Mexican business FEMSA, which owns the OXXO convenience store chain, has reported sales of MXN184.8 bn (US$8.4 bn) for 2019 for its proximity division (it also owns health stores and gas stations).
This figure, which includes all its proximity stores in Mexico, Colombia, Chile and Peru, represents a 10.4% year-on-year (YoY) increase. Same-store-sales (SSS) rose by an average of 5%, which was driven by a 6.1% increase in the average customer ticket, but partially offset by a 1% decrease in traffic.
In Q4 the proximity division delivered total revenue of MEX47.9 bn (US$2.2 bn) a 10.6% increase YoY. SSS increased by 5.5% (average) driven by 7.8% growth in the average ticket but offset by a 2.1% decline in store traffic.
"As we look at 2020, we see a consumer in Mexico that remains resilient, particularly in the northern part of the country. We are optimistic about Brazil, where we are seeing good performance in our existing operations and have high expectations for our new ventures. And on the strategic front, we are pleased with the opportunities we are being able to invest in..." Eduardo Padilla, FEMSA’s CEO
1,331 new stores opened in the year
OXXO opened 1,331 stores in 2019. The vast majority of these were in its home market, Mexico. It ended the year with 19,330 stores across all the countries in which it operates. This represents a 7% growth on the 17,999 stores it started the year with.
OXXO looking to expand into new markets
Over the last few years, OXXO has expanded into new Latin American markets outside Mexico. It ended 2019 with around 91 stores in Chile, 80 in Colombia and 50 in Peru. It recently said it plans to open stores in Ecuador and Brazil in 2020.
Since entering Colombia and Chile, OXXO has been opening stores at a much more subdued level than in Mexico. In the medium term we expect Peru to be its second biggest market for expansion, based on how receptive Peruvian consumers have been to modern convenience.
Competition set to increase in Peru
After just a year in the market OXXO has opened approximately 50 stores, all in metropolitan Lima (Peru’s capital). Its opening programme is set to intensify as it aims to open 300 stores over the next two years. It will need to expand quickly to compete with Tambo +, which is expanding aggressively in the market and had a strong presence when OXXO first entered the market.
Tambo + is the leading modern convenience retailer in Peru, with around 60% share. It ended 2019 with 406 stores and has begun to open them outside the country’s capital. Tambo + plans to open 110 stores in 2020, in line with its longer-term aim to operate 600 stores by 2021. Its current strategy is to continue expanding into Peru’s provinces and to open a food plant dedicated to developing its own products. Both will give it a competitive edge over OXXO.
What’s driving OXXO’s international expansion?
The convenience channel is becoming increasingly popular in the region. Consumer behaviour is changing, more customers are looking for proximity and to increase the speed of shop. They are shopping more frequently and buying fewer (mostly ready-to-eat) items. This is influenced by factors like people working longer hours, more women workers, congested cities, and smaller households.
A range of hot food to go and meal deals available at OXXO Colombia
Source: IGD Research
Customers had traditionally used mom-and-pop stores for on-the-move purchases but retailers like OXXO and Tambo + provide a more modern, well-lit and clean shopping environment. Time-poor customers are using these retailers’ stores as they feel they can rely on them to have the products and brands they need, consistently.
Apart from Mexico, modern convenience still has a low share in Latin America, particularly when compared to markets in Europe and Asia. This presents a sizable opportunity for other convenience players looking to enter the region.