Wednesday, December 22, 1999
Royal Ahold, the food retailer, and the principal stockholders of La Fragua, the leading supermarket and hypermarket company in the Central American republics of Guatemala, El Salvador and Honduras (combined population of 24 million), announced today they have signed an agreement to jointly expand the retail activities of La Fragua in the region.
The companies announce the formation of a new 50/50 joint venture into which La Fragua brings all of its 119 stores with 1999 sales of approximately USD 535 million.
For Ahold, the joint venture offers excellent opportunities for regional development. Ahold is already well positioned in Latin America through its joint ventures with prominent local partners Bompreo (in Brazil), Disco (in Argentina) and Santa Isabel (in Chile, Peru, Paraguay and Ecuador). For La Fragua, teaming up with Ahold provides international experience and know-how, important economies of scale and financial resources to boost its growth in the markets of Central America, where it is the prominent food retailer.
La Fragua: low-cost, efficient operations
La Fragua, a privately-held company, was founded in 1928 and opened the first Central American supermarket in 1959. The Paiz family in Guatemala holds an 80.4% interest in the company. The balance of the shares is owned by employees and third parties close to the family. La Fragua operates 93 modern supermarkets, hypermarkets and discount stores in Guatemala (population 12.4 million), 20 stores in El Salvador (pop. 5.8 mln) and 6 in Honduras (pop. 6 million). These 119 stores comprise 26 supermarkets, 4 hypermarkets, 83 discount stores and 6 others.
Proven, successful store formats
The Supertienda Paiz are conventional supermarkets with a prominent non-food assortment mainly located in Guatemalan shopping malls or in commercial, high-traffic areas as stand-alone units. They are open from 8:00 AM - 9:00 PM, seven days a week. About 50% of sales is generated in dry groceries, the rest by non-food and perishables.
Three state-of-the-art Hiper Paiz hypermarkets, two of which are located in the capital Guatemala City, have an average selling space of 8,000 m2. A fourth hypermarket recently opened in El Salvador. The popular stores offer a range of services including a bank, a pharmacy, and dry cleaning and film processing facilities. Hiper Paiz is the only well-developed hypermarket concept in Central America. The Despensa Familiar is a hard discount format with 58 stores in Guatemala, 19 in El Salvador and 6 in Honduras. The stores carry about 1,500 competitively-priced products, primarily dry groceries. Non-food items include clothing, footwear and stationery. The successful concept serves customers seeking essential items at very low prices.
Comment by Ahold Board member Allan Noddle
Allan Noddle, Ahold Corporate Executive Board member responsible for Latin American activities, said teaming up with La Fragua is 'fully in line with Ahold's ongoing commitment to the Latin American region. With a combined population of 24 million people, Guatemala, El Salvador and Honduras have made dramatic political and economic progress recently. All three countries have succeeded in controlling inflation, achieving macro-economic stability and sustaining positive growth rates. Central America offers excellent opportunities for Ahold to grow regionally as well as offer local customers a superior shopping experience. We are delighted to be joining forces with the Paiz family, who have grown and managed La Fragua so professionally. We look forward to a long and fruitful relationship benefiting all stakeholders of the companies involved.'
Comment by Carlos Paiz, Chairman of La Fragua
Carlos M. Paiz, Chairman of La Fragua, said in a statement that he too was delighted to be joining forces with Ahold. 'The partnership will clearly reinforce our growth strategy for the region. It will also provide additional financial strength combined with international know-how covering all aspects of the food retail business. We have forged a mutual understanding of how to take La Fragua to a faster growth rate and are happy to be associated with a partner that shares our business philosophy and has considerable experience as a prominent global food retailer and on this continent in particular. We look forward to working with Ahold's Latin American Support Unit, capitalizing on the many opportunities offered by these markets and passing them on to our customers and associates alike.'
Ahold in Latin America
In Latin America, Ahold is already co-owner of the leading Brazilian food retailer Bompreo, the prominent Argentine supermarket chain Disco, and the Santa Isabel supermarket company with stores in Chile, Peru, Paraguay and Ecuador. Ahold's overall annualized sales for the region, including those of the new joint venture with La Fragua, are expected to amount to USD 4.3 billion with considerable potential for further growth.