Retail Chinn-wag: competition heats up in Mexico’s convenience sector

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Oxxo: market leader in Mexican convenience

Simon Chinn: increasing competition in Mexico

In a regular new column, Verdict retail consultant Simon Chinn, assesses the latest grocery store formats and concepts around the globe

One of the things I noticed on my recent trip to Mexico was the proliferation in the convenience sector since I spent a year studying there some five years ago. At the turn of the century, the modern convenience store market was largely dominated by market leader Oxxo (part of Grupo Femsa, the leading bottler of Coca Cola in Latin America) and 7-Eleven (part of Grupo Chapa) in major urban centres.

While ‘Mom and Pop’ style stores run by families, often right out of their own homes were very prevalent (and still are) across all parts of Mexico, in the most part the retail sector has modernised. In grocery a number of big chains dominate the market including Soriana and Wal-Mart, players that have mainly focused on big box out-of-town hypermarkets. In recent years competition has heated up in the local store market and now there are a lot more chains competing for consumers’ convenience needs.

Walk down a typical Mexican street and you are likely to stumble across a number of convenience chains. While Oxxo continues to dominate the market with its extensive network of over 8,000 stores, it now shares the territory with a growing number of competitors such as Super City (part of retail conglomerate Soriana) and Extra (owned by brewer Modelo).

Super City: competing more in Mexico

Each retailer has adapted its concept slightly to compete in an increasingly crowded market. Oxxo for example has a much wider selection of dry grocery than Extra. However its stores often feel quite cramped and cluttered compared to the more open plan Extra stores. In 2009 Extra underwent a renovation programme to redefine its stores. It increased footfall through offering additional services such as mobile phone credit top-up. It also launched a range of own brand products in categories such as sandwiches, salads, desserts and coffee, with prices that undercut the competition. To an extent Extra is now more geared towards food service and food to go than some of its closest competitors.

Looking ahead competition in the Mexican convenience market is likely to intensify as the sector has yet to reach saturation point and more players plan to make their presence felt in the neighbourhood market, such as Wal-Mart which is beginning to roll out smaller stores under the Bodegas Express format.

In the main part Oxxo will continue to dominate the Mexican convenience scene. It shows no signs of letting up, despite reporting weaker results in 2009 as its business suffered the double impact of Mexico’s recession and the swine flu outbreak. Despite these setbacks, the market leader continues to open around 1,000 new stores a year and plans to extend its network to 12,000 outlets by 2015. While some of its main competitors lack the financial clout to realise such an ambitious expansion plan, Oxxo is likely to face increasing pressure from its rivals in many of its new locations as more retailers look to capitalise on the lucrative convenience market.