Saturday, July 30, 2011

First 4,000 Sq. Ft. Fresh & Easy Neighborhood Market 'Express' Store Set to Open in Los Angeles' San Pedro Community This Year

The Fresh & Easy store in Danville, California (pictured above) opened March 2 has about 10,000 square-feet of selling space inside. The San Pedro "Express" unit in Los Angeles will have less than half as much. [Photo: Fresh & Easy Buzz.]

Breaking Buzz

We broke the news in this January 23, 2011 story [Tesco's Fresh & Easy Neighborhood Market Looking For Locations For New, Smaller-Format 4,000-to-5,000 Square-Foot Stores] that Tesco-owned Fresh & Easy was developing a 4,000-5,000 square-foot edited version of its about 10,000 (selling space) square-foot Fresh & Easy Neighborhood Market stores and looking for locations in Southern California to test the concept.

We've now discovered what will  likely be the first smaller-format Fresh & Easy store to open. That unit, in Southern California, will be a 4,000 square-foot store at Sixth and Gaffey Streets (here) in San Pedro, which is a community in and around Los Angeles' harbor area and home to the Port of Los Angeles.

Fresh & Easy Neighborhood Market currently plans to call the 4,000-5,000 square-foot stores Fresh & Easy Neighborhood Market "Express," according to our sources, to differentiate the smaller units from the flagship (10,000 square-foot) Fresh & Easy Neighborhood Market stores, which it currently has 176 of in California (127 units), Metro Las Vegas, Nevada (21 units) and metro Phoenix, Arizona (28 units)

As we reported in January of this year, the Fresh & Easy "Express" format stores will essentially be a smaller and edited version of the 10,000 square-foot Fresh & Easy grocery markets. They will also borrow a couple elements from the United Kingdom-based retailer's Tesco Express (about 2,500-3,000 square-feet) convenience-style stores, which it operates in the UK and elsewhere in Europe.

Fresh & Easy Neighborhood Market has applied to the State of California for an off-sale beer and wine license for the 4,000 square-foot store at the San Pedro location, something we've verified through California's Alcohol Beverage Control Department.

Additionally, a hearing regarding Fresh & Easy Neighborhood Market's application for the beer and wine license is scheduled for September 21 of this year, according to a City of Los Angeles notice we recently reviewed.

In our January story we reported that among the current potential smaller store sites Fresh & Easy Neighborhood Market is looking at in Southern California include at least three locations in Orange County, along with more than one site in Los Angeles and nearby Santa Monica.

According to our sources, assuming it doesn't run into any objections in obtaining the beer and wine license for the store along with incurring other types of delays, Fresh & Easy CEO Tim Mason and his senior staff would like to open the 4,000 square-foot "Express" store in San Pedro around mid-November of this year, although as we always say about new store opening dates at Tesco's Fresh & Easy, they are fluid and dynamic. If the store doesn't open this year, it will open in early 2012, our sources say.

We reported in this December 10, 2010 story [Fresh & Easy Neighborhood Market CEO Tim Mason Says 70 New Stores Possible in Los Angeles Area] that Tim Mason, who since then has become the deputy CEO of Tesco as well as CEO of its El Segundo (Southern) California-based Fresh & Easy Neighborhood Market chain, told members of the Valley Industry & Commerce Association of the San Fernando Valley at a meeting that Fresh & Easy was looking to open up to 70 new stores in the Los Angeles area.

"We've identified 70 opportunities [new store locations] in Los Angeles", Mason told a meeting of the Valley Industry & Commerce Association of the San Fernando Valley (VICA) on December 9, 2010. "If we can open those 70 opportunities, that will be 1,400 jobs, as well as 300 construction workers per-site. We’re eager to invest and we want to get on," he told the group.

Tesco's Fresh & Easy has opened three stores in Los Angeles County so far this year; in Long Beach, San Dimas and Walnut Park. A few additional new Fresh & Easy stores are set to open this year in Los Angeles County, including in Long Beach, which isn't far from San Pedro. In addition to Long Beach, Tesco has other Fresh & Easy stores near San Pedro, in Harbor City and Signal Hill., for example.

On July 12 of this month Mason said in a speech he gave at Town Hall Los Angeles that Fresh & Easy was still  looking at opening those 70 stores, saying as he did in December 2010 that part of the grocer's ability to do so is predicated on it not being bogged down with numerous local government regulations and objections by community and neighborhood groups.

Some of the 70 Los Angeles-area locations Fresh & Easy has identified are, like the San Pedro unit, in the 4,000-5,000 square-foot range and, like the store in San Pedro, will be "Express" units rather then flagship Fresh & Easy Neighborhood Market stores, although the 10,000 square-foot fresh food and grocery market remains Teco's primary format focus in the U.S.

Tesco's primary focus with Fresh & Easy will remain on the current 10,000 square-foot format stores, adding the smaller "Express" units as an adjunct or secondary format.

We'll have more on Fresh & Easy Neighborhood Market's "Express" smaller store initiative soon in Fresh & Easy Buzz. Stay tuned.

Friday, July 29, 2011

Northern California-Based Grocer Raley's Adds Private Brand Value With its Family Picnic Pack

Raley's adds value with its Family Picnic Pack in two key ways: The product's the-whole-is-greater-then-the-sum-of-its-items nature offers a convenient and affordable concept for shoppers; and the reusable thermal carry bag provides a value that keeps on giving long after the picnic is over and the food is consumed. [Photo credit: Fresh  & Easy Buzz.]

Private Brand Showcase

We're always on the lookout for retailers that come up with creative, value-added ways to merchandise and promote their own-brand products.

One such development that recently caught our eye is the Family Picnic Pack created and now being offered for sale by West Sacramento, California-based supermarket chain Raley's, which operates 133 stores under the Raley's (superstores), Nob Hill Foods, Bel Air (supermarkets) and Food Source (discount warehouse) banners in Northern California and Northern Nevada.

Raley's Family Picnic Pack features all the fixings needed for a summer picnic (except for the drinks and napkins), and includes a reusable thermal carry-bag to tote everything in.

The centerpiece of the retailer's picnic pack is a 16-piece assortment (4 breasts, 4 wings, 4 thighs, 4 drumsticks) of Raley's in-store-made ready-to-eat fried chicken, which comes chilled so it can be kept cold in the thermal carry bag.

Along with the fried chicken, the Family Picnic Pack includes a 3lb container of potato or macaroni salad, a 15-count package of cookies from the in-store bakery, a 12-count package of paper plates and a dozen-pack of  forks, all under the Raley's store brand.

In addition to the selection of Raley's brand ready-to-eat foods, paper plates and cutlery, the grocer's Family Picnic Pack also includes a package (12-count) of King's (brand) Hawaiian Rolls, which is a popular brand and item in the market regions where it has stores.

The reusable thermal bag is designed to keep all of the refrigerated items at a proper temperature while traveling to and while at the picnic, along with serving as a carry bag to hold the Family Picnic Pack, which is retailing for $19.99 and designed to feed eight people, which works out to just $2.50 per-person.

Raley's Family Picnic Pack is a hit on three levels from a retailer product creation standpoint, in our analysis.

First, it's value-added, meaning it takes various existing single items sold in the stores and bundles them into a seasonal (summer picnic) theme, thereby creating a product (the Family Picnic Pack) which previously didn't exist.

A major benefit of this is that most customers aren't likely to purchase each of the private brand items contained in the picnic pack individually while on a shopping trip. However, by bundling the products into a thematic single product, customers are more likely to do so because of the suggestive merchandising and selling aspect of the Family Picnic Pack.

The added value comes both in creating the meal concept of the Family Picnic Pack - (almost) everything needed for a picnic - along with including the reusable thermal carry bag as part of the package.

Second, by focusing the picnic pack item selection primarily on Raley's brand products, the retailer not only can achieve incremental sales on the own-brand items (see above) but also achieve secondary marketing and product promotion for the private brand ready-to-eat and non foods items.

For example, buying the Family Picnic Pack might be the first time many customers will have tried some or all of the Raley's brand products that comprise it. So in that instance it has the ability to generate brand and item trial, which is a key brand marketing objective.

Further, since all but one of the items in the picnic pack are private brand, it also serves as a promotional vehicle for the Raley's brand products.

