How Heritage Grocers is building its tech stack, along with its supermarket portfolio

Journalists and grocery industry insiders last week got an up-close look at how Heritage Grocers Group—owner of banners Cardenas Markets, El Rancho Supermercado, Tony’s Fresh Market and Los Altos Ranch Market—is building a tech arsenal as it rapidly expands its Hispanic-focused grocery store empire.   

Prabash Coswatte, chief administrative officer of Ontario, California-based Heritage Grocers Group, and Heritage’s Chris Simmons, gave a tour of one of its newest Cardenas Markets stores in Las Vegas on the last day of the annual Groceryshop conference.

A Cardenas associate pours samples of Horchata. / Photo by Timothy Inklebarger

Heritage Grocers Group was launched in 2022 when its owner, Apollo Global Management, through Apollo Funds, purchased Cardenas, with 57 locations in California, Nevada and Arizona, and Tony’s Fresh Market, which operates 21 stores in metro Chicago. In June, it bought Garland, Texas-based El Rancho Supermercado, which runs 27 stores in Texas and one in Kansas.

Coswatte said that in a little over 13 months, the company has grown to 113 stores, increasing its annual revenue from $700 million to roughly $3 billion. Heritage plans to open two more Cardenas locations before the end of the year, he added.  

He said there is no one-size-fits-all solution to managing and stocking the stores because customer demographics vary greatly between banners. “We do tailor our assortments,” he said, noting that there is a heavy Cuban influence in Las Vegas, compared to its shoppers in Texas. “I think it’s where our competitors get it wrong.” 

Related:Cardenas Markets Promotes Prabash Coswatte to COO

In a little over 13 months, Heritage Grocers Group has grown to 113 stores and $3 billion in revenue. / Photo by Timothy Inklebarger

During the Cardenas tour, Simmons highlighted the work Heritage is doing with one of its tech partners, Upshop. Since November, Simmons has incorporated Upshop’s inventory management system, Upshop CGO, and its prepared food production planning tool, Upshop Fresh, at 82 locations, and he said it has cut shrink by roughly 40%.  

That was the singular purpose for adopting the AI-powered inventory tools, but Simmons said there’s a bonus. “The benefit we didn’t plan on was cash flow,” he said. “We started ordering less …" 

Simmons demonstrated the process Cardenas and the other stores now use to stock the shelves. “Our goal is that we place the best, smartest order we can and receive it, stock it and put it away, and we maintain it, so that the shelves are full, to the best of our ability. That’s what we’re using it for, and it does it exceptionally well,” he said.  

Related:Apollo Funds to Acquire Cardenas Markets

Chris Simmons gives a demonstration on the Upshop CGO technology that uses AI to manage inventory. / Photo by Timothy Inklebarger

They tech enables Cardenas associates to scan a UPC code on one of its shelves and see every detail, such as where the product is located in the store, inventory forecasting by day for the product, an promotions coming up, a daily history of sales and more.  

Simmons demonstrated by scanning the UPC for an item that was not stocked on one of the aisles and was able to see the last date that particular item was sold in the store. The Upshop CGO tool enables associates to simply scan the code of any item during their morning inventory rounds and determine if they’re out of stock. The tool then determines if an order needs to be made.  

“You walk through and look at your empties, and if it says there are none on hand, you have nothing else to do,” he said.  

The technology frees up hours of labor and guarantees less loss as a result of overstocking. “It takes into consideration quantity on-hand, quantity on-order, all promotion conditions – it's looking at all that information to make sure that we have the right quantity on-hand until next delivery, so we never over-order.”

Related:Cardenas Markets parent acquires El Rancho Supermercado

Cardenas is applying AI-powered inventory management tools to its bakery and tortilleria departments. / Photo by Timothy Inklebarger

Cardenas is now configuring the Upshop Fresh technology in its tortilleria department to reduce waste. “We take hundreds of pounds of corn and we oil it for 24 hours, and then we grind it,” he explained, noting that the corn is then used to make about 30 different products that are sold in the store.  

Upshop’s not the only tech solution Heritage has put in place over the last year to strengthen its stores. Heritage announced during Groceryshop that it has expanded its relationship with tech company Upside, which provides mobile app services to Cardenas. That omnichannel presence will now be available at its 28 El Rancho Supermercado stores and 21 Tony’s Fresh Market stores. 

“In just over two years, Cardenas' partnership with Upside has delivered remarkable results. A March 2023 case study found that Upside has driven a nearly 86.7% increase across all consumer segments, both on and off the Upside app, with a noteworthy 35% comprising entirely new shoppers to their locations,” the companies said in a joint press release.  

That means a $1.5 million increase in profit for Heritage.

Cardenas' tortilleria uses hundreds of pounds of corn to make more than 30 products that are sold in the store. / Photo by Timothy Inklebarger

The customer data Upside is able to provide through its personalized digital offers adds to the AI-driven approach the company is using to better know its customers, according to Coswatte. He spoke at the Groceryshop breakout session “Leveraging Automation,” telling attendees that data backs up the company’s long-term strategy of growth through acquisition. 

“What's really important for us to understand is who did we acquire, who's the customer base and what does the data mean?” he said. "The data becomes a really key aspect of it.”

Prabash Coswatte, chief administrative officer of Ontario, California-based Heritage Grocers Group, (left) discusses automation with Sebastian Bak, partner and managing director, Boston Consulting Group (right) at Groceryshop. / Photo courtesy: Upshop