Tuesday, March 31, 2009

Despite Having Postponed its Northern California Launch Indefinitely; Tesco's Fresh & Easy Planning Third Store in Modesto, California

Central Valley, California Market Region Report - Modesto, CA

Despite having postponed its launch into Northern California indefinitely, Tesco's Fresh & Easy Neighborhood Market is planning a third store in the Northern San Joaquin Valley city of Modesto.

That store, a built-from-the-ground-up unit, is located in rural south Modesto, on Crows Landing Road near Whitmore Avenue.

There's currently a "Fresh & Easy Coming Soon" sign up at the store construction site, which is situated near a shopping center on Crows Landing Road that contains a Burger King fast food restaurant.

Crows Landing Road is a long, mixed-use commercial retail and industrial strip that ties the southern portion of Modesto into its downtown. The location of the Fresh & Easy market is at the far southern end of the commercial strip, in an area that's on the urban-rural edge of south Modesto. There are numerous orchards and other agricultural fields near the store site.

South Modesto is an interesting mix of commercial businesses, industrial firms and mostly single-family residential housing. The area has a very high Latino population. Many of the retail stores along Crows Landing Road cater to Hispanic shoppers, for example.

In terms of retail, along with a number of Latino grocers and bakeries, there's Hispanic-focused general merchandise stores, a number of used car lots, fast foods restaurants, service stations, a large retail-wholesale produce market and a Starbucks cafe with a drive-through window, which is located near the future Fresh & Easy grocery store location.

The neighborhood also has numerous industrial and wholesale distribution businesses. For example, the Winco Foods supermarket chain has a 700,000 square foot distribution center not far from the Fresh & Easy store site. There's also a number of small manufacturing businesses in the area.

The Stanislaus (Modesto is the county seat of Stanislaus County) County Jail is also located on Crows Landing Road, not far from the future Fresh & Easy store, along with a golf driving range, which also is near the site of the future Fresh & Easy market.

It's a very mixed use commercial, residential, industrial and agricultural part of the city. In urban planning terms it can be characterized as an urban fringe area.

Along with the city's Airport District, South Modesto has the highest percentage of low income residents in Modesto, according to the city's Economic Development Department. Most of the housing in the neighborhood is older and is among the most affordable in the city of 205,000. Stanislaus County has a population of about 520,000. Modesto is the county's largest city.

South Modesto also has, along with the Airport District neighborhood, the highest percentage of city residents receiving federal, state and county government financial assistance, such as welfare, WIC vouchers and food stamps, according to the city of Modesto.

At 16.9% (February numbers), Stanislaus County, along with next door Merced County (19% unemployment rate), has among the highest unemployment rates in California, if not in the U.S. The region has been hit hard by the housing foreclosure crisis. Merced and Stanislaus have been among the top five-highest per capita counties in the U.S. for housing foreclosures for over a year. California's overall unemployment rate for February was 10.5%

The south Modesto area has an even higher unemployment rate than the city of Modesto and Stanislaus County does as a whole. Estimates are that about 21% of the residents in the area are without jobs at present.

The city of Ceres, which has a population of 43,000, is near the Crows Landing Road future Fresh & Easy store location. Wal-Mart is currently building a 200,000 square foot combination food and general merchandise Supercenter in Ceres, just a few miles from the Fresh & Easy site. The Supercenter is slated to open later this year, according to the City of Ceres planning department.

As we've previously reported, Tesco currently has two other Fresh & Easy store sites planned for Modesto. One of those stores, located in the Sylvan Square Shopping Center in a former supermarket, was supposed to have opened by now. However, little if any work has been done to convert the vacant building set to house the Fresh & Easy market. Read our May 10, 2008 story: New Markets: Tesco's Fresh & Easy to Move Into Modesto, California Market; Open its First Store in the City Early Next Year.

The second location, at 1717 Oakdale Road in Modesto, also is slated to go into a vacant supermarket building. However, work on remodeling the building has yet to begin. Read our November 6, 2008 piece here: Upcoming New Markets News: Tesco Will Open A Second Fresh & Easy Store in Modesto, California.

The Crows Landing Road location, planned Modesto store number three, has some initial construction work started on it. The site is fenced-in and the "Fresh & Easy Coming Soon" sign is clearly visible from Crows Landing Road.

However, according to residents of the neighborhood, there hasn't been much if any construction work going on at the Fresh & Easy site recently.

This isn't a surprise to Fresh & Easy Buzz because it's our analysis that it's very unlikely Tesco will open any of its Fresh & Easy markets in Northern California this year, based on our reporting and research.

The Crows Landing Road location is substantially different than the other two Modesto store sites. Those two locations are in urban, middle-class residential neighborhoods. Plans call for those two Fresh & Easy stores to be housed in now vacant buildings in those neighborhoods that have a long history of being supermarket locations.

On the other hand, not only is the planned Crows Landing road location in a much lower income part of Modesto, the area also is very rural.

On the plus side, there are few full-service grocery markets in the area. There's a Latino-focused supermarket a few blocks away, located in what was once a Save Mart supermarket, along with a couple smaller Hispanic grocery stores and a convenience store not far away.

The part of Crows Landing Road where the Fresh & Easy site is located gets a considerable amount of daily commuter traffic. Numerous residents of smaller cities surrounding Modesto work in the city and use Crows Landing Road to get to and from work each day. That's why, for example, the Starbucks in the area is mostly a drive-through cafe.

In our analysis, based on the lack of full-service grocery markets in the Crows Landing Road neighborhood, along with the fact the area is a rural part of the city with a high percentage of low-income residents, the planned Fresh & Easy store therefore qualifies as a "food desert" location. "Food deserts" are neighborhoods underserved by grocery stores that offer a decent selection of fresh foods and groceries at affordable prices.

Interestingly, the residents we talked to about the planned Fresh & Easy market on Crows Landing Road in Modesto all thought it was either a conventional convenience store or fast food restaurant.

When told it was a combination grocery and fresh foods market, all were very surprised.

But it could be a moot point in the near -to- medium term since it doesn't look like plans call for the store to be completed soon.

However, the Crows Landing Road location does make three locations thus far for Tesco's Fresh & Easy in Modesto.

Fresh & Easy Neighborhood Market has not confirmed any of the three locations for Modesto, nor announced their existence.

However, Fresh & Easy Buzz has documented the three sites in multiple ways, including visually, as well as through our commercial real estate sources, and through the California Alcoholic Beverage Control Department, for the Oakdale Road and Sylvan Square stores, because Tesco's Fresh & Easy applied for beer and wine permits for those two locations.

Based on our reporting and research though, its unlikely any of the three Modesto Fresh & Easy stores, along with those elsewhere in Northern California, will open this year. Stay tuned.

Linkage - Related stories:

>May 10, 2008: New Markets: Tesco's Fresh & Easy to Move Into Modesto, California Market; Open its First Store in the City Early Next Year

>November 6, 2008: Upcoming New Markets News: Tesco Will Open A Second Fresh & Easy Store in Modesto, California

>May 15, 2008: Fresh But Never Easy: Tesco's Long But Rapid South-North March in the Nation-State of California

>September 15, 2008: Wal-Mart Expanding its Discount Store-to-Supercenter Conversion Program As Part of its Strategy to Grab Even More Food and Grocery Sales Market Share

>December 29, 2008: Competitor News: Winco Foods to Expand in California and Nevada in 2009; Put Aggressive Focus on Central Valley, Northern California and Northern Nevada

>February 11, 2009: Tesco's Fresh & Easy Isn't the Only Food & Grocery Retailer With its Eyes on Bakersfield: Wal-Mart's Bakersfield Push and Central Valley, CA Strategy

Friday, March 27, 2009

In Vino Veritas: Tesco's Fresh & Easy to Introduce 25 New Wines as Part Of Wine Category Makeover We First Reported On in October, 2008

Wine Category Merchandising

Tesco's Fresh & Easy Neighborhood Market will introduce 25 new wine SKUS in its stores over the next three months, 15 of which will be proprietary wines exclusive to Fresh & Easy, according to wine category manager Karen Fletcher.

The 25 new wines will be a mix of domestic and imported varieties, Ms. Fletcher says, and will range in price from a low of $1.99 a bottle -to- $40 a bottle.

"Fresh & Easy's new selection of wines will be perfect for summer drinking and includes traditional favorites such as a California Cabernet from Sonoma. Unique imports will also be added to the company's range including a Malbec from Argentina, sparkling wines from Italy and a Tempranillo-Shiraz and Ribera del Duero from Spain," Fresh & Easy corporate wine category manager Fletcher says.

"We're always hunting for new wines so our customers have something new to enjoy. We have some great picks coming from California, Washington, Argentina, Spain and Australia. "Now that we're offering all of our wine at 20 percent off 6 (bottles), which is our best deal yet, it's a great opportunity for our customers to try something new, or to buy their favorite wines at a great price."

Tesco Fresh & Easy's Fletcher is referring in the quote to the retailer's just-launched 20%-off purchases of six bottles of wine or more promotion, which we reported on and wrote about in this piece yesterday: In Vino Veritas: Tesco's Fresh & Easy Kicking-Off 20 Percent-Off Six Bottles Or More Wine Promotion This Week; Promotion Runs Until April 25.

In October of 2008 Fresh & Easy Buzz reported exclusively about the wine category review led by category manager Fletcher taking place at Fresh & Easy corporate headquarters in El Segundo, California. [That story: Category Management Report: Fresh & Easy Conducting Wine Category Review and SKU Rationalization; We Offer Some Analysis.]

Additionally, in this November 11, 2008 piece [Wine Category Report: Tesco's Fresh & Easy Kicks Off New Merchandising and Promotional Efforts Designed to Grow Wine Category Sales.] we wrote about Fresh & Easy's plans to grow its wine category sales.

The introduction of the 25 new wines over the next three months, along with the 20%-off deep-discount promotion launched this week and running until April 25, are a direct result of the wine category evaluation we wrote about in October of last year and the merchandising and promotional plans we reported on in November, 2008.

