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.