Fresh & Easy Neighborhood Market to Offer Alcohol Beverage Tastings in Some of its California Stores

Breaking Buzz

Fresh & Easy Neighborhood Market has applied for a license to hold wine and beer tastings at its store in the Willow Glen shopping center at Bird Avenue and Minnesota in San Jose, California. San Jose, which is the largest city in Northern California with over 1 million residents, is located in the South Bay Area region.

The photograph at top, taken today by a Fresh & Easy Buzz correspondent, shows the alcohol beverage tasting application sign on the front window of the store. The application is for a tasting license, as is noted on the second subject line. The store already offers alcoholic beverages for sale. You can click on the photo at top to enlarge it.

Employees of the store tell us the Willow-Glen neighborhood Fresh & Easy store plans to start holding tasting events as soon as the license application is approved by the California Alcohol Beverage Control Department.

Additionally, we've learned via our reporting that Fresh & Easy Neighborhood Market  plans to apply for alcohol beverage tasting licenses for some of its other 134 stores in California.

United Kingdom-based Tesco, which is the third-largest retailer in the world after number two Carrefour of France and U.S.-based Walmart Stores, Inc., currently operates 183 Fresh & Easy grocery markets in the Western U.S. The other 49 Fresh & Easy stores are in Arizona (28 units) and Nevada (21 stores).

Fresh & Easy Neighborhood Market hasn't publicly announced its plans to begin holding alcohol beverage tastings at its Willow Glen-San Jose store, or at any of its other grocery markets in California, or elsewhere.

New California law

Last year the California State Legislature passed a legislative bill (AB 605) that then-Governor Schwarzenegger signed  into law which loosed the restrictions on how alcohol beverage tastings are required to be conducted in retail stores in the Golden State.

The new law, which went into effect January 1, 2011, allows supermarkets, mass merchandisers and large liquor stores to host free wine, beer and distilled spirits tastings as long as the area where the tastings are conducted are separated out from the rest of the store by a temporary barrier of some sort, such as a rope, fence or chain.

Previously retailers were required to dedicate a permanent section of the store for the alcohol beverage tastings if they wanted to hold such events.

One retailer that's had such dedicated areas in its stores for a number of years is Northern California-based Beverages & More (BevMo), which is a category-killer format, specializing in the wine, beer and spirits categories, along with specialty foods.

However, besides BevMo, few grocers with stores in California have created such dedicated spaces in their stores in order to hold the tasting events.

Whole Foods Market and West Sacramento-based Raley's Supermarkets have in-store restaurants and cafe's in many of their respective stores in California. As a result, a number of the two chains' stores hold alcoholic beverage tastings in the restaurant/cafes, which not only qualified as a dedicated area under the old law but is a natural place to hold tastings because there's seating and food available.

For example, the Raley's store at 255 South Tracy Boulevard in Tracy, California holds alcoholic beverage tasting events in the store's restaurant/cafe every Wednesday from 5:30-7:30 p.m. Think happy hour. Tracy is in California's Northern Central Valley, about an hour's drive from San Francisco.

The restaurant and cafe, which is attached to but separate from the store's deli department, features prepared food and drink items in an eat-in area that has a seating bar, a lounging and eating area with tables and chairs and a big screen television set.

Pictured above and below: A recent wine tasting event at the Raley's superstore in Tracy, California. The photos were taken by a Fresh & Easy Buzz correspondent who attended the event, which also featured a full-spread of food, which you can see in the photo above.

Under the new law Raley's and Whole Foods Market, like all other grocers, can now hold the tastings elsewhere in the stores if they choose. But in those stores with dining and drinking-in areas - Whole Foods' has numerous stores in California, for example, that have either in-store wine or beer bars (and often both) where the drinks are available for sale by the glass - it makes good sense for a variety of reasons to do the tasting events in them.

Most of these Whole Foods' stores in California that have such in store features, which are attached to in store restaurants or food bars, hold alcoholic beverage tastings.

For example, the patio wine bar at Whole Foods' store in San Francisco's Potrero Hill District, where the grocer holds regular tastings, has become a neighborhood hangout and a third place, where people eat - food is available in the attached in-store restaurant - drink wine and catch up on what's happening with each other and in their neighborhood. Home and the workplace are the first and second places for most of us.

But most grocers in California haven't set up the dedicated spaces because square-footage is an extremely valuable commodity in a supermarket. Therefore it's difficult for a grocer to justify setting aside even 500 square-feet to be used only for alcoholic beverage tastings, particularly when that space can be used as merchandising space to produce sales on a daily basis.

The new law that went into effect in January of this year has opened the door for grocers to offer the tastings because they need only to temporarily rope off a section of the store, say in the beer, wine and spirits department, when they hold a tasting, rather then permanently dedicate valuable square-footage for the events, as was required under the old law.

Grocer interest growing

Not much application activity took place during the first few months of this year following the new law's taking effect. However its been picking up considerably over the last few months, according to a spokesperson for the state Alcohol Beverage Control Department.

We've also discovered a spate of recent activity among grocers in our reporting. For example, a number of Whole Foods' stores in Southern and Northern California have started conducting tastings, under the provisions of the new law, over the last few months, as have some stores operated by Southern California-based upscale grocer Bristol Farms.

Also in Southern California, Albertsons, which is owned by Supervalu, Inc., has applied for tasting licenses for some of its 200-plus stores in the region.

Mollie Stone's begins tastings

In Northern California, Mill Valley, California-based Mollie Stone's Markets, which operates nine stores in the San Francisco Bay Area, began its first alcohol beverage tastings - after recently receiving licenses at the stores - at six of its nine stores - three units in San Francisco and the stores in Burlingame and Greenbrae - on Friday, October 28.

Friday's Halloween-themed tasting, which was held from 3-6 p.m at the six supermarkets, featured Hornsby Hard Cider.

A spokesperson for Mollie Stone's told us the grocer is waiting to receive its tasting licenses for the other three stores, which are in San Bruno, San Mateo and Palo Alto, and that once it receives them from the state it plans to hold tasting events at those stores as well.

Mollie Stones has a number of  upcoming tastings planned. Some of the adult beverages a spokesperson for the grocer tells us will be sampled include wines from Ghost Pines, Edna Valley, Frei Brothers, Barefoot Bubbly, Red Rock and Dancing Bull. The grocer is also planning some upcoming spirits tastings, including having a mixologist create cocktails using Ketel One Vodka and Limoncello di Sonoma. Limocello is a popular Italian distilled spirit that's been catching on in the U.S. over the last few years.

The new supermarket tasting law is particularly advantages for grocers that operate small-format stores, like Tesco does with its Fresh & Easy Neighborhood Market chain. The Fresh & Easy stores average about 10,000 square-feet of selling space.

Were it not for the loosening of the regulations under AB 605, a small-store chain like Tesco's Fresh & Easy would be extremely hard-pressed to even justify dedicating a couple hundred square-feet for the tastings on a permanent basis. It needs every square-foot it can get for merchandise.

More on the new law

The new law is also particularly advantageous for upscale and foodie- format-oriented food retailers, like Whole Foods, Bristol Farms and Mollie Stone's, for example, that do a lot of specialty and gourmet food sampling in-store. Now, for example, under the new alcohol beverage tasting law in California the grocers can offer wine and food pairing-type demonstrations, as long as the sampling takes place in the temporarily designated area required by the law.

The law has a number of requirements that retailers must follow in order to hold the alcohol beverage tastings in-store.

In order to qualify for the tasting license, retailers must already have an off-sale beer and wine permit, to do beer and wine tastings, and an alcohol beverage license, if they also want to conduct spirits tastings.

Then retailers must apply for and be granted a license from the state Alcohol Beverage Control Board, like Fresh & Easy is doing for the store in San Jose.

Retailers must pay a $300 application fee and $261 annual renewal fee for a state license to hold the tastings, which can only be conducted by alcohol beverage manufacturers or wholesalers. Significantly, store employees are prohibited from conducting the tastings, as are any other employees of the retailer holding the event.

Of additional significance, cities and counties have the right to restrict the alcohol beverage tasting events under the state law. That means retailers must follow any and all local regulations that may be in place in addition to the state law.

There are also a number of restrictions on how the tastings can be conducted in-store.

For example, participants must be 21-years-old or older, and it's the retailer's responsibility to verify that they're of legal age, even though the alcohol beverage manufacturer or distributor is conducting the tasting.

Only one type of alcoholic beverage can be offered per tasting event - either beer, wine or distilled spirits. But there can be no multiple combinations. Tequila shot with beer-chaser tastings are prohibited, for example.