Own brands

Proprietary brands and wines are a major part of Tesco Fresh & Easy Neighborhood Market's wine category merchandising strategy.

The strategy comes directly from United Kingdom-based Tesco, which is one of the top retailer's of wine globally. Tesco creates and merchandises numerous varieties of proprietary wines in its stores in the United Kingdom, where its that nation's leading food and grocery retailer, and elsewhere throughout the world where it has stores.

Tesco also is the number one retail buyer of Australian wines, and as a result is able to get excellent bargains on Australian-made wine to use in its various proprietary wines. For example, the Fresh & Easy Neighborhood Market proprietary value brand, Big Kuhuna, which it sells for $1.99 a bottle in California and for $2.99 in Nevada and Arizona, is an Australian wine. There are two varieties of Big Kahuna, a white and a red.

Fresh & Easy Neighborhood Market wine category manager Karen Fletcher is familiar with this system since she came to Tesco's Fresh & Easy from Tesco in the United Kingdom.

Master of Wine

Tesco's Fresh & Easy also uses a Master of Wine, who works with Ms. Fletcher and the wine category buyers to create the proprietary wines for the stores.

According to the Masters of Wine Institute, there currently are only 274 Masters of Wine, located in 23 countries. The designation requires rigorous testing in order to earn it. [You can learn more about the Masters of Wine designation here.]

New wines: pricing

Tesco's Fresh & Easy isn't saying what percentage of the 25 new wines to be introduced over the next three months are in what price ranges; just that the retail price-points will range from $1.99 -to- $40. However, according to a source, we're told that the majority of the 25 new wines will be in the value-price range, which generally means under about $12 a bottle.

Right now wines selling for under $10 a bottle make up the vast majority of the volume being sold, with wines priced at about $6.99 and below comprising the highest percentage of the under $10 segment.

In other words, with wine as with most all else at present, value is ruling among shoppers.

SKU rationalization

Tesco's Fresh & Easy also doesn't say if it's discontinuing any wine SKU to make room for the 25 new varieties. We can report that the retailer is eliminating some slower moving wines as part of its category evaluation and the introduction of the new SKUS. Out with some old, in with some new -- that's what a category evaluation and SKU rationalization is all about.

As part of its strategic objective to increase wine category sales, look for additional new category developments and promotions in the coming months, in addition to the introduction of the 25 new wines over the next three months, and the 20%-off promotion which lasts until April 25.

Below is a linked selection of a few wine category pieces from Fresh & Easy Buzz:

[Reader Note: You can follow Fresh & Easy Buzz around on Twitter.com at www.twitter.com/freshneasybuzz.]

Thursday, March 26, 2009

In Vino Veritas: Tesco's Fresh & Easy Kicking-Off 20 Percent-Off Six Bottles Or More Wine Promotion This Week; Promotion Runs Until April 25

Promotional Merchandising: Wine Category

Tesco's Fresh & Easy Neighborhood Market is kicking off a three week deep-discount wine promotion in its stores in California (Southern and Bakersfield), southern Nevada and Metropolitan Phoenix, Arizona, in which it's doubling the 10% discount it offers shoppers on purchases of six or more bottles of wine to 20% off.

The 20%-off six bottles or more promotion, which started this week, runs until April 21, 2009, according to Fresh & Easy Neighborhood Market.

Fresh & Easy started offering 10%-off purchases of six or more bottles of wine in November, 2008, following retailers with stores in California, Nevada and Arizona like Safeway Stores, Raley's, Trader Joe's, Cost-Plus World Market, Target, Beverages & More and others that have been offering 10% -to- 15%-off purchases of six or more bottles of wine for quite some time.

The 20%-off promotion ups the ante in the highly competitive retail wine markets where Fresh & Easy operates its 116 combination grocery and fresh foods markets.

BevMo's five cent wine promotion

But Tesco's Fresh & Easy isn't the only wine retailer promoting aggressively at present. Wine, sprits and beer beverage category killer retailer Beverages & More (BevMo), which has numerous stores in California, Nevada and Arizona, is currently in the midst of its annual "buy one bottle of wine at the regular price get a second bottle of equal value for 5-cents" spring wine promotion.

BevMo conducts this annual promotion in all of its stores, which feature wine, spirits, beers, snacks, specialty-gourmet foods and more, each year starting right before spring and on into the spring season months. It's a very popular promotion and results in a huge volume of wine sales for the retailer. [You can learn more about the BevMo 5-cent wine sale here.] [Related reading: Southern California Market Report: Beverages & More to Join Trader Joe's and Fresh & Easy to Form Manhattan Beach Food and Beverage Retailing Triangle.]

Mix & match at Fresh & Easy

Shoppers can mix and match the six or more bottles of wine -- different varieties, different price-points -- and receive 20% off the total during the Fresh & Easy 20% wine promotion between now and April 25.

Yet another value-based move

The wine promotion is another example of how Tesco's Fresh & Easy is moving closer to the value proposition positioning Fresh & Easy Buzz suggested for the grocery and fresh foods chain about one year ago. [Read more here: March 26, 2009: News, Analysis & Commentary: Tesco's Fresh & Easy Continues Moving Closer to the 'Value Propostion' Positioning; This Time in Prepared Foods Category.] [And here: March 2, 2009: Fresh & Easy Buzz Redux: Much of the Value Proposition-Based Analysis and Suggestions We've Been Offering Now Being Adopted By Tesco's Fresh & Easy.]

Wine category efforts at Fresh & Easy

In October and November of 2008 we reported exclusively on efforts then in progress at Tesco's Fresh & Easy Neighborhood Market to conduct a complete wine category review and SKU rationalization [this story on October 28, 2008: Category Management Report: Fresh & Easy Conducting Wine Category Review and SKU Rationalization; We Offer Some Analysis] and on the grocery chain's new program designed to increase wine category sales through new promotional efforts in its stores in this [November 11, 2008 piece: Wine Category Report: Tesco's Fresh & Easy Kicks Off New Merchandising and Promotional Efforts Designed to Grow Wine Category Sales.]

The 20%-off discount promotion is a direct result of those wine category activities led by Fresh & Easy's wine category manager Karen Fletcher, who came to Fresh & Easy from Tesco in the United Kingdom.

Additional wine category developments are following, including the introduction of a number of new proprietary brand wine varieties by Tesco's Fresh & Easy, with an emphasis on value-priced varieties.

The 'Big Kuhuna'

Fresh & Easy sells a value-based proprietary wine from Australia called the Big Kuhuna for $1.99 a bottle in California and $2.99 in Nevada and Arizona. The wine is similar to Trader Joe's famous "Two Buck Chuck" value wine. Trader Joe's "Two Buck Chuck" is a California wine.

Under the 20%-off six bottles or more promotion, a shopper can get six bottles of Big Kuhuna for under $10. That's a good buy in these recessionary times.

Promotional product in-stock key

As a result, we suspect Fresh & Easy will see some high volume sales in the next three weeks on the Big Kuhuna wines, along with a number of other varieties.

We do hope that unlike was the case when it promoted a dozen red roses for $9.99 for Valentines Day in February, 2009 (a hot price), when it ran out of the roses every day in most of its stores and was out of stock days before Valentines' Day in many of the stores, that the grocer has prepared itself with plenty of wine inventory, particularly the two varieties of Big Kuhuna, so that shoppers aren't let down by out-of-stocks when they go to their neighborhood Fresh & Easy market to cash in on the good value deal being offered in the 20%-off promotion until April 25. [Click on the comments link and read the comments in this piece: The Valentine's Day (Retail Promotional Price) War of the (Dozen Long-Stemmed) Red Roses: And the Winner Is... Tesco's Fresh & Easy.]

If the retailer has plenty of wine inventory (particularly Big Kuhuna), thereby pleasing shoppers rather than alienating them, the promotion will be a positive one in that it should move some significant wine volume, generate new customer trial, and introduce new shoppers to the store's wine departments and selections. If all works, that's a triple-win.

There's no reason after all to let Beverages & More get all the wine action this month and next month in California, Nevada and Arizona with its 5-cent wine sale.

Below is a linked selection of past wine category pieces from Fresh & Easy Buzz:

[Reader Note: You can follow Fresh & Easy Buzz around on Twitter.com at www.twitter.com/freshneasybuzz.]

News, Analysis & Commentary: Tesco's Fresh & Easy Continues Moving Closer to the 'Value Propostion' Positioning; This Time in Prepared Foods Category

Pictured above are two -- chicken teriyaki and chicken & broccoli alfredo -- of the six new fresh & easy store brand family size, value-priced prepared meals. Note the "serves 4 for $8" label in the top right hand corner of the packages. We think it's a good value message to include the text right on the package.

The Value-Proposition and Prepared Foods Merchandising

Tesco's Fresh & Easy Neighborhood Market continues to move closer to the value proposition merchandising positioning we first began suggesting for the grocery and fresh foods chain about one year ago. [Read more about it in this March 2, 2009 piece: Fresh & Easy Buzz Redux: Much of the Value Proposition-Based Analysis and Suggestions We've Been Offering Now Being Adopted By Tesco's Fresh & Easy.]

The grocer's latest value-based merchandising move is the introduction on March 18 of a line of six new "family size," prepared meals which are designed to feed a family of four for only $8.

The six new meal items being introduced in the Fresh & Easy stores are:

>Lasagna with Meat Sauce, 44 oz.
>Chicken & Broccoli Pasta Alfredo, 40 oz.
>Spaghetti with Turkey Meatballs, 45 oz.
>Chicken Teriyaki with Rice & Vegetables, 45 oz.
>Chicken & Bacon Macaroni & Cheese, 40 oz.
>Chicken Burritos with Green and Red Sauce, 40 oz.

Additionally, Fresh & Easy marketing director Simon Uwins says the grocery chain will be introducing additional varieties in the value-based, family meals line over the next few months.

At $8 each the family size prepared meals are a value offering. But they are in the same general price range as many similar meal deals offered by supermarket chains like Safeway Stores, Inc. (Vons and Safeway in California, Nevada and Arizona), Kroger Co. (Ralphs, Food 4 Less, Fry's, Smith's in California, Nevada and Arizona) and Supervalu (Albertsons). However, these retailers aren't beating Fresh & Easy on the price-point punch. Some are about even, others are a bit higher on comparative items. The $8 price point is a good one for the items at Fresh & Easy right now, in our analysis.

