Monday, January 31, 2011

UFCW Union Launches Outdoor Billboard and Facebook Ads as Part of its 'Fix Fresh & Easy' Media Campaign

The billboard pictured above is on the 405-Freeway in Southern California.

Tesco's Fresh & Easy and the UFCW Union

The United Food & Commercial Workers Union (UFCW) has expanded its "Fix Fresh & Easy"media campaign from its initial website and social media efforts - Twitter feed, Facebook page and YouTube channel - to outdoor advertising and targeted advertisements on Facebook.

Additionally, the union has launched a new video on its YouTube channel, which is tied-in to the advertising campaign.

In a story on December 20, 2010 - UFCW Union Launches New 'Fix Fresh & Easy' Neighborhood Market Website and Social Media-Based Campaign - we reported that the UFCW union was launching its "Fix Fresh & Easy" Neighborhood Market campaign, which is a multi-media-based effort to draw attention to what the grocery clerks' union says are numerous problems at the Tesco-owned, El Segundo, California-based fresh food and grocery chain, which has had operating losses of over $500 million so far since the first Fresh & Easy markets opened in November 2007.

"Fix Fresh & Easy" is the latest effort by the UFCW to unionize store-level employees at United Kingdom-based Tesco's 156 Fresh & Easy markets in California, southern Nevada and metro Phoenix, Arizona, something the union, which represents about 1.5 million retail grocery clerks and workers in allied industries in the U.S., Canada and Puerto Rico, has been attempting to do beginning before the first stores opened in late 2007.

It's also a new tact for the UFCW union, in that "Fix Fresh & Easy" takes a "consultative" approach, pointing out what the union and some Fresh & Easy Neighborhood Market store workers say are problems with how the chain is operated, then offering various solutions (fixes) to those problems, often times using employees of the chain to deliver those messages via various forms of media.

Outdoor advertising

The UFCW union has kicked-off the new outdoor advertising element of its "Fix Fresh & Easy campaign with a billboard (pictured at top), which is located on the busy 405-Freeway (southbound near Century Boulevard) in Southern California. The billboard is not only located in a spot that has some of the highest commuter traffic counts in Southern California, its also in a place that's nearby a number of Tesco's Fresh & Easy stores in the region.

The majority - 93 stores - of Tesco's 156 Fresh & Easy markets are located in Southern California. Fourteen stores are in the Bakersfield and Fresno (seven in each region) metro areas in California's Central Valley. The remaining stores are in the metro Phoenix, Arizona region - 28 units - and metro Las Vegas, Nevada, where Tesco has 21 Fresh & Easy stores.

The 405-Freeway location is the first billboard in the union's outdoor advertising campaign, and currently the only one. However, a spokesman for the UFCW union tells Fresh & Easy Buzz that additional billboards like the one pictured at top are planned for Southern California, and possibly Arizona and Nevada.

The billboard features a real union construction worker, called "The Repairman." The name plays off the "Fix Fresh & Easy" theme. The other people on the billboard with "The Repairman," wearing "Fresh & Easy Green" are Fresh & Easy Neighborhood Market store workers from Southern California.

The UFCW spokesman says the theme of the billboard is designed to tie-in with the union's social media-based efforts, in which it's offering ways to "Fix Fresh & Easy," the leading suggestion being for the chain to sit down with representatives of the UFCW to discuss unionizing Fresh & Easy Neighborhood Market store-level employees.

New video

The UFCW union has also launched a new video (see below) on YouTube, tied-in to the outdoor and Facebook advertising campaign. The less than two minute video, "Fresh & Easy Customers Speak Out," features "The Repairman." along with interviews with various Fresh & Easy store customers, discussing whether or not they will continue shopping at Fresh & Easy Neighborhood Market in light of the unionization issue.

We asked the spokesman for the grocery clerks union to verify for Fresh & Easy Buzz that the people in the video are actual Fresh & Easy store customers. Here's what he said: "The people are real customers from [Fresh & Easy] stores across LA. They chose not to shop after being given a flyer, and then were approached and offered the opportunity to appear in the film."



Facebook ads

In addition to launching the outdoor advertising campaign with its first billboard on the 405-Freeway in Southern California, the UFCW union is also running two different ads on Facebook, as part of the popular social media site's targeted, paid advertising program.
The Facebook site ads are being run on a targeted, rotational basis to selected Facebook users, including Fresh & Easy Neighborhood Market employees and customers in California, Nevada and Arizona, according to the union. (See the screenshots of the Facebook advertisements pictured above and below.) The UFCW union spokesperson says additional advertisements are being prepared to be run on Facebook as part of the campaign, adding the two current ads being started off on a "heavy" rotation," meaning they will show up frequently on the Facebook pages of the various targeted users.

More to come

The grocery clerks union is planning additional activity soon in its "Fix Fresh & Easy" media campaign, which in addition to a website, Twitter feed, Facebook page and YouTube channel, now also includes the Facebbok advertisement component and the outdoor advertising campaign.

Additionally, as we've been reporting in Fresh & Easy Buzz since 2009, the UFCW union locals in Northern California are preparing a local campaign of their own, targeted to when Tesco opens its first Fresh & Easy stores in San Jose and Danville (San Francisco Bay Area) on March 2, followed by the openings of nine other stores between March 9 and the end of April.

Although not yet announced by the grocer, two stores in San Francisco, in the Richmond and Bayview neighborhoods, are set to open in April or May, according to our sources, although those dates could change depending on if the stores are ready to open by then. [You can see the opening dates and locations of the 11 Northern California Fresh & Easy stores here.]

Fresh & Easy's response

Meanwhile, Tesco corporate director and Fresh & Easy Neighborhood Market CEO Tim Mason has been using what you might call, borrowing from the world of diplomacy, a "soft power" approach, along with other efforts, to suggest to Fresh & Easy store employees that joining the UFCW union is not in their best interests. The program sends "Fresh & Easy Ambassadors" to the stores to talk with employees about the advantages of keeping Fresh & Easy Neighborhood Market non-union. The "Ambassadors" aren't supposed to tell store workers not to organize a union, or that if they do so they will be looked on in a less than favorable light by senior management. Rather, their role is designed as a consultative or persuasive one, hence the "soft power" analogy.

Periodically CEO Mason has read reports prepared by the "Fresh & Easy Ambassadors" to corporate headquarters employees during meetings, according to sources who've been at the meetings, and has indicated he thinks the approach is working well as part of the chain's efforts to remain non-union, according to those sources.

Recent Related Stories

December 20, 2010: UFCW Union Launches New 'Fix Fresh & Easy' Neighborhood Market Website and Social Media-Based Campaign

December 20, 2010: Glassell Park-Los Angeles Store Workers Catalysts For New UFCW Campaign to Unionize Fresh & Easy Neighborhood Market

October 6, 2010: The Daily Show Catches Las Vegas-Based UFCW Union Local 711 In Labor Relations 'Catch 22'

October 5, 2010: UFCW President Joe Hansen's Chairmanship of Change to Win Adds Fire Power to Union's Fresh & Easy Neighborhood Market Campaign

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

Also, see (click on) the following links - , , , , , , - for additional related stories.

Sunday, January 30, 2011

The Sprouts & Henry's Deal Talks: Smart & Final is Looking Like A Retailer That Wants to Make A Deal




The Insider - Heard on the Street

It's been over three weeks since I broke the story that representatives of Phoenix, Arizona-based Sprouts Farmers Market and City of Commerce, California-based Smart & Final were having discussions about a possible acquisition of Irvine, California-based Henry's Farmers Market by Sprouts. See my January 5, 2011 column: Will 2011 See Sprouts Farmers Market Acquiring Henry's Farmers Market? 'The Insider' Says it Could Be in The Cards

Smart & Final, which is owned by private equity firm Apollo Global Management, owns Henry's Farmers Market. Sprouts Farmers Market is privately-held.

The 25 days hence doesn't mean the discussions have ended though. To the contrary, talks between the Sprouts Farmers Market and Apollo Global Management/Smart & Final representatives are set to continue.

But even more interesting, I can tell you this: Smart & Final and its private equity firm owner want to sell the Henry's Farmers Market chain, even if a deal with Sprouts doesn't come to fruition. This strong desire to sell Henry's is also a key reason why the acquisition/merger talks are continuing.

Sprouts Farmers Market is the closest bird-in-the-hand buyer Smart & Final has. But if the bird (Sprouts) decides not to build its nest in the hand (Henry's), It's my analysis Smart & Final will shop Henry's Farmers Market around, searching for another buyer.

Why? Because Smart & Final wants and needs to unload Henry's in order to get an infusion of needed cash, after losing what Fresh & Easy Buzz reported in November and December 2010 to be at least $40-$50 million, on its SmartCo Foods venture in Denver. [See - December 11, 2010: Smart & Final's Not So Marvelous SmartCo Foods' Misadventure in Denver; November 17, 2010Smart & Final Pulls the Plug On All Five SmartCo Foods Stores in Metro Denver After Being Open Less Than Five Months

Some recent behavior by Smart & Final/Henry's lends a bit of observational or empirical evidence to what my sources tell me and what I offer in my analysis above.

