Competitor News: Arizona's White Hot Competitive Climate Plus the Recession Leads Bashas' to Close More Stores; Layoff 700 More Employees

Arizona Region Market Report

Arizona's family-owned Bashas' Markets supermarket chain announced today it plans to close additional stores in the state, along with laying off more employees.

Through its spokesperson Kristi Nied the 160-store hometown Bashas' chain said it will close five to ten underperforming stores in Arizona under its flagship Bashas' banner and its Food City Latino format banner. Three or more of the stores will be in the Metropolitan Phoenix region where Tesco's Fresh & Easy has 30 of its small-format, Fresh & Easy grocery and fresh foods markets.

Bashas' also says it will eliminate about 700 jobs. The number of layoffs could exceed the 700 by at least a couple more hundred if Bashas' ends up closing close to or the full 10 stores, a source in a position to know told us today.

The 700 eliminated jobs comes on the heels of the grocery chain laying off about 350 employees in late January of this year, as we reported and wrote about in this February 6, 2009 news and analysis piece: Arizona Market Region Analysis: Bashas' Worker Layoffs, Closing of Stores Could be the 'Canary in the Coal Mine' in Ultra-Competitive Arizona Market.

Additionally, in the summer of 2008, Bashas' laid off about 250 employees in what then was its very first round of worker firings, which it attributed to the severity of the economic recession in Arizona, along with the intense competition in the food and grocery retailing sector in the state. [June 8, 2008: June 8, 2008: Arizona Region Market Report: First Signs of A Weakening Might Be Starting to Show in the 'White-Hot,' 'Super-Competitive' Arizona Market.]

As we wrote about in this April 1, 2009 story [Competitor News: Bashas' Chain Launching 10,000-Plus Item Storewide Price Slashing Program This Week in its Arizona Supermarkets], Bashas' fired a competitive salvo in its home market of Arizona by slashing the prices on over 10,000 items in its 150-plus stores in the state.

Bashas' operates 150-plus stores in Arizona, where it is headquartered, under its flagship Bashas' banner (the majority of stores); Food City, its Latino-focused format banner; A.J.'s Fine Foods, an upscale and specialty banner; Eddie's Country Store; and Bashas' Dine (prepared foods focus). Bashas' also operates a small chain of liquor stores in Arizona called Sportsman's Fine Wine & Spirits.

The firing of the 700 employees announced today by Bashas' is its third since the summer of 2008. It appears that competition is such for the grocer that in addition to launching is price-slashing and promotional program just a few weeks ago, it still needs to cut costs on the expense side of the ledger, closing the five to 10 stores and laying off the 700 employees.

Since Fresh & Easy Buzz was saying nearly a year ago, like in this story, [June 8, 2008: Arizona Region Market Report: First Signs of A Weakening Might Be Starting to Show in the 'White-Hot,' 'Super-Competitive' Arizona Market], that something would have to give among one or more chains in Arizona in terms of what we call the white hot competitive food and grocery market in the state, coupled with the recession and housing foreclosure crisis, both which have hit the state particularly hard, we aren't surprised Bashas' is closing additional stores and laying off more employees. Although the 700 employees is more than we anticipated, on top of the about 500 already let go since the summer of 2008.

Unlike Wal-Mart, Safeway, Kroger's Fry's, and even Tesco's Fresh & Easy, all players in the Arizona market and all owned by public companies that are among the largest retailers in the world, Bashas' is a privately-held company that has all but just a few of its stores in Arizona. As a result, it doesn't have the kind of capital these publicly-held mega-retailers do to buffer it in the current super-competitive and economically-challenged climate in Arizona, particularly since the credit and financial crisis is far from over.

In addition, since all but a few of Bashas' stores are in Arizona, it doesn't have a significant presence in other states, like all the others do, that can offset its Arizona business. In other words, all of Bashas' food retailing eggs are basically in the Arizona basket, even though it is a multi-format operator in the state, which is a plus for the retailer despite its problems.

More will give, and more shoes will fall, in the Arizona market. The competition continues to heat up. The economy is far from improving as of yet in the state. And population growth, which has been the key to Arizona's, particularly the Phoenix Metro region's, pre-recession booming economy, is pretty much at a standstill.

Linkage - Select Related Posts:

>December 16, 2008: Food & Grocery Retailing in the Recession: Bashas' Broadening the Shopper-Base in its Hispanic Format Food City Stores; Shoppers Search for Value

>February 6, 2009: Arizona Market Region Analysis: Bashas' Worker Layoffs, Closing of Stores Could be the 'Canary in the Coal Mine' in Ultra-Competitive Arizona Market

>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

>December 12, 2008: Fresh & Easy Looking For Gold in Gilbert: Second Store in the Arizona City Set to Open Jan. 7; A Third Fresh & Easy Market to Open In Fall, 2009

>December 12, 2008: Marketing & Promotions Report: Manufacturers' Coupons Becoming the 'New Black;' Use Among Consumers Soaring; Marketers Distributing More Than Before

>October 2, 2008: Arizona Market Report: Fresh & Easy Opens Two New Stores; Marketside Opens in Three Days; Analysis of One Of the Most Competitive Markets in the U.S.

