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

Breaking Buzz

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

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

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

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

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

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

New California law

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Grocer interest growing

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

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

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

Mollie Stone's begins tastings

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

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

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

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

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

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

More on the new law

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

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

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

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

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

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

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

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

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

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

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

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

Fresh & Easy

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

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

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

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

BevMo Chain Ends Full Time Employment For Store Workers; They Say No Way and Join With UFCW Union to Demand 'A Better BevMo'

Labor Day 2010

The store-level employees, CEO (Alan Johnson) and owners (New York and London-based private equity firm TowerBrook Capital Partners), along with the UFCW union's local 5, of Concord, California-based beverage and food superstore chain BevMo (once known as Beverages & More) are involved in a battle that very much mirrors the state of the U.S. economy and labor relations today, as we celebrate Labor Day today.

The state of the economy and labor on Labor Day is, sadly: High unemployment with no near-term chance of reduction; increased wage stagnation; a growth in income disparity that could, if not checked soon, have significant negative social implications for American society; and a growing towards the elimination of full time jobs, replacing them with part time status.

Beginning a few months ago, San Francisco Bay Area headquartered BevMo, which has 104 stores in California and Arizona, started to reduce the hours of many of its full-time employees, telling them it was a temporary adjustment in order to function in the poor economy. BevMo sells wine, beer, spirits, non-alcoholic beverages, snack foods, specialty foods and related non-foods items at discount prices in its stores, which average about 10,000 -to- 12,000 square-feet. It also operates an online store nationally.

In early August, BevMo made the hourly cuts official company policy.

On August 3, Maria de Vries of BevMo's HR department, sent the brief memo below to all of the retailer's full-time store-level employees, telling them that beginning in August all employees previously categorized as full time would now be officially categorized as part time. In other words, full time (40 hours week) would no longer be considered an employment status at BevMo for store-level workers.

Below (in italics) is the the August 3, 2010 memo:

To:
From: Maria de Vries
RE: Optional Transition premium Relief

Effective August 1, 2010, your hours will be reduced from full time to part time status. As a result of this change, you will lose eligibility for benefits under the BevMo Health and Welfare Plan. We recognize that losing eligibility for benefits can create a substantial hardship for employees and their families. To help our employees adjust to the loss of benefits due to this change in employment status, there will be an optional transition period during which you can remain on our benefit plan through January 29, 2011. Employer contributions towards benefits and employee contributions made through payroll deductions will remain the same during this period. If you do not want to take advantage of this transitional relief you will be permitted to cease payroll deductions as exemptions that will allow for continued eligibility will only be sought for individuals who would like to take advantage of this transitional period.

You can view a photocopy of the August 3, 2010 memo here.

Prior to receiving the memo on August 3, a group of San Francisco Bay Area BevMo store employees had already formed a committee, which they named the "BevMo Workers Committee," and allied with the United Food & Commercial Worker's (UFCW) union local 5, which represents unionized retail food and grocery workers throughout the San Francisco Bay Area, and in other parts of Northern California.

On August 12, just nine days after BevMo CEO Alan Johnson had the memo sent to the full time employees, formalizing the change of their status to part time, the BevMo store employees (a few who are pictured above) coalition and UFCW local 5 staged a rally at Oakland's Jack London Square, across the street from A BevMo store. At the rally, the employee coalition announced their plans to form a union at the 34 Northern California BevMo stores under local 5's jurisdiction. Joining the workers were local 5 president Ron Lind, Oakland Mayoral candidate and former California State Senate (Democrat) Speaker Pro Tem Don Perata, Shawn Stark from the Oakland Firefighters union and a few other supporters. Perata has been a major player in Bay Area and California politics for decades. Currently, he's the odds on favorite to be the next major of Oakland.

In conjunction with the August 12 rally, the employee coalition and UFCW local 5 issued a statement, in which they said: "On August 12 BevMo workers gathered at the Oakland store to announce a campaign to defeat takeaways by the company and organize a union. The company has eliminated full-time positions, resulting in the loss of medical benefits for employees made part-time and suspension of the company’s 401(K) plan. BevMo workers have decided to take the company’s actions head on and form a union to achieve their goals. The company for its part, instead of acting honorably has engaged the services of a union busting consultant and has started training managers to fight the workers attempts to unionize.

