Sunday, July 6, 2008

Former NBA Great Earvin 'Magic' Johnson is Working His Business Magic in Urban, Inner City Neighborhoods; We Offer An Idea For Tesco's Fresh & Easy

Earvin "Magic" Johnson makes a point using his hands and arms, which have slam-dunked a million basketballs, during a press conference in May with executives of the Best Buy electronics chain. At the press conference Johnson and Best Buy announced a partnership in which Magic Johnson will work with the retailer to improve sales and open stores in urban, inner city neighborhoods. [Photo Credit: Don Barletti/Los Angeles Times.]

In 1995 NBA basketball star Earvin "Magic" Johnson met with the key leaders of the rival Crips and Bloods street gangs in Los Angeles.

The purpose of the meeting? Mr. Johnson was building a movie theatre, his very first venture as a businessman, in Baldwin Hills near Los Angeles. In the meeting, the magician of the hardwood floor asked the leaders of the two rival gangs a simple question: Would the gang members be kind enough not to shoot up the movie theatre, which was located on both Crips and Bloods-claimed turf in the city, according to an article recently published in the Los Angeles Times' sports section.

"I just laid it out to them that I'm building this theatre for the community," Mr. Johnson told the Times' Mike Bresnahan and Greg Johnson for their June 30 article. Further, Johnson said he told the gang leaders: "You can't have anything happen at this theatre because we're going to hire your cousins, your mothers, your sons and daughters. You come in here and shoot up the place, it might be your own relatives inside," Mr. Johnson is quoted as saying in the Times' piece.

Earvin "Magic" Johnson's popular Baldwin Hills movie theatre complex has now been open for 13 years, and continues to draw crowds--and to hire the sons, daughters, mothers, fathers and cousins of the inner city community. There has never been a shooting incident or report of serious violence inside or directly outside the theatre, and Mr. Johnson says it's been largely untouched by violence since it opened 13 years ago.

From that "slam dunk" successful start, Earvin "Magic" Johnson, basketball magician turned entrepreneur, turned big businessman, has become one of the most serious and biggest developers and operators of urban inner-city businesses in America.

Today, through his Canyon-Johnson Urban Fund, created in 1998 and financed primarily by major pension funds like the California Public Employees' Retirement System (CalPERS) and other institutional investment funds, Mr. Johnson has financed 31 real estate developments in 13 states and the District of Columbia. In April of this year, Canyon-Johnson launched its third and biggest investment fund designed to focus on underdeveloped and underserved urban neighborhoods, and in just a few weeks raised $1 billion in funds from pension funds and other institutional investors, despite the commercial credit crisis in the U.S.

In addition to his Canyon-Johnson Urban development fund, Mr. Johnson own and operates Magic Johnson Enterprises, which is based in Beverly Hills, California. The company currently operates AMC Magic Johnson Theatres, like that first one in Baldwin Park built in 1995, in four U.S. States; operates 116 Starbucks Cafes located primarily in urban inner-city neighborhoods in 14 states and Washington D.C.; 31 Burger King fast food franchises in the Southeast U.S.; and 13 24-Hour Fitness/Magic Johnson Sport health clubs. Mr. Johnson also owns about 5% of his old basketball team, the Los Angeles Lakers.

Earvin "Magic" Johnson, who was diagnosed with the AIDS virus in 1991 while still with the Lakers and has become one of the most visible spokesman for research and prevention of the disease, is the only joint-venture partner the Starbucks chain has ever joined forces with.

When the mega-coffee retailer wanted to locate some of its stores in urban, inner-city U.S. neighborhood, Starbucks CEO Howard Schultz and Mr. Johnson had a meeting, which resulted in the two hatching a joint-venture deal in which Magic Johnson Enterprises and Starbucks would open cafes in numerous low-income, inner city neighborhoods where the coffee giant had never ventured with one of its cafes before.

Read the Los Angeles Times' Sports Section article, "For Magic Johnson, the NBA was only halftime," from the June 30 Los Angeles Times here.

The urban, inner city U.S. neighborhoods in which Mr. Johnson is developing commercial and residential projects, along with opening and operating his various retail business ventures like Starbucks and the others, are the same neighborhoods in Los Angeles and elsewhere in urban America also underserved by supermarkets offering basic groceries and fresh foods at affordable prices; the so called "food desert" neighborhoods.

While these neighborhoods might not need another Burger King, the former basketball star turned entrepreneur is demonstrating that it's possible to bring Starbucks Cafes (which provide a third place for neighborhood residents to socialize over a cup of coffee), first-rate movie theatres (the AMC branded theatres Johnson owns and operates are upscale in design), and fitness clubs to lower-income, inner city neighborhoods, where such businesses would not previously locate.

Tesco's Fresh & Easy Neighborhood Market, which like Mr. Johnson's enterprises is headquartered in Southern California, has publicly stated that a significant part of its food retailing strategy with its small-format Fresh & Easy grocery stores is to locate numerous stores in neighborhoods underserved by grocery stores offering basic groceries and fresh foods at affordable prices. In Los Angeles County for example, these are the same neighborhoods where Earvin "Magic" Johnson has been locating his various retail businesses for 13 years now.

