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SAN DIEGO - Warehouse club operatorPriceSmart Inc. on Tuesday announced a major investment by, and the entering of a joint venture agreement with, Grupo Gigante, S.A. de C.V., one of Mexico's largest grocery and retail store chains.
PriceSmart and Gigante have agreed to invest initially up to a total of $40 million for the opening of Mexico's first four PriceSmart stores within the next 18 months, with 2 of the stores to open in time for the 2002 Christmas shopping season, and may invest additional funds as necessary for further expansion of the joint venture in the future. PriceSmart and Gigante will contribute $20 million each to the 50/50 venture. PriceSmart, through a management agreement, will run the day-to-day operations of the warehouses. The joint venture will benefit from the purchasing power that Gigante brings to the transaction with its $3 billion in annual sales.
"We are very excited about the opportunity to work with Gigante to develop PriceSmart into a respected name in retail in Mexico," said Gil Partida, PriceSmart's President and CEO. "This is a remarkably good fit for us. It means more than just entering a very large and demographically ideal market with the assistance of an experienced and proven Mexican retailer. We are perhaps more excited about the opportunities inherent in our combined purchasing power, resulting in some quite significant savings to PriceSmart's members in our Mexico stores, and soon, in our stores outside of Mexico."
"This is a joint venture where the whole will be greater than the sum of the parts. It's a good business in which to invest," said Roberto Salvo, Gigante's CEO. "After having studied PriceSmart's impressive successes in Central America and the Caribbean during the last two years, we knew it was a natural fit for us and for Mexico. Large warehouse clubs have performed very well in Mexico. PriceSmart's smaller store format is even better suited for the needs of our country. It will allow us to reach all corners of Mexico and give a far greater number of Mexicans the opportunity to take advantage of a great idea."
PriceSmart operates 24 warehouse clubs in 11 countries in Central America, the Caribbean and Asia (four in Panama; three each in Costa Rica, Dominican Republic, and Guatemala; two each in El Salvador, Honduras, the Philippines, and Trinidad; and one each in Aruba, Barbados, and the United States Virgin Islands). PriceSmart also licenses nine warehouses in China and one in Saipan, Micronesia.
PriceSmart, headquartered in San Diego, is a volume-driven, membership merchandise and services provider, delivering quality, value and low prices to the rapidly emerging consumer class in Latin America, the Caribbean and Asia.