First, in my January 5 column I reported Smart & Final/Henry's pulled out of signing a lease for a store in Boise Idaho, which would have been its first in the state, at the last minute, in late December 2010, surprising the building's owner, as well as members of the Boise City Council. Smart & Final/Henry's was high on locating the store at the site in Boise, until the plug was pulled on SmartCo Foods in November 2010.

Most recently, Smart & Final/Henry's decided against signing a deal it had in principal with John DiNapoli and his JP DiNapoli Cos. Inc. commercial real estate company, which earlier this month bought Cosentino's Market, at 2666 South Bascom Avenue in San Jose, California, and land around the store from the Cosentino brothers, for $10 million. Members of the Cosentino family have operated grocery stores in the San Francisco Bay Area for over eight decades, along with acquiring real estate, like the land they owned around the South Bascom store. [Read - January 17, 2011
First Look at the Willow Glen-San Jose Fresh & Easy Neighborhood Market Store Set to Open March 2, 2011 - for more details about the Cosentino's.]

Developer DiNapoli's plan called for demolishing the existing Cosentino's store building and then constructing a new building on the same site, which would house a Henry's Farmers Market store. The Henry's store would serve as the food and grocery retail anchor of what would then become a shopping center developed by DiNapoli on the surrounding land he bought from the Cosentino's along with the market. The target was to have the Henry's and some related stores opened in 2012.

But the developer and owner of the properties has found a new, local grocer to go into the Cosentino's store and to serve as the food and grocery retail anchor for his development. The local grocer is Lunardi's Markets, which like Cosentino's has a long history (57-years) in San Francisco Bay Area food retailing. The founders of both Cosentino's and Lunardi's were immigrants from Italy.

Instead of tearing down the building, Lunardi's is going to move into it - and soon. Cosentino's is closing on February 26, 2011. According the the developer, Lunardi's plans to move in just a few days to a week after the Cosentino brothers close the store.

Lunardi's Markets, which is headquartered in San Bruno just a few miles down the peninsula from San Francisco, operates seven supermarkets in the Bay Area. The soon to be vacated Cosentino's supermarket at Union & Bascom in San Jose will become store number eight for the family-owned, independent grocer. Lunardi's has an existing store at 4650 Meridiam (at Branham) in San Jose, not far from the 2666 South Bascom Cosentino's store.

The reason this decision by Smart & Final/Henry's to not go forward with the store is significant is because prior to November 2010, when Apollo Global Management/Smart & Final pulled the plug on its less than five month old SmartCo Foods venture in metro Denver, Colorado, Henry's was going full-bore into grabbing store locations in Northern California, focusing on the Sacramento region and the Bay area. Henry's Farmers Market opened its first store in Elk Grove, near Sacramento, in the summer of 2010.

However, Smart & Final/Henry's has now put the breaks on all that activity; so much so that it's obvious to a close observer that the behavior is related to the acquisition talks with Sprouts Farmers Market.

For example, in addition to the above examples, Smart & Final/Henry's recently put the breaks on its plans to open a store in Walnut Creek, California, in the East Bay Area. Just a few months ago the retailer was attempting to fast-track the approval of the store through the Walnut Creek City Council. Now, according to a source with the City of Walnut Creek, little has been heard recently about Henry's plans to open the store in the city.

Further in this regard, commercial real estate sources who previously provided us with information about the various cities and neighborhoods in Northern California where Henry's was looking at and signing leases for stores in Northern California, told me recently the grocer's search has for all practical purposes been put on hold. This tracks with similar information I have from a source in a position to know the day-to-day plans at Henry's in terms of its new store location search strategies.

Lastly, the grocer recently took down a list of coming new stores from the Henry's Farmers Market website. Looking at this behavior in conjunction with what I've described above helps make my point, which is that all is at hold at Henry's because Apollo Global Management/Smart & Final have one thing in mind - selling the chain.

My bottom line: The talks between representatives of both farmers market-style food-grocery chains continue. But if a deal can't be done to sell Henry's Farmers Market to Sprouts Farmers Market, or to merge the two chains in a way that puts at least a substantial amount of cash in Smart & Final's hands, Apollo Global Management/Smart & Final will shop Henry's around, hoping it can find a buyer. Is there another buyer. That's hard to say. But I can say without a doubt I don't see another buyer out their that has the same high level of synergies with Henry's Farmers Market that Sprouts does.

Therefore, the talks between Sprouts and Smart & Final/Henry's continue. Or to quote that famous deal-maker of the baseball diamond, Yogi Berra: " It ain't over till it's over." And it isn't over between Sprouts and Henry's - yet.

- 'The Insider'

[Editor's Note: 'The Insider' column appears regularly in Fresh & Easy Buzz. The opinions in the columns are those of 'The Insider,' and not necessarily shared by Fresh & Easy Buzz. Below are links to 'The Insider's' first column of 2011, and to a selection of 2010 columns, published in Fresh & Easy Buzz.]

The Sprouts and Henry's deal talks: Follow the story at the links below

January 5, 2011: 'The Insider' - Will 2011 See Sprouts Farmers Market Acquiring Henry's Farmers Market? 'The Insider' Says it Could Be in The Cards

January 7, 2011: 'The Insider' - Sprouts Farmers Market-Henry's Farmers Market Deal Negotiations Continue; End-Game Could Be Near

January 8, 2011: Smart & Final-Henry's Tell Employees About Deal Discussions With Sprouts Farmers Market; Confirming 'The Insider's' Reports

January 10, 2011: Sprouts Farmers Market to Open Second Northern California Store in Roseville No Later Than Mid-April

January 11, 2011: 'The Insider' - A 'New York State of Mind': 'The Insider' On Walmart, Apollo Global Management, Tesco's Fresh & Easy and the NRF in New York City

January 24, 2011: 'The Insider' - End-Game Could Be Near in the Sprouts Farmers Market-Henry's Farmers Market Deal Talks

December 11, 2010: Smart & Final's Not So Marvelous SmartCo Foods' Misadventure in Denver

November 17, 2010: Smart & Final Pulls the Plug On All Five SmartCo Foods Stores in Metro Denver After Being Open Less Than Five Months

Saturday, January 29, 2011

Fry's Food Stores Brings Back 'Competitor Coupon Match' Promotion; Accepting Fresh & Easy Neighborhood Market Coupons in Arizona

Fry's is turning up the heat, touting low prices at its Arizona stores on billboards like the one above in the Phoenix suburb of Chandler, as well as through promotions like its "competitor coupon match" program. The text on the billboard says: "For two years running, retail independent services have ranked Fry's #1 in low prices of traditional grocers in Arizona." Click on the photo to enlarge it.

Metro Phoenix, Arizona Market region
News/Analysis

Kroger Co.-owned Fry's Food Stores didn't wait long to bring back its "competitor take-all" "coupon match" program in the white-hot-competitive metro Phoenix, Arizona food and grocery retailing market.

We last wrote about Fry's extremely successful coupon promotion, in which it accepts the store coupons issued by all of its major competitors, along with doubling the value of all manufacturers' cents-off coupons up to a dollar, in a November 2010 piece - November 19, 2010: Kroger-Owned Fry's Store Coupon Jujitsu Ensnares Tesco-Owned Fresh & Easy Neighborhood Market in Arizona.

Fry's ended the "competitor coupon match" promotion in late December 2010. But the Kroger-owned grocery chain has brought it back for 2011, beginning this week, on January 26, and running until the grocer gives further notice. The promotion is good in all of the grocer's 120-plus Arizona stores. Metro Phoenix, where most of the states residents live, is where the majority of food and grocery dollars are spent in Arizona.

Under the promotion, Fry's is accepting store coupons issued by the following grocery chains doing business in Arizona: Albertsons, Safeway Stores, Bashas', Fresh & Easy Neighborhood Market, Sunflower Farmers Market, Sprouts Farmers Market, Walmart Marketside, Walmart Neighborhood Market, Whole Foods, Target, AJ’s, Trader Joe's, Food City and Pro's Ranch Market.

As we've said in past stories about the Fry's promotion, the default target of the store coupon aspect of the promotion ends up being Tesco's Fresh & Easy Neighborhood Market, because out of all the grocers listed above, its the only chain that issues discount store vouchers on a regular basis. These are the Fresh & Easy $5-off purchases of $20 or more; $6-off-$30; $10-off-$50 and the like store coupons the grocer has in distribution at virtually all times, as we written about extensively in Fresh & Easy Buzz.

If you're skeptical about our analysis that Tesco's Fresh & Easy Neighborhood Market is the default target (meaning the program isn't specifically aimed at Fresh & Easy exclusively but it's the competitor most affected anyway) of Fry's "coupon match" promotion, take a look here.

