FEMSA converts 15 DK stores to OXXO in Texas

Fomento Económico Mexicano (FEMSA) has converted 15 DK stores to the OXXO brand, all located in the Midland-Odessa metropolitan area in West Texas, United States, reported FEMSA Chairman and CEO José Antonio Fernández Carbajal.

He said the goal is to convert the vast majority of stores—around 99%—and likely close some and open new units.

"We're planning to open a few stores this year, even as a test. But again, they're below 10, and we'll just see how the momentum works," Fernández Carbajal explained during his recent conference call with analysts.

He emphasized that consumer reaction to the rebranding has been "very positive," which has been reflected in double-digit growth in both sales and customer traffic.

“We just rebranded 14 more and are seeing very similar increases… The increase in sales and traffic has been significant, even in the double digits since the first store. There's probably a honeymoon phase, and they should stabilize,” he said.

FEMSA is currently experimenting with store formats to define its value proposition. Some OXXO stores in the United States will be more focused on grocery sales, while others will combine convenience and dollar-dealer concepts.

The executive explained that they have already launched the Andatti coffee brand and announced that they plan to test some outlets with Gorditas Doña Tota, in addition to a partnership with an unnamed pizza chain.

"We're trying some other things in terms of fried foods, but it's too early. We'd love to reach up to 10% of our in-store sales revenue in foodservice, but it's too early to say how that will turn out. We need more months," said the chairman of FEMSA's board of directors.

In the next two years, he added, they are confident of achieving a "winning value proposition," with an offering that only OXXO can provide, attracting traffic from the larger regional retailers.

José Antonio Fernández Carbajal added that, although his plan is to grow organically, at some point he will seek merger and acquisition opportunities in the southwest and southeast of the United States.

"We would explore M&A opportunities if they arise in regions where we believe we could be a strong consolidator, such as the Southwest and Southeast, excluding California and Florida. The most important thing is to make sure we have the right value proposition," he added.