Thursday, July 31, 2008

Thursday Fresh (& Easy) Buzz: News and Insight About Tesco's Fresh & Easy Neighborhood Market and Food and Grocery Retailing in the USA

Fresh & Easy Southern California

La Quinta times two: Tesco plans to build its second small-format Fresh & Easy Neighborhood Market grocery store in the Southern California desert city of La Quinta near Palm Springs.

The Fresh & Easy grocery market will be the co-retail anchor, along with a CVS drug store, in a new 10 acre development called Jefferson Square, at Jefferson Street and Fred Waring Drive in North La Quinta, according to J. Scott Fawcett, president of Newport Beach, California-based Marinita Development Co., the project's developer.

Mr. Fawcett says his firm has been working on plans for the center since 2000.

The Jefferson Square center will be 90,000 square feet. In addition to the Tesco Fresh & Easy grocery store and CVS drug store retail anchors, Mr. Fawcett says there will be 10 smaller retail shops which will be leased to a variety of tenants, including a name brand restaurant he says the firm is in negotiations with and therefore can't name at this time.

"We are certain the Fresh & Easy will do very well," Fawcett says. "There are no grocery stores within miles of the residential area (around the center). We're doing this in two phases rather than building everything at once and have them sitting empty."

The first La Quinta Fresh & Easy Neighborhood Market is currently under construction at Calle Tampico and Desert Club drive in the city. It's scheduled to be the first of the two stores in the city to open.

Tesco is putting a major focus on the desert region. It currently has stores open in the nearby cities of Indio, Palm Desert and Cathedral City, with a Fresh & Easy grocery store scheduled to open soon in Palm Springs.

Fresh & Easy Arizona

Four more new Arizona stores set to open: In addition to opening its 20th Arizona Fresh & Easy grocery store yesterday at 7th Avenue and Indian School Road in Phoenix, Tesco has announced an additional four Arizona stores that will be opening soon in the market. Those stores are as follows:

• Dobson and Queen Creek roads in Chandler on Sept. 10.
• Gilbert Road and Southern Avenue in Mesa on Sept. 10.
• Scottsdale Road and Shea Boulevard in Scottsdale on Aug. 27.
• Baseline and Kyrene roads in Tempe on Sept. 10.

The Tempe store will be the first Fresh & Easy market in that city. The retailer currently has stores in Chandler, Mesa and Scottsdale.

As we reported in this piece yesterday, Tesco hopes to have about 37 of the small-format, convenience-oriented combination grocery and fresh foods Fresh & Easy grocery markets opened in Arizona by the end of this year.

With the opening of the new Phoenix store yesterday, Tesco now has 67 Fresh & Easy Neighborhood market grocery stores open in Southern California, Nevada and Arizona. Plans call for about 30 more new stores to be opened by September, 2008.

The right way, the wrong way and the Tesco way: United Kingdom-based international retailer Tesco PLC, parent company of Fresh & Easy Neighborhood Market USA, is well known in the food and grocery industry globally for its methodological, and some say laborious, technological and quality control procedures regarding the process potential suppliers and vendors have to go through in order to produce a store brand item for the retailer.

It seems Ed Debartolo (he's not the former owner of the San Francisco 49ers football team) learned just how extensive and time consuming that process is when dealing with Tesco, the UK's largest and world's number three retailer.

Mr. Debartolo is the owner of Phoenix, Arizona-based Berto's, a $22 million a year specialty producer of Italian Gelato and Sorbet treats.

Despite the process, it appears the end result was good for both Bertos and Tesco's Fresh & Easy. Read a story about the experience in this July 30 article from the Arizona Republic newspaper, written by staff writer Cathryn Creno.

As the great American (he called himself "The Great One") comedian, and host of the long running television show bearing his name, Jackie Gleason used to say...'How Sweet it is.'

Fresh & Easy Las Vegas, Nevada Metropolitan Region

New stores: Fresh & Easy Buzz has learned the next new Fresh & Easy Neighborhood Market in the Las Vegas, Nevada Metropolitan region will open on Aug. 21. That new store is at Horizon Ridge Parkway and Stephanie Street in Sin City. Tesco plans to open at least 10 new Fresh & Easy grocery markets in the Las Vegas Metro region between now and the end of the year.

Small-Format Food Retailing: The independent segment

In addition to covering, writing about and offering analysis on Tesco and its Fresh & Easy Neighborhood market USA venture and stores, Fresh & Easy Buzz also reports on, writes about and offers an analytical eye on what we call the small-format food and grocery retailing revolution going on in the U.S. and throughout other parts of the world.

Tesco is a leader in this revolution, both in the U.S. with Fresh & Easy but even more so in Europe, with its Tesco Express small-format combination grocery and convenience stores.

We believe a combination of current trends in the U.S., $4 and soon to be $5 a gallon gasoline, a suburban-to-urban migration pattern in many parts of the U.S., and the need to cut overhead by food retailers (meaning perhaps in many cases building smaller stores) because of the combination of soaring energy costs and high food inflation, offers a bright future for small-format (on average 5,000 -to- 25,000 square foot) food and grocery stores in the U.S. particularly.

Researcher, writer and broadcaster James Kunstler, who wrote the popular 1993 book "The Geography of Nowhere" about suburban and urban migration and related issues, believes suburbs are done for in the U.S., which of course if true would mean many people would become urban migrants. Read an interview with Mr. Kunstler here. There's also a link there to his website which contains a podcast from the author about suburban/urban issues.

The suburban-urban discussion is important to food retailing because an even small but significant migration by consumers to cities will mean the need to build smaller-format grocery stores, which as we know is already happening. In fact, most American urban neighborhoods, regardless of economic level, are currently underserved by food and grocery stores, which makes small-format stores a growth sector even without significant suburban to urban migration trends becoming real.

If suburban to urban migration in significant numbers becomes the case, it also means small-format retailers like Fresh & Easy, Aldi, Trader Joe's and the many other newcomers to the format (Wal-Mart, Safeway and the like) will be positioned to kick of a radical revolution in American food and grocery retailing.

Of course, that paradigm could shift as fast as it becomes reality. For example, maybe with a suburban to urban mass migration movement, Internet-based home grocery delivery will finally come into its own in the U.S.? Its all good food for thought; and strategic planning.

The New Corner Grocers

Speaking of small-format food and grocery retailing in the U.S., it's not just the big guys like Tesco, Aldi, Wal-Mart, SuperValu (Sav-A-Lot), Safeway and others who are either in the game or getting into it. The small, independent guy or gal, the entrepreneur and independent grocer, also are opening new small-format grocery stores throughout America.

The independent grocer, the pioneer of small-format food retailing in the U.S., never went away. Not by any means.

There are ten of thousands of successful multi and single store independent food and grocery store operators in America, and thousands more mom & pop shop and mini mart retailers, along with many more operating natural, specialty and gourmet foods stores. Despite the highly competitive supermarket and mass merchandiser chains in the U.S., the independent food and grocery retailing sector is alive and thriving in America.

Much of the new-wave of independent food retailing in the U.S. is in the small-format segment, where entrepreneurs are creating hybrid formats, mixing basic grocery stores with traditional convenience stores, fresh foods, specialty foods and other twists and variations that it takes an innovator (which usually means an independent) to come up with. And, many of these independents are beginning to open stores in urban neighborhoods in cities across America.

The Portland, Oregonian newspaper has a interesting piece in today's edition about two such independents in Portland, Oregon, both who have recently opened new small-format grocery stores and are looking to create their own respective niches in the market. Read the article here.

Downtown Denver, Colorado also is seeing a number of independents open small-format grocery stores in the city's core. These grocers include: Marczyk Fine Foods, Cook's Fresh Market and Tony's Market, which is the latest to locate in downtown Denver with what will be a 15,000 square foot food and grocery store. read more about what's happening in downtown Denver here.

Wednesday, July 30, 2008

Tesco PLC Acquires Royal Bank of Scotland's 50% Stake in Tesco Personal Finance; Goal is to Become A Retail Banking Leader

On May 31 we ran this report from the Sunday Times of London in which the paper's sources said Tesco PLC, parent company of Fresh & Easy Neighborhood Market USA, planned to acquire the Royal Bank of Scotland's (RBS) 50% ownership share of Tesco Personal Finance, the financial services and banking division of Tesco PLC.

