May 19, 2021
Grupo Comercial Chedraui, Mexico’s third-largest retailer and the largest Hispanic grocery store operator in the U.S., has reached an agreement to acquire Smart & Final, which operates “smaller, faster” warehouse stores across California, Arizona and Nevada.
The set purchase price is $620 million. Private-equity giant Apollo, the seller, acquired the business in 2019.
Smart & Final, which is headquartered in Commerce, CA, operates more than 250 free-membership warehouse-style stores under the Smart & Final and slightly larger Smart & Final Extra banners, as well as 16 stores in Northwestern Mexico through a joint venture. The company is celebrating its 150th anniversary this year.
The retailer seeks to differentiate itself by offering a broad range of product sizes, including standard-sized items typically found at conventional grocers and larger-sized offerings typical of warehouse clubs. Pricing is said to be “substantially lower” than conventional grocers and competitive with large discounters and warehouse clubs.
“We believe we offer higher quality produce at lower prices than typically found at large discounters,” Smart & Final added in its 2019 10K. “We also believe our Smart & Final stores provide a better everyday value to household and business customers than typical warehouse clubs by offering greater product selection at competitive prices, with no membership fee requirement, in a convenient easy-to-shop format.”
Flagship Smart & Final stores average about 17,000 square feet and carry about 12,000 SKUs on average. Costco’s locations, in contrast, average 146,000 square feet and offer an average of 3,800 SKUs. Conventional supermarkets generally average between 30,000 to 40,000 SKUs.
For Chedraui, the acquisition broadens and diversifies its customer base and expands its footprint. In the U.S., through its Bodega Latina subsidiary, Chedraui operates 120 stores under its ownership of Los Angeles-based El Super and Houston-based Fiesta Mart.
With Smart & Final’s annual sales at $4.1 billion, Chedraui’s sales in the U.S. will reach in excess of $11 billion post-acquisition. “Smart & Final, with a unique go-to-market and operating strategy, is an attractive fit that is aligned with our business strategy in the U.S., utilizing differentiated formats to focus on growing, but underserved markets,” said Carlos Smith, president and CEO of Bodega Latina.
DISCUSSION QUESTIONS: What do you think of the competitive positioning and growth potential for the Smart & Final concept? Will the change in ownership from a private equity firm to Chedraui make a difference for Smart & Final’s operations and performance going forward?
"The biggest encouragement is that they are no longer under the thumb of a PE firm and now are owned by a real retailer, one who also knows the target."
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May 19, 2021 at 11:41PM
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