One-Year On: Bristol Farms Adds 4,500 New Natural, Organic, Local and Gluten-Free Items to its Stores

Click on the letter above from CEO Kevin Davis to enlarge it.

Southern California Market Region

It's been about one year since Bristol Farms' senior management team and the private equity firm Endeavour Capital acquired the Southern California-based specialty grocery chain from Supervalu, Inc., which obtained the trend-setting upscale chain some years' earlier as part of its buyout, in partnership with the Cerberus private equity firm, CVS Pharmacy and a couple other players, of Boise, Idaho-based Albertson's Inc.

As we wrote about in detail in this story last year - October 29, 2010: CEO Kevin Davis, Execs and Investment Firm Buy Upscale Southern California Bristol Farms Chain From Supervalu, Inc. - the deal to buy Bristol Farms from parent Supervalu was quarter-backed by CEO and President Kevin Davis, who spent many years at the specialty grocery chain while it went through numerous ownership changes.

Davis has an extensive background in the food-grocery retailing business in Southern California, including working as a store manager, district manager, corporate vice president of sales/advertising and senior vice president of marketing at Ralphs, which is the largest grocery chain in the region.

Kevin Davis joined Bristol Farms after leaving Ralphs, which he first joined in 1974 as a retail grocery clerk. Kroger Co. bought the Ralphs and the Food 4 Less chains in Southern California from billionaire supermarket industry investment guru Ron Burkle in the 1980's.

This month, a year after he, his management team and the investment firm took over ownership of Bristol Farms, Davis is announcing what he says is the launching of the specialty grocery chain's "most important change to our merchandising plan in our 28 year history."

That change, Davis says in a letter to customers and potential customers featured at the top of this week's Bristol Farms' advertising circular (see at top), is the "adding of over 4,500 new organic, natural, local and gluten-free products, combined with more specials and more everyday values on key brands throughout the store."

"We’ve added more shelves, more items, more variety, and more value to the extraordinary products and unique Bristol style customer service our shoppers expect and deserve," Davis writes in the letter addressed to shoppers included in this week's (November 16-29) advertising circular, and posted at the top of this story.

The addition of the 4,500 new organic, natural, local and gluten-free SKUs into the 13 Bristol Farms stores (12 in Southern California and one in San Francisco) looks to be completed, based on visits we've made to three stores over the last couple weeks, and conversations with workers in those stores. Bristol Farms also operates a natural foods store in Santa Barbara under the Lazy Acres name.

Davis also wrote a brief post on the Bristol Farms company blog on November 8 announcing the merchandising initiative. The content of the advertising message to customers in this week's ad circular is taken from that post.

Bristol Farms has also unveiled the special logo - "Great Taste Just Got Better: More Organics, More Natural, More Local and More Value! - (pictured at top) as a way to tout and promote the addition of the 4,500 new SKUs in the respective product categories noted above.

The logo is being used throughout the grocer's stores, as well as on its website and in printed media materials.

The addition of the 4,500 new natural, organic, locally-produced and gluten-free products is a natural for Bristol Farms because the small chain's focus since the first store was opened in 1982 in Rolling Hills, California, has been on the specialty-natural-organic-fresh foods niches.

In its early days Bristol Farms became best-known for the numerous specialty and gourmet groceries it stocked in the stores, along with its extensive and high-quality fresh-prepared foods offering. Scouting and introducing unique specialty and gourmet food products remains something Bristol farms prides itself on doing.

The grocer built on this positioning and added more and more natural and organic products into the 1990's.

The 1990's, however, brought major new store growth to Southern California from natural-organic grocery chains like Whole Foods Market, Wild Oats Markets (now part of Whole Foods) and its Henry's Farmers Market chain (now part of Sprouts Farmers Market), along with others, therefore making Bristol Farms' specialty grocer niche one that's today occupied by a lot of competitors, including Whole Foods, Trader Joe's, Gelsons, Sprouts and others, such as Tesco's Fresh & Easy, which has opened 105 stores in Southern California since November 2007, and is increasingly being positioned by Tesco as a specialty grocery chain.

A focus on "local" in general, not just offering locally-produced products, has also been a hallmark of Bristol Farms popularity in Southern California.

For example, in 2000 when Bristol Farms' acquired the old Chasen's restaurant building in Beverly Hills/West Los Angeles, which was known as the gathering place for Hollywood's biggest stars, it incorporated many of the  famed eating and watering hole's existing design elements into the store it constructed , and that still stands at the location, including keeping the high-backed leather booths Chasen's was famous for, and re-using them in the store's restaurant-dining area. About a half-century ago then actor and future President Ronald Reagan proposed to his second wife, actress Nancy Davis (no relation to Kevin we're told), who became First Lady, while sitting in one of those booths during dinner at Chasen's.

