Saturday, May 31, 2008

Breaking News: Tesco Has Two New Fresh & Easy Stores in the Pipeline For San Francisco Bay Area; Brings Total to Date to 20 Units For the Region

Tesco's Fresh & Easy Neighborhood Market, which already plans to open a grocery store in the San Francisco Bay Area city of Vallejo as part of its first wave of 18 confirmed stores set to start opening in the region early next year, has two new additional store locations in the city in the pipeline, according to Susan McCue, an official with the Vallejo Economic Development Department.

The first Vallejo location, for which a lease has already been signed, is at Oakwood Avenue and Springs Road, as we reported here on January 30, 2008. That store is expected to open in the first quarter of 2009.

The other two Vallejo stores in Fresh & Easy's pipeline are expected to open sometime next year. We don't have addresses for the additional two stores yet, and the state of California Department of Alcohol Beverage Control says Fresh & Easy Neighborhood Market hasn't yet filed applications for off-sale beer and wine for the two Vallejo stores.

The city of Vallejo is aggressively courting new retailers to come to the city because its needs an infusion of sales tax monies in order to operate the city. Last month the city filed for bankruptcy, which is a rare thing for a municipal government to do in the U.S.

However, even after cutting expenses dramatically, the city couldn't find a way to make its revenue's meet it expenses, including it's current deficit, so it decided to file the bankruptcy petition and seek relief, giving it time to reorganize its municipal finances.

This is where new retail comes in for the city. In addition to Fresh & Easy, Vallejo is courting category-killer beverage and specialty foods retailer Beverages & More to open a store in the city.

Click here for an enlarged version of the map above

Beverages & More is based in nearby Walnut-Creek and has stores located throughout California and in other Western USA states. The stores offer a wide-variety of spirits, wines, beers, non-alcoholic beverages, specialty and gourmet foods (including some prepared foods) and related items like drinking glassware, candy, snacks and a limited assortment of non-foods items related to food and drink.

Food isn't taxable in California but alcoholic beverages and non-foods items are, so the city can collect its portion (a portion goes to the state) of sales tax revenues from the sale of those items in the Fresh & Easy and Beverages & More stores.

Vallejo was recently hit with a big potential retail sales tax revenue blow however, when Wal-Mart backed out of it's plans to locate a huge Supercenter in the city because of opposition from community groups. On Friday, Wal-Mart told the city it was withdrawing its application for a Supercenter in the city, after four years of trying to get the store built amidst lots of opposition from community groups and local small businesses.

Home Depot plans to locate a store in a former Wal-Mart discount store building in the city though, according to McCue, so that should be a boost to the city's sales tax revenue since nearly 100% of everything sold in a Home Depot has a sales tax.

Wal-Mart's change of plans for a Vallejo Supercenter could be good news for Fresh & Easy; unless Wal-Mart decides to put a couple of its new, small-format (15,000 square foot) Marketside banner combination basic grocery and in-store prepared fresh, prepared foods format stores in the city, which it might bring to California after the initial stores open in Arizona this summer, as we reported here. Of course, since the first Marketside stores haven't even opened yet, it's a moot point at present.

Meanwhile, the fact Fresh & Easy plans to open two additional stores in Vallejo for a total of three thus far in the city of about 130,000, demonstrates once again what we mean by what we call the retailer's "critical mass" retail store location strategy. That strategy is to locate a "critical mass" of stores close together (about 1.5 -to- 2 miles apart eventually) in key target market regions and in the cities in those regions. Think Starbucks' and Walgreens drug stores' strategies for example.

Having three--and possibly more down the road--grocery stores in a city the size of Vallejo is building fairly strong "critical mass," even if those stores average about 10,000 square feet like the small-format combination basic grocery and fresh foods Fresh & Easy stores do.

It also shows Tesco wants to be a major food and grocery retail player in the San Francisco Bay Area like it does in Southern California, Arizona and Nevada.

As we reported some time ago, Tesco's Fresh & Easy Neighborhood Market has plans to open far more than the initial 18 grocery stores its thus far has confirmed for the Bay Area. In addition to these two new Vallejo stores in the pipeline and set to open next year, there are more coming up in other Bay Area cities. We will be reporting on those additional new San Francisco Bay Area stores soon.

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