It's important also to remember that in the current economy, fresh, prepared foods are competing with frozen foods items. Shoppers are putting aside any perceived quality differences between fresh, prepared and frozen (and often they aren't quality differences between the two) if the value of the frozen items exceeds that of the fresh, prepared.

For example, Stouffer's line of premium but value-priced meal entrees like its family-sized meat loaf, macaroni & cheese and lasagna are selling extremely well in the recession. The marketer is promoting the family size items in retailer's advertising circulars at discount prices, along with distributing "cents off" coupons for the items. We've seen the Stouffer's brand family-size frozen items ad-priced in the $6.99 range. They are all in the about 40-ounce package size range.

Sales in the frozen food category, particularly of value-priced entrees and meals, are up over 2006-2007 sales because of the recession.

Fresh & Easy behind the prepared foods value curve

However, at a cost of $2 person, the Fresh & Easy family size meal offerings are a good deal. But the grocer is way behind the curve in introducing value-oriented size and priced prepared foods offerings.

For example, Safeway started offering value-based family meal prepared foods items in the same price range in the summer of 2008, as the supermarket chain saw the demand for such offerings growing because of the recession.

Kroger followed suit at its Southern California Ralphs supermarkets and in its Fry's and Smith's stores in Nevada and Arizona just a couple months later.

Supervalu, Inc. also introduced its "Culinary Circle" value prepared foods line last summer as well. [Related story: March 25, 2009: Supervalu, Inc. Introduces New, Value-Plus-Convenience Meal Solutions Program; Features Refrigerated Case 'Meal Centers' in Multiple Store Departments.]

And Wal-Mart's small-format Marketside grocery and fresh foods markets in Arizona, which feature in-store fresh, prepared foods, started offering a selection of value-priced prepared foods items like macaroni & cheese and meatloaf, among others, in family sized offerings in December of 2008, less than two months after the four stores in Metropolitan Phoenix, Arizona opened in early October. In January of this year Wal-Mart's Marketside added to its value-based, family-sized prepared foods offerings and has been promoting the items regularly in the stores in Arizona this year.

Being a near-last mover rather than a first-mover is something that's been the case with Fresh & Easy from the start. It particularly hurts the chain in the fresh, prepared foods category because it touted itself as the "new leader" in the category during the run-up to the opening of its first stores in November, 2007 -- and ever since.

But it hasn't been. It shouldn't have taken the grocer this long to figure out that value is the place to be when it comes to prepared foods in the current economy, which started going in the tank at least a year ago. Safeway started adapting its prepared foods offering in the value direction in June, 2008, for example.

Our October, 2008 suggestion

Tesco's Fresh & Easy did introduce a new line of mix & match prepared foods items for two, priced at $10, in October, 2008, as we reported and wrote about in this piece: Prepared Foods Category Report: Fresh & Easy Introduces New Line of Mix & Match Prepared Foods; We Report, Offer Some Analysis and A Marketing Thought. However that offering was a convenience one, targeted to couples, than it was a family-based, value offering.

In fact, in that very story on October 31, 2008, Fresh & Easy Buzz suggested that what Tesco's Fresh & Easy needed to do was to create a line of family meals for four, perhaps using the new meal for two mix & match line in part as a basis for that value meal creation and marketing.

Below (in italics) is part of what we said in that October 31 piece:

"Of course the mix and match nature of the new prepared foods line also has utility for families of any size. In fact, because the meals are designed for two, a family of say four can buy two different combinations, say a pasta and side dish combo and a meat and veggie combo, and then share it all family style. Twenty dollars for four is still a reasonable meal deal. Plus there likely will be leftovers.

In fact, it would be a good idea for Fresh & Easy to do some marketing around the new line in that regard. Say offering a mix and match meal deal for a family of four using the 30 items, positioning it around a theme such as: "Family Style Eating at an Affordable Price -- Mix and Match Dinners for Four With Leftovers to Boot

Doing so would be a good way to appeal to larger families (can do a version for six as well), along with encouraging larger single purchases (and a bigger market basket or total ring), in addition to using the "dinner for two theme." We call it "mix and match" merchandising and marketing."

Here is what Tesco Fresh & Easy Neighborhood Market's marketing director, Simon Uwins, said in the March 18, 2009 press release announcing the new six item value-based family meals: "Customers are telling us they are looking for larger sizes to feed their families on a budget. Our kitchen products have been very popular - like our chicken alfredo and macaroni & cheese - so we are introducing portions that are large enough to feed a family of four for only $8."

The recession has gotten so much worse since October, 2008 that our research shows price-points on prepared foods meals for four are hottest at $10 and under. Therefore, we think Tesco's Fresh & Easy has set a good price point on the meals at $8.

Safeway has been offering a couple prepared foods meal deals for four at $8 -to- $10 each week and has been doing extremely well with the items. The supermarket chain generally rotates two different such items each week.

Having the six items available at the $8 price-point in the Fresh & Easy stores everyday is a good move by the grocer, in our analysis.

Cross-merchandising as margin leverage

We noticed the six value-meals well-displayed in two Fresh & Easy stores we visited last week.

We would highlight the six items in the prepared foods refrigerated cases in all the stores even more so though, perhaps even putting a colorful banner of sorts around the item facings to highlight the "family sized" and value-priced" nature of the meal deals. Set the items out from all the others.

We would suggest featuring the six prepared foods items this way in all the stores, with lots of signage demonstrating the value -- cost of only $2 per person for a family of four, compare that to a restaurant meal, as an example.

We also would build small displays on the floor below where the items are featured in the refrigerated cases. These displays would feature tie-in family meal items like napkins, paper plates, a beverage and other related items. At $8 an item the margin on the family meals can't be much. Therefore these cross-merchandising displays will add incremental sales to the purchase. related cross-merchandising works.

For example, if a shopper picks up a package of paper napkins, plates and a 12-pack of soda with an $8 meal deal, that's potentially an added $8 in incremental sales.

The signage on the display needs to tie in to the family prepared foods meal deals above in the refrigerated case. The key words are: "family," "value," "quality," "deal."

A promotional opportunity for Fresh & Easy

We think Tesco's Fresh & Easy is missing a great promotional merchandising opportunity to combine its prepared foods and basic grocery offerings together into a store-wide, value-based promotion.

Here's what we would do: Starting on say May 1 (May Day), we would launch a special four week store-wide promotion using the theme "Dine Out at Home with Fresh & Easy." The four-week special promotional event would bring all of Tesco Fresh & Easy's grocery and prepared foods offerings together in a cross-merchandising promotion.

We would feature lots of prepared foods items, including the six value-priced family size meal deals, for sale during the four weeks at discount prices. We would also feature numerous related basic grocery items, both national brands like Coke and Pepsi, for example, and fresh & easy store brands across all categories, in displays throughout the stores, all under the "Dine Out at Home With Fresh & Easy" theme. Value and fun being the premise.

All of the displays would tie-in to this theme -- prepared foods, fresh foods, grocery and non-foods items alike. Displays would feature beverages and snacks, desserts and paper plates, napkins and beverage glasses. There would be wines cross-merchandised with cheeses. Prepared foods items would have signage designating this theme, as would all the non-refrigerated items throughout the store.

Value priced produce would be included, as would meats.

We also would bring in some special items that fit the dine out at home theme. These could be in and out items that would boost sales and create shopper interest and excitement. For example: Pre-pack shippers of music CD's and DVD's. Simple decorating items for dining out at home like candles and the like. A pre-pack shipper or two featuring board games to play at home for families.

Additionally, we would set up food sampling stations in the stores, out in the aisles. This creates excitement rather than segregating all the food sampling back in the Fresh & Easy stores' "The Kitchen" area, which is removed from the store floor. Sampling in the aisles creates excitement. We would sample the prepared foods items daily, paired with other items.

We would create a "Dine Out at Home With Fresh & Easy" family menu and party guide. Promote it. Create excitement around the theme. The focus being on how to dine out at home in style for little money. A slice of heaven in the recession.

Lost of themed decor and signage in the stores. Everything tied-in to the theme. And the month-long promotion advertised in external media using all the thematic tie-ins.

May Day and the entire month of May marks spring and the prelude to summer, a time of renewal. Tout a renewal of spirit in the recession with the month-long promotion. Make dining out at home exciting and affordable. Showcase the prepared foods offerings at value prices mixed with basic and specialty grocery items all offered at discount prices.

This would be old fashion grocery merchandising and marketing at its finest. It's what Tesco's Fresh & Easy needs. Shoppers love bargains, especially right now. But they also love retail excitement.

Offer a shopper sweepstakes, some in-store giveaways, drawings; a contest in which the customer of each Fresh & Easy store who comes up with the best dining out at home recipe wins a prize, for example. Make it fun. Demonstrate the value for consumers in "Dining Out at Home with Fresh & Easy." Include shoppers in the promotion. Make it interactive.

Wednesday, March 25, 2009

Supervalu, Inc. Introduces New, Value-Plus-Convenience Meal Solutions Program; Features Refrigerated Case 'Meal Centers' in Multiple Store Departments

Pictured above is one of the "4:15" freestandling merchandising cases in Supervalu, Inc.'s new "Simply Good Meals" meal solutions program. This and similar merchandising units will be located in store produce and meat departments in 1,300 Supervalu owned and operated supermarkets to start.. Other meal solution destination merchandising units will be located in store deli departments.

Competitor News: Merchandising Developments

Supervalu, Inc., which operates the Albertsons banner supermarkets in Southern California and southern Nevada, along with a total of about 2,500 supermarkets under numerous banners nationwide in the U.S., today announced the introduction of a new meal solution destination in-store program it calls "Simply Good Meals." Supervalu, Inc. had 2008 sales of $45 billion.

