San José, Costa Rica, since 1956

El Verdugo Gulped Up by a Bigger Retail Fish

Costa Rica’s largest electronics retail conglomerate has swallowed up El Verdugo, one of its smaller competitors, continuing a trend toward consolidation that has marked the Costa Rican business climate in recent years.
Grupo M Holding announced this week that it had picked up the appliance retailer for an undisclosed sum. The brand joins El Gallo más Gallo, Play and Importadora Monge in Grupo M’s portfolio.
With the acquisition of El Verdugo’s 23 locations – mostly in the Central Valley – Grupo M will control 205 stores in Costa Rica and a total of 350 in Central America.
The group posted sales of $515 million last year. CEO Gastón Monge said that prior to the purchase, the family-owned company held between 42% and 45% of the electronics retail market in Costa Rica. It was not immediately known how much more of a market share the purchase of El Verdugo will give to Grupo M.
Grupo M’s closest competitor, Gollo, operates 103 locations. Other, even smaller competitors include Hogar Feliz and Casa Blanca.
The acquisition of El Verdugo is Grupo M’s latest move in what has been an aggressive push for the Central American retail electronics and consumer credit market.
The company entered Nicaragua in 2000 and Honduras in 2004. In 2006, Grupo M bought out the family-owned El Prado stores in El Salvador and opened 10 stores in Guatemala. The company runs 145 stores outside Costa Rica.
Its local push for market share includes the 2006 opening of the Play stores, highend consumer electronics retailers aimed at wealthier consumers.
The acquisition of El Verdugo represents a renewed focus on the lower end of the market, Monge said.
“The purpose of the purchase of El Verdugo is to have in our portfolio another offering for the mass market,”Monge said.
Before the acquisition, Grupo M’s El Gallo más Gallo stores occupied that niche, with the Importadora Monge stores targeting the middle-class consumer.
Grupo M plans to keep the El Verdugo brand and expand it. The plan is to have between 70 and 80 El Verdugo stores operating come 2011.
In the region as a whole, Grupo M’s goal is to add another 150 stores by 2011 and gross $1 billion in sales.
Monge downplayed the impact of Wal-Mart’s entry into the Central American market in 2005, saying that company’s off-theshelf retail model is different from Grupo M’s emphasis on consumer credit.
“We’re in some ways very different businesses,” he said.
Grupo M’s purchase of El Verdugo is just the latest in a spate of consolidations and acquisitions that have been changing the face of the Costa Rican business landscape in preparation for the implementation of the Central American Free-Trade Agreement with the United States (CAFTA).
Local bank Interfin and regional bank Banex were recently purchased by Scotiabank and HSBC, respectively, while Citibank acquired Banco Cuscatlán. In response, the country’s public banks are talking about a merger.
In manufacturing, Costa Rican appliance manufacturer Atlas Eléctrica got bought by Mexican giant Mabe this January.
And Costa Rican construction materials company Abonos Agro has been selling off pieces of itself.

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