A year earlier, in 1999 Bristol Farms acquired another landmark business, this one in Hollywood. The grocer retained many local elements of that landmark business, the former Chalet Gourmet, in the design of its grocery store at the location in Hollywood.

Earlier this year Kevin Davis said, in relation to the acquisition of Bristol Farms from Supervalu

He also said at the time the now "locally-owned" grocer was interested in opening additional locations in Northern California, where there's just one store in San Francisco, if the right location were to come along.

Our 'The Insider' columnist offered one suggestion for Bristol Farms' in Northern California in his May 30, 2011 column here. Andronico's new owners, Renovco Capital, which finalized its acquisition of the grocer at the end of October and is working fast and hard to turn the six-store San Francico Bay Area operation around, might be interested in talking turkey down the road.

The San Francisco Bristol Farms store is inside the big, vertical San Francisco Centre shopping mall on Market Street downtown. The store's focus in more on ready-to-eat and ready-to-heat fresh-prepared foods than it is on groceries, although it includes a small assortment of groceries, fresh foods and perishables. There's also seating inside the store, where breakfast, lunch and dinner is offered to eating-in as well as for take-out.

Since the October 2010 buyout, Bristol Farms has also been improving and beefing-up its in-store deli/fresh-prepared foods offering, which was already extensive. For example, the grocer recently introduced a new line of high protein and fiber-packed ready-to-eat "energy salads," featuring varieties like Italian Salad with Middle Eastern Couscous, Wheatberry Salad, Quinoa Salad and Edamame Tofu Salad.

Fresh bakery is another department where Bristol Farms has over the decades created a signature image. It was one of the first grocers in Southern California, for example, to introduce a full line of in-store baked fresh artisan breads, doing so in the 1980's.

Another in-store bakery feature Bristol Farms started many years ago - and it should use it more aggressively in its current marketing and merchandising efforts, in our analysis - is its "One of A Kind" baked goods program, in which it creates and offers a unique item that's generally not available at any of its competitors. A few of its "One of A Kind' baked goods items have included: Texas Chocolate Cake, Carrot and Pumpkin Cake, Bristol Farms' Gourmet Brownies and various unique varieties of fresh-baked scones.

Bristol Farms is also expanding its private brand program, developing and introducing more products under its "Bristol Farms" brand, such as a line of cookies it debuted this summer, which feature conventional varieties like chocolate chip, ginger, snickerdoodle and iced oatmeal, along with two certified organic vanilla and lemon wafers.

The specialty grocery chain also recently introduced a new line or organic fruit preserves under its "Bristol Farms" brand, and has expanded its own-brand line of organic herbs and spices as well.

The grocer is also branding many fresh meat, pork and poultry items under the "Bristol's Own" private brand, which is a new and more aggressive branding effort than its made with the categories in the past.

Bristol Farms finds itself independent and in a very competitive niche in Southern California.

Not only are there numerous grocers like Whole Foods, Trader Joe's, Tesco's Fresh & Easy, Gelsons and Sprouts focusing today on the specialty, natural, organic, fresh food and gluten-free categories - and have their own brands of products in the respective categories along with selling manufacturers' brands - the once very niche categories have become much more mainstream, which is why Safeway Stores, Inc., for example, features an extensive selection of specialty, natural and organic foods in its Lifestyle format Vons stores and more-upscale Vons Pavilions markets in Southern California, as does Kroger-owned Ralphs in its same-banner stores, as well as in its more-upscale Ralphs Fresh Fare units.

Both the Safeway and Kroger-owned chains (Vons and Ralphs, which are the top two grocers in the region) feature their own brands of organic, natural and premium food and grocery products as well. Supervalu-owned Albertsons, the third-largest grocery chain in Southern California by market share, also offers its own brand, Wild Harvest, of natural and organic food and grocery products.

Bristol Farms, now celebrating its first year of independence from Supervalu, Inc., has to carve out its own niche in competitive Southern California, having on one side the giants - Safeway (Vons), Kroger (Ralphs), Supervalu (Albertsons) - each offering a strong assortment of private-brand and manufacturer-branded specialty and organic foods in each of their respective chains - while the numerous specialty grocers in the market region - Whole Foods, Sprouts, Trader Joe's, Gelsons, Fresh & Easy and others - push at it with similar positioning and product offerings from the other end.

As a result, it's worth watching what Bristol Farms' management team, 17 members of which are now owners as well as employees, does in the coming year or two to attempt to differentiate the grocer from the specialty format-focused competitors noted above and others, while at the same time offering consumers a reason to shop at its stores, even though increasingly many of the same products it offers are available at the thousands of mainstream supermarkets and other format food and grocery stores in the region.

