Dive Brief:

• Cardenas Markets announced Thursday that it plans to acquire six Rio Ranch Market stores in Southern California.
• Cardenas expects the transaction to close by the middle of July and said stores will eventually be integrated into its operations after that point.
• “As we look ahead, we will continue to identify strategic opportunities to grow our business, while providing a fresh & authentic shopping trip for our customers,” Doug Sanders, Chairman & CEO of Cardenas Markets, said in a statement.

Dive Insight:

With the acquisition of six Rio Ranch Market stores, Cardenas is building up its store density east of the Los Angeles area, where it currently operates just a few stores.

Founded in 1983, the Rio Ranch Market chain focuses on fresh foods like meat, produce, prepared foods and bakery items, according to Thursday’s press release. The company’s stores are located in Perris, San Bernardino, Chino, Banning, Fontana and Riverside. Once the acquisition closes, they’ll join several Cardenas locations nearby in Moreno Valley, San Bernardino, Fontana, Ontario and Riverside. 

With nearly a dozen stores in the greater Los Angeles area, Cardenas will hope to become a destination market for a growing number of Hispanic and Latino consumers. Hispanic consumers comprise nearly 20% of the U.S. population, and their buying power increased 87% between 2010 and 2020, according to eMarketer. 

The first Cardenas Markets store opened in 1981, and the grocery company has grown through a combination of organic expansion and acquisitions to more than 50 stores in three states. The company was acquired by private equity firm KKR in 2016, and a year later, the firm combined it with Mi Pueblo to create one of the country’s largest Hispanic grocery chains.

In late 2017, Cardenas acquired seven Los Altos Ranch Market stores in Arizona from Northgate Gonzalez Markets. “Acquisitions and new strategic store locations are a key component of our growth strategy,” John Gomez, the then-head of Cardenas, said in a statement at the time.

By beefing up its footprint in Southern California, Cardenas poses more of a competitive threat to Northgate Gonzalez, which operates dozens of stores in the region.

Regional grocers like Cardenas are turning to acquisitions in order to expand and grow their economies of scale. And experts believe that M&A will heat up in the years ahead as technology, building costs and competition put pressure on regional chains.

“I do think that the operating environment and strategically what's happening in the market is setting us up for a wave of M&A among regional grocers in the coming months and years,” said David Ritter, managing director with Alvarez & Marsal, in a recent interview.