The alcoholic beverages sampled at the events must be given free to the participants.

The free tastings cannot occur before 10 a.m. or after 9 p.m.The manufacturer or distributor representatives conducting the tastings are allowed by law to serve a person no more than 8 ounces of free beer in a day, which is 4 ounces less than a standard 12-ounce can; and up to three samplings of wine or distilled spirits, at maximums of 1 ounce and a quarter-ounce per sampling, respectively.

If tasters ask more alcohol they the law allows to be offered at the tastings the manufacturer or distributor conducting the tasting is instructed to explain the legal limits to them. If they persist, the retailer can ask them to leave the event and the store.

Fresh & Easy

Fresh & Easy Neighborhood Market sells beer and wine in all but two of its stores in California. The grocer offers distilled spirits (hard liquor) in a number of its stores in California but not in the majority of the 134 units.

The Fresh & Easy store in San Jose's Willow Glen neighborhood has been one of the grocery chain's top-three sales performing stores, out of the 15 units opened so far this year in Northern California, since it opened on March 2, according to our sources.

The store, along with the unit in Danville, were the first two Fresh & Easy stores Tesco opened in Northern California.

The wine category is a major focus for Tesco with the Fresh & Easy stores; more so than beer or distilled spirits. Therefore, it's our analysis that wine tastings will comprise the majority of alcohol beverage testing events held at the store on Bird Avenue in San Jose, although not exclusively, as we expect some beer tasting to go on as well.

'The Insider' Offers Some Advice He Suggests the New Owners of Northern California's Andronico's Markets Should Take Post-Haste

All six of the stores still have signs saying Andronico's Market, like on the San Francisco store above, despite the fact the grocer changed the name to Andronico's Community Markets over a year ago. For 'The Insider' this is a blessing in disguise because he says the new ownership needs to bag the Andronico's Community Markets name and return to Andronico's Markets, with an emphasis on Andronico's, similar to how it's depicted on the sign above.

The Insider - Heard on the Street

In my October 18 column - May-to-October at 82-Year-Old Andronico's Markets: New Owner, 2 Stores Closed ... Now What? - I reported that an investment fund led by Renovo Capital and created by it and Rosewood Private Investments got the green light from the Oakland, California division of the U.S. Bankruptcy Court to acquire 82-year-old grocer Andronico's Markets, which has its headquarters next to and above its store in San Francisco and operates six stores in the Bay Area region, down from a high of 14 units less than a decade ago and two stores shy of the eight it operated until closing two units this year - one grocery market in Palo Alto, California, closed in July, and the store on University Avenue in Berkeley, closed yesterday.

Three of the existing Andronico's stores are in Berkeley - on Shattuck Avenue, Solano Avenue and Telegraph Avenue. The other two units are in Los Altos, in the South Bay Area, and San Anselmo, which is in Marin County in the North Bay.

On Friday, October 28, the day before the closing of the University Avenue store in Berkeley - the university city that's been home base for Andronico's since it was founded in 1929 by Greek Immigrant Frank Andronico - Renovo Capital partner Scott Lavie and Andronico's CEO, Bill Andronico, who is Frank's grandson and has been running the chain since the 1980's, publicly announced the closing of the deal and sale of Andronico's to the investment firms and their fund, following the approval by the bankruptcy court, as I reported on in my October 18 column.

The purchase price, as I noted on October 18, was $16 million.

Renovo Capital has already invested about $5 million in Andronico's in the form of secured debtor-in-possession financing, which was part of its strategy to keep Andronico's alive financially and operationally until it could complete the acquisition through the court proceedings, which began in August.

The closing of the University Avenue store in Berkeley was also a part of the deal worked out with the court.

The store's about 20 employees have been told by the new owners that they can apply for jobs at the remaining six Andronico's stores. However, that's more theoretical than a reality for all or most of the workers because the last thing the new ownership wants and needs to do is add to rather than reduce Andronico's labor costs, considering the small chain's debts of $10-$15 million are about equal to its assets, according to the Chapter 11 filing.

Renovo's Lavie and Bill Andronico, who is staying on for now to continue running the 82-year-old chain that bares his family's name, said Friday, as they've said previously, that the new ownership plans to invest cash to improve the stores and the small chain's operations.

Here's what Bill Andronico said on Friday: "I want to thank our loyal customers, our committed employees and our faithful vendors who have worked with us through this difficult chapter in the company's history. I am pleased that Renovo Capital's purchase will allow us to improve our standing in the market and build on the strong brand my family has built over three generations."

Bill Andronico is the third generation of the Andronico family to run the grocery chain, having taken over for his father John in the 1980's. John Andronico took over from his father, Frank Andronico, who in 1929 founded Andronico's with a small grocery store on Solano Avenue in Berkeley, the site of one of the three existing stores in the city.

Here's what Scott Lavie, a Renovo Capital partner who's been heading up the Andronico's deal said as part of the same announcement on Friday: "Andronico's will continue to operate six locations: three stores in Berkeley and markets in San Francisco, San Anselmo and Los Altos. Renovo is committed to investing into the store's physical infrastructure to update the facilities and ensure that the stores continue to improve the quality of service for which they have historically been known. As part of this effort, key members of Andronico's executive management team will be retained to manage the company and its operations."

Lavie added this in the announcement: "We are excited about the opportunity for improvement in Andronico's stores to better serve our customers." The acquisition of the Andronico's brand was based on its market cache, and in combination with Renovo's ability to invest in the stores and employees, we want to ensure that Andronico's continues its commitment to excellence and delivering value to our customers for generations to come."

According to the August bankruptcy filing, Andronico's was doing about $120-$130 million in annual sales at the time, which is considerably less than half the annual sales the chain was doing at its 14-store peak, based on sales figures I'm aware of from the early-to-mid 2000's.

In my October 18 column I offered some analysis and informed opinion on what I think the future might hold for Andronico's under the new ownership, if you care to take a look, here.

The "key members" of Andronico's executive management team that Scott Lavie says in the quote above will be retained by the new ownership potentially include, in addition to Bill Andronico: Steve Epidendio, Justin Jackson and Anthony Gilmore.

Last year Bill Andronico brought the three men, all former Whole Foods Market guys, along with another Whole Foods' alum, John Clougher, into the then family-owned chain to help him raise financial capital and turn the chain around.

Claughter, who has been the president and COO of Andronico's since then, reporting to Bill Andronico, is leaving to become the CEO of A.G. Ferrari Foods, a small specialty grocery chain that Renovo Capital and Rosewood also recently bought out of bankruptcy. (See my October 18 column for details).

Claughter, who is leaving to head A.G. Ferrari Foods as noted above is the former president of Whole Foods Market's Pacific Northwest Region, which includes Oregon and Washington State.

Jackson, who's held the title of executive vice president at Andronico's since last year, was the first Whole Foods Market alum Bill Andronico recruited last year. Most recently prior to that he was vice president of purchasing for Whole Foods' Pacific Northwest division.

Epidenio, who managed one of the Andronico's stores for about nine years, from the 1980's-to-early 1990's, later went on to become vice president of retail operations for Whole Foods Market's Northern California division. His position at Andronico's since last year has been as the grocer's vice president of operations.

Lastly, Anthony Gilmore, who was president of Whole Foods' Northern California region from 2004-2007 and worked for the natural-organic foods' chain from 1996-2007 before leaving in 2007 to take a job titled vice president of corporate lifestyle, new concept development and corporate perishables, at Pleasanton, California-based Safeway Stores, Inc., has since last year been Andronico's chief strategist and chief administrative officer.

From 2007-2010 at Safeway Stores' headquarters in the San Francisco Bay Area city of Pleasanton, Gilmore worked on, among other projects, the development of the grocer's "The Market" small-format fresh food and grocery chain.

Safeway opened its first "The Market" store in Long Beach, California in 2008, followed by a second unit in San Jose in 2009.

Safeway's CEO, Steve Burd, decided not to go forward with the small-format stores, which are very similar in format to Tesco's Fresh & Easy Neighborhood Market, as Fresh & Easy Buzz has reported. Not long after that decision by Burd, Gilmore, who worked for Safeway as a retail clerk and store manager for 19 years before joining Whole Foods Market, left the Pleasanton-based chain to join his fellow Whole Foods' alums at Andronico's.