Additionally, take a look at what Fry's shoppers are saying about the return of the grocery chain's "coupon match" program here and here.

A few of Fry's other major competitors, like Albertsons, Bashas' and Safeway and a couple others, issue store coupons - such as $10-off-$50 and $25-off-$100 versions. But they do so on a sporadic basis, compared to Fresh & Easy's regular use of the discount vouchers. Fry's issues its own store coupons on occasion, such as a $5-off purchases of $35 or more voucher and a $10-off purchases of $100 or more version.

Another reason Fry's promotion targets Tesco's Fresh & Easy most directly, although as we've said that's not the strategy behind it for the Kroger chain, is because the Fresh & Easy neighborhood Market stores don't take manufacturers' cents-off coupons as a matter of policy.

In the program, Fry's Food Stores allows shoppers to combine the use of one of these store coupons, such as a $6-off-$30 voucher from Fresh & Easy, with their manufacturers' coupons, deducting both types from customers' total grocery order purchases at checkout.

For example, suppose mom or dad head off to a Fry's supermarket with a grocery list, a $6-off purchases of $30 or more Fresh & Easy store coupon, and a stack of manufacturers' cents-off coupons, each having a face-value of 50 cents and over.

Once at the store, our grocery shopper then fills his or her cart with an assortment of food and grocery items - ranging from milk and bread, to packaged snacks, household cleaners, breakfast cereals and more.

At the checkout lane our shoppers hands the grocery checker the coupons, then braces herself for the total, as the Fry's clerk scans the items.

The pre-coupon deduction total just so happens to end up being $50, right on the button.

Smiling, the friendly Fry's checker says..."Let me deduct the coupons for you." Scanning each coupon, there are 10, all with a value of 50 cents or higher, our shoppers $50 market basket purchase now drops down to $40. But there's more to come. Lastly, the checker scans the $6-off Fresh & Easy store coupon (the manufacturers' cents-off coupons are deducted first) and announces..."That will be...$34, please.

Not bad, $16 off a total grocery order of $50, thanks to the doubling of the manufacturers' cents-off coupons and the Fresh & Easy $6-off store coupon combination. Fry's allows shoppers to use only one coupon per retailer, per order. However, if a customer has a store coupon from Fresh & Easy, say a $6 off, and one from Albertsons, for example, such as a $10-off-$50 voucher, they can then use both on a single order. Therefore, in our example, the customer order would drop to $24, if he or she used both the Fresh & Easy and Albertsons' store coupons, in this particular example.

Well, we should note that "it's not bad for the shopper." But it's less than good for Fry's gross margin on that particular order and any others like it. Why? The chain gets reimbursed for the face value of the manufacturers' coupons, plus a carrying charge of a few pennies for each coupon, but has to eat the rest of the deduction it gives, up to that dollar, along with eating the entire value of the Fresh & Easy Neighborhood Market store coupon or those from any other competitor.

If Fry's wasn't owned by Kroger, the second-largest retailer of food and groceries in the U.S. after Walmart Stores, it wouldn't be able to sustain such a margin hit. But since Fry's is just one of Kroger's many chains, the mega-retailer can sustain the margin hit better than a smaller chain because it can spread it out over many chains and stores throughout the U.S.

And Fry's, which is the number two market share leader in Arizona after Walmart Stores, Inc., believes the added sales it gains from the coupon promotion in the hyper-competitive metro Phoenix market is worth taking this margin hit. If not, the chain wouldn't have brought the "coupon match" promotion back so soon in 2011, after doing it for more than half of 2010.

Meanwhile, the fact Fry's is accepting store coupons, along with doubling manufactures' cents-off coupons, is a tough nut for Tesco's Fresh & Easy in metro Phoenix, where the grocer has 28 stores, after closing six markets in November of last year.

The deep-discount store coupons are Fresh & Easy's primary promotional tool, in addition to its weekly advertising circular. It issues the vouchers regularly, nearly always having at least one version, and often times two or three versions, in circulation.

Based on our research and reporting - which you can see at the stories linked at the end of this piece - the Arizona Fresh & Easy stores experience a significant drop in sales, which is something Tesco can't afford, whenever Fry's runs its "competitor match" coupon promotion. Further, the fact Fry's kicked-off the promotion on Wednesday without issuing an end-date, could mean the Kroger-owned chain plans to run it non-stop over the next few months, which is something it did in 2010.

If that's the case, which sources tell us it is, the increased competition from the region's number two food retailer, Fry's, comes at a very bad time for Tesco's Fresh & Easy, which not only is trying to grow its same-store-sales considerably, but also must significantly increase its overall margin, which currently sits at a negative-38%.

After California, where Tesco has 107 of its 156 small-format fresh food and grocery stores, metropolitan Phoenix, Arizona has the second-highest number of stores, at 28, followed by 21 units in metro Las Vegas, Nevada.

Although the Arizona store-count is much lower than in California, Tesco needs to grow same-store sales in all of its Fresh & Easy units, not just those in one market region or another. And the more competition, which equals price pressure, means the harder it is for Fresh & Easy to move that gross margin up into the positive sphere.

Metro Phoenix, with Walmart, Kroger, Safeway, Albertsons and Bashas' - the top five in market share (in that order) battling against each other, along with niche players like Sprouts, Sunflower, Whole Foods, Trader Joe's, Fresh & Easy and others doing the same (and with WinCo Foods on the way in 2012) - is already arguably the most-competitive grocery retailing market in the U.S., as we've said in Fresh & Easy Buzz for over three years.

Blazing hot, price-competitive promotions like Fry's "coupon match" just add additional heat to that already burning competition. And because Fry's program is coupon-based, much of that competitive promotional heat is directed at Tesco's Fresh & Easy Neighborhood Market's metro Phoenix, Arizona operations and 28 stores.

Related Stories

January 18, 2011: Fresh & Easy Neighborhood Market Launches 'Extra-Low Every Day Low Price' Merchandising Program

November 19, 2010: Kroger-Owned Fry's Store Coupon Jujitsu Ensnares Tesco-Owned Fresh & Easy Neighborhood Market in Arizona

February 3, 2009: Competitor News: 'Grocer-Gone-Wild:' Arizona's Fry's and its 'Bring it On' 'Take All Competitors' (Including Tesco's Fresh & Easy) Store Coupon Move

May 20, 2009: Breaking Buzz: Tesco's Fresh & Easy Issues Another New Discount Store Coupon ($10-off $50 Though); We Told You the Coupons Would 'Be Back'

Plus, see (click on) the following links - , , , , , and - for additional related stories.

Friday, January 28, 2011

Mollie Stone's Markets Confirms Our January 13 Report; Announces New San Francisco Store Via Twitter & Facebook

The change of ownership sign above was posted on the shuttered DeLano's IGA store at 4201 18th Street today.

On January 13, 2011, we reported in this story - Mollie Stone's Markets Taking Over Closed 18th Street DeLano's IGA Market in San Francisco's Castro District - that Mill Valley, California-based multi-store independent grocer Mollie Stone's Markets is taking over the recently vacated DeLano's IGA Market space at 4201 18th Street in San Francisco's Castro District, which in March will become home to its ninth supermarket and third store in what the late Pulitzer Prize-winning (1996) San Francisco newspaper columnist Herb Caen, who died in 1997, called "The City," always in caps.

In the late-1940's Caen, who also coined the term "Beatnik" in an April 1958 column and detested it whenever anyone called San Francisco "Frisco," gave "The City" another nickname, "Baghdad-by-the-Bay," which he coined to describe its exotic multiculturalism. The nickname caught on and continued to be used regularly by many San Franciscans half a century later, until President George W. Bush's invasion of Iraq in 2002, which cast Caen's definition in a completely different light, particularly in politically liberal San Francisco.

The now vacant (as of December 2010) 1960's-style DeLano's IGA Market store (pictured above) at 4201 18th Street in San Francisco's Castro District will be transformed into a Mollie Stone's Market by March 2011.

Yesterday Marin County-based privately-held Mollie Stone's Markets publicly announced its plans to open its ninth store at the Castro District location on 18th Street in March 2011 - and it did so using its Facebook and Twitter social media sites, along with its website, generating a considerable amount of buzz in the process, particularly on its Twitter.com feed.

I Tweet therefore I am

The grocer set the stage for its new store announcement on its @mollie_stones Twitter feed yesterday, with the initial tweet below, at just before 2:10 pm:

[Tweet: Mollie Stone's has big news to announce. It's something we haven't done in 6 years. You will get "the scoop" just before the story breaks! via HootSuite.]

Shortly after, the grocer made the new store announcement in the tweet below:

[Tweet: Inside Scoop! You get the news first! @mollie_stones announces new market in San Francisco! http://bit.ly/dVJMnn Please RT!]

The bit.ly link in the tweet above is to a social media-based press release Mollie Stone's used to make the new store announcement, a good move since the use of the various social media sites is designed to create as much buzz as possible around the new store between now and March, when it opens.