Lastly, at $19.99 the Family Picnic Pack is affordable - the total cost is less than buying the fried chicken, potato or macaroni salad and rolls at KFC, and the plates and forks separately, for example, plus you get the thermal carry bag (added value) - while still providing a high single-SKU-ring for Raley's.

For example, for each shopper who adds a Family Picnic Pack to his or her grocery purchases at a Raley's-owned store, that total order jumps by $20, which is music to a grocer's ears because the more a customer spends during a single shopping trip (market basket size) the better it usually is for a food retailer's profit margin on the order.

Additionally, affordability combined with a high ring is a great combination for a retailer, assuming the product sells, because it offers a greater opportunity for higher volume sales. When the $19.99 Family Picnic Pack is broken down to its per-serving price of $2.50 person (for eight), which Raley's isn't doing in its promoting and advertising of the seasonal item but should, the value becomes much more apparent. A compare the price-per-serving to KFC sign in the stores would likely sell additional picnic packs for example.

The family-owned grocer, which has about $3.1 billion in annual sales, is currently offering its Family Picnic Pack in selected Raley's, Bel Air and Nob Hill Foods banner stores. According to a Raley's spokesperson, plans call for the retailer to offer the picnic pack through most of August. Customers can also pre-order it on the grocer's website for later pick-up in-store.

In addition to its flagship "Raley's" store brand, the West Sacramento-headquartered chain also offers products under its Sunnyside Farms and Bayview Farms (dairy products) private brands, both of which it shares with Modesto, California-based competitor Save Mart Supermarkets, and Nob Hill Trading Company, which is an upscale-oriented specialty foods' brand.

Raley's is also an owner-member of the Topco private brand development and marketing cooperative. The grocer features a number of the cooperative's brands in its stores, including Full Circle, which it uses as its natural and organic products' store brand.

Adding value like Raley's has done with its Family Picnic Pack not only is a good way for food and grocery retailers to increase sale but it's also an excellent way to draw attention to their private or store brands. And using seasonal themes, such as summer and picnics, affords grocers an ongoing way to create value added items like Raley's has done with its summer season picnic pack.

Related Stories

July 20, 2011: Limited Edition Sunnyside Farms Ice Cream Flavors, Including the Latest Featuring an Iconic Cookie Brand, Hit Save Mart and Raley's Stores For the Summer Season

April 20, 2011: Raley's Supermarkets Introducing New 'Raley's Tonight' Fresh Heat-and-Eat Gourmet Entrees

October 30, 2010: Raley's Launches New 'Raley's TO GO' Pre-Packaged, Refrigerated Fresh-Prepared Foods Line

Click here to read additional stories in our Private Brand Showcase feature.

Wednesday, July 27, 2011

'Son of Tesco Fresh & Easy Law' Moving Through State Senate: Will California Determine Fresh & Easy Neighborhood Market's Checkout Scheme?

Self-service or "assisted" checkout at Fresh & Easy Neighborhood Market.

Assembly Bill 183 (AB 183), which passed in the California State Assembly earlier this year by a large majority, is making its way though the committee process in the California State Senate and could be voted on by the full body as early as late this summer or early fall.

AB 183, which we've nicknamed the "Son of Tesco Fresh & Easy Law" law for reasons you'll soon learn, will if passed by the California State Senate and signed into law by Governor Jerry Brown (Democrat), ban the sale of all alcoholic beverages at self-service checkouts in grocery and other format retail stores where adult beverages are sold.

The reason we gave AB 183 the "Son of Tesco Fresh & Easy Law" moniker is two-fold: (1) It's a successor bill to two previous pieces of legislation, first in 2008 and again in 2010, designed to prohibit the sale of alcohol at self service checkouts; and (2) Tesco's Fresh & Easy Neighborhood Market would be the only major retailer in California the bill would have a major operational affect on because its stores offer self-service checkout only, which it calls "assisted checkout" because store employees will assist customers with checkout if asked.

If AB 183 becomes law in California, where Tesco has 127 of its 176 Fresh & Easy grocery markets - there are 28 stores in metropolitan Phoenix, Arizona and 21 units in metro Las Vegas, Nevada - the grocer will at a minimum most likely have to add at least one full-service checkout in each of its stores in the Golden State, which is something it does not want to do because it believes - in our analysis incorrectly - the cost savings from having self-service checkout only outweighs the benefits of offering shoppers the choice between self and full service checkout, which is something all of its competitors that offer self-service do.

The two previous bills, both authored by Assemblyman Hector De La Torre (Democrat-Southgate, Southern California), failed to become law. In 2008 De La Torre's failed to pass by a majority in both houses in Sacramento. His second bill in 2010, , passed in both the California State Assembly and California State Senate but was vetoed by then Governor Arnold Schwarzenegger, who is a Republican, albeit a moderate one.

AB 183, which is authored by Assemblywoman Fiona Ma, a Democrat from San Francisco's Richmond District, the neighborhood where Tesco recently opened its first Fresh & Easy store in the city at 32nd Avenue and Clement Street on June 22, is virtually identical to the previous two bills in that it amends California's alcohol beverage license law to include as a provision of holding an off-sale wine and beer permit and/or a liquor license that the holder will not sell alcohol at self-service checkout stand in its stores. A violation of the law by a retailer would be a misdemeanor, according to the bill's current legislative language.

None of California's major retailers, including stores operated by national giants Safeway Stores, Inc., Kroger Co, Supervalu, Inc., Walmart Stores, Inc., 7-Eleven, Target or Costco, nor any regional chains and independents we're aware of, offer self-service checkout only like Tesco's Fresh & Easy does. Instead, the retailers that do offer self-service checkout in the Golden State do so along with offering full-service checkout in their respective stores.

Therefore, although the state's trade group for grocers, the California Grocers Association (CGA), which United Kingdom-based Tesco's Fresh & Easy and most of the other grocers with stores in California are members of, is working to defeat AB 183, the fact is none of its other members will be materially affected if the legislation becomes law because unlike Fresh & Easy Neighborhood Market those retailers offer both full and self-service checkout lanes or full-service only in their stores.

AB 183 moving through senate committee process

AB 183, which was passed in the California State Assembly by a 48 (in favor) to 26 (against) vote on May 26, is now headed to the Senate Appropriations Committee, following recent passage in the Senate Governmental Organization Committee, and is set for an August 15 hearing in appropriations.

Because the California State Senate is controlled by Democrats, who have a 25 to 15 member margin over Republicans, the Appropriations Committee like all others has a Democrat majority. Therefore we expect AB 183 to pass out of the committee with a majority vote in favor, just as AB 1060 did in 2010.

It's also our analysis, as we've been saying in our coverage of the legislation all year, that AB 183 will pass in the California State Senate like it did in the state assembly in May, and as AB 1060 did last year in both legislative bodies.

Democrats have a 10-member advantage in the California State Senate. Therefore even if a number of Democrats were to vote against AB 183 (we think no more than three or four will at the most) the bill would still pass in the senate. Additionally, it's possible a few Senate Republicans will vote for AB 183 because it's supported by numerous law enforcement organizations, clergy groups and Mothers Against Drunk Driving (MADD), all of which are important interest groups for some Republicans in California. (Here's a list of the major supporters and opponents of AB 183.)

Jerry Brown: Man on the white horse for AB 183 opponents?

If our analysis is correct, and we believe it is, Fresh& Easy Neighborhood Market, CGA and the other groups working to defeat AB 183, such as the California Chamber of Commerce and the California Hispanic Chamber of Commerce, will have just one way to stop the "Son of Tesco Fresh & Easy Law" from becoming just that - law. That one opportunity to kill the bill will be to appeal to Governor Jerry Brown directly as well as through a public relations campaign to veto the legislation. [Suggested reading: Jerry Brown, The Man on the White Horse. J. D. Lorenze, 1978.]

Prior to this month our analysis was that Brown would in very high probability sign AB 183 if it passes both legislative bodies. To attach a metric to our previous analysis, our confidence rating was about 80%  in the positive the Governor would sign the bill if it passes.

However, a couple recent developments, including the passage of the state budget and Brown's veto of the so called California "Card Check" legislation this month, which passed in both the California State Assembly and Senate and would have allowed farm workers to join a union by simply filling out a card rather than voting in a secret ballot election, have lead us to reduce that confidence rating somewhat.