There are additional details about the industry backgrounds of the former Whole Foods Market alums in my May 30, 2011 column about Andronico's  - 82-Year-Old Grocer Andronico's Needs A Sugar Daddy of Sorts: 'The Insider' Suggest Tesco and its Fresh & Easy Neighborhood Market Might Fit the Bill - if you're interested.

The executive management team - Bill Andronico, Epidenio, Jackson and Gilmore - is deep with experience in food and grocery retailing, including in Northern California's San Francisco Bay Area. But it also might be a bit to collectively expensive for the new ownership and for Andronico's balance sheet, even though there will be some savings on the expense side with John Claughter's move over to nine-store A.G. Ferrari Foods, which Renove bought out of bankruptcy for less than $2 million dollars.

Assuming all or most of the executive team is retained, based on the extensive experience and individual talents of each of the members, they have a shot at turning Andronico's around, assuming they do some out of the box thinking and implementation - no wholesale Whole Foods Market format cloning, for example - and are able to strike a fine balance between creating a strategic blueprint for going forward that combines the best elements of Andronico's successful food and grocery retailing history with much needed changes in how the chain has been operating for the last decade.

Andronico's knows merchandising - and executes it extremely well. As an example, take a look at the produce department merchandising pictured in the photographs above and below. The photos were taken November 27, 2009, at one of the six remaining stores. [Photo credit: Willo O'Brien.]

I'm not the foremost expert on Andronico's, if such a thing exists. But I've been a close observer of the grocer and the markets it operates its stores in for nearly three decades.

Therefore, I'm going to offer a list of five key action steps the new ownership needs to have the executive team start and focus on post-haste (immediately), as in beginning on Tuesday. On Monday they all need to go out in the stores, interact with shoppers, and give away free treats to kids in the stores for Halloween - along with an action timeline, if its serious about saving the six-store chain - and eventually growing it.

There are additional things to focus on - but this is a list to get busy on starting Tuesday morning.

Here goes:

1. Dump the Andronico's Community Markets name and go back to Andronico's Markets, which has been the grocer's name since it changed it from Andronico's Park & Shop in the 1980's.

Adding "Community" to the name of the stores add zero-value to Andronico's, its marketing position or operations, in my analysis. In fact, it's a determent. I see it as added word baggage and meaningless semantic clutter.

Customers and residents of the San Francisco Bay Area call the chain "Andronico's," and have done so for decades. Even before the family changed the name of the stores from Andronico's Park & Shop to Andronico'sAndronico's." In fact, that's one reason the grocer dropped "Park & Shop" from the name.

The name "Andronico's" (not Andronico's Community Markets) has brand equity with shoppers in the Bay Area, which is one reason Renovo says they bought the grocer out of bankruptcy. Why mess that up?

Further, the exterior signs on the six stores still say Andronico's Markets. Dropping "Community" from the name will not only fit with what shoppers already call the stores, it will save a ton of cash because it will eliminate the need to buy and install new store signage, which is an expensive proposition, particularly for a fledgling small grocery chain. It's money that should be put to better and higher uses by the new ownership.

Conversely, keeping the Andronico's Community Markets name but keeping the Andronico's Markets signs on the stores, which has been the case for over a year since the name change, creates brand dissonance among consumers. It's also extremely poor marketing and branding.

Additionally, if these two reasons aren't enough - and they are - dumping the Andronico's Community Markets name, which the new executive team created and changed the name of the company and stores to last year, apparently in an attempt to tell shoppers that the grocery chain that's been family-owned and community-based for 82-years was now really community-based, gives the new ownership a great press release headline story.

My press release story headline would read something like this: "Back to the future at Andronico's: New owner takes back the Andronico's Markets' name because it's meant 'community grocer' for eight decades."

Timeline: Launch by Friday, November 4.

2. Evaluate each of the stores ... using a metaphorical microscope.

The San Francisco store (Inner Sunset District) is an excellent location. The new owners need to nurture it.

The Shattuck Avenue Andronico's unit in Berkeley is a good location. The store on Solano Avenue (Berkeley) is decent-to-fair. The Telegraph Avenue (Berkeley) unit is mediocre - but has potential to improve.

The benefit in Berkeley is the three stores give Andronico's brand, advertising and promotional synergy and reach. But the stores have to perform on their own, and do so against major and increasing competition, in order to justify keeping all three open.

Regarding the stores in San Anselmo and Los Altos, unless they're performing better than I'm told (neither has ever been a sales barn-burner by the way), I would put them under the microscope closely. I would be asking 'Would closing one or both of these stores and using the savings to grow business at the remaining stores (and possibly adding a new location) be a better alternative than keeping them open?'

Were I crafting the strategy for Andronico's, there's a scenario I would look at closely.

Here it is: There's a potentially good location available to Andronico's in San Francisco, which is the vacant Delano's IGA Market store (about 15,000 square-feet) in the city's Richmond District. The store, at 6333 Geary Boulevard (at 27th Avenue), has been has been vacant since last year, when owner Harley Delano closed it, along with four other units, because of financial struggles. (see here for details.)

Tesco opened one of its Fresh & Easy markets not far away (at 32nd and Clement) in June of this year. That store has been doing fairly well since opening four months ago.

However, in my analysis the highly populated Richmond District could support a grocery store in the former Delano's building, particularly one that offers a strong mix of everyday grocery items, along with specialty and fresh foods offerings.

One problem with the Fresh & Easy stores is they only offer about $5,500 SKUs in the 10,000 square-feet of selling space. About 65% of those items are the chain's private brands. And of the remaining 35%, about half the items are nationally branded packaged food and grocery items. As a result, most shoppers can't get all they desire at a Fresh & Easy store, particularly when it comes to their favorite national grocery brands.

The former Richmond District Delano's location is just across Golden Gate Park from Andronico's supermarket in the Inner Sunset District. But the distance is such that few if any residents who live in the Richmond District cross the park to shop at the Andronico's, instead shopping at a Safeway supermarket in the neighborhood, along with another unit not far away on La Playa at Ocean Beach, and at the now-opened Fresh & Easy store.

What I would seriously look at would be potentially closing one of both of the two worse-performing (taking into consideration the future performance potential the stores have) Andronico's stores (which could easily be the San Anselmo and Los Altos units or the Telegraph store in Berkeley as I've noted previously) and then putting a new store in the vacant Richmond District Delano's building, assuming the costs of doing so were within reason. A decent monthly lease and the like. (I have no affiliation with the landlord of the building.)

Doing so would give the new ownership five or six stores - three units in Berkeley and two in San Francisco, under the two-store closing scenario, with one additional unit (total of six) under the one-store closing scenario.

Depending on relative performance, keeping the San Anselmo store in Marin County (the one-store closing strategy), which is much closer to San Francisco and Berkeley geographically than the Los Altos store is, would make the best sense from a synergy perspective because the six units would all be located in fairly close geographical proximity.

Berkeley, San Francisco and San Anselmo are all clustered fairly close together. Los Altos is farther out in the South Bay Area, next door to Palo Alto where Andronico's closed the store in July.

The type of store I envision for Andronico's in the former Delano's building is a smaller version (with some differences) of its Inner Sunset-San Francisco supermarket, which is nearly 30,000 square-feet.

The Richmond District-San Francisco Andronico's would carry at least 20,000 SKUs, with a mix of basic groceries, specialty-natural-organic products and fresh prepared foods.

Mollie Stone's Markets, which took over one of the former five Delano's stores, the unit in San Francisco's Castro District, offers that many SKUs in the store, which only has 9,000 square-feet of selling space. The former Delano's in the Richmond District has at least 12,000 square-feet of selling space, based on my estimate.

I would go stronger proportionately on the basic grocery category and item mix (essentials) in the hypothetical Richmond District Andronico's store than Mollie Stone's has done with its store in the Castro District (which has a good mix for the neighborhood) because the Richmond isn't as strong demographically for specialty-natural organic and fresh-prepared foods, a specialty of both Mollie Stone's and Andronico's, as the Castro District neighborhood is.

Were I directing strategy at Andronico's I would use the Castro Mollie Stone's store, along with an edited version of the Inner Sunset Andronico's supermarket, as the basis of my blueprint for the Richmond District Andronico's new unit. The Richmond District neighborhood also has a substantial Asian-American population (primarily Chinese but also others), so I would make sure to focus on the Asian foods category across all of the store's departments, particularly dry grocery, produce and fresh meat.

The hypothetical Richmond District Andronico's in my plan would be very much a basic grocery store - rather than a specialty grocery store with a selection of everyday products - with a major focus on fresh produce and meats, a lot of everyday food and grocery essentials, and a decent selection of specialty-natural-organic items, along with a small but very comprehensive ready-to-eat and ready-to-heat fresh-prepared foods offering, which historically is a category Andronico's has been a pioneer of in the Bay Area and even nationally in the U.S.

