Chedraui supermarket chain expands in the United States

194

Due to a higher percentage of its earnings in dollars, the company expects its share price to be stronger.

Born in Xalapa in 1920, the Chedraui supermarket chain is one of the most traditional supermarkets in Mexico, however, in the last two decades, it has gained ground in the US sector. Now, after the purchase of Smart & Final, the company expects this country to represent more than half of its income.

In an interview with Forbes Mexico, Arturo Vasconcelos, general director of Operations, Logistics and Commercial of the company, assures that at present a large proportion of its sales come from its business in the United States, where its recent purchase represents a very profitable growth and attractive.

“Now the business in the United States will already represent a large proportion of the company’s total sales, more than half… it leaves us with a very good financial position, also because a very important part of the business is already transacting in dollars. , by accessing new markets, carrying the message and the Chedraui brand, we believe that this also gives the action a lot of financial strength ”, he says.

And it is that the Chedraui chain set its first foot in the United States in 1997, but in 2010, already with its subsidiary Bodega Latina, they acquired Fiesta Mexicana Market LP and Fiesta Warehouse LLC, in 2018 Fiesta Mart, while last May they announced the purchase of Smart & Final.

According to its financial report, in 2020 approximately 57% of the company’s revenues came from Mexico and 43% from the United States; However, Monex estimates that with the acquisition of Smart & Final its dollarized income would be more than doubling, representing around 64% of its consolidated sales.

For Vasconcelos, with this, the company’s risk is balanced, in such a way that exchange rate fluctuations have no less impact on business results; however, he specified that the company’s growth will continue both in Mexico and in the United States.

“Smart & Final is a company that has been established for a long time, we believe that it has had very good results over time and complements the portfolio of stores that we have in general … which puts us in a very healthy position and with a very balanced risk. Sometimes, this factor can help improve the company’s results and others can dilute us a bit, the variable, let’s say of the exchange rate and income in dollars, makes us have, although they are independent businesses, a lot of solidity in the value of the company. action ”.

In this sense, he explained that, although the club has a presence in Mexico, with some stores in Baja California Norte, before making the decision to launch a format as in other parts of the national territory, there are still some options that they consider they can explore, so they do not plan to bring the brand in the short term.

Traffic recovery, omnichannel and growth

The general director of Operations, Logistics and Commercial of Chedraui indicates that the company completely depends on the economic situation of the country, so they foresee that a recovery stage will come for 2022 because it is coming from 2020 and 2021 bases affected by the pandemic and as the economy and employment grow, those factors that influence consumption also do so in businesses like yours.

“ We see that we should already experience recovery of categories that were still affected in 2021, such as back to classes that will also have to recover during the following year and many more. You will also remember that 2021 includes certain periods of still disruptive comparison that the customer experienced ”.

In fact, Vasconcelos highlights that last July they began to see a recovery in traffic to stores and achieved very significant growth in double-digit tickets; at the same time that there is a consumer who is affected in his economy and who requires very creative solutions and directed towards this second half of the year to be able to optimize his spending.

“What is going to be the second half of the year, this issue of our client’s economic recovery will play a fundamental role in understanding purchasing behavior, especially in these high ticket categories, remembering that our client always privileges the purchase of basic products and there are some more discretionary expenses ”.

While in their omnichannel strategy they also see significant growth, which represent 4.2% of the total, where they observe that a large part of the trends driven by the pandemic continue, since the digital channel continues to solve some important purchase needs, while those stores serve other needs.

“We see many countries that have grown their omnichannel platforms at much higher levels than Mexico, I’m talking about countries like the United States, like some Europeans; We believe that an aspiration above 10%, of having a double business in these channels, is very feasible, that would represent more than double what we have right now, I think that number is achievable, but a couple of years still reach those levels ”.

Regarding the growth plan in stores, it indicates that they have several channels that they are exploring, both large stores, hypermarkets and supermarkets, as well as those of small-format called “Supercito”.

And it is that Chedraui will make investments this year of between 2,700 and 2,800 million pesos, with which it expects the opening of 8 stores.  

“Our investment strategy in that sense is more based on where there are opportunities to serve a client, when we detect that opportunity what we do is identify very well what that geography is and what demographics that geography has, and then decide what format is the more suitable to put: it is Selecto, they are normal stores, Supercito or new digital channels ”, says Vasconcelos.

Source: forbes.com.mx

Mexico Daily Post