Jerry Brown, who marched with Cesar Chavez in the 1960's and 70's and pushed and signed groundbreaking pro-farm worker legislation during his previous incarnation as Governor in the 1980's, is a longtime supporter of the United Farm Workers Union, founded by Chavez, which was behind getting the "Card Check" bill passed.

It remains our analysis at present that AB 183, if passed later this year by the California State Senate, will be signed by Governor Brown, although our current confidence rating he will sign the bill into law is about 70% for to 30% that he would veto it.

However, that's our current assessment. And things can change between now and the next few months in California politics. For example, opponents' of AB 183 have ratcheted up there lobbying and PR campaign to defeat the legislation, getting a umber of major California newspapers to come out with editorials against the bill, for example, although how influential this will be is questionable in today's climate where newspaper editorial boards have far less influence over politicians and voters than they once had.

Supporters of AB 183 recently told us they're planning soon to invigorate their campaign in favor of the legislation in response to the added efforts by opponent groups.

But despite the lobbying and PR campaign, it's difficult to see, based on our reporting, how AB 183 can be defeated once it's voted on by members of the California State Senate.

Therefore the endgame for the bill's opponents, chief among them Tesco's Fresh & Easy Neighborhood Market which is doing most of its work through the CGA and a couple Sacramento-based lobbying and public relations firms, remains with the Governor, in our analysis. Stay tuned.

Related Stories: Follow the Legislative History in Fresh & Easy Buzz

June 4, 2011: 'Son of Tesco Fresh Easy Law': Self-Checkout Booze Ban Bill AB 183 Sails Through California State Assembly; State Senate Next Stop

May 11, 2011: Son of Tesco Fresh & Easy Law' - California Assembly Appropriations Committee Passes Self-Checkout Ban Bill AB 183 By 12-4 Margin

May 6, 2011: 'Son of Tesco Fresh & Easy Law': California State Assembly Appropriations Committee Hearing For AB 183 Cancelled

May 4, 2011: 'Son of Tesco Fresh & Easy Law': Strong Chance California Legislation to Prohibit Alcohol Sales at Self-Service Checkouts Could Pass This Year

September 30, 2010: Self-Service-Only Checkout Safe at California Fresh & Easy Neighborhood Market Stores Thanks to Governor's Veto Pen

September 30, 2010: Fresh & Easy Neighborhood Market Hopes Governor Schwarzenegger Can Find His Veto Pen Before Midnight Tonight

September 28, 2010: Fresh & Easy Neighborhood Market Hoping Governor Schwarzenegger Prefers His Veto Pen When it Comes to AB 1060

September 25, 2010: Future of Fresh & Easy Neighborhood Market's Self-Service-Only Checkout in California Up to Governor Schwarzenegger

August 24, 2010: California State Senate Sends Bill to Governor That Could End Self-Service-Only Checkout at Fresh & Easy Neighborhood Market

August 15, 2010: Bill to Ban Alcoholic Beverage Sales at Self-Service Checkouts Would End 'Self-Service Only' at California Fresh & Easy Neighborhood Market Stores

Tuesday, July 26, 2011

Bag Designed in Vegas Won't Stay Only in Vegas: Tonya Jacobsen Wins Fresh & Easy Neighborhood Market's Design-A-Bag Contest

Contest winner Tanya Jacobsen [Photo credit: Fresh & Easy Neighborhood Market.]
The 'Art' of (and in) Food and Grocery Retailing

Tesco's Fresh & Easy Neighborhood Market today announced that Tonya Jacobsen of Las Vegas is the first place winner of the 176-store fresh food and grocery chain's 2011 reusable shopping bag design contest.

In addition to taking home first place honors, the Las Vegas resident will also have all or most of her food and grocery purchases at Fresh & Easy for the rest of the year paid for because she received $5,000 worth of store gift cards from the grocer for her winning bag design.

Fresh fruit theme, vibrant colors

Jacobsen's fresh fruit-themed design was chosen as first place in Fresh & Easy's recently-ended Design-a-Bag contest by members of the grocery chain's "friends of fresh & easy" e-mail-based marketing and quasi-loyalty program, who voted on ten finalist designs out of 800 submissions, from June 27-to-July 10. The contest was launched on April 5 of this year.

Fresh & Easy Neighborhood Market says 30,000 members of "friends of fresh & easy" voted in the contest. The e-mail-based program has about 350,000 members, according to the grocer.

Jacobsen, who says she's originally from Idaho and moved to Vegas three years ago, and who paints as an avocation - which is evident in the vibrant use of colors featured in her painted design - said about hearing she won first place in the contest, "I wanted my design to be bright and fun so it could capture the feeling I get when I visit my local store. It’s been a really great experience, and I thank everyone who supported my design."

She also expressed surprise in winning first place, saying about the win, "I was so surprised. I didn’t even tell anybody that I initially submitted it. I was stunned when I got the call that I was a finalist. Then to find out that I won was a huge shock. My boyfriend's family was going nuts. All of my family in Idaho was really excited for me too."

Bag designed in Vegas won't stay only in Vegas

Along with the personal pride of winning first place and the $5,000 prize, Jacobsen's design will be turned into a reusable shopping bag and sold in Fresh & Easy Neighborhood Market's stores in California (127 units), metropolitan Las Vegas, Nevada (21 units) and metro Phoenix, Arizona (28 units) beginning later this year.

Tesco's Fresh & Easy has been selling a reusable bag featuring last year's winning design by Josephine Close in its stores all year. The bag sells for 99-cents.

We like the Vegas resident's design, particularly because of its use of fresh fruits and vibrant colors. In fact, it was one of our three favorites in the contest.

Artwork in the stores

We think Tesco's Fresh & Easy Neighborhood Market, which has borrowed numerous operations and merchandising concepts from competitiors Trader Joe's and Whole Foods Market, should borrow another one from the two grocers and offer Tonya Jacobsen a full or part time job creating artwork for the Fresh & Easy stores, starting with the produce departments, which could use some brightening up, say starting with a few fresh fruit and vegetable-themed murals, which the fresh food and grocery chain can hang on the walls or display on easels - or both. Notice, for example, how her artwork brightens up the store in the photo at top.

Whole Foods Market, for example, employs full time artists in all its stores in New York City, while Trader Joe's has full time chalkboard artists in all its grocery markets in the U.S, who create the colorful chalkboard art and signage that's become an iconic part of the TJ's shopping experience. [See - June 21, 2011: The 'Art' in Food Retailing On the First Day of Summer at Whole Foods Market in New York City's Chelsea District.]

Having in-store artwork painted by a customer and the winner of the Design-A-Bag contest would also be a great story for the grocer to be able to tell: "Customer/painter/bag design contest winner creates fresh produce-inspired paintings for Fresh & Easy stores."

And Jacobsen doesn't have to be limited to the fresh produce theme either. Creativity and inspiration are two key elements of art. And there's more to the stores than produce.

For example, there could be prepared foods'-themed art, along with numerous other in-store and neighborhood-oriented themes, all based on what inspires the artist and store employees, all of which Fresh & Easy could use in the stores and rotate in-and-out periodically.

The artwork could be localized as well - Vegas themes in Las Vegas; urban themes in Los Angeles and San Francisco; agricultural themes in Fresno and Bakersfield in California's Central Valley; and so on.

As an example, we would turn the already completed design pictured at the top here, which is from one of the ten contest finalists, Janeil Lim of Los Angeles, into a mural and use it in Fresh & Easy stores in neighborhoods which have a high degree of ethnic diversity, such as south Los Angeles and others.

Fresh & Easy Neighborhood Market could start this art-in-the-stores process by simply turning Jacobsen's colorful fresh fruit-themed bag design painting (pictured above) into a large wall mural.

We would start by putting a mural on the wall in the produce section, or on an easel there, in each of the 21 Las Vegas metropolitan area Fresh & Easy grocery markets, say about a week before her bag debut for sale in all 176 stores. In-store artwork by a Las Vegas resident, a nice local angle.

Food and grocery retailing-merchandising is an art.

And a great way to enhance that art is with some real artwork in-store. Therefore since, as we were the first publication to report, Tesco is in the process of making numerous changes inside its Fresh & Easy stores, the timing is perfect for some in-store art, the cost of which would be significanty less than most of the major changes we've reported the grocer is making to the stores. (See the linked stories at the bottom of this piece.)