Tesco PLC has now reported it's acquired RBS's 50% share of Tesco Personal Finance for ~950 million-p (British Pounds) or $1.9 billion U.S., and will be the sole owner of the financial services business.

Tesco and RBS have been joint-venture partners in Tesco Personal Finance for many years. However in recent years Tesco PLC CEO Sir Terry Leahy and his financial services division team have felt the 50-50 joint-venture with RBS was hampering Tesco's ability to create new initiatives, grow the personal financial services enterprise and better integrate the personal banking operations with Tesco's retail store operations.

With full ownership of Tesco Personal Finance, Tesco PLC wants to drive hard into retail banking and financial services, becoming a major player in checking, credit cards, loans, mortgages and the like.

The synergies with the about 1,700 Tesco branded retail stores it operates in the UK are considerable, including the ability to use its vast Tesco Club Card consumer data base as a cross marketing tool between its retail and financial services businesses.

Below are a few articles from the a selection of newspapers, business and financial publications about the acquisition by Tesco PLC of the remaining 50% of Tesco Personal Finance:

UK-The Independent: Tesco pays £950m to launch its assault on the banks

UK-The Guardian: Financial services: Tesco pays £950m to buy out RBS stake in bank

UK-This is Money: Tesco takes on banks after RBS buyout

UK-Daily Mail: Welcome to Tesco-bank: Supermarket giant to offer current accounts and mortgages.

UK-Telegraph: How do Tesco’s financial products stack up?

UK-Director of Finance Online: Supermarket rescues bank
Strange things can happen during a credit crunch but Tesco bailing out Royal Bank of Scotland probably says everything about the state of the UK economy. The supermarkets are strong; banks are weak. Click here to read the full story.

Banking Business Review: Tesco: it's in the bank

Associated Press: Tesco buys RBS out of its personal finance arm; plans full-service retail bank

As we suggested above, the synergies between a giant retailer like Tesco, which is the UK's number one retail chain and the world's third largest retailer after number two Carrefour of France and number one Wal-Mart, Inc.

In fact, in 2006-2007, U.S.-based Wal-Mart planned to create its own retail bank, which the mega-retailer planned to position as a full-service financial institution, tieing it in with its retail store network as well.

However, there was so much opposition from certain U.S. government regulatory agencies, consumer activist groups and others, that Wal-Mart eventually decided to scale down its plans to open a full-fledged financial services business and opted to create a limited financial services arm that focusing just on its customer credit card business, similar to what Target and a couple other large U.S. retail chains do.

Tesco PLC however received no such opposition in the UK in acquiring Royal Bank of Scotland's 50% stake in Tesco Personal Finance. Of course this is due in the main to the simple fact that Tesco already owned half of the business, along with it being called Tesco Personal Finance.

But there more to it than just that. In the UK it is an accepted practice for large retailers like Tesco--which operates various different format stores in the country ranging from huge hypermarts and supermarkets, to discount stores and combination small-format grocery/convenience stores. Tesco sells everything from food and groceries, to clothing, appliances, electronics and more in the UK, similar to what Wal-Mart does in the U.S. and elsewhere.

In addition to Tesco, which is the UK's number one retailer, number two Asda, which is owned by Wal-mart, and number three Sainsbury's also have personal finance divisions, along with being in the insurance business like Tesco is.

Additionally, these retail chains also are in the Internet service provider business, all operate online/home delivery grocery stores, and are diversified into other sectors along with their major focus on grocery, hard and soft goods retailing.

Neither of these two competitors--Asda or Sainsbury's--will have a personal financial business to rival Tesco though now that it has bought out the RBS 50% stake in Tesco Personal Finance.

Despite the credit crunch and financial institution crisis currently going on in the U.S. and UK, acquiring the remaining shares of Tesco Personal Finance from RBS is a wise medium and long term decision for Tesco PLC in our analysis. After all, no industry has better cash flow even in a poor economy than the supermarket industry, which is Tesco's bread and butter business.

As a UK financial analyst said yesterday in explaining Tesco's acquisition of the RBS 50% stake in Tesco Personal Finance: the supermarkets are strong and the banks are week. That might be all the reason needed for the deal.

We don't see any immediate benefits to the deal for Tesco's Fresh & Easy Neighborhood Market USA division. However, down the road we believe Tesco will better leverage its Tesco Personal Finance business with all of its international retail operations, including Fresh & Easy in the U.S., now that it is the sole owner of the banking business.

Fresh & Easy Buzz in the News: Numerous Publications Quoting Fresh & Easy Buzz July, 2008 Reports and Stories

A number of consumer, business and industry trade publications have recently picked up reports and stories from Fresh & Easy Buzz which were published in the blog this month (July, 2008).

Below are a few of those publications:

The London Telegraph Newspaper ran a story on July 29 based on our report about the Tesco Fresh & Easy grocery store to be built in Fresno, California being the first store in the chain (currently 67 stores) to incorporate local, community and neighborhood design elements in its design. The story quotes Fresh & Easy Buzz as first reporting the news. Read the London Telegraph story here. Our story from July 23: Fresno, California Fresh & Easy Grocery Store to Be First in Chain to Include Local, Community and Neighborhood Design Elements and Features

The popular online publication (Los ran a story on July 15 titled "The Fresh & Easy Law," sighting Fresh & Easy Buzz's report on the proposed California legislation that would ban grocery stores offering self-service checkout lanes only from selling alcohol unless such stores added at least one full-service checkout lane in each store. Read the July 15 piece here. Our story from July 14: Breaking News & Analysis: CA Assemblyman Introduces 'Tesco Fresh & Easy Law' to Ban Stores With Self-Checkout-Only From Selling Alcoholic Beverages

On July 19, the food and grocery industry blog Natural~Specialty Foods Memo also ran an item about our report on the proposed California law to ban grocery stores which only offer self-service checkout, like Tesco's Fresh & Easy Neighborhood Market does, from selling alcoholic beverages unless those stores add at least one full-service checkout land in each store. Read the July 19 item from Natural~Specialty Foods Memo here: Will Tesco's Fresh & Easy feel the no-booze sales blues?

The Orange County (Southern California) Register newspaper's 'Fast Food Maven' blog, which is written by business section reporter Nancy Luna, also linked to Fresh & Easy Buzz's report on the proposed California self-service checkout-alcohol sales ban legislation. The link is under "Related Stories" here.

The online publication Pacifica Riptide ran a piece on July 16 about our report that Tesco applied for a liquor license and plans to open a Fresh & Easy grocery store in the San Francisco Bay Area coastal city of Pacifica, which is located just a few miles from San Francisco. You can read the report from the Pacifica Riptide here. Our June 24 Pacifica, California story: Upcoming New Markets News: Tesco to Locate Yet Another Fresh & Easy Store in San Francisco Bay Area; 21 Thus Far By Fresh & Easy Buzz's Reporting

We thank the Fresh & Easy Buzz readers who sent us these links. It's much appreciated. If you see Fresh & Easy Buzz mentioned or quoted in the "news," feel free to email us the link at

UFCW Union Flyers On His Door Knob Cause Heat in 'The Pragmatic Chef's' Mental Kitchen; Others Wondering About the Negative Campaign As Well

Blogger the 'pragmatic chef' arrived home last night to find a couple of the United Food and Commercial Workers union's (UFCW) "Fresh & Easy Facts" and "Don't Be Fooled By Fresh & Easy" anti-Tesco Fresh & Easy Neighborhood Market flyers on his front door knob.

As we've reported in Fresh & Easy Buzz, the UFCW is doing flyer drops in neighborhoods like 'the pragmatic chef's' where Tesco is getting ready to open new Fresh & Easy small-format combination basic grocery and fresh foods markets. Tesco is doing lots of new store openings at present--it's opening about 30 new Fresh & Easy grocery stores in the next 90 days.

Although he says he is a longtime union man, the pragmatic chef says finding the UFCW's flyers--and then reading them--created a little heat in his mental kitchen, leading him to rant about it today in his blog.