>June 8, 2008: Arizona Region Market Report: First Signs of A Weakening Might Be Starting to Show in the 'White-Hot,' 'Super-Competitive' Arizona Market

>April 9, 2008: Arizona's Shopper and Employee-Beloved Bashas' Named One of 'The Best' Places to Work in the State For Second Year in a Row

[Follow Fresh & Easy Buzz around on Twitter.com at www.twitter.com/freshneasybuzz.]

Got Milk? Getting it For Shoppers is Much Less Expensive Now Than it Was A Year Ago in California, Nevada and Arizona; Tomorrow it's Even Free

California, Nevada and Arizona Region Report - Milk

Fresh, whole milk (the kind that comes from cows) is currently selling on average for 40% -to- 50% less for a gallon than it was a year ago in California, Nevada and Arizona, the three states where Tesco has its current 116 Fresh & Easy Neighborhood Market grocery and fresh foods stores.

Today it's easy to find a gallon of milk priced everyday at $1.99 in supermarkets in the three states. Not so a year ago.

Hot deals on fresh cold milk at Fry's supermarkets in Arizona

Some supermarkets, like Kroger Co.-owned Fry's in Arizona, are even offering gallons and half- gallons of fresh milk at loss-leader promotional prices in their weekly advertising circulars. For example, this week Fry's is advertising gallons of whole milk for $1.47, and half gallons for 88-cents each, in its Arizona supermarkets. Fry's is the number two food and grocery sales market share leader in Arizona, just a couple points behind number one Wal-Mart.

Discount coupons for fresh milk in California

In California, the California Milk Advisory Board (CMAB), which promotes the state's about 2,000 dairy farmers and the fresh milk and value-added dairy products they produce, distributed full-color, full-page free-standing inserts (FSI's) in March and again this month, advertising and promoting California-produced milk and dairy products.

The March FSI included a coupon good for 50-cents off a gallon or half-gallon of California-produced fresh, whole milk, along with a second coupon good for 30-cents off any dairy product made with milk from California's dairy farmers.

This month's CMAB full-page FSI also features a coupon good for 50 cents off gallons and half- gallons of fresh milk, along with a coupon good for 50-cents off any one pound package of butter, as long as it is made in California and has the association's "Real California" seal on the package, showing the product is made from milk from California's dairy farmers.

The California Milk Advisory Board (CMAB) has also made the coupons available on its Web site. The trade group pays retailers the face value of the coupon plus a three -to- five cent per coupon handling charge for redeeming the milk coupons in the stores.

Tesco's Fresh & Easy Neighborhood Market doesn't except manufacturers' coupons like the milk board is distributing. Therefore shoppers can't take advantage of and use the 50-cents off fresh milk and other California-produced dairy products' coupons in the Fresh & Easy stores.

And Tesco's Fresh & Easy can't gain the added sales the 50-cent coupons are bringing to food and grocery retailers in California. The milk board included the FSI's in the Sunday editions of every major daily newspaper in California in March and this month. That's millions of the coupons distributed.

About half of Tesco's 116 Fresh & Easy grocery and fresh foods markets are located in Southern Californa (and three in Bakersfield.) The other half are roughly equally divided between southern Nevada and Metropolitan Phoenix, Arizona.

California is the number one producer and processor of fresh milk and most value-added dairy products in the nation.

Free Milk from Shamrock Farms at Bashas in Arizona tomorrow

Arizona's Shamrock Farms, which is the largest family-owned branded dairy company in the southwestern United States, is taking fresh milk promoting to a new level tomorrow, Saturday, April 11. The local Arizona-based dairy company is teaming up with local supermarket chain Bashas' in a mega-free Shamrock Farms brand milk giveaway at four Bashas' supermarkets in the state.

Shamrock Farms will give away 10,000 half-gallons (5,000 gallons) of its new Shamrock Farms Essentials and Essentials for Kids fresh milk at the four Bashas' stores tomorrow. The dairy company also will be handing out coupons good for 65-cents off future purchases of the half gallon containers of the milk; the same coupons current available on the company's Web site. The value-added, nutrient-rich Essentials line comes only in half gallons.

The four Bashas' stores where Shamrock Farms will be giving away the free milk tomorrow are:
>Seventh Street and Missouri in Phoenix, Arizona
>Power and Chandler Heights roads in Queen Creek, Arizona
>Power and McDowell roads in Mesa, Arizona
>Lake Pleasant Road and Beardsley in Peoria, Arizona

The dairy company will distribute 2,500 free half-gallons of the milk at each of the four stores; one gallon per person or family.

The milk freebie event starts at the stores at noon according to Shamrock Farms. It ends when all of the 2,500 half gallons of free milk have been distributed; but no later than 5pm. We doubt if the Shamrock Farms' folks will need to stay at the stores anywhere close to 5pm. We suspect the milk will be gone in an hour or two at each store. "Free" is a magic marketing word.

Shamrock Farms, which is a division of the Shamrock Foods Company, says those consumers who don't get a free half-gallon of its new Essentials nutrient-fortified fresh milk at one of the four Bashas' supermarkets tomorrow will get a second chance for a freebie.

The company says it will again be handing out free half-gallons of the milk on March 18 at the Metro Phoenix March for Babies event. That event is at Phoenix's Wesley Bolin Plaza, 1900 W. Washington Ave., in front of the state Capitol building. It starts at 7am on March 18.

Founded in 1922, Shamrock Farms is the largest family-owned and operated dairy in the Southwest U.S. The company produces and distributes a full line of dairy products, including fresh milk, sour cream, cottage cheese, whipping cream, ice cream, and more. The dairy processor and marketer is well known in Arizona and throughout the southwest for its spokesbovine -- Roxie The Cow.