82-Year-Old Grocer Andronico's Needs A Sugar Daddy of Sorts: 'The Insider' Suggest Tesco and its Fresh & Easy Neighborhood Market Might Fit the Bill

The Insider - Heard on the Street

Last week the San Francisco Chronicle and a couple papers in nearby Berkeley published brief stories in which they reported eight-store, family-owned grocery chain Andronico’s Community Markets is having financial problems.

The reports were based on e-mails sent to the papers from suppliers/vendors the grocer owes money to on a past-due basis.

It's true the grocer is past-due to the vendors. But Andronico's financial struggles aren't a new development, as reading the reports might suggest. Instead, the grocer's financial difficulties began in earnest in late 2005-2006, becoming very serious in 2009, and remaining so today, due primarily to too much debt, increased competition and later the economic recession.

The 82-year-old upscale-oriented eight-store independent, headed by CEO Bill Andronico and founded in 1929 by his grandfather, Frank Andronico, moved on April 26, 2011 from its longtime headquarters located at 1109 Washington Avenue in Albany near Berkeley to a suite of offices above and next to its store (pictured above) on Irving Street in San Francisco’s Inner Sunset District.

The lease on the Albany digs, where Andronico's has been for about 25-years, was up May 1. The grocer didn't renew it, instead deciding wisely to save some cash by utilizing what is a fairly decent amount of office space at the San Francisco location, which is its best overall performing store out of the eight supermarkets it operates - four in Berkeley, and one unit each in San Francisco, Palo Alto, Los Altos and San Anselmo.

Palo Alto and Los Altos are in the South Bay Area, not far from San Jose. San Anselmo is in Marin County.

In the past Andronico's rented out some of the office space above and attached to the supermarket in San Francisco's Inner Sunset District.

The store is the only supermarket in the densely-populated neighborhood, which among other things is home to the University of California at San Francisco, a medical professions' campus which has a medical school, school of pharmacy, graduate school of health sciences, a major research hospital and additional research institutes.

Since I've known about Andronico's serious financial problems since 2009 - and its overall financial struggles since 2006 - I thought I would offer some details, analysis and commentary on the topic and issue for Fresh & Easy Buzz readers, many of whom are very familiar with Andronico's Community Markets, which until last summer was known simply as Andronico's Market, and before that as Andronico's Park & Shop.

The signs on the Andronico's stores still say Andronico's Market, even though the name of the chain and stores were changed to Andronico's Community Markets last summer. I'm told by a person in a position to know at Andronico's there are no current plans to put up new signs because of the expense of doing so.

First off, last week Bill Andronico responded to the San Francisco Chronicle with an e-mail, which was published May 26.

According to the May 6 item in the paper, Bill Andronico wrote in the e-mail that the grocer is looking to "recapitalize" and to "bring in lending/investor partners to replace the existing lender group and, additionally, provide growth capital." (You can read the rest of his e-mail as published in the Chronicle here.)

There's really nothing new about Andronico's trying to bring in new investors and raise capital. It brought in new money a decade ago, which is how from the late 1990's to the early 2000's  it built a new store and fresh foods facility in Emeryville (East Bay), two very upscale and expensive-to-construct stores in the East Bay Area cities of Danville and Walnut Creek, and how it financed the remodeling of the San Francisco store in 2008, along with doing a few other things.

Additionally, the grocer has been seriously trying to raise money from existing and new investors for at least six years that I'm aware of. It continues to try.

The first major sign Andronico's was having serious financial difficulties beyond those that surfaced in 2005-2006 was when in 2009 it let a number of category managers and buyers go at its then headquarters in Albany. The grocer had established a well-staffed professional category management system in the late 1990's, after having just a couple grocery buyers, a produce buyer, meat buyer and small prepared foods headquarters' staff prior to that.

Shortly after the cutbacks, Bill Andronico brought in former Whole Foods Market executive Justin Jackson as a consultant. Before joining Andronico's, Jackson was the vice president of purchasing for Whole Foods Market's Pacific Northwest Region

As part of his job, Jackson, who is executive vice president of Andronico's, recruited a new senior management team, largely comprised of ex-Whole Foods Market guys from the Pacific Northwest and Northern California divisions.

That team includes: John Clougher, Andronico's president and COO; Steve Epidendio, vice president operations; and Anthony Gilmore, who's titles are chief strategist and chief administrative officer. Bill Andronico remains CEO.

Clougher is the former president of Whole Foods' Pacific Northwest Region. Epidendio was the vice president of retail operations for Whole Foods Markets' Northern California division. He was previously a store manager for Andronico's for about nine years, from the late 1980's to early 1990's, later joining Whole Foods Market in Northern California.

