LOS ANGELES -- The "giant" from Mexico is coming to southern California next week.
Grupo Gigante is scheduled to open its first U.S. store here in densely Hispanic Pico Rivera May 5 -- coincidentally, Cinco de Mayo, a holiday commemorating Mexico's 1742 victory over the French Army.
The 60,000-square-foot store is the first of four locations the Mexico City-based giant expects to open here this year.
Moving into southern California is a logical expansion for Grupo Gigante (pronounced Hee-gan-tay), whose stores in Mexico extend as far north as Tijuana, just across the border from San Diego about 125 miles south of here.
It's also a logical move because of the large number of Mexicans who live here, according to Justo Frias, president of Gigante Holdings International, a wholly owned subsidiary that was created to open Gigante stores in the Los Angeles area.
"Southern California has a Mexican population of 3.8 million people -- second only to Mexico City's 22 million residents," Frias said.
Pico Rivera -- an enclave about 10 miles east of downtown Los Angeles -- has a Latino population exceeding 65% and was a logical choice for Gigante's first U.S. store, he added.
"Pico Rivera fits the demographic profile of what we feel is our market here because of the high percentage of Latino customers, both first-generation and assimilated," Frias explained. "Our format is targeted directly at both groups."
Frias said Gigante's plans for southern California include the following:
To operate large stores with aggressive pricing.
To offer customers a large dose of entertainment along with product merchandising, including a large-screen television set broadcasting sporting events and telenovelas.
To distribute products from a combination of Mexican and U.S. suppliers, with approximately 10% of the store's inventory coming directly from Mexico.
To open three more stores in southern California this year.
Grupo Gigante is Mexico's only national chain, with 177 food outlets (113 combination stores, 39 discount warehouse stores and 25 conventional supermarkets), plus Toks family restaurants and Office Depot and Radio Shack stores. Its 1998 sales were $1.9 billion -- third highest in Mexico behind Cifra/Wal-Mart and Commercial.
Angel Losada, executive president of the parent company, told SN Grupo Gigante has contemplated a move into the United States since the mid-1980s, "but California has always been a tough competitive market to enter, so we concentrated on projects in Mexico.
"But when Justo Frias joined the company and we discussed the prospect of entering the Los Angeles market with him, he was very enthusiastic, and after a couple of studies, we felt the numbers looked good and the recognition of the Gigante 'brand' was excellent."
Gigante avoided entering the United States through either Houston or San Antonio, Losada told SN, because Fiesta Mart and H.E. Butt Grocery Co., respectively, did an excellent job serving the Latino markets in those areas. "We decided on Los Angeles because it was so close to our Tijuana division, which meant we could service some products from there," Losada explained.
Gigante operates 26 stores in its Baja California division, which extends as far north as Tijuana. Frias, the director of the Baja division, is overseeing the expansion into the United States.
Frias told SN he believes the Gigante name is already familiar to many Mexican consumers here. "With so many Mexicans crossing the border, we think we have a great deal of name recognition in this country," he said. "So we're not starting from zero, though I'm not sure if we're starting from 100% either."
Frias declined to pinpoint Gigante's volume expectations. "We hope to do as much business as possible, and we feel strongly that our first few stores will give us a good indication of the mix and the products we need to carry, plus the degree of customer acceptance.
"Once we have that information, we'll spend two or three months analyzing the results, and if we think it's working, the potential sales base for Gigante depends on how much investment we want to make in the U.S."
One of the big questions facing Gigante, Frias told SN, is how assimilation might affect buying habits. "We're very confident about our U.S. expansion, but what we don't know is how consumer tastes might change through assimilation," he said.
"We've spoken to experts in the area over the past year and a half, and we've talked to consumers and looked at competing stores, but you never know for sure till the doors open. But we feel confident that what we offer will be accepted."
According to Losada, the stores will be bilingual "to cater to the first-generation Mexican who speaks Spanish and to some second-generation Mexicans who understand Spanish but speak in English. And we hope to make second- and third-generation Mexicans who speak only English comfortable as well."
The Pico Rivera location, and three other sites Gigante has its eye on, are already being served by a variety of large and small independent operators geared to serving a Latino clientele. So what does Gigante bring to the "mesa"?
"Independents in the Los Angeles area do a good job, but they have more of the appeal of an American supermarket," Losada told SN. "We'll have more festivities in our stores -- shopping at Gigante will be like a fiesta, with more of the flavor of Mexico than our competitors are offering. And we'll be trying to give more service and provide more of the ambience of a Mexican supermarket."
According to Frias, "We will bring a different look and a different format to the community, and we hope and pray that format and that look will be accepted by our targeted client base."
