Wednesday, January 27, 2010
Tesco's Fresh & Easy is planning a new store opening 'Big Bang' for February.
Thus far, the fresh foods and grocery chain plans to open nine new stores next month. For those keeping score, the nine will be the most new stores Fresh & Easy has opened in a single month since September, 2008, according to our tracking.
Below are the nine new Fresh & Easy stores set to open thus far next month:
Opening on February 3, 2010
Shaw & West
2047 West Shaw Avenue, Fresno, California
Opening on February 17, 2010
Tampa & Nordhoff
19350-A West Nordhoff Street, Northridge, California
Telegraph & Day
5101 Telegraph Road, Ventura, Calfornia
48th & Ray
4816 East Ray Road, Phoenix, Arizona
210 Freeway & Riverside
2015 North Riverside Avenue, Rialto, California
Opening on February 24, 2010
Central & Adams
1025 East Adams Boulevard, Los Angeles, California
Winter Gardens & Woodside
9720 Winter Gardens Boulevard, Lakeside, California
Whittier & Painter
13301 Whittier Boulevard, Whittier, California
Manning & Upper Bridge
577 I Street, Reedley, California
[Reedley is in the Fresno, CA market region]
Tesco opened a new Fresh & Easy store today in Rancho Cucamonga, which is in Southern California. The store is at 8956 Foothill Boulevard in the city.
The grocer has thus far opened five new stores this month - three in the Fresno market region and two in Southern California.
Based on our information, today's new store opening in Rancho Cucamonga will be the last one for January 2010.
Monday, January 25, 2010
Walgreens Eyeing San Francisco For Fresh Foods Program: Could it Strike Category Gold in the City By the Bay?
Drug chain Walgreens is looking closely at San Francisco, California as one of the first major U.S. cities in which to launch its fresh foods (ready-to-eat foods and probably some ready-to-heat as well) program, Fresh & Easy Buzz has learned.
As we first reported in this January 6, 2010 story, former Fresh & Easy Neighborhood Market director of Fresh Foods Jim Jensen left the Tesco-owned chain on December 30, 2009 to take a job with Walgreens at its corporate headquarters in Illinois. Fresh & Easy is based in the Southern California city of El Segundo
Jensen's new position at Walgreens is as the drug chain's new corporate divisional manager of fresh foods. See our stories here for details. Both the division and the position are new at Walgreens.
Jim Jensen is joining Brian Pugh, the former vice president for retail operations at Tesco's Fresh & Easy, at Walgreens. Pugh is the vice president of merchandising at the drug chain, a position which includes responsibility for the consumables categories, including the new fresh foods focus.
San Francisco: The City
San Francisco would be a good and logical choice as one of the first major U.S. cities for Walgreens to launch it's fresh, prepared foods program for a number of reasons:
>Geography and dense population: San Francisco is a compact city, just 47 square miles in size. It's also a highly dense city. San Francisco has a population of about 850,000 residents living in those mere 47 square miles. In addition, because San Francisco is a headquarters city, it's estimated it has a daytime population of about 2 million.
>Strong retail real estate: Walgreens has a whopping 64 drug stores in San Francisco, including having at least one store in just about all of the city's many neighborhoods. This is powerful retail real estate penetration. San Francisco is a city of neighborhoods.
>Prime demographics: San Francisco's population skews young. It also has a high percentage of single people. These two demographics are excellent for the retail merchandising of ready-to-eat and ready-to-heat fresh, prepared foods of all types. In other words, San Francisco is a grab-and-go and more fresh foods merchandising heaven.
Additionally, San Francisco has among the highest income of all U.S. cities. It's in the top five.
But even more important, San Franciscans spend a higher percentage of their income on prepared foods of various types than do residents of nearly any other U.S. city. New York City and Boston being the two closest.
San Francisco has a much higher proportion of people living in apartments than it does single family houses. This phenomenon also lends itself to higher purchases of ready-to-eat and ready-to-heat fresh foods.
Add to this the fact that San Francisco is a walking and public transit city, which means frequent grab-and-go eating, and you can begin to see the reasons why making the city one of its first markets in which to launch its fresh, prepared foods program would make good and logical sense for Walgreens.
San Francisco's high daytime population - they all have to eat lunch - also offers an added incentive for a chain like Walgreens to add fresh, prepared foods to some or all of its 64 stores in the city. These suburban commuters work downtown in the city's financial district, but also at the many media companies in the South of Market neighborhood, as well as in numerous neighborhoods throughout the city. Their are Walgreens stores in nearly all of these neighborhoods.
Pictured above is a Walgreens store in San Francisco's South of Market neighborhood. The store is the retail anchor of a mixed-use office and residential building, which offers a ready-made customer base for grab-and-go prepared foods.
San Francisco: Fresh foods gold mine
Walgreens already sells a limited variety of fresh foods, such as milk, eggs, juices and other beverages, along with some perishable and frozen foods in its stores nationwide. However, by fresh, prepared foods we're taking about ready-to-eat items like sandwiches, snacks and desserts, and ready-to-heat items like pizza's, hot sandwiches and perhaps even entrees and side-dishes in a limited assortment.
San Francisco, which was where the successful gold miners spent their treasures during the great California Gold Rush in the 1800's, is one of the strongest markets in the U.S. for sales of ready-to-eat and ready-to-heat fresh, prepared foods. This includes sales at supermarkets, specialty food stores, corner grocery markets, convenience stores and at a vast variety of prepared foods venues like restaurants, kiosks and other outlets.
With its existing base of 64 stores in the city, if Walgreens were to introduce fresh, prepared foods in some or all of those stores, it would become a major retailer of ready-to-eat and ready-to-heat foods in San Francisco by virtue of the fact it covers those 47 square miles with a retail store unit blanket. Existing retail real estate is a powerful strategic tool to have.
For example, Supermarket chain Safeway Stores, Inc., which is headquartered just 30 miles from San Francisco in Pleasanton, has about 15 stores in the city. Of course Safeway's supermarkets, even its smallest units in San Francisco, are at least three times the size of the San Francisco Walgreens' drug stores. They also offer much more in the way of food and grocery selection.
But that's not what's most significant in this case, since little square footage is needed to merchandise a selection of fresh, prepared foods. What's key for Walgreens is that it has those 64 stores, which are located throughout the city, including in the downtown, as well as in San Francisco's many neighborhoods. This is the power of existing retail real estate we mentioned earlier.
Walgreens and Safeway have the most stores in San Francisco of any retail chain of any format we are able to find.
It's clear San Francisco offers considerable opportunity for Walgreens in the fresh foods space as it further develops and starts to launch its program.
Walgreen's isn't at present confirming or denying that it's looking closely at San Francisco as one of the first markets in which to rollout its fresh, prepared foods program, which we think will be mostly ready-to-eat-focused, but will also have some ready-to-heat items as a part of it.