After all, sometimes it's much smarter for a grocer to pick the low hanging fruit first. And often it's starring you right in the eyes.

Related Stories

June 27, 2011: Voting Starts in Fresh & Easy Neighborhood Market's 2011 'Design-A-Bag' Contest

April 4, 2011: Fresh & Easy Neighborhood Market to Launch Reusable Bag Design Contest Tomorrow

January 19, 2011: Customer-Designed Reusable Shopping Bag Now On Sale At Fresh & Easy Neighborhood Market Stores

July 27, 2010: The Winner of Fresh & Easy Neighborhood Market's Reusable Bag Design Contest Is...

June 17, 2010: Fresh & Easy Neighborhood Market Picks Eight Finalists in its Reusable Bag Design Contest; Website Voting Through June 30

April 19, 2010: Tesco's Fresh & Easy Joins Kroger Co. in Holding Earth Month-Earth Day Reusable Bag Design Contest

Also: Click here for a complete selection of stories fom Fresh & Easy Buzz on the reusable shopping bag topic and issue.

Changes at Tesco's Fresh & Easy Neighborhood Market

June 30, 2011Tesco's Fresh & Easy Neighborhood Market Developing Loyalty Card Program it's Planning to Launch This Year

May 18, 2011: Major Changes Coming to Tesco's Fresh & Easy Neighborhood Market Stores

May 3, 2011: Tesco's Fresh & Easy Neighborhood Market Launching 'Clip-Strip' Cross-Merchandising Program in Stores

April 12, 2011: Fresh & Easy Neighborhood Market to Shrink Health & Body Care Sections in Stores; Add Candy and Snack Items

Sunday, July 24, 2011

Supervalu-Owned Cub Foods Chain Parades its Lumberjack-Size Shopping Cart Down the Streets of Stillwater, Minnesota Today

The giant shopping cart in today's Lumberjack Days' parade.

The Sunday Supplement: Grocers Need to Go Big or Go Home When in the River City of Stillwater, Minnesota

Giant grocery shopping carts as promotional "vehicles" for grocery chains might just be the new black.

For example, we wrote about Modesto, California-based Save Mart Supemarkets' giant "Hot Rod" shopping cart in this June 28, 2011 story: Gentlemen ... Start Your Grocery Cart: Save Mart Supermarkets Goes 'Big' With 12-Foot High Motorized Shopping Cart. [Also see this related story - June 29, 2011: Save Mart Supermarkets Signs On For Five More Years' of NASCAR Sponsorship.]

The 12-foot-high Save Mart shopping cart (pictured here), which is nicknamed "Big Red" and called "Piccinini's Pride" by some Save Mart insiders (Bob Piccinini is the majority-owner, chairman and CEO of the 240-store supermarket chain) is powered by a 454 cubic inch Chevy racing engine. It can hold three grown men inside the basket, with enough room leftover for a few kids and  numerous bags of groceries.

Save Mart's "Hot Rod" cart has been making the rounds to various events in Northern California this summer (see the stories linked above), a well as stopping off at a few of the grocer's Save Mart and Lucky banner stores in the region.

The giant shopping cart's next major appearance is in August, when it will take center stage at the popular Hot August Nights celebration in Reno, Nevada, where Save Mart operates stores in addition to Northern California and California's Central Valley.

Cub Foods' 'Lumberjack-size' shopping card a parade hit

Today in Stillwater, Minnesota, thousands of miles from Modesto, California were Save Mart Supermarkets' is headquartered, Cub Foods, a local chain owned and operated by Eden Prairie, Minnesota-based Supervalu, Inc. unveiled its own giant grocery shopping cart - racing motor not included - at the annual Lumberjack Days Grand Parade in Stillwater, which is located on the St. Croix River.

Supervalu, Inc.-owned Cub Foods operates 69 supermarkets in Minnesota, Wisconsin and Illinois. Of those units 58 stores are in Minnesota's Minneapolis-St. Paul metropolitan area. The small River City of Stillwater, which has 18,000 residents, is located 20 miles east of downtown St. Paul.

The Cub Foods' giant shopping cart is actually a parade float, as you can see in the photograph at the top of this piece.

The cart is motorized. But unlike the 454 Chevy engine on Save Mart's "Hot Rod" cart, which CEO Bob Piccinini told us in June allows it to hit upwards of 100 miles-an-hour (if anyone is crazy enough to attempt it), the Supervalu-owned chain's version instead has a tiny motor that moves the float/cart along at a standard parade speed or pace.

Notice the over-sized food and grocery product packages in Cub Foods' giant shopping cart pictured at top? A Supervalu, Inc. spokesperson says the big cart plus the big grocery product packages featured inside it "equals big savings," which at least is the message the grocery chain says it wanted to get across in today's parade, along with having a little fun.

We do know the fun part was experienced because according to a group of parade spectators we talked to today, the giant shopping cart appeared to receive a good deal of attention and created lots of smiles among parade-goers, the viewers told us.

The annual Lumberjack Days Grand Parade is part of an event-packed five day festival in Stillwater, Minnesota called Lumberjack Days. You can see just how event and activity-packed the annual celebration of the city's heritage is by taking a look at its website here.

A number of residents of Stillwater and the surrounding area were concerned that the fast-rising St. Croix River might interfere with this year's Lumberjack Days celebration and parade, particularly after the city had five inches of rain on Friday, July 19.

But event organizer Dave Eckberg says there was no way he and his team were going to allow heavy rains and a rising river to stop the popular annual celebration of the city's heritage, which has as its title sponsor this year Supervalu, Inc. competitor Walmart Stores, Inc.

A little irony: Supervalu, Inc. is headquartered in nearby Eden Prairie, Minnesota. It's not only the dominant grocer in the state but also one of the top employers in Minnesota. It's the home state grocery chain. 

It's CEO, Craig Herkert, was a senior executive at Bentonville, Arkansas-based Walmart Stores, Inc. before taking the top spot at Supervalu, which owns Cub Foods and other chains like Albertsons, Save-A-Lot, Shaw's and numerous others.

One of the key states Walmart's U.S. division is putting a major focus on in terms of growing its food and grocery retailing presence nationally is Minnesota, which is the major reason it's the top-sponsor of Lumerjack Days this year. Walmart is the market share leading seller of groceries in the U.S. Supervalue, Inc. is neck-to-neck with Safeway for the number four slot. Kroger is number two. Costco is number three.

On Friday July 19th Lumberjack Days' organizer Eckberg said, "We're not compromising the event in any way. We're actually really excited about the possibilities [presented by the rising river]. The concert venue is moving west, away from the the river about 200 feet. We're clearing three parking lots and closing off most of Water Street. We'll still be right downtown, East of main Street and all events remain on schedule."

That's a spirit the town's original Lumberjacks would be proud to know still exists in Stillwater.

And we bet Supervalu's Cub Foods' chain would like to see some of that "can do" spirit in its stores, with locals filling regular-sized shopping carts to the brim, having been inspired by viewing the Supervalu-owned chain's Giant shopping cart float in today's Lumberjack Days parade.

Friday, July 22, 2011

Beyond the Press Release: A Couple Reasons Why Fresh & Easy Neighborhood Market is Expanding its 'Gourmet' Private Brand

Private Brand Showcase

Tesco's Fresh & Easy Neighborhood Market announced today it's introducing 12 new fresh-refrigerated ready-to-heat food items under its "fresh&easy Gourmet" brand, which it introduced into its stores in California, Nevada and Arizona in January of this year.

In today's press release, which you can view here, Tesco's Fresh & Easy says it introduced the "gourmet" fresh-prepared foods brand in February 2011.

It's true February is when Tesco's Fresh & Easy Neighborhood Market announced the debut of the brand in a press release.

But "fresh&easy Gourmet" was actually launched in January of this year, as we were the first to report in this story - January 21, 2011: Tesco's Fresh & Easy Neighborhood Market Introducing New 'Gourmet' Private Brand - about three weeks before the fresh food and grocery chain announced the launch of the first batch of items under the brand, which it did on February 8 in this press release.

