Mexican Firm Plans Arleta Supermarket

Mexico’s largest food retailer has acquired a long-vacant commercial property in the San Fernando Valley community of Arleta with what Los Angeles officials say are plans to open a major supermarket and retail center.

Under a deal announced Monday, Mexico City-based Grupo Gigante took over 12.6 acres at the former Gemco property at Van Nuys Boulevard and Beachy Avenue in a purchase and lease agreement.

City officials said the company, which operates 218 stores and restaurants, plans to open a 59,000-square-foot supermarket in February 1999, and would lease or rent five smaller buildings that it would erect on the property, which has been vacant since 1986.

It would be the first foray into the United States for Grupo Gigante, which dominates the Mexican retail market with a nationwide chain of operations that reported $2.1 billion in sales last year.

More than 50% of the company’s stores in Mexico are “hyperstores” selling everything from produce to apparel to weightlifting equipment, but the planned Los Angeles store would offer only food, city officials said.

Company officials said Monday that they had agreed to acquire the property and had ordered architectural drawings of the project, but warned that it is far from a done deal.

“We’re just pursuing the possibility,” said Justo Frias, manager of the company’s Baja California operation. “It’s so darn premature I don’t know what to tell you.”

Frias said he still must seek approval for the project from the company’s board of directors, and suggested that they could decide to resell the property for a quick profit.

Taking credit for the deal was Mayor Richard Riordan’s Los Angeles Business Team, which seeks to attract and keep employers in the city.

Deputy Mayor Rocky Delgadillo said the team brokered negotiations between Grupo Gigante and the disparate property owners involved with the Arleta site, including Dayton Hudson Corp., which turned over its 62-year sublease on 9.6 acres there to the Mexican firm.

Riordan said the store would anchor economic development in the northeast San Fernando Valley and provide jobs for local residents.

“Los Angeles continues to show why it’s the nation’s most diverse and powerful market,” he said.

An analyst with Paribas Capital Markets, however, characterized the deal as strange.

“You have a management that’s . . . not familiar with the local market,” said analyst Sudhir Roc-Sennett. He noted that the company’s suppliers, which offer a wide variety of fresh produce not usually available in the United States, are all in Mexico.

“Unless they’re planning to do an awful lot of truck driving, they’re not going to be competitive,” he said.

Industry officials, however, said the company could cater to the Valley’s first-generation immigrants--a market in which they said U.S. chains have struggled.

“Everyone wants a piece of it. Everyone can’t do it well,” said an official at Certified Grocers of California, who asked not to be identified.