BevMo, however, issued its own statement on August 12, in which it said a number of the claims being made by the employees and local 5 are wrong. The statement (below in italics), directed at UFCW local 5 but not BevMo store employees, says:

"BevMo!, one of the country's leading alcoholic beverage-lifestyle superstore retailers, today addressed the numerous inaccurate and misleading public statements being made about the company by the United Food and Commercial Workers Union Local 5 (UFCW 5).

Despite some of the most difficult economic times our country, our state and our company have ever faced, we at BevMo! have always considered our employees first. We pride ourselves on providing our employees with competitive wages and benefits, and on investing in our employees' training and careers," said Alan Johnson, Chief Executive Officer of BevMo!

"It is categorically untrue that we have cut health care benefits or suspended our 401(k) plan – we continue to offer those benefits to our employees who are eligible and have enrolled in the plans. We are disappointed that the UFCW 5 has chosen to mislead our employees in this way."

Numerous inaccurate claims are being made.

Below are the facts:

Today BevMo! has over 500 full-time employees who are offered health care benefits and access to a 401(k) plan.

Some employees have had their hours reduced as BevMo! ensures its business is better positioned to provide good service to its customers and weather the economic storm.

BevMo! continues to offer health care benefits to those employees whose hours have been reduced. If those employees participated in the 401(k) plan, then the company continues to offer them access to that plan.

Regarding the health care benefits portion of BevMo's August 12 statement, it does appear to be counter to the August 3, 2010 company memo (see above) sent to full time employees, in which it's clearly stated that the change from full time to part time status includes a loss of company health care benefits; right away for those who don't choose to participate in the transition plan, and after January 29, 2011 for those who do.

In terms of the 401 (k) issue, BevMo has either already or is considering eliminating its company-employee match, which most companies offer in various forms - 25%, 50%, 75%, 100%, for example. That's the issue the store employees are concerned about. The 401 (k( plans would continue. Workers can make their own contributions, which recieve tax-deferred status. But BevMo wouldn't match the contributions, which it's done and has been its policy for most if not all of the 16 years the chain has been in business.

BevMo CEO Alan Johnson has clarified the health care issue, however. On August 13 he said BevMo plans to continue to provide store employees with health care benefits. And further, that the retailer has no plans to discontinue the benefits, adding BevMo didn't mean to imply in the August 3, 2010 memo to the full time employees that their benefits would be discontinued at the end of January 2011. (Read the memo above and decide for yourselves what was or wasn't meant.)

Broader coalition formed

The BevMo store employee coalition and UFCW local 5 has now morphed their campaign into a more comprehensive coalition, called the "Union Committee to Build a Better BevMo." The committee has issued a five-point white paper detailing what it wants from the fast-growing beverage superstore chain and its owner, private equity firm TowerBrook, which has an office in San Francisco.

Here are the five demands the committee is making, taken from its white paper:

1. Restoration of Full-time Jobs: "We feel that there needs to be a mutually agreed upon ration between FT and PT workers, as well as a guaranteed minimum of hours."

2. Restoration of Health Insurance: "While we are pleased to hear that on August 13, Alan Johnson clarified that "we have made clear that we will continue to provide (BevMo employees) with health care benefits and we have no plans to discontinue those benefits" and "we did not mean to imply in our initial communications to those employees that their benefits would be discontinued at the end of January 2011", we seek a mutually agreed upon health care plan.

3. Restoration of 401 (K): "We feel that it is disingenuous for Towerbrook Management to underplay to the media that the elimination of 401 (K) matching had on many loyal employees. Without any sort of pension, as held by hundreds of thousands of Unionized grocery workers, this 401 (K) served as the only way for many to supplement an unstable Social Security system."

4. Immediate $1 hour Wage Increase: "This increase is necessary to address the loss of income suffered by many because of a reduction of hours simultaneous to the hiring of more PT workers. It is also a fair demand given the lack of even cost of living pay increase simultaneous to the openings of new stores. We also reiterate our position of mutually agreed upon wage increases and not simply by :review."

5. Recognition of Union and Commencement of Bargaining: "We reiterate our desire to bargain with the Company in good faith. As BevMo has contracts with all its vendors so too should a mutually agreed upon contract be held with its employees. In the interest of transparency, we also urge Towerbrook to disclose the nature of the contract now held by recently hired ACG, a labor consultant group.