[Read our story here - February 8, 2011 - Private Brand Showcase Déjà Vu: Fresh & Easy Neighborhood Market Announces its New 'Gourmet' Brand - along with this piece from the day before - February 7, 2011: Getting There First...Plus, Are Tesco's Fresh & Easy and Safeway Traveling Down A Similar Private Brand Aisle? - for details and extensive background and analysis on the "fresh&easy Gourmet brand.]

The 12 new items in the grocer's "fresh&easy Gourmet" line are divided into three categories - fresh-prepared meals, Gourmet (meals) for two and fresh pizzas. All the items are refrigerated and ready-to-heat. (See a list of the 12 new items here.)

Upscale-specialty focus continues

The introduction of the additional SKUs in the "Gourmet" fresh-prepared foods' line just six months after the introduction of the brand is further evidence of an important phenomenon we first pointed out, based on our reporting, observation and analysis, in late 2010 and have continued to offer evidence of since then about Fresh Easy's private brand focus.

That phenomenon is the grocer has since late 2010 focused (not exclusively of course) its own-brand efforts into a more upscale-oriented specialty and higher-end niche in order to attempt to create private brand product differentiation vis-a-vis its competitors, as well as in an attempt to come out with products that can potentially offer higher gross margins, which is something Tesco's Fresh & Easy needs to achieve in a major way. The jury remains out in our analysis as to how this strategy is working thus far.

The quote from John Burry, Fresh & Easy Neighborhood Market's chief commercial officer (head of buying and merchandising in U.S. industry terminology) in the press release issued today also strengthens our analysis, first developed last year, that the Tesco-owned chain of 176-stores has been and continues to move into a more specialty-gourmet-upscale niche in terms of its primary private brand development focus.

The quote: "Customers love our Gourmet products, so we expanded the range with some truly unique and exciting meals only available at Fresh & Easy," said John Burry, Fresh & Easy Chief Commercial Officer. "We are happy to continue to bring more restaurant-quality, fresh food options for our customers to eat at home, as more and more people look for ways to save money."

Our point isn't that Fresh & Easy Neighborhood Market is focusing exclusively on this higher-end and specialty niche. Rather, it's where the grocer has been putting the majority of its private brand focus, starting in late 2010 and continuing to the present.

More unique niche items, higher gross margins

It's all about trying to give consumers a reason to shop at Fresh & Easy - differentiation; unique own-brand products. Think Trader's redux, for example, except in the case of fresh-prepared foods Trader Joe's isn't a key player, as it prefers the frozen foods' category over fresh-prepared when it comes to meals, side-dished and the like.

It's also all about gross margin. In order to break-even with Fresh & Easy by the end of Tesco's 2012/13 fiscal year, which ends February 2013 (about 19 months from now), which Tesco CEO Philip Clarke has publicly said will happen, the grocer must get its gross margins (and overall operating margin) up dramatically. [See - April 19, 2011: Tesco's Fresh & Easy Neighborhood Market Posts Biggest One-Year Loss Yet - $307 Million Loss on Sales of $818 Million.]

Increasing gross margins is one reason Tesco's Fresh & Easy is focusing more on the upscale-specialty niche when it comes to private brand new product development. than it has in the past.

For example, the new "fresh&easy Gourmet" meals for two retail for $9.99 each, which is a higher price-point than the grocer's similar "fresh&easy brand" prepared meals of a similar serving size.

The gross margins just aren't there to date with Fresh & Easy's overall private brand offering, which comprises about 65% of the about 5,000 SKUs offered in its stores.

The higher-end, higher retail price-point items carry a higher gross margin than the mainstream "fresh&easy" brand items do, which explains in part its strategy of focusing on them more so at present.

Expect to see the trend continue when it comes to the grocer's private brand development across all categories.

Related Stories

February 8, 2011: Private Brand Showcase Déjà Vu: Fresh & Easy Neighborhood Market Announces its New 'Gourmet' Brand

February 7, 2011: Getting There First...Plus, Are Tesco's Fresh & Easy and Safeway Traveling Down A Similar Private Brand Aisle?

January 21, 2011: Tesco's Fresh & Easy Neighborhood Market Introducing New 'Gourmet' Private Brand

December 23, 2010: New Items Show Fresh & Easy Neighborhood Market's Niche-Specialty Category Private Brand Development Focus

December 13, 2010: House (Sparking) Cider Rules at Fresh & Easy Neighborhood Market

Recent Private Brand Showcase Stories

July 20, 2011: Limited Edition Sunnyside Farms Ice Cream Flavors, Including the Latest Featuring an Iconic Cookie Brand, Hit Save Mart and Raley's Stores For the Summer Season

July 11, 2011: Tesco Developing New Flavors For 'ChokaBlok' Ice Cream Brand; Launching Range in Central Europe

July 7, 2011: Not Just A 'Flash in the Pan': Tesco's New Brand of the Same Name With Potential 'Fresh & Easy Twist' Hitting United Kingdom Store Shelves

July 6, 2011: Tesco Launches New 'Flash in the Pan' Brand Ready Meals in UK Stores; Files Brand Trademark in U.S.

June 26, 2011: Tesco Bringing Fresh & Easy Neighborhood Market's 'goodness for kids' Brand to the UK - With a 'Tesco' Twist

June 27, 2011: Tesco Introduces First Items in Fresh & Easy Neighborhood Market-Developed 'Tesco goodness for kids' Brand in United Kingdom Stores

June 23, 2011: Mollie Stone's Markets' Owners' Eponymous Mike & Dave's Wing Sauce Grows Display Wings

June 19, 2011: Safeway Has A Picnic in San Francisco Featuring the 'World's Longest Picnic Table' to Showcase its 'Open Nature' Natural Foods' Brand

June 11, 2011: Sliders, Meatballs and More - Fresh & Easy Neighborhood Market Introducing Six New Heat & Serve Food Items

You can click on this link -  - to read all the stories in our Private Brand Showcase feature.

Wednesday, July 20, 2011

Limited Edition Sunnyside Farms Ice Cream Flavors, Including the Latest Featuring an Iconic Cookie Brand, Hit Save Mart and Raley's Stores For the Summer Season

Private Brand Showcase

Northern California's second and third-largest supermarket chains (Safeway Stores, Inc. is number one), Modesto-headquartered Save Mart (240 stores with about $5 billion in annual sales) and West Sacramento-based Raley's (131 stores and about $3.1 billion annual sales) have a relationship that's unique among food retailing competitors in the U.S. - the two grocery chains share the same fresh, refrigerated and frozen dairy products' private brand, Sunnyside Farms, as well as a secondary value brand, Bayview Farms.

But the relationship goes far beyond merely sharing the private brand: The two competing chains are also the primary owners of the company that produces the dairy products via a joint-venture called Super Store Industries, based in Lathrop, which is located between Modesto and Stockton in the Northern Central Valley.

Save Mart operates supermarkets under the Save Mart, Lucky, S Mart and Max Value banners, along with a chain of discount warehouse format stores called Food Maxx. The stores are located throughout Northern California and south to Bakersfield in the Central Valley.

Raley's operates three supermarket banners - Raley's (combo superstores as well as supermarkets), Bel Air and Nob Hill Foods, along with a discount warehouse banner of its own, Food Source. It's stores are primarily in the Sacramento region, San Francisco Bay Area, south coast and Northern Central Valley areas. Both chains also have stores in Northern Nevada.

As a part of Super Store Industries, the main feature of which is a buying-merchandising office and massive distribution center for Save Mart and Raley's in Lathrop, the joint-venture also owns two dairy processing plants, Mid Valley Dairy/Sunnyside Farms in Fairfield and Sunnyside Farms in Turlock.

The Fairfield plant produces Sunnyside Farms' and Bayview Farms' fresh fluid milk, while the Turlock plant produces cultured dairy products - cottage cheese, yogurt and the like - and ice cream and frozen novelties under the Sunnyside Farms private brand, which is offered in the various banner stores operated by the two competitors.

And it's Sunnyside Farms brand ice cream which is the topic of this Private Brand Showcase piece today.

Earler this year the Sunnyside Farms' ice cream brand product development team at Super Store Industries' came up with a plan to create a series of limited edition ice cream flavors as a way to celebrate the key summer ice cream selling season and to create some excitement and added sales for the Sunnyside Farms brand in Save Mart and Raley's-owned stores.