The "Simply Good Meals" concept offers prepared and easy-to-prepare food items that are merchandised in branded, standalone refrigerated cases which are located in various store departments. The offerings are designed so shoppers will find complete, easy-to-make meal solutions in one spot in the various store departments.

The focus is on offering affordable, convenient meal solutions to capture shoppers who are looking for what to prepare for dinner that night while shopping in the store.

For example, Most stores will initially feature up to four "Simply Good Meals" in-store destinations, including two in the produce area, one in the meat section and one in the deli department. Some stores will also have additional meal and soup destinations in the deli area, according to a Jim Smits, Supervalu's group vice president for fresh foods.

One of the destinations -- known as "4:15" (as in the time of day) -- will feature a selection of items targeted to busy moms and designed to create a good, easy, home-cooked meal for a family of four for under $15 and, in many cases, in 15 minutes or less, according to Smits.

"Research shows that most people don't know at 4 o'clock what they are having for dinner that night, and in many cases, these hurry-up meals result in less-than-balanced and more expensive food choices," Smits says.

"We wanted to make it easier for our customers to answer that inevitable 'what's for dinner' question by providing them with simple, convenient, affordable ideas for creating a real home-cooked meal."

Smitts adds in explaining the merchandising philosophy behind the new meal solution-centered program: "The 'Simply Good Meals' program addresses consumers' needs for convenience, value and family meal-time help at a time when concerns about the economy are causing changes in their eating and shopping behaviors.

According to the Food Marketing Institute, 71 percent of consumers are cooking at home more and eating out less at restaurants. Yet on a typical weekday, nearly 53 percent of consumers don't decide what's for dinner until a couple of hours or less before the meal. While time constraints continue to drive demand for quick and easy meal solutions, moms frequently find that meals at cheaper price points are incomplete or less satisfying.

In addition, most moms equate cooking with emotional meaning, with eight in 10 saying they show their love for their families by making home-cooked meals as often as possible, and 74 percent saying they put a lot of care and emotion into their cookin, according to Yankelovich. At the same time, nearly 45 percent of women say they tend to prepare the same meals all the time, and others simply lack the time and skills to cook."

Items in the "4:15 meal solutions" destination area will include offerings like those listed below, according to Supervalu:

>Ready-to-heat beef roast, potatoes and a salad.
>Lasagna, salad and French baguette.
>Pork teriyaki tenderloins, a side dish and salad.

Initially the meal solutions will change every other week, ensuring a variety of different menus for busy, on-the-go moms, according to Supervalu's Smits.

Additionally, all of the meal solutions offer paint-by-the-numbers-style simple preparation instructions.

Supervalu said today it will initially roll the meal solutions program out in 1,300 of its 2,500 U.S. supermarkets to start, beginning right away.

There's nothing particularly unique about the more value-based meal solution-centered offering from Supervalu in terms of the products offered and the concept of meal solutions, which is something Supervalu and most other supermarket chains have been doing for a number of years, although the merchandising practice has become more pronounced since last year when the recession hit hard.

The merchandising aspect of the program, the placement of the branded meal solution centers in different store departments, does offer some originality though. By placing the branded meal centers in the produce and meat departments, as well as in the deli/prepared foods sections, Supervalu has the potential of addressing customers at multiple points-of-purchase and decision-making in-store.

Such a multi-departmental merchandising strategy is a good one we believe because it attempts to catch the shopper with a meal solution idea in departments other than deli/prepared foods, thereby increasing the point of opportunity in which the customer is offered the selling proposition.

The meal centers also are a form of cross-merchandising, which enhances the opportunity for incremental sales since the concept is that shoppers will buy the multiple components (items) of the "meal" rather than merely an item or two. Such meal-centered cross-merchandising works in food retailing, as long as the cross-merchandised items are good and the pricing is appropriate.

This isn't Supervalu, Inc.'s first offering in the value-based meals and related prepared foods segment. The new meal solutions program follows the introduction by the grocery company last year of its "Culinary Circle" brand, a value-priced fresh, prepared foods line in all of its stores, including the Albertsons banner.

The "Culinary Circle" brand items are all prepared foods however. The items in the "Simply Good Meals" program include heat-and-eat and quick fix items that need some minimal preparation and value-adding (salad dressing on a salad type of stuff) at home. The average time to prepare the meals in the "Simply Good Meals" program is about 15 -to- 20 minutes, according to Supervalu.

In terms of the price point -- the under $15 -- it's our analysis based on research that the hot button meal solution price-point at present is about $12 and under for a complete meal for four. For example, Safeway Stores and Raley's, two supermarket chains with numerous stores in California and other western states, have since the middle of 2008 been offering meal solutions deals priced at under $12 and $10 and under for four. These offerings have been very popular at the two supermarket chains.

A number of the Supervalu "Simply Good Meals" program offerings come in at about $10 -to- $12 for four. We think those will be the most popular offerings in the program in the current recessionary climate.

Tesco's Fresh & Easy currently operates 116 combination grocery and fresh foods markets in California (Southern and Bakersfield), Metro Las Vegas, Nevada and in the Phoenix, Arizona Metropolitan region.

Supervalu, Inc. operates the Albertsons chain in Southern California. The chain is number three in market share overall in Southern California after Kroger Co.'s Ralphs and Safeway Stores' Vons.

Supervalu also operates the Albertsons banner supermarkets in southern Nevada, along with in Washington state, Oregon, Idaho, Montana, Wyoming and Utah.

The Albertsons stores in Arizona however are owned and operated by the private equity firm Cerebus, as are the Albertsons banner stores in New Mexico, Colorado, Texas, Louisiana and Arkansas.

Cerebus licenses the Albertsons brand name from Supervalu for these stores. The reason for this split is because Cerebus acquired those divisions from Albertsons, Inc. as part of the 2006 $9.7 billion acquisition of the company by Supervalu, in which Cerebus, drug chain CVS and Kimco Realty Company were investors.

Cerebus acquired all of the Albertsons, Inc. divisions mentioned above, along with a couple others like Northern California, which Cerebus sold last year to Modesto, California-based Save Mart supermarkets. Save Mart now operates those stores in the San Francisco Bay Area and Sacramento region under the Lucky banner. The Lucky stores are the number two market share leader in the Bay Area ,after number one Safeway.

Supervalu, Inc. also owns the 16 Bristol Farms supermarkets in Southern California and one store in San Francisco in Northern California. It acquired the small chain in the deal for Albertsons, Inc. in 2006. Albertsons bought then independent Bristol farms a few years before that.

Bristol Farms is an upscale, specialty-oriented format. It's a pioneer in fresh, prepared foods development and merchandising, albeit with most of its offerings at higher price-points. However, Supervalu has learned much about the fresh, prepared foods category, for example, since acquiring Bristol Farms nearly three years ago. Some of that knowledge has resulted in changes and product improvements overall in the category for Supervalu, including at its Albertsons stores in California and Nevada.

Supervalu, Inc. also owns the small-format, no frills, deep discount Sav-A-Lot chain. The Sav-A-Lot stores, many of which are franchised to independent operators, aren't included in the new meal solution program. [Supervalu, Inc. is growing Sav-A-Lot significantly. Read our December, 2008 piece where we detailed some of that growth here: Competitor News: Supervalu Inc.'s Small-Format, No Frills, Extreme Value Sav-A-Lot Chain Beefing Up its Executive Ranks as Part of its Growth Program.]

Friday, March 20, 2009

Federal Government Spending Bill Increases WIC Voucher Program Dollars by $1.2 Billion; 21 Percent Increase

Food & Grocery Retailing & the U.S. Economy

The $410 billion spending bill signed by President Obama last week provides a whopping 21% increase (an extra $1.2 billion) for the WIC supplemental nutrition food program for woman and children. The spending bill funds the government until September, 2009.

The added $1.2 billion will be used in part to increase the dollar value amount of the WIC (Women's, Children and Infants) vouchers currently distributed to the poorest of the poor mothers currently receiving the assistance from the federal government.

Additionally, the $1.2 billion WIC program budget increase will also be used to provide supplemental food assistance for the many new mothers signing -up for the program due to the recession and increasing unemployment throughout the U.S. Many working mothers are asking for the assistance for the first time because of job losses and other economic struggles in the current economy.

WIC vouchers are given to low-income mothers who qualify and can only be used to purchase specific foods. These specific items include infant formula, low-fat and non-fat whole milk, eggs, whole grain cereals, peanut butter, canned tuna, certain varieties of cheese, fruit juices, fresh produce and other nutritious products.

The U.S. federal government is currently adding new items to the qualifying WIC voucher list, including fresh fruits and vegetables and additional whole grain items like fresh breads.

The federal government has been experimenting with including a select number of fresh produce items in the program for close to a year, and has decided to make the fresh fruits and vegetables a permanent part of the qualifying items that can be purchased using the vouchers, which look similar to a paper check and are processed by grocery store clerks in the same way they process paper checks.

Tesco's Fresh & Easy Neighborhood Market is one of the few grocery chains that doesn't except the federal government-issued WIC vouchers. All of Fresh & Easy's major competitors in California, Nevada and Arizona -- Safeway (Vons and Safeway banners), Kroger (Ralphs, Food 4 Less, Fry's Smith's) Bashas, Wal-Mart, ect. -- accept the vouchers from poor mothers.

The vouchers are the only way most low-income mothers who qualify for the WIC program can provide infant formula and nutritious foods to their infants and toddlers. And since the vouchers specify the items that can be purchased, it's a good system in that it makes sure the most needed items are provided to the children. Food stamps can be used to purchase most consumable items with a few exceptions.

For grocers accepting the WIC vouchers are a positive since most of the items mothers are allowed to purchase using them have higher price point products like infant formula, whole milk and cereals.

Additionally, the vouchers stimulate sales of items like infant formula that many grocers wouldn't otherwise sell much of.

Further, most mothers who use the WIC vouchers buy the majority of their groceries at the stores where they redeem the vouchers. If they also get food stamps, they will most often use the stamps at the same store. They also regularly use cash at that same store to buy the non-food items not allowed with either the WIC vouchers or food stamps.