The fresh buzz on fresh milk prices

The reason for the dramatically lower retail prices and unusual promotions, like the generic 50-cent off coupons good for any brand of milk produced in California being distributed by the California Milk Advisory Board CMAB), is because the supply of milk in the state is up while the demand is down. OR the demand is down based on the level of supply. It goes both ways.

For example, California's dairy farmers are currently being paid about 60% less for their milk than they were a year ago. They're struggling.

In fact it has gotten so tough on dairy farmers in California's San Joaquin Valley, which is the highest per-capita milk producing region in the U.S., that the Modesto, California-based Western United Dairyman, a state dairy farmer trade association, is working with the region's dairy farmers on a cow kill program. Under the program dairy farmers are killing off many of their cows, selling them to meat processing companies.

The hope of the cow herd-reduction program is that by reducing the number of milk-producing cows, the supply of milk will thereby be reduced, leading to the dairy farmers receiving a higher price for their milk from the milk processing companies because supply and demand will then be in a more equal balance.

Milk production is down by 5.8% in California, compared to the same time last year, according to the Western United Dairymen. The nearly 6% reduction in milk supply hasn't helped increase the milk price paid to the state's dairy farmers though, which is why the group wants to reduce the supply further through the herd reduction program.

Additionally, the California Milk Advisory Board is distributing the fresh milk and dairy products coupons for two primary reasons.

First, the trade group is trying to increase sales, and thus demand, for fresh milk produced by California's dairy farmers.

Second, the trade group says about 20% of all fresh fluid milk sold in California comes from out of state dairy farmers with about 80% coming from California dairy farms.

The milk board hopes to reduced that 20% (out of state produced milk) by whatever percentage it can. Even taking a 5% bite out of the 20% of out of state milk sold in California would translate into a substantial boost to California's milk producing dairies, the trade group says.

Milk prices: Plus for consumers, retailers; minus for dairy farmers

Meanwhile though, consumers in California, Nevada and Arizona -- and throughout the U.S. -- are saving big bucks on fresh milk right now, compared to what they were paying a year ago.

And if you include the supermarket promotions, like Fry's in Arizona, the cents off coupons, not to mention the free giveaways like tomorrow's Shamrock Farms event at the four Bashas' stores, the savings on fresh fluid milk is even greater.

That's one grocery shopping (and pocketbook) silver lining for consumers, as well as for food and grocery retailers since they are making basically the same profit margins as a year ago, in this current recession.

But like is always the case, it comes at a price for another group. In this case that group is dairy farmers, not just in California but throughout the U.S. They are receiving the lowest payments for the milk they sell to milk processors in recent memory.

But, at least tomorrow at the four Bashas' supermarkets, there won't be any crying over free milk. But we bet there will be lots of competition among consumers to be one of the first 2,500 hundred people in line at each of the four stores to get their free half-gallon of milk.

Competitor News: Bashas' Chain Launching 10,000-Plus Item Storewide Price Slashing Program This Week in its Arizona Supermarkets

Arizona Market Region Report: Food & Grocery Retailing in the Recession

Bashas', Arizona's home state supermarket chain, is fighting back against the economic recession and stiff competition from numerous food and grocery retailers in the state by launching a major price-slashing initiative in its 100-plus Bashas' flagship banner supermarkets. Arizona-based Bashas operates about 156 supermarkets in the state (out of about 161 total) under the Bashas', Food City (Latino format) A.J.'s Fine Foods (upscale format), Eddie's Country Store and Bashas' Dine (prepared foods focus) banners. Bashas also operates the small Sportsman's Fine Wine & Spirits chain in Arizona.

Mike Proulx, Bashas' president and CEO, said starting this week the supermarket chain is slashing the everyday prices on more than 10,000 nationally branded and private label food and grocery items across all store categories and departments.

The current economic recession and the added competition from chains like Wal-Mart, Safeway, Kroger Co-owned Fry's, Albertsons, Costco, Tesco's Fresh & Easy Neighborhood Market and others in Arizona is what's behind the aggressive price-slashing value move by hometown chain Bashas'.

"In the 77 years that Bashas' has been in business, we've weathered countless economic downturns," Bashas' CEO Mike Proulx said in announcing the storewide price reductions. "Not only was our company formed during the height of the Great Depression, but we've survived the ups and downs of the supermarket industry, increased competition and national economic fluctuations. As Arizona's hometown grocer, we knew we needed to do something more for families looking to stretch their dollars during these tough economic times."

Bashas' is serious about trying to protect its turf in the white hot competitive Arizona market region, a state that has been hit among the hardest by the housing foreclosure crisis, credit crisis, unemployment and overall recessionary blues.

In addition to its massive category-wide price reduction move this week, Bashas' is going back to some of that old time food retailing religion in the form of offering shoppers a good old supermarket sweepstakes promotion.

The promotion is a win-free-groceries-for-a-year sweepstakes, for which one lucky winner will walk away with $5,200 in Bashas' gift cards, or the equivalent of $100 a week in free groceries for an entire year, according to Johnny Basha, the vice chairman of the company and a member of the Basha family, owners of the supermarket chain.

Additionally, fifty-three second-prize winners will each receive a Bashas' gift card worth $50. One winner will be chosen from each participating Bashas' store in metropolitan Phoenix and Tucson.

