F-1/A: BBB Foods Inc. Files for IPO, Aiming to Expand Discount Grocery Model in Mexico

BBB Foods Inc., a leading hard discount grocery retailer in Mexico, has filed for an initial public offering (IPO) to raise capital for debt repayment and general corporate purposes.

Summary

• BBB Foods Inc., known as Tiendas 3B, has filed for an IPO of its Class A common shares.
• The company intends to list its Class A common shares on the New York Stock Exchange under the symbol TBBB.
• The IPO aims to raise capital for debt repayment, including Promissory Notes and Convertible Notes, and for general corporate purposes.
• BBB Foods Inc. is a pioneer and leader in the hard discount grocery retail model in Mexico.
• The company's revenue grew at a CAGR of 34.4% from 2020 to 2022, reaching Ps.32.6 billion (US$1.85 billion) in 2022.
• As of year-end 2023, the company operated 2,288 stores, representing a CAGR of 22.4% since 2020.
• The company's business model focuses on offering high-quality products at bargain prices to budget-savvy consumers.
• The company's stores serve low-to-middle income households, which spent US$219 billion in 2022, representing 70.7% of Mexico's total current monetary spend.
• One or more funds and/or accounts managed by Capital International Investors have indicated an interest in purchasing up to an aggregate of US$88 million in Class A common shares in this offering at the initial public offering price.

Sentiment

Score: 7

Explanation: The document presents a generally positive outlook for BBB Foods Inc., highlighting its growth, efficient business model, and strong competitive position. However, it also acknowledges certain risks and challenges, such as economic factors, competition, and potential regulatory changes, which temper the overall sentiment.

Positives

• The company has experienced rapid growth in revenue and store count.
• The company's business model is highly efficient and generates strong cash flow.
• The company has a strong private label offering.
• The company has a decentralized and nimble organization.
• The company is led by a founder-led management team with extensive industry experience.

Negatives

• The company has a negative working capital.
• The company has a history of net losses.
• The company is subject to risks associated with operating in Mexico, including economic and political instability.
• The company's principal shareholder will have significant influence over the company after the IPO.

Risks

• Economic factors may reduce customer spending.
• Failure to achieve or sustain growth strategies and initiatives.
• Risks associated with private label products.
• Inability to successfully manage inventory balances.
• Significant disruption to the distribution network.
• Failure to maintain the security of business, customer, employee or vendor information.
• Changes in laws and governmental regulations.
• Natural disasters, unusual weather conditions, pandemic outbreaks, acts of violence or terrorism, and global political events.
• Changes to, or withdrawals from, free trade agreements.
• Difficulties in obtaining or enforcing judgments against the company or its executive officers and directors in the United States.

Future Outlook

The company plans to continue expanding its store network, develop new private label product lines, increase sales of spot products, and introduce new categories of products and services.

Management Comments

• Talking to our customers during my regular store visits is where I get my best insights.
• We strive to give our customers every day the best value for their money in everything we carry.
• Preserving our can-do and scrappy startup culture has been and will continue to be top of my mind.
• Our team and culture at 3B are the main driver of our success today and for the future.
• We want to help the Mexican consumer live better and be a catalyst for improvement in the neighborhoods in which our stores are located.

Industry Context

The Mexican formal grocery market is large and growing, with approximately US$124 billion in annual sales for 2022 and is projected to grow at a 7.6% compounded annual rate from 2022 to 2027, according to Euromonitor. The market is fragmented, with Walmex being the dominant player in the Modern channel. Hard discount is still a nascent business model in Mexico, representing only 2.3% of sales in the Mexican grocery market for 2022, according to NielsenIQ.

Comparison to Industry Standards

• The company's gross profit margin for 2022 was 15.1%, compared to gross profit margins of 28.1% of La Comer, 23.4% of Walmart de Mxico (Walmex), 22.9% of Chedraui and 22.1% of Soriana.
• Hard discounters in Germany (Aldi and Lidl), Poland (Biedronka, Aldi and Lidl), and Turkey (BIM and A101) represented 23.6%, 33.6% and 24.1%, respectively, of their corresponding grocery markets annual sales in 2022 based on data from Euromonitor, compared to 2.3% in Mexico.

Related Party Transactions

• The company has entered into transactions with related parties, including Promissory Notes and Convertible Notes held by related parties.
• The company has agreed to pay a onetime US$400,000 service fee to affiliates of Quilvest Capital Partners.

Stakeholder Impact

• The IPO will provide the company with greater financial flexibility to support its development and growth.
• The IPO will create a public market for the company's Class A common shares.
• The IPO will facilitate the company's future access to the capital markets.

Next Steps

• The company intends to list its Class A common shares on the New York Stock Exchange under the symbol TBBB.
• The company will use the net proceeds from this offering for the repayment of indebtedness and for general corporate purposes.
• The company will continue to expand its store network, develop new private label product lines, increase sales of spot products, and introduce new categories of products and services.

Key Dates

Keywords

IPO, initial public offering, BBB Foods, Tiendas 3B, Mexico, grocery, retail, hard discount, private label, discount, stores