Walgreens recently applied to the city of San Francisco for permits to sell alcohol at 34 of its 64 stores in the city. This is part of a national corporate move, to offer alcohol sales in more of its stores in the U.S., which is part of the drug chain's increased focus on offering more consumables for sale in its stores, which we first wrote about here in January 2009. The new fresh foods program is also part of that new consumables strategic emphasis.
Tesco's Fresh & Easy currently has two confirmed store locations in San Francisco - at 3rd Street & Carrol Avenue and at Silver Avenue & Goettingen Street. However, those locations have been confirmed by Fresh & Easy since January 30, 2008.
The fresh foods and grocery chain has twice postponed its Northern California launch since then. And Fresh & Easy has yet to announce if it will open any stores in Northern California, including the Bay Area, in 2010.
But it appears, based on our information, research and analysis, that Walgreens is thinking that if you are in San Francisco, you should have fresh foods in your stores.
Related stories from Fresh & Easy Buzz:
>Thursday, January 21, 2010: Walgreens Announces Hiring of Former Fresh & Easy Fresh Foods Director Jim Jensen; Confirms Our January 6 Report
[Graphic credit: The limited edition print of San Francisco's North Beach neighborhood with the Transamerica Pyramid building in the background is by Cao Yong Editions, courtesy of NCH Galleries.]
Thursday, January 21, 2010
Walgreens Announces Hiring of Former Fresh & Easy Fresh Foods Director Jim Jensen; Confirms Our January 6 Report
Additionally, see our follow-up piece - Friday, January 15, 2010: Just-Exited Tesco Fresh & Easy Fresh Foods Director Jim Jensen to Head New Fresh Foods Initiative at Walgreens Drug Chain.
Today, Thursday, January 21, Walgreens announced in a statement it has hired former Fresh & Easy fresh foods director Jim Jensen to head up its fresh foods program, confirming our early reports.
Here's a report on Walgreens announcement from Dow Jones Newswires published in today's Wall Street Journal - January 21, 2010: Walgreen Taps New Executive For Venture Into Fresh Food
Numerous other business and industry trade publications will be reporting the story today and tomorrow now that Walgreens has publicly announced the move in a press release...
But Fresh & Easy Buzz readers learned the news 15 days ago when we broke it on the Blog.
Fresh & Easy Buzz has been reporting on and writing about Walgreens' increased food and grocery product merchandising emphasis - and its connection to Tesco's Fresh & Easy - long before the recent spate of coverage in the mainstream press and in other Blogs came about in the last couple days.
For example, below is a bibliography of just a few of the related stories from Fresh & Easy Buzz on the topic going back as far as well over a year ago. There are links at these posts to other related stores from the Blog as well.
>January 22, 2009: Neighbors by Location Only: Will Mega-Drug Chain Walgreens' New Focus on Consumables and 'Affordable Essentials' Rob Sales From Tesco's Fresh & Easy?
>December 22, 2008: Drug Chain Walgreens to Slow New Store Growth; Despite Tesco Fresh & Easy's Recent Announcement to Do Similar, We Suggest An Analogy is Misplaced
>December 22, 2008: Breaking News: Mega-Drug Chain Walgreens Hires Former Tesco Fresh & Easy USA VP of Operations Brian Pugh For New VP of Format Development Position
>Monday, September 22, 2008: Key Personnel Breaking News: Co-Vice President of Retail Operations Brian Pugh No Longer Employed At Tesco Fresh & Easy Neighborhood Market
[Editor's Note: Fresh & Easy Buzz will have more to come in the following days on Walgreens' move into fresh foods merchandising. Stay tuned.]
Wednesday, January 20, 2010
'Welcome to Guernsey': MF Global Analyst Michael Dennis Takes a Fresh Look at Tesco's Fresh & Easy in New Report
In particular is the new report's focus on the extensive personnel turnover in the executive and category manager headquarter positions at Fresh & Easy we've broke the news on, written about and offered analysis on, along with our most recent pieces on drug chain Walgreens' move into fresh foods category merchandising. See this story, and the links at the bottom, and this piece, and the links at bottom, as recent examples.
Other examples include our analysis on Tesco Fresh & Easy total sales vs. same-store-sales (called like-for-like sales in the UK), the potentially margin-busting regular use of its 20%-off store coupons (called vouchers in the UK), along with some other topics and issues we've addressed in Fresh & Easy Buzz for the last two-plus years.
Least any readers think we're crying sour grapes in this regard - far from it. Fresh & Easy Buzz is pleased to be read - and used as a source - particularly by an analyst who's put much effort into examining Tesco's Fresh & Easy business since before the first stores opened. Since we put much effort into our coverage and analysis of Fresh & Easy, we appreciate that same effort by others who do the same.
We agree with a considerable amount of the report's focus and emphasis - and disagree with a couple other aspects.
We will offer some analysis of our own on some of the issues addressed in the MF Global report and the future of Fresh & Easy in an upcoming analysis piece.
However, we wanted to make the new report from the financial advisory firm available to our readers here on Fresh & Easy Buzz right away.
Fresh & Easy Director of Real Estate Charges 'Breach' Over Commercial Real Estate Agent's E-Mail; Agent Fires Back
Monday, January 18, 2010
California, Nevada & Arizona Food & Grocery Retailers Conducting In-Store Donation Programs For Haiti Relief
Last Tuesday's 7.0 magnitude earthquake in Haiti struck at the heart of a country with already extreme poverty and serious developmental challenges.
Like most of you we've read about and watched the events in Haiti with a deep sadness. And like many of you we've also done what we can to help in terms of offering monetary donations, as well as encouraging others to do the same.
Want to help? Google has compiled a good list of Information, resources, and ways you can help survivors of the Haiti earthquake. It's a good place to start.
America's food and grocery retailers, as well as many of those throughout the world - and their suppliers - have hit the ground running in terms of making donations and raising funds for the various agencies that are on the ground assisting the survivors of the earthquake in Haiti.
Here's a list compiled by the Blog Natural~Specialty Foods Memo of many of the U.S. and global food and grocery retailers and their suppliers providing aid to the various agencies offering relief in Haiti. We've been following the list since last week - and it continues to grow. The industry's efforts so far are truly impressive.
Numerous food and grocery retailers with stores in California, Nevada and Arizona - the three states where Tesco has its 135 Fresh & Easy food and grocery markets and a key focus of our coverage and analysis of the industry - are holding in-store customer donation programs to raise cash for the various non-profit agencies aiding the victims of the earthquake in Haiti.
All of the retailers are offering to accept customer donations at the point-of-sale at store checkstands, either accepting cash or letting shoppers round-off their total purchase, donating whatever amount the customer desires to Haiti relief efforts through the respective food retailer.
Below is a list of food and grocery retailers raising money for Haiti relief in the three states. We will add others if and when we obtain additional information.
