Fresh & Easy Locking-Up Leases For Northern California Invasion

As we've reported before, Tesco's Fresh & Easy Neighborhood Market plans on entering Northern California in a big way, beginning later this year--and really making a big splash in the region in 2009. Currently, the grocer has stores in Southern California, Arizona and the Las Vegas, Nevada metropolitan area.

Here's what we know about the Fresh & Easy Northern California invasion plan to date:

>Tesco has confirmed only one location in Northern California thus far. That site is in the Bayview-Hunters' Point neighborhood in San Francisco. The neighborhood is a low-to-moderate income one, and has a majority African American population, although that is changing rapidly as younger generations of African Americans move out of the city to the outlying regions where homes are more affordable.

Fresh & Easy store executives held a ribbon cutting ceremony at the Bayview-Hunters' Point location late last year, along with San Francisco mayor Gavin Newsom, and members of a neighborhood group who've been trying to get a grocery store that sells fresh foods in the neighborhood for at least a decade. Tesco has signed a lease for the site. The store will be the retail anchor of a brand new mixed-use, primarily residential condo and apartment development on Third Street in the neighborhood. Additionally, A San Francisco city official and a commercial real estate agent told us they know of at least two other sights in the city of nearly 800,000 that Tesco Fresh & Easy representatives are currently negotiating for.

>Tesco has signed a lease for a location in the city of San Jose, the largest city in the Bay Area with nearly one million residents. The Fresh & Easy store will be on Bird Avenue in a former Albertsons supermarket. Tesco will remodel the empty supermarket building to fit its Fresh & Easy format. Further, our commercial real estate source, and a San Jose city government sources, tell us Fresh & Easy is looking at as many as 3-4 more locations in the city for its combination basic grocery/fresh, prepared foods grocery markets.

>Tesco has signed a lease for a store in Fairfield, California. The Bay Area city is located about 40 miles from San Francisco on the freeway route to Sacramento. Fairfield is about 70 miles from Sacramento.

>Tesco is looking to make the east Bay Area city of Oakland its retail beachead in the Bay Area. The grocer has already locked-up a lease for at least one store site, and is in the process of negotiating for another. Additionally, a commercial real estate source told us he has talked with Tesco about 2-3 other potential locations in Oakland for Fresh & Easy stores. A local Oakland city government official also said at a recent Bay Area economic forum that Fresh & Easy has told her that they want to locate as many as five stores in the City, which is located just over the Bay Bridge from San Francisco.

>Tesco has signed a lease in Concord's Clayton Valley Shopping Center, where it plans to open a Fresh & Easy grocery market in 2009. The leased building in the center is about 14,000 square feet. Concord is in the east Bay Area, about 15 miles from Oakland.

The above locations are all in the Bay Area, and are what we have confirmed as "done deals" for Fresh & Easy stores to date.

Tesco is negotiating over numerous other sights throughout the Bay Area however. According to our commercial real estate and city and county government sources, the grocer is looking in the east Bay Area cities of Hayward, Walnut Creek, Antioch, Oakely, Pittsburg, Pleasanton, Dublin and Livermore, (in addition to Concord and Oakland), where it plans on having one or more stores per-city.

Further, in addition to San Jose, the grocer also is discussing locations in the south Bay Area cities of Fremont, Redwood City, Menlo Park, San Mateo and Burlingame.

Basically, Fresh & Easy is using a similar "ring the bay" strategy for its upcoming Bay Area launch as it currently is using in Southern California. That strategy is to locate stores all over the region, creating a critical mass of the small grocery stores throughout cities and neighborhoods. We refer to this as a "Starbucks" or "Walgreens" strategy. The coffee retailer and drug store chain have used this "critical mass" retail strategy to much success in California and elsewhere.

In addition to the nine-country San Francisco Bay Area, which has a population of about 7 million people, Tesco also is negotiating with commercial real estate people for Fresh & Easy store sites in the Sacramento metropolitan region, which currently has a population of about 3 million. This includes stores in Sacramento itself, and in the nearby suburbs of Woodland and Davis, as well as others.

Tesco also plans to locate a small distribution center in the central valley city of Stockton, which is about 45 miles from Sacramento. Stockton also is about an hours drive from San Francisco. The distribution center would service Fresh & Easy stores in the Bay Area and throughout Northern and Central California.

In addition to locating the distribution center in Stockton, our sources tell us Fresh & Easy representatives are looking for store locations in the city of Stockton, and in the nearby cities of Tracy, Lathrop, Manteca and Modesto. The region from Stockton and Tracy to Modesto, has over 1 million residents.

Tesco's number-one priority in Northern California clearly is the San Francisco Bay Area. Second is the Sacramento region, and third is the rest of Northern and central California.

Based on discussions with commercial real estate people, government officials and other sources, we think Tesco plans on opening about 30-50 Fresh & Easy stores in Northern California by the end of 2009.