Timeline: Start the analysis now. Make a decision fast.

3. Conduct the category and pricing reviews next week. Make changes rapidly.

The new ownership needs to focus more than Andronico's has in the recent past on customizing the store's product mix to location. For example, with the opening last year of the Whole Foods Market store nearby in the Haigh-Ashbury District, Andronico's should beef-up its everyday grocery product offerings at its store in San Francisco's Inner Sunset District. Whole Foods doesn't carry everyday groceries - Tide, Charmin, Kelloggs, Coke and the like - and doing so is a competitive advantage Andronico's should better capitalize on in the store, which is its best-performing unit out of the six grocery markets.

The new ownership needs to look at each of the six stores in this way. Localize, localize, localize, when it comes to product categories and merchandise mix.

Timeline: Begin next week. Implement before year-end.

4. Go back to a weekly advertising circular. Add substance back.

One of the major cutbacks Andronico's made was to reduce its once very substantial weekly advertising circular to one that's a fraction of the former flyer. Its also reduced the promotional frequency of the circular from weekly to about one every three weeks. That won't cut it in the very competitive Bay Area markets where its stores are located.

Therefore, one of the first things I would do is bring back the substantial, weekly circular. However, I would put an equal focus on distributing digital, non-paper versions of the weekly ad - company website, Facebook, ect. - as I would paper versions, which are generally direct-mailed to households our included in Tuesday or Wednesday editions of local newspapers.

Timeline: Break the new, expanded ad for the Thanksgiving holiday sales week. That's about two weeks from today.

5. Hold a "Thanksgiving" community celebration at each store, thanking shoppers for sticking with Andronico's through tough times - and letting them know better days are coming soon.

Timeline: A week before the Thanksgiving Holiday. It is a "thanksgiving" celebration, after all.

This is just a start. But the five action items are good ones for the new ownership to put on the "to do" list, to be tackled starting Tuesday morning. I'll take a look at Andronico's, and my list, again before the end of the year.

Note: In my first column about Andronico's financial difficulties, on May 30, 2011, I strongly suggested to president Bill Andronico and his senior management team that they start using social media, particularly Facebook and Twitter, post-haste, as a low-cost, potentially high-impact way to talk to customers and shoppers specifically about what's going on with the company and generally as a way to communicate about and promote the stores.

Three weeks later, on June 20, Andronico's became active with a Facebook page, and over the last few weeks has been posting a variety of information on it on a regular basis - and doing a good job of it.

Additionally, on July 29 Andronico's set up and account on Twitter - @andronicos1 -  and has benn regularly posting tweets as a way to talk to customers and promote the stores.

I haven't (intentionally) has any direct communication with the members of the Andronico's senior management team, but the timing of the launch on Facebook and Twitter is definitely interesting, based on the playbook I've been suggesting for the grocer.

It's also something the senior management team should have been doing a long time ago. But, as a wise man (or it could have been women) once said ... Better to be late to the party than to have never attended. Social media offers a lot of potential for Andronico's if used regularly and in a creative way.

Related Stories

October 18, 2011: Look for Fresh & Easy Neighborhood Market to Grab Closing University Avenue Andronico's Supermarket in Berkeley CA ... If it Can

October 18, 2011: May-to-October at 82-Year-Old Andronico's Markets: New Owner, 2 Stores Closed ... Now What?

May 30, 2011: 82-Year-Old Grocer Andronico's Needs A Sugar Daddy of Sorts: 'The Insider' Suggest Tesco and its Fresh & Easy Neighborhood Market Might Fit the Bill

>Also see the following links - Mollie Stone's Markets, DeLano's IGA Markets - for additional related stories.

>You can read all of our 'The Insider' columns at this link -  The Insider - along with all past coverage about Andronico's here.

Move Over Chipotle - Fresh & Easy Neighborhood Market Introduces its Own Brand of Burrito Bowls

Private Brand Showcase: Fresh-Prepared Foods

Taking a cue perhaps from the super-popular Chipotle Mexican Grill restaurant chain, Tesco's Fresh & Easy Neighborhood Market has introduced a new line of refrigerated, fresh-prepared ready-to-heat burrito bowls under its fresh&easy kitchen fresh-prepared foods private brand.

The 15 ounce burrito bowls (pictured at top), which come in three varieties -  pollo asado (chicken), carna asada (beef) and carnitas (pork) - recently hit the refrigerated display cases in the 183 Fresh & Easy fresh food and grocery markets in California (134 units), Arizona (28 stores) and Nevada (21 units).

In addition to the meat main course, the burrito bowls also contain ingredients eaters would expect to see inside a traditional tortilla-wrapped burrito, including rice and beans. We spotted corn in one of the bowls as well.

The everyday retail price for all three varieties of the fresh&easy kitchens' burrito bowls is currently $4.49 each.

Chipotle's famous burrito bowl.

Burrito bowls,which are essentially open-face traditional burritos in a bowl, have been a big hit for Chipotle Mexican Grill, the natural foods and ingredients-focused fast-casual food chain that's been growing rapidly since the first restaurants were opened in 1993.

There are currently about 1,200 Chipotle restaurants, with many more on the way. Most of the units are in the U.S. Chipotle also has restaurants in Canada and the United Kingdom.

The chain, which has as its motto "Food With Integrity," takes great care in sourcing the ingredients it uses in it ready-to-eat food items. It also puts a major effort on ethical and local food sourcing, along with environmental sustainability.

Unlike most U.S. fast food chains, Chipotle doesn't attempt to offer every sort of food combination possible on its menu, instead offering a limited assortment of items, using a mass customization approach that offers the basics, such as beef, chicken and pork as the base, and then lets customers customize the offering and build their own meals. For example, see the burrito bowl menu item here.

At $4.49 each, Fresh & Easy's burrito bowls retail for 30%-40% less than Chipotle's.

A number of U.S. natural foods companies have had frozen burrito bowls on the market for some time. Among the most popular brands are Evol Foods, Amy's Kitchen and Helen's Kitchen. The food-makers offer all-vegetarian varieties of burrito bowls as well as the meat versions. The frozen bowls take just a few minutes to heat in a microwave oven.

All three of the above noted brands are carried by numerous grocery chains, independents and natural foods retailers.

For example, Whole Foods Market carries the Evol and Amy's Kitchen burrito bowls in most of its 300-plus stores in the United States. The Amy's Kitchen brand is popular with big supermarket chains as well as in natural foods stores.

We've also spotted ready-to-heat and ready-to-eat burrito bowls in the deli/prepared-foods departments (refrigerated and heated cases) in a number of Whole Foods stores, including in California.

Iconic specialty grocery chain Trader Joe's also offers a line of frozen burrito bowls under its Trader Joe's store brand. Varieties include chicken, beef and pork.

California, Nevada and Arizona, the three western states where Tesco has its 183 Fresh & Easy stores, are, along with New Mexico, Texas and Colorado, the most Mexican food-focused states in America. The traditional burrito, for example, has become the first cousin to the hamburger among eaters in the three states, regardless of nationality.

The burrito bowl, in our culinary analysis, is sort of the California-Mex version of the traditional burrito - a blend of Mexican food tradition meets California cuisine.

From a culinary perspective the burrito bowl can also be conceptualized perhaps as the spicy Latin relative of the open-face sandwich, which is served on a plate rather than in a bowl though, and hasn't been a very popular restaurant item in America since the 1970's.

The burrito-minus-the-tortilla is becoming increasing popular, particularly in the west. Therefore, if Fresh & Easy displays its new private brand line of burrito bowls properly in-store, which it's currently doing in our observation, and promotes the new line, we think the grocer just might have a winner on its hands.

We also think a couple all-vegetarian burrito bowl varieties, and maybe a couple breakfast burrito bowls, are the  logical SKUs for a line extension when the time comes.

[Readers: Click on this link - private brand showcase - to read a selection of related stories.]

[Photo credit: Fresh & Easy Neighborhood Market.]

Former Meat Buyer Wins $400,000-Plus Legal Judgment From Fresh & Easy Neighborhood Market

Tesco's Fresh & Easy Neighborhood Market could have used the $489,747,73 to pay for six or seven of the in-store bakeries it's installing in many of its 183 stores, at the estimated cost of $65,000-$80,000 per-bakery installation, per-store.