Southern California and Central Valley
Safeway Stores in all of its Vons and Vons Pavillions banner supermarkets in Southern California and the Central Valley, from Bakersfield to Fresno. Click here for details.
Kroger's Ralphs/Food 4 Less chain in all of its Ralphs and Food 4 Less banner stores in Southern California and the Central Valley, from Bakersfield to Fresno. Click here for details.
Save Mart Supermarkets in all of its Central Valley Save Mart and FoodMaxx (including Fresno and Bakersfield regions) stores. Click here for details. [Note: Save Mart Supermarkets said today (01/18/2010) it raised $85,000 in its stores over the weekend (01/16-01/17) in just its first two days of fund-raising.]
Whole Foods Market in all its stores in Southern California and the Central Valley. Click here for details.
Safeway Stores in all of its Safeway and Pak N Save banner stores in Northern California. Click here for details.
Kroger's Foods Co warehouse stores at all Northern and Central California locations. Click here for details.
Save Mart Supermarkets in all of its Lucky, Save Mart, SMart and FoodMaxx banner stores in Northern California and the Central Valley. Click here for details.
Raleys Supermarkets in all of its Raley's, Nob Hill Foods, Bel Air and Food Source banner stores throughout Northern California. Click here for details.
Whole Foods Market at all its stores in Northern California. Click here for details.
Safeway Stores in all of its Safeway and Vons banner stores in Nevada. Click here for details.
Kroger's Smiths Food & Drug in all of its Nevada stores. Click here for details.
Kroger's Ralphs/Food 4 Less in its Food 4 Less banner stores in Nevada. Click here for details.
Whole Foods Market in all its stores in Nevada. Click here for details.
Safeway Stores in all of its Arizona Safeway banner supermarkets. Click here for details.
Kroger's Fry's supermarket chain and Smiths Food & Drug in all Arizona stores. Click here for details. [Note: Kroger Co. said today (01/19/2010) it's already raised $600,000 in all its U.S. stores (including the chains in our list) for Haiti relief, and that it expects the total to be over a million here.]
Bashas' Supermarkets in all of its Bashas', Food City and AJ's Fine Foods banner supermarkets. Click here for details.
Whole Foods Market in all its stores in Arizona. Click here for details.
Drug chains: California, Nevada, Arizona
The Rite Aid drug chain, which has numerous stores in California, Nevada and Arizona, is selling $1 disaster relief certificates in all of its stores in these three states and in its stores located throughout the U.S. All of the donations collected from the sale of the certificates will be donated to the American Red Cross International Response Fund. Click here for details.
"We [Tesco plc] are shocked by the devastation that the earthquake has caused in Haiti. We have made a donation of £50,000 through the British Red Cross who have already arrived in the area. Our donation will help thousands of families who have survived the earthquake with family kits containing vital items such as blankets, tarpaulins and first aid kits. The British Red Cross do outstanding work and it's an honour to work with them in such tragic circumstances," she says.
Mark Astarita, the director of fundraising for the British Red Cross, says: "Tesco are leading the way with their generous and swift donation to our Haiti earthquake appeal. Thanks to them we can immediately send lifesaving relief supplies to the people of Haiti, who have lost everything in the earthquake."
Tesco's donation is part of the emergency partnership between Tesco and the British Red Cross which began in 2000, according to executive director Neville-Rolfe. The British Red Cross was Tesco's charity of the Year in 2007/2008.
Tesco CEO Leahy makes personal donation
In addition to the donation made by Tesco, Britain's The Sun'newspaper is reporting that Tesco plc CEO Terry Leahy has made a personal donation to Haiti relief as part of "The Sun's Helping Haiti" appeal, which the British newspaper kicked off on Friday, January 16.
Tesco CEO Leahy's donation was among those made by a group of British sports stars and celebrities, along with a donation by the The Sun, which raised £250,000 (pounds) - $408, 575 U.S. dollars - on the very first day of the newspaper's fundraising campaign (Friday, January 16), the paper says in a story here.
The amount of Tesco CEO Terry Leahy's personal donation isn't disclosed by the newspaper in its story.
Readers: For a comprehensive and regularly updated list of U.S. food and grocery retailers - and their suppliers - that have donated to Haiti relief efforts see the Natural~Specialty Foods Memo Blog here.
Friday, January 15, 2010
Just-Exited Tesco Fresh & Easy Fresh Foods Director Jim Jensen to Head New Fresh Foods Initiative at Walgreens Drug Chain
On January 6, 2010 we broke the news in this report [Breaking Buzz: Corporate Director of Fresh Foods Jim Jensen Leaves Tesco's Fresh & Easy] that Jim Jensen, Tesco Fresh & Easy Neighborhood Market's director of fresh foods, had left the company.
In the January 6 story we also reported that Mr. Jensen had left his position at Fresh & Easy to take a job with the Walgreens drug chain at its corporate headquarters in Deerfield, Illinois.
We also reported in the January 6 piece that Jim Jensen would join another Tesco Fresh & Easy corporate headquarters former employee at Walgreen's - Jeff Pugh, Fresh & Easy's former vice president of retail operations.
Mr. Pugh left Tesco's Fresh & Easy in September 2008, as we reported in this story: September 22, 2008: Key Personnel Breaking News: Co-Vice President of Retail Operations Brian Pugh No Longer Employed At Tesco Fresh & Easy Neighborhood Market.
In December 2008 Brain Pugh joined Walgreens as its corporate vice president of format development, a new position at the drug chain, as we reported in this story: December 22, 2008: Breaking News: Mega-Drug Chain Walgreens Hires Former Tesco Fresh & Easy USA VP of Operations Brian Pugh For New VP of Format Development Position.
In March 2009 Brain Pugh was promoted by Walgreens, as we detailed in this report: March 2, 2009: Walgreens Promotes Former Tesco Fresh & Easy Exec Bryan Pugh to VP Merchandising Position; Move Fits Drug Chain's Current Strategic Focus.
In our reporting for the January 6, 2010 story, we had information that Jim Jensen was not only leaving Tesco's Fresh & Easy to join Walgreens but that he is taking a new position at the drug chain - director of fresh foods.
However, we didn't have enough source confirmation on that particular aspect of the story to go with it in print, based on our source and fact checking criteria - so we left it out, even though we believed it to be the case based on the information we obtained.
But today Bloomberg reporter-writer Carol Wolf helps us - and the ongoing story - out a bit.
In an interview piece today, she quotes Walgreens' vice president Brian Pugh from a January 11 interview she had with him (just five days after our Jim Jensen story was published) as announcing publicly that Walgreen Co. is going into the fresh foods merchandising business.
