Mexican Retail Giant Invests in Logistics and Private Brands for Growth
Grupo Chedraui, a prominent Mexican chain of self-service stores, is reinforcing its business strategy in the United States following the integration of operations into a new distribution center and by promoting private brands and competitive pricing.
New Distribution Center in California
Antonio Hernández, a consumer sector analyst at Actinver Casa de Bolsa, explained that the retailer will start to completely eliminate transportation costs starting in 2026, optimize its logistics network, and increase productivity due to the consolidation of operations in its new distribution center in Rancho Cucamonga, California.
Carlos Smith, CEO of Chedraui USA, stated in a recent analyst conference: “The distribution center is critical to support our long-term store growth strategies. The total capital investment is approximately $120 million.”
The 1.4-million square foot (around 130,000 square meters) facility replaces the previous five distribution centers and will supply both Smart & Final and El Super chains.
With about 30% additional capacity, the new center allows for expansion. Moreover, inventory management for the self-service store chain can be optimized, according to Antonio Hernández.
After visiting the new Distribution Center in California, Hernández reported that Chedraui completed full integration of its operations by May 2023, with June being the first full month operating under the new scheme.
While no specific savings percentage was mentioned, benefits in margins are expected to be visible starting from the second quarter of 2025, primarily due to an easy comparison base, as integration along with its point-specific costs began in the second half of 2024, according to Hernández.
Private Brands and Perishable Products
The new US distribution center handles dry and frozen goods, with perishable products expected to be integrated soon. Meanwhile, Chedraui has adopted a hybrid wholesale and retail sales strategy and reinforced its perishable products strategy, which account for 40-60% of sales at El Super and Fiesta, though they have a smaller presence in Smart & Final.
Chedraui has consolidated Smart & Final product lines into three main private brands, with First Street being the most prominent and already introduced in Mexican stores. Private brand participation in Smart & Final accounts for about 30%, as per Hernández.
Maintaining Competitive Pricing and Marketing
Chedraui has also strengthened its strategy to maintain competitive pricing compared to other chains and marketing campaigns to boost Smart & Final’s performance, which has shown weaker results in recent quarters.
Key Questions and Answers
- What is Grupo Chedraui’s strategy in the US? The Mexican retail giant is reinforcing its business strategy in the US through a new distribution center, private brands, and competitive pricing.
- What does the new distribution center in California offer? The 1.4-million square foot facility replaces previous distribution centers, supplies Smart & Final and El Super chains, and has 30% additional capacity for expansion.
- When will the benefits of the new distribution center be visible? Benefits in margins are expected to be visible starting from the second quarter of 2025.
- What is Chedraui’s approach to private brands? Chedraui has consolidated Smart & Final product lines into three main private brands, with First Street being the most prominent and introduced in Mexican stores.
- How is Chedraui maintaining competitive pricing? Chedraui has strengthened its strategy to maintain competitive pricing compared to other chains and implemented marketing campaigns to boost Smart & Final’s performance.
Chedraui operates 384 stores in the US. El Super caters to the Hispanic market, while Smart & Final serves both households and businesses with merchandise assortment, high private brand penetration, and no-membership access.