Anthony Gilmore was recruited by Jackson and Clougher to Andronio's. Just prior he was vice president of corporate lifestyle, new concept development and corporate perishables at Pleasanton, California-based Safeway Stores, Inc., from 2007 until leaving in 2010, where among other things he worked on the development of its "The Market" small-format stores, which Safeway has stopped opening. There are two "The Market" stores - one in Long Beach, California, the other in San Jose. [See - October 15, 2010: Safeway Shelving 'The Market' Small Store Format; Won't Be Part of its Strategy Going Forward.]

Gilmore, who has 34-years experience in the food and grocery retailing business, most of it at Safeway and Whole Foods Market - and most of those years in Northern California - was president of Whole Foods' Northern California Region from 2004-2007. During his tenure in the position he was responsible for leading the development of numerous new Whole Foods locations in Northern California, many of which opened this year and last.

He went to work for Whole Foods in 1996 as the manager of its store in Palo Alto, California, where one of Andronico's eight stores is located. 

Gilmore later managed a store in Boulder, Colorado and was later promoted to regional vice president of the natural and organic-focused grocer’s Southwest Region, taking over as president of the division a short time after.

From 2002-2004 he was president of Whole Foods' Midwest division, getting promoted to president of the much larger Northern California Region in 2004.

Before joining Whole Foods Market in 1996, Gilmore spent 19-years working for Safeway Stores' in Northern California at the store-level, including as a store manager.

One of the casualties of the shake up at the grocery chain was the departure of Gary Wallner, who for 21-years was the face of Andronico's to the vendor-broker-supplier community. Wallner joined Andronico's in 1989 as a buyer-merchandiser, progressed to director of buying and merchandising, and then became vice president, which was the title he held when he left in May 2010.

In addition to Wallner, a couple other senior executives were let go in the reorganization.

One of the first things the new management team at Andronico's did last summer was to change the name of the chain, from Andronico's Market, to Andronico's Community Markets.

The change reflects the grocer's attempt to reposition the stores from their historic higher-end, upscale/specialty focus to a more community or neighborhood-oriented grocer. The stores still focus on specialty, natural, organic and fresh and fresh-prepared foods, along with offering basic groceries as they always have, but the group has been trying to tone down the upscale aspect in order to try to reach a broader customer base.

The recession that first hit in 2008 added to Andronico's financial problems, along with its debt load and the increased competition, because some its core-customers were forced to trade-down to grocery stores that offered lower prices. Although the Bay Area economy has improved somewhat since, as is often the case when  consumers start shopping around elsewhere, they continue doing it even when things get better economically, at best splitting their business among two or three food retailers.

The family-owned grocer has a history of name changes. For example, until the late 1980's-early 1990's the stores were called Andronico's Park & Shop Markets, then becoming Andronico's Market, the company name and store names until last summer.

Going Forward

First and foremost, Andronico's is looking for new investors - and money - plain and simple.

Additionally, the grocer has an experienced and seasoned senior management team.

Bill Andronico knows the Bay Area food and grocery retailing market extremely well, as does Gilmore and Epidendio, most particularly out of the others, although I question if Andronico's can afford as much high-priced talent as it has brought on in the senior management ranks.

For example, Bay Area competitor Mollie Stone's Markets (nine stores), which is privately-owned and very similar in format to Andronico's historic format positioning, has a much leaner management structure and team and is doing well despite the continued economic recession and competition from major chains and other independent grocers in the Bay Area. Mollie Stone's opened its ninth store in San Francisco's Castro District in March of this year, for example.

Andronico's has what in my analysis and opinion are three strong stores out of the eight it operates in the Bay Area. Those stores are its Inner Sunset supermarket in San Francisco and two stores in Berkeley - Shattuck Avenue and Telegraph Avenue - out of the four units in the Easy Bay Area city.

The other five stores are decent-to-marginal.

The two other Berkeley units, on University and Solano Avenues respectively, haven't been great performers for many years.

And Andronico's has and faces increased competition in Berkeley, where for decades it was the leading grocer with its four stores.

For example, Trader Joe's opened its first store in Berkeley this year. The TJ's store on University Avenue, not far from the Andronico's Communty Market unit on the same street, which leads to the world renown University of California at Berkeley campus, has taken a significant bite out of sales at the Andronico's store.

Additionally, local independent Berkeley Bowl opened a new store in the city last year. That and its existing store - the grocer is super-popular and focuses on fresh foods (particularly produce) as well as natural, organic and specialty products - have also hurt Andronico's considerably, as has the Whole Foods store (near the Telegraph Avenue Andronico's), which has come on stronger over the last few years, compared to its past performance.

Even though it's still a strong store, the Inner Sunset District Andronico's unit got some new competition earlier this year when Whole Foods Market opened a store a five minute drive away, at Haight and Stanyon streets in San Francisco's Haight-Ashbury District.

