Ole, Smart & Final joins chains going south - Smart and Final Stores Corp.'s Mexican joint-venture with Central Detallista S.A

Discount Store News, Jan 4, 1993 by Arthur Markowitz

SANTA BARBARA, Calif. - Add Smart & Final to the list of warehouse chains expanding to Mexico.

The company, which operates 125 non-membership warehouses, has formed a joint venture with Central Detallista, S.A. de C.V., to open nine Smart & Finals across Northern Mexico by 1995 - the initial three opening this year - and to sell its 1,100 private label products in the warehouses and the Mexican retailer's 42 stores.

The stores will be modeled on Smart & Final's current prototype, 15,000-sq.-ft. to 19,000-sq.-ft. warehouse-type units that stock about 10,000 skus, mainly large and institutional size food products but with a smattering of paper goods and janitorial supplies. Smart & Final doesn't charge a membership fee and its warehouses are open to consumers.

Smart & Final will invest $10 million to $15 million in the venture, owned equally by the two partners, along with providing operational and technology expertise. The nine stores are to be spotted in Baja California and Sonora, the Mexican states abutting California and Arizona, but Smart & Final hopes to eventually open about 50 stores throughout in Mexico.

Central Detallista is a 50-year-old, $300 million privately held company owned by the Fimbres family, which has three generations of experience in the supermarket business. It's based in Tijuana, Mexico, which is just over the border from Chula Vista, Calif., and operates two regional grocery businesses: Calimax, a 33-store supermarket chain, and Bodegon, a nine-unit warehouse chain that just sells to small groceries, unlike Smart & Final which also serves large food businesses like institutions and restaurants and consumers.

Bodegon resembles Smart & Final's original operation prior to the chain's remodeling into warehouses with an augmented customer base during the mid-'80s.

Robert Emmons, Smart & Final's chairman and chief executive officer, said the company had long considered expanding into Mexico as the logical extension of its success serving Hispanic customers.

Smart & Final has stores in the border markets of El Centro and Chula Vista, Calif., and Yuma, Ariz. The company analyzed these three stores and found they had a high percentage of Mexican customers. Additionally, labels for its three private brands, Iris, Montecito and Smart Buy, are already bilingual to service Hispanic shoppers in its stores in California, Arizona and New Mexico.

Central Detallista decides to enter the joint venture rather than convert its Bodegons into full-line warehouses, as the deal with Smart & Final will expand the Mexican company's overall presence in what is becoming a highly competitive market due to the influx of American retailers.

Last year Wal-Mart formed a joint venture with Cifra, S .A. de C.V. that has already begun to open Club Aurrera membership warehouses and Wal-Mart Supercenters, while Price Co.'s joint venture with Comercial Mexicana has launched Price Club de Mexico wholesale clubs. Kmart, meanwhile, was negotiating a joint venture at press time with El Puerto de Liverpool to open stores patterned after Super Kmart Center (see story, page 1).

The boom in joint ventures between American and Mexican companies reflects the growing belief that the North American Free Trade Agreement - signed by the presidents of the two countries and the prime minister of Canada last month but awaiting approval by Congress - will result in markedly increased trade among the three nations.

Jose Fimbres Moreno, Central Detallista's chairman and ceo, said Smart & Final has developed a unique format that has been highly successful in the United States and in marketing to California's Hispanic community. "We believe that this success can be transferred to Mexico. This joint venture also allows Central Detallista to further strengthen its presence in Northern Mexico as the leading food company."

Central Detallista's stores are in Tijuana, Rosarito, Ensenada, Mexicali, Tecate and San Luis Rio Colorado.

The two companies at press time were completing the final details of the joint venture, including the name of the new company, location of its headquarters in Mexico, makeup of its board and naming of its executives, along with the locations of its stores.

Smart & Final had talked about expansion into Mexico last fall at a conference sponsored by security analysts Alex. Brown & Sons. "The announcement now tells who is our joint venture partner," said Leanne Reynolds, Smart & Final's director of corporate and investor relations.