Discount Retail Chain Tiendas 3B (owned by Anthony Hatoum and PE Group Quilvest Capital Partners) has already opened more than 1,800 stores in Mexico in less than 20 years.
When Anthony Hatoum moved to Mexico in 2004, he spoke no Spanish and his only experience was as a consultant for McKinsey. He now owns one of the largest discount retailers in the country, opening stores at the rate of one per day.
Hatoum's idea for the business came when, while working for Merrill Lynch, he oversaw an investment in the Turkish heavily discounted chain BIM. He wondered where the model pioneered by Aldi and Lidl might work. His research led him to choose Mexico because of its large size, political stability and depth of capital markets.
He raised money with investors, the largest of which was Quilvest Capital Partners, a private equity firm owned by the founder of Quilmes beer. Heavily discounted companies are usually private because they need 10 to 15 years to get started, Hatoum says.
In less than 20 years, Tiendas 3B has already opened more than 1,800 stores nationwide. Revenue, which totaled US $140 million in 2021, is growing at around 30 percent year-over-year, placing it on the Financial Times' list of America's Fastest-Growing Companies.
Tiendas 3B, which stands for "Good, Nice and Cheap," uses a "cut with the same mold" format for its stores, Hatoum says. Each is between 400 and 500 square meters, about the size of a large convenience store. "Will I conquer the whole market?" asks Hatoum. "No way, but I will be a very strong participant in the niche I'm playing in and this one turns out to be huge in Mexico."
The company, which has 17,000 employees, is present in 13 states in the center of the country, with a warehouse in each state run by relatively autonomous regional directors. The expansion is governed by a philosophy of "stretching" rather than "jumping", so it will not open in cities far removed from existing stores.
Inflation has hit Mexico hard since the pandemic began, something that favored 3B's business model by forcing consumers to save.
Alvaro Garcia, an analyst at BTG Pactual, says discount stores had already struggled in Mexico, due to consumers' preference for well-known brands, but it looks like 3B found the right formula.
"Mexicans love their brands," Garcia explains. However, given that sector leader Bodega Aurrera is actively promoting its own brands, Tiendas 3B could benefit from a change in Mexicans' consumption habits.
At a store in Mexico City, Hatoum points out products created by the company. He says they aim to be 20 to 30 percent cheaper than those from well-known brands and save time on replenishing store inventory.
Walmart, FEMSA and other retailers expanded into new areas, such as financial services. Asked if he plans to open up to entirely new divisions as well, he says he wants to focus on his current business. But he admits it's something the next generation could do. "You can see this business as a platform to launch many more businesses."
