OXXO set to expand in Brazil

Oliver Butterworth
Retail Analyst
@RetailAnalysis

Date : 07 September 2020

Grupo Nós, a joint venture between Raízen (one of Brazil’s largest energy companies) and FEMSA Commercial (owner of the OXXO convenience chain), has announced plans to open 500 OXXO stores in Brazil over the next three years. This will create a more competitive landscape in the market, particularly in the south east region.  

FEMSA joint venture with Raízen

Raízen, a Shell brand licensee, is one of Brazil’s largest energy companies. It operates more than 6,200 Shell service stations in the country. Roughly 1,000 feature Shell Select forecourt convenience stores, which are franchised or licensed (by Raízen) to independent operators.

In August 2019, Raízen announced the formation of a 50-50 joint venture with FEMSA Comercio. The agreement made FEMSA the owner of 50% of Raízen Convenência’s shares, which were valued at BRL1.122 bn (US$212m).

The transaction was successfully closed on November 1, 2019 and Grupo Nós was formed. This creates a strong synergy, as both businesses bring complementary expertise in their remits and respective markets. Although OXXO also operates gas stations in Mexico, the joint venture is limited to the convenience store business and excludes fuel service station operations.

Why is this a good move for OXXO?

Following its huge success in Mexico, FEMSA continues to expand OXXO into new countries in Latin America. Outside of Mexico it has operations in Colombia, and in recent years it entered Chile (2017) and Peru (2018).

The joint venture presents FEMSA with an opportunity to expand its OXXO banner in a new market, with the support of a strong local partner that has vast experience of operating in Brazil. Daniel Rodríguez Cofré, FEMSA Comercio’s CEO, commented: “We have been looking at Brazil as a compelling market for small format retailing for a long time”.

Raízen can help FEMSA to develop the right value proposition, which best meets the needs of the Brazilian consumer.

How can it benefit Raízen?

OXXO is the biggest convenience retailer in Latin America, both in revenue and store numbers. It operates over 20,000 stores in Mexico (its home market), many of which are forecourt stores. FEMSA has an aggressive and consistent expansion strategy and has opened around 1,300 stores annually in the last three years.

Raízen is looking to increase the number of Select stores in its gas stations and to strengthen its relationship with franchisees. FEMSA will be well placed to support this expansion. FEMSA has also become an expert in developing on-the-move ranges and maximising the space and range in small footprint stores. This will be invaluable experience for Shell Select.

FEMSA also knows how to operate stores efficiently, and at low-cost, whilst running them professionally. It can therefore play an advisory role to the franchisees, applying best practice from OXXO.  

“This move will make us even stronger…We want to become a reference in the convenience and proximity segment with a greater capacity for expansion and even more efficiency in our investments and operations, offering a better value proposition to our franchisees.” Leonardo Pontes, Executive Commercial Vice President at Raízen.

Plans to open 500 OXXO stores over the next three years

Rodrigo Patuzzo, president of Grupo Nós, said: “We are building an expansion machine within the company,” and the business plans to open 500 standalone OXXO stores in Brazil over the next three years. Initially, these will all be in the South East region. Openings are expected to commence in October and the first stores will be in Campinas (the most populous city in the interior of São Paulo).

OXXO’s presence will no doubt increase competition with Brazil’s other modern convenience retailers, particularly Carrefour’s Express banner, and GPA’s Minuto Pão de Açúcar and Mini Extra banners.

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