The employee-union committee submitted the white paper to BevMo CEO Johnson in August. As of the end of last week, a member of the committee said it has yet to receive a response from BevMo on the demands. BevMo says it isn't commenting on the demands.
A black tie affair: September 8 Rally and demonstration

As a result of not hearing from BevMo, the employees and UFCW local 5 say they've scheduled a rally for Wednesday, September 8, at TowerBrook corporate office in San Francisco's financial district. The committee has billed the rally as "BevMo workers strike back! A fight for full time positions. Tailgate @ TowerBrook, A September 8 Demonstration. [See above]

They call the rally a 'black & white affair,' and are asking participants to bring party favors to the mass demonstration in the plaza below the high-rise building at 555 California Street, where TowerBrook's San Francisco office is located.

Growing part time economy

As we celebrate labor day today, we're seeing a continuing increase in the number of U.S. companies, including some food and grocery retailers, that are moving away from having full time employees and hiring on a part time basis instead. Doing so allows employers to save a considerable amount of money on labor expenses, along with in some cases reducing or eliminating health coverage and pension/401 K plans for the part timers.

Part time work has always had its place in America, but usually as part of being a second income for most households. But as "part time" gets redefined as a "new normal" in the U.S., it also brings with it a drastic reduction in income for American families who may be caught in a situation in which both breadwinners have found themselves either changed to part time from full time status or only being able to find part time work, despite a desire and need to work full time.

Hopefully part time is more a function of the poor U. S. economy rather than on the way to achieving that "new normal" status. The reason I say this is because we're seeing a growing income disparity in the U.S. like never before. This situation is most focused on low-skilled workers, like retail clerks and others. These are jobs that generally require no post high school education.

Full time, at 40 hours a week, even a $12 hour grocery clerk job can bring home decent bacon, although for a family of even just three it's far from enough to live a very good lifestyle. But two-earners making that and working full time can live fairly well, relatively speaking of course. But reduce that $12 hour job from 40 hours a week to 25 - or even 30 - and the reduction in income becomes drastic. What to do? Get another part time job it you can.

BevMo & TowerBrook

On March 1, 2007, the TowerBrook private equity firm, which has $5 billion under its management, acquired BevMo, which was founded originally as Beverages & More and later shortened to BevMo because the stores acquired it as a nickname in 1994 by veteran northern California retailer and entrepreneur Steve Boone.

Prior to starting BevMo in 1994, Boone founded Liquor Barn, in 1979, which was a small chain in the San Francisco Bay Area similar to BevMo. Safeway Stores, Inc. acquired Liquor Barn from Boone in the mid-1980's. After operating the Liquor Barn stores for a few years, Safeway closed them, saying the format and chain didn't fit with its long term strategy.

From 1987 -to- 1990 Boone was president and CEO of Oakland, California-based imported goods (furniture, kitchenware and the like), wine and specialty foods reatailer Cost Plus World Market.

Boone sold BevMo, which struggled for many years, to private equity firm Madison Dearborn Partners in 2001. At one time it was thought the investment firm might close the chain. But TowerBrooke's acquisition in 2007 breathed new life into BevMo.

Since Towerbrook's acquisition of BevMo three years ago, the retailer has opened 40 new stores. According to CEO Alan Johnson, who was brought in to run the chain by its private equity firm owners, plans call for opening about 100 new stores over the next few years. BevMo had 2009 sales of over $500 million, according to Johnson.

TowerBrook is run by Co-CEO's Neal Moszkowski, in New York City, and Ramez Sousou, in London. Both men were formerly the Co-cheif executives of Soros private equity, one of the investment firms owned by billionaire investor and pro-union liberal/progressive globalist, activist and political player George Soros. Both also used to work for the Goldman Sachs investment bank.

In terms of its investment strategy, TowerBrook pursues control-oriented investments in large and middle market companies in the U.S. and Europe It says it partners with highly capable management teams who are seeking situations characterised by complexity. "We invest first to transform and then to build businesses. To this end, we have developed an investment strategy based on the twin principles of superior sourcing and adding value to each company we acquire," the form says in its strategy statement.

Most of the companies in TowerBrooke's portfolio are far from glamorous - and and probably not known to most people - except one - Jimmy Choo shoes, which it bought in February 2007, just one month before acquiring BevMo.

It's clear TowerBrook believes in the BevMo format. If not it wouldn't have acquired the chain in the first place and certainly wouldn't have already opened 40 new stores in three years, with plans to open another 100 in the next few years.

The private equity firm is rather low key, although it does operate a charitable foundation.