You would be hard-pressed to find a grocer that accepts WIC vouchers (about 99.5% of them do in the U.S.) who would stop taking them because of the labor involved in doing so.

Accepting the WIC vouchers is also a social and economic compact between the U.S. food retailing industry and the U.S. federal government.

The grocery industry and its trade associations endorse the WIC program and encourage all food retailers in the U.S. to accept the vouchers and to advertise that they welcome their use in the stores. Nearly all U.S. supermarket chains, mass-merchandisers and independent grocers post signs in their stores saying the accept WIC vouchers as well as including text in their weekly advertising circulars advertising the same. Many farmers' markets also accept WIC. A number of convenience and drug stores accept the vouchers as well.

The U.S. food and grocery retailing industry believes accepting the vouchers is the right thing to do, along with being a smart thing to do from a sales and customer service standpoint. That's why nearly every grocery store in America honors WIC vouchers.

The added $1.2 billion for the WIC program is being distributed right away, according to the federal government, since the demand for the vouchers is currently so high.

That's good news for most grocers, since the additional $1.2 billion all will go to retailers of food, since the vouchers are for specific food items only.

Since California, Nevada and Arizona are in the top ten of U.S. states hit hardest by the recession, unemployment and the housing foreclosure crisis, the three states have among the fastest-growing number of poor mothers seeking assistance from the WIC program. The added monies will go a long way towards filling the need in the three states. The extra WIC money also will give a small shot in the arm to grocers in the three states. Every little bit helps.

The added money also will give a small boost to milk producers, infant formula marketers and those companies producing fruit juice, cereals and fresh produce, since those are the main categories of products purchases with the WIC vouchers.

[Linkage: Three recent, related posts: March 7, 2009: Analysis & Commentary: The Seven Retail Operations Changes Tesco's Fresh & Easy Neighborhood Market Needs to Make to Help it Get On the Success Track ... December 29, 2008: Tesco's Fresh & Easy, 'Food Deserts' and WIC Vouchers; A 'Year-End' Analysis & Commentary ... September 7, 2008: Analysis & Commentary: Should Tesco's Fresh & Easy Put An Asterisk Next to its Motto? Yes; Unless it Corrects Four Operational Omissions.]

[Reader Note: You can follow Fresh & Easy Buzz on Twitter.com at www.twitter.com/freshneasybuzz.]

Thursday, March 19, 2009

Another Tesco Fresh & Easy Future Market City Bans the (Plastic) Bag: No Plastic Carrier Bags In Palo Alto, CA Supermarkets Starting September 18th

Retail Operations. Green Retailing.

The Palo Alto, California City Council passed legislation this week that will require supermarkets in the San Francisco Bay Area city in Northern California to stop providing customers with single-use plastic carrier bags in their stores.

The council voted 7-1 in favor of the plastic bag ban at supermarkets.

The new law gives supermarkets in the city, which is home to Stanford University and is a major part of high-tech Silicon Valley, six months to phase out the use of the plastic carrier bags in the stores. Beginning on September 18 of this year the grocery markets will no longer be able to offer the plastic bags.

The city of Palo Alto has been grappling over passing some sort of single-use plastic bag law for over a year. About a year ago we talked to Phil Bobel, manager of the city's environmental compliance division. Palo Alto was then going forward with a per-bag fee law, in which shoppers would pay 15-25-cents for each plastic bag they requested in the stores, rather than an outright bag ban.

Last year, Boble met with representatives of Safeway Stores, Inc., Andronico's Markets (a local chain), Mollie Stones (another local chain) and other grocers with stores in Palo Alto. The city agreed not to enact the per-bag consumer cha legislation until it had further dialogue with the grocery retailing companies.

However, between then and now, the Palo Alto City Council decided it would go with an outright ban on the distribution of the single-use plastic carrier bags at the city's supermarkets.

Palo Alto has seven good-sized grocery stores: A Safeway supermarket; an Andronico's Market unit; a Mollie Stone's store; JJ&F, a local independent; Piazza's Fine Foods, another local independent supermarket; a Whole Foods Market natural foods supermarket.; and Sun Country, an independent natural foods market.

The Whole Foods Market store, Sun Country and Piazza's Fine Foods supermarket already offer only paper grocery bags to shoppers, and not single-use plastic.

That means Safeway, Andronico's, Mollie Stone and JJ& F will be the only four supermarkets required to eliminate the plastic bags on September 18th.

Of course any new grocery stores that open in Palo Alto will not be able to offer the single-use plastic carrier bags either.

On grocer that plans on opening a grocery and fresh foods market in Palo Alto is Tesco's Fresh & Easy Neighborhood Market.

We reported in this October 15, 2008 story [Tesco to Locate Fresh & Easy Store in Palo Alto, California; it's First in the City and SF Bay Area Store Number 22 By Our Reporting] that Tesco had secured a site in Palo Alto for one of its Fresh & Easy markets, as part of its push into Northern California. Tesco's Fresh & Easy hasn't confirmed the Palo Alto site. But we have in our reporting.

In the October 15 piece, we discussed the plastic bag-fee/ban issue in Palo Alto.

Tesco's Fresh & Easy grocery and fresh foods stores don't offer shoppers the paper bag option. Instead they offer only free single-use plastic carrier bags.

The stores also sell a reusable "Bag for Life." The clear carrier bag, made out of a synthetic material, costs 20-cents each. Fresh & Easy says it will replace the bag for a customer's life, hence the name. The stores also sell an assortment of reusable canvas shopping bags, including one that retails for just 99-cents.

But the majority of Fresh & Easy shoppers get their groceries packed in the free single-use plastic bags. And because the stores don't offer the paper bag option as 99% of its competitors do, that means more plastic bags get used at a Fresh & Easy store on a relative basis than they do at stores that offer both free paper and plastic.

Fresh & Easy has postponed its launch into Northern California until an undetermined or at least unannounced date, despite the fact it's paying monthly leases on about 50 store sites, based on our reporting.

In addition to Palo Alto, which beginning September 18 will ban plastic bags at supermarkets, the city of San Francisco has a plastic bag ban law that's now been on the books going on two years. Tesco thus far plans to open two Fresh & Easy stores in San Francisco. The grocer will either have to offer paper grocery bags in those two stores and in the one in Palo Alto, or force shoppers to have there purchases packed only in bags they pay for, like the "Bags for Life."

Other cities in Northern California where Tesco has Fresh & Easy sites are also in the process of debating and proposing plastic bag ban laws. Others are working on bag-fee legislation.

Additionally, the city of Manhattan Beach in Southern California passed a law last year which bans the plastic bags in grocery stores in the city. Tesco has a Fresh & Easy store in Manhattan Beach. Numerous other cities in Southern California are working on bag ban or fee legislation, as are the elected officials in Los Angeles County.

A few cities in Arizona where Tesco has Fresh & Easy stores also are in the process of discussing plastic bag bans or per-bag fee legislation.

We've suggested since at least one year ago that Fresh & Easy offer paper grocery bags as well as the single-use plastic carrier bags in its stores. [A recent, related piece: March 7, 2009: Analysis & Commentary: The Seven Retail Operations Changes Tesco's Fresh & Easy Neighborhood Market Needs to Make to Help it Get On the Success Track.]

Our argument isn't only an environmental one. Rather it's more of a choice argument, along with the fact that by not offering the paper option the grocery chain intentionally limits its customer base, as there are shoppers who just absolutely hate the plastic bags, which is why 99% of the supermarket chains in the Western U.S. offer the paper or plastic option.

What Tesco might not know because it's a British grocer, although that's what research is for, is that paper grocery bags were the only bag used in U.S. supermarkets for decades. Even after the single-use plastic carrier bag was introduced in supermarkets in the 1970's, many chains and independents waited years after before they started offering them. In fact, were it not for strong marketing by the plastic carrier bag industry, which included offering the bags for rock bottom prices to grocers, the plastic bags might never have even gotten widespread distribution in American supermarkets, discount and drug stores.

Because of the history of the paper grocery bag in U.S. food retailing, nearly every major supermarket chain and independent kept the paper bags after bringing in the plastic bags, offering the paper option, even though the plastic bags cost much less for the retailers to buy from suppliers.

History and tradition are tough things to buck by a start up grocery chain.

American consumers also love choice, right down to what type of bag their groceries are packed in at the grocery store.

As we offered in analysis first about a year ago, and in a number of other posts since then, Tesco would be wise to just bring paper grocery bags into the Fresh & Easy stores, offering them as an option with the single-use plastic. If not, legislation is and will do it for the grocer anyway, on a piecemeal basis.

We believe in being proactive rather than reactive. Waiting for laws to tell a retailer it has to offer an option like paper bags, which 99% of its competitors already do anyway, is reactive. Bringing in the paper option, and then touting it as an example of expanding shopper choice (and the environmental benefits since there's a comprehensive recycling system in the U.S. for the paper bags but not for the plastic) at Fresh & Easy is proactive.

Basically ever city in town in California, and most elsewhere in the U.S., either has a curbside recycling program which includes paper grocery bags or allows residents to thrown the paper grocery sacks in their green waste trash bins. The garbage companies contracted by the cities then turn the paper and green waste into composed which is generally sold to lanscaping companies and given away to city residents for garden use.

No curbside recycling programs, with perhaps a couple rare exceptions, exist in California and U.S. cities. The bags aren't compostable either. They have to be returned to the supermarket or another recycling facility in order to get recycled. Unfortunately most consumers don't do this. Instead they toss the plastic bags in the garbage. The result being the bags end up in landfills. And it's single-use plastic bags you see littering the streets and beaches rather than paper grocery bags. It's plastic bags not paper bags that also are a major part of the floating plastics garbage clog in the Pacific Ocean ranging from the west coast in the U.S. to Japan.

We shall see which road Tesco's Fresh & Easy takes in terms of offering the paper bag option in its stores. We believe the CEO could order the change tomorrow. But we could be wrong since if the decision were that simple Tesco Fresh & Easy Neighborhood Market CEO Tim Mason, who also is a corporate officer of Tesco plc, would have likely saw the need to offer the paper bag option ages ago and ordered the change made post haste.

