Although Benton-ville, Ark.-based Wal-Mart Stores Inc. and Britain’s Tesco PLC are the leading global retail food retailers, there are others worth considering if you are building a balanced stock portfolio.

Smaller than Wal-Mart and Tesco, in size and scope, some of these companies have made recent acquisitions while others are pursuing growth in emerging markets.

One such food retailer is Belgium’s Delhaize Group SA, whose main business is U.S. convenience stores. Its margin is improving as it assimilates acquisitions and rationalizes activities, says Patricia Fee, money manager at IG International Management Ltd. in Dublin.

Another food retailer focusing on the sizable U.S. market, adds Fee, is Minnesota-based SUPERVALU Inc. Both a wholesaler and retailer, SUPERVALU has an opportunity to restructure its business following the June 2006 acquisition of the Albertsons LLC grocery chain.

Then, there are Wal-Mart de Mexico SAB de CV and Controladora Comercial Mexicana SAB de CV, both of which are taking advantage of the fast growth in Mexico and the emergence of a middle class.

Here’s a look at the four companies in more detail:

> Controladora Comercial Mexicana Sab De Cv. Charles Burbeck, head of global equities at HSBC Halbis Partners in London prefers Comercial to Wal-Mart de Mexico because it has equally good growth prospects but its stock is more cheaply priced.

New York-based J.P. Morgan Securities Ltd. , too, favours Comercial. In an April 26 report, J>P> Morgan had a “buy” rating on Comercial, but without a target price. It believes the company is poised to resume floor space growth and has tailored formats to specific niches that do not compete directly with Wal-Mart de Mexico’s formula.

However, Patricia Perez-Coutts, money manager for AGF Funds Inc. in Toronto, says Comercial is not even close to Wal-Mart de Mexico in its choice of discounted products, number of store locations and its ability to control costs and inventories. In addition, Comercial has been “significantly mismanaged” in the past, she says, noting that management “tried ‘Every day low pricing’ and failed miserably.”

Comercial now has new management, however, which may do better, Perez-Coutts adds.

In the six months ended June 30, Comercial’s net sales were Mex$22.6 billion (US$2.1 billion), up 6.3% from Mex$21.3 billion in the same period a year earlier. Net income was Mex$778.5 million during this period, a 23% increase from Mex$632.9 million in the first half of 2006. Long-term debt was Mex$5.3 billion as of June 30.

Comercial’s 356.2 million “BC” units, which were trading on the Mexican Stock Exchange at around Mex$29 a share in mid-September, consist of three “B” common shares and one “C” common share, the latter class of which votes on only certain transactions. There are also 729.8 million “B” units consisting of four “B” common shares.

> Delhaize Group Sa. J.P.Morgan has a “buy” rating on Delhaize, with a 12-month target price of 80 euros a share. Its shares trade on NYSE Euronext in Brussels. On the other hand, UBS Ltd. ’s London office rates it a “neutral” with a target of 76 euros a share. A share was trading at around 67 euros in mid-September.

Delhaize is the eighth-largest supermarket group in the U.S., with sales of 3.3 billion euros (US$4.4 billion) in its first quarter ended March 31. That represents 71% of the company’s total sales of 4.7 billion euros. Belgium accounts for sales of 1.1 billion euros or 23%; Greece for sales of 272 million euros or 6%; and emerging markets for 38 million euros or 1%.

The Greek operations are run through 61%-owned Alpha-Beta Vassilopoulos SA, which is publicly listed on the Greek stock exchange.

SOLID GROWTH EXPECTED

J.P. Morgan expects Delhaize’s organic growth to move into the 6%-7% range annually over time, noting that its Salisbury, N.c.-based Food Lion LLC division is in a position to start opening new stores and that its Hannaford Bros. Co. division of Portland, Maine, remains a centre of innovation, with computer assisted ordering the next system to be rolled out.

UBS also expects solid growth from both Food Lion and Hannaford. UBS notes that Delhaize has suffered no negative impact from the subprime housing credit crunch, high fuel costs or food inflation. The company has been able to pass on 3% food inflation to consumers.

Another positive is a recent debt restructuring lowered debt servicing costs.