A long campaign

What's less clear is how it's going to deal with the unionization issue. Northern California, particularly the Bay Area, is a very strong union region. There's no current talk of unionizing the BevMo stores in the Central Valley or Southern California, or in Arizona; just the about 34 mentioned earlier in my column.

Private equity firms like TowerBrooke don't just enter (acquire a company), at some point they also exit (sell). Very few potential buyers are interested in a retail company that has a history of, or is embroiled in, a union organizing battle. That's something they have to take seriously into consideration in terms of their ownership - and the eventual existing of ownership - of BevMo.

The BevMo employee group, partnered with the union, is one of the strongest such groups I've seen organize in an attempt to seek union representation at a non-union chain in a very long time. For example, it's much more organized than the Fresh & Easy Neighborhood Market employees working with the UFCW in the attempt to unionized the Tesco Fresh & Easy stores.

There already appears to be a give-back - or perhaps the August 3 BevMo memo to the full time employees was just very poorly written - on the elimination of health insurance as part of the new part time status.

But TowerBrooke/BevMo wouldn't have hired what is called by management a labor consultant and called a union-buster by labor unions, if it doesn't plan to fight tooth and nail to try to keep the union out. Those of you who have hand on knowledge about good labor consultants/union busters from either or both ends of the spectrum, management or labor, will know fully the meaning of what I'm saying.

This campaign is just starting to heat up, and BevMo employees at stores in Southern California and Arizona are just learning about it and expressing interest as well, meaning it could spread to the other regions and to the other UFCW locals soon.

Meanwhile, BevMo is opening and numerous new stores, particularly in California but also in Arizona, this year and next. Stay tuned.

In Vino Veritas: Tesco's Fresh & Easy Kicking-Off 20 Percent-Off Six Bottles Or More Wine Promotion This Week; Promotion Runs Until April 25

Promotional Merchandising: Wine Category

Tesco's Fresh & Easy Neighborhood Market is kicking off a three week deep-discount wine promotion in its stores in California (Southern and Bakersfield), southern Nevada and Metropolitan Phoenix, Arizona, in which it's doubling the 10% discount it offers shoppers on purchases of six or more bottles of wine to 20% off.

The 20%-off six bottles or more promotion, which started this week, runs until April 21, 2009, according to Fresh & Easy Neighborhood Market.

Fresh & Easy started offering 10%-off purchases of six or more bottles of wine in November, 2008, following retailers with stores in California, Nevada and Arizona like Safeway Stores, Raley's, Trader Joe's, Cost-Plus World Market, Target, Beverages & More and others that have been offering 10% -to- 15%-off purchases of six or more bottles of wine for quite some time.

The 20%-off promotion ups the ante in the highly competitive retail wine markets where Fresh & Easy operates its 116 combination grocery and fresh foods markets.

BevMo's five cent wine promotion

But Tesco's Fresh & Easy isn't the only wine retailer promoting aggressively at present. Wine, sprits and beer beverage category killer retailer Beverages & More (BevMo), which has numerous stores in California, Nevada and Arizona, is currently in the midst of its annual "buy one bottle of wine at the regular price get a second bottle of equal value for 5-cents" spring wine promotion.

BevMo conducts this annual promotion in all of its stores, which feature wine, spirits, beers, snacks, specialty-gourmet foods and more, each year starting right before spring and on into the spring season months. It's a very popular promotion and results in a huge volume of wine sales for the retailer. [You can learn more about the BevMo 5-cent wine sale here.] [Related reading: Southern California Market Report: Beverages & More to Join Trader Joe's and Fresh & Easy to Form Manhattan Beach Food and Beverage Retailing Triangle.]

Mix & match at Fresh & Easy

Shoppers can mix and match the six or more bottles of wine -- different varieties, different price-points -- and receive 20% off the total during the Fresh & Easy 20% wine promotion between now and April 25.

Yet another value-based move

The wine promotion is another example of how Tesco's Fresh & Easy is moving closer to the value proposition positioning Fresh & Easy Buzz suggested for the grocery and fresh foods chain about one year ago. [Read more here: March 26, 2009: News, Analysis & Commentary: Tesco's Fresh & Easy Continues Moving Closer to the 'Value Propostion' Positioning; This Time in Prepared Foods Category.] [And here: March 2, 2009: Fresh & Easy Buzz Redux: Much of the Value Proposition-Based Analysis and Suggestions We've Been Offering Now Being Adopted By Tesco's Fresh & Easy.]