The first limited edition flavor, Sunnyside Farms Limited Edition Premium Watermelon Sherbet was launched in late May. The summer-only flavor features a smooth watermelon-flavored sherbet with flakes of milk chocolate shaped to look like watermelon seeds.

The Central Valley area near Turlock where the Sunnyside Farms ice cream plant is located is a key watermelon growing area, so the limited edition flavor ties-in to one of the many locally-grown crops from the area, as well as fitting the war summer season well.

The ice cream flavor development team followed up on the seasonal Watermelon Sherbet ice cream item in late June when it launched its second limited edition ice cream flavor into the Raley's and Save Mart stores. That flavor, Sunnyside Farms Cinnamon Churro Premium Ice Cream, celebrates the popular hand-held Mexican desert item the Churro, which is a cinnamon favored bread or cake-like treat that's popular with Latinos but in recent years has also become a cross-cultural favorite, particularly in parts of the U.S. like California and Nevada which have high Latino or Hispanic populations.

California's Central Valley and much of Northern California has a significant Latino population, so like the Watermelon Sherbet the Sunnyside Farms Limited Edition Cinnamon Churro Premium Ice Cream also has a strong local angle in terms of celebrating one of the many foods Hispanics have introduced into the region and America at large.

Sunnyside Farms introduced the limited edition ice cream flavor with a Latino twist in a big way on June 26, offering free samples from its Sunnyside Farms ice cream truck at the Toyota Save Mart 350 NASCAR race at Infineon Raceway in Sonoma County. The limited edition flavor was introduced into the Save Mart and Raley's stores just a couple days earlier.

This week Sunnyside Farms is introducing its newest limited edition ice cream flavor into the stores owned by the two grocery chains. That flavor, Sunnyside Farms Circus Animal Cookie Premium Ice Cream (pictured above and at top), features swirls of pink and white cookie batter ice cream and Mother's brand Circus Animal Cookies, which have been a favorite of kids of all ages in Northern California for many decades.

Mother's is an iconic cookie brand in Northern California. And its Circus Animal Cookies have been a favorite of three generations of children - and their parents - in the region, due in large part to the fact the brand was founded in San Francisco in 1914 and baked in nearby Oakland from 1915 until 2006. [See the companion story below on the blog or read it by clicking here -

Save Mart and Raley's should have a big hit on its hands with the Limited Edition Sunnyside Farms Circus Animal Cookie Premium Ice Cream because it should evoke nostalgia in older consumers who grew up eating the Mother's Circus Animal Cookies while at the same time grabbing the attention of the latest generation of kids who will want to taste the ice cream that includes their favorite animal-shaped cookies in it.

And speaking of kids, ice cream and local angles, on Saturday (July 16) Sunnyside Farms' employees who work at the Turlock, California plant, along with volunteers from the community, gave a little something back to the community's children when they spent the day constructing a "green" play structure called the "Sunnyside Farms-Got Milk Play Structure," in Bristol Park in the city of 75,000 residents.

The "environmentally friendly" play structure (pictured above and below) is made from 41,310 recycled plastic milk jugs.

Along with wanting to provide a place for kids to have fun and get exercise, Sunnyside Farms' says it hopes the play structure will inspire Turlock residents to "take small steps daily, such as recycling and exercising, to care for our environment and build healthier families"

That play structure will come in handy after the kids (and mom and dad) enjoy the newest limited edition ice cream from Sunnyside Farms, made right in town and packed with those Mother's Circus Animal Cookies. Mom and Dad will have to find their own form of exercise though.

The way Mother's Cookies Crumbled ... and Was Reborn

The creation of Sunnyside Farms' latest limited edition ice cream featuring Mother's Circus Animal Cookies would never have happened were it not for food giant Kellogg Company buying the Mother's brand and assets in 2008 and re-launching Mother's Cookies in mid-2009.

Read why in the sidebar below:

The Mother's brand of cookies is extremely popular in Northern California, due in large part to the fact the company and brand was founded in San Francisco in 1914 by N.M. (Noah) Wheatley, who ran a newspaper stand on the corner of Market and Kearney Streets in the city and bought the rights to a recipe for some home-baked cookies from one of his customers. The recipes he bought produced the first Mother's Cookies.

In 1915 Wheatly set up a one-man-shop in a small building across the bay on 12th Avenue in Oakland, where he baked and sold about 2,000 Mother's cookies a day, until in 1922 he moved to a larger location on 18th Street in Oakland and hired some employees.

From there, sales of the Mother's brand of cookies began to soar, and by 1942 Wheatley had moved into a larger and much more modern bakery plant at 810 81st Avenue in Oakland, where he eventually had over 750 people working for him there and in sales in several additional western states.

In 1962 the Wheatley family sold the thriving Mother's Cookie brand and company to George Markham, who was a vice president at the company. 

Mother's continued to grow and Markham later sold the company to a group of employees who operated the cookie company from 1983 to 1996.

In 1996 the company was sold to to Artal NV, a Belgian company that two years later sold Mother's Cookies to Specialty Foods Corp., which was a conglomerate put together by the famous (or infamous) investor-Bass Brothers who were doing a roll up in the cookie brand category, for about $100 million.

Prior to buying Mother's Cookies, Specialty Foods Corp. purchased the Archway cookie company. After the Mother's purchase the Bass Brothers' conglomerate became the third-largest cookie-baker and marketer in the U.S., after Nabisco and Keebler.

In 2000 Specialty Foods Corp. sold the combined Archway and Mother's company (remember it was an investor roll up) to Italy's Parmalot Finanziari for about $400 million. At the time Parmalot was fast-growing and diversifying from its then primarily milk and tomato products business into cookies and other categories.

Mother's ownership merry-go-round was far from over though.

In 2005 Parmalot filed for bankruptcy amid a scandal over the illegal sale of corporate bonds that ended up taking the company down.

In 2005 Parmalot sold Archway-Mother's to the U.S. private equity firm Catterton Partners, which proceeded to close the Oakland Mother's Cookies factory in 2006, firing about 240 workers and moving the baking operations to Archway plants in Ohio and Canada.

Things got worse though.

In 2008 there was an accounting scandal at the private equity firm-owned Archway-Mother's Cookie Company, which combined with the financial crisis that hit the same year spelled the end - the company filed bankruptcy and fired all the workers, taking the Archway and Mother's brands off grocery, drug and mass merchandise store shelves.

Consumers in Northern California where Mother's Cookies got its start in 1914,took the news personally. For some it was like a loss of a family member.

Campaigns were launched asking various companies to buy the Mother's brand and assets and bring the cookies back.

Northern California grocery chains like Safeway Stores, Save Mart, Raley's and others even joined in, suggesting to companies like Nabisco, Keebler and others that if they took over the brand there was room on the shelves for it.

In 2008 Lance Inc. bought the Archway brand and assets and reopened the plant in Ashland, Ohio.

But it didn't want Mother's.

But shortly after, in December 2008, food giant Kellogg Company, which owns leading cookie brand Nabisco, got approval from the bankruptcy court to acquire the Mother's brand and assets and announced it would bring back most of the brands popular varieties, including Circus Animals, and have the cookies in the pink and white packages back on store shelves by mid-2009, which it did, re-launching Mother's Cookies in May 2009.

The first stores to get the cookies were located in Northern California.

Tuesday, July 19, 2011

Whole Foods Market's Potential Irish Opportunity Dashed in A Flash; Musgrave Group Buys Superquinn

Pictured above is a Musgrave-affiliated 16,000 square-foot Supervalu banner supermarket in Virginia, County Cavan, Ireland, owned by the McEvoy family. The independent-owner-operators of the Supervalu store, which features full-service meat and seafood counters staffed with experienced butchers and fish mongers, along with an in-store bakery, service deli and post office branch, say 70-75% of the food items offered in the supermarket are grown and produced in Ireland.

Wholesaler Musgrave has a major fresh and local foods program, including private brands its developed, that's used by its Supervalu and other banner retailers, including the McEvoys. Superquinn, which Musgrove is buying, also puts a major emphasis on fresh and local foods in its 23 stores in Ireland. The two should be a good fit.


[Companion Story: July 18, 2011: The Superquinn Irish Sweepstakes Offers An Opportunity For Whole Foods Market On the Emerald Isle.]