Ground Control to Shopper: Point-of-Purchase-Based Mobile Couponing the Next Hot Ticket; Kroger Co. Leading the Food Retailing Pack

Above is how a paperless coupon looks on a mobile phone using the Cellfire mobile couponing system at Kroger Co. stores.

Promotional Merchandising 2.0: Mobile Couponing

Kroger Co., which operates supermarket chains under the Ralphs, Food 4 Less, Fry's and Smith's banners in California, Nevada and Arizona, and over 2,200 supermarkets under various banners throughout the U.S., is continuing to make it easier for shoppers to use manufacturers' "cents off" coupons right in the store, as well as tapping into the fast-growing grocery coupons trend even further, by adding a second electronic, mobile couponing service to its stores.

Kroger is now offering the Shortcuts.com paperless coupon systems in its stores in the three states, along with in all of its chains and stores throughout the U.S.

Tesco's Fresh & Easy Neighborhood Market's 115 stores are located in California (Southern and Bakersfield), southern Nevada and Arizona.

How the system works: While shopping in a Kroger supermarket shoppers can go to Shortcuts.com on their cell phone or other hand-held mobile communications device and select the available and desired manufacturers' coupons online. The coupons then become available right away on the Kroger Co. customer's loyalty card for discount at checkout.

The Shortcuts system, which is owned by AOL, allows users to search for specific coupons as well as view their shopping lists from their mobile devices, according to Kimberley Partoll, executive vice president of AOL’s new ventures unit, which runs Shortcuts and just announced the new partnership with Kroger Co. The service is free to shoppers.

"Shortcuts.com Mobile enables users to access coupon savings while they're doing their shopping and the coupons are available for use once they hit the checkout line, Ms. Patroll says in describing the convenience of the manufacturers' "cents off" coupon system.

[You can view the Shortcuts Website and some of the coupon offerings here.]

In addition to Kroger Co, other supermarket chains using the Shortcuts mobile system include QFC in the Pacific Northwest, Payless supermarkets and a few others.

Fast food chains like McDonalds, Subway and Jack in the Box are also using mobile couponing very aggressively.

Cellfire mobile system

In December, 2008 Kroger Co. became the first grocery chain in the U.S. to offer shoppers the mobile, paperless coupon option through the Cellfire mobile couponing system. Kroger is keeping Cellfire as well as adding the Shortcuts system.

"The manufacturers are finally realizing that there's a way to do couponing better," Dan Kihanya, the vice president of consumer marketing for Cellfire said in announcing the Kroger partnership last year. "They realize the power of digital media can be applied to the coupon promotion world."

Major consumer packaged goods marketers are offering coupons through both mobile systems. They include Proctor & Gamble, Kimberly Clark, Kellogs, Quaker Oats, Con Agra and numerous others. Smaller food companies also are beginning to use the mobile couponing systems.

Before adopting the Cellfire system for its 2,220-plus stores in the U.S., Kroger Co. tested the mobile coupon system in the summer and early fall of last year in 200 of its supermarkets in the southern U.S. According to data from the 10-week test more than 50% of shoppers who joined the program redeemed more than one coupon, and the average coupon’s conversion rate was between 10% and 20%. That's pretty good for a test program of a then brand new coupon technology.

The Cellfire mobile coupon system works similar to Shortcuts system. The manufacturers' coupons are downloaded directly to a user's mobile phone, then a discount is given at the checkout stand via the customer's store loyalty card. You can learn more about how the system works here.

Point-of-purchase where the action is

The ability for shoppers to be able to access coupons right at the point-of-purchase in the store is powerful. It's also a powerful tool for the retailer in that having customers search their mobile phones for manufacturers' coupon offerings right in-store at the point-of-sale leads to incremental sales, in our analysis.

For example, suppose a shopper is in the cleaning products aisle and after choosing her laundry detergent (say Tide brand) and dish washing soap (say Dawn brand), both of which were on her shopping list, and which she found "cents off" coupons on Cellfire or Shortcuts for via her mobile device, she also picks up a container of Downey fabric softener and a box of Bounce dryer sheets because she found "cents off" coupons on the site for the items, along with the laundry detergent and dish washing soap. All of those brands are produced and marketing by Proctor & Gamble, a heavy distributor of coupons.

Labor savings

The Cellfire and Shortcuts' mobile systems also are valuable to grocery chains because the "paperless" nature of the mobile systems eliminates the labor needed at checkout to scan and handle paper manufacturers' "cents off" coupons. In the grocery business even saving a few seconds on each checkout can boost productivity numbers.

In order to use each of the mobile coupon systems a retailer must have a loyalty card system in place like Kroger and many other supermarket chains do have because that's how the discounts from the paperless "cyber coupons" get credited to shoppers' grocery order totals. A customer buys $100 worth of groceries at Fry's, for example, and has $5 worth of coupons downloaded from Cellfire or Shortcuts. When the checkout clerk scans the shopper's loyalty or club card, which contains the discount value, the $5 is subtracted from the customers account.

Mobile couponing will soar

We expect the use of mobile couponing systems like Cellfire and Shortcuts to spread to numerous other supermarket chains and other format retailers like mass merchandisers and drug chains. The convenience, cost-saving and potential to add incremental sales aspects of the systems are to powerful in our analysis and opinion for food and grocery retailers to avoid. Kroger Co. sees that, which is why the grocery chain is getting into using the systems in an aggressive way.

We aren't alone in that analysis. A research report issued recently by market research firm Juniper Research forecasts that the redemption value of mobile coupons will increase by over 30% by 2010. The report says mobile couponing will be a big winning for retailers that use it in the current recession. Read more about the research report here

The mobile couponing systems also have a built in growth potential. Consumers 16-35 today use mobile and smart phones like Apple's iphone as the norm. And older consumers are fast joining the club. Retailers like Kroger that have mobile couponing systems in place stand to benefit as shoppers discover the availability of such systems in the stores.

Everybody online

Manufacturers' also are putting more and more coupons online. It's provides them with a cost-savings over the printing, distribution and redemption costs that come with paper coupons. Paper coupons aren't going away anytime soon though. While shoppers can download and print the online coupons at home then take them with them grocery shopping, the mobile systems eliminate that entire step, making it much more convenient for the shoppers. That's powerful.

[See these two recent posts regarding the soaring use by consumers of manufacturers' coupons: March 7, 2009: Consumer Use and Retailer Redemption of Manufacturers' Coupons Soaring Says Leading Redemption Company in the U.S.; But Not at Tesco's Fresh & Easy. March 9, 2009: Consumer Use and Retailer Redemption of Manufacturers' Coupons Soaring Says Leading Redemption Company in the U.S.; But Not at Tesco's Fresh & Easy.]

The point-of purchase in-store is perhaps the most powerful marketing, promotional and selling place in food and grocery retailing. That's why grocers put so much effort into how the store shelves are set with product, store displays, signage and other in-store merchandising aspects.

Therefore, having the ability to allow shoppers to download manufacturers' "cents off" coupons, which the marketers not the stores pay for, is a logical extension to what's referred to as store marketing, the concept that today the main thrust of grocery marketing and merchandising is in the store aisles.

Expect to see much more of it.

No mobile couponing at Tesco's Fresh & Easy

Tesco's Fresh & Easy Neighborhood Market doesn't except manufacturers' "cents off" coupons in any form in its stores. We think the new, fast-growing mobile couponing segment, coupled with the existing and also fast-growing Internet-based couponing boom, along with the still most-used and increasingly popular paper manufacturers' coupons segment demonstrates what a mistake that policy is for Fresh & Easy, in our analysis.

As we've been writing for about a year, not accepting the manufacturers' "cents off" coupons is like saying to a huge and fast-growing segment of shoppers who regularly use the coupons when they shop, that their business is welcome, as long as they don't bring their coupons with them to the store. It's a customer-limiting factor for Tesco's Fresh & Easy, in other words. [See our March 7, 2009 story here: Analysis & Commentary: The Seven Retail Operations Changes Tesco's Fresh & Easy Neighborhood Market Needs to Make to Help it Get On the Success Track.]

[Reader Note: You can follow Fresh & Easy Buzz on Twitter.com at www.twitter.com/freshneasybuzz.]

Wednesday, March 18, 2009

Fresh & Easy Buzz Redux: Tesco's Fresh & Easy Kills Plain White Paper Advertising Flyers; Moving Closer to What We Termed 'Minimalism By Design'

Tesco's Fresh & Easy Neighborhood Market distributed its third once-a-week frequency advertising flyer today. The promotional ad flyer, good from March 11-24, 2009, features the five fresh produce items (98-cent produce packs) above, along with other food and grocery items.

Promotional Merchandising: Tesco Fresh & Easy's Weekly Ad Flyer

On January 27, 2009 we wrote and published this piece [Tesco Fresh & Easy's 'New' Advertising Flyer: Minimalism Without Thought or Design Does Not A Retail Advertising Communications Piece Make] in which, among other analysis and suggestions offered, we suggested that the fact Tesco's Fresh & Easy Neighborhood Market had changed to a black ink on cheap plain white paper advertising flyer, from its previous color promotional flyer, was probably not a good idea, to say the least.

The title of the January 27 story says it all. In the piece we offered that there is nothing wrong with minimalism when it comes to advertising flyers, particularly in hard economic times like the present, as long as it is what we term "minimalism by design." That's opposed to "minimalism by default."

However, the two black ink on inexpensive plain white paper flyers we discussed in the piece were completely without design. Therefore, we suggested Fresh & Easy needed to go back to the computer graphics program or layout table and create something at least a bit more graphically attractive, and include at least one or two colors in the advertising flyer.

No more plain white ad flyers

Tesco's Fresh & Easy did just that with the supplemental advertising flyer it distributed about two weeks after our story was published on January 27.

In addition, Fresh & Easy has issued at least three -to- four advertising flyers since that one, and all have at least two colors, and at least have some thought given to the layout. In other words, they look much better that the plain white paper flyers we analyzed and critiqued in our January 27, 2009 piece.

