Apr 29
Fiesta Mart, founded in Houston four decades ago to cater to Hispanic grocery shoppers, has had to fight for market share in recent years amid fierce competition for those same customers.
Now, in a deal that could reinvigorate the aging retail icon, an out-of-state investment firm has purchased the chain with the announced intention of “building value.”
Little is known about the new owner’s specific plans for the stores or what is ahead for the some 8,000 Fiesta Mart employees. The buyer, Washington, D.C.-based Acon Investments, declined to be interviewed about its plans for the 60 Texas stores it acquired, including 34 in the Houston area.
But in a statement, founding partner Ken Brotman said the company “looked forward to building value in a business that is very well positioned for continued growth.”
The company purchased the stores from Houston’s Levit family, which less than six months ago sold its wholesale business, Grocers Supply, to an East Coast supplier.
Acon has scored a “real coup” in acquiring Fiesta, said Burt Flickinger III, managing director of Strategic Resource Group, a New York retail consulting firm.
He said the store’s new owner, which has had success with grocery investments in Latin America, is well positioned to increase sales in the fast-growing Texas markets, even with competition from the region’s biggest grocers: H-E-B, Walmart and Kroger.
“If Acon provides sufficient investment capital to Fiesta to expand, it should be very successful,” Flickinger said. “If Acon is at all shortsighted about investing in Fiesta and tries to harvest professional fees and limit capital investment, as a few private equity firms have done in the U.S., it will limit Fiesta’s future potential.”
Terms of the deal were not disclosed. In 2013, Grocers Supply reported revenue from all sources, including Fiesta Mart, of $3.5 billion.
More target Hispanics
For years, Fiesta Mart was the only game in town when it came to Hispanic markets, said Jason Baker, a principal at Houston retail brokerage firm Baker Katz.
That’s changed over the last decade as grocery operators have entered or expanded in the Houston market targeting the growing population of Spanish speakers.
H-E-B’s Mi Tienda and Joe V’s Smart Shop and Aldi are all going after the Fiesta customer, Katz said.
“There is more competition in their space than any time before,” he said.
Houston retail expert Ed Wulfe said Fiesta has a special niche, but “the challenge of the independent grocer is great. They are competing with all the big guys.”
One of Fiesta’s newer stores was a recent casualty of the local cutthroat grocery industry.
Last year, the company closed a store in Sugar Land it had open less than one year. The location had offerings such as in-store yogurt and coffee shops to appeal to a wider customer base.
While the Levits had owned Grocers Supply for more than 90 years, the family bought Fiesta in 2004.
The grocery chain was founded by Donald Bonham and O.C. Mendenhall in 1972.
Bonham, who had lived and worked in the grocery business in several countries in Latin America, saw a need in the United States for supermarkets catering to Hispanics nostalgic for items from their home countries. He partnered with Mendenhall and opened a store in the Near Northside.
Grew in the 1980s
By 1982, Fiesta had opened eight stores, including one spanning 100,000 square feet on Bellaire and Hillcroft. That store and the company’s others drew customers from many backgrounds and the company began offering more international products.
In the 1990s, Fiesta expanded into the Austin, Dallas and Fort Worth markets. Today, the company has 34 stores in the Houston area, including one Fiesta Fresh Market; two in Austin; and 24 in the Dallas-Fort Worth area, including two Carnival stores.
Mike Nichols, former chief operating officer of Grocers Supply and now a consultant to the Levit family shareholders, said the sale of Fiesta was part of the Levit’s strategy to sell its operating businesses and move into real estate.
The family owns buildings, warehouses and shopping centers that hold Fiesta stores or Grocer Supply operations. He declined to say how much.
Earlier this year, the Levit family sold stores affiliated with an earlier acquisition of Gerland Corp.
Founded in 1996, Acon manages private equity funds and partnerships that invest in various businesses in the United States and Latin America.
The company has experience investing in the supermarket business, including Latin American retailers Carulla and Vivero. The two companies later merged.
Last year, Acon purchased Katy-based Igloo Products Co.
At the time, the company said it planned to expand sales of Igloo coolers and other products around the globe.
Other local investments
Acon has invested in other consumer-oriented businesses, such as Spencer’s specialty gifts and Spirit Halloween. It is also involved in the energy sector, most recently investing in Houston-based Sequitur Energy Resources last year, and Mariner Energy a decade ago.
For its Fiesta acquisition, Acon has hired grocery executive Michael Byars as president and CEO of the grocery chain.
Flickinger said Fiesta has had strong leadership and that it remains a “formidable competitor.”
“Fiesta has a very strong following from Spanish-speaking shoppers to students to seniors to people from every neighborhood and economic background throughout the greater Houston market place,” he said.