.8B-$0.9B) is currently realized by branded cheese producers; the remainder comprises private label sales. The market is highly diverse by retail channel (i.e., mass, wholesale, traditional grocery, bodega, e-commerce, etc.). The largest individual channel is mass / supercenter (~one third of the total) which as you’d expect, is dominated by Wal-Mart and bodegas are a much higher percentage of sales when compared to typical categories within food and beverage.
The market is expected to grow at a 5-7% annual rate in coming years, buoyed primarily by the demographic trends highlighted earlier.
Market growth results from a combination of robust underlying Hispanic population growth (~2-3% annual volume growth) and 2-3% from pricing. This young, increasingly educated Hispanic population will drive growth in purchasing power and ultimately trickle down to a robust growth in Hispanic cheeses. A few secular drivers point to an outcome where businesses with adequate scale and capital to invest come out as the winner, including the increasing rise of automation applied to the traditionally “hand-made” cheese production process as well as increasing regulatory and food safety requirements as a result of multiple Listeria outbreaks in recent years.
There is also a potential future where the long-term market growth is greater than 7% if U.S. household penetration improves from historical levels (i.e., if non-Hispanic households start incorporating more Hispanic-style cheese into their grocery spend) but this will likely take decades and is not something I'd underwrite.
Household Penetration – % of U.S. Households Purchasing Hispanic Cheese in 2023
Source: IRI Integrated Fresh and Food
I think I’ve laid out a reasonable framework for thinking about the industry as whole, but now let’s look at how that pie gets divided and where the competitive landscape sits today. I am going to focus primarily on the larger branded segment as there is less publicly available information on who exactly the key players are within the lower margin private label portion of the market (if I had to guess it is a mix of larger co-ops in Wisconsin and smaller mom-and-pop producers like Hispanic Cheese Makers).
Competitive Landscape
Cacique (~35% Branded Hispanic Cheese Market Share)
The clear leader and largest company in the branded segment is Cacique, known for its wide range of authentic Mexican cheeses, creams, and other products like chorizos and tamales. While Cacique offers other styles of cheeses (i.e., Caribbean and South American-style), they are primarily focused on Mexican-
styles given the Company’s original founding in California and strong presence in Texas, the two states with the highest saturation of Mexican-Americans.
Cacique was founded in 1973 by Gilbert and Jennie de Cardenas, a couple of Cuban immigrants who settled in California. They noticed a gap in the market for authentic Mexican cheeses and decided to start producing and selling their own. The company began in a small, leased space in Los Angeles, where they initially focused on making cotija cheese—a staple in many Mexican dishes. The company grew quickly as demand for authentic Hispanic products increased among the Hispanic population in the U.S., especially in California and Texas. Focused on high quality and traditional recipes, Cacique gained a loyal customer base of recent Hispanic immigrants that were searching for a taste of home.
Over the years, they expanded their product line to include a variety of cheeses such as queso fresco, panela, and asadero, as well as cremas and yogurts specifically tailored to Hispanic tastes. In the 1980s and 1990s, Cacique continued to innovate by introducing new products and improving packaging to extend shelf life and enhance convenience for consumers. They were among the first to introduce vacuum-sealed packaging for Hispanic-style cheeses in the U.S., which was a significant innovation at the time.
Cacique has significantly expanded its production capabilities and distribution network in recent years. They have modernized their facilities and incorporated more sustainable practices into their production processes. The company has also engaged in various community outreach and philanthropic efforts, further strengthening its brand in the communities it serves. Today, Cacique remains a family-owned business, with the second generation of the de Cardenas family at the helm. The company is recognized as one of the leading producers of Hispanic dairy products in the United States, with products available in supermarkets nationwide.
Interestingly, in 2021 Cacique announced it had received a minority investment from legendary investor Seth Klarman’s firm Baupost. The total amount invested was not disclosed but right around the same time, Cacique announced plans to open an $88 million 200,000 square-foot facility in Amarillo, Texas so I think it’s a fair bet to assume Baupost’s investment was in the $90-$100M range for a small minority stake. At a minimum this implies Cacique is worth around a billion dollars.
Tropical Cheese Industries (~25% Branded Hispanic Cheese Market Share)
Tropical Cheese Industries is a leading manufacturer of Hispanic-targeted dairy products in the United States, particularly known for its high quality, strong brand, and wide variety of cheeses that cater to different tastes within the Hispanic community. Tropical is the dominant player on the east coast (primarily New York, New Jersey, and Florida) and is particularly diverse in its offerings (strong in Caribbean, Central, and South American-style cheeses) compared to Cacique’s dominant position in just Mexican-focused dairy products.
Founded in Perth Amboy, New Jersey in 1982, Tropical started as a small operation focusing on the production of Caribbean-style cheeses, responding to the growing demand from the local Cuban and Dominican population on the east coast. Over the years, Tropical Cheese expanded into Mexican, South American, and Central. American-style cheeses and other dairy products to become a major player in the dairy industry on the east coast. Tropical Cheese is known for its wide range of products, including varieties such as queso fresco, queso de freir, queso blanco, and crema. The company has continually adapted and expanded its product line to include more than just cheeses, venturing into creams and desserts typical of Latin American cuisine. The company has focused relentlessly on maintaining traditional recipes and techniques while incorporating modern technology to improve product quality and safety.