Tesco's Fresh & Easy Neighborhood Market USA is a non-union food and grocery retailing chain, unlike Tesco in the United Kingdom where the company is based, which is union- affiliated.

The major chain grocers--Safeway Stores (Vons banner), Kroger Co. (Ralphs supermarkets), SuperValu (Albertsons), Bashas and others, including most regional chains and larger independent grocers--in Southern California, Nevada and Arizona where Tesco's Fresh & Easy grocery stores are located are UFCW-represented union shops.

Trader Joe's, Whole Foods Market, Sprouts Farmers Markets, Wal-Mart, Costco and a few others in these three states are, like Tesco's Fresh & Easy Neighborhood Market, non-union shops.

The UFCW is conducting a grass roots and media campaign both in the Western U.S. states of California, Nevada and Arizona, as well as in Tesco's home country the United Kingdom where the international retailer has its headquarters, which is designed to get Tesco executives to meet with union leaders to discuss unionizing Fresh & Easy store-level employees.

Thus far Tesco has declined to meet with the UFCW union's leaders, saying its position is that the UFCW is free to organize the Fresh & Easy store workers within the guidelines of U.S. labor laws, adding that it is up to the store employees if they choose to join the union.

We've suggested recently in a couple of stories in the blog (see links at bottom) that the UFCW might want to take a page from Barack Obama (who has pledged to run a positive campaign for President against Republican John McCain), the candidate it's supporting for U.S. President, and rather than using the negative tactics it is in the anti-Tesco Fresh & Easy Flyers, focus more on the positive features, of which there are many, that Fresh & Easy store-level workers could gain from affiliating with the UFCW.

We suggested this because we have heard from Fresh & Easy store employers, consumers and others that they, like the Pragmatic Chef, find the negative UFCW campaign repugnant.

In fact, we've even talked to executives of two unionized supermarket chains who told Fresh & Easy Buzz they don't like the negative food safety focus of the UFCW flyers, telling us they fear that message could potentially cause erosion on the part of some consumers in the retail supermarket industry's food safety record and abilities.

Both industry executives, who work for supermarket chains that have UFCW unionized store-level workers, also told us they didn't think the union's flyer campaign was very successful to date in getting Tesco to the table for a meeting, which is the UFCW's stated goal of its overall campaign.

Related Posts in Fresh & Easy Buzz:

Tuesday, July 29, 2008

Metro Phoenix Arizona Market Report: Tesco Opens Store Number Twenty in Phoenix Market; We Use That Milestone to Offer A Market Overview and Analysis

Phoenix, Arizona, the center of the Phoenix Metropolitan region and the Arizona city where Tesco opened its 20th Fresh & Easy grocery market this morning. The region has become arguably the most competitive food and grocery retailing market in the United States.

Tesco opened its 20th small-format Fresh & Easy Neighborhood Market grocery store in Arizona's Phoenix Metropolitan region at 635 West Indian School Road in Phoenix this morning. The grocery chain, which operates convenience-oriented combination basic grocery and fresh foods markets averaging 10,000 -to- 13,000 square feet, plans to have about 37 of the stores opened in the Phoenix Metro area by the end of this year.

As Fresh & Easy Buzz has written often, Arizona, and especially the Phoenix-West and East Valley market region, is arguably the most competitive food and grocery retailing market in the U.S.

Market share leaders include Safeway Stores, Inc., the third-largest grocery chain in the U.S., and Arizona-based Bashas, which operates over 160 supermarkets in Arizona.

Additionally, Arizona, and particularly the Phoenix Metro region market, is one of Wal-Mart, Inc.'s key growth markets in the U.S. The world's largest retailer and now the number one seller of food and groceries in America, has over 70 of its mega-Supercenters in the state, with numerous more either in the pipeline set to open soon, under construction or on the drawing board.

Wal-Mart also operates about 20 of its Neighborhood Market supermarkets in Arizona, most in the Phoenix Metro area. Those stores are about 45,000 square foot supermarkets which feature a complete selection of fresh foods, grocery products and non-foods items. Wal-Mart plans to open a number of new Neighborhood Market supermarkets in Arizona this year and in 2009.

Additionally, this fall Wal-Mart plans to open its first four small-format (about 15,000 square foot) Marketside combination fresh foods and grocery stores in Arizona. All four of the initial Marketside stores will be in the Phoenix Metropolitan region, each fairly close to an existing Tesco Fresh & Easy Neighborhood Market grocery store.

In addition to Safeway, Bashas, Wal-Mart and Tesco's now 20 Fresh & Easy small-format grocery stores, Fry's supermarkets also is a major player in the Arizona market, as is Albertsons, which is owned by SuperValu, Inc., the second largest U.S. supermarket chain in the U.S., after number one Kroger Co.

Not enough competition for you?

Toss in fighting tiger small-format natural and specialty foods retailers Sunflower Farmers Market and Sprouts Farmers Market, which in addition to selling lots of fresh produce and meats, along with natural and organic food and grocery products at discount prices, also offer extensive fresh, prepared foods selections in their respective stores, which average 15,000 -to- 30,00 square feet. Both Sunflower and Sprouts have about 20 stores each in Arizona, and have targeted the state for rapid new store expansion.

Still not enough competition?

Let's not forget Whole Foods Market, Inc., which has a number of stores in Arizona and is planning to open more in the next couple years.

And when it comes to small-format category killers and competitors, one can't leave out Trader Joe's, which has a major presence in Arizona with about 20 stores, with more on the way.

Then there is Costco Wholesale, which also has a significant presence in Arizona and is growing its store count in the state. Costco, which sells basic groceries as well as upscale specialty, natural and organic foods in its huge membership-required stores, along with quality USDA Choice grade meats at discount prices, takes business away from every type of format food retailer, even Wal-Mart's Supercenters.

Arizona, which has a overall Hispanic or Latino population of about 35 -to-40%, as well as being located right on the Mexican border, also has numerous Hispanic format supermarkets which offer an abundance of fresh foods and groceries specifically catering to Latino consumers, as well as offering many traditional American grocery brands and products.

These ethnic Hispanic supermarkets are category killers for traditional food retailers just as Costco is. With 35 -to- 40% of the food shopping public in Arizona of Hispanic ethnicity, for all intents and purposes these ethnic supermarkets can really be viewed as mainstream grocers in the state, since they appeal to such a high percentage of Arizona consumers.

It's against this super-competitive climate that Tesco is currently making Arizona and specifically the Phoenix Metropolitan region market one of its three target markets for its small-format combination basic grocery and fresh foods Fresh & Easy grocery stores, which operate on an everyday low-price strategy, as well as offering regular specials.

It's this combination--low everyday prices for basic groceries and fresh foods, combined with convenient shopping--that Tesco hopes will set its Fresh & Easy stores apart in the Arizona market.

However, the retailer is far from alone in that hope. Wal-Mart's Neighborhood Market stores, its soon to come Marketside markets, Trader Joe's, Sunflower Farmers Market and Sprouts Farmers Market all operate on a similar strategy, although there are significant qualitative format, merchandising and positioning differences among all these retailers.

However, the point is they all are going for a share of the Arizona consumers stomach, and doing so with various versions of convenience-oriented small-format stores. There's only so much share-of-stomach to go around.

And size doesn't matter when it comes to gaining share-of-stomach. In fact, the jury is still out on whether Arizona customers will shop small-format grocery stores like Fresh & Easy on a regular, primary basis, or if they will merely use them as fill-in or secondary and tertiary food and grocery shopping venues.

Wal-Mart is betting that is the case. The mega-retailer has designed and will be positioning when they open in the fall its Marketside stores as fill-in or secondary and tertiary shopping markets. It's using a three-format food retailing strategy in Arizona with its average 180,000 square foot combination grocery and general merchandise Supercenters, it's 45,000 square foot Neighborhood Market stand-alone supermarkets, and its more upscale 15,000 -to- 20,000 square foot Marketside combination fresh foods and grocery stores.

Unlike Tesco's Fresh & Easy, stores which makes its prepared foods items at a central kitchen in Southern California and then ships them to the Arizona stores, Wal-mart plans to make all its fresh, prepared foods right in-store.