As we reported in this piece on July 2, Tesco Fresh & Easy Neighborhood Market CEO Tim Mason announced the food retailer would open a new store in a low-income, "food desert" neighborhood in South Central Los Angeles.

Earlier this year, the grocery chain opened a store in the low-income city of Compton, in Los Angeles County. Not only is the Compton neighborhood where Tesco opened the Fresh & Easy supermarket underserved by such food stores, but the entire city is as well. Prior to the Fresh & Easy grocery market opening earlier this year, the city of about 100,000 had only one full-service supermarket. Now it has two; still underserved, but far better served than before the Fresh & Easy store opened.

Before opening the Compton Fresh & Easy grocery store, Tesco opened what was its first food store in a "food desert" neighborhood in Los Angeles' Eagle Rock neighborhood, which is a historically low income area that's currently going through a gentrification process.

To date, Tesco has located just two of its current 62 Fresh & Easy grocery markets in Southern California, Nevada and Arizona in urban, inner city neighborhoods underserved by supermarkets that offer basic groceries and fresh foods at affordable prices. Both are in Los Angeles County, with the third one on the way in South Central as we wrote about here.

Tesco also plans to open one of the initial batch of 19 stores it will start opening early next year in the Sacramento Metropolitan region in Northern California in a "food desert" neighborhood, Oak Park in Sacramento.

Additionally, one of the grocery chain's 21 stores thus far planned for the San Francisco Bay Area includes a store in San Francisco's low-income, primarily African American and Latino Bayview-Hunters Point neighborhood, which is in a part of the city long underserved by supermarkets.

As Fresh & Easy Buzz has written about in the past, a Los Angeles-based coalition of community, labor and faith organizations called the Alliance for Responsible and Healthy Food Stores, has been putting pressure on Tesco to locate more of its planned Fresh & Easy grocery stores in Southern California in low income, inner city Los Angeles neighborhoods underserved by supermarkets. The alliance says its identified numerous sites where it wants Tesco to consider opening Fresh & Easy stores.

The coalition also argues Tesco isn't living up to its pledge to open stores in these neighborhoods, despite the fact the retailer only opened its first Fresh & Easy grocery store just 9 months ago, and has opened two--with plans for a third--of the Fresh & Easy markets in Los Angeles County "food desert" neighborhoods.

Presently, Tesco's Fresh & Easy Neighborhood Market, along with a couple smaller Southern California-based multi-store independent chains, are the only food retailers that seem intent to at least open some stores in these underserved neighborhoods.

Others like Safeway Stores, Inc.-owned Vons and Kroger Co.-owned Ralphs, the two leading supermarket chains in the Southern California market, has expressed no plans to open stores in these neighborhoods, although Ralphs did open one of its new "Fresh" format Ralphs stores in downtown Los Angeles recently. However, that store, which opened on the ground floor of an upscale, urban residential loft development, is in an area of downtown that although has been a "food desert," is rapidly undergoing gentrification--including many new, trendy shops moving in--with most of the new residents moving in being young, urban professionals.

Perhaps there's a way for Tesco's Fresh & Easy Neighborhood Market to open more of its food stores in more Los Angeles area lower income, inner city neighborhoods in the way Starbucks has done in partnership with Earvin "Magic" Johnson, while still addressing the genuine concerns any retailer rightly has about the possible crime and violence in many of these neighborhoods?

Starbucks joined up with Magic Johnson Enterprises in part because he offered an established brand for the coffee retailer in these inner city neighborhoods. Perhaps start up Tesco's Fresh & Easy could use such an established brand, as well as a "brand-assisted" way to grow their Fresh & Easy stores faster in these "food desert" neighborhoods?

Since Mr. Johnson has that brand identity, especially in Southern California, along with a now successful track record of joint-venture partnerships with the likes of Starbucks and other retailers, perhaps it would be worth it for Tesco's Fresh & Easy Neighborhood Market to, like Starbucks CEO Howard Schultz once did, sit down and meet with the magic man and discuss urban, inner city retail development, with a focus on food stores. If nothing else, the Fresh & Easy executives would get to meet Earvin "Magic" Johnson, who's one charming human being.

Mr. Johnson did that recently with executives of the Best Buy electronics chain. The result: the magician of the hardwood floor and now the boardroom is working with the electronics products' retailer to boost its sales and open more stores in urban, inner city neighborhoods.

Imagine the power of the brand, "Fresh & Easy/Magic Johnson Neighborhood Market," throughout not only the "food desert" inner city neighborhoods in Los Angeles and elsewhere in Southern California--but in Phoenix, Arizona, Las Vegas, Oakland, Sacramento and elsewhere. While it certainly wouldn't be a "slam dunk," it has the potential to certainly be a successful "three point shot," that rather than touching the backboard sails right through the net.

Short of a joint-venture, a relationship with Mr. Johnson similar to the one recently inked between him and mega-electronics retailer Best Buy, in which Earvin "Magic" Johnson will work his urban, inner city business development magic in Southern California and throughout the U.S. for Best Buy, could be something Tesco's Fresh & Easy Neighborhood Market could benefit from on multiple fronts--improved sales, strong positioning in inner city neighborhoods with its Fresh & Easy stores, marketing, and public and community relations. It's a fresh, and potentially highly successful, idea and development.

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