Contests and sweepstakes like this are making a comeback in the supermarket industry in these tough economic times, designed as ways to get shoppers into the stores. For example, Safeway Stores, Inc., which is a major player in Arizona food retailing, currently is running a customer sweepstakes-drawing around its "Ranchers Reserve" store brand beef line. The first prize winner receives a brand new pickup truck and Airstream travel trailer. There are numerous second prize winners as well.

Bashas' started offering the sweepstakes in its stores this week. Shoppers can enter until April 30. The grocer says the prize drawing will take place in May.

As we reported and detailed in this February 6 piece [Arizona Market Region Analysis: Bashas' Worker Layoffs, Closing of Stores Could be the 'Canary in the Coal Mine' in Ultra-Competitive Arizona Market] the Arizona-based chain laid off 203 employees as a way to cut expenses amidst the double whammy of economic recession and heavy competition in Arizona. those firings came on top of previous layoffs earlier.

The hometown Arizona-based supermarket chain also is closing five of its stores in the state.

Having made the layoffs and decided on the closing of the five less than desired performing stores, and thus focusing on the expense control side of the ledger, Bashas' now appears to be putting its focus on the demand or sales side, kicking off the major price-slashing program as a way to keep and gain shoppers in Arizona.

The primary, although not exclusive, focus of the price reductions on the 10,000-plus items is on essentials or basic everyday food and grocery products that shoppers by most frequently. That obviously makes sense as that's where the hottest competition among competing grocers currently is, not only in Arizona, but throughout the United States.

As we discussed in past stories in Fresh & Easy Buzz, Bashas has always been a tough competitor. Years ago when Safeway became a major player in Arizona many analysts were writing Bashas' off. They survived. When Kroger Co. came to town in a big way... ditto. And the biggest threat, Wal-Mart, hasn't rendered Bashas' a failure, although the brawny big box retailer from Bentonville, Arkansas is the most serious threat to Bashas and all of the other supermarket chains doing business in Arizona to date.

Bashas' is showing with the major price reduction program that it gets value -- that merely being the hometown grocery chain isn't enough in the current recession.

But it's also clear that the Arizona-based supermarket chain is struggling, based on the layoffs, store closings and felt need to reduce the everyday prices on so many items. Although such price reductions are hardly exclusive to Bashas' in the current econopmic climate -- many supermarket chains are making similar moves, although at 10,000-plus items Bashas' is about the most extensive we've heard of thus far.

Arizona is shaping up as competition central in U.S. food and grocery retailing in the recession. Tesco's Fresh & Easy certainly has its job cut out for it competing with these long time major players like Bashas', Safeway, Kroger, Wal-Mart and the others in the state.

Linkage - Select Related Posts:

>December 16, 2008: Food & Grocery Retailing in the Recession: Bashas' Broadening the Shopper-Base in its Hispanic Format Food City Stores; Shoppers Search for Value

>February 6, 2009: Arizona Market Region Analysis: Bashas' Worker Layoffs, Closing of Stores Could be the 'Canary in the Coal Mine' in Ultra-Competitive Arizona Market

>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

>December 12, 2008: Fresh & Easy Looking For Gold in Gilbert: Second Store in the Arizona City Set to Open Jan. 7; A Third Fresh & Easy Market to Open In Fall, 2009

>December 12, 2008: Marketing & Promotions Report: Manufacturers' Coupons Becoming the 'New Black;' Use Among Consumers Soaring; Marketers Distributing More Than Before

>October 2, 2008: Arizona Market Report: Fresh & Easy Opens Two New Stores; Marketside Opens in Three Days; Analysis of One Of the Most Competitive Markets in the U.S.

>June 8, 2008: Arizona Region Market Report: First Signs of A Weakening Might Be Starting to Show in the 'White-Hot,' 'Super-Competitive' Arizona Market

>April 9, 2008: Arizona's Shopper and Employee-Beloved Bashas' Named One of 'The Best' Places to Work in the State For Second Year in a Row

[You can follow Fresh & Easy Buzz around on Twitter.com at www.twitter.com/freshneasybuzz.]

Food & Grocery Retailing in the Recession: Bashas Broadening the Shopper-Base in its Hispanic Format Food City Stores; Shoppers Search for Value

Competitor News: Arizona Region Market Report - and Beyond

Arizona-based, family-owned supermarket chain Bashas uses a multi-format food and grocery retailing strategy in the state.

The hometown supermarket chain, which operates about 160 stores in Arizona, has its namesake banner Bashas supermarkets, which consist of both superstores and conventional supermarkets. This banner is the bullwork of the grocery chain's business in the state.

But Bashas strategy also includes covering niche markets with its additional food retailing formats. These include the retailer's AJ's Fine Foods banner, which are supermarkets that focus on merchandising specialty, gourmet, natural, organic, premium and fresh, prepared foods in an upscale retail setting.

AJ's Fine Foods, which pioneered specialty and gourmet food and grocery retailing in the state, was a popular multi-store independent for many years in the Metro Phoenix market. Bashas acquired it a number of years ago and has selectively added new stores.

In addition to its flagship Bashas banner and its AJ's Fine Foods upscale supermarkets, Bashas also operates a small chain of upscale wine and spirits stores, Sportsman's Wines. The current four-store mini-chain (two stores in Scottdale, one in Phoenix and one in Glendale) was acquired by Bashas not too long ago from the family that founded and operated the popular Phoenix Metropolitan region upscale wine and spirits mini-chain for a number of years.

