Dive Brief:
- Albertsons announced it has made an investment in El Rancho Supermercado, a 16-store chain in Texas that serves predominantly Latino customers, according to a company release. Terms of the investment were not disclosed.
- Albertsons says its investment reflects a desire to enter the fast-growing Hispanic grocery industry, and that its retail expertise will help El Rancho grow. El Rancho will continue to operate as an independent chain.
- "With El Rancho's own distribution and manufacturing facilities serving their Texas stores, we can share best practices that will reduce costs and benefit our customers," Albertsons CEO Bob Miller said in the release.
Dive Insight:
Less than two months after it purchased meal kit company Plated, Albertsons has sunk its teeth into another high-growth segment of the food industry.
Across the country, and especially in the Texas, Southern California and Florida markets, Hispanic grocers are tapping into a valuable and growing shopper base with authentic foods and one-of-a-kind store experiences. Driven by a Hispanic population that currently stands at 54 million and is set to more than double over the next 40 years, retailers like Fiesta Mart, Northgate Markets and Cardenas Markets have grown considerably in recent years — and not only in crowded markets but in diverse and low-income neighborhoods, as well, where traditional grocers often struggle.
El Rancho Supermercado, based in Garland, Texas, is smaller than many Hispanic grocery chains, with just 16 stores. But it’s shown considerable potential for growth of late. According to a recent grocery survey by Rincon & Associates, a consulting firm that focuses on Hispanic businesses and consumers, El Rancho has a 10.5% market share in the Dallas-Fort Worth market — ahead of H-E-B (8.1%) and Fiesta Mart (6.5%).
El Rancho focuses on authentic products and services, and has a wide array of produce, meat and seafood options. Stores feature refreshment stations with seating and flat screen TVs, a tortilleria that turns out fresh-made tortillas, and numerous hot food selections.
With Albertsons’ investment, El Rancho gains crucial funding to help it expand. More importantly, it gains expertise from a retailer that excels at scaling stores and implementing efficiency measures. As Food Dive outlined in a recent story, Hispanic grocers are at a crucial point in their evolution. Having grown up as independent operations, they’re on the cusp of mainstream appeal and require the investment, consolidation and expertise needed to scale effectively.
Private equity has gotten involved. In 2015, Acon Investments acquired Houston-based Fiesta Mart. Last November, investment firm KKR, along with Victory Park Capital, bought California grocers Cardenas Markets and Mi Pueblo, whose combined 49 stores accounted for $1.3 billion in annual sales. In July, KKR merged Mi Pueblo and Cardenas and announced the goal of becoming the nation's largest Hispanic retailer.
Scott Moses, managing director and head of food retail and restaurants investment banking with Peter J. Solomon in New York — who served as financial advisor in the Albertsons-El Rancho deal, advised Mi Pueblo on its sale to KKR/Cardenas and advised on Sprouts Farmers Market's merger with Henry's Farmers Market in 2011 and Sunflower Farmers Market's sale to Sprouts in 2012 — believes that Hispanic grocers face the same growth potential and challenges that natural and organic grocers did more than a decade ago.
“There are already hundreds of Latino-focused specialty grocery stores in the U.S., but there should be many more over time as population dynamics continue to change across the country," Moses told Food Dive.