The company has won numerous awards for its products, reflecting its commitment to quality. Tropical’s facilities incorporate the latest in dairy processing technologies which has helped the company maintain high standards and compliance with increasingly stringent federal and state food safety regulations. Tropical is also known for its community involvement and has been actively engaged in supporting local communities through various initiatives and educational programs, which has strengthened its ties and brand loyalty among its consumer base.
Today, Tropical operates out of four facilities – a flagship production facility in Perth Amboy and three distribution facilities (two in Florida and one in Massachusetts). The company remains family-owned and managed.
Long-Tail of Smaller Players with less than $200M in annual sales (~40% Branded Hispanic Cheese Market Share) Smaller brands like La Morenita, El Mexicano, V&V Supremo, La Vaquita, La Chona, and dozens of others make up the remainder of market.
Investment Considerations
Importance of Scale. Large-scale producers like Cacique and Tropical benefit from scaled production and distribution footprints which (like any food/CPG company) leaves them better positioned to win competitive shelf space within big box grocery chains and club stores like Walmart, Kroger, Costco, and Sam’s Club. To consistently stay on the shelf, leading retailers demand fast lead times and consistent product quality which is difficult for subscale brands to achieve across multiple states given the upfront investment required to build out a scaled, fully refrigerated supply chain. Once brands get really big (>$500M-$1B in sales), theoretically they could start experimenting with commodity price hedging for the main inputs (nonfat dry milk and whey) which should take some of the risk out on the cost side (allowing for more competitive pricing). On the flip side, smaller, specialized producers might carve out niches by going big on quality/organic, artisanal production methods, or unique flavors. Another scale benefit is larger marketing budgets which play into enhancing brand value (see branding discussion below for further discussion).
Concentration of Hispanic Buying Power. As you can see in the graphic below, Hispanic buying power is incredibly concentrated in a few big markets. Most U.S. Hispanics live in four states – California, Texas, Florida, and New York – though these populations are expanding into other regions of the country. This has important implications for the competitive dynamics within the market because of the short shelf life – producers must have distribution facilities in or nearby these key states to achieve significant scale.
Household Penetration – % of U.S. Households Purchasing Hispanic Cheese in 2023
Purchase Criteria for Consumers
a. Authentic Taste and Freshness – Foreign and U.S.-born Hispanics from different countries each have vastly different dairy preferences, perceptions, and consumption patterns, which makes authentic taste incredibly important. Freshness and “natural” are highly valued food attributes among Hispanic consumers. The term fresh is often linked directly to a farm heritage, as many foreign-born Hispanics emigrated from rural areas where they drank milk from their own family farm, or purchased it from a local dairy or milkman. As a result, more than 40 percent of less acculturated Hispanics say milk from their home country tastes better than the milk in the United States, reporting that it’s “more natural,” “fresher,” or has “no chemicals/preservatives/is pure.” Almost a quarter of Hispanics say they’ve consumed organic milk and 18 percent say they’ve consumed hormone-free milk in the past 30 days, compared to 11 percent and 7 percent of the general population. Not only is freshness an indicator of taste preferences, but it also sends health cues.
b. Availability / Distribution – Hispanic cheeses have a shorter shelf life. Historically, these cheeses were consumed relatively quickly after manufacture. This presents issues in the United States, given the country’s cheese distribution system and retailer expectations regarding shelf life of cheeses. The fresh types of Latin American cheeses typically have a higher pH and moisture content, which makes them more prone to undesirable microbial growth, including pathogens and spoilage bacteria. Therefore, these cheeses must be produced under very strict sanitary conditions.
c. Brand – Even with lower incomes, less acculturated Hispanics are brand loyal and are most likely to buy branded dairy products.
d. Price
Key Brand Valuation Drivers and KPIs in the Industry:
$ Volume – Absolute dollar volume at a specific retail location – how much a brand sells in total at an average location, usually looked at at the individual store level and by region and channel overall.
Total Distribution Points ("TDP") – Measurement that tells you the relative health of your brand or product. Using TDP lets you craft a winning product assortment strategy and avoid investing in weak products. You can find it by calculating the number of retailers your products are in (breadth) and the number of products you’re selling in those stores (depth). Looking at one or the other metric is valuable, but it doesn’t paint a complete picture. TDP is particularly valuable for CPG products that sell in many retailers like grocery products or other fast moving consumer goods ("FMCG"). The more stores your products are in, obviously the more distribution points you have and the higher the valuation. The more distribution points or "wallet share" you have with a given retailer, the more bargaining power you have because your brand is established as a category leader in the minds of consumers.
$/TDP (sales per distribution point, also known as SKU velocity) – measures the sales per point of distribution for a given product. One of the most common and powerful measures of distribution productivity. $/TDP (sales per distribution point, also known as velocity). When looking across product groups with differing distribution levels, $/TDP accounts for the distribution and ranks products on their sales productivity based on distribution levels. For example, one brand might sell 2 times more than another brand, but if the higher selling brand has 3 times the distribution levels, then it is actually a less productive brand on the shelf.
SKU Assortment – Total number of unique SKUs a brand sells at a specific store. Good way of tracking diversity and breadth of a brand's product offering.