The retailer plans to argue in its marketing that this fact makes its prepared foods fresher than the competition. And in this case we know who the competition will be--Tesco's Fresh & Easy. Of course, this point of differentiation only has the potential of being successful for Wal-Mart's Marketside if its in-store fresh, prepared foods are "fresher," better tasting and healthier than Fresh & Easy's are. If they aren't perceived a such by consumers, it could backfire if Wal-Mart touts its in-store fresh, prepared foods "advantage."

Conversely to Wal-Mart, Tesco has positioned its small-format Fresh & Easy grocery stores as primary, neighborhood shopping venues, stating that its goal is to appeal to all shoppers and to have the stores shopped as primary food and grocery shopping venues.

Trader Joe's on the other hand doesn't expect or even position its specialty grocery stores to serve as most consumers' primary shopping venues. However, despite that positioning Trader Joe's sales in its 10,000 -to- 15,000 square foot stores exceeds the average sales per-square foot of most primary supermarkets in the U.S. In fact, with only about 300 stores currently, Trader Joe's is rated as the 25th largest supermarket chain by sales by the supermarket industry trade publication Supermarket News.

The fill-in, secondary and tertiary food and grocery shopping venue strategy also is the focus of Safeway Stores, Inc. with its new "The Market" small-format grocery stores.

This format, which so far is seen in one store called "the market by Vons" which opened in Long Beach, California in May, is an upscale, combination basic grocery, fresh and specialty foods store of about 15,000 square feet. The "The Market" format features fresh produce and meats, fresh, prepared foods, a selection of perishables and basic groceries, along with such features as an in-store hearth used to bake fresh breads and an in-store cafe called "Signature Cafe" which sells the fresh, prepared foods items.

As Fresh & Easy Buzz has reported, Safeway is currently negotiating to put its second and third "The Market" format stores in downtown San Jose, California and downtown Los Angeles.

The stores are named based on the name of the supermarket banner Safeway operates in a given market. For example, the chain uses the Vons banner in Southern California. Therefore the small-format stores are called "the market by Vons" in that market. Safeway also operates Vons supermarkets in Nevada.)

In Arizona, Northern California, Colorado, Oregon, Washington state and in other regions in the U.S., Safeway uses the Safeway banner. Therefore, if Safeway opens any of its "The market" small-format stores in Arizona, which is likely, those stores will go by the name "the market by Safeway," as will the San Jose store in Northern California.

Tesco is betting big on the Arizona market though, as it is in Southern California and the Las Vegas, Nevada Metro region.

Having 37 or so Fresh & Easy stores in the Metro Phoenix market by the end of the year should give Tesco, as well as its competitors, a pretty good idea as to consumer adoption rate of the notion of using the small-format, convenience-oriented Fresh & Easy stores as primary and to a lessor extent secondary, shopping venues.

Thus far, Arizona shoppers have not made the majority of the 20 Fresh & Easy stores their primary shopping venues based on our extensive observation and analysis. Rather, they are secondary and tertiary stores currently in the main.

However, the first Arizona Fresh & Easy grocery store hasn't even been open a year yet, and many of the 20 stores has been open for just a few months. (Store number 20 just opened today.) Therefore, it is far to early to tell if shoppers will adopt the small-format stores as primary and secondary shopping venues. However, by the end of the year, a good indication of that direction should be much clearer.

Further, with Wal-Mart opening the first four Marketside stores and more of its Neighborhood Markets, combined with Trader Joe's, Sunflower Farmers Market and Sprouts Farmers Market all opening different but also similar in some ways small-format stores, the end of the year also will bring a better assessment of the small-format food retailing climate in Arizona.

Lastly it's important to note in a food and grocery retailing market as competitive as Arizona's is, it can become hard to even determine what is and what isn't a primary shopping chain.

In fact, one could argue all of the food and grocery retailers in the super-competitive Arizona could potentially become secondary shopping venues since in such a market it could become the consumer norm, if it hasn't already, to shop at least two or three different chains regularly. Of course, the death in such a market then becomes being one of the primarily tertiary shopping chains if a retailers business model is built on being a primary and to a lessor extent secondary--but not tertiary--grocery retailer.

Sitting above all these retailers (and consumers) is a very poor U.S. economy which is being felt strongly in Arizona, California and other Western USA states that are experiencing higher than national average unemployment, gas prices and home foreclosures.

This poor U.S. economy is favoring food retailers like Wal-Mart and Costco that focus on low prices and value. This is evidenced by both retailer's recent sales and profit reports.

The current economy, especially in Arizona, Nevada and California, also should be favoring Tesco's Fresh & Easy, which offers retail prices comparable to Wal-Mart and Costco--and other discounters--on its fresh & easy store brand of groceries and fresh foods.

Based on the favorable prices on the fresh & easy brand, we aren't seeing the sales in the Arizona stores that we think should be happening. Of course, the fresh & easy brand, like the stores, are new and therefore have zero brand equity compared to Wal-Mart's, Costco's and Safeway's store value brands for example.

That could change with time. However, as we've suggested numerous times in Fresh & Easy Buzz, it's our analysis that in order for that sales situation to change in the retailer's desired more positive direction, Tesco needs to better position both the Fresh & Easy stores in Arizona (and in Southern California and Nevada for that matter) and the fresh & easy product brand better. It also needs to better communicate that brand message once it finds a better position for both the stores and the brand.

Tesco has an excellent marketing reputation in the United Kingdom and in some of the other countries where it operates. Therefore its potential to get it right with Fresh & Easy is there.

However, in our analysis, although we are seeing some progress, the retailer has yet to find a tight, solid marketing position for Fresh & Easy, and then develop a multi-media in-store and external marketing and merchandising program to communicate a message. Doing so by the start of next year seems to us to be crucial to the overall success of the retailer.

Don't bet against Tesco successfully doing that. However, time matters even to the world's third-largest retailer when it comes to losing money. Generally speaking, the start of year two marks a seminal point in terms of any start-up moving in to a less "start-up" phase if you will. Next year will mark that phase for Tesco with its Fresh & Easy Neigborhood Market USA.

The end of this year and the beginning of 2009 also will mark a time of having even more Arizona Fresh & Easy stores for Tesco. Of course, it also will mark a point in time in which all the retailers mentioned earlier will to one extent or another also have more stores open than they do now, particularly Wal-Mart, which is opening numerous Supercenters, Neighborhood Market supermarkets, and of course the new small-format Marketside food and grocery stores, throughout the rest of this year.

Wal-Mart is the fastest growing food and grocery retailer in terms of overall sales and new store square footage in Arizona. Every chain in the state sees it as the biggest threat to its business. In that regard, Tesco's Fresh & Easy is far from alone.

Tesco's Fresh & Easy and San Francisco's Tenderloin Redux: Upcoming Developments Offer First Mover Opportunity For Fresh & Easy or Competitors

Pictured above is the new Curran House affordable family housing and retail development, created by the Tenderloin Neighborhood Development Corp. and the San Francisco Mayor's Office of Housing, in the Tenderloin neighborhood. It's major new developments like this and others that are changing the downtown San Francisco neighborhood. Click here to learn more about this and other similar developments in the Tenderloin.

In our Sunday (July 27) feature, Fresh Buzz: Tesco's Fresh & Easy Neighborhood Market, Tesco PLC and Related Food Retailing News and Insight, we wrote an item about Tesco's Fresh & Easy Neighborhood Market saying "no thanks" to San Francisco, California Mayor Gavin Newsom and Dan Falk, the executive director of the Tenderloin Neighborhood Development Corp., to locating a small-format Fresh & Easy grocery store in a potential mixed-used development in the low-income Tenderloin neighborhood in downtown San Francisco, after Tesco representatives toured the neighborhood.

In that item, "Tesco's Fresh & Easy to San Francisco's Mayor: No thanks in the Tenderloin," we wrote that although the neighborhood currently has its share of less than desirable inhabitants, the majority of its residents are hard working San Franciscans who can't afford to live in other more desirable neighborhoods in the city due to the extremely high rental costs in the city by the bay.

We also discussed how the Tenderloin neighborhood is changing, including how Asian and other ethnic immigrants are turning it around by opening small businesses and raising families in the low-income downtown mixed-residential and commercial neighborhood.