In acquiring Sportsman's, Bashas saw a number of synergies between it and its AJ's Fine Foods upscale target consumer, which was part of the grocer's motivation for buying it. Bashas also acquired Sportsman's it has said as a way to improve the supermarket chain's overall expertise in wine and spirits merchandising, as well as to open new stores and build the business in and of itself. This upscale segment isn't doing all that well for Bashas at present, as is the case with pretty much all upscale food retailers in this recession.

Bashas also is testing a natural foods store in Arizona, Ike's Farmers Market. That store is located in Oro Valley, Arizona.

But it's not just conventional superstore/supermarket, upscale specialty and natural foods formats Bashas includes in its multi-format strategy in Arizona. The grocery chain also operates Food City, which is a format and banner targeting the state's extensive Hispanic or Latino population, which comprises about 40% off all Arizona residents.

Basha's currently operates 61 Food City supermarkets, with store number 62 set to open soon in El Mirage, Arizona. The stores are full supermarkets with a focus on the fresh foods, groceries and non-foods Hispanic consumers buy and use most often. Food City stores also carry a strong selection of basic food and grocery items just like those found in all supermarkets. After all, Latino consumers have particular food preferences, but they also purchase many of the same brands and products Americans from all ethnic backgrounds buy.

Among the special features the Food City stores offer are huge fresh produce and meat departments. Many of the stores also have full-service pharmacies in-store. In addition, the stores offer a full check-cashing service because many Hispanic consumers, as well as others, don't use banks but rather prefer or have to cash their payroll checks at a supermarket or discount store like Wal-Mart, essentially using the stores as their financial instituion.

It's estimated that in both California, Nevada and Arizona, for example, as many as 25% of people don't use banks but rather use supermarkets and discount stores for their "banking" services such as payroll check cashing. Tesco's Fresh & Easy stores don't cash payroll checks or take paper, personal checks. Just cash, debit and credit cards. All 104 Fresh & Easy markets are in California, Nevada and Arizona.

As a result of not cashing payroll checks, Tesco is missing out on this huge, potential customer base in its Fresh & Easy stores. Wal-Mart, Kroger, Safeway, Bashas --the leading food and grocery retailers in these three states -- not only all cash payroll checks, they encourage it as policy because of all of the business it brings to their stores.

When it comes to basic food and grocery items, It is just this aspect of its Food City stores -- that they sell lots of basic food and grocery products at discount prices -- that Bashas is using in a new merchandising and marketing program designed to position the stores to a wider customer base -- everybody -- that's looking to save money in this severe economic recession, which has hit Arizona particularly hard.

In fact, in just the last month Bashas has added more basic or mainstream food and grocery items to its Food City banner stores, products that appeal to a wider audience, and focused on further discounting these "American-style" food and grocery items.

The new approach and program designed to increase business in the Food City supermarkets appears to be baring some recessionary shopper fruit, according to a recent piece in the Arizona Republic, written by staff writer Cathryn Creno, who covers the Arizona food and grocery retailing industry for the paper. Additionally, Fresh & Easy Buzz recently was in a couple Food City stores and observed an ethnically diverse consumer base shopping the supermarkets.

You can read the Arizona Republic story here.

Bashas isn't eliminating its Hispanic shopper niche in the Food City banner stores. Rather it's attempting to broaden the shopper base during the current bad economic times, which is creating in what our research has found are some profound changes in consumer food and grocery shopping patterns of behavior, particualrly in the Western U.S., where numerous different retail formats selling food and groceries exist.

For example, we're finding consumers shopping alternative formats much more than ever before in recent history in this recession.

Many shoppers are seeking out food and grocery bargains at dollar and 99-cent stores and salvage grocers and others, for example. Salvage grocers (also sometimes called "scratch & dent" grocers) are those that primarily sell slightly damaged or blemished food and grocery products, as well as manufacturers' close-outs.

Berkeley, California-based Grocery Outlet, which operates a chain of franchised salvage-type supermarkets (including stores in California, Nevada and Arizona), has reported this year its sales are up by at least 10-15%, and its owner-operators report seeing new faces in their stores daily.

Many shoppers also are seeking out ethnic supermarkets looking for bargains. These include Hispanic consumer-oriented stores like Food City and Asian foods-focused discount supermarkets as well.

The 99-Ranch Asian supermarket chain for example says its seeing more and more non-Asian shoppers in its big supermarkets located in California and elsewhere in the U.S. than it's ever seen before. The stores offer both basic food and grocery items and Asian foods at discount prices. The stores fresh meat and produce departments, which offer lots of value-priced items, have become particularly popular with non-Asian shoppers over the last few months, the company says, and we have observed having visited a number of the stores recently and seen shoppers of various different ethnic backgrounds in the markets.

As we wrote about yesterday in this piece [ Food & Grocery Retailing in the Recession: Wal-Mart CEO Describes Changes in Consumer Behavior-More Cheap Basics, More Cooking at Home; More Leftovers], Wal-Mart CEO Lee Scott said on the NBC news program "Meet the Press" on Sunday that the mega-chain is seeing shoppers buy more cheaper, basic food and grocery items in its U.S. stores, including purchasing more frozen foods when they are on sale in place of fresh, prepared foods, for example. Wal-Mart's research he said shows consumers are buying these items on sale and storing them rather than purchasing more expensive fresh foods on a weekly basis.

