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.
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