Further, we suggested Tesco take a second look at putting a Fresh & Easy grocery store in the Tenderloin, based on the fact the neighborhood is changing for the positive, along with the fact that it is underserved by grocery stores that offer a selection of basic groceries and fresh foods at reasonable prices. In other words, despite the negative aspects of the Tenderloin, many positive aspects also exist, including market-based ones; not to mention how much commercial retail space rents will go up as the neighborhood starts more rapidly developing.

In our email inbox today we noticed a story from the San Francisco-based blog BeyondChron (a name play on the fact the San Francisco Chronicle is the only major daily newspaper in the city) written by Randy Shaw, who is a longtime activist for San Francisco's Tenderloin neighborhood, the editor of the blog, and the director of the Tenderloin Housing Clinic, which advocates for and develops affordable housing in the San Francisco neighborhood.

In his piece, "State Approves Uptown Tenderloin Historic District," Shaw talks about an application to the California Historical Resources Commission that was made in 1983 to create the national Uptown Tenderloin Historical District.

The application languished for over two decades. But Shaw reports that on July 25, the California state commission approved the application. The proposal now goes to the Keeper of the National Register in Washington D.C. for possible approval.

Such a historic designation if approved by the Keeper of the National Register could be significant for San Francisco's Tenderloin neighborhood and its economic and social development because with such designations comes the opportunity to receive federal grants and loans to restore historic buildings and public spaces. In turn, such urban designations bring in private sector developers who want to locate commercial and residential developments in such districts.

Should the Tenderloin get this historical district designation it likely will mean improvements in the downtown neighborhood will happen much faster than without it, potentially offering its residents a better lifestyle along with creating new commercial developments, including opportunities for retail grocers.

As we said in the item in Sunday's feature, those grocers who get to neighborhoods such as San Francisco's Tenderloin or downtown Los Angeles, stand the best chance of being the most successful food retailers in such respective areas. First mover advantage has its benefits after all.

Perhaps this is a new reason for Tesco's Fresh & Easy, along with other grocery chains like San Francisco Bay Area-based Safeway Stores, Inc. and others, to consider locating a store in that new development at Eddy and Taylor Street in San Francisco's downtown Tenderloin neighborhood? We think it is.

We spoke with a spokesperson in San Francisco Mayor Gavin Newsom's office today who said the mayor's phone line is open and waiting to hear from any and all grocery chains and independents who might want to take a first, or second, look at the Tenderloin site.

Meanwhile, Randy Shaw reports a lease has already been signed to locate a Tenderloin Historic Museum at Eddy and Leavenworth, which is near the proposed development at Eddy and Taylor, where Mayor Newsom and Dan Falk wanted Tesco to locate a Fresh & Easy store.

Shaw says that and other new projects on the drawing board will eventually create lots of new residential and tourist pedestrian traffic in the downtown neighborhood. And, one thing we all know, people have to eat, and prefer to shop in their own neighborhood rather than drive or take public transportation outside of it to shop at a supermarket like many of the Tenderloin's current residents do.

Read Randy Shaw's full piece about the evolving tenderloin neighborhood here. Click here to read about some new developments in the neighborhood. Click here to read about a major new facility the Salvation Army opened last month in the Tenderloin neighborhood. Click here to read about the various Tenderloin neighborhood new housing and economic development initiatives being spearheaded by San Francisco's internationally famous Glide Memorial Church.

We bet with all the changes coming to the Tenderloin neighborhood, that if Tesco's Fresh & Easy doesn't jump on the opportunity soon to locate a store there, an enterprising grocery chain or independent will soon do so.

In fact, we were told today by a very reliable source that in addition to discount salvage grocery chain Grocery Outlet having an interest in the Eddy and Taylor site in the Tenderloin, a major food retailer and a very successful Bay Area multi-store independent grocery chain are both considering looking at the site as well, each sighting the fact that locating stores in low-income "food desert" neighborhoods such as the Tenderloin is becoming a competitive advantage in an increasingly competitive retail grocery industry in California and elsewhere in the U.S.

Fresh & Shaking: Strong 5.8 Earthquake Hits Southern California; Felt in San Diego and Las Vegas

LOS ANGELES, CA - A strong 5.8 (Richter Scale) earthquake shook Southern California this morning at 11:42 a.m. Pacific Daylight Time, causing buildings to sway and triggering some precautionary evacuations.

Tesco operates over half of its 63 small-format Fresh & Easy Neighborhood Market grocery stores in Southern California, with the remaining half of its stores located in the Las Vegas Metropolitan region in Nevada and in the Phoenix region in Arizona.

There are no reports yet if supermarkets such as Fresh & Easy have lost product from the goods' tumbling off shelves as often happens in earthquakes of this magnitude.

The jolt was felt from Los Angeles to San Diego, and slightly in Las Vegas, according to a report from the Associated Press, sighting a U.S. Geological Survey spokesperson.

Preliminary information from the U.S. Geological Survey estimated the quake at magnitude 5.8, centered 29 miles east-southeast of downtown Los Angeles near Chino Hills in San Bernardino County.

Tesco's huge 850,000 square foot Fresh & Easy Neighborhood Market distribution center is located in Riverside County, which is next door to San Bernardino County, where the earthquake was centered.

Los Angeles Fire Department spokesman Brian Humphrey told the Associated Press there were no immediate reports of damage or injury in Los Angeles. San Bernardino County fire dispatch also had no immediate reports of damage.

The quake struck just 25 minutes ago, at 11:42 a.m. Pacific Daylight Time. Buildings swayed in downtown Los Angeles for several seconds. It's still too early after the earthquake to determine fully what possible damage the tumbler might have caused.

Workers quickly evacuated some office buildings.

"It was dramatic. The whole building moved and it lasted for a while," Los Angeles County sheriff's spokesman Steve Whitmore, who was in the sheriff's suburban Monterey Park headquarters east of Los Angeles, told the Associated Press.

Sunday, July 27, 2008

Fresh Buzz: Tesco's Fresh & Easy Neighborhood Market, Tesco PLC and Related Food Retailing News and Insight

Tesco to move into Northern California's South Coast region: First store to be in Seaside, in Monterey County

Tesco plans to build and open its first Fresh & Easy grocery store in Northern California's south coast region, in the city of Seaside, which is next door to Monterey, according to a report in the Monterey County The Herald newspaper. Seaside is in Monterey County. Fresh & Easy Buzz verified the local newspaper's report with the city of Seaside.

Fresh & Easy Neighborhood Market signed a lease with the Orosco Group to occupy a 14,000-square-foot building on the shopping center's southwest corner, the center's developer announced Thursday. The building has not yet been built, and a date for the store's opening was not announced.

The grocery store gives the city an anchor tenant to build around as it develops its downtown, said Diana Ingersoll, Seaside's deputy city manager. "I see the store as a catalyst for the rest of the development of the West Broadway Urban Village," Ingersoll said. "It is actually an anchor to our downtown. Fresh & Easy also addresses the absence of a supermarket in Seaside. Safeway in Del Rey Oaks and Save Mart in Sand City are the closest options for the city's residents."

This is an important event in Tesco Fresh & Easy's Northern California plans, as the seaside store is the grocery chains first one to be planned in what is considered the south coast market region.

The Monterey, Pebble Beach, Carmel, Seaside area, along with other south coast cities, are distinct from the San Francisco Bay Area, where Tesco currently has plans to open 21 Fresh & Easy grocery stores thus far, beginning early next year. Plans thus far also call for 19 of the stores in the Sacramento region and one in Modesto in the northern San Joaquin Valley. Many others are planned throughout Northern California.

As regular readers know, Fresh & Easy Buzz always says that when news of a first Fresh & Easy store pops up in a new market region like Northern California's south coast, it means many more Fresh & Easy grocery markets in that region will open as well because Tesco is operating on what we call a "critical mass" retail store strategy with Fresh & Easy. The company's strategy is in every market region it opens stores in to open other Fresh & Easy stores within about 2 or so miles from each other.

That won't happen right away. But you will see more stores for the Monterey-Seaside market region and throughout the south coast area and inland as well in Gilroy and the like. We will try as always to be the first publication that reports them to our readers.