Scott's observations are echoed by numerous supermarket chain executives we've talked with in the last month. They say there's a clear trend people are cooking and eating more at home. That they are buying more food ingredients instead of highly processed and fresh, prepared foods.

These industry executives also tell us price (and discounting) is King right now. They are seeing more "cherry picking" of weekly advertising circular specials and in many cases reduced market basket sizes which they attribute to shoppers buying from two or more supermarkets depending on a given week's ads.

Our research shows there's a "search for value" among U.S. shoppers right now. Additionally, with the drop in the per-gallon price of gasoline below $2.00, shoppers are more willing to drive around to different stores for deals than they were just a little over a month ago when gas was over $4 gallon.

This "flight to value" means food and grocery retailers, regardless of the format stores they operate, must tighten their belts and emphasise the value proposition, with a particular focus on selling basic food and grocery items for the best prices possible in their stores. Retailers also must focus their weekly promotions on more basic items and get creative in promotions.

Shoppers are still looking for indulgent and premium products but are buying them more as irregular treats rather than on a regular basis like they were doing as recently as the first quarter of this year.

Right now it's all about the basics. For example"

>Leftovers have taken on new status in households, something else Wal-Mart Stores, Inc. CEO Lee Scott said shoppers are telling Wal-Mart.

>Manufacturers' cents-off coupons are becoming gold. Weekly supermarket advertising circulars are getting read rather than tossed in the garbage can. Unlike all of its major competitors in the Southern California, Nevada and Arizona markets, Tesco Fresh & Easy Neighborhood Market stores don't accept manufacturers' cents off coupons. [Read more here: Marketing & Promotions Report: Manufacturers' Coupons Becoming the 'New Black;' Use Among Consumers Soaring; Marketers Distributing More Than Before.]

>Consumers who never set foot in a 99-cent store are doing so; and buying food and grocery items in these stores.

>Non-profit retail food cooperative markets, where in return for paying an annual fee and/or volunteering hours to work in the stores, owner-customers receive 20% or more off the price of groceries, are booming.

>Wal-Mart is seeing a substantial cohort of higher-income consumers shopping in its Supercenters and Sam's Club stores. Additionally, the retailer's sales and income for the last two quarters demonstrate it's thriving in the down economy, according to CEO Scott and Wal-Mart USA president Eduardo Castro-Wright.

Price and value is top of mind among food and grocery shoppers. The challenge for retailers right now is to position their respective stores in the minds of these consumers as the place to shop in order to get that value.

And as we've been writing about, our analysis is doing so is job one for Tesco's Fresh & Easy Neighborhood Market right now -- to create a real value proposition for its 104 stores in Southern California, Nevada and Arizona, and do it fast -- and then hammer home that value proposition regularly in-store and through marketing programs in a regular, repetitive, consistent, concise and clear way.

Tesco's Fresh & Easy model seems designed to achieve this but the execution by Fresh & Easy USA corporate just hasn't been and isn't there. We wonder why since United Kingdom-based Tesco plc. is a proven global retailer?

Is it because the U.S. is the toughest market the retailer has faced to date? Is it because Tesco flubbed with Fresh & Easy? Or is it a senior management problem at Fresh & Easy Neighborhood Market in Southern California. Or, perhaps, a combination of all three?

We've argued that's it's all three, along with a couple other details. But most of all, Tesco's Fresh & Easy Neighborhood Market has failed to date to capitalize on what we believe could be its greatest strength, particularly in the recession, which is the creation of a solid value proposition, followed by a tight merchandising and marketing program designed to implement it. There's no time to do so like the present, after all.

Earth Day 2008: Arizona-Based Basha's Grocery Chain Launches the 'Ultimate Green Bag' Reusable Shopping Bag Giveaway and Year-Long Promotion

Arizona-based Basha's supermarkets and one of its suppliers, Shamrock Farms dairy, have teamed-up to offer Basha's customers what the grocery chain says is "a new kind of reusable shopping bag" for Earth Day 2008.

"We're calling it the 'Ultimate Green Bag' because it's good for the environment and good for your wallet," Johnny Basha, the vice chairman of the family-owned, multi-format chain told Fresh & Easy Buzz.

The Basha's-Shamrock Farms dairy reusable bag promotion kicks-off tomorrow on Earth Day in all of the grocer's Arizona supermarkets and will run for the rest of this year.

Store customers can get a free (one per-person), reusable 'Ultimate Green Bag' by bringing in and exchanging five or more single-use plastic carrier bags for the reusable bag. Bashas' will recycle all of the plastic grocery bags brought in to the stores by shoppers.

Customers also can get a free 'Ultimate Green Bag' by purchasing one gallon of Shamrock Farms' milk at any Bashas' supermarket.

Additionally, the reusable shopping bags are currently on sale and will be for the foreseeable future for 99 cents each in all Bashas' stores, according to Johnny Basha.

The grocery chain also is using the 'Ultimate Green Bag' as part of a value-oriented promotion for shoppers. The chain will have numerous in-store and advertised weekly promotions which will allow customers to earn more free reusable bags when they purchase certain products, similar to the current promotion which gives shoppers one free bag when they buy a gallon of the Shamrock Farms milk. A variety of Bashas' suppliers and vendors are participating in the promotional program.