The Whole Foods' store went into a vacant building that for decades was home to a Cala Foods market, which was closed a number of years ago by Kroger Co., its owner. Ironically, the Haight and Stanyon Whole Foods store was one of the many locations acquired by Gilmore during his tenure as president of Whole Foods Market's Northern California division.

During the years the former Cala Foods building and now Whole Foods store was vacant, the Andronico's unit in the Inner Sunset gained added business and sales because the store was the nearest full-service supermarket for many people in the Haight-Ashbury neighborhood.

The Palo Alto, Los Altos and San Anselmo Andronico's stores are what I call decent-to-marginal performers, and are subject to becoming worse-performing with increased competition, which is coming everywhere in the Bay Area, with Trader Joe's, Sprouts Farmers Market, Whole Foods Market, Sunflower Farmers Market, Target and Tesco's Fresh & Easy Neighborhood Market all opening numerous new stores, along with continuing new store growth from Safeway and others, in the region.

Walmart also plans to start opening some of its new smaller-format Walmart Market and Walmart Express stores in the Bay Area, beginning later this year or in early 2012.

So what's Andronico's to do?

Option one is to bring in new investors with cash - this the grocer's preferred option because it desires to stay independent, according to my good sources - and not sell the 82-year-old chain bearing the family name, although investors do own a piece of it now.

When founder Frank Andronico stepped down, Bill Andronico's father took over. And when his Dad retired, Andronico, who's a graduate of the University of Southern California's Food and Grocery Industry Management Program and has worked in the family business for about three decades, became CEO. That's a serious and important legacy to uphold and maintain.

In its 82-years Andronico's has also been a innovator, no only in the Bay Area but nationally.

For example, it was one of the first grocers in the U.S. to offer fresh-prepared foods made in-store by chefs.

Andronico's was also one of, if not the first, grocers to install multi-shelved refrigerated produce cases in its stores. In fact, when it first did so many decades ago, such produce cases didn't exist, so the grocer had them custom made.

The family-owned chain also is a pioneer in specialty, gourmet, natural and organic food and grocery product merchandising and promotion. For example, long before Whole Foods Market opened its first store in the Bay Area in the 1980's, Andronico's was already firmly established as a leader in the then just-starting-to-emerge categories in the United States.

Andronico's was among the first wave of supermarkets in the U.S. that provided significant space on its shelves to natural and organic product brands like Lundberg (rice), Celestial Seasonings (tea), Newman's Own and many others, as well as to specialty and gourmet foods from abroad and at home.

Andronico's was also the first grocer I'm aware of that completely replaced the standard metal grocery shelving in its stores with wire Metro shelving, something that not long after it did so became popular among grocers in the Bay Area and throughout the U.S., thanks in part to Bay Area-based grocery store designer John Sutti, who built his considerable reputation in large part on the innovative store design work he did in partnership with the family in their stores.

A story: When Whole Foods Market co-CEO Walter Robb went to work for the then fledgling grocery chain in the early 1990's, his first task was to spearhead the renovation of a vacant building on Miller Avenue in Mill Valley, California that he previously had the lease on and had planned to turn into his own grocery store. But failing to raise the cash, Robb instead did a deal with Whole Foods' founder (and the other co-CEO) John Mackey, which was that in return for a little money and a job as the store's planner and then manager he would sell the lease to Whole Foods so the location could become the grocer's first store in Mill Valley.

It was a good decision for Whole Foods, Robb and Mackey. The 14,000 square-foot store has among the highest sales-per-square-foot of any Whole Foods unit - averaging about $550,000 a week in sales. Robb later became president of Whole Foods' Northern California Region. The Northern California Region has become a top-performer for Whole Foods. Mackey and Robb, who later became co-president of Whole Foods, went on to have a great working relationship, so much so that Mackey and the grocer's board named Robb co-CEO last year.

Robb (and Whole Foods) hired John Sutti and his firm to do the design work for the Miller Avenue store, which is one of two Whole Foods Market stores in the small town of Mill Valley (about 10,000 residents), in large part because Robb was impressed with the work Sutti did for Andronico's, who Robb called on for a couple years prior to that as a sales consultant for a number of Bay Area natural and organic products' companies. He also got had gotten to know Bill Andronico and the Andronico's stores fairly well prior to that as the manager of a natural foods store in Marin County.

Jean Greenfield, who for a number of years in the 1990's worked as Whole Foods' Northern California regional buyer out of a tiny converted closet, accessible by climbing a latter, atop a small loft in the backroom of the Miller Avenue store, later went to work for Sutti's retail store design firm. Whole Foods later established its Northern California headquarters in Emeryville, where it is today.

Bottom Lines(s)

Andronio's has been working hard on option one, bringing in new investors, for nearly one year now, since the new senior management team took over. So far - no new investors or cash.