Tesco's Fresh & Easy to San Francisco's Mayor: No thanks in the Tenderloin

San Francisco Mayor Gavin Newsom and Dan Falk, executive director of the Tenderloin Neighborhood Development Corp., which has been trying to bring a grocery store that sells fresh foods and basic groceries to the ruff and tumble San Francisco neighborhood of that same name, recently thought they hit pay dirt when representatives from Tesco's Fresh & Easy Neighborhood Market expressed an interest in locating on of its small-format, combination grocery and fresh foods stores in the "food desert" neighborhood.

Tesco currently has plans to open two of its Fresh & Easy grocery stores in San Francisco next year, as we've previously reported in the blog. One of those stores is in the low-income Bayview-Hunters Point Neighborhood, which like the Tenderloin is currently underserved by grocery stores.

However, as today's San Francisco Chronicle reports, once representatives from Tesco's Fresh & Easy Neighborhood Market visited the proposed Tenderloin neighborhood location at Eddy and Taylor Street, they said no thanks to the Mayor and Mr. Falk.

Unlike Bayview-Hunters Point, which although is low-income has numerous home owners and businesses, the Tenderloin is just that, the part of San Francisco right in the center of the city that is home to prostitutes and pimps, drug dealers and drug and alcohol abusers.

They are the minority though. But a very visable minority.

The Tenderloin also is home to thousands of good, hard working people who live there because its one of the few places they can afford to live in the expensive city. It's also home to numerous hard working Asian immigrants, who live in the Tenderloin and operate small businesses, working 12 or more hours a day, six days a week.

And it is just because so many good people do live in the Tenderloin that it's a shame a decent grocery store won't locate there.

But it also is hard to blame a food retailer if it says no thanks. The handful of mini-marts in the neighborhood, which seem to sell everything except basic groceries and fresh foods at decent prices, experience lots of shoplifting, often have to call the police on a regular basis, and generally employ security at night to protect the store and the decent customers.

According to the San Francisco Chronicle piece, Grocery Outlet, which is a surplus grocery retailer that sells near out of code, excess inventory and other grocery items, along with regular meats and produce, is considering opening a store in the site Fresh & Easy said no thanks to. Grocery outlet is headquartered in nearby Berkeley.

We know the location Fresh & Easy turned down; and can't say we blame them. However, the grocery chain might want to take a second look, as the Tenderloin is slowly changing--more hard working Vietnamese and other ethnic immigrants moving in and opening small businesses, the city is working with developers to build new multi-residential housing (which is what is going to go on the Eddy and Taylor site), and a developer plans to tear down and rebuild a bad strip of Market street and create a discount retail store area where there currently are empty buildings primarily.

Pacifica Dreams and the relativity of 'affordability'

Fresh & Easy Buzz was the first publication we are aware of to report here that Tesco plans to open a Fresh & Easy grocery market in the Pedro Point Shopping center, which is being completely rebuilt, in the coastal San Francisco Bay Area city of Pacifica, where the average home sells for about $775,000.

Today's San Francisco Chronicle has a good profile of the coastal city, which is famous for its rugged coastline, beaches and cool, misty fog.

Among the changes going on in Pacifica, which is just a few miles from San Francisco and considered its "affordable alternative," include adding lots of new retail in addition to the small-format Fresh & Easy grocery store. Read the Chronicle piece about the Bay Area's coastal oasis here.

A walk to work in downtown L.A. on the wild side

On Friday we reported on Safeway Stores, Inc.'s plans to open what will be either its second or third small-format "The Market" grocery store in downtown Los Angeles. In Friday's piece, we discuss the growing numbers of both professionals and younger than average age retirees that are moving to downtown Los Angeles from the suburbs to either be closer to where they work or to make a lifestyle shift from suburban to urban living.

Patrick McMahon, a staff writer for the Los Angeles Times newspaper is just one of those suburban to urban migrants.

In a viewpoint story in today's Times, "A walk to work on the wild side: Life in the city center exercises the body and the senses," Mr. McMahon, who lives in downtown Los Angeles' popular 7th Street Lofts, which have a 55,000 square foot Ralphs Fresh Fare supermarket on the ground floor, describes his life in downtown Los Angeles, which includes a mere 10-block walk to work for him at the Times' building.

It's a far different life than where he lived previously: "For two years, my home was a tiny one-bedroom house on stilts way up above Mulholland Drive on Pacific View Drive. It overlooked a woodsy glen, and downtown lights twinkled in the distance at night. Great neighbors, a fine landlord, privacy and silence added to its appeal." Read the story here.

Downtown Los Angeles is changing, and the food retailers like Ralphs and soon to be Safeway with its small-format "the market by Vons" that get their first have the best chances of succeeding. The same is true of San Francisco's Tenderloin neighborhood. While not changing as fast as downtown L.A, it is changing none the less. First movers there will come out on top as well.

Small-Format Food Retailing Revolution in the U.S.

A small-format, combination natural foods market, convenience store and gas station sprouts in North Carolina

Matthew Johnson, a successful Moorsville, North Carolina oral surgeon and real estate developer, says he always wanted to be able to shop at a combination small grocery/convenience store that sold healthy, fresh and premium foods, along with basic groceries, as well as offering a fueling station out front.

So, the oral surgeon, real estate developer and now grocer decided to design and open just such a store himself. Mr. Johnson recently opened the first 6,000 square foot Johnson Family Markets, a 6,000 square foot combination natural foods market, convenience store off of Interstate 77 in Moorsville, South Carolina, near the city of Charlotte.

Sitting in his medical office next door to his new store, Johnson, 42, says he'd always wanted a healthy convenience store, “kind of like a smaller version of Trader Joe's, with the ability to get gas.” So he built it himself, in Mount Mourne Springs, a development designed to evoke the open-air shopping centers he'd enjoyed while serving with the Army in Germany, according to a story in Friday's Charlotte Observer newspaper.

As we've been suggesting for months in Fresh & Easy Buzz, there is a small-format food and grocery retailing revolution going on in the U.S. It being led by both big chains like Tesco, Trader Joe's, Safeway, SuperValu, Inc, Aldi and others, along with smaller regional grocers and independents, including entrepreneurs like Matthew Johnson, who like innovators often do, combine concepts and formats to create something new and whole out of more than one existing part.

Read the full story about the first small-format hybrid Johnson Family Market here.

A tale of two Fresh & Easy store concepts

Tesco will open a new Fresh & Easy Neighborhood Market grocery store at the corner of Canon Street and Catalina Boulevard in San Diego, California's Point Loma neighborhood.

The Point Loma neighborhood store, pictured above, is a built from the ground up Fresh & Easy neighborhood market, rather then being one that's in a converted retail building like nearly all of the current 63 Fresh & Easy grocery stores in California, Nevada and Arizona are.

Fresh & Easy Buzz has visited two built from the ground up Fresh & Easy stores, one in Las Vegas and the other in the Southern California desert region. Compared to the Fresh & Easy markets in the remodeled buildings, the built from the ground stores are much more attractive and inviting. They have skylights that let in lots of natural light and also are much more energy efficient than the renovated building markets are.

In many ways, it's a tale of two store concepts within one company: the built from the ground up Fresh & Easy markets and the current majority of the 63 Fresh & Easy stores, which are located in the remodeled retail buildings.

Tesco PLC News Report

Very expensive out-of-date food products for Tesco

Tesco PLC, the parent company of Fresh & Easy Neighborhood Market USA, was recently fined ~133,400-p (British Pounds) for selling out-of-date-food in one of its Tesco Extra stores in the United Kingdom city of Coventry, according to a June 6 report on the Coventry Telegraph newspaper web site.

This isn't the first time in recent years Tesco has been fined for selling out-of-date food in its stores in the UK. Tesco is based in the United Kingdom and it that country's number one retailer.

Friday, July 25, 2008

Breaking Competitor News: Safeway Stores, Inc. Plans to Open A Small-Format 'the market by Vons' Grocery Store in Downtown Los Angeles

Safeway Stores, Inc. plans to open the second or third (see our June 5 report about a potential "the market by Safeway" store in downtown San Jose, California here) store of its small-format (15,000 square foot) "The Market" grocery stores in downtown Los Angeles, Fresh & Easy Buzz has learned.