Johnny Basha says the retailer's goal is to get as many of its customers as possible multiple, free 'Ultimate Green Bags' so they can bring the reuseable bags with them when coming to shop the stores, thereby reducing both the number of single-use plastic carrier bags the chain uses, as well as decreasing the overall amount of plastic grocery bags that enter the waste stream in Arizona.

The reusable bag giveaway and ongoing promotion is one of the grocery chain's numerous environmental initiatives.

Those initiatives include energy, water and fuel conservation programs, packaging source-reduction and recycling programs and other "green" measures for all of its 160 stores.

Johnny Basha says the retailer currently is recycling about 25,000 tons of cardboard and plastic materials each year, is at present conserving enough energy annually to power 7,500 homes in Arizona, and is launching a fuel-efficiency program for its distribution center truck fleet, with the initial goal of eliminating 1,775 tons of carbon emissions annually. Bashas' said it arrived at this initial goal because it represents the equivalent of removing about 1/3 of its current trucking fleet from the road.

Arizona's Shopper and Employee-Beloved Bashas' Named One of 'The Best' Places to Work in the State For Second Year in a Row

Arizona's Bashas' Family of Stores, a multi-format supermarket retailer that operates about 159 stores in every county of the state (including few stores in New Mexico and one in Needles, in Southern California) was named yesterday as "one of the best places to work in Arizona" in an annual statewide employee survey conducted by the Phoenix Business Journal and Best CompaniesAZ, an Arizona-based human resources consulting firm.

It was the second year in a row the family-owned and operated supermarket chain was named one of the best places to work at in the Southwestern U.S. state. Bashas' also was the only retail grocery company to make the "best places to work" list this year.

Bashas' was founded 76 years ago in 1932 by brothers Ike and Eddy Basha Sr. That was a tough year to start a company of any kind in Arizona, or any place in America for that matter, since in 1932 the United States was in the midst of the Great Depression.

In part, the Arizona supermarket chain's depression era founding--and not only survival but ability to thrive for 76 years in one of the most competitive grocery markets in the nation--set the foundation for today's Bashas'.

Despite trying their best, U.S. national supermarket chains like Safeway Stores, Inc. and Albertsons (now part of SuperValu, Inc.) haven't been able to use their much larger size, capitalization and greater resources to diminish Bashas' position and reputation as the state's top grocer, neck-in-neck with Safeway for market share supremacy.

The Arizona best places to work list winners get named to the list as a result of votes by company employees who work for the companies that are nominated. In other words, its Bashas' employees who named the grocery chain one of the "best places to work" in Arizona.

Here's how it works: A firm called Quantum Market Research, Inc. conducts surveys of employees of Arizona-based companies, asking employees questions about the various companies' work environments, the workers' opportunities for personal growth and development, corporate human resources practices, and how the company values their (employee)personal contributions and embraces new ideas and innovations. The employees don't reveal their names on the survey questionnaires to help ensure truthfulness and protect the workers' privacy.

Quantum Market Research then independently analyzes and tabulates the employer survey questionnaires. In order to be named "one of the best places to work in Arizona," a company must receive a total score of 80% (out of 100%) from the employee survey results.

"The real honor (of being on the "best" list) is that our employees had the ultimate say in this award," says Mike Gantt, Phoenix-based Bashas' corporate senior vice president of human resources.

"It's wonderful to know they are satisfied with a well-balanced work environment that addresses both their professional and personal needs. Everyone benefits from this type of environment--our employees, our customers, and the communities we serve," Gantt added.

Bashas', the region's competitive environment, and Tesco's Fresh & Easy

Arizona's Phoenix Metropolitan and East Valley region is one of the three target markets (the others being Southern California and Metro Las Vegas, Nevada) where Tesco's Fresh & Easy Neighborhood Market has thus far opened a total of 61 stores. Currently there are 17 of the small-format (10,000 -to- 13,000 square feet), convenience-oriented combination basic grocery and fresh foods grocery markets in the Phoenix Metro/East Valley region. Tesco plans on opening at least 15 more of the Fresh & Easy stores in the market area before the end of this year.

Since Arizona, including the Phoenix Metro/Easy Valley region, is Bashas' home turf, it's been watching Tesco's Fresh & Easy closely. Thus far, in off-the-record conversations we've had with two Bashas' executives, we've been told the family-owned locally-based supermarket chain has yet to see "any appreciable" "Fresh & Easy effect" in terms of diminished sales in its stores.

These comments from the Bashas' people seem legitimate as we've also had conversations with numerous members of the Arizona Retailers Association (the state's trade group for grocery retailers of all sizes), local food brokers and grocery industry regional sales managers, and others who live and work in the region, and none of them have told us they've observed any significant shift in business as of yet as a result of the 17 Fresh & Easy grocery markets being in the market.

The Arizona grocery company is a multi-format supermarket chain. In addition to its flagship Bashas' banner stores, which are conventional, multi-category supermarkets and superstores, the retailer also operates: AJ Fine Foods, which is an upscale, premium and specialty supermarket format; Ike's Farmers' Market, a natural and health foods-oriented format; Food City, which is an ethnic supermarket geared-towards and targeting Hispanics or Latinos; and Sportsman's Wines, an upscale wine, beer, spirits and specialty foods' chain which Bashas' recently acquired from its owners.