The advertising flyers since then have a layout similar to what we suggested in the January 27 story, although they still need work to make them easy to read and more marketable. The flyers now also include color, green and red most recently, against the white backdrop.

Fresh & Easy needs to design the flyer so that graphically it fits into its overall merchandising and marketing communications message. It's a marketing-advertising communications piece, and when consumers see it a retailer should want them to immediately identify the ad flyer with the stores and the grocer's overall merchandising and marketing message.

As we reported and wrote about in this March 11, 2009 piece [Fresh & Easy Buzz Redux: Tesco's Fresh & Easy Changes its Promotional Advertising Flyer to 'Weekly;' Something We've Been Suggesting For About A Year], Tesco's Fresh & Easy Neighborhood Market has now changed to a once-a-week advertising flyer, which is something we first suggested it needed to do about one year ago. [The new weekly ad, March 18-24 is out today, here. Produce here.]

Now that the grocery and fresh foods chain is using a weekly ad flyer like all of its competitors are, it won't need to issue so many (if any) direct-mailed, paper supplemental ad flyers like it's been doing as a way to attempt to stay current because its previous advertising schedule was one ad flyer about every three weeks.

Additionally, now that Fresh & Easy is producing and distributing a weekly advertising flyer, it needs to produce a quality piece. It can be minimal -- in fact their might even be a certain cache to doing so -- but it needs to be "minimalism by design," not by default.

A perfect example of "minimalism by design" when it comes to grocer advertising flyers or circulars is Trader Joe's famous "fearless flyer." The TJ's ad flyer is printed on very inexpensive paper, newsprint basically. It is minimal in its look -- but by design.

The Treader Joe's "fearless flyer" contains mostly black ink pen-style artwork and generally uses only one other color (most often red) in its pages. The flyer is really more a booklet. But it is inexpensive to produce.

The Trader Joe's ad flyer fits perfectly with the grocery chain's image and merchandising and marketing communications message. The pen-art in the flyer reminds one of the hand written and drawn chalkboard signs in the stores, for example. That's a graphic marketing communications tie-in.

And the design of the flyer fits Trader Joe's quirky (by design) image: the names of its store brand products, the way the store employees dress, the look of the stores, and the like. That's integrated merchandising and marketing. That's what marketing communications is supposed to be. Advertising flyers need to be a part of that whole, not something different each week.

Tesco's Fresh & Easy now has a chance, with its now weekly ad flyer schedule and frequency, to produce a low-cost, high-impact, attractive paper advertising flyer similar to what we've previously suggested it could and should do.

By attractive we don't mean it has to be high-quality or fancy. Remember "minimalism by design" is just fine. But like the Trader Joe's "fearless flyer," which is minimal, but also is attractive, so too can Fresh & Easy design one that meets those dual criteria.

Fresh & Easy needs an advertising flyer that fits its overall image -- is a part of that image. The grocery chain needs to come up with a design and then stick with it. Advertising communications is best when it's integrated and consistent. Tweaks are fine but not wholesale changes each week.

Like they say, you only get one first impression.

We've had many readers tell us the plain white, and even the slightly better versions we described above (the ones after our January 27 story), Fresh & Easy flyers often go right in the circular file or recycle box because they look like junk mail. There's a reason grocery chains like Safeway Stores, Kroger and others make their weekly advertising circulars or flyers as attractive as they can within budget. That reason is that the food retailers want consumers to not only look at the promotional pieces -- but read and use them to do their grocery shopping, as well.

Up until the first of this year, Tesco's Fresh & Easy produced and distributed fairly attractive paper versions of its ad flyers. Then they changed them in January, most likely to save money. Saving money is fine. But being penny-wise but pound foolish isn't smart. Fresh & Easy needs to find a happy and economic medium between its previous graphically attractive advertising flyers and the ones it's currently producing and distributing (the paper, direct-mailed versions.)

It appears to us that since we wrote the January 27, 2009 piece, the grocery chain has been experimenting with its advertising flyers. They have improved. But they could improve much more. Minimalism is great -- just as long as it is by design rather than default.

And more important, Tesco's Fresh & Easy needs to decide on an advertising flyer design (at least a basic design) and then stick with it. And as we said earlier, it needs to be integrated with the chain's overall merchandising and marketing. We look forward to seeing what develops.

Tuesday, March 17, 2009

Store Location Strategy: Whole Foods Market-FTC Settlement Agreement Puts 32 stores on the Market; What Should Tesco's Fresh & Easy Do About it?

Food & Grocery Retailing in the Western USA

Whole Foods Market, Inc. reached a settlement agreement on March 6 with the U.S. Federal Trade Commission (FTC) regarding the FTC's nearly 20-month antitrust legal challenge against the Austin, Texas-based natural and organic foods chain's 2007 acquisition of then major competitor Wild Oats Markets, Inc., which was headquartered in Boulder, Colorado.

[We last wrote about the then ongoing antitrust case here.]

The settlement agreement between Whole Foods Market, Inc. and the FTC requires the natural foods and grocery chain to sell a total of 32 of its stores; 13 operating markets and 19 stores that have already been closed. Ten of those 19 stores were closed by Wild Oats Markets, Inc. before the 2007 acquisition by Whole Foods Market. Nine of the 19 stores have been closed by Whole Foods' since acquiring Wild Oats.

Of the 13 operating stores to be sold, 12 are former Wild Oats' units acquired by Whole Foods Market, Inc. in the 2007 deal. Just one of the 13 stores is a Whole Foods banner market store that existed prior to the 2007 acquisition of Wild Oats.

The FTC-Whole Foods settlement agreement also requires Whole Foods Market, Inc. to put up for sale the "Wild Oats" brand and all related intellectual property associated with it. This includes all the branding and packaging materials associated with the "Wild Oats" brand products, which then Wild Oats Markets, Inc. featured in its stores and for a couple years were sold in most Kroger Co.-owned supermarkets in the U.S., prior to Kroger creating its own natural-organic store brand just a few years ago.

Whole Foods Market has worked to eliminate the "Wild Oats" brand since the 2007 acquisition, rebranding all but about 6-10 former Wild Oats stores "Whole Foods" (and those stores are in the process of being rebranded as we write this), and closing-out and discountinuing all of the products under the brand from the former Wild Oats Market stores' shelves. Therefore it isn't a brand the natural grocery chain planned on using anyway, although it might have preferred to bury it rather than to sell it.

Whole Foods Market, Inc. currently operates 279 natural foods supermarkets in the U.S., Canada (6 stores) and the United Kingdom (5 stores). It had gross annual sales of $8 billion in 2008.

If the 13 operating stores are sold, that will bring Whole Foods' store count down to 266. The 13 stores to be sold had $31 million dollars in sales for the first quarter, 2009, which just ended. That works out to annual sales of about $124 million, which won't have a significant negative impact on the natural grocry chains annual sales.

Whole Foods Market will open about 10 new stores in 2009. Those 10 new stores will likely make-up most of that $124 million in annual sales because they are all bigger than the 13 stores to be sold, and a number of them are in its top demographic markets, such as in Northern California.

For example, Whole Foods Market will open its first store in the Northern California coastal city of Santa Cruz tomorrow. The city of about 100,000 residents has a very high natural and organic foods shopper demographic. We expect the Santa Cruz Whole Foods' store to be a high volume market for the natural grocer, possibly doing in the $600,000-plus per week sales range. The new store is 31,500 square feet. As an example, the Whole Foods store in Mill Valley, California (Marin County) does about $500,000 a week on average and is only 14,000 square feet. It is a very high volume store.

As a part of the settlement deal with the FTC regarding the 13 operating Whole Foods stores being sold, if those stores don't sell in a one year period of time, Whole Foods Market gets to keep them. The natural grocery chain also will operate and gain the income from the 13 stores until each respective store is sold.

A third-party receiver has been appointed by the FTC and Whole Foods Market, Inc. to sell the 13 operating and 19 closed stores. They are in the process of being put on the market by the receiver as we write this piece.

Below are, first, a list of the 13 operating Whole Foods stores being sold. After that is a list of the 19 closed stores being put on the market. The stores in green font are those located in markets where Tesco's Fresh & Easy Neighborhood Market operates. Fresh & Easy has stores in California (Southern CA and Bakersfield), southern Nevada and Metro Phoenix, Arizona. A number of the 13 currently operating and the 19 closed Whole Foods stores for sale are in Arizona and Nevada. None are in California.

The 13 operating stores for sale:

7133 N. Oracle Rd., Tucson, AZ
8688 E. Raintree Dr., Scottsdale, AZ
2584 Baseline Rd., Boulder, CO
1651 Broadway St., Boulder, CO
3180 New Center Pt., Colorado Springs, CO
5910 S. University Blvd., Littleton, CO
9229 N Sheridan Blvd., Westminster, CO
340 N. Main St., West Hartford, CT
4301 Main St., Kansas City, MO
1090 St. Francis Dr., Santa Fe, NM
7250 W. Lake Mead Blvd., Las Vegas, NV
19440 N.W. Cornell Rd., Hillsboro, OR
6930 S. Highland Dr., Salt Lake City, UT

The 19 closed stores for sale

5350 W. Bell Rd., Glendale, AZ
1422 N. Cooper Rd., Gilbert, AZ
874 E. Warner Rd., Gilbert, AZ
9028 W. Union Hills, Peoria, AZ
13823 N. Tatum Blvd., Phoenix, AZ
15569 W. Bell Rd., Surprise, AZ
200 W. Foothills Pkwy., Fort Collins, CO
8194 S. Kipling Pkwy., Littleton, CO
6424 Naples Blvd., Naples, FL
4600 Shelbyville Rd., St. Matthews, KY
87 Marginal Way, Portland, ME
8819-8833 Ladue Rd., St. Louis, MO
7831 Dodge St., Omaha, NE
517 N. Stephanie St., Henderson, NV
4879 S. Virginia St., Reno, NV
5695 S. Virginia St., Reno, NV
2077 N.E. Burnside St., Portland, OR
17711 Jean Way, Lake Oswego, OR
3736 W. Center Park Dr., West Jordan, UT

Out of the total 32 stores for sale, 12 are located in Arizona (8) and Nevada (4), two of the three states where Tesco's Fresh & Easy operates its stores. Fresh & Easy currently has stores only in the Las Vegas Metropolitan region in southern Nevada. However, it currently has at least two stores in development in the Reno area in northern Nevada.