Here's what is reported in the piece today (in italics) from the January 11, 2010 phone interview with Brian Pugh:
Walgreen Co. plans to offer fresh foods and prepared meals to draw “time-starved” shoppers to its more than 7,000 stores, taking on retailers such as Target Corp. and Kroger Co. The drugstore chain has been talking with foodmakers including Unilever NV , Nestle SA and Sara Lee Corp. about creating private-label and branded products, said Bryan Pugh , vice president of merchandising.
“Everyone is time-starved and we have the most convenient 7,000 locations in the U.S.,” Pugh said in a Jan. 11 telephone interview. “They’re on-the-way-home destinations that are easy to get in and out of and will provide a good value.” He declined to say when the project will be implemented or how much it costs.
Walgreen, based in Deerfield, Illinois, must sort out supply and distribution issues and test in some markets before introducing freshly prepared foods such as salads, cut fruits, ready-to-bake pizzas and sandwiches into more stores, he said. The goal of the program, along with the sale of beer and private-label wine, is to boost revenue , Pugh said.
[You can read the entire Bloomberg piece here.]
In the Bloomberg interview Brian Pugh confirms Walgreens is getting into the fresh foods merchandising business in some form.
It's important to note though that unlike Tesco's Fresh & Easy, Walmart, Safeway and most other major food retailing chains that develop and operate their own fresh foods programs in-house, Walgreens is looking to (or already has found) find outside vendors/suppliers to actually make the fresh foods products it introduces in its drug stores. This in fact is a smart idea, since it would make little sense for the drug chain to create its own in-house fresh foods program given the high start up and operational costs associated with it. It's much better, if managed well, for the retailer to use outside suppliers to make the products.
Interestingly though - and remember we are connecting dots - in the Bloomberg interview piece Brain Pugh declines to name the new director of fresh foods Walgreens has hired to head up its fresh foods program - and no name is reported in the story.
Here's what Walgreen Co. vice president Pugh told the Bloomberg reporter as she reports in her piece today (in italics):
Walgreen hired a director of fresh foods, who will begin work in several weeks, Pugh said. He wouldn’t name the person.
Since Bloomberg's Carol Wolf helped us out a bit with this ongoing story in her piece today, it would only be fair to return the favor. So we will.
The name of the new director of fresh foods for Walgreens is Jim Jensen, who left his position as director of fresh foods at Tesco's Fresh & Easy on December 31, 2009, as we reported on January 6, 2010 in this story. Mr. Jensen is taking a little time off, packing up and moving to Illinois from Southern California, and will start work at Walgreen Co. in a week or two.
Walgreens has not confirmed publicly or officially confirmed Jim Jensen as the new head of its fresh foods merchandising efforts.
The story of Walgreen's going into the fresh foods business - although we stress we don't see it offering an as complete and extensive line of fresh, refrigerated ready-meals and other products like Tesco's Fresh & Easy and Safeway do, for example - gets all the more interesting because in California, southern Nevada and Arizona, where Fresh & Easy has its current 134 stores, a key store location strategy for Tesco has been to locate many of its Fresh & Easy Neighborhood Market stores right next to or near a Walgreens drug store unit.
Tesco and Walgreens have even partnered with shopping center developers to be the two key retail anchors - food and drug/pharmacy - in a number of new and remodeled centers.
[Fresh & Easy Buzz started connecting Walgreens and Tesco Fresh & Easy dots in late 2008 and early 2009. Suggested reading: January 22, 2009: Neighbors by Location Only: Will Mega-Drug Chain Walgreens' New Focus on Consumables and 'Affordable Essentials' Rob Sales From Tesco's Fresh & Easy? December 22, 2008:Drug Chain Walgreens to Slow New Store Growth; Despite Tesco Fresh & Easy's Recent Announcement to Do Similar, We Suggest An Analogy is Misplaced.]
Since Brain Pugh was in charge of retail operations at Tesco's Fresh & Easy, do you suppose he might see the irony - and potential opportunity - in the fact that so many Fresh & Easy and Walgreens units are located so close together in California, Nevada and Arizona?
Further, since fresh foods (and all consumables) falls into his responsibility list as the merchandising vice president at Walgreens, might Brain Pugh be seeking to use the close proximity of these numerous Fresh & Easy and Walgreens stores as a competitive advantage for the Drug chain in terms of fresh foods - and other consumables - merchandising and retailing?
And, in addition, might he like to use the irony of the Fresh & Easy and Walgreens units' close proximity as a retail category (fresh foods and all consumables) stiletto against Tesco, which he worked for in Asia for many years before coming to Southern California as part of the team starting up Fresh & Easy? When Brain Pugh left Fresh & Easy he left his career at Tesco plc as well, even though it began with the company long before Fresh & Easy was envisioned?
With Walgreen Co. getting into the fresh foods category - which is about 40% -to- 50% of the total offerings in a Fresh & Easy store (the other half being packaged goods and grocery products in various categories) - combined with the fact that numerous Fresh & Easy stores are located near Walgreen's stores in Tesco's three markets mentioned above - Tesco's Fresh & Easy will find itself with new and added competition right next door or across or just down the street at many of its locations.
Walgreen's already sells limited selections of packaged food and grocery items, household goods, beer, wine (and spirits in some locations) and perishables in its stores - and as we've reported and written about has been expanding its food and grocery selections in the stores for well over a year now - so that is existing competition close by for Fresh & Easy. But adding the fresh, prepared foods in whatever dimension and SKu count will add a new layer of competition to a category that Tesco believed was underdeveloped in the U.S., using that belief as one of the key reasons it invested in and developed the Fresh & Easy concept and chain.
The story is far from over - and it will get even more interesting. We will have more to come soon.
Connecting the Dots - And More: Related stories from Fresh & Easy Buzz:
>December 25, 2009: It's 'British Invasion: The Sequel Down Under' For Former Tesco Fresh & Easy Neighborhood Market Director of Grocery Charlotte Maxwell
>August 17, 2008: Special Report: Tesco Fresh & Easy Neighborhood Market Experiencing A Category Manager and Buyer 'Brain Drain'
>August 17, 2008: Special Report: Tesco Fresh & Easy's Director of Grocery Returning to the UK; Grocery Chain Reorganizing its Corporate Buying Department
>August 22, 2008: Special Report: Today Last Day For Fresh & Easy Neighborhood Market Director of Grocery Charlotte Maxwell; Moving Back to Tesco in the UK
>September 22, 2008: Key Personnel Breaking News: Co-Vice President of Retail Operations Brian Pugh No Longer Employed At Tesco Fresh & Easy Neighborhood Market
>December 22, 2008: Breaking News: Mega-Drug Chain Walgreens Hires Former Tesco Fresh & Easy USA VP of Operations Brian Pugh For New VP of Format Development Position
>March 2, 2008: Walgreens Promotes Former Tesco Fresh & Easy Exec Bryan Pough to VP Merchandising Position; Move Fits Drug Chain's Current Strategic Focus
>March 12, 2008: Breaking News: Tesco plc. Makes Major Personnel Change to Fresh & Easy Neighborhood Market USA Senior Management Team
>May 29, 2008: Tesco Makes Official Announcement of Jeff Adams' Title and Position at Fresh & Easy Corporate; Confirms Our Report of March 5
>January 22, 2009: Neighbors by Location Only: Will Mega-Drug Chain Walgreens' New Focus on Consumables and 'Affordable Essentials' Rob Sales From Tesco's Fresh & Easy?