Bashas' multi-format Arizona strategy has been very savvy. For example, it acquired AJ's Fine Foods--which was the state's leading privately-held, multi-store independent specialty, gourmet and natural foods grocer--as a way to establish a position in upscale food retailing. Since acquiring the small grocery chain a few year's ago, Bashas' has continued to add stores, primarily in the Metro Phoenix area.

Additionally, located on the border with Mexico, Arizona has on of the highest per-capita Hispanic-American populations in the U.S. Latinos also are the fastest growing ethnic group in the U.S., and are growing at an even faster-rate in Arizona than in all other U.S. states except California.

Bashas' creation of its Food City format, designed and positioned directly at Hispanics, was a smart move in capturing the substantial (and growing) Latino consumer food dollar in Arizona. Further, since Hispanic Americans on average spend far more of their income on food and groceries than any other ethnic group in the U.S., the Food City format offers excellent growth opportunities for the grocery chain corporately.

The grocery retailer's newest format, the Ike's Farmers Market natural foods stores, also positions the grocer to cash-in on the growing movement towards natural foods in the Arizona Market, as well as protect itself from Whole Foods Market, Sunflower Farmers Market and Sprouts Farmers Market, three natural and organic foods grocers who've built numerous stores in Arizona in the last few years.

Lastly, like AJ's Fine Foods, Sportsman's Wines, which is a recent acquisition for Bashas', is a long time popular beverage (with some specialty foods) retailer in the state. It's considered to be the premiere retailer of fine wines, micro-brewed beers and spirits in Arizona.

In addition to providing obvious synergies with upscale grocery chain AJ's, the Sportsman's Wines' addition allows the grocery chain to diversify into the category-killer beverage segment, while using the category expertise of the Sportsman's team, which the supermarket chain kept on, for all of its stores, regardless of format.

One of the primary reasons Bashas' is so successful in Arizona despite strong competition from the Safeway's and Albertsons' of the U.S. grocery retailing world, who are 10 to- 12 times its size, is because it permeates everything it does--from operations and merchandising, to employment practices and marketing--with "localism."

An intense focus on local history, culture, practices and demographics, regardless if a chain is from another country, is a national U.S. chain with stores in the region but headquartered thousands of miles away, or is a hometown-based one, is a key element in U.S. grocery retailing.

For example, it's no accident many of the market share leading supermarket chains in the western U.S. regions where Tesco has its Fresh & Easy stores aren't the U.S. mega-grocers like Kroger, SuperValu and Safeway (all which have major operations in Arizona, California and Nevada) and do practice a degree of local marketing everywhere they have stores) but the smaller, privately-held regional grocery chains like Bashas' in Arizona, Stater Bros. in Southern California, Raleys in Northern California's Sacramento region and Northern Nevada, and Save Mart in Northern California's Central Valley.

Each of the four regional chains mentioned above is the number one or two market share leader in its respective region. Take Southern California as an example. Safeway's Vons and Kroger's Ralphs Grocery Co. are the number one and two market share leaders in all of Southern California. However, in the huge Inland Empire region (which is bigger geographically than many European countries) regional Stater Bros. controls the grocery sales market share.

Northern California is a similar case. San Francisco Bay Area-based Safeway Stores, Inc. is clearly the 7-million resident-strong Bay Area's number one grocery chain (Save Mart's Lucky banner is second).

However, in the nearby Sacramento region (about 2.5 million people) local chain Raleys, with 130 stores and sales of about $3.5 billion, is number one. Further, just down the road in the Northern San Joaquin Valley counties of San Joaquin, Stanislaus and Merced (about 1.5 million residents total) Modesto-based (Stanislaus County) Save Mart, Inc., which has over 400 stores and about $6.3 billion in annual sales, is the number one supermarket chain in market share.

Bashas tells us it has no plans to rest on its "one of the best places to work in Arizona" laurels, nor that it's slowing up its multi-format growth plans.

The Arizona grocery chain plans to open a number of new Bashas' banner supermarkets before the year is out, along with another new upscale AJ's, at least one and likely two Ike's Farmers' Markets, and more Hispanic consumer targeted Food City supermarkets, along with at least one new Sportsman's Wines shop.

This is in a market--Arizona generally and specifically the Phoenix Metro and East Valley region--that's among the top-five most competitive in the U.S. In addition to Bashas', Safeway has nearly 200 stores in the state, Wal-Mart has a number of its Supercenters in Arizona and about 20 of its 43,000 square foot Neighborhood Market supermarkets, and plans to open the first four -to- five of its brand new small-format Marketside grocery stores in the Phoenix area this summer.

Let's not forget Albertsons either, which is a major player in Arizona. Then there's Trader Joe's, the earlier mentioned Sprouts Farmers Markets and Sunflower Farmers Markets--both of which have recently launched major new store opening programs in the state--along with numerous independents who are very competitive.

Lastly--but far from least--is Costco Wholesale, which continues to take a bigger share of the grocery sales market from retailers of all formats in Arizona and elsewhere in the western U.S. Of course--there's also mass merchandisers Target and Kmart, a few drug chains which sell lots of grocery products in their scores of stores, more ethnic supermarkets...very competitive.

This is the competitive environment Fresh & Easy is up against currently in Arizona. As a start up and the retail child of an overseas company, Fresh & Easy is going to have to really step it up on all fronts to succeed in Arizona, home of local guy Bashas' and all the other retailers who are trying to make a success of grocery retailing in this supercharged grocery market.