Additionally, 26 out of the total 32 stores for sale are located in the Western U.S., in states other than Arizona and Nevada. That leaves only six stores outside the west.

The reason this is the case is because the FTC's main antitrust argument was that a combined Whole Foods-Wild Oats constituted a retail monopoly in 15-29 U.S. markets in what the FTC called the "natural and premium organic retailing segment." The majority of U.S. markets in which the FTC claimed in its legal challenge that the combined Whole Foods-Wild Oats was the most monopolistic in based on its regulatory agency created retailing category were in the Western U.S. Therefore the majority of stores offered for sale are in the west.

Arizona and Nevada

Since so many of the former Wild Oats Market stores being offered for sale are in Arizona, this obvioulsy provides Tesco's Fresh & Easy an opportunity to acquire additional new store locations in what is its second highest market region in terms of store count -- Arizona -- particularly the Phoenix Metro and easy-west valley regions.

Additionally, since all but one of the 32 stores for sale are former Wild Oats units, they are a perfect physical size for Tesco to convert into Fresh & Easy markets. Most of the 31 former Wild Oats locations for sale (out of the total 32) average about 14,000 -to- 20,000 square feet in size. This is the perfect size for Tesco to convert since the Fresh & Easy stores average about 10,000 -to- 13,000 square feet.

It's much cheaper to convert an existing store of the size of the former Wild Oats units into a Fresh & Easy market than it is to convert the former 35,000-plus square foot supermarkets and much larger big box stores Tesco has in many cases converted into Fresh & Easy stores. But the retailer knows that. It just opened a new Fresh & Easy store in Pasadena, California two weeks ago that is in a former Wild Oats store that was closed before the acquisition of the company by Whole Foods Market, Inc.

But the mere fact the stores in Arizona and Nevada are for sale, and in what we hear are in many instances for good prices, along with the fact the former Wild Oats Market stores are the perfect size to convert into Fresh & Easy markets for Tesco, doesn't mean Tesco's Fresh & Easy Neighborhood Market should buy any of the stores, especially in Arizona.

Why? It's our analysis that Fresh & Easy basically has enough stores in the Phoenix metro region for right now. In fact, we think that a number of the Fresh & Easy stores, which are located so close to one another as they are, are actually canabalizing sales of each other in numerous cases.

At this point in time, we suggest Tesco look only to key cities in Arizona on a very selective basis where there are currently no Fresh & Easy stores for new locations. The only duplication exception in the Phoenix Metro region being spots that are just screaming for a small-format grocery store.

In terms of the stores being put up for sale by Whole Foods in Arizona, our suggested strategy above basically narrows the list down to one store -- the former Wild Oats Market store in Peoria, Arizona. We would look at that former Wild Oats store to buy and convert into a Fresh & Easy. In all of the other cities, Tesco already has plenty of Fresh & Easy stores, in our analysis. [By the way, Wal-Mart will open one of its small-format, combination grocery and fresh foods Marketside stores in Peoria later this year, it's fifth Marketside unit in the Phoenix Metro region.]

We would also take a pass on the stores for sale in Las Vegas and Henderson, in southern Nevada. Tesco has enough stores in the market for now as well, in our analysis. Actually it has a few too many.

But we would take a close look at the two former Wild Oats' units for sale in the Reno area, in northern Nevada.

Colorado and Oregon

Beyond taking this limited look at the former Wild Oats stores for sale in Arizona and Nevada, here is what we would do: We would take a very close look at the seven former Wild Oats stores for sale Colorado.

Yes, we know Tesco's Fresh & Easy is currently only in three markets: California (Southern and Bakersfield), southern Nevada and Arizona. And we know it has postponed its launch into Northern California at least two or three times now.

But being in only the three states and markets with its current 116 stores is part of Fresh & Easy's problem: With its "critical mass" store location strategy, the grocery chain has put way too many stores in just three states, with the stores located way too close to one another.

There have been three negative primary results of this strategy, in our analysis:

>First, the "critical mass" store location, limited market focus strategy has resulted in too many Fresh & Easy stores being located too close together. This is causing stores to canabolize sales of other nearby stores.

>Second, the decision by Tesco to open so many Fresh & Easy stores in such a short period of time so close to one another in only three states-markets resulted in numerous bad store location decisions, in our analysis. That's in part of the reason why so many of the current Fresh & Easy markets are doing below $150,000 per week in sales.

>Third, Tesco's research failed to identify its only real key consumer demographic group so far, based on our research. The one group that seems to have thus far started to develop brand identity with and some brand loyalty to the Fresh & Easy retail brand (meaning they are primary shopper potential) and stores are members of the about 18-34 year old consumer. This is the only demographic segment we've identified thus far that contains some members who seem to have "gotten" the Fresh & Easy format, as Tesco's Fresh & Easy often puts it, as it is at present.

Consumers in this age segment tend to live in urban regions not suburbs where most of the Fresh & Easy markets are located. Think in and around Phoenix, Arizona but not farther out in the suburbs where many of the Fresh & Easy stores are located. Think college or university towns. Think Metro Los Angeles and the west side more so than the Inland Empire region and Orange County, where most of the Fresh & Easy stores in Southern California are located.

And think San Francisco and Silicon Valley in Northern California's Bay Area, as well as Metro Denver, Colorado and the hip city of Boulder where two of the former Wild Oats Colorado stores for sale are located.

A Western U.S. market region strategy, not limited 'critical mass'

In other words, instead of opening numerous more new stores in the Metro Phoenix, Arizona east and west valley regions and in Metropolitan Las Vegas (there is still plenty of room in Southern California for new stores), accept for the very limited new store fill-ins we described earlier, what Tesco needs to do is to spread out in other key Western U.S. states-regions (San Francisco Bay Area in Northern California and states like Colorado to start), thereby creating a bigger market basket instead of counting on more and more stores in the same markets to lead to success.

We would open select stores in select areas in the the San Francisco Bay Area right away. (More on this in an upcoming piece in Fresh & Easy Buzz.)

We would look at the seven Colorado former Wild Oats' stores for sale by Whole Foods. Then we would look to Oregon and Washington state, from Northern California. Then look to Utah, Idaho and New Mexico, from Colorado.

We don't mean a year or two from now. We mean right now.

What we are talking about to start is the opening of just a few Fresh & Easy stores in these states-market regions, not the "critical mass" strategy Tesco has employed to date.

For example, we see opening a total of about 7-10 Fresh & Easy stores in Metro Denver and key other cities in the state outside of the Metropolitan Denver market region. In a similar move, we suggest opening about 4-5 Fresh & Easy stores in the Metro Portland, Oregon market region and one or two outside the Metro region.

We would open about 7-10 stores in the Seattle Metro region and surrounding area to start, two-three in the Boise, Idaho Metro region, and perhaps two each in the Santa Fe and Albuquerque Metro market regions in New Mexico, to start.

This "Western U.S." strategy is opposed to Tesco's limited market region, many stores in just three states store location strategy. We will be elaborating on the alternative strategy in a future piece in the Blog.

One result of Tesco putting all of its stores in just three Western states is that those three states -- California, Nevada and Arizona -- just happen to not only be the three states hit worse by the housing foreclosure crisis, financial and credit crisis and unemployment in the west -- but also in the entire U.S.

In contrast, although being hit by the recession, Colorado, Utah and Washington State, for example, all are fairing much better that the three states. Utah has just a bit over 4% unemployment, for example, which is nearly half the national average, and is 6% below California's unemployment rate. Colorado and Washington state also have much less job loss than California, Nevada and Arizona.

And in California, the San Francisco Bay Area is doing much better than the rest of the state. It has much lower unemployment than Southern California and the Central Valley. For example, San Francisco's unemployment rate is under 6%, nearly half as much as the state's average of 10.4%.

The housing foreclosure percentage is much lower in the Bay Area than anywhere else in the Golden State, for example. And the diverse economy is till creating new jobs in some sectors, unlike what's happening in the rest of the state. (We would add that of the 18 confirmed Fresh & Easy locations by Tesco in the San Francisco Bay Area, and the additional approximately seven or eight we've discovered and reported on but haven't been confirmed by the retailer yet, about 60% of the store sites are in what we consider poor locations. We will elaborate on this in that future piece.)

Lastly, for those readers with a logistics and distribution bent, Tesco's Fresh & Easy can distribute to all of these Western States out of its Distribution center in Riverside County, (Southern) California. All that's needed are some tweaks to its current logistics model, along with one or two key additions. Yes, you have to wait for that upcoming piece to read what those logistical tweaks and addition are.

So, that's how we would deal with the new influx of grocery stores now for sale in the Western U.S. because of the Whole Foods Market-FTC settlement agreement, were we Tesco's Fresh & Easy Neighborhood Market. And we hear there could be some wheeling and dealing (good prices) for the stores, since the sale is the result of the settlement agreement with the FTC.

But its all about good store location strategy rather than good deals on closed stores, in our analysis and experience. That you can take to the bank, as long as it isn't Bank of America or Citi, and you are looking for a commercial loan.

We will elaborate on the "Western U.S. strategy," as opposed to what we term Tesco's current limited state, limited market, "critical mass" store location strategy, along with the Northern California piece, and the logistics piece, in an upcoming post or two in Fresh & Easy Buzz. Please stay tuned.

[Editor's Note: For detailed coverage and analysis about the FTC v. Whole Foods Market antitrust case, along with the settlement agreement, we suggest Natural~Specialty Foods Memo (NSFM), which has covered the topic, issue and legal case extensively since the acquisition happened in the summer of 2007. Here is a bibliography of its recent coverage, along with posts from its archives. Here is a recent piece about the selling of the "Wild Oats" brand and intellectual property.]

[Readers: You can follow Fresh & Easy Buzz around on Twitter at: www.twitter.com/freshneasybuzz.]