In the press release, Mollie Stone's co-owner David Bennett says about the new store in San Francisco's Castro District: "Our Castro market will be our third store in San Francisco, and we are positively delighted to expand in our 'City by the Bay.' The Castro Market is in one of the finest and most vibrant neighborhoods in California; we believe it will beautifully blend with our Mollie Stone’s culture. We understand the passion and expectations in the neighborhood, and we will stop at nothing to provide an outstanding shopping experience. We look forward to developing strong, rewarding relationships with each and every customer."

Bennett, who along with partner Mike Stone are the majority-owners of Mollie Stone's Markets, goes on in the announcement release to describe the philosophy behind the grocer's locally-focused operations, customer service and merchandising approach, along with offering a shout out to a couple foreign-owned specialty grocery chains readers might be familiar with: "We don't believe bigger is better. We believe better is better. In this day and age when large national chains and foreign-owned specialty chains are vying for our local dollars and sales, Mollie Stone's offers locals the ability to keep all the revenues and spending here in the Bay Area. Mollie Stone’s is filling the void for old style hometown quality, selection, and service," Bennett says. "We specialize in catering to customers who need (and deserve) extra attention and hard to find products, or those who simply need help or assistance. Call us old fashioned, but Mollie Stone’s still treats customers one at a time. Always have. Always will."

Fresh foods like produce are a key merchandising focus at Mollie Stone's Markets. Pictured above is the produce department at the grocer's store in the Bon Air Shopping Center, in the Marin County city of Greenbrae.

Building buzz

Following the Tweet announcing the new store, in which it encouraged followers to "retweet" (RT) it, Mollie Stone's offered additional tweets about the new store and its March 2011 opening throughout the day yesterday, along with "retweeting" tweets from many of its followers on Twitter, continuing to do so selectively through today. You can view the "Tweet" activity at the grocer's Twitter Feed: [www.twitter.com/mollie_stones]

Mollie Stone's "Tweeter-in-Chief" is also using the "TweetReach" analytical tool to track the new store buzz its creating, as well as to help in additional buzz creation. People on Twitter tend to like such quantification and analysis. Therefore, such tools not only serve their primary focus - to quantify - but can serve the secondary purpose of creating excitement around an announcement, topic or campaign because they also create an additive effect.

You can view Mollie Stone's real time "TweetReach" Report here.

Caught in the 'Tweet-Stream'

When Fresh & Easy Buzz discovered the announcement yesterday from Mollie Stone's Markets, we put out a tweet about it since we had reported on it a full 15-days before today's announcement from the grocery, in our January 13, 2011 story: Mollie Stone's Markets Taking Over Closed 18th Street Delano's IGA Market in San Francisco's Castro District.

[Our Tweet: January 27, 2011: #Grocer @mollie_stones Confirms http://bit.ly/hRTtJC Our Report On New #SanFrancisco Store http://bit.ly/f43yQV #retail via web.

Interestingly, when we checked Mollie Stone's "TweetReach" Report for this story a few minutes ago, we noticed @freshneasybuzz is second, just below the grocer's own Twitter feed, in terms of the number of impressions generated by "13 Twitterers" regarding the new store announcement. Frankly, we're not sure how significant that ranking is - although it suggests our Tweets are being read - and had no master plan to achieve that lofty status when we posted our Tweet yesterday. But we must say - it does look rather impressive.

Beyond the buzz: Food retailing

But Friday frolicking aside regarding our being caught in the "Tweet-Stream," Mollie Stone's has so far created considerable social media buzz in the just 24-hours since it made the announcement about its plans to open its ninth store and third unit in San Francisco, at 4201 18th Street in San Francisco's Castro District, a neighborhood known throughout most of the world because of its famous history of successful gay activism.

But beyond the buzz, which despite the name of our blog is where we always like to go, the Castro District location at 4201 18th Street in San Francisco is a good one for Mollie Stone's (it also would have been good for Tesco's Fresh & Easy), as we explained in our January 13 story.

In fact, Mollie Stone's has a solid history of grabbing good locations in the City by the Bay. Such was the case when it took over the former Grand Central Market (2435 California Street) in Pacific Heights and Tower Market (635 Portola Drive) in Twin Peaks a number of years ago. Both locations are "money" sites for a grocer that knows how to merchandise basic groceries side-by-side with quality fresh foods and specialty, organic and gourmet products, which just happens to be the essence of Mollie Stone's mission statement and positioning as a food retailer.

Based on our experience, knowledge and analysis, the 18th Street location in San Francisco's Castro District, vacated in December 2010 by DeLano's IGA, should be the third "money" location in San Francisco for Mollie Stone's Markets and its "Best of Both Worlds" merchandising strategy.

The buzz, after all, can drive shoppers to a new store - and that's very important. But once they get there, it's up to that fascinating recipe that makes food retailing so interesting, which consists of just the right combination of merchandising, pricing, location, store design and customer service, to get customers to return - and keep coming back.

Related Stories

January 13, 2011: Mollie Stone's Markets Taking Over Closed 18th Street Delano's IGA Market in San Francisco's Castro District

January 26, 2011: Fresh & Easy Neighborhood Market is On A Mission - In San Francisco's Mission District

January 12, 2011: First Northern California Fresh & Easy Neighborhood Market Stores Opening March 2; Nine More to Follow March-April

December 14, 2010: Fresh & Easy Neighborhood Market to Open 5800 Third Street 'Flagship' Store in San Francisco Later in 2011 Than Originally Announced.

November 30, 2010: DeLano's IGA Markets Closing Five Stores in San Francisco & Marin County; Fairfax, Davis Units to Remain Open (For Now)

November 29, 2010: Veteran Grocer Harley DeLano's 'DeLano IGA Markets' Chain On the Verge of Closure in San Francisco Bay Area

Additionally, see (click on to read) the following links - , , , , , , - for more related stories.

Thursday, January 27, 2011

Incoming Tesco CEO Philip Clarke Names Expanded Corporate Executive Committee

The changing of the guard at Tesco plc

Incoming CEO Philip Clarke has named - and enlarged - the members of his executive committee, which will assist him and United Kingdom-headquartered Tesco's board in making policy when he takes over for retiring Terry Leahy on March 1 of this year.

Tesco is the parnet company of El Segundo, California-based Fresh & Easy Neighborhood Market, which currently has 156 fresh food and grocery stores in California, Nevada and Arizona.

In addition to the current seven members of the executive committee under CEO Leahy, who are all members of Tesco's board, Clarke has named seven new members, all Tesco executives, to the committee, which functions to run the company just below the Tesco plc board level.

Below are the new members of the executive committee, named today by incoming Tesco CEO and current director of European operations and corporate information technology Clarke:

  • Gordon Fryett, Tesco's new head of corporate property strategy;
  • Alison Horner, the recently appointed corporate group personnel director;
  • Trevor Masters, head of operations in the Czech Republic, Hungary, Poland, Slovakia and Turkey;
  • Mike McNamara, who was appointed today as chief information officer, with responsibility for both IT strategy and operations across the group;
  • Bob Robbins, recently appointed chief operating officer of Tesco's United Kingdom (UK) business, which represents about 70% of total corporate revenue;
  • Ken Towle, the recently appointed corporate/group Internet retailing director;
  • Laura Wade-Gery, Tesco's new commercial director (corporate buying and merchandising) for UK clothing, electronics and general merchandise.
Gordon Fryett, Alison Horner, Trevor Masters and Mike McNamara will report directly to Philip Clarke, according to a corporate spokesperson. Bob Robbins and Laura Wade-Gery, whose responsibilities are in the UK, will report to Richard Brasher; and Ken Towle, who will operate within the services area, will report to Andrew Higginson, Tesco said today.

Additionally, the spokesman says Tesco will shortly be appointing a group commercial director, who is also expected to join the executive committee.

The seven new members (plus the eighth to be named later) join the seven Tesco board members listed below to comprise Philip Clarke's executive committee:

  • Philip Clarke (board chairman) – Tesco group CEO
  • Tim Mason – Tesco deputy group CEO, CEO Fresh & Easy USA
  • Richard Brasher – CEO United Kingdom
  • Andrew Higginson – CEO Tesco group services
  • Laurie McIlwee – Tesco group chief financial officer.
  • Lucy Neville-Rolfe – Tesco group corporate & legal affairs director
  • David Potts – CEO Asia
Tim Mason, who's currently the CEO Tesco's El Segundo, California-based Fresh & Easy Neighborhood Market and a member of Tesco's board, gets the added title of Tesco deputy CEO, as noted above, on March 1, when Philip Clarke replaces Terry Leahy as CEO at global headquarters in Cheshunt, UK.

Mason will remain in Southern California at Fresh & Easy's headquarters. Running the 156-store fresh food and grocery chain will remain his main job function. However he will take on some added Tesco corporate responsibilities, to include marketing and branding, along with the company's global climate change initiatives, which have been the pet project of CEO Leahy over the last few years.