>December 22, 2008: Drug Chain Walgreens to Slow New Store Growth; Despite Tesco Fresh & Easy's Recent Announcement to Do Similar, We Suggest An Analogy is Misplaced
>March 29, 2008: Tesco's Fresh & Easy 'Taking a Pause' From New Store Openings: A Full Review In the Works
Thursday, January 14, 2010
UFCW Union Launches Informal Boycott of Fresno CA Fresh & Easy Stores Today; One Day After the Stores Open
The United Foods & Commercial Workers union Local 8-Golden State, based in Roseville, California near Sacramento, launched informational picket lines at three of Tesco's Fresh & Easy Neighborhood Market stores in the cities of Fresno and Clovis in California's Central Valley today, just one day after the fresh foods and grocery chain opened the three stores in the two cities Wednesday morning.
The three Fresh & Easy stores are located at 2820 Tulare St. and 8059 N. Cedar Avenue in Fresno, and at 790 Shaw Avenue in Clovis. Clovis is a suburb of Fresno and is located right next door to the city.
Tesco also opened a Fresh & Easy market in nearby Lemoore in early December 2009. There are currently four Fresh & Easy stores in the Fresno region. An additional store is set to open next month in Fresno at 2047 West Shaw Avenue. More stores will be opening, likely in late February and early March.
Jacques Loveall, President of UFCW Local 8-Golden State, says the grocery clerks' union is asking shoppers in Fresno and Clovis not to shop at Fresh & Easy and to shop instead at UFCW- unionized grocery stores such as Save Mart, Food Maxx (Both owned by Modesto, California-based Save Mart Supermarkets) Kroger-owned Foods Co, Safeway Stores-owned Vons, local independent Ronnie’s Midway market and the local outlets of the Rite Aid drug chain.
"Tesco, which is Fresh & Easy’s parent company in the United Kingdom, is siphoning money out of our community," Loveall says, regarding the union's informal picketing of the three Fresno-area Fresh & Easy stores. "We are responding to that provocation."
The union local president added: "California has enough challenges without a foreign company (Tesco) coming in with substandard jobs that threaten good local companies that bring value and good jobs to our community. It’s bad enough good American jobs are exported overseas at an alarming rate. Now this global giant from the UK is coming to our country thinking it can take advantage of American workers on our own turf. We will not allow that to happen."
Loveall says Tesco's Fresh & Easy poses a threat to unionized food and grocery market share and to the living standards of UFCW union members' wages and benefits.
"Our members are prepared to do whatever it takes to ensure that workers at Fresh & Easy have the same access to the good pay, health care, pension and job security that are enjoyed by Union members," the UFCW union local president says.
The UFCW union has been campaigning against Tesco's non-union status with Fresh & Easy for over two years, as we've reported on and written about extensively for that period of time in Fresh & Easy Buzz. [Our first report was in 2007 here: UFCW Union to Organize Fresh & Easy Clerks in 2008.]
In late September 2009 UFCW Local 8-Golden State launched an informal picketing campaign at three then recently-opened Fresh & Easy stores in the Bakersfield, California region. Two of those stores are in Bakersfield; one at 11100 Olive Drive and the other at 5190 Stockdale Hwy. The third Fresh & Easy store is at 611 Cecil Avenue in nearby Delano. Bakersfield is south of Fresno in the southern Central Valley.
In 2008 the UFCW conducted a very aggressive multi-strategy tactical campaign against Tesco's Fresh & Easy. That campaign included: picketing at Fresh & Easy stores in Southern California, Arizona and Nevada; a multi-media public relations campaign in both the U.S. and UK; the authoring of a shareholder resolution at Tesco's annual meeting in the United Kingdom against Fresh & Easy's non-union status, which failed to pass; along with various other tactics to attempt to get Tesco to open Fresh & Easy to the union.
The UFCW union even was able to get then candidate and now President Barack Obama to sent a letter to Tesco requesting it open Fresh & Easy to union representation, as we reported in this June 2008 story.
Tesco's official position has been that it's the choice of the Fresh & Easy store-level employees, which are the workers the UFCW is attempting to unionize, to vote in favor of UFCW representation if they choose to but that the company has no position pro or con unionization for Fresh & Easy retail employees.
In September 2008, as we reported in this story [September 17, 2008: Store Workers at Huntington Beach Fresh & Easy Demand Union Recognition From Tesco Fresh & Easy Neighborhood Market] employees of the Fresh & Easy market in Huntington Beach in Southern California asked Fresh & Easy's senior management for recognition as a UFCW union shop.
But as we reported in this story in early October [October 2, 2008: Tesco Fresh & Easy Denies Huntington Beach Store Employees Request to Be Recognized As A Union Store; Next Step Likley to Be Open Ballot Election] Fresh & Easy's corporate management denied the store workers' request, which isn't an unusual conclusion in such matters.
No open ballot election has taken place for the Huntington Beach Fresh & Easy store employees to date. Our union sources told us last year that the main reason from their end for this is because they were waiting for the U.S. Congress to take up the Employee Free Choice Act legislation, which many thought Congress would do in 2009. However, health care reform prevented Congress from putting the legislation, also called "Card Check," on the agenda. It is expected to be debated this year.
A Fresh & Easy Buzz correspondent talked to a couple employees at the Huntington Beach Fresh & Easy in fall 2009 regarding the union issue. The consensus of the employees was that joining the union had sort of fizzled out as a priority for the workers because of the recession and high unemployment rate, particularly in Southern California. However, we also know the idea of being able to start the unionization process with Fresh & Easy with that one store is far from dead among UFCW organizers.
The UFCW's aggressive unionization campaign against Tesco and its Fresh & Easy chain went rather silent in late 2008, and remained that way for all of 2009.
The UFCW union's public relations media campaign came basically to a halt. The UFCW even stopped updating the Web Site and Blog - fresh & easy facts - it's used against Tesco's Fresh & Easy in the campaign. For example, it hasn't updated the articles part of the site since June 2008.
We don't see signs that the UFCW's campaign to unionize Tesco's Fresh & Easy is about to return to its aggressive 2008 stance anytime soon.
However it's important to note that Local 8-Golden State is one of the strongest and most successful of all the UFCW locals nationwide in terms of organizing and contract negotiations with existing unionized supermarket chains.
