Dive Brief:

• Mexico’s Grupo Comercial Chedraui announced it will acquire Texas-based Fiesta Mart and its 63 stores to create one of the U.S.’s largest Hispanic grocery chains, according to a news release. Chedraui’s Bodega Latina unit, which currently operates 59 El Super stores in California, Arizona, Nevada, New Mexico and Texas, will oversee the new stores.
• Sources interviewed by The Wall Street Journal estimate Fiesta Mart’s value at $300 million. The chain is owned by private equity firm Acon Investments, which bought it in 2015. Combined, Fiesta and El Super bring in around $3 billion in annual revenue, according to the companies, and operate in the five states that hold more than 50% of the Hispanic population in the U.S.
• There are 55 million Hispanic consumers in the U.S., according to the Census Bureau, and that number is projected to double by 2060. Nielsen research shows that Hispanic shoppers outspend other shoppers in 12 of 16 primary categories covered by the firm.

Dive Insight:

Bodega Latina now controls one of the largest Hispanic grocery chains in the U.S., but it will have to address significant issues with Fiesta Mart if it hopes to continue growing.

For decades, Fiesta Mart has been a favorite among Texas’ Hispanic shoppers. In recent years, though, the chain has failed to resonate with second- and third-generation consumers. In 2016, it began updating its stores to incorporate a broader array of ethnic products and services. This included English tea, Puerto Rican bread and foodservice stations serving Thai noodles, Greek salad and sushi. Fiesta also added more apparel — including kids’ clothes — redesigned its employee uniforms, and incorporated services like a smoothie bar.  

According to sources interviewed by Food Dive, the new international focus alienated many of its core Hispanic customers. A consumer survey conducted by Dallas-based Rincon & Associates found that Fiesta Mart’s market share among Hispanic shoppers in Dallas plummeted from 25% in 2015 to just 6.5% in 2016.

Last year, Fiesta Mart replaced CEO Mike Byars with Target veteran Sid Keswani.

Fiesta’s woes aside, expansion, consolidation and big-time investments are heating up in the Hispanic grocery channel. Last summer, private equity firm KKR merged its Cardenas Markets and Mi Pueblo brands, creating a unified chain covering key markets throughout California. In November, Albertsons announced it had invested in El Rancho Supermercado, a popular 16-store chain in Texas.

And Southeastern Grocers may have just filed for bankruptcy, but its Fresco Y Mas banner remains a bright spot. The company has converted numerous Winn-Dixie and Bi-Lo stores to the format, and recently announced new locations in Orlando and Tampa.

Significant tailwinds are boosting Hispanic grocers’ prospects. The number of Hispanic shoppers in the U.S. is set to double in the next 40 years. According to Nielsen, this group spends $175 more per year than other consumers on high-value fresh foods. Hispanic grocers like Northgate Markets are also reeling in many non-Hispanic consumers who crave authentic south-of-the-border flavors.

Consolidation and investment will help Hispanic grocers scale up and even compete with mainstream chains. But operators will have to carefully calibrate their approach so that their offerings appeal to a broad range of consumers without sacrificing authenticity. If companies like Bodega Latina can do so, they’ll continue to grow in key Hispanic markets on the West Coast and in the South, and eventually push into cities across the U.S.