"I am delighted that I have been able to bring together such a strong team which possesses the right blend of talent and experience needed to drive the company forward and take it to a new level," Incoming CEO Clarke said today, announcing his expanded executive committee. "This is a formidable group of people with an enviable range of talents gleaned over many years in Tesco and other organisations, both in the UK and overseas."

Meanwhile, retiring CEO Sir Terry Leahy is attending the World Economic Summit in Davos, Switzerland, where he's participating in a panel discussion, along with other global business and government leaders, focusing on climate change and carbon reduction issues and strategies.

As noted above - the climate change issue is one that's very important to Leahy, both as CEO of Tesco, which is nearly at the end of its 14-year run, and personally. Expect him to continue working on it at some level after his retirement from Tesco on the last day of February 2011.

Wednesday, January 26, 2011

Fresh & Easy Neighborhood Market is On A Mission - In San Francisco's Mission District

The DeLano's IGA Market store at 1245 South Van Ness in San Francisco's Mission District (pictured above) closed in December 2010.

A San Francisco Chronicle business columnist and a couple local blogs (see here) reported today that it's likely Tesco's Fresh & Easy Neighborhood Market will soon be signing a lease for the recently vacated DeLano's IGA Market supermarket at 1245 South Van Ness Avenue in San Francisco's Mission District.

The reports, which aren't news to us here at Fresh & Easy Buzz, track with what we know - which is that Tesco's Fresh & Easy has agreed in principal with the now vacant building's landlord on a lease, and is in the process of finalizing its terms.

Another reason today's reports don't come as news to us is because we suggested in a story back on November 30, 2010 that Fresh & Easy Neighborhood Market should take a close look at the Mission District DeLano's IGA Market store, along with four others, as part of our reporting on the grocer's troubles, which led to its closing five of its seven supermarkets late last year. [See - November 30, 2010: DeLano's IGA Markets Closing Five Stores in San Francisco & Marin County; Fairfax, Davis Units to Remain Open (For Now).

The locations of the five DeLano's markets referred to in our November 30, 2010 story linked above are:

>Outer Richmond District, San Francisco: 6333 Geary Boulevard (at 27th Avenue)
>Castro District, San Francisco: 4201 18th Street
>Mission District, San Francisco: 1245 South Van Ness Avenue
>Marin County, Tiburon: Cove Shopping Center, 1 Blackfield Drive
>Marin County, Mill Valley/Tamalpais Valley, 207 Flamingo Road

Below (in italics) is what we said in the last half of the November 30, 2010 piece linked above:

A (potential) Fresh & Easy opportunity

"One of the stores that Tesco's Fresh & Easy Neighborhood Market plans to open early next year in Northern California is not far from the Outer Richmond District DeLano's IGA Market unit, at 6333 Geary Boulevard, that will soon be closed. The Fresh & Easy store, which is at 32nd Avenue & Clement Street in the Outer Richmond, should benefit from the closing of the DeLano's market because there isn't another grocery store in the immediate portion of the neighborhood.

Tesco's Fresh & Easy would be wise to take a serious look at all five of the closing DeLano's IGA Markets stores, particularly the two units in Marin County (Mill Valley and Tiburon), where Fresh & Easy Neighborhood Market doesn't currently have any planned locations.

The 18th Street store in San Francisco's Castro District, which is a space of no more than 10,000 square-feet, is also a location Tesco's Fresh & Easy should look very closely at trying to acquire. We suspect a number of grocers will be looking at the location.

The Castro District ranks high for sales of natural, organic, fresh-prepared and specialty foods, for example. Both Whole Foods Market and Trader Joe's have plans to open stores in the Castro in 2011. Whole Foods' approval looks solid. Trader Joe's is having some problems in terms of getting its store site in the neighborhood approved.

The other two closing DeLano's stores, the Geary Boulevard unit in San Francisco's Outer Richmond District mentioned previously and the Mission District store on South Van Ness, offer less potential for Fresh & Easy in our analysis, although we would take a close look at both, just not as close as the others.

The Geary Boulevard DeLano's IGA Market location in San Francisco's Outer Richmond District is likely too close in proximity to the 32nd Avenue & Clement Street Fresh & Easy store opening early next year for both stores to do well, in our analysis. One store would probably cannibalize sales of the other, which is something that's been happening with some of the Fresh & Easy stores that are located too close to each other in Southern California, Arizona and Nevada.

The Mission District DeLano's store offers some potential for Tesco's Fresh & Easy. However, based on a number of factors, it's our analysis the location would be a real uphill struggle for the Fresh & Easy format."

Not long after we published the November 30, 2010 piece, commercial real estate sources told us representatives of Tesco's Fresh & Easy Neighborhood Market were inquiring about leasing the vacant building for a Fresh & Easy store. The grocer's talks with the vacant building's landlord, Joanne Wong-Lam, have progressed since then.

A Tesco source has also confirmed the existence of the talks for Fresh & Easy Buzz.

Fresh & Easy Neighborhood Market currently has plans to open three stores in San Francisco at: Third Street & Carroll; 32nd & Clement; and Silver Avenue & Goettingen.

As we've previously reported, based on our current information, the Third Street & Carroll (5800 Third Street) and 32nd & Clement Fresh & Easy stores will open in early summer 2011 - May or June. [See - December 14, 2010: Fresh & Easy Neighborhood Market to Open 5800 Third Street 'Flagship' Store in San Francisco Later in 2011 Than Originally Announced.]

Exterior construction on the 5800 Third Street unit is complete. Work on the store's interior is progressing. Renovation work on the 32nd and Clement store, a vacant former Albertson's supermarket, which Fresh & Easy originally said would open in the first quarter of 2011 but has since postponed, is just getting started. The 32nd & Clement Fresh & Easy store will be side-by-side with a CVS drug store. [For a look at the floor plan see - June 26, 2010: Tesco Planning to Announce in July When First Northern California Fresh & Easy Neighborhood Market Stores to Open.]

No work has yet started on the vacant building at Silver Avenue & Goettingen that Tesco's Fresh & Easy acquired in early 2008. The building was formerly a Cala Foods/Bell Market supermarket. Meanwhile, despite our November 30, 2010 analysis that the Mission District location at 1245 South Van Ness would be an uphill struggle for the Fresh & Easy format, the Tesco-owned fresh food and grocery chain looks like its preparing to lease the site and give it a go. (Of course, nearly everything in San Francisco is an uphill struggle from a topographic point of view. But we did mean the term figuratively, as well as literally.)

As we said back in November of last year, the location does in our analysis offer potential for Tesco's Fresh & Easy Neighborhood Market. But of course, the devil is in the details. InSpecifically, such potential can only be fully-realized if the grocer makes sure the store and its product merchandise mix is tailored to the neighborhood's demographics, which includes a combination of lower-income Hispanic residents, lower-to-middle-income whites, and a significant percentage of younger, single residents who don't have a lot of disposable income, along with a small but growing professional class.

Such neighborhood-oriented merchandising isn't something United Kingdom-based Tesco's Fresh & Easy Neighborhood Market USA does though. Instead, for example, it essentially offers the same product mix at it stores in lower-income and primarily African American and Latino South Los Angeles and Compton, as it does at the Fresh & Easy markets in middle-to-upper income and majority white Orange County and suburban Phoenix, Arizona.

Perhaps Northern California - a fresh, new market region for the grocer - would be a good place for Tesco's Fresh & Easy to start doing a little bit of neighborhood or micro-merchandising. If it were to do so, particularly in San Francisco, it's sales and profits at those stores would be much higher and better that they will be without taking such an approach. This includes the potential future Fresh & Easy stores at 1245 South Van Ness, in the city's Mission District.

A history of 1245 South Van Ness, in San Francisco's Mission District

DeLano's IGA, which closed its store at 1245 South Van Ness in December 2010, wasn't the first - and won't be the last - food retailer to operate a grocery store in the now vacant building in San Francisco's Mission District.

>From at least the early 1950's until 1963 a chain called Siri's operated a supermarket in the now vacant building at 1245 South Van Ness. The store is about 16,000-20,000 square-feet.

>In 1963 the Purity Stores supermarket chain, once a powerhouse in California but now gone, acquired the Siris chain, which included the store at 1245 South Van Ness. The store then became a Purity market.

Pictured above is the Cala Foods store at 1245 South Van Ness, as it looked during its about three decades in operation, from the mid-1970's-to-mid-2000's.

>In the mid-1970's the 1245 South Van Ness location became a Cala Foods supermarket. At the time Cala Foods, which later merged with another small Bay Area chain called Bell Markets, was a locally-owned independent grocer. Kroger Co. would later acquire Cala Foods/Bell Markets, in the late 1980's.

