About two months after it began rebranding the c-stores it acquired last year from Delek US Holdings, Fomento Económico Mexicano S.A.B. de C.V. (FEMSA) has now converted 15 locations to its Oxxo banner. And signs point to the Latin American retail giant ramping up those conversions — and updating the in-store offerings — at greater speed in the coming months.
During FEMSA’s first-quarter earnings call on Monday, José Antonio Fernandez Garza, CEO of FEMSA’s retail division, which it calls internally as proximity and health, said consumer reactions to these conversions — all of which have been in the Odessa and Midland markets of Texas — have been positive.
“The increasing sales and traffic have been significant… even in the double digits for the first store,” Garza told analysts on Monday.
However, the executive emphasized that “it’s too soon to tell” what kind of sales expectations FEMSA will have for its U.S. Oxxo rollout. He admitted that the early success is likely a “honeymoon phase” that will eventually stabilize, and that FEMSA still has “a lot of work” to do to build Oxxo’s value proposition in the U.S.
Garza compared the type of sustainable growth FEMSA wants for Oxxo to that of a few regional players who’ve built loyal followings through consistent organic growth and quality in-store offerings.
"The players that are winning share are the 'super regionals' — the Wawa’s, the Casey’s, the QuikTrip’s,” Garza said. “They’re not obsessed with big M&A. They're obsessed with getting the value proposition right and expanding organically. That's what we want to do."
Focus on foodservice
When FEMSA began its rebrands back in February, company leaders said it intended to bring capabilities from its operations in Latin America, where it has over 20,000 convenience stores, to the U.S.
This process has begun, with the Oxxo Mexico team sharing its pricing, assortment and segmentation skillsets with the U.S. team, Garza said on Monday.
Garza added that part of this process has been building Oxxo’s foodservice offerings in the U.S. FEMSA is bringing its proprietary Andatti coffee program — which features beans grown in Veracruz, Chiapas and Oaxaca, Mexico — to its U.S. stores, and is introducing some locations to its Doña Tota QSR, which specializes in gorditas.
"The players that are winning share are the 'super regionals' — the Wawa’s, the Casey’s, the QuikTrip’s. They’re not obsessed with big M&A. They're obsessed with getting the value proposition right and expanding organically. That's what we want to do."
José Antonio Fernandez Garza
CEO of retail, FEMSA
FEMSA will also launch an Oxxo pizza program with the help of an undisclosed pizza chain in the U.S., Garza said. He added that this partnership is an opportunity for FEMSA to “learn a category that we have not developed well in Mexico.”
“We would love to achieve up to 10% of our revenues of in-store sales on foodservice, but it's too early to tell yet how that will turn out,” Garza said.
Oxxo is experimenting with different food offerings as FEMSA figures out its value proposition during the test phase, Carbajal said. Some stores will be “more geared toward grocery,” while others may present as a blend of c-stores and dollar stores.
“We're willing to take those experiments because we really want to learn what works and what we can roll out nationally,” he said.
Although FEMSA intends to grow Oxxo organically in the U.S, the company will eventually look for a “good M&A opportunity” in the Southwest or Southeast, where it intends on becoming a “big consolidator,” Garza said.
“It’s too early to claim any type of victory or to expand, but our obsession would be organic growth with certain inorganic opportunities if they present [themselves].”
Correction: A previous version of this story misattributed quotes by José Antonio Fernandez Garza.
