Oxxo Looking North?

Femsa's c-store chain will expand beyond Mexico, executive says

MONTERREY, Mexico -- One month after Brazil's Petrobras chain announced that it may move into retailing in the United States, a second south-of-the-border retailer may be eying northerly expansion. Fomento Economico Mexicano SAB de CV (FEMSA), Latin America's largest beverage company, will expand its Oxxo convenience stores beyond Mexico by year's end, finance chief Javier Astaburuaga said.

Femsa, as the company is known, will bring Mexico's largest c-store chain to other countries in the region where it distributes beer and Coca-Cola drinks, Astaburuaga said in an interview with Bloomberg [image-nocss] News at the Consumer Analyst Group of New York conference. He declined to elaborate on which countries.

The Oxxo unit, originally created to push the company's beer brands, became an engine for Femsa's growth as consumers in Mexico increased their buying power and chose formal retailers over family-owned corner stores.

"In this particular format, we have found a white space which existed in the Mexican market," Astaburuaga said during a presentation at the conference in Boca Raton, Fla.

Monterrey, Mexico-based Oxxo's sales more than tripled in the past five years to $3.9 billion in 2007, making it Femsa's second-largest business by revenue and pushing down the beer unit to the third-biggest contributor. The number of c-stores more than doubled to 5,563 in the period.

The chain will open about 700 more locations this year, Astaburuaga said.

FEMSA is the leading beverage company in Latin America. It controls an integrated beverage platform that comprises Coca-Cola FEMSA, the largest Coca-Cola bottler in the region; FEMSA Cerveza, one of the leading brewers in Mexico, with presence in Brazil, and an important beer exporter to the United States and other countries; and Oxxo.

In late January, Alberto Guimaraes, president of Petrobras Americas Inc., the U.S. arm of Brazil's state-run oil company Petrobras, said that the company is looking at more oil and gas production in the Gulf of Mexico, more U.S. refining capacity, a bigger role in the domestic biofuels market and possibly even Petrobras-branded gas stations in the United States.

Over the next five years, Petrobras plans to invest $4.9 billion in the United States, mostly upstream and midstream.

Downstream, Petrobras is starting to do market analysis for the introduction of its own branded gas stations in the United States, but is in "no hurry" to open stores, Guimaraes said.