>The now vacant building at 1245 South Van Ness in San Francisco's Mission District would remain a Cala Foods market until 2006, when Kroger Co. sold it, along with seven other stores, to Harley DeLano and his son Dennis. Harley DeLano was the President of Cala/Bell throughout the 1990's. The store and the others formed the basis of DeLano's IGA Markets. The DeLano's now own just two stores, one in Marin County and another in Davis, near Sacramento.

>From 2006 to December 2010, when the DeLano's closed the Mission District store and four others in San Francisco and Marin County, the now vacant grocery store at 1245 Van Ness flew the Delano's IGA Market banner.

Related Stories

November 29, 2010: Veteran Grocer Harley DeLano's 'DeLano IGA Markets' Chain On the Verge of Closure in San Francisco Bay Area

November 30, 2010: DeLano's IGA Markets Closing Five Stores in San Francisco & Marin County; Fairfax, Davis Units to Remain Open (For Now)

January 17, 2011: First Look at the Willow Glen-San Jose Fresh & Easy Neighborhood Market Store Set to Open March 2, 2011

January 14, 2011: Tesco 'Banking' on California in 2011 For Fresh & Easy Neighborhood Market USA

January 13, 2011: Mollie Stone's Markets Taking Over Closed 18th Street Delano's IGA Market in San Francisco's Castro District

January 12, 2011: First Northern California Fresh & Easy Neighborhood Market Stores Opening March 2; Nine More to Follow March-April

December 14, 2010: Fresh & Easy Neighborhood Market to Open 5800 Third Street 'Flagship' Store in San Francisco Later in 2011 Than Originally Announced

November 12, 2010: Postponed But Not Abandoned: Fresh & Easy Neighborhood Market Gearing Up For Northern California Launch

Also see the links (click on) - , , , - for more related stories.

Monday, January 24, 2011

End-Game Could Be Near in the Sprouts Farmers Market-Henry's Farmers Market Deal Talks



The Insider - Heard on the Street

It's been three weeks since I first broke the story in my January 5, 2011 column that talks were going on between Sprouts Farmers Market and Smart & Final regarding a possible acquisition of Smart & Final-owned Henry's Farmers Market by Sprouts. City of Commerce, California-based Smart & Final, and thus Henry's, is owned by private equity firm Apollo Global Management. Arizona-based Sprouts Farmers Market is privately-held.

Since my January 5 column and follow-up columns, along with this news story - January 8, 2011: Smart & Final-Henry's Tell Employees About Deal Discussions With Sprouts Farmers Market; Confirming 'The Insider's' Reports - a couple other publications have followed our lead and written about the Sprouts/Henry's deal talks, including Supermarket News, which published a story on January 13, 2011 here. The January 8 story linked above offered a clear road map as to how other publications could easily check the deal talk reports published in Fresh & Easy Buzz.

The deal talks

No deal has yet been reached by the two parties. The talks continue though. And, based on information from my sources, I can tell you that both Sprouts and Apollo/Smart & Final want to make a deal that would result in an acquisition of Henry's Farmers Market by Sprouts Farmers Market. But as they say - the devil is in the details. Think details like valuations and financing, for example.

Regarding those details, sources tell me the two parties are very close to finding an agreement on them. Apollo/Smart & Final and Sprouts' ownership team have talked before about a possible acquisition of Henry's Farmers Market by Sprouts Farmers Market. But, my sources say, the representatives of both chains are currently closer to doing a deal than they've been in any of those past discussions.

One source tells me he thought a deal might be announced by the end of last week. It wasn't. But talks are continuing this week.

I'm not going to predict an outcome just yet. But based on what I've been hearing since late last week, don't be surprised if some sort of a deal is announced before this week is out.

I will be offering more on the deal talks before the week is out though. So stay tuned.

- 'The Insider'

[Editor's Note: 'The Insider' column appears regularly in Fresh & Easy Buzz. The opinions in the columns are those of 'The Insider,' and not necessarily shared by Fresh & Easy Buzz. Below are links to 'The Insider's' first column of 2011, and to a selection of 2010 columns, published in Fresh & Easy Buzz.]

The Sprouts and Henry's deal talks: Follow the story at the links below

January 5, 2011: 'The Insider' - Will 2011 See Sprouts Farmers Market Acquiring Henry's Farmers Market? 'The Insider' Says it Could Be in The Cards

January 7, 2011: 'The Insider' - Sprouts Farmers Market-Henry's Farmers Market Deal Negotiations Continue; End-Game Could Be Near

January 8, 2011: Smart & Final-Henry's Tell Employees About Deal Discussions With Sprouts Farmers Market; Confirming 'The Insider's' Reports

January 10, 2011: Sprouts Farmers Market to Open Second Northern California Store in Roseville No Later Than Mid-April

January 11, 2011: 'The Insider' - A 'New York State of Mind': 'The Insider' On Walmart, Apollo Global Management, Tesco's Fresh & Easy and the NRF in New York City

December 11, 2010: Smart & Final's Not So Marvelous SmartCo Foods' Misadventure in Denver

November 17, 2010: Smart & Final Pulls the Plug On All Five SmartCo Foods Stores in Metro Denver After Being Open Less Than Five Months

Sunday, January 23, 2011

Tesco's Fresh & Easy Neighborhood Market Looking For Locations For New, Smaller-Format 4,000-to-5,000 Square-Foot Stores


Breaking Buzz

Tesco has developed a smaller-format version of its Fresh & Easy Neighborhood Market fresh food and grocery store - in the 4,000 square-foot -to- 5,000 square-foot range, compared to Fresh & Easy's 10,000 square-foot -to- 12,000 square-foot size - and is currently looking for potential locations for the smaller footprint stores in Southern California, where it's considering opening the first few of the smaller stores, and in Northern California, Fresh & Easy Buzz has learned.

The smaller stores are an addition to and not a replacement for the current 10,000 square-foot -to- 12,000 square-foot Fresh & Easy markets.

We don't have all the details on the new format as of yet.

However, based on what we've learned so far, the smaller format is essentially an edited version of the existing Fresh & Easy format.

The 4,000 square-foot -to- 5,000 square-foot stores would offer basically the same product category assortment as the 10,000 square-foot -to- 12,000 square-foot stores do but in a limited way, based on the fact the smaller stores will be about half the size as the existing Fresh & Easy markets are. Think of the smaller stores as essentially offering a limited assortment of the current Fresh & Easy store product assortment and mix, with perhaps a couple other minor tweaks here and there.

El Segundo, California-based Fresh & Easy Neighborhood Market's real estate team is currently looking at sites for the 4,000 square-foot -to- 5,000 square-foot stores primarily in Southern California and secondarily in Northern California.

Further, we're told both urban and suburban retail store sites are being looked at by Tesco's Fresh & Easy for the new, smaller stores, which could have the "Express" name attached top them.

For example, among the current potential smaller store sites the fresh food and grocery chain is looking at 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, one of the reasons Tesco's Fresh & Easy is considering opening the smaller stores is because Tesco's business model has restrictions on the amount of capital used to purchase and lease store locations. This is one reason, for example, there aren't 10,000 square-foot -to- 12,000 square-foot Fresh & Easy stores in Southern California cities like Santa Monica or regions like West Los Angeles, which have among the highest retail commercial real estate costs in Southern California.

In contrast, according to our sources, by being able to build or lease locations in the 4,000 square-foot -to- 5,000 square-foot range, Fresh & Easy Neighborhood Market can get into these desirable cities and neighborhoods because the rental and purchase costs for stores half the size of the existing Fresh & Easy markets in places like Santa Monica and West L.A., and elsewhere where retail real estate costs are similar, generally fit into the business model Tesco has set for Fresh & Easy when it comes to the amount of capital available for buying and leasing store locations.

Tesco's Fresh & Easy Neighborhood Market has been working for some time to come up with a way to adapt the current product offering (about 4,500-5,000 SKUs) in the 10,000 square-foot -to- 12,000 square-foot Fresh & Easy markets to a smaller format store, such as those we're reporting on in this piece, according to a source in a position to know such information.

The existing Fresh & Easy stores carry about 4,500-5,000 SKUs. Many independent grocery stores in the 4,000 square-foot -to- 5,000 square foot range carry 5,000 (and far more) SKUs.

Fresh & Easy Neighborhood Market could easily fit the same number of SKUs it currently offers in the 10,000 square-foot -to- 12,000 square-foot stores in the 4,000-5,000 square-foot units simply by narrowing the store aisles, using higher shelving, and reducing the amount of product facings it gives each item in the store. Sources tell us though that the smaller stores will offer a limited assortment of the current Fresh & Easy store mix rather than doing what we describe above.

The primary but not only reason Fresh & Easy Neighborhood Market has developed the smaller store format is because it wants to create more flexibility within Tesco's property capital allocation model, described earlier, which will then allow Fresh & Easy to open stores in these desired but so far unobtainable locations and still be within its property budget.

The smaller stores are Fresh & Easy's answer to this situation, according to the source, who says the first of these smaller stores should come on line this year in Southern California first, then later in Northern California.