This brings us to what I call option two, which would be an outright acquisition or major investment - controlling or significant minority interest - in Andronico's.

I see two grocery chains this might make sense for - Tesco's Fresh & Easy Neighborhood Market and Bristol Farms - both of which are headquartered in Southern California and have stores in Northern California's Bay Area.

Bristol Farms and Endeavour

In October 2010 members of Bristol Farms' senior management team, including CEO Kevin Davis, along with investment firm Endeavour Capital bought the upscale 14-store chain from its then owner, Supervalue, Inc. Bristol Farms has one store in Northern California, in San Francisco, and is scouting the region, with a focus on the Bay Area, for potential future stores. [See - October 29, 2011: CEO Kevin Davis, Execs and Investment Firm Buy Upscale Southern California Bristol Farms Chain From Supervalu, Inc.]

Andronico's and Bristol Farms are very similar chains, even though the new team is trying to position Andronico's Community Markets more into the community or neighborhood market space - which to date in my analysis and opinion hasn't and isn't working.

Therefore, I see some definite synergies (and mutual opportunities) between the two grocers in terms of Bristol Farms/Endeavour Capital taking a look at Andronico's, as either an investment opportunity or acquisition.

Both grocers are also supplied by wholesaler Unified Grocers, which doesn't want to lose the Andronico's business.

Will Bristol Farms take a look? I would if at the helm. Would Andronico's be interested? One would think so.

One problem though: Andronico's is union. Bristol Farms is not. That means a deal of any kind is going to involve the United Food & Commercial Workers (UFCW) union on some level, which is something Bristol Farms would like to avoid.

Tesco and Fresh & Easy

The other opportunity I find most interesting is Tesco and its Fresh & Easy chain.

Andronico's offers the following to Tesco and its Fresh & Easy Neighborhood Market chain, which has opened 11 stores in Northern Californa (nine units in the Bay Area) so far this year, and opens its first store in San Francisco June 22, followed by its second unit in the city on August 24.

>Talent: Bill Andronico and Anthony Gilmore (and maybe one additional member of the senior management team), both know as much about the Northern California market region as most grocers operating in it do. That would be a big plus for Tesco and Fresh & Easy, which as a dearth of senior executives with experience in Northern California or elsewhere in the U.S.

>Fresh Foods: Andronico's has a, history of having among the finest fresh produce, meat and fresh-prepared foods programs not only in Northern California but in the U.S. Tesco's Fresh & Easy could benefit greatly from this expertise and experience.

>Store Locations: Tesco could utilize all eight of Andronico's stores.

What I would do as Tesco:

>Get rid of the Andronico's Community Markets name and go back to Andronico's Market, keeping the San Francisco, Shattuck Avenue-Berkeley and Telegraph Avenue-Berkeley stores under the Andronico's Market banner and format. Use it as the basis of a possible upscale chain down the road. Invest some money in the two Berkeley stores, although it need not be much as they are in pretty good shape.

>Change the University Avenue and Solano Avenue stores in Berkeley to Fresh & Easy Nieghborhood Market stores. Both locatons are about the same size as Fresh & Easy markets - 10,000-12,000 square-feet - and geographically fit the format best of the four.

>Also convert the San Anselmo, Palo Alto and Los Altos locations to Fresh & Easy stores.

Tesco's Fresh & Easy has no stores in Berkeley, which is one of the better cities in the Bay Area for the format.

Tesco's Fresh & Easy also doesn't yet have any stores in Marin County (San Anselmo), Palo Alto or Los Altos, all desirable locations.

Andronico's fresh-prepared foods program and the high quality of the products it produces could be helpful to United Kingdom-based Tesco overall, in the UK where it's a major player but far from the best - Marks & Spencer, Waitrose and Sainsbury's are better in my view - in ready-to-eat and ready-to-heat prepared foods' merchandising and globally in some of its other operations.

Lastly, Andronico's specialty-oriented expertise and historic upscale format might also be a benefit to Tesco in the UK if it ever decides to create an upscale format and position it against the nation's leading upscale-specialty-natural-organic grocery chain,Waitrose, and Whole Foods Market, which is opening additional stores there.

Union redux: Like Bristol Farms, Tesco's Fresh & Easy is a non-union food and grocery retailing chain. And, as readers of Fresh & Easy Buzz are well aware because we cover the issue more extensively and more in-depth than any other publication does, the United Food & Commercial Workers Union (UFCW) has been trying to unionize Fresh & Easy Neighborhood Market since early 2008. Therefore, the fact Andronico's is a union grocer could pose a serious barrier to Tesco making any sort of  investment in Andronico's - even buying it - should the UK-based global retailing giant-come-to-America consider my scenario.