As we mentioned in our May 15 piece when we were one of the first publications to report on the upcoming grand opening (which Safeway kept under wraps) of Safeway's first small-format store, "the market by Vons," in the Belmont Shores neighborhood in Long Beach (Southern) California (the inside of which is pictured at the the top), the grocery chain had plans to also open "The Market" small-format food stores in urban locations. [Read our report on Safeway's plans to open a "the market by Safeway" in a new high-rise residential development in downtown San Jose in the San Francisco Bay Area here.]

We haven't been able as of yet to determine the precise location of the "market by Vons" store slated for downtown Los Angeles. We have some strong leads from sources but aren't ready to report a location until we are able to further confirm it.

For decades, downtown Los Angeles has been what is termed a "food desert," meaning that the vast urban downtown has been without food and grocery stores that offer a decent selection of basic groceries and fresh foods, especially fresh produce, at affordable prices.

Although the downtown is still underserved by such grocery stores, it's beginning to change primarily as the result of lots of new residential development that's been occurring in the city's urban core in recent years.

For example, a year ago this week, Southern California-based Ralphs supermarkets, which is a banner owned by Kroger Co., opened one of its first new Fresh Fare format supermarkets in what was then a brand new residential loft development in downtown Los Angeles.

The one-year old downtown Los Angeles upscale Ralphs Fresh Fare supermarket at 645 West 9th Street, which isn't a small-format grocery store but rather is a 50,000 square foot urban giant, was the first full-service supermarket to open in downtown Los Angeles in decades.

The Ralphs Fresh Fare stores are more upscale than the Ralphs conventional supermarkets, hundreds of which are located throughout Southern California. And as the "Fresh Fare" name implies, the stores feature an expanded selection of "fresh" foods, including produce, meats, dairy and fresh, prepared foods. The stores also have a greater selection of natural, organic and specialty food and grocery items than conventional Ralphs supermarkets do.

Although Tesco's Fresh & Easy Neighborhood Market is based in Southern California and has stores in Los Angeles, the grocery chain has yet to open one of its small-format (10,000 -to- 13,000 square foot) combination basic grocery and fresh foods markets in downtown Los Angeles. Based on our sources, who are good, Tesco's Fresh & Easy currently doesn't have any downtown Los Angeles stores in the new store opening pipeline either.

Ralphs, and now Safeway Stores, Inc. with its small-format "market by Vons" future downtown Los Angeles store, aren't the only grocers looking to the city's urban core for new business.

Hispanic consumer-focused, family-owned Southern California-based Liborio Market has opened a couple new supermarkets in downtown Los Angeles recently.

Liborio Market opened its first store in Southern California on February 6, 1966 in Los Angeles with $1,400 of initial capital, which was the collective savings of Enrique J. Alejo, Jr., Enrique B. Alejo, Sr., Randy M. Alejo, Berta Alejo and Nancy Alejo. The first store1,200 sq. ft. and had only $800 in beginning inventory, according to members of the family-owned grocer.

Liborio Market currently operates 9 full-sized supermarkets in Southern California, Nevada and Colorado. Two of those 9 supermarkets are in downtown Los Angeles. (five of the 9 stores are in Southern California where the grocer is headquartered.) One of the stores is in Las Vegas, Nevada. The remaining three supermarkets are located in Colorado: one each in Colorado Springs, Aurora and Commerce City.

Although the grocer's stores focus on Latino customers, the downtown Los Angeles stores also offer basic food and grocery items in order to reach the many non-Hispanics who live in the downtown neighborhoods. All of the Liborio Market supermarkets have full-size fresh produce, meat and grocery departments, along with having in-store bakeries and fresh, prepared foods departments.

The majority of the new residential growth in downtown Los Angeles is coming from younger professionals, who are moving into the numerous new multi-unit residential loft, apartment and high-rise condominium developments that have been built in the downtown core in recent years, and continue to be built despite a bit of slowing do to the credit crunch and the poorU.S. and California economies.

These young, mostly college educated professionals are moving to downtown Los Angeles for a variety of reasons, including to be closer to the office buildings where they work, to enjoy the excitement of the urban core, which is becoming an arts and restaurant and club mecca, and for a variety of other personal and professional reasons.

Downtown Los Angeles, as is downtown San Francisco and San Jose in Northern California, is luring numerous retired baby boomers in there late fifties to mid-seventies into the new, upscale lofts and condos rising throughout the city's urban core.

Many retired baby boomers who've lived in the suburbs for decades now find themselves with their children grown and out of the house, retired from their primary careers and perhaps working as consultants or in other second full-time and part time careers (or merely retired), as well as being "house rich" from twenty to thirty years of built-up equity as a result of historically fast-rising California housing values.

Many are "cashing out" and leaving the suburbs for urban centers such as Los Angeles' for a variety of reasons, ranging from desiring a simple change of lifestyle, to being able to be in the center of the city where they can drive less and walk to restaurants, cafes, restaurants and art galleries, for example.

Safeway's fairly upscale "The Market" format food and grocery stores, which feature fresh, prepared foods, fresh produce and meats, along with a selection of basic and natural and specialty food and grocery items, fit this "new urban" lifestyle well, although in the case of downtown Los Angeles, where the majority of residents are still low-income, the store's price points as they currently are in the Long Beach store, will need to come down if the store is going to cater to all levels of income in the downtown Los Angeles neighborhood where it is located.

However, since urban living usually means shopping more frequently because often residents in the urban core walk to the store or take public transportation, the fact that elements of the small-format "The market" format strores are designed for that type of shopping could make it a success in downtown Los Angeles.

Safeway has positioned its "The Market" format stores for "fill-in" shopping since the grocery chain also operates hundreds of full-size supermarkets in Southern California and elsewhere in the United States.

Therefore, unlike Tesco's Fresh & Easy Neighborhood Market, which the retailer has positioned to appeal to all consumers and wants to be used by consumers as a primary shopping neighborhood grocery store, Safeway can live by design with only attracting a certain segment--generally higher income--of consumers. In fact, that's the strategy behind the small-format, fairly upscale "The market" format stores.

To look at it in a related way, Safeway is using a multi-format food retailing strategy, with its "The Market" stores as secondary and tertiary shopping venues (its supermarkets being primary), while Tesco is using a single-format strategy currently, with its small-format Fresh & Easy stores designed to appeal to all shoppers and to be primary and to a limited extend secondary grocery shopping venues.

As we've reported previously, Safeway plans both a suburban and urban strategy in locating its small-format "The Market" food and grocery stores. [The name of the stores depends on the supermarket banner the retailer operates in a given market region. For example, it operates the Vons banner in Southern California. Therefore the stores are called "the market by Vons." In Northern California it uses the Safeway banner. Therefore those stores will be called "the Market by Safeway.]

The future store in downtown Los Angeles, along with the potential store in downtown San Jose we reported on here, demonstrates Safeway plans to put as much emphasis--at least thus far--on urban locations as it does on suburban ones. This makes sense because urban neighborhoods, regardless of demographics, are seriously underserved by quality food and grocery stores.

Tesco's Fresh & Easy realizes this trend as well, which is why it's mixes an urban and suburban store location strategy into its mix in California, Nevada and Arizona.

Small-format food and grocery stores are the ideal urban format. You will see even more urban stores from Safeway and Tesco's Fresh & Easy, as well as from other food retailers; not just in California but throughout the United States.

It's taken the grocery retailing industry a long time to see the potential of urban stores, and the changing suburban to urban demographics have helped that realization along in the last few years. However, numerous major grocery chains and independents are now seeing the potential of opening small-format stores in the city core. In fact, we see opening urban small-format grocery stores of various formats as being on of the top initiatives of the U.S. food and grocery retailing industry over the next few years.

Recent Related Posts From Fresh & Easy Buzz:

Wednesday, July 23, 2008

Fresno, California Fresh & Easy Grocery Store to Be First in Chain to Include Local, Community and Neighborhood Design Elements and Features

The Fresno, California City Council last night approved plans for an approximately 15,000 square foot Tesco Fresh & Easy Neighborhood Market at 2820 Tulare Street in the Central Valley city in California.