Friday, January 21, 2011

Tesco's Fresh & Easy Neighborhood Market Introducing New 'Gourmet' Private Brand

Private Brand Showcase
News/Analysis

Tesco's Fresh & Easy Neighborhood Market is introducing a new private brand - 'fresh & easy kitchen Gourmet' - in most of its stores this week, starting with a line of refrigerated, ready-to-heat fresh-prepared meals, heat-and-eat refrigerated soups, and a line of heat-and-serve frozen meals.

The new brand is actually better described as a new "co-brand" because Fresh & Easy Neighborhood Market uses its exiting "Fresh & Easy Kitchen" brand name along with "Gourmet" on the packaging, making it a co-branding effort similar to what the grocer does with its 'Fresh & Easy goodness' brand.

As you can see in the photograph above though, the focus of the name of the new brand is clearly "Gourmet," with "Fresh & Easy kitchen" being secondary, both in font size and label placement on the product packages.

Tesco's Fresh & Easy has not formally announced or introduced its new private brand.

Fresh meals

The initial line of 'Fresh & Easy kitchen Gourmet' refrigerated, ready-to-heat meals includes the following upscale-sounding varieties: Chicken Milano, Fontina Chicken, Portabella Mushroom Pappardelle (pasta), Apricot Pork Tenderloin, Slow Braised Beef, Braised Lamb Shank, Mediterranean Salmon, Lobster Ravioli, and Champagne Shrimp.

The fresh, ready-meals retail for $5.99-$6.99 everyday, depending on the variety. In addition to the fresh-prepared meals, there's also a refrigerated, ready-to-heat soup line under the new private brand. The first two items being launched this week in the gourmet soup line are French Onion and Crab & Sweet Potato Bisque.

Frozen meals

The first items being introduced this week in the 'fresh & easy kitchen Gourmet' frozen meals line are: Braised Beef in Red Wine Sauce, Pork with Portobello Mushroom Sauce, and Mediterranean-Style Fisherman Stew.

All three frozen meals are priced at $6.99 each.

Additional private brand upscaling

Late last year we noted in two stories in Private Brand Showcase - December 23, 2010: New Items Show Fresh & Easy Neighborhood Market's Niche-Specialty Category Private Brand Development Focus and December 13, 2010: House (Sparking) Cider Rules at Fresh & Easy Neighborhood Market - that the new private brand and new item development at Tesco's Fresh & Easy has been and will continue to be headed in a more upscale/premium/specialty niche or focus rather than in a discount or price-focused direction. The grocer's new 'fresh & easy kitchen Gourmet' brand, its first new private brand of 2011, offers added evidence that our analysis is correct.

The brand is not only premium and upscale in its actual name - "Gourmet" - but also in the nature - the product names and ingredients - of the first batch of SKUs introduced in the fresh and frozen product lines.

The $5.99-$6.99 price points are in range as well, although its our analysis that the jury will be out for some time as to whether or not Fresh & Easy is able to obtain repeat sales on the items, considering the portion size/price point combination. Shoppers are trading up compared to the previous three years. However, spending $28, the cost of buying four fresh or frozen meals for a family of four, is something many shoppers aren't likely ready to do on a regular basis at present.

Fresh & Easy's prices on the items are in line with many of its competitors, and lower than some of its other competitors, however.

Fresh & Easy's private brand lineup

The addition of the 'fresh & easy kitchen Gourmet' brand (or co-brand) brings to five the number of private brands Fresh & Easy Neighborhood Market currently has in its portfolio. Those five retailer brands are:

>Private brand name: fresh&easy = basic store brand. Categories so far: across all store categories: Dry grocery. Refrigerated. Frozen. Includes natural and organic products.

>Private brand name: eatwell = healthy foods' brand. Categories so far: Refrigerated and fresh-prepared foods, frozen, dry grocery.

>Private brand name: fresh & easy goodness = private brand targeted to kids, with a healthy foods' focus. Categories so far: dry grocery/drinks

>Private brand name: Mother's Joy = line of breakfast cereals. Categories so far: dry grocery. Just the cereal line.

>Private brand name: fresh & easy kitchen Gourmet = gourmet/premium brand. Categories so far: fresh-prepared foods, frozen.

>Private brand name: retreat = non-foods brand. Categories so far: Health and body care.

Gourmet

According to our sources, Tesco's Fresh & Easy doesn't currently have immediate plans to extend the 'fresh & easy kitchen Gourmet' brand into other categories, such as dry grocery, beyond its current fresh-prepared refrigerated foods and frozen food categories.

However, Fresh & Easy Neighborhood Market usually starts a new store brand out, except for its fresh&easy flagship private brand, with products in just one and sometimes two categories. This was the case with its 'eatwell' healthy foods brand. The grocer launched the brand in early 2010 with a line of ready-to-eat and ready-to-heat fresh-prepared foods items. A few months later Fresh & Easy extended the brand into the dry grocery category, followed by branding a line of frozen meals under 'eatwell,' all in the same year, as we reported on and wrote about here.

As such, we will be watching the further development of Fresh & Easy's new 'fresh & easy kitchen Gourmet' private brand throughout the year.

Private Brand Showcase: 2011 stories

January 20, 2011: Fresh & Easy Neighborhood Market's 'eatwell' Brand Frozen Meals Take Center Stage In-Store This Week

January 18, 2011: Fresh & Easy Neighborhood Market Launches 'Extra-Low Every Day Low Price' Merchandising Program

January 6, 2011: Fresh & Easy Neighborhood Market Hopes 'eatwell' Makes For A Healthy 2011

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

January 4, 2011: Fresh & Easy Neighborhood Market Kicks Off 2011 With an Appeal to 'eatwell'

[Click for a selection of stories from 2010.]

Thursday, January 20, 2011

Fresh & Easy Neighborhood Market's 'eatwell' Brand Frozen Meals Take Center Stage In-Store This Week

Private Brand Showcase
Private brand in-store merchandising & promotion

Tesco's Fresh & Easy Neighborhood Market doesn't merely want shoppers to "eat well" this week. It wants them to do so by buying, loading their home freezers with, and eating multiple packages of its 'eatwell' private brand frozen meals, which the grocer is promoting and displaying in end-cap, coffin-case freezer displays in all 156 of its Fresh & Easy markets in California, Nevada and Arizona this week.

As you can see in the photographs above and below, the freezer case displays feature large point-of-purchase signs touting the 'eatwell' frozen meals and the $1.49 unit promotional price point.

Fresh & Easy Neighborhood Market, which is owned by United Kingdom-based Tesco, has been promoting its 'eatwell' brand aggressively since the first week of January. Such healthy foods' brand and item promotions are a common theme for grocers at the start of a new year. Think of the promotions as a "new year, get healthy" type of hook for food retailers, which taps into consumers' resolutions and other goals, which often includes eating more healthy foods.

This month, the grocer also introduced a number of new items under its 'eatwell' brand, which includes products in the fresh-prepared foods, dry grocery and frozen categories, as we reported and wrote about recently in these two stories - January 6, 2011: Fresh & Easy Neighborhood Market Hopes 'eatwell' Makes For A Healthy 2011 and January 4, 2011 Fresh & Easy Neighborhood Market Kicks Off 2011 With an Appeal to 'eatwell.'

Fresh & Easy Buzz was the first publication to report Fresh & Easy Neighborhood Market was extending its 'eatwell' private brand into the dry grocery and frozen food categories, from fresh-prepared foods, last year. [See - August 2010 piece - August 18, 2010: Fresh & Easy Neighborhood Market Extending 'eatwell' Healthy Foods' Private Brand Into Dry Grocery Category. Also - September 10, 2010: Fresh & Easy Neighborhood Market Extending its 'eatwell' Healthy Foods' Brand Into Frozen Food Category and September 27, 2010 - First Items in Fresh & Easy Neighborhood Market's 'eatwell' Brand Frozen Foods Line Arriving in Store Freezer Cases This Week.]

Tesco's Fresh & Easy is focusing big on 'eatwell' frozen for January and into February. Along with the large and colorful in-store displays, the grocery chain is advertising the 'eatwell' frozen meals this week in its weekly advertising circular, for $1.49 each. The $1.49 promotional price began on January 12 and runs until February 11, 2011. The items sell for $1.99 regularly. [See - January 18, 2011: Fresh & Easy Neighborhood Market Launches 'Extra-Low Every Day Low Price' Merchandising Program.]

The conclusion to the big 'eatwell' frozen case in-store displays and advertised promotion: Tesco's Fresh & Easy Neighborhood Market obviously doesn't merely want shoppers to "eat well" - it wants them to buy, stock their freezers with and eat lots of 'eatwell' private brand frozen meals.
[The photos at top were taken this week by a Fresh & Easy Buzz correspondent.]