Wine category efforts at Fresh & Easy

In October and November of 2008 we reported exclusively on efforts then in progress at Tesco's Fresh & Easy Neighborhood Market to conduct a complete wine category review and SKU rationalization [this story on October 28, 2008: Category Management Report: Fresh & Easy Conducting Wine Category Review and SKU Rationalization; We Offer Some Analysis] and on the grocery chain's new program designed to increase wine category sales through new promotional efforts in its stores in this [November 11, 2008 piece: Wine Category Report: Tesco's Fresh & Easy Kicks Off New Merchandising and Promotional Efforts Designed to Grow Wine Category Sales.]

The 20%-off discount promotion is a direct result of those wine category activities led by Fresh & Easy's wine category manager Karen Fletcher, who came to Fresh & Easy from Tesco in the United Kingdom.

Additional wine category developments are following, including the introduction of a number of new proprietary brand wine varieties by Tesco's Fresh & Easy, with an emphasis on value-priced varieties.

The 'Big Kuhuna'

Fresh & Easy sells a value-based proprietary wine from Australia called the Big Kuhuna for $1.99 a bottle in California and $2.99 in Nevada and Arizona. The wine is similar to Trader Joe's famous "Two Buck Chuck" value wine. Trader Joe's "Two Buck Chuck" is a California wine.

Under the 20%-off six bottles or more promotion, a shopper can get six bottles of Big Kuhuna for under $10. That's a good buy in these recessionary times.

Promotional product in-stock key

As a result, we suspect Fresh & Easy will see some high volume sales in the next three weeks on the Big Kuhuna wines, along with a number of other varieties.

We do hope that unlike was the case when it promoted a dozen red roses for $9.99 for Valentines Day in February, 2009 (a hot price), when it ran out of the roses every day in most of its stores and was out of stock days before Valentines' Day in many of the stores, that the grocer has prepared itself with plenty of wine inventory, particularly the two varieties of Big Kuhuna, so that shoppers aren't let down by out-of-stocks when they go to their neighborhood Fresh & Easy market to cash in on the good value deal being offered in the 20%-off promotion until April 25. [Click on the comments link and read the comments in this piece: The Valentine's Day (Retail Promotional Price) War of the (Dozen Long-Stemmed) Red Roses: And the Winner Is... Tesco's Fresh & Easy.]

If the retailer has plenty of wine inventory (particularly Big Kuhuna), thereby pleasing shoppers rather than alienating them, the promotion will be a positive one in that it should move some significant wine volume, generate new customer trial, and introduce new shoppers to the store's wine departments and selections. If all works, that's a triple-win.

There's no reason after all to let Beverages & More get all the wine action this month and next month in California, Nevada and Arizona with its 5-cent wine sale.

Below is a linked selection of past wine category pieces from Fresh & Easy Buzz:

>October 27, 2008: Southern California Market Report: Beverages & More to Join Trader Joe's and Fresh & Easy to Form Manhattan Beach Food and Beverage Retailing Triangle

>March 22, 2008: In Vino Veritas: No Whining About This 'Parker-Point' Rating for a Fresh & Easy Proprietary Spanish Wine

>July 22, 2008: Obituary: Innovative Trader Joe's Head Wine Buyer and Popularizer of Value Wines Robert Berning; 73

>March 4, 2008: In Vino Veritas: Fresh & Easy Store Brand Wines Win Two Silvers and Lots of Bronze Medals; Trader Joe's 'Two-Buck Chuck' Chardonnay Wins a Double-Gold

>July 9, 2008: In Vino Veritas: Fresh & Easy Announces 63 Wine Awards to Date; Will Face Off Again Against Wine Award Winning 'Big Kahuna' Trader Joe's at State Fair

>September 22, 2008: Fresh & Easy Buzz Strategy Session: Trader Joe's and the Key to Enlightenment?