Or perhaps the nearly half-million dollars could have been used to buy space on many more outdoor advertising billboards and additional radio advertising time, in order to create added awareness of and increased sales for the fledgling grocery chain, which has its stores in California, metro Las Vegas, Nevada and Arizona.

Or maybe on a more practical note, particularly since Fresh & Easy lost $112 million in Tesco's fiscal half-year ended August 27, the grocer could have used the $489, 747,73 to pay the wages and health care benefits of around 25 of its store-level employees, each making $10 hour and working an average of 30-hours a week, for an entire year. Each Fresh & Easy store employs about 25 part-time workers.

But neither of the three potential and logical uses for the $489,747,73 in question is an option.

Instead, Fresh & Easy Neighborhood Market recently paid the nearly half-million dollars to a former employee named Kyle Weathersby, who worked as a meat buyer for the Tesco-owned El Segundo, California-based chain until he was fired in 2008.

Weathersby, who lives in Southern California, was accused by senior management at Fresh & Easy of stealing meat, which was the stated reason for his termination.

Category managers and buyers at Fresh & Easy were also told by a member of the grocery chain's senior management team about Weathersby's firing, and the reason for it, which is something not generally done when dealing with sensitive human resource matters of such a nature.

We know this to be the case because we first learned about Mr. Weathersby, his firing and the meat issue shortly after it happened over four years ago, as did many of the employees who work at Fresh & Easy's corporate headquarters in Southern California.

According to our research, no criminal charges were ever filed against Weathersby, based on the meat theft accusation.

Shortly after being fired by Fresh & Easy, Weathersby, who is African American, and his Los Angeles-based attorney, Stephen Glick, filed a wrongful termination/employment discrimination lawsuit in Los Angeles County Superior Court against Tesco's Fresh & Easy Neighborhood Market.

Glick has extensive trial experience in employee rights and wrongful termination law, having won numerous cases for his clients against former employers, including grocery chains such as Kroger-owned Ralphs, Albertsons and the former Wild Oats natural foods chain, which was acquired by Whole Foods Market in 2007. He's also been involved in a number of high-profile employment-related class action lawsuits in California and on the federal level.

On June 10 of this year a Los Angeles County Superior Court Judge issued a judgment against Fresh & Easy Neighborhood Market for $489,747.73, awarding that amount to former Fresh & Easy meat buyer Kyle Weathersby, giving him and his attorney a victory in the lawsuit, which was filed in 2008 and in court for over four years.

This story hasn't been reported elsewhere, until now here in Fresh & Easy Buzz.

Court records show that Fresh & Easy Neighborhood Market fought Weathersby's case hard, spending a considerable amount of money on legal fees in the process.

But in the end the ex-meat buyer and his lawyer, who shares in the big cash award, won their case.

It took Weathersby a while following the judgment to get his check however - slightly over three months to be precise.

But in September, following a number of actions taken by lawyer Glick - culminating in a mid-August visit to the Fresh & Easy store in Pasadena, California accompanied by some Los Angeles County Sheriff's deputies armed with a writ of execution - Fresh & Easy Neighborhood Market paid the judgment amount due to the Los Angeles County Treasury Department, which in turn issued a check for $489,747.73, dated September 14, 2011 (pictured at the end of this story), to Kyle Weathersby's attorney, Stephen Glick.

Attorney Glick, after taking his cut of the winnings, forwarded on the bulk of the $489,747.73 to former Fresh & Easy meat buyer Kyle Weathersby.

We've reviewed the case, Weathersby v. Fresh & Easy Neighborhood Market.

If you add in the legal costs spent by Fresh & Easy Neighborhood Market to defend against the lawsuit, the financial loss to Tesco far exceeds the $489,747.73 paid out to the former employee who won his lawsuit against the grocery chain. Legal fees to defend against a lawsuit in Los Angeles Superior Court for four years don't come cheap for a grocery chain. They hurt even more when you lose the case.

Were we in Tesco CEO Philip Clarke shoes, who in 2008 was busy running the United Kingdom-based global retailer's corporate information technology department and retail operations in Europe and Asia, we would be asking numerous questions about how the termination was handled in 2008 by Fresh & Easy Neighborhood Market's senior management.

After all, Fresh & Easy Neighborhood Market, which has lost around $1 billion since the first stores were opened in November 2007, could have used the nearly half-million dollars to pay for the six or seven in-store bakery additions, to buy outdoor advertising and radio spots, or to pay the wages of the 25 or so store-level employees for an entire year, instead of spending it on lawyers and legal judgments.

Clarke, who inherited Fresh & Easy and its problems from Terry Leahy when he became CEO of Tesco in March of this year following Leahy's retirement - Tim Mason, Fresh & Easy's current CEO, has been in- charge of the chain in El Segundo-based since Tescoom Terry Leahy when he became CEO of Tesco in March of this year following Leahy's retirement - Tim Mason, Fresh & Easy's current CEO, has been in- charge of the chain in El Segundo-based since Tesco set up shop there in 2006 - has made a commitment that 183-store Fresh & Easy Neighborhood Market will break-even by the end of Tesco's 2012/13 fiscal year, which is a mere 16 months away, ending the last week in February 2013.

Doing so - breaking even at Fresh & Easy in 16 months - is now going to be around a million dollars more difficult for Clarke, Tesco and Fresh & Easy's thousands of employees to achieve, as a result of the $489, 747.73 judgement and associated lawyer fees and legal costs.

[Click on the facsimile of the check and check stub (below) from Los Angeles County, via Tesco's Fresh & Easy Neighborhood Market, to Kyle Weathersby's attorney, to enlarge it.]

Farms ... at Safeway? Grocer Launches its Newest Private Brand ... 'Safeway Farms'

Private Brand Showcase

Farms ... At Safeway?

The answer to the sentence above is yes, if the specific question is ... What's the name of Safeway Stores' newest private brand.

Pleasanton, California-based Safeway Stores, Inc., which we've nicknamed the "Private Brand Factory" because of its prolific practice of creating new food and grocery brands, is this week launching its newest own brand - "Safeway Farms" - which it's debuting on a line of packaged fresh produce items and salads.

We counted around 17 SKUs in the fresh produce and packaged lettuce/salad categories under the new Safeway Farms fresh produce brand in store visits.

Those items include fresh produce category staples like packaged Red Leaf, Green Leaf and Romain lettuce, bagged spinach, and petite baby carrots (pictured at top and below), along with bagged salad blends - American Blend, Spring Mix and Italian Mix, for example - salad kits, like Caesar and Southwestern Ranch, and ready-to-eat salad bowls in four varieties.

We also spotted one Safeway Farms steam-in-the-bag SKU, which is a steam-and-eat vegetable medley item.

The grocer's new Safeway Farms brand also features a selection of ready-to-eat salad bowls, called "Safeway Farms Cafe Bowl," in varieties including Cranberry-Walnut, Cobb and two others.

A list of the Safeway Farms' SKUs we've identified is at the end of this piece.

Safeway Stores hasn't announced its new private brand to the press via a press release or statement. Therefore it's likely you're reading about Safeway Farms for the first time in Fresh & Easy Buzz.

With the addition of Safeway Farms to its store brand portfolio, Safeway Stores, Inc. now offers three private brands in its fresh produce departments. In addition to the new brand, the others include - O' Organics (for organic packaged produce) and Eating Right, which is the retailer's healthy foods brand.

Safeway Stores' also offers a few packaged produce items under its "Safeway" value brand. The "Safeway" brand will go away in produce however, in favor of Safeway Farms, we're told.

Dual corporate name, no corporate name PB strategy

Safeway Farms is the second new private brand the supermarket chain has introduced this year that includes the the "Safeway" corporate name as part of the brand name.

The other Safeway name-inclusive brand is Safeway Kitchens, which we wrote about here in May. The brand featuring the corporate name was launched earlier this year, featuring a variety of bread and bakery items. The supermarket chain recently extended the Safeway Kitchens brand, which we said in the May 2011 story it would do, from the bread and bakery items into a two or three SKU line of breakfast cereals.

The Northern California-based grocer now offers four private brands featuring the Safeway name. Those brands are: "Safeway" (it's everyday value store brand), Safeway Select (a premium-oriented brand), Safeway Kitchens (so far in the bread/baked goods and breakfast cereal categories), and now Safeway Farms, which it's debuting in the fresh produce category.

At the other end of its private brand spectrum, Safeway Stores, Inc. offers numerous brands that don't include the "Safeway" name as a part of the brand name.