@page_break@The reason for UBS’s “neutral” rating for Delhaize is currency movements. Because the company reports in euros, the decline in the U.S. dollar against the euro is having a dampening effect on the company’s earnings growth. The US$ was down 7% in the first six months of 2007 from the same period a year earlier.

Delhaize has made a number of acquisitions and will probably make more. UBS expects it to remain focused on small to medium-sized deals in existing or adjacent markets.

Delhaize’s net income was 198 million euros for the six months ended June 30, up only 1.8% from 194.4 million euros in the first half of 2006 because of the bond repayment. Revenue, at 9.5 billion euros, was down marginally from 9.6 billion euros. Long-term debt was 2.1 billion euros as of June 30.

There were 96.5 million shares outstanding as of Dec. 31, 2006, of which French insurance company AXA owned about 13%. The shares can be bought as American depositary receipts on the New York Stock Exchange, with one ADR equaling one share.

> Supervalu Inc. Fee thinks SUPERVALU’s stock is attractively priced, particularly given the restructuring opportunities arising from its purchase of 1,124 of Idaho-based Albertsons LLC’s best performing stores in June 2006.

The Albertsons deal made SUPERVALU the second biggest grocery chain in the U.S. It almost doubled the company’s store count to 2,656 and gave it a strong presence in New England, Philadelphia, Chicago, the Midwest and California. The cost of the acquisition was US$6.3 billion in stock and the assumption of US$6.1 billion in Albertsons debt.

UBS, however, is not impressed by that deal. It had a “reduce” rating on the stock in late July, noting that the company is not maintaining its share of industry growth.

Still, SUPERVALU’s 268.9 million widely held shares were trading around US$40 a share in mid-September on the NYSE, well above UBS’s 12-month target price of US$37 a share.

SUPERVALU’s net income was US$148 million in the first quarter ended June 16, vs $87 million in the same quarter a year earlier. Net sales were $13.3 billion vs $5.8 billion the previous year. Long-term debt was $8.9 billion.

> Wal-Mart De Mexico Sab De Cv. UBS’s New York office put a “buy” rating on Wal-Mart de Mexico in a July 9 report, with a target price of Mex$54.50 a share, which is up substantially from the Mex$39 a share at which it was trading in mid-September on the MSE. The shares also trade as ADRs on the NYSE with one ADR equal to 10 common shares.

Stéphane Champagne, portfolio manager at Signature Advisors, a unit of CI Investments Inc. in Toronto, calls the stock expensive in the short-term. However, he says, it’s an attractive long-term investment given its growth prospects, which are enhanced by the fact that the competition — including Comercial — doesn’t have the same size or financial strength.

The emergence of Mexico’s middle class is also a very positive development and, Champagne notes, the company has been granted a banking license, which should increase traffic.

But Wal-Mart de Mexico is also moving into low-income cities in the country’s southern region with stores that offer limited products, mainly food. Perez-Coutts says there are 300 cities that it could penetrate in the next 10 years.

Wal-Mart de Mexico has much better quality and customer service than its competitors and is in the process of rolling back prices, which have already been lowered on about half of its 4,000 items, adds Perez-Coutts.

The company carries fresh food, which takes market share away from the mom-and-pop stores. There are continuous upgrades of the mix of products with increasing emphasis on perishables as well as its own brands.

Like Champagne, Perez-Coutts admits the stock isn’t cheap. But she sees greater growth potential for Wal-Mart de Mexico as a result of the higher economic growth she believes Mexico can achieve, as well as the company’s ability to penetrate markets further — particularly in the country’s southern region.

The company started in 1958 as Cifra SA de CV. Wal-Mart got involved through a joint venture in 1991 and took a controlling interest in 1997. Wal-Mart owns 66% of the 8.6-billion outstanding shares that trade on the MSE.

In the first six months ended June 30, Wal-Mart de Mexico’s revenue was Mex$101 billion (US$9.2 billion), up 11% from Mex$90.8 billion during the same period a year earlier. Net income was Mex$5.9 billion, also up 11% from Mex$5.3 billion in the first six months of 2006. Long-term liabilities were Mex$2.5 billion as of June 30. IE