For example, in Northern California and the Central Valley, the local's territory, all of the leading supermarket chains - Safeway (Safeway and Vons), Kroger-owned Foods Co and what's left of Cala Foods, Raley's (Raley's, Nob Hill, Bel Air and Food Source) Save Mart (Save Mart, Lucky and FoodMaxx), Albertsons - and most of the small chains, multi-store independents and even many larger single-store independents are unionized.
What the local has been unable to do, even though its region is arguably the strongest unionized grocery market in the nation, is to be able to force non-supermarket food retailing operators like Walmart, Whole Foods Market, Trader Joe's, Winco Foods and a couple others to unionize, although it has tried and continues to try to do so.
There's significant pressure on the UFCW to unionize these chains, particularly in California, because the union chains like Safeway, Kroger and the others, are coming under continued pressure from these non-union operators in terms of increased competition and encroachment on market share. This is a fact the CEO's of Safeway, Kroger, Stater Bros., Save Mart, Albertson's, Raley's and the other chains with operations in California have made clear via their representatives to the union in contract negotiations.
Fresno could be the new battle ground for the UFCW's continued efforts to unionize the store-level employees of Tesco's Fresh & Easy. But thus far the union's efforts in Southern California, Arizona and Nevada haven't born fruit. We will be falling the developments closely. Stay tuned.
[Readers: Click here and here for an extensive selection of past Fresh & Easy Buzz coverage of the UFCW and Tesco Fresh & Easy unionization issue and related topics. Notice the various links to other stories at the posts at the two links above as well.]
Tuesday, January 12, 2010
Deconstructing Tesco Fresh & Easy's 35% Total Sales Increase For the Just-Ended Holiday Trading Period 2009
The holiday trading or sales period reported today by Tesco for Fresh & Easy is the six weeks up to January 6, 2010 - basically the last week of November 2009, all of December 2009, and the first week of January 2010.
From today's trading statement: "In the United States, Fresh & Easy had a stronger Christmas and New Year period than last year, with total sales growth of 35% at constant exchange rates (24% at actual rates) and strongly positive like-for-like sales growth."
That sounds great. Or does it?
Total sales vs. same-store-sales
The 35% sales increase for the 2009 holiday sales period compared to 2008 for Fresh & Easy reported today by Tesco is merely a total sales increase number rather than what's referred to in the U.S. retail industry as same-store-sales (called like-for-like sales in the United Kingdom). As you can see in the above quote (in italics) from the trading statement, all that is said about like-for-like (same-store stores) sales is they were "strongly positive."
Same-stores-sales is a key indicator because it measure sales of stores open at least a year. Same-store-sales (like-for-like) excludes new stores a retailer may have opened during the period of say January 7, 2009 and third week of November 2009. Here's a full definition of same-store-sales.
Same-stores-sales is what financial analysts and others who look closely at retailers of all types and formats use a the critical gauge of how those retailers really are doing sales-wise. It's also what retailers themselves look at closely, along with competitors.
Tesco, for example, reported the holiday period like-for-like sales for its operations in the United Kingdom but didn't break them out for its international operations, including Fresh & Easy USA. The retailer has a policy of doing it that way, as do some other retailers.
Tesco's holiday trading period sales performance in the United Kingdom, including same-store-sales, was very good. From today's trading statement: "In the UK, total sales outperformed the industry as a whole, increasing by 8.3% compared with the same period last year (8.0% excluding petrol). Like-for-like sales excluding petrol and including VAT increased by 5.1% in the period (4.9% VAT-adjusted), all of which was volume growth. This was the strongest Christmas performance for three years." Read the full trading statement release here.
Behind the numbers
Tesco had about 102 Fresh & Easy stores opened in California, Nevada and Arizona at the beginning of the six week (the six weeks prior to January 6, 2009) 2008 holiday sales period. The 100th Fresh & Easy store opened on November 12, 2008, as documented in this Fresh & Easy press release.
At the start of the six week 2009 holiday trading period there were about 129 Fresh & Easy markets open in California, Nevada and Arizona.
That means Tesco opened about 27 new Fresh & Easy neighborhood market stores from the end of the six week holiday trading period to the beginning of the six week 2009 holiday sales period.
The about 27 new or additional stores (the number of stores opened between the 2008 and 2009 holiday sales period) works out to about 25% -30% more stores on a percentage basis than the existing 102 store base during the holiday period of 2008. Simply put: there were about 102 stores in the 2008 holiday trading period and about 129 stores for 2009 holiday trading period.
What this means is the 35% increase in gross sales for the holiday sales period 2009, compared to the same period in 2008, includes the fact that there were about 27 additional Fresh & Easy stores opened in the 2009 sales period compared to 2008.
You open about 27 new stores, total sales go up commensurately.
Looking at this fact - the existence of the additional about 27 Fresh & Easy stores opened for the 2009 period - the reported 35% sales increase suddenly appears to be what it really is: Just about what one would expect the 2009 holiday period sales to be, compared to the same period in 2008.
Open about 27 new stores between 2008 and 2009 and total sales increases about 35% - or slightly more or slightly less.
The key indicator, which unfortunately Tesco didn't release, is what is the increase or decrease in same-store-sales (like-for-like) for the holiday 2009 sales period, compared to the same period in 2008. Such a measure would give us a real indicator of true sales growth on stores open more than a year.
But, as we mentioned at top, all Tesco said about same-store sales growth in today's report is they are strongly positive.
That statement offers no empirical evidence. In other words it has to be taken as being the case on pure faith and trust.
It's of course Tesco's choice not to break out same-store-sales for Fresh & Easy. They aren't required to do so.
But it's also true the retailer is touting the 35% increase, which many mainstream and respected business publications reported today with headlines like this: "Holiday sales surge at Fresh & Easy."
In summary then, what Fresh & Easy Neighborhood Market's 35% sales increase for the holiday sales period 2009, compared to the same period in 2008, means is that overall sales grew by 35% - and that 35% sales growth included having about 27 more stores open and operating for the 2009 period, compared to 2008.
We aren't putting down the overall sales increase of 35% Tesco reported today for Fresh & Easy. Rather, our task is to attempt to explain it. And for serious consumers of such information, going behind the numbers always makes good sense.
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Sunday, January 10, 2010
Tesco Drops From Third to Fourth Place in Important Global Retailing Ranking Despite Having Higher Sales Growth Than Rival
The 13th annual "Global Powers of Retailing" report released today (January 10, 2010) by the Deloitte Touche Tohmatsu business advisory and accounting firm shows that United Kingdom-based Tesco Plc has dropped from third place in the firm's annual global retailer ranking to fourth place, being overtaken by the Germany-based retail company Metro Group AG.
The Deloitte study and report ranks the top 250 retailers in the world based on their respective annual sales.
The sales data for the just-released report is for fiscal year 2008, which encompasses (fiscal) years ended through June 2009, according to the business advisory and accounting firm.
