Mexican retail and bottling company FEMSA intends to refocus on retail—including taking another stab at opening convenience stores in the United States—after it divests its stake in Dutch beer maker Heineken, the company has announced. In a previous attempt, after opening an initial store in 2014, the company said it could open as many as 900 U.S. c-stores.
As part of a strategic review process begun in 2022, executives of Fomento Económico Mexicano, S.A.B. de C.V. (FEMSA) said on Feb. 15 that its board of directors has approved a new long-range plan to reduce debt, simplify its corporate structure and maximize value creation. The plan includes focusing on the core business verticals that have the highest strategic relevance, growth potential and financial and competitive strength—retail, Coca-Cola FEMSA and digital, the company said.
To help accomplish these new growth goals, FEMSA is divesting its nearly 15% stake in Heineken, worth an estimated $7.7 billion according to a Reuters report, and FEMSA’s representatives will resign from Heineken’s boards immediately, the company said. It will also explore strategic alternatives for its other investments.
U.S. Retail Ambitions
Monterrey, Mexico-based FEMSA has more than 30,000 small-box retail locations in 10 countries including approximately 20,900 Oxxo convenience stores in Mexico, Chile, Colombia and Peru, as well as a large drugstore platform in Latin America. In October, FEMSA acquired Muttenz, Switzerland-based Valora Holding AG, which has approximately 2,700 small-format c-stores and points of sale in Switzerland, Germany, Austria, Luxembourg and the Netherlands.
Through its digital ecosystem, FEMSA also offers spin, a digital wallet; a business-to-business financial technology product; and Oxxo Premia, the brand’s first loyalty program that rewards customers for their day-to-day spending.
For retail, the company sees “excellent long-term growth opportunities comprised of proximity, health and fuel,” it said in a presentation about the announcement.
Along with plans to expand its retail offerings in Mexico and South America, FEMSA said it will “explore the proximity retail space in the United States.” It did not indicate whether that meant new-to-industry stores, acquisitions or both, nor did it indicate a timeline.
FEMSA is looking for “blank spaces” to move into in the United States and is open to a partnership with a third party, CEO Daniel Rodriguez said, according to a Reuters report. FEMSA is hesitant to take on the “fuel risk” associated with U.S. c-stores, which are typically also gas stations.
U.S. Retail Hurdles
In 2014, FEMSA opened its first “proof-of-concept” c-store in the United States, in Eagle Pass, Texas, bordering Piedras Negras in Mexico. Although they did not specify a U.S. growth size or market target with the current announcement, FEMSA executives in 2015 told a Texas House of Representatives committee that “Oxxo is prepared to make a major investment all across Texas. We plan to open 900 stores in the next 10 years … investing more than $850 million and creating more than 6,000 jobs. The overall business-friendly climate in the state along with the strong economy and many consumers who are already familiar with the Oxxo brand, make it extremely attractive for the expansion of our stores.”
Entry in the U.S. market has been complicated previously by FEMSA’s Heineken stake.
The Texas Supreme Court in 2017 ruled in favor of the Texas Alcoholic Beverage Commission, which denied a retail permit to a foreign corporation whose parent company also holds a 20% ownership interest in a foreign brewer. The TABC code prohibited a “tied house,” or “any overlapping ownership or other prohibited relationship between those engaged in the alcoholic beverage industry at different levels, that is, between a manufacturer and a wholesaler or retailer or between a wholesaler and a retailer.”
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