Tuesday 5 December 2023

Growth of the Wholesale Supermarket Business in Costa Rica

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COSTA RICA NEWS — Those who don’t live or have visited Central and South America, PriceSmart is a company most have probably never heard of. PricesSmart is the company that owns and operates membership shopping warehouse clubs in Latin America and the Caribbean, selling perishable foods and consumer products to individuals and businesses, as well as offers ancillary services.

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Things You Didn’t Know About Pricesmart

[/su_pullquote]The company faces little competition but has the ability to become the next Costco, a path that is already travelling with more 30 stores, six in Costa Rica.

Many are confused about PriceSmart and Costco, are they the same company? Although they share the same business model and PriceSmart’s roots are from Costco, they are not.

Price Club was founded in 1976 by Sol and Robert Price. In 1993, the Price Co. and Costco Wholesale Club merged, forming Price/Costco Inc (later renamed Costco Wholesale Corporation). In 1994, Price Enterprises Inc. spun off from Price/Costco, naming Robert Price as Chairman, President and CEO of Price Enterprises, PriceSmart becoming a wholly owned subsidiary of Price Enterprises.

A brief history
It’s first club store was opened in 1996 in Panama.  In 1997, PriceSmart opens its second store in Panama and separates from Price Enterprises Inc. separates itself from PriceSmart by spinning off all non-real estate assets to PriceSmart. PriceSmart completes pricesmart tres riosIPO and begins trading as PSMT on NASDAQ stock exchange.

It wasn’t until 1999 that PriceSmart made its big push into the Latin American market, opening seven stores that year: one each in Costa Rica, Guatemala, El Salvador, Honduras, Panama, two in the Dominican Republic. A year later, eight more stores are added: Dominican Republic, El Salvador, Honduras, two in Costa Rica, Panama, Guatemala and Trinidad & Tobago.

In 2001 and 2002 the company continued expanding, with stores in Guam, the Philipines and licenses in China, with the creation of PSMT Mexico, a joint venture with Grupo Gigante, with PriceSmart holding 50% ownership. PSMT Mexico opens 2 club stores in Mexico.

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In 2003, Nicaragua gets its first PriceSmart. So does Jamaica. The company opens four more stores in, one each in the Dominican Republic, Guatemala, Guam and the Philipines.

It wasn’t until 2005 that PriceSmart opened an additional store in Costa Rica. That year it PSMT Mexico closes its 3 stores in Mexico, relocating the San Pedro Sula, Honduras store a year later. In 2007, PriceSmart opened 2 club stores (Guatemala and Trinidad) and selling its interest in PSMT Mexico to Grupo Gigante.

After a few years of organizational changes, in 2009, PriceSmart began expanding again, opening club stores again and Ranked #55 on Fortune Magazine’s list of 100 fastest growing companies. In 2011, PriceSmart began its expansion into South America, opening its first club store in Colombian port city of Barranquilla, then two more in Cali and soon one Bogotá, Colombia’s capital city. The company says it has plans to open two more, one in Medellin and Pereira for next year.

In Costa Rica it operates six stores: Alajuela, Escazú, Heredia, Tibás, Zapote and Tres Rios, and faces little competition.

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The recently opened Shoppers, in Zapote, is a store similar to PriceSmart in its presentation, but with no club membership. Shoppers is owned and operated by Mundo Mágico, that operates 24 stores across the country, the majority in smaller communities outside the Greater Metropolitan Area of San José (GAM in Spanish).

The Shoppers store in Zapote
The Shoppers store, operated by Mundo Magico, in Zapote

Another is Pequeño Mundo, the low end warehouse style store, with the majority of its low-cost products from Asia. Pequeño Mundo operates ten stores in the GAM, with the principal store and main offices in Guachipelín de Escazú.

Pequeño Mundo store in Guachipelin, Escazu
Pequeño Mundo store in Guachipelin, Escazu

A recent player is Mayca, promoting its stores as “membership free”. Founded in 1995, MAYCA has evolved from an importer of disposable products to an established full line distributor of food service and bakery. “Only last year, it opened two stores located in Heredia, a third is planned for April 2011 in The Coyol and is expected to end the year with two more in the northern metropolitan area and one in Guanacaste. $ 1.5 million will be invested only in stores in 2011, ” according to Elfinancierocr.com.

In May of this year, Sysco Corporation, North America’s leading food service distributor, announced the purchase 50 percent of Mayca for an undisclosed price.

140513Mayca1-1000x647And then there is Walmart, whose stores were initially a conversion of the Hypermás stores. Walmart also operates the Mas X Menos, Pali and Maxi Pali supermarkets in the country.

The market of wholesale supermarkets in Costa Rica continues to grow, mainly driven by the opening in recent years of convenience stores, bakeries, ‘sodas’ (small low-end restaurants), restaurants and hotels. Some establishments have reported an average annual growth of 20% in sales.

An example of this is the case of Mayca, who according to a report by Elfinancierocr.com, “in the past two years has doubled its number of outlets and now projects it will close 2014 with 10 stores and a 14% growth in sales.”

Meanwhile, Universal de Alimentos, “in February went from operating a distribution center measuring 2000 m² to one measuring 6,500 m², and in 2013 sales grew by nearly 20%.”

As for the membership supermarket chain PriceSmart, “nearly 20% of its sales comes from institutional clients, which were not part of its approach when it came to the country 15 years ago,” according to Elfinancierocr.com

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