The jury is still out on whether the Fresh & Easy format will succeed. Right now in my analysis the majority of the jury is voting no. But Philip Clarke and company might still be able still change that verdict, although the clock is ticking very fast.

Were I an advisor to Tesco CEO Philip Clarke and his deputy CEO Tim Mason (and I'm not and don't seek such a position), who's also CEO of El Segundo, California-based Fresh & Easy Neighborhood Market, I would tell then to call Bill Andronico post-haste and set up a meeting with him, Anthony Gilmore and the CFO, to start. The investment in time is well worth the potential outcome.

And, of course, Andronico's could benefit - starting with surviving - from an investment or more from Tesco. As such, were I advising Bill Andronico (and I don't), I would tell him not to wait to hear from Tesco CEO Clarke or his deputy Tim Mason. Instead, I'd suggest he reach out and ask for a meeting. Perhaps he already has - Philip Clarke was in San Francisco late last week, leaving the airport on Saturday to return to London?

if Andronico's had hired that social media director it's been advertising for on its website for nearly a year - I first saw the ad on the website in August 2011 and noticed Andronico's removed it about one week ago - it could communicate with Tesco on Facebook and Twitter, two important social media sites Andronico's has zero-presence on. See its Facebook site, for example, assuming it's actually the grocers.

If I were being paid the big bucks to turn a grocery chain like Andronico's around, one of the first things I would do is create a significant presence on Facebook, Twitter (Andronico's has neither that I can find) and a couple other social media sites. You can hire a talented college intern to help for near-nothing, for example.

The sites are free but potentially powerful. They also allow a grocer to address customers and potential customers directly and instantly - no need to send e-mails to third parties like local newspapers, which is so 20th Century.

Bill Andronico should call Mollie Stone's co-owner Dave Bennett, who understands the potential power of social media, and chat a bit. Then he should ask his numerous senior executives what they're waiting for on the social media front? After all, 82-year-old Andronico's needs and deserves solutions rooted in the 21rst Century, not the 20th.

A Sugar Daddy of sorts isn't needed for social media and many other low-to-no-cost operations, merchandising, marketing and promotional programs that are needed but I'm not seeing being implemented at Andronico's, which makes me wonder - are things that close to the end financially? Or is it time for another new senior management team? Or both?

It would be a shame to lose the 82-year-old chain completely. So time and much better effort from the senior management team seems to me to be of the essence.

CEO Kevin Davis, Execs and Investment Firm Buy Upscale Southern California Bristol Farms Chain From Supervalu, Inc.

Actress Halle Berry, who's a regular customer at the Hollywood, California Bristol Farms store at 7880 West Sunset Boulevard, will likely be happy to learn the upscale grocery chain isn't going away and is now back in local control. The photo of the casually dressed actress leaving the store was taken on June 3, 2010 by Hollywood celebrity blogger JustJared.com. You can see the Bristol Farms logo on the grocery bags in her cart. Ms. Berry appears to be a paper and not plastic (or reusable) user when it comes to her grocery bag of choice. Based on the contents of her shopping cart, Halle Berry also appears to be a good customer for the upscale grocer when it comes to the house plant category.

From Twitter-to-the-Blog: Southern California Market Region Report

On July 22, 2010 we tweeted the following (reproduced in italics below) to Natalie Berg, an analyst with London-based retail research firm Planet Retail. The Tweet: @Natalie_Berg: Keep it under your beret: There is some talk about a possible senior exec w/investor or a grocery wholesaler participation buyout of BF (Bristol Farms) 3:09 PM Jul 22nd]

Our Tweet was in response to one Ms. Berg, who covers both the UK and U.S. retailing scenes for Planet Retail (and who offers insightful Tweets), posted on July 13, in which she wrote: "@Natalie_Berg Just updated SuperValu forecasts. Bristol Farms now classified as "other" and they are quietly selling off stores. Do I smell a divestment? 8:23 AM Jul 13th."

Then Supervalu, Inc.-owned Bristol Farms didn't sell any stores in 2010 but it has closed four stores in Southern California since it acquired the chain in 2006 from then Boise, Idaho-based Albertsons Inc. Those stores were located in Valencia, Woodland Hills, Redondo Beach and Mission Viejo.

Today Supervalu, Inc. announced it has sold the upscale 14-store Bristol Farms division to chairman, president and CEO Kevin Davis and a group comprised of 17 other executives and management members, who've acquired the division in partnership with private equity firm Endeavour Capital, which takes its name from the H.M.S. Endeavour, the ship that was piloted by noted explorer James Cook. Endeavor Capital has offices in Portland, Oregon, Seattle, Washington and Los Angeles. The new ownership team takes over today, Supervalu said.