Those brands include: 'O Organics, which has become the leading organic foods brand in the U.S. with over $1 billion in annual sales; Eating Right (healthy foods) and Open Nature, the natural foods brand the supermarket chain introduced early this year with a line of fresh meats and poultry, and has since expanded into multiple categories encompassing perishables (deli, dairy), bakery (including a full line of breads), frozen foods and dry grocery (salad dressings, breakfast cereals, cookies and crackers and more).

Additional non-Safeway labeled private brands include: Signature Cafe (ready-to-eat and ready-to-heat fresh-prepared foods); Primo Taglio (lunch meats, cheese and related perishable deli items); Rancher's Reserve (fresh beef in the meat department); Waterfront Bistro (fresh and frozen packaged fish and seafood); Lucerne (dairy products); mom to mom (a line of baby products including disposable diapers, infant formula and toiletries); Priority Pet Care (pet supplies); and Bright Green, which is a line of environmental-friendly or "green" household product (cleaners, paper goods, light bulbs) and general merchandise items.

In early summer Safeway also introduced a new value-priced and value-positioned private brand called Pantry Essentials.  So far we've seen a handful of consumable items under the new brand, including toaster pastries and pancake mix in the dry grocery category, and packaged hot dogs in fresh meat.

Safeway Stores has also replaced the non-consumable products it previously offered under its Basic Red brand, which before that was called Value Red, with the Pantry Essentials brand. The products are household items - toilet tissue, paper towels, facial tissue, garbage bags, paper plates, plastic cups and a few others.

Safeway sells its 'O Organics and Eating Right brands to other retailers in the U.S. and overseas through an entrepreneurial venture business it created in 2009. It plans to offer its fast-growing (in SKU-count and dollar sales) Open Nature natural foods' brand as part of that brand marketing and wholesaling business in the near future, a source in a position to know at the grocer's headquarters in Pleasanton recently told Fresh & Easy Buzz.

Meanwhile, the addition of the Safeway Farms' brand and the new produce items under it demonstrates that Safeway Stores, Inc. plans to continue extending the "Safeway" product brand name (and corporate name) throughout store departments - it's in the dry grocery, bakery, perishables, frozen food and general merchandise categories under the Safeway and Safeway Kitchens brand names already - along with putting a focus on its various non-Safeway-named private brands, the two most recent being the price and value focused Pantry Essentials brand and the value-added Open Nature, both of which were launched this year.

Below are the Safeway Farms' brand produce SKUs we've identified:

Packaged Specialty Produce
Safeway Farms Petite Carrots
Safeway Farms Steam In Bag Vegetable Medley

Packaged Lettuce
Safeway Farms Romain Lettuce Singles
Safeway Farms Hearts of Romain
Safeway Farms Green Leaf Lettuce
Safeway Farms Red Leaf Lettuce

Safeway Farms (packaged) Lettuce Mixes
Spring Mix
American Blend
Baby Spinach

Safeway Farms (packaged) Salad Kits
Apple, Blue Cheese & Pecan
Southwestern Ranch
Italian Salad
Supreme Caesar

Safeway Farms Cafe (salad) Bowls
Cranberry-Walnut Salad
Chef Salad
Cobb Salad
Spinach Dijon Salad

Related Stories

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

May 28, 2011: At The 'Brand Factory': Safeway Stores' Launches Newest Private Brand - 'Safeway Kitchens'

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

January 5, 2011: Safeway Adds 'Open Nature' to its Natural-Organic-Healthy Foods' Private Brand Portfolio

April 8, 2011: The Branded 'Signature Cafe' in Safeway Stores' Soon to Open 'Social Safeway' in Washington D.C. Should Turn A Few Heads

July 21, 2010: 'Sipsational' & 'Quenchtastic': Safeway Introduces New 21-Flavor Line of Soft Drinks Under 'refreshe' Private Brand

Click on this link - Safeway Stores Inc. - to read additional stories about Safeway.

Click on this link - private brand showcase - to read past stories in our 'Private Brand Showcase' feature.

Look for Fresh & Easy Neighborhood Market to Grab Closing University Avenue Andronico's Supermarket in Berkeley CA ... If it Can

Breaking Buzz

Companion Story - October 18, 2011: May-to-October at 82-Year-Old Andronico's Markets: New Owner, 2 Stores Closed ... Now What?

Look for Tesco's Fresh & Easy Neighborhood Market to grab the lease on the Andronico's grocery store on University Avenue in Berkeley, California that the new owners of the six-store supermarket chain announced yesterday it will be closing soon, if it can strike a deal to it and the landlord's liking before another grocer does.

Investment firms Renovo Capital and Rosewood Investment Capital, which last Thursday acquired 82-year-old family-owned Andronico's through its $50 million Renwood Opportunity Fund partnership for about $16 million, said yesterday they're closing the University Avenue store, which is one of four Andronico's grocery markets in Berkeley. The closing will leave Andronico's with six stores, three in Berkeley, and one each in San Francisco, San Anselmo and Los Altos.

Andronico's filed for Chapter 11 bankruptcy protection in August, listing debts of $10-$50 million, with assets of about the same amount. Renovco Capital, which among other things provides financing to financially struggling companies, has kept Andronico's operating since August by providing it with about $5 million of asset-secured debtor-in-possession financing.

Fresh & Easy Neighborhood Market has been looking for store locations in Berkeley for some time as part of its launch into Northern California early this year.

So far the fresh food and grocery chain has opened 14 stores in the region, 12 of which are in the San Francisco Bay Area. Berkeley is in the East Bay Area, where almost half of those 14 Fresh & Easy stores are located. Fresh & Easy has no planned locations to date for Berkeley, where space for new grocery stores is difficult to find.

We happen to know from sources internal to and that work closely with Tesco's Fresh & Easy that the University Avenue Andronico's store in Berkeley has been on the El Segundo, (Southern) California 182-store fresh food and grocery chain's radar screen, should it be closed.

Now that Andronico's new owners have announced the closure of the University Avenue store (something our 'The Insider' columnist said in a May column was likely and wrote about in his column today, linked at the top), new owners or not, we're told Fresh & Easy wants the location if it can get it can strike a deal. In fact, according to our sources, both the building's landlord and representatives of the City of Berkeley's economic development department plan to talk to representatives of the grocery chain about the soon-to-be-vacant grocery store as early as this week.

The City of Berkeley's economic development team also plans to reach out to other grocers about taking over the University Avenue Andronico's store, a member of the staff told us yesterday.

In our analysis the location has the potential to be a good one for Tesco's Fresh & Easy.

Iconic grocer Trader Joe's recently opened a new store on University Avenue, not far from the Andronico's location. The Trader Joe's has taken considerable business from the store. However, in our observation and analysis, it was Andronico's overall financial problems that hurt the University Avenue store's sales performance over the last couple years more so that the opening of the Trader Joe's, although it's opening was significant.

In terms of other grocers, the Andronico's location is sort of a mixed bag, depending on the food retailing format. For example, we don't see the Bay Area's three leading grocery chains - Safeway Stores, Save Mart/Lucky or Raley's - being interested in the University Avenue store, which is under 20,000 square-feet.

However, the University avenue location is a potentially good one for natural-organic foods chains like Sprouts Farmers Market, Sunflower Farmers Market and Whole Foods Market. At one time natural foods chain Wild Oats, which was acquired a few years ago by Whole Foods, had a small store (about 5,000 square-feet) on University Avenue near the Andronico's market. But the store was closed over a decade ago as part of then Wild Oats' decision to close what were a handful of stores it operated in Northern California.

The Andronico's location also offers potentially good opportunity for local Bay Area independent grocery chains like Mollie Stone's Markets and Lunardi's, both which operate supermarkets that offer both mainstream groceries and specialty selections.

Both Sprouts and Sunflower Farmers Market have big plans for Northern California, focusing on the Bay Area and Sacramento region. We expect both grocers to look at the site, assuming Fresh & Easy Neighborhood Market doesn't grab the lease this week.

May-to-October at 82-Year-Old Andronico's Markets: New Owner, 2 Stores Closed ... Now What?

Companion Story: October 18, 2011: Look for Fresh & Easy Neighborhood Market to Grab Closing University Avenue Andronico's Supermarket in Berkeley CA ... If it Can

The Insider - Heard on the Street

In May I wrote in detail about the financial problems facing one of California's oldest family-owned grocery chains, 82-year-old Andronico's, which at the time operated eight supermarkets in Northern California's San Francisco Bay Area.