The look will be neither distinctively Mexican nor American, he said. "We're mixing the merchandising and look of a Mexican supermarket with a conventional U.S. supermarket," he explained, "with perishables playing an important part."
Size will also be a key factor, Frias said, with Gigante's U.S. stores projected in the range of 50,000 to 60,000 square feet. "Not every area can support a store of that size, but we don't want to sacrifice format for location, so we'd rather go with a larger format than build a 20,000-square-foot store in a key location," he said.
He also said price will be very important in the Gigante equation. "We believe a large price format is the best vehicle to address the southern California market, and while other independent retailers here have large stores with a price orientation, we feel the combination of our format, layout and interior look will distinguish us," he explained.
The Pico Rivera Gigante will have a single entrance that leads customers directly into the perishables area, where they will encounter an expansive produce department, followed by a scratch bakery offering fresh tortillas and hot bolillos -- a Mexican roll "that must be served hot out of the oven or it isn't a bolillo," Frias said.
At the back of the store will be the dairy, service deli and service and self-service fresh fish and meat counters. On the opposite side wall will be packaged meats and deli items, with a service area up front featuring health and beauty aids, liquor and a variety of leased shops. The store will have 13 checkstands.
Home-meal replacement will not play much of a role at Gigante, Frias said, "because Mexicans like to cook from scratch, and value-added pricing on prepared foods is not a key to the Latino market."
According to Losada, the store will have a familiar feel for former Mexican nationals.
"We will try to make them feel like they are home again by giving them a shopping experience that is very similar to what they had in Mexico," he told SN.
That will include festive colors -- bright reds, blues and greens on the walls, along with shiny off-white on the floors -- plus wide aisles, a clean friendly atmosphere and lots of entertainment, Losada said.
Frias said Gigante hopes to make the customers' experience "part shopping, part entertainment," by offering continuous activity "that creates an ambience that says something is happening all the time.
"Our stores in Mexico are twice the size -- 120,000 square feet," Frias said, "and we have a lot of departments there that entertain customers that we won't have here, including clothing, domestics and other general merchandise.
"Here in the U.S., with smaller stores, the entertainment values will be different. In a store like ours, with a wide variety of products and low prices, the store itself becomes something that's happening in the area and that, in itself, is entertainment."
In addition, he said, the store will feature a 10-by-10-foot TV screen on the rear wall, near the meat department, showing sporting events and telenovelas (Mexican soap operas). There will also be special appearances by TV and sports stars and other personalities "that create a festive mood," Frias said.
Although many U.S. retailers sell products made in Mexico, "our stores will expand that number," Frias said. "There are a lot of good Mexican items already available in the market, but we see opportunities to expand," he said, based on the opportunity for Mexican distributors delivering products to Gigante's Tijuana stores to drive another 125 miles up to Los Angeles.
Frias said approximately 10% of Gigante's 18,000 stockkeeping units will bear the label, "Hecho en Mexico" (made in Mexico), including salsas, spices and tortillas.
Frias said Gigante has enjoyed a good initial reception from U.S. vendors, "although we already have relationships with the multinational companies in Mexico, and we're working with them there. But because of those relationships, we have been given more of a sounding board here."
He said he hopes Gigante's U.S. stores will be able to expand the variety of Mexican produce available to the local market on a year-round basis. "Most of the items we will carry -- including tomatillos [green tomatoes for fresh salsa], romalitos [an herb], napoles [cactus leaf] and jicama [a potato-like vegetable] -- are available at some stores, but not all at one time," he said.
After the first store in Pico Rivera opens next week, Gigante hopes to open two or three more stores late in the year, with the second store in Arleta, a Hispanic section of the San Fernando Valley; a third unit in either La Puente or Covina; and a fourth location in East Los Angeles.
The Arleta site has been troublesome for Gigante, Frias said. After the company acquired the 12.6-acre site a year ago, the Los Angeles Unified School District expressed some interest in acquiring a piece of the property to build a high school, "but nothing has been determined yet," Frias said.
"If nothing happens soon, we will move forward with that site and open our second store there."
Although Frias was born in Spain, he's been in the United States since he was 11 and previously worked as a store manager for Safeway in Washington, followed by stints overseeing Safeway's civilian franchise store operations in Saudi Arabia and starting the chain's civilian store operations in Jordan.
He left Safeway in 1990 to open two convenience stores in the Pacific Northwest, which he still owns, then joined Gigante in 1994 as director of its Baja division.
Assisting Frias at Gigante's U.S. headquarters in Santa Ana, Calif., is Mark Colbo, vice president of Gigante Holdings International and a former executive at Safeway, Pleasanton, Calif., and Supervalu, Minneapolis. All store personnel, recruited both locally and from Gigante's Baja California staff, will report to Colbo, Frias said.