Writing about breaking news and selling fresh foods have more in common than might first meet the eye. For example, both are extremely perishable and therefore are subject to having a short shelf life.

Such is the case regarding our story of less than 24-hours ago in which we suggested that Ireland's Superquinn supermarket chain, which went into financial receivership and for sale on the auction block yesterday, offered an opportunity for Austin, Texas-based Whole Foods Market in its efforts to grow its business across the pond.

What a difference a day makes tough.

Ireland's Musgrave Group, which is a family-owned grocery wholesaler and operates supermarkets in partnership with independent owners under the Supervalue, Centra and Daybreak banners in Ireland, along with the Budgens and Londis brands in Great Britain and Dialprix in Spain, said today it's buying Superquinn and that it would retain the grocery chain's 2,800 employees at its 23 stores in Ireland.

Chris Martin, Musgrave's CEO, said about the deal today: "Having come to this agreement with the Joint Receivers, we are excited by this opportunity. Purchasing Superquinn, when approved, supports our growth agenda and will sustain our competitiveness. We are looking forward to working with the Superquinn team to develop the future of the business."

Neither Musgrave Group or the creditors and receivers said how much the Irish grocery wholesaler-retailer is paying for Superquinn.

But the Irish Times reported today (here) that according to its sources Musgrave bought Superquinn for about €100 million, which if true is €350 million less than debt-ridden owner Select Retail Holdings paid for it in 2005 when it bought the 51-year-old supermarket chain from founder Fergal Quinn.

The paper also reported today Musgrave Group is buying a distribution center in Blanchardstown, Dublin and 11 properties around the city as part of the deal, which is included in the €100 million price tag.

In our piece yesterday we said Musgrave Group/Supervalue was one of the potential buyers for Superquinn. We didn't expect such a quick deal though, even though based on the confidence the bank creditors and receivers voiced in their statement yesterday it was clear discussion were already in the works with one or more potential buyers.

If Musgrave Group's purchase of Superquinn is approved by the Irish authorities, the retailer, which has a combined market share of between 23-24% with its Supervalu, Centris and Londis bane stores, will overtake United Kingdom-based Tesco as the leading food and grocery retailer in Ireland. Tesco has an about 27% share. Musgrave Group's will rise to about 29-30% with the addition of Superquinn's 23 stores in Ireland. The Supervalue brand (and stores) is the groery wholesaler's leading food and grocery retailing banner in Ireland with an about 19.5% market share.

We think Ireland's Competition Authority will look closely into Murgrave Group's purchase of Superquinn but  will approve it without much difficulty for two primary reasons. Those reasons are:

>Better to have a local retailer, Musgrave, buy another local retailer, Superquinn, than have one from outside Ireland do so. The two fastest-growing grocers in Ireland for example are the German hard-discount chains Lidl and Aldi.

>Musgrave's has pledged to keep all 23 Superquinn stores open and retail its 2,800 employees. That will be a tough promise for the group to make. But its music to the ears not only of the workers but of Ireland's politicians because the country continues to struggle with high unemployment.

In announcing the deal today Musgrave Group CEO Martin said: "Superquinn has been challenged by the scale of its debt burden and the difficult trading environment. This purchase secures the jobs of 2,800 people and on completion of the sale process, Musgrave intends to invest in the stores and work with the Superquinn employees to develop the future of the business."

Musgrave Group was founded in 1876 by brothers Thomas and Stuart Musgrave. Today it's Ireland’s leading food and grocery wholesaler/distributor, serving around 3,300 stores in Ireland, Great Britain and Spain.

The wholesale grocer reported sales of €4.4 billion for its 2010 fiscal year, with a pre-tax profit of €72 million. Sales for 2010 were 3% less than in the previous year. But the 2010 profit amount was 3% higher than the profit for 2009.

Musgrave also eliminated €59 million in debt which it started out with in 2010, closing the year with a net cash surplus of €21 million.

We expect Musgrave to keep the Superquinn banner because of the brand's strong standing and iconic status in Ireland.

We also expect the wholesaler to over time find independent grocer-owners for most or all of the 23 Superquinn stores because Musgrave Group's model and focus is to be a product wholesaler and value-added partner providing financial, operational, marketing, advertising and merchandising services and the like to its independents who own their own stores.

As for our story yesterday, although its shelf-life is already over in terms of timeliness for Whole Foods Market, unlike perishable fresh foods which go away when the sell-by date is up, the story remains useful perhaps as a case history, despite its short shelf-life as part of a breaking news story.

For example, Whole Foods' got its start in the UK, where it has just five stores, by acquiring four markets previously owned by Britain's Fresh & Wild chain. As we detailed in our story yesterday, the natural and organic-focused grocery chain plans to at least double its store count in the UK over the next five years by building new stores. It's signed leases for two new units in metro London thus far and soon will open a store in Scotland.

Perhaps Whole Foods Market, taking its UK origin (Fresh & Wild) and our case history example (Superquinn) as twin points of departure, should start thinking small acquisitions as well as organic growth in the UK and surrounding area, considering the retailer continues to say it's bullish on the region as one of its existing two (the other being Canada) markets outside the U.S.

Monday, July 18, 2011

The Superquinn Irish Sweepstakes Offers An Opportunity For Whole Foods Market On the Emerald Isle

Pictured above: Superquinn's newest supermarket, an urban unit below a residential complex, at Heuston South Quarter, St. Johns Road West, Dublin, Ireland.


A syndicate of banks, including the main debt-holders Bank of Ireland, AIB and National Irish Bank, announced today the 51-year-old Irish supermarket chain Superquinn is being put into financial receivership due to the struggling grocer's debts, which are said by its creditors to be in the range of €400 million, which is about $635 million based on today's Euro-to-dollar conversion rate.

The banks said in the statement today they've appointed Kieran Wallace and Eamonn Richardson of the KMPG accounting firm as the receivers.

The recievers' charge from the bank creditors is to find a buyer for the 23-store Superquinn supermarket chain, which was founded by Fergal Quinn in 1960 and sold by the family to the Select Retail Holdings consortium in 2005 for about €450 million (slightly more than the current debt-load), post-haste.

Here's what one of the receivers, Eamonn Richardson, said today: "The Group [Superquinn owner Select Retail Holdings], which has been operating in a tough trading environment, has been heavily indebted, primarily due to property related loans. Therefore, this receivership, together with the planned sale as a going concern is a positive development for Superquinn, its employees and customers. We hope to be in a position to release further details on a proposed sale in the coming days."

The statement also said Superquinn's current CEO, Andrew Street, will remain in charge of the supermarket chain during the receivership process.

The banks and receiver administrators added in the statement today they're "confident of a successful sale of the business to a suitable buyer with a view to maintaining the Superquinn brand, the existing Superquinn stores, all of the jobs in these stores, and the highly regarded Superquinn product and service offering."

That's a tall order. But we imagine the creditors would settle for any one element out of the four listed above if the acquisition price is right.

The Superquinn brand does have iconic status in Ireland. For readers in the U.S. or elsewhere unfamiliar with the Irish grocer, think Ralphs in Southern California or H-E-B in Texas, for example, two chains with decades of operation and solid brand equity.

Therefore, the buyer - say any of the UK's top grocers like Waitrose, Morrisons, Tesco, Walmart-owned ASDA or Sainsbury's, for example - will have a struggle in deciding whether to change the banner, although if a big chain does buy Superquinn, it would probably eventually change the banner to its own, regardless of what it does in the interim.

Superquinn says it has about 2,800 employees at its stores located throughout Ireland and at its headquarters offices.

The chain had 24 stores until 2009, when it closed its store in Dundalk. Superquinn also fired 400 employees the same year, including those who worked at the shuttered supermarket.

It's hard to say because of the heavy debt load, but in our analysis the two leading candidates to acquire Superquinn are probably the UK supermarket chains Waitrose and Morrisons. Of the two, Superquinn's up-market format and fresh foods-focus fit Waitrose best from a merchandising standpoint, in our analysis, although the fit is also a good one for Morrisons.

Tesco, which is the food and grocery sales market share leader in Ireland with a 27.1% share, according to the most recent figures (12 weeks ended April 18, 2011) from Kantar Worldpanel Ireland, might also be interested in acquiring Superquinn, although we believe the competition authorities would likely veto any such deal because of its dominance in the Republic.