[Read my May 30, 2011 here: 82-Year-Old Grocer Andronico's Needs A Sugar Daddy of Sorts: 'The Insider' Suggest Tesco and its Fresh & Easy Neighborhood Market Might Fit the Bill.]

In the column I said the survival-mode shoes would soon start dropping at financially troubled Andronico's, which underwent a name change last year from Andronico's Markets to Andronico's Community Markets. They did ... And continue to do so.

The first shoe dropped in July, when the upscale-oriented food and grocery chain, which was founded in 1929 by Greek Immigrant Frank Andronico and has been headed for two-plus decades by his grandson, Bill Andronico, closed its store in the Stanford Shopping Center in Palo Alto, California. I pointed out in the May piece that the store was one of the three worse-performing of the eight Andronico's units.

In August the other shoe - perhaps better described as a heavy-heeled boot - dropped: Andronico's, with one less store than it had a month earlier, filed for Chapter 11 bankruptcy protection, listing debts in the $10-$50 million range, with assets about equal to its debt load.

Not long after the August filing in federal bankruptcy court in Oakland, California, Renovo Capital, a financial firm that invests in companies in financial distress, provided about $5 million in asset-secured debtor-in-possession financing to Andronico's to keep it alive. Renovo also began negotiations with Andronico's to acquire the grocer, which has been owned by the Andronico family since 1929 (three generations).

Last Thursday Renwood Opportunities Fund, a partnership created in October 2010 between Renovo Capital and Rosewood Private Investments, acquired Andronico's from the family for about $16 million, having received final approval to do so from the bankruptcy court. The $50 million Renwood Fund was established last year by the two investment firms to invest in distressed middle-market companies and special situation opportunities.

Two days before, on Tuesday, the financial firms also bought bankrupt nine-store San Francisco Bay Area specialty foods store chain A.G. Ferrari Foods through the $50 million Renwood Fund.

Like Andronico's, A.G. Ferrari, which has three stores in San Francisco, two in Oakland, and one each in Berkeley, Lafayette, Corte Madera and Los Altos, is a food retailing institution in the San Francisco Bay Area. It was founded as a family-owned and operated importer of Italian Foods in 1919. The first store was opened shortly thereafter.

The small stores offer imported and domestic specialty and gourmet groceries, including under it's own label, some frozen foods, and an extensive selection of ready-to-eat and ready-to-heat fresh-prepared foods, with a specialization in Italian cuisine.

Paul Ferrari, a member of the founding A.G. Ferrari Foods' family and who remains president of the chain - for now - expanded the operation over the last couple decades, ending up most recently with 13 stores. Six stores have been closed as part of the specialty retailer's financial problems, which resulted in it filing Chapter 11 earlier this year.

The new owner has brought on ex-Whole Foods Market man John Clougher, who as I reported in my May 30 column has been a top executive at Andronico's since 2010, as CEO of A.G. Ferrari.

Renovo-Renwood hopes it can create some synergies between the seven-store A.G. Ferrari Foods and six-store Andronico's, which is a major reason why they bought both out of bankruptcy, and which is one reason why Clougher, who's been at Andronico's since last year, was named CEO of A.G Ferrari.

In terms of that attempt to find synergy, here's a scoop: Look for A.G. Ferrari's private brand of Italian and related specialty and gourmet food products to start showing up on the shelves and in the perishable cases at the six Andronico's stores in the coming weeks.

Back at Andronico's, as part of the Renovo-Renwood acquisition, Bill Andronico remains CEO of the food and grocery chain founded by his grandfather, Frank, and headed for decades by his father, John, until he took over in the 1980's - at least for the time being.

A week after acquiring Andronico's, Renovo-Renwood made its first move yesterday, announcing it's closing the Andronico's unit on University Avenue in Berkeley, California.

The closing will leave the grocer with three grocery stores in the Easy Bay Area city of Berkeley - one each on Shattuck, Telegraph and Solano avenues.

The other three stores are in the Bay Area cities of San Francisco, Los Altos and San Anselmo.

As I correctly reported in my May 30 column, based on information from my sources, the University Avenue unit was the poorest performing of the four Berkeley stores, something the new owner confirmed yesterday.

The new owner said yesterday that it doesn't plan to close any of the remaining three stores in Berkeley. But it wouldn't surprise me in the least bit if the investment firm's aren't forced soon to close one of the remaining three Andronico's stores in the city, even though I believe it would like to keep all three for reasons of having a better retailing critical mass in Berkeley.

My predicted candidate for closure in Berkeley, if it comes, is the Telegraph Avenue Andronico's unit, which over the last couple years has lost considerable sales to a nearby Whole Foods Market store and Berkeley Bowl, a very popular and high volume local two-store independent grocer. Both Berkeley Bowl stores are located in the city.

The store on Solano Avenue has seen better days as well. And in the coming year-to-two years it will face increased competition from Safeway Stores, which plans to expand and renovate a store nearby, and Whole Foods Market, which is planning a second store not far from the Shattuck Andronico's unit in Berkeley.

The Shattuck Avenue Andronico's market has historically been the grocer's top-performer in the city, but it too is coming under increased competition from Safeway Stores, which also has plans to expand and renovate an existing supermarket not far from the location.

The new owner also must take a serious look at the Andronico's units in the North Bay Area city of San Anselmo (Marin County) and Los Altos, which is in Silicon Valley in the South Bay and not far from the Palo Alto market the grocer closed in July.

Each of the units are Andronico's only grocery stores the respective regions. Having a single store in a market-area - and the North and South Bay are both heavily populated and competitive areas - is a difficult proposition for a grocer because of a lack of critical mass (stores) when it comes to marketing, advertising and promotion. Renovo-Renwood, which doesn't have deep experience in operating grocery stores, will find this out sooner rather than later.

Selling or closing one or both of these stores is something I believe could come before a closing or selling of the Telegraph Avenue store in Berkeley would. Under this scenario, the new owners could sell one or both of these stores and use the cash to improve and promote the remaining four stores, the three units in Berkeley and the supermarket in San Francisco, which is the top-performing store out of the six grocery markets.

Even Andronico's best performing store, the unit in San Francisco's Inner Sunset District noted above, has its challenges. Last year Whole Foods Market opened a new store at Haight and Stanyon Streets in the San Francisco's Haight-Ashbury District.

The Haight-Ashbury Whole Foods store, which is about a five minute drive from the Andronico's unit in the Inner Sunset, has taken some business away from Andronico's, which like Whole Foods specializes in natural, organic and specialty foods, as well as fresh-prepared foods.

The Inner Sunset Andronico's should be able to hold its own though for a couple key reasons.

First, it's the only full-service supermarket in the highly-populated Inner Sunset District. The store has also been a fixture in the neighborhood for decades and has fairly strong customer loyalty.

Additionally, unlike Whole Foods, Andronico's offers a full-selection of mainstream food and grocery products - think big brands like Kraft and Coke and products like Kellogg's Frosted Flakes and French's Mustard - in its stores, including the unit in San Francisco. This is a big plus for the grocer at the Inner Sunset location vis-a-vis the nearby Whole Foods Store.

Additionally, the nearest major mainstream competitor to the Andronico's store is a fairly small Safeway Store a couple miles away on Noriega Street in the Outer Sunset District. There's very little available space in the Inner Sunset for a competitor to open a decent-sized grocery store, as well, which makes the Andronico's location valuable from a geographical perspective.

It's too early to know if Renovo-Renwood can turn Andronico's around, let alone make a success out of the small chain, which has a history of innovation in the Bay Area, which include innovations in interior store design, display fixture use and merchandising that have been copied locally by Safeway Stores, Whole Foods Market and others.

The new owner faces numerous challenges. These include: the diminution in quality and poorer-then-historical appearance of the stores over the last couple years, which the new owner says its going to reverse by investing in renovations; increased competition in every city where the six stores are located; the debt load the new owner is assuming, which includes $1 million owned the United Food & Commercial Workers (UFCW) employee pension fund - Andronico's is a unionized grocer - and more.

Of course the investment firms just might want to turn Andronico's and the six stores around "just enough" to sell the chain off as a whole or sell the stores off individually to multiple grocers, which is the strategic plan I believe Renovo-Renwood is attempting and hopes to pull off.

And speaking of unions and grocers, the contract between the UFCW and Northern California's unionized grocers, which includes Andronico's, expired ten days ago. Contract negotiations are currently taking place between representatives of the union locals and Northern California's three-largest unionized chains, Safeway Stores, Inc., Save Mart and Raley's.