The 2820 Tulare Street location is the site of Fresno's historic old Hofbrau restaurant, pictured at top, which once was a city landmark famous for its generous portions of roasted beef, turkey, ham, pastrami and other meats and side dishes, along with its numerous varieties of cold draft beers, before it was closed down.

Fresh & Easy Buzz has learned the Tesco Fresh & Easy Neighborhood Market at the old Hofbrau location in Fresno will be the first store in which the grocery chain plans to incorporate local, community and neighborhood elements into the design theme of, which is something we've been suggesting since January Tesco do with its Fresh & Easy stores.

Plans for the Fresh & Easy grocery market going into the old Hafbrau include the store having a clock tower as part of the design, a masonary facade and murals which reflect the historic and cultural nature of Fresno and the 2820 Tulare Street neighborhood.

Including local (community and neighborhood) design features, including using murals with a local flair, is something Fresh & Easy Buzz has suggested in numerous blog pieces Tesco do with its Fresh & Easy stores in order to localize them, better fit into the communities and neighborhoods where it has its stores, and create a better "sense of place" to enhance the shopping experience in the stores for customers.

A member of the Fresno planning department told Fresh & Easy Buzz Tesco wants the store to fit into the historic elements of the neighborhood, as well as play up on the old Hafbrau's historic home there.

We've argued for a number of months that it's important--and will lead to greater success for the grocery chain--for Tesco to localize some of the design elements of its stores so as to respect and reflect the history and culture of the communities and neighborhoods it locates its small-format, combination grocery and fresh foods markets in because doing so will make the retailer not only a more accepted member of the neighborhood, but will pay dividends in the form of increased sales and customer loyalty in return.

As we were the first publication to report on March 17 (with a detailed follow up piece in May), Tesco plans to open at least an initial five Fresh & Easy grocery stores in the Fresno Metropolitan region, and likely will open additional stores in the region down the road. The first Fresbo market region stores should start opening in early 2009.

We haven't heard anything from our Fresno sources, both within the city government and in the commercial real estate and business community in the city, about any of the other four planned Fresno region Fresh & Easy stores having localized design enhancements like plans call for the 2820 Tulare Street store going into the old Hofbrau to have. We are continuing to investigate that aspect however.

Meanwhile, based on the overview we received from a source who was at last night's Fresno City Council meeting, it appears the plans for the old Hofbrau building Fresh & Easy grocery store are singularly unique compared to the 63 small-format grocery stores the grocery chain has opened thus far in that the retailer is taking some local community and neighborhood elements and aspects into consideration in the design of the store, rather than it being a cookie cutter-designed grocery market like the current stores, the majority of which have gone into remodeled existing buildings, are.

Like we've been suggesting since December, 2007--localization of some elements of a grocery store's design, along with some aspects of its product mix, is key in today's food retailing and local consumer-conscious society. Or, as the late, longtime former Speaker of the U.S. House of Representatives Thomas "Tip" O'Neill used to say when asked to explain his fabulous success in politics..."Everything is local."

A Selection of Past Fresh & Easy Buzz Posts about Fresh & Easy Neighborhood Market and the localization of store design:

Tesco's Fresh & Easy Creates and Launches an 'Affordable Gourmet' Meal-Centered Promotion: We Like it

Tesco's Fresh & Easy Neighborhood Market has created what Fresh & Easy Buzz thinks is a smart "affordable gourmet" meals promotion, creating a media tie-in with a recent survey conducted by the Nielson marketing research firm that found two-thirds of American consumers are reducing their discretionary spending, including eating out less and preparing more meals at home, due too the poor U.S. economy, and particularly because of the soaring cost of gasoline at the pump.

Fresh & Easy Neighborhood Market has created a meal-centered promotion which features seven quality but inexpensive dinners, made with items bought at the stores, for under $50.

The quality but bargain meal suggestions are designed to provide dinners for two for each night of the week for an entire week for under $50.

Below is the menu, including the prices for each dinner suggestion:

fresh&easy Boneless Beef Chuck Roast ($3.59/lb)
fresh&easy Mashed Potatoes ($2.49/17oz)
fresh&easy Cauliflower, Broccoli & Carrot Mix ($1.98/12oz)

fresh&easy Pork Potstickers (1.99/10oz)
fresh&easy Mango Chicken with Basmati Rice ($4.49/17oz)

fresh&easy Chicken Ravioli ($2.79/10oz)
fresh&easy Tomato Basil Marinara Sauce ($2.25/25oz)
fresh&easy Artisan French Loaf ($1.67/16oz)

fresh&easy Pork Baby Back Ribs ($4.79/lb)
fresh&easy Organic Baked Beans ($0.98/15oz)
fresh&easy Hickory Barbecue or Jalapeno Cheddar Kettle Chips ($0.89/5oz)

fresh&easy Chicken Thighs ($.89/lb)
fresh&easy Fajita Mix ($2.99/10oz)
fresh&easy Corn Tortillas ($1.54/36 count)
fresh&easy Spanish Rice ($1.99/16oz)

fresh&easy Carrot Ginger Soup ($2.99/20oz)
fresh&easy Beef Shepherd's Pie ($4.99/24oz)

fresh&easy Cage Free Large Brown or White Eggs ($2.28/dozen)
fresh&easy Hash Browns ($1.69/10 count)
fresh&easy Polish Kielbasa Sausage ($1.29/12oz)

We like the meal-centered promotion because it combines two consumer "hot buttons": eating well for cheap, combined with full meal or dinner suggestions.

Despite the down economy, consumers still want to eat quality foods. Most of the dinner ideas in the promotion pencil out to be less inexpensive than a far less tasty and less healthy trip for two to the fast food joint.

Additionally, since many consumers don't cook regularly, let alone plan meals, a meal-centered promotion like this one, which offers suggestions along with prices, makes it easier for novice cooks, who because of the poor economy are being forced to prepare food at home, to answer that daily question: "What's for dinner."

In addition to featuring the quality but value-priced week's worth of dinners in the promotion, Fresh & Easy also is tossing in a value wine suggestion, its $1.99 (in California; $2.99 in Nevada and Arizona) proprietary Big Kahuna store brand Cabernet Sauvignon and Chardonnay wines.

Fresh & Easy Buzz believes the "affordable gourmet" concept is a good one for food retailers to be using in the current down U.S. economy. Many consumers who don't normally cook are looking to do so as they can't afford to eat out at restaurants as frequently as they normally have been doing during better economic times.

Additionally, gourmet yet affordable meals are one of the few indulgences many people can enjoy in a poor economy. We call it the "Haagen-Dazs effect." Consumers might not be able to afford a vacation, a new car, or even new clothing--but they can often afford to spend a little bit extra money on ocassion for an affordable indulgence like Haagen-Dazs super premium ice cream rather than buying the cheaper stuff for half the price.

As such, we believe there's strong appeal to a promotion like Tesco Fresh & Easy's. It offers quality foods at affordable prices and bundles the promoted items into a meal suggestion format, creating an "idiot proof" guide to a week's worth of dinners for under $50.

Numerous U.S. retailers have and are doing similar "meal-centered" promotions. Historically such promotions have been very popular, even in good economic times because of the informational aspect of the promotion, in which the meals are put together for shoppers.

Right now, consumers across all income levels are looking for ways to save money, not only because of the soaring price of gasoline at the pump as the Nielson survey shows, but also because of the fast-rising cost of food at the supermarket.

Fresh & Easy Buzz thinks Tesco's Fresh & Easy Neighborhood Market has a winner with its new "affordable gourmet," meal-centered promotion.

If it does a similar promotion again, we suggest the retailer might want to think about creating a similar menu but for a family of say four, since it's families of about that size who are struggling even more than two-person (dinners for two) households with the current poor economy. Of course, we understand consumers can just double the promoted dinner items and price...but experience tells us few consumers will do that mentally.

It's a minor criticism though. And, unfortunately, since it looks like the poor U.S. economy--complete with soaring fuel and food prices--is going to be around for a while, Tesco's Fresh & Easy has plenty of time to do similar promotions for families of four, five, six and even more.

In fact, as we said earlier, meal-centered promotions like this one also are good when the economy is doing well because of the value of the serving-suggestion aspect of the promotion. Therefore it's a concept that can be used in both good and bad economic times, the price aspect merely being the independent variable.