Also from Tesco's perspective as the market share leader in Ireland, as it is in the entire UK, the cost-benefit analysis - 23 stores (14 of which are in the metropolitan Dublin area) with about €400 million in debt - makes little sense in terms of a Tesco buy, at least in our analysis.

Ireland's second-largest supermarket chain by market share, Dunnes, (23.6% according to Kantar) and number three Supervalu (19.5%), which isn't affiliated with the U.S. grocery chain of the same name, might also be interested in buying Superquinn, which according to Kantar Ireland has a 6.4% share of the national market, which is down from 6.9% last year.

However, in our analysis, competitiveness would also be a potential political issue for both chains, as would the simple fact Superquinn's heavy debt load might not justify buying a competitor grocer with a declining 6.4% market share, although that share is pretty good for 23 stores.

Walmart's ASDA chain and Sainsbury's, Tesco's top two competitors in the United Kingdom and which according to Kantar have a meager combined 1.5% market share in Ireland, might also be interested in Superquinn, although of the two we think Sainsbury's would be the more likely grocer to perhaps make a bid because of its closer fit (than ASDA's) from a merchandising standpoint with Superquinn. In fact, in our analysis Superquinn would be a good play for Sainsbury's if it can get a good deal.

Whole Foods Market's Irish Opportunity

But it's not just UK-based chains that Superquinn presents an opportunity for in our analysis.

For example, we think the Superquinn "Irish sweepstakes" offers an interesting strategic opportunity for Austin, Texas USA-based Whole Foods Market, which currently has just five stores in the UK, four of which it acquired when it bought the small Fresh & Wild chain a few years ago. The fifth store,Whole Foods' only built-from-the-ground-up unit to date in the UK, is its 80,000 square-foot High Street Kensington mega-market in London, which it opened in 2007. All five stores are in and around London, England.

Earler this year Whole Foods Market co-founder and co-CEO John Mackey said the natural grocery chain plans to at least double the number of stores it has in the UK over the next five years.

Thus far the natural grocer has signed two new leases in London's Richmond and Fulham districts, which is nearly half-way to that doubling. The two stores are scheduled for late 2012 or early 2013 openings.

Whole Foods Market is also opening its first store outside the London area soon, in the city of Gifnock, which is a fairly high-income suburb just south of the city of Glasgow. Walter Robb, Whole Foods' co-CEO, said in a talk given earlier this year we attended that additional stores are being planned in metropolitan Glasgow, Scotland.

The Texas-based natural and organic grocery chain has been struggling and losing money in the UK for years, although its getting closer to break-even with its operations there. In its fiscal 2010 year Whole Foods' lost £3.06 million (about $5.8 million) in its UK operations, which was down significantly from the previous year's loss of £4.36 million (about $7 million).

On top of that improvement, Whole Foods' mega-Kensington High Street store in London turned a profit for the first time since 2007 in the grocer's latest quarter, along with experiencing strong comparable store sales in the double-digits.

Whole Foods Market says its committed to expanding in the UK. In fact, last year co-founder/co-CEO Mackey  said publicly that if the natural-organic grocer had to choose between Canada and the UK - its two international divisions outside the U.S. - it would choose the UK.

Despite this commitment, Whole Food Market suffers from a lack of critical mass in the UK.

It's also not clear to us if Whole Foods' focus on London and the surrounding environs makes much sense, considering the competition from up-market grocer Waitrose, which offers a substantial selection of natural and organic foods and has a strong brand franchise in the UK. This geographical focus in fact is something Whole Foods agrees on in part, which is why it's expanding into Scotland - to geographically diversify.

In our analysis, Ireland, which shares a long kinship with the United States where Whole Foods is a huge success, is as good or better a potential market for the natural grocer as England or Scotland is.

And Superquinn, which shares numerous merchandising and operational elements with Whole Foods Market - a focus on fresh foods; local foods procurement, merchandising and promotion; natural, organic and specialty product offerings; a high-level of customer service; and more - is as good an acquisition fit as Whole Foods' could find across the pond, in our analysis, assuming it could get a good deal on the 23-store chain, considering the heavy debt-load it's carrying.

Superquinn operates as a conventional supermarket along with its specialty and fresh foods focus. This isn't something that fits Whole Foods Market's culture or strategy in the U.S. But Ireland isn't the U.S. And different countries often call for different approaches and strategies, including within those regions or nations.

For example, after it acquired chief rival Wild Oats Markets in 2007, it sold the then hybrid conventional-natural-specialty 30-plus-store Henry's Farmers Market chain to Southern California-based Smart & Final, giving as the reason that operating such a chain wasn't part of its culture or strategic plans. We suspect that might be the case with Superquinn, although it need not be.

But that wouldn't have to be a problem for Whole Foods Market were to acquire the Irish supermarket chain.

For example, under one scenario, it could keep all of the Superquinn units that make sense from a demographic and lifestyle perspective (Whole Foods' key data point in terms of store locations is percentage of college graduates and consumers who've attended college), change the banner to Whole Foods Market on those stores and sell off the remaining Superquinn markets, using the proceeds to help pay down the debt.

Another scenario, regardless of how many units it were to keep, would be to co-brand the stores using the iconic Superquinn brand in combination with the Whole Foods name - or keep the Superquinn name completely, which might be its smartest strategy.

Doing this wouldn't be unheard of for the grocer. For example, Whole Foods Market operates a few stores in the U.S. that don't have the Whole Foods Market name, including the Harry's Farmers Market stores in Georgia, which were acquired via acquisition a number of years ago.

The Harry's stores in fact are a hybrid conventional-natural-organic-specialty format. In other words there's precedent for the natural grocer's doing so.

Therefore, in our analysis it wouldn't be a stretch, and perhaps would be a wise move, for Whole Foods Market to operate the Superquinn stores, in this scenario, as a hybrid format, keeping the best of what the 51-year-old Irish chain offers and adding some of the best elements from Whole Foods, such as its focus on organics. Both Whole Foods Market and Superquinn put a major focus on fresh foods - produce, meats, deli, in-store bakery and fresh-prepared foods - which is a natural marriage.

We also think Whole Foods' decentralized culture and operations structure, particularly as it pertains to its UK operations but also the way it operates in the U.S., would serve it well were it to acquire Superquinn and operate it as a best-of-both-chains-type hybrid conventional-natural-organic-specialty food and grocery chain. It could retain many of the Superquinn people, who all have a local focus, and blend them with the Whole Foods' UK folks, who already understand the grocer's culture, for example.

Superquinn also operates an online ordering and home delivery business, which could allow Whole Foods Market to extend its business and sales on the Emerald Isle far beyond the 23 (or however many Superquinn units it would end-up keeping) brick-and-mortar supermarkets.

When Irish eyes are smiling

The Devil is always in the details when it comes to deals like Superquinn, particularly since the chain has a heavy debt-load, a declining market share and negative sales growth. Kantar Ireland's figures for the period described earlier have Superquinn with negative sales growth of about 5%, for example.

But it is also under such circumstances - heavy debt and a decline in market share - that good deals can also be made. In those cases ... God is in the details.

As far as Whole Foods Market - which recently announced its long-term strategy is to go from slightly over 300 stores currently in America to 1,000 units, which could easily more than triple the grocer's current annual sales of nearly $9 billion - goes outside the U.S. (a few stores in Canada and the UK), an acquisition of Superquinn and a presence in Ireland is certainly something the Austin, Texas-based grocer should seriously look into, in our analysis.

After all, from a historic and cultural perspective, is there really any better and more logical place for an American grocer to go overseas than Ireland, where nearly every resident either has a family member or friend who at one time or another has lived in the U.S?

Whole Foods Market is also a known brand name in Ireland because of the extensive travel and trade relationships between the two countries.

Like the U.S., Ireland is in an economic slump. But also like in the U.S., there continues to exist in Ireland a food and grocery retailing up-market. Superquinn offers a opportunity for Whole Foods Market to perhaps participate in that niche, as well as to jump-start its strategy across the pond and from there across the channel.

Like we said, both the Devil and God are in the details. But we do think Superquinn is worth a look for Whole Foods Market. After all, co-founder and co-CEO John Mackey's Irish eyes do remain clearly focused across the pond.