>November 11, 2008: Wine Category Report: Tesco's Fresh & Easy Kicks Off New Merchandising and Promotional Efforts Designed to Grow Wine Category Sales

>October 27, 2008: Category Management Report: Fresh & Easy Conducting Wine Category Review and SKU Rationalization; We Offer Some Analysis

>April 25, 2008: Tesco's Fresh & Easy to Launch A Marketing-Oriented, Brand-Building Consumer Public Relations Campaign For its Store Brand Products and its Wines

>April 30, 2009: Raising Arizona and Getting Local in the Neighborhood: State's First 100% Locally-Produced Wine Offers Win-Win for Tesco's Fresh & Easy Arizona Stores

>July 14, 2008: Breaking News & Analysis: CA Assemblyman Introduces 'Tesco Fresh & Easy Law' to Ban Stores With Self-Checkout-Only From Selling Alcoholic Beverages

>November 10, 2008: Competitive Retailer Wine Category Report: First Person Singular - 'How I Sold 37 Bottles of Wine in 45 Minutes at Trader Joe's'

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

Southern California Market Report: Beverages & More to Join Trader Joe's and Fresh & Easy to Form Manhattan Beach Food and Beverage Retailing Triangle

A portion of the old Office Depot building, along with an adjacent warehouse, that Tesco remodeled and turned into its Manhattan Beach, California Fresh & Easy Neighborhood Market grocery store at 1700 Rosecrans Avenue will house a competitor of sorts to Tesco's Fresh & Easy, Fresh & Easy Buzz has learned.

Beverage and specialty foods category killer retailer Beverages & More (BevMo) plans to locate one of its discount spirits, wine, beer and specialty foods superstores next door to the 1700 Rosecrans Avenue Fresh & Easy grocery and fresh foods market, inside a portion of the building not used by the grocery chain for its market.

BevMo will join a Trader Joe's specialty grocery store, which is located at 1800 Rosecrans Avenue just across the parking lot from the Fresh & Easy store, as neighbors in what looks to be not only a one stop food and beverage shopping center but also is shaping up to be a very competitive corner of Manhattan Beach when it comes to food and beverages, especially beer, wine and spirits. We call it the Manhattan Beach food and beverage retailing triangle.

The city of Manhattan Beach Planning Commission recently voted to approve the Beverages & More store going into the 1700 Rosecrans Avenue location after some discussion about traffic concerns at the location, along with a review of the retailer's alcohol sales policy. After a discussion of BevMo's liquor sales policy and potential traffic concerns at the site, the planning commission voted to approve the chain's application to remodel a portion of the empty buildings next door to the Fresh & Easy, approving its permit. [You can view the planning documents here: http://www.citymb.info/agenda/2008/Ag-Min20080916/20080916-15.pdf.]

Beverages & More stores, which average about 10,000 -to- 12,000 square feet, are described by the retailer as "alcohol-beverage lifestyle superstores." The stores devote about half their square footage to spirits, wines, craft beers and non-alcoholic beverages. The alcoholic beverage items range from the lowest end, price-focused brands, to the highest-end premium spirits, wines and craft beers. The stores also sell lots of varieties of bottled waters, sodas and new age-style non-alcoholic beverages.

The other half of the stores are devoted to selling shelf-stable specialty, natural and gourmet foods; snacks (both mass market and specialty brands); national brand and specialty candies; and non-foods items related to beverages and lifestyle. The non-foods merchandising mix includes wine and drink glasses (glass and disposable), paper plates and napkins, bar accessories and related items.

The Beverages & More stores also have refrigerated cases where cheeses, deli items and a small selection of related specialty and gourmet prepared foods products are offered for sale.

The focus of the stores revolves around alcoholic beverages and specialty foods (the "More" in Beverages & More. There's an education/sampling center in each store where wine, spirits and craft beer tastings are conducted regularly. Often times specialty food product sampling is combined with the beverage tastings.

Education about wine, spirits and craft beers is a big part of the chain's marketing. Wine makers and other experts are brought in-store regularly for seminars, tastings and related events. [Read about BevMo's chief wine buyer at this link: Wilfred Wong / Beverages & More's drinker in chief.]

The positioning of the BevMo chain is to be the best one-stop source for alcoholic and non-alcoholic beverage items in terms of overall selection (from low-end to premium), along with offering the best prices and value on the category items. Specialty foods also are priced at everyday low prices. The objective is to be a category killer in the alcoholic beverage and specialty foods categories.

BevMo, which is headquartered in Concord in the San Francisco Bay Area, currently operates 93 alcoholic beverage and specialty foods superstores: 45 in Northern California, 39 in Southern California and 9 in Arizona. Locations are based in and around the major metropolitan markets of San Francisco, Sacramento, Los Angeles and San Diego in California; and Phoenix in Arizona. The Manhattan Beach store will be number 94 for the chain.

Some history

Beverages & More is currently owned by the investment firm TowerBrook Capital Partners LP, which acquired the chain in 2007 from another investment firm.