Tesco, which owns and operates the Fresh & Easy Neighborhood Market fresh foods and grocery chain, which has 131 stores located in California, Nevada and Arizona, was ranked third in last year's Deloitte Touche Tomatsu global study of top retailing companies. Germany's Metro Group was ranked number four.
It's important however to note that the Deloitte report points out Tesco plc had a better sales growth rate for the 2008 fiscal year period than Germany's Metro did, but relative currency strength against the US dollar enabled Metro AG to climb above Tesco, back into third place.
[Editorial note: Were we (Fresh & Easy Buzz) as analysts to chose between better sales growth - Tesco - vs. moving up from number four to number three in the ranking - Metro AG - we would choose better sales growth. It's a more significant indicator or trend for a retail company. However, the change in ranking for Tesco isn't completely insignificant since Deloitte's annual study and ranking is watched closely by the retailing industry, analysts and investors.]
The just-released report ranks Germany's Metro Group as having 2008 gross sales of $99,004 billion, placing it in third place after number two Carrefour Group of France (with 2008 sales of $127,958 billion). United Kingdom-based Tesco comes in fourth with 2008 annual sales of $96,210 billion.
Number two-ranked Carrefour and number three-ranked Metro trail number one-ranked U.S.-based Walmart Stores, Inc., which had fiscal year 2008 sales of $401,244 billion, considerably.
In fact, Walmart's $401,244 billion in 2008 fiscal year annual sales is about equal to the combined totals of the number two-through-number six-ranked retailers in the report.
The global study ranks United Kingdom-based Tesco in fourth place just below Metro with 2008 sales of $96,210 billion.
Rounding out the top ten top retailers in the world, based on 2008 fiscal year sales, are: (number 5) Germany-based Schwarz Unternehmens Treuhand KG, owner of the Lidl supermarket chain, ($79,924 billion); (6) U.S.-based The Kroger Co. ($76 billion); (7) U.S.-based The Home Depot, Inc. ($71,288); (8) U.S.-based Costco Wholesale ($70,977); (9) Germany-based Aldi GmbH & Co., owners and operators of the small-format Aldi discount grocery stores, ($66,063 billion); and (10) U.S.-based Target Corp. ($62,884).
Out of the top ten ranked retailers in the report based on their respective 2008 fiscal year annual sales, a whopping five are U.S.-based retail companies.
Three of the top ten retailers are based in Germany; one (Tesco) is based in the United Kingdom; and one (Carrefour) is based in France.
The two centers of retail leadership, at least on an annual sales basis, clearly are the United States and Germany, according to the report. The two countries are home to eight out of the ten top retailers in the world, based on the report's findings.
Of the top ten 10 retailers, all but one - Home Depot - puts a major focus on selling food and grocery products, along with other general merchandise items. Walmart, Carrefour Group, Metro Group, Tesco plc., Schwarz Unternehmens Treuhand KG, Kroger Co., Costco Wholesale, Aldi and Target Corp. all offer extensive food and grocery selections in one or more of their respective retail store formats.
Dr. Ira Kalish, director of consumer business for Deloitte Research in the United States and the lead author of the study and report says: "Despite one of the sharpest economic contractions in decades, the world’s largest retailers were able to increase sales by 5.5% in fiscal year 2008, with total retail sales equaling around $3.8 trillion."
However, Dr. Kalish adds the report shows that the global recession affected retailers’ bottom line. Profitability at the largest 250 retailers in the world fell from 3.7 percent in fiscal 2007 to 2.4 percent in 2008.
Two-thirds of the 184 retailers that disclosed their bottom-line results in the report saw their net profit margin decline in 2008, with 30 retailers operating at a loss. This trend affected almost every geography and category, Kalish says. Retailers in Europe saw their profitability fall from 4.1 percent in 2007 to 2.7 percent in 2008, while those in North America fell from 3.6 percent to 2.4 percent. Only those in Africa and the Middle East saw increased profitability.
Hardlines and leisure goods retailers saw their profit margin fall by more than half to 3.1 percent from 6.8 percent. Sales growth for fashion retailers fell into negative territory and profits were cut in half to 4.1 percent. Even the fast- moving consumer goods (FMCG) sector, which includes supermarkets and other food retailers, saw profits fall from 3 percent to 2.2 percent, despite seeing higher sales growth than the other groups at 8.6 percent, according to the report's data.
“2008 has been a tumultuous year for the global retail industry," Dr. Kalish says. "Sales growth slowed and profitability fell, sharply for some. Many retailers ‘bought’ sales with heavy promotions which hit the bottom line hard. However, we are already seeing evidence that as economic recovery takes hold around the world retailers should be able to return to a path of improving profitability.”
Below are some key findings of the report as detailed by Dr. Ira Kalish:
Most retailers have yet to make online push as social networking sites start to make an impact
Multichannel retailing continues to grow as more companies develop an e-commerce capability. However, online still accounts for a small percentage of sales. On average, online sales account for 6.6 percent of total sales for the top 100 retailers in the world. FMCG retailers seem yet to have embraced e-commerce with online sales accounting for only 0.9 percent.
“The internet is going to pose an ever-greater challenge and opportunity for retail in the next decade,” says Kalish. “Retailers need to ensure their multichannel strategy is in place to capitalize on web-savvy shoppers migrating to the net. Secondly, we are starting to see retailers launch targeted marketing campaigns online by offering special deals or discounts through their website or social networking sites.
“Social networking will increase transparency in the retail industry, giving consumers greater access to information about retailers, their products and pricing. This has the potential to undermine margins by lowering prices to the level of the most desperate seller. There are great opportunities too, as new touch points open up for retailers to communicate with their customers.”
Emerging market retailers set to take on established players
“Many emerging market retailers are rapidly becoming world-class players in their own right,” says Kalish. “Not only are they well-equipped to compete with the global giants in their home markets, some are becoming competitive in other markets too. The next step will be investments into developed markets and some of this is starting to take place. These are typically specialty players rather than food or mass merchandise retailers. The global playing field of retailing is becoming more level.”
Global growth bounces back but economic rebalancing is taking place
“Countries that borrowed heavily to finance excessive consumer spending may experience slower consumer spending growth as households struggle to de-leverage, repair tattered balance sheets and accumulate wealth,” Kalish says. “More of the economic growth of these countries will be driven by exports, business investment and government spending.
“Conversely, those countries whose growth was fueled by exporting to borrowing countries will no longer be able to depend on such markets and will likely shift away from export-oriented growth toward growth driven by consumer spending. Retail spending growth in markets such as the U.S. and UK is likely to be slower over the next decade, while a larger share of the growth will take place in countries with large surpluses, especially the big emerging markets.”
Click here to download a copy of Deloitte's 2010 "Global Powers of Retailing" study and Ranking." The top 250 retailers are detailed in the report.