Wednesday, January 19, 2011

Customer-Designed Reusable Shopping Bag Now On Sale At Fresh & Easy Neighborhood Market Stores

In July of 2010, Tesco's Fresh & Easy Neighborhood Market announced the winner of its reusable shopping bag design contest - Los Angeles resident Josephine Close - as we wrote about in this story: July 27, 2010 - The Winner of Fresh & Easy Neighborhood Market's Reusable Bag Design Contest Is...
Ms. Close, who won a $5,000 Fresh & Easy gift card for her efforts, was chosen as the contest's grand prize winner from among a group of finalists, all of whom created interesting reusable bag designs. [See - June 17, 2010: Fresh & Easy Neighborhood Market Picks Eight Finalists in its Reusable Bag Design Contest; Website Voting Through June 30.]

In our July 27, 2010 story we noted that the winning bag design was being turned into a reusable shopping bag, which would be offered for sale in Tesco's Fresh & Easy stores in California, Nevada and Arizona.

That's now happened: The paisley-design reusable shopping bags (pictured at top), which evoke a bit of a 1960's retro-look, are being offered for sale in all 156 of Tesco's Fresh & Easy markets beginning this week, for a mere 79 cents each.

At that reasonable price we suspect bag designer Close will see her finished product in the hands of numerous shoppers over the next few months, not only in Fresh & Easy stores, but at other grocery markets, farmers' markets and, if she uses public transportation in Los Angeles, in the hands of more than one bus and metro rail line car rider.

Here's what Roberto Munoz, Fresh & Easy Neighborhood Market's director of neighborhood affairs says about the design-a-bag contest, which lead to the winning bag by Los Angeles resident Josephine Close: "We set out to design a desirable and affordable bag people actually want to use and re-use, and we turned to our customers for inspiration," said Roberto Munoz, Fresh & Easy Director of Neighborhood Affairs. "Based on sales of the bag already, we know customers like the design and the price point. We hope this new bag will continue to encourage customers to use fewer single-use bags in exchange for reusable options."

We have one burning question though for reusable shopping bag designer Josephine Close, in case she happens to read this piece: "How many of your attractive, retro-looking reusable shopping bags were you able to fill with groceries, using your $5,000 Fresh & Easy gift card?

Tuesday, January 18, 2011

Fresh & Easy Neighborhood Market Launches 'Extra-Low Every Day Low Price' Merchandising Program

Private brands & grocery merchandising
News/Analysis

Tesco-owned Fresh & Easy Neighborhood Market today launched a new everyday low-price-oriented merchandising program in its 156 stores in California, Nevada and Arizona, in which it's guaranteeing the shelf prices on a selected number of its private brand items for an extended period of time. Fresh & Easy is calling the shelf prices on the selected group of items: "extra low every day."

Among the first batch of products included in the program include: 'fresh&easy' apple juice, in a 64 ounce bottle ($1.99); a multi-pack of 'f'resh&easy' brand bone-in loin pork chops ($1.99 pound); a multi-pack of 'fresh&easy' chicken breasts (1.99 pound); and assorted varieties of 'fresh&easy' packaged pasta (99 cents each).

Additional private brand items in the new everyday low-price-oriented program include various varieties of fresh&easy brand packaged cheese, ice cream, pre-packaged fresh lettuce items, and bagged vegetable steamers.

The shelf prices on the first batch of private brand items in the new everyday low-price-oriented merchandising program, which have shelf signs featuring the item price and the words "every day" below it, are guaranteed for about two months - from today -to- March 22, 2011. After March 22 Fresh & Easy reserves the right to raise the prices on the products, although it may or may not do so.

Based on our research, the shelf prices on the items listed above with the "extra low everyday low-prices" listed are the same as they were before Tesco's Fresh & Easy launched the program this week. That's not to say the price points are good or bad. Rather, its to say the price points on those specific items weren't lowered from what the shelf prices were a few weeks ago. The pasta price of 99 cents a unit everyday is excellent, for example. On the other hand, a number of the other items are about the same as what nearly all of Fresh & Easy's competitors offer on their respective private brands of the same variety.

The key proposition in the new merchandising program though, in our analysis, is the "price guarantee," in which the grocer is pledging not to raise the "extra low every day" shelf prices on the selected items for a given period of time.

EDLP, high-low, or both?

At first blush Fresh & Easy's new everyday low-price-oriented (EDLP) merchandising program looks like a move by the grocer to become more of an EDLP operator, rather than the hybrid EDLP/high-low grocer it currently is.

However, that's not the case. In addition to launching the merchandising program in the stores this week, Fresh & Easy Neighborhood Market also distributed a spate of its deep-discount store coupons today, which included a $6-off purchases of $30 (20%-off) or more coupon online and a $5-off purchases of $2o (25%-off) or more in its direct-mailed paper advertising circular.

The grocer also continues to distribute an online and direct-mailed weekly promotional circular, which features various items at reduced prices for a one week period of time.

The deep-discount store coupons, which can be used by shoppers on any of the retailer's private brands or manufacturer brands offered in the Fresh & Easy markets - the coupon amount is taken off customers' total grocery order purchase - is a promotional device and therefore part of high-low food and grocery retailing philosophy and practice - particularly because Fresh & Easy uses the coupons regularly - rather than a merchandising philosophy normally associated with EDLP grocers.

Many high-low retailers, such as Walmart and WinCo Foods, to name two that operate in the same markets as Tesco's Fresh & Easy Neighborhood Market does, use promotional mailers, coupons and other promo devices occasionally, but not on a regular basis like Fresh & Easy does. These retailers focus primarily on everyday low shelf pricing, using promotions at times as a device to stimulate customer draw and sales.

Fresh & Easy, on the other hand, is what we call a mixed or hybrid EDLP/high-low operator because the grocer uses the EDLP philosophy and practice and the high-low promotional variant equally in its stores.

It is our analysis though that Fresh & Easy Neighborhood Market CEO Tim Mason and his senior executive team, at least conceptually, have launched the "extra low every day low prices" merchandising program in the hope if it's successful down the road it could allow the grocer to stop distributing its deep-discount store coupons on a regular basis, as it has been doing chronically since 2008.

The 20% and 25%-off coupons take a big bite out of the fresh food and grocery chain's overall margin, which currently is in the cellar, at a negative-38%. Mason and company must get this margin up significantly, say at least in the low plus-twenty percentile, in order to have a chance of ever making a profit with Fresh & Easy, in our analysis.

Tesco has set the end of its 2012/13 fiscal year, a little over two years from now, to break-even with Fresh & Easy Neighborhood Market. Tesco lost $151 million on Fresh & Easy in the first half of its current fiscal year - 2010/11. The current fiscal year is over at the end of February 2011.

Significantly reducing the frequency of, or eliminating completely, the deep-discount store coupons will be a tough slog for Fresh & Easy though because, by using them so regularly, the chain has created a perception among shoppers that the vouchers, and the 20%-25% discount (if used to buy the minimum dollar purchase required) they offer, is a normal part of the grocer's pricing policy. In other words, a perception exists among customers, in our observation and analysis, that without the coupons the prices at the Fresh & Easy stores are too high.

The evidence of this phenomenon is two fold: When in the past Fresh & Easy tried to not use the store coupons for a couple months in 2009, sales in the stores dropped, and customers complained about the lack of coupons to the grocer in huge numbers, many saying that without the coupons they were not shopping in the stores or buying much less when they did shop at Fresh & Easy.

The retailer responded to these twin developments in 2009 by resuming regular distribution of the discount coupons, something its continued on a regular basis ever since, including this month.

Extra-low - everyday

Obviously it's too early to offer an analysis on the efficacy of Fresh & Easy Neighborhood Market's new everyday low-price-oriented merchandising program, since it is just starting. However, we can see pitfalls with the program, as well as some potential positive opportunities.

Overall though, it's our analysis right now that the program isn't going to have any material benefit on Fresh & Easy's sales. Even more important - and obvious - it will do nothing directly to help increase the grocery chain's gross margin.

The program could over time possibly help create a better overall customer price perception of Fresh & Easy. However, a true picture of how the stores can do will not come until the grocer stops - and perhaps it never will - using the deep-discount store coupons on a chronic basis.

For example, Fresh & Easy seldom lets more than two or three days pass between the expiration date of a batch of coupons and the distribution of a new batch. A good test would be to issue the coupons for just one week out of each month. Then we could see how the stores do for the other three weeks out of the month when the coupons offering 20%-25%-off shoppers' total grocery purchases aren't available.

We don't see this happening though. Why: Because it's our analysis that without the regular distribution of the coupons as described above, sales at the Fresh & Easy stores would drop substantially, despite the fact the everyday prices in the stores are decent, and despite the fact the chain distributes a decent promotional circular each week.

It's not too early to offer this, however: What we call the "Fresh & Easy coupon conundrum"and the associated issues described above is something incoming Tesco CEO Philip Clarke, who takes over the corner office at Tesco's corporate headquarters in the United Kingdom in early March, should be very concerned about.

Related Stories

Click on the following links - , , , , , , , - to view a selection of related stories in Fresh & Easy Buzz.