However, it has an interesting entrepreneurial history.

BevMo was founded in 1994 in Concord, California by Steve Boone, an entrepreneur who previously had founded the Liquor Barn alcoholic beverage category killer chain in 1979 in partnership with Safeway Stores, Inc. Safeway later sold the chain when the supermarket company was acquired and taken private by the KKR investment firm in a leveraged buyout. (KKR later took Safeway Stores, Inc. public, which is its current status.)

Boone put together an investment group and opened the first Beverages & More store in Walnut Creek (next door to Concord) in the San Francisco Bay Area in 1994, beginning his second act in the liquor category killer retailing business.

The BevMo stores have many similarities to Boone's Liquor Barn stores. However, the Beverages & More stores are more upscale in design. They also feature specialty foods which the Liquor Barn stores didn't.

Boone ran BevMo for a number of years, opening about 20 or so stores, all in the Bay Area. He later ran into some financial problems in terms of operating capital for the chain and it was eventually sold to an investment group which eventually began adding new stores and expanding into Southern California and Arizona. Since acquiring Beverages & More last year TowerBrook Capital partners LP has been growing the store count as well, focusing particularly in Southern California and Arizona in terms of new store openings.

The Manhattan Beach retail triangle

With the BevMo store slated to go in right next door to Tesco's Fresh & Easy -- along with the Trader Joe's right across the parking lot -- 1700-1800 Rosecrans Avenue is set to become a competitive mecca for the sales of alcoholic beverages and specialty foods.

Beverages & More puts a big emphasis on selling wine, for example, which also is something Fresh & Easy and Trader Joe's do. BevMo often runs hot promotions in the wine category. For example it recently concluded its annual "buy one bottle at regular price get a second bottle of equal value for 5-cents" sale. Each year during this promotion the retailer moves tens of thousands of cases of wine in its stores. The retailer offers similar promotions regularly.

One point of differentiation Fresh & Easy has is that it sells basic food and grocery items, along with prepared foods, natural and specialty foods, and alcoholic beverages. Since Trader Joe's focus is natural and specialty products at discount prices and BevMo's focus is alcoholic beverages and specialty foods, this is helpful to Fresh & Easy in this up-an-coming super-competitive location.

Of course, wine is an important category for Fresh & Easy. The retailer also needs to sell lots of prepared and specialty foods along with its basic groceries in its stores. That's where the bigger market basket (average ring) sizes and higher margins come from. Having a category killer like BevMo coming in right next door will likely kill some of these category sales for the Fresh & Easy store.

The Trader Joe's at 1800 Rosecrans, which also sells wine and craft beers and prepared foods along with its natural and specialty foods focus, does very well. Local sources tell us the store grosses about $500,000 in weekly sales. This isn't an unusual number for a Trader Joe's store even though they average only about 10,000 square feet. The retailer has among the highest gross sales per square foot of any food and grocery retailer in the U.S.

The 17000 Rosecrans Fresh & Easy location, which opened in early July of this year, also has been a good one for Tesco -- one of its best thus far actually. According to our estimates, which come from a very good source, the store has been averaging about $200,000 in gross weekly sales since shortly after opening. That's among the highest in sales of all of the current 96 Fresh & Easy grocery and fresh foods markets open to date.

Based on how well both the Trader Joe's and the Fresh & Easy are doing in their neighboring Rosecrans Avenue locations in Manhattan Beach, its rather safe to say it is a good food and grocery retailing location.

In fact, the Fresh & Easy store there appears to have thus far benefited from locating near the existing Trader Joe's unit. This isn't unusual in good locations. A new retailer can tap into an existing retailer's customer base and even expand the base. And since the Fresh & Easy store sells basic groceries and the Trader Joe's doesn't, that's a complementary aspect despite the fact the two retailers also have many categories in common from a competitive standpoint.

Perhaps the addition of the Beverages & More store in the mix will even further expand the customer base at what will become the 1700-1800 Rosecrans food and beverage retailing triangle in Manhattan Beach?

One thing though is for sure, shoppers will be able to competitively shop rather easily for that bottle of wine or 6-pack of beer, along with having a wide-variety of specialty and natural foods items to choose from at competitive prices with the addition of the new BevMo store to the neighborhood mix. Perhaps we should name the entire Manhattan Beach retail triangle -- Trader Joe's, Fresh & Easy and now BevMo -- "Booze and More?"