Albertsons Cos. Invests in El Rancho Supermercado

Albertsons Cos. has invested in El Rancho Supermercado, a retailer operating 16 stores in Texas that serve the Latino community.

Under the new deal, El Rancho will operate as an independent company. The agreement provides Boise, Idaho-based Albertsons Cos. an opportunity to invest in the fast-growing Latino grocery sector, allowing the two companies to leverage their complementary strengths to better serve the Latino community.

"With El Rancho's own distribution and manufacturing facilities serving their Texas stores, we can share best practices that will reduce costs and benefit our customers,” said Bob Miller, chairman and CEO of Albertsons Cos.

Added Salah Nafal, president of El Rancho: “The transaction will allow El Rancho to accelerate growth and expand into new markets throughout Texas while finding operational efficiencies in all aspects of our business. We are aligned with Albertsons Companies' vision for the future, strategic initiatives and culture of innovation.”

Peter J. Solomon Co. and Simpson Thatcher & Bartlett served as financial and legal advisors, respectively, to El Rancho, while Schulte Roth & Zabel served as legal advisor to Albertsons.

Texas falls in second place in terms of Latino population, according to Pew Research Center, with 10.4 million members of the community residing there. As the population grows, grocers have an opportunity to expand their focus on the demographic, which often has a differentiated demand for products compared to non-Latino shoppers.

Scott Moses, managing director and head of food retail and restaurants investment banking at New York-based Peter J. Solomon, notes that the best Latino-focused grocery stores have a differentiated merchandise mix and authentic experience that traditional grocers have often had difficulty replicating. And El Rancho is exceptional here.

“El Rancho is one of the leading Latino-focused operators in the country, with a great track record of growth and highly-productive stores,” Moses told Progressive Grocer. “There are many ways Albertsons and El Rancho can help each other to better serve Latino customers; it is a logical partnership.”

Moses, who worked on the mergers of Sprouts Farmers Market with Henry’s Farmers Market in 2011, the sale of Sunflower Farmers Market to Sprouts in 2012, and the sale of Mi Pueblo to KKR/Cardenas in 2016, likens the growth in Latino-focused grocery to that of farmers market stores a decade ago. The difference with Latino-focused stores, however, is the “extraordinary demographic trend driving the format’s growth.”

“There are only a few hundred Latino-focused grocery stores today operated by major chains,” he said. “This will evolve significantly in the next decade, as there are many more stores currently operated by traditional grocers that would better serve their evolving communities as Latino-focused stores.”