Based on Andronico's poor financial condition, competitive challenges and the fact Renovo-Renwood is going to have to invest substantial capital in the grocery chain in order to keep it alive, not to mention make it successful, it wouldn't surprise me in the least bit if the new owners ask the UFCW union locals for a number of contract concessions, or even attempt to leave the union completely, although that will be near-impossible, when it comes to negotiating and signing a new three-year contract this year.

In the past, Andronico's, like most of the unionized small chains and independents in Northern California - and there are many of them - essentially agreed on the terms of the contract - often called a "me too" contract deal - negotiated and agreed to between the union locals and the region's "Big Three" chains.

Andronico's did this last time around, three years ago. But that was then and this is now. Were it not for Renovo-Renwood providing emergency financing for and then acquiring Andronico's, the 82-year-old grocer would likely have gone out of business. That would have put around 350 unionized store-level grocery workers out of a job.

I expect the new owners to attempt to use this leverage on the union locals in contract negotiations, probably in separate talks from those currently going on between union officials and the "Big Three" chains, although the fact the pension fund is owned $1 million by Andronico's, a debt which the bankruptcy court hasn't discharged according to the my recent review of the court's records, should give the UFCW locals leverage of their own, in turn.

The store-level employees of Andronico's, many who've been in the UFCW union for 10 or more years, and in the case of others are close to retirement, will also join with the union if the new owners make any attempts to go non-union. Many are already very concerned about the debt owed the union pension fund, for example.

The good news, if you appreciate the saving of an 82-year-old regional food and grocery retailing institution - Andronico's Community Markets, or Andronico's Markets if the new owners take the advice I offered in my May 30 column to go back to the old name - is six of the eight stores remain in business, as for now does the "Andronico's" name and brand.

I say "for now" because those of us with experience in food and grocery retailing acquisitions know they seldom end up down the road turning out like the buyers and sellers say they will, particularly when the acquired retailer is a financially distressed grocer and the buyer is a fund, with an expected return on investment, created by two investment firms.

Such investment vehicles are designed to eventually make money for the firms, usually within a five-year time horizon. And that money is generally made by selling the financially distressed property (read Andronico's) that was bought at a discount.

My bottom line: The new owners will restructure the Andronico's operation, lowering labor costs (they've started that process already with the decision to close the store on University Avenue in Berkeley); invest some cash in improving the looks of the stores (any they don't sell soon); pump up the marketing and promotional budget and spend somewhat; and then attempt to either sell all six supermarkets as a whole or sell off the six stores in pairs or individually.

The predicted time horizon: One-to-four years, with a preference from the new owners to achieve the objective, with a decent profit, sooner rather than later.

Walmart Closing its Four Marketside Small-Format Markets in Arizona October 21

The soon to be vacant 'marketside by Walmart' store in Tempe, Arizona.


Walmart Stores, Inc. will close its four small-format "marketside by Walmart" fresh food and grocery markets in metropolitan Phoenix, Arizona on October 21, Fresh & Easy Buzz has learned.

Walmart representatives met with the employees of the four stores, located in the Phoenix metro-region cities of Mesa, Gilbert, Chandler and Tempe, today, informing the workers that the four stores opened on October 4, 2008 will be closed October 21, and that "marketside by Walmart" will cease to exist as a format for the retailer, according to our sources, which include employees at two of the four stores who we talked to shortly after they were told of the closings. [Click on this link to read stories about the October 4, 2008 openings.]

Walmart currently has no plans to open stores in the soon to be vacant "marketside by Walmart" locations under either its Walmart Market/Walmart Neighborhood Market smaller-to-medium format chain or its new Walmart Express small-format, according to our sources.

Walmart Stores, Inc. held its Annual Meeting for the Investment Community today. Presentations were made by CEO Mike Duke, Walmart U.S. chief Bill Simon and other key senior executives. But no mention was made of the retailer's plans to close the four "marketside by Walmart" stores, perhaps because the store employees were being told of the October 21 closure plans at the same time the investment meeting was taking place.

That Walmart Stores is closing the small-format stores (originally called "marketside") it opened as a test three years ago doesn't come as a surprise to Fresh & Easy Buzz. For example, we reported in September 2010 that Walmart planned to either close or convert the four "marketside by Walmart" stores to a different format by early this year.

We were correct about Walmart's plans to close the grocery markets at the time, although according to our sources the retailer eventually decided to wait until the fall, this month, to do so for a variety of reasons. As such, we did get the specific date wrong.

The fact of the matter is, as we've previously reported, Walmart essentially decided to shelve the "marketside by Walmart" format in late 2009. In 2010 the retailer made the decision to not open any additional stores and to close the four units in Arizona before the end of 2011.

Instead of "marketside by Walmart" becoming its small-format strategy for the U.S., Walmart then decided to go forward with a dual smaller-format store strategy: Walmart Market (smaller-to-medium format stores in the 28,000-to-60,000 square-foot range) and the small-format Walmart Express, which averages 10,000 (some urban versions like the one recently opened in Chicago) -to- 15,000 square feet.

In addition to the first urban region Walmart Express opened last month in Chicago, there are four other units, two in Arkansas and two in North Carolina. Those stores, all in rural towns, are in the 15,000 square-foot range.

In this December 21, 2009  piece - Wither Walmart's Small-Format 'marketside' Stores and Format? - we wrote about the eventual decline of Walmart's "marketside by Walmart" small-format experiment. On October 21 the final chapter of the test (and the withering) will come to an end when the four stores in metro Phoenix, Arizona are closed.

Perhaps it's appropriate (and also a bit ironic) that the four stores involved in Walmart's first new small-format experiment of its modern era, "marketside by Walmart," are located in metro Phoenix, because like in the story of the mythical "Phoenix" that rose from the ashes, a revamped smaller-to-medium format version of Walmart Neighborhood Market and a new small-format convience-oriented grocery chain, Walmart Express, have risen from its ashes.

Walmart U.S. president Bill Simon said at the investor conference today that the retailer plans to open an additional six Walmart Express stores by January, 2012, for a total of 11.

The format is still in test mode, according to Simon, and Walmart will decide whether or not it will go forward with more 'Express' stores once all 11 units are open and have a little history behind them.

"The roll out of Walmart Express is predicated on the review of our pilot program, and the opportunity to build greater scale in a particular market," he said.

Simon also said today that Walmart plans to open between 80-100 of the smaller-to-medium-format (28,000-60,000 square-foot) Walmart Market/Walmart Neighborhood Market stores next year.

This is a major smaller-to-medium format push for Walmart. To put the 2012 plans into perspective, Walmart has opened just under 200 Walmart Neighborhood Market stores in the U.S. since it launched the format and chain about 15 years ago.

The original Walmart Neighborhood Market stores averaged about 42,000 square-feet. The 28,000-60,000 square-foot Walmart Market/Walmart Neighborhood Market format is a revamp of the format.

But despite all this small (format) talk, the mega-supercenter will continue to be Walmart's primary format going forward over the next couple years.

Bill Simon said today Walmart plans to open 130-135 supercenters next year. The new supercenters will average 90,000-120,000 square-feet, although many will be larger than that. As such, the amount of new supercenter square-footage dwarfs that of the planned new smaller-to-medium and small format stores.

Additionally, he said Walmart plans to open as any as 385 new stores in the U.S. over the next two years, with the vast majority of those new units being supercenters.

The "marketside" brand name will live on in the form of Walmart's fresh foods brand (see here) of the same name, which includes a variety of fresh-prepared foods, deli items, bakery goods and packaged fresh produce.

The fresh food products under the"marketside" brand are sold in most of Walmart's supercenters, Walmart Neighborhood Market and Walmart Express stores.

But as Walmart expands its smaller format store base in the U.S. over the next couple years, none of those numerous planned new smaller stores it opens will be "marketside by Walmart" units.

Related Stories

December 21, 2009: Wither Walmart's Small-Format 'marketside' Stores and Format?

October 19, 2010: Walmart's Four 'Marketside by Walmart' Stores Set to Be Closed Soon Never Came Close to Weekly Sales of $100,000

October 11, 2010: Walmart to Outline its Urban-Focused Smaller-Format Grocery Store Plans Wednesday; What Might Be In-Store?

September 23, 2010: Revisting 'marketside by Walmart': Format As We Know it On the Way Out But Some or All Of the Four Stores Could Be Converted

September 9, 2010: Walmart Plans to Close Arizona 'marketside by Walmart' Stores, Dump Format By Year-End or Early 2011

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

Additionally, click here, here, here, here and here for more related stories. Also see the links on the pages.