Saturday, January 9, 2010
In December 2009 we published this piece [December 21, 2009: Wither Walmart's Small-Format 'marketside' Stores and Format?] in which we reported that the Web Site for Walmart Stores' 'marketside by Walmart' fresh food and grocery stores had been replaced by a single page site touting its new line of 'marketside' fresh, prepared foods, and examined the potential future of the four small-format stores, located in Metropolitan Phoenix, Arizona.
Our story has generated a considerable amount of interest in the food retailing industry and media, including being picked up by the convenience store industry trade publication CSP Reports on December 30, 2009 here and by CBS's BNET business news Web site on January 8, 2010 here.
Brand 'marketside' & synergy
In October 2008 we published this analysis and think piece [October 6, 2008: 'The Promotional Pundit:' How Wal-Mart Can Use its Supercenters to Create Customers For its New Small-Format Marketside Stores in Arizona] in which we suggested ways in which Walmart could use its retail power in the Arizona market to create a synergistic relationship for its start up 'marketside by Walmart' stores (then called just 'marketside'), as well as for all of its food and grocery retail formats and banners, particularly its flagship Supercenters and Neighborhood Market supermarkets.
Walmart operates Supercenters, club stores and its Neighborhood Market supermarkets in Arizona, along with the four 'marketside by Walmart' small-format food stores. Walmart is the food and grocery sales market share leader in Arizona., followed by Kroger's Fry's and Safeway Stores, Inc.
One thing we suggested in the October 2008 piece was that Walmart could open branded 'marketside' kiosks in its Supercenters. We also suggested various other things Walmart could do in this regard - the focal point being all about how the retailer could expand and extend 'brand marketside.'
Walmart in fact has recently started doing just that - extending its 'marketside' brand via a new line of store brand fresh, prepared foods products and branding 'marketside outside of the four walls of the small-format Arizona stores.
New 'marketside' fresh-prepared foods line
Recently Walmart began testing the sale of a new store/private label brand of fresh foods labeled 'marketside' in some of its Supercenters, discount format stores and Neighborhood Markets.
The first of the 'marketside' store brand fresh foods products are a line of prepared pizzas in varieties such as Three-Cheese, Pepperoni and Canadian Bacon. The retailer recently has been advertising the 'marketside' pizzas in its ad circulars and promoting them with price discounts in-store. Walmart handed out free samples of the 'marketside' pizza in many of its Supercenter and discount format stores during a special three day Thanksgiving holiday promotion in November.
Announcing the planned line of 'marketside' store brand fresh foods products in July 2009, Wal-Mart spokeswoman Amy Wyatt-Moore said in a statement: "We are testing a number of concepts on home meal replacements and chilled entrees under the 'marketside' brand in select Walmart stores."
Brand 'marketside' & Walmart's Neighborhood Markets
Walmart also started another 'marketside' branding experiment in late summer of 2009. It has rebranded the deli departments (including naming them 'marketside delis') in a handful of its Neighborhood Market supermarkets in Texas and Arizona as "marketside delis," also branding most of the bulk and packaged deli items and fresh, prepared foods under the 'marketside' brand, as it does in its four 'marketside by Walmart' food and grocery stores in Arizona.
Conceptually these two 'marketside' branding efforts outside of the four walls of the 'marketside by Walmart' stores reminds us much of what we suggested the retailer do vis-vis 'marketside' in that October 2008 piece: 'The Promotional Pundit:' How Wal-Mart Can Use its Supercenters to Create Customers For its New Small-Format Marketside Stores in Arizona. In fact, Walmart is sort of turning our concept on its head a bit.
Brand extension & synergy
The expansion of the 'marketside' brand into the test of a private label/store brand fresh foods line and 'marketside' branded deli departments also fits in with the analysis we offered in this October 5, 2008 piece [Wal-Mart's Marketside is More Than the Sum of the Parts of its Other Formats; While Time and Consumers Will Judge, We See the Format As A Stategic Fit] where we laid out the potential synergistic elements of brand 'marketside' and the 'marketside' retail format; brand extentions which Walmart wasn't attempting to develop at the time and only began doing in the late summer of 2009.
What do we make of these developments by Walmart?
First, Walmart's recent developments with brand 'marketside' conceptually follow our analysis well over a year ago about the synergistic potential of brand 'marketside,' or at least the idea that attempting to brand 'marketside' beyond the four walls of the four Arizona 'marketside' food-grocery stores is something the chain should and needs to do.
Second, we think the broader branding of 'marketside' could serve a two-fold purpose for Walmart: It could help the existing 'marketside by Walmart' food stores and any future units Walmart might open because by expanding the brand into store brand fresh food products and 'marketside' in-store deli departments in its Neighborhood Market supermarkets and its Supercenters, more consumer awareness and top of mind vis-a-vis 'marketside' will be created. That's what branding and brand extension is all about.
Lastly, Walmart needs a better position in the fresh, prepared foods space in all of its key formats - Supercenters, Neighborhood Market, discount stores and Sam's club stores. The existing four Arizona 'marketside' fresh foods stores have and could continue to serve as an idea, concept and product development incubator for the giant retailer. Think synergy again. In other words, a secondary function of the 'marketside by Walmart' food stores in Arizona is to serve as the research and development lab for Walmart's overall fresh, prepared foods program.
Three predictions for 'marketside' (brand and stores) for 2010
1. Walmart will keep the four Arizona 'marketside by Walmart' stores open in 2010. It will do so in part to serve the research and development function we mention above. Walmart won't open any new small-format 'marketside by Walmart' stores in 2010 though, either in Arizona or elsewhere in the U.S.
2. Walmart will introduce a few additional packaged fresh, prepared foods items (SKUs) under its 'marketside' brand in some of its Supercenters, discount format stores and Neighborhood Market supermarkets in 2010, following up on the 'marketside' prepared, take-and-bake pizza.
Look for some or all of these prepared foods items in 2010: 'marketside' ready-to-heat fresh soups in containers and ready-to-eat packaged salads. Plus 'marketside' ready-to-heat prepared entrees in varieties like macaroni & cheese, meatloaf and pot roast, for starters.
3. Walmart will brand the deli departments in a few (or perhaps more than a few) additional Neighborhood Market supermarkets into 'marketside delis.' Perhaps in some Supercenters as well.
Since the primary focus of the small-format (about 16,000 square feet) 'marketside by Walmart' stores is fresh foods, and particularly fresh, prepared foods, Walmart's thinking we believe is that although its Neighborhood Market store delis are much smaller than 16,000 square feet, they can still be 'mini marketside' fresh, prepared foods stores (the deli departments) within the Neighborhood Market supermarkets, which average about 43,000 square feet.
[Click here and here for a selection of past posts in Fresh & Easy Buzz about Walmart's 'marketside' retail format and stores.]
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