$TBBB: Tiendas 3B is Mexico's Aldi. Is it too late to buy? | Fruit Tree Capital

Tiendas 3B has more than 3,700 stores in central Mexico, opens roughly 150 more every quarter, and earns its money back on a new store in about two years. It is the Aldi model, built by a founder who saw BIM work in Turkey, moved to a country where he did not speak the language, and has spent 21 years compounding it. Alberto Vadia of Fruit Tree Capital thinks it is a hundred bagger from here.

My problem is the price. The stock is approaching $50, it has run a ton, and the bulls I was reading a few months ago were underwriting it in the mid 30s. So I push Alberto on the thing that actually decides this: do the unit economics survive the move from 3,500 stores to 15,000, or does a two year payback quietly become a four year payback once they leave central Mexico? We also get into the two equity offerings from a business that self funds every store it opens, why every other hard discounter on earth stayed private, what Costco at 40 times earnings implies for a Mexican retailer, and whether adding fruits and vegetables is an expansion or a risk.

This episode is sponsored by Trata: https://www.trata.com/tbbb. Trata is two buysiders who own the stock talking about what they are actually worried about. They have two calls on TBBB that I used to prep for this one, and you can hear a sample at the link.

Chapters:

(00:00) Intro

(01:48) Sponsor: Trata

(02:50) Alberto Vadia, Fruit Tree Capital

(04:22) What is Tiendas 3B, and the Aldi playbook

(07:27) Why they own it: no debt, management, compounding

(08:45) What is the market missing?

(12:09) The chicken and egg problem in hard discount

(13:25) Private label, 900 SKUs, and beating Walmart on ibuprofen

(16:55) The stock has run: have we missed it?

(18:52) Why every other hard discounter stayed private

(21:12) Costco at 40x, and the Mexico haircut

(26:43) Do the unit economics survive stores 5,000 to 15,000?

(28:43) The self splitting distribution center model

(31:46) The equity offerings, and who was actually selling

(36:49) No loss leaders, and the missing fruits and vegetables

(41:58) Why is a Mexican category killer listed in New York?

(45:36) The bare bones deck and the HQ visit

(46:50) Long term, volatility, customer first

Alberto Vadia / Fruit Tree Capital: https://www.linkedin.com/in/albertovadia/

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