M&A activity lands grocers on Hot 25 Retailers list

Nine grocers made the "Hot 25 Retailers" list of the fastest-growing U.S. retail chains, released Wednesday by the National Retail Federation (NRF).

The report, a collaboration between NRF and data analytics firm Kantar, ranked the growth rate of privately held companies with global sales of more than $2 billion between 2021 and 2022.  

Chedraui, which operates 377 stores under the banners El Super, Fiesta Mart and Smart & Final, topped the list with a massive growth rate of 137%. That’s due mainly to the company’s acquisition of Smart & Final for $620 million in 2021.  

The company reached an estimated $7.44 billion in retail sales in 2022, up from $3.13 billion in the prior year.  

Post-pandemic stress in the grocery industry is leading to a string of mergers and acquisitions that are driving outsized performance like the kind seen at Chedraui, David Marcotte, Kantar senior vice president, wrote in a blog post.

“Mexican grocer Chedraui wasn’t the only grocer in a buying mood," the report noted. "Raley’s, which had 100 grocery stores mostly in Northern California and Nevada, moved into Arizona, New Mexico and four Tribal Nations in a merger with Bashas’ Family of Stores at the end of 2021. That was enough to land the combined grocer at No. 2 on the Hot 25, with 74% growth.” 

Sales at Raley's jumped to an estimated $5.52 billion for the year, up from $3.18 billion in 2021, according to the report. 

Superior Grocers took the sixth spot on the list and was the third fastest-growing grocer at 30.1%. U.S. sales increased to $1.72 billion in 2022, up from $1.32 billion in the previous year.  

Once again, the purchase of 22 Numero Uno stores by the Southern California-based chain helped the company rise up on the ranking.  

“If you look at the growth in grocery, it’s almost all M&A,” Marcotte said in a statement. “That both shows the strength of the sector and some of the stress.” 

He also attributed the success of those companies that made the list to a heavy investment in retail media. “Retail media, with its ability to connect with shoppers on all levels, is very profitable and can add up to 2% of your operating margin,” Marcotte said. “But—and the but is a big one—it takes a lot of investment. If you’re not a big player, that plays out. That’s one of the things driving this activity.” 

The report noted that not all of the grocers on the list made it there through mergers and acquisitions. BJ’s Wholesale Club, which ranked 7, Costco (No. 12), Publix (No. 18), Schnucks (No. 21) and HEB (No. 25) landed on the list by “by slowly expanding their strong regional footprints and adding services like delivery,” the report explained.  

“It’s clear that companies that are making moves are igniting some of their growth,” Marcotte said, adding that more M&A is expected in 2023.