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Mexico's Grupo Comercial Chedraui Agrees to Buy Texas Grocer Fiesta Mart, Sources Say

25 Mar 2018 4:01 am
By Heather Haddon 

The U.S. arm of Mexico's Grupo Comercial Chedraui SAB agreed to buy Texas-based Fiesta Mart Inc., the latest supermarket tie-up as a wave of consolidation shifts into Hispanic food stores.

The acquisition, by Chedraui's California-based unit Bodega Latina Corp., which runs the El Super chain, values closely held Fiesta Mart at as much as $300 million including debt, according to people with knowledge of the discussions. The deal for Fiesta Mart, owned by private-equity firm Acon Investments LLC since 2015, could be announced Sunday.

The deal positions Bodega Latina to become one of the largest Hispanic food retailers in the U.S. by revenue, as it would add more than 60 stores and another region to its growing terrain in California, Arizona, and Nevada.

Competition has driven a wave of consolidation among food retailers and distributors. Amazon.com Inc.'s purchase of Whole Foods Market Inc. and the expansion of European deep discounters in the U.S. has fueled a variety of deals.

Last month, Albertsons Cos. announced it was buying Rite Aid Corp. and its nearly 2,000 remaining stores, for example. The competition has also caused a number of supermarket restructurings and outright sales in the past year.

Now, deal hunters are turning their sights toward the Hispanic food-retail sector. The industry remains fragmented and its prospects are relatively strong given the heightened interest among consumers for imported specialty products.

Last year, food wholesaler and retailer Supervalu Inc. bought Associated Grocers of Florida Inc. and Unified Grocers Inc. to give the Minneapolis company greater access to Hispanic and Caribbean markets. Albertsons invested in the Texas-based El Rancho Supermercado chain in November and private-equity giant KKR & Co. oversaw the tie-up between the Cardenas Markets and Mi Pueblo supermarkets last summer.

Chedraui, based in the Mexican municipality of Xalapa, has also been on a buying spree, which has transformed it into one of the largest consumer-goods retailers in Mexico. It has a market value of about 37 billion Mexican pesos ($2 billion).

Hispanic shoppers are driving growth in food and beverage sales in an otherwise anemic environment for consumer companies and retailers. Hispanic consumers increased their spending on consumer goods by just under 1% over the year ending in October, while dollars spent by other shoppers was down slightly, according to Nielsen. Hispanics outspent other shoppers in 12 of the 16 primary food and consumer categories tracked by the research firm. More adventurous eating among the U.S. population has also fueled an interest in Hispanic products, according to Nielsen.

Hispanic-oriented food retailers are well positioned given a growing population that seeks out imported and specialty products in stores, said Bob Goldin, co-founder of food consultancy Pentallect Inc.

"They are a very loyal group," said Mr. Goldin, adding that Hispanic supermarkets are "pretty well insulated" from Amazon.

The U.S. Hispanic population, now standing at around 55 million, is projected to more than double by 2060, according to U.S. Census Bureau projections.

Write to Heather Haddon at heather.haddon@wsj.com

(END) Dow Jones Newswires

March 25, 2018 00:01 ET (04:01 GMT)

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