Thirteen of the 14 stores operate under the Bristol Farms banner. One is a Lazy Acres banner natural foods market. It's in Santa Barbara. Twelve of the Bristol Farms banner stores are in Southern California. One Bristol Farms store is located in the Westfield San Francisco Centre at 845 Market street in downtown San Francisco.

Supervalu operated Bristol Farms, which is headquartered in the Southern California city of Carson, as an autonomous division, hence Kevin Davis' various senior-level titles.

Bristol Farms has also operated independently from Supervalu in terms of its procurement, continuing its previous policy of buying from Southern California-based retailer-owned cooperative grocery wholesaler Unified Grocers. Under its new ownership, Bristol Farms' CEO Davis says it will continue its long relationship with Unified, which he has been a board member of in the past.

Davis, along with Bristol Farms' executive vice president Sam Masterson and the 16 other employees will own a percentage of the specialty grocery chain along with Endeavour Capital, which has a track record of investing in grocery chains like Idaho-based WinCo Foods, Oregon-based New Seasons Market and others. [The private equity firm's investment portfolio is a varied one. You can view the companies it's invested in here.]

Interestingly, both WinCo Foods, which Endeavour Capital sold its stake in earlier this year, and New Seasons, which the firm invested in only last year, are both employee-owned food retailers, as Bristol Farms now is, at least to a limited degree (18 employees). WinCo has been employee-owned (except for a small percentage which is held by investors) for many years. New Seasons changed from private ownership to employee-ownership earlier this year.

Kevin Davis has been with Bristol Farms, which was founded by partners Irv Gronsky and Mike Burbank with a single store in Rolling Hills, California in 1982, for 14-years. Early in his career at Bristol Farms Davis was the head-buyer/merchandiser for the upscale Southern California grocery chain, which is a pioneer in specialty grocery retailing not only in Southern California but nationally.

Davis has an extensive background in the food retailing business in Southern California, including working as a store manager, district manager, corporate vice president of sales and advertising and senior vice president of marketing at Ralphs, which is the largest grocery chain in the region. He first went to work as a grocery clerk for Ralphs in 1974.

Bristol Farms has been the step-child of its two most recent corporate owners - Boise, Idaho-based Albertsons Inc., followed by Supervalu, which obtained Bristol Farms as part of its 2006 joint-acquisition of Albertson's Inc. in partnership with private equity firm Cerberus Capital Management. Cerberus owns Albertsons LLC. For example, the Albertsons stores in Southern California are owned and operated by Supervalu, Inc. But the Albertsons stores in Arizona are a part of Cerebus' Albertsons LLC.

Albertsons Inc., which is now part of Supervalu, Inc., bought Bristol Farms in 2004 from Los Angeles-based investment firm Oaktree Capital Management For $137 million, specifically as a play to enter the upscale specialty food retailing niche.

At the time the then Boise, Idaho-based chain said it planned to grow Bristol Farms not only in Southern California but would expand it geographically into other parts of the U.S. However, those plans never materialized. In the two years it owned the specialty grocery chain, Albertsons Inc. opened a few new Bristol Farms stores in Southern California and bought the Lazy Acres store in Santa Barbara (in 2005). But only one Bristol Farms' store opened outside of Southern California, the unit in San Francisco, which was opened in 2006, shortly before Albertsons Inc. was acquired by Supervalu and Cerberus.

When Supervalu, Inc. obtained Bristol Farms in the Albertsons Inc. acquisition, it too talked about expanding the upscale chain, both in terms of opening new stores in Southern California and in Northern California and potentially expanding geographically. That never happened either under its ownership. From 2006-2010 three former Southern California Albertsons units - in the Westchester neighborhood in Los Angeles, Palm Desert and La Jolla - were converted to Bristol Farms stores, and a new store in Valencia was opened in November 2008, but that's about it in terms of expansion. The Valencia store was closed in late February of this year due to poor performance

At its high point, Bristol Farms operated 17 stores under the banner of the same name. The closing of the four stores - Valencia, Woodland Hills, Redondo Beach and Mission Viejo - brought the store count down to the current 13 Bristol Farms units.

Being free from Supervalu's corporate ownership should allow Kevin Davis and company to get back to what Bristol Farms historically has done well: Innovative specialty food retailing with an independent grocer's local touch. The Bristol Farms stores offer a full-selection of basic food and grocery items but put a major focus on specialty, gourmet and natural food and grocery offerings across all categories, including fresh-prepared foods.

With its backing from Endeavour Capital we also expect to see Bristol Farms' selectively open new stores in a measured way, primarily in Southern California but perhaps out of the region as well. For example, Davis has long been interested in Northern California. And with just one store in the region, in San Francisco, there's certainly plenty of room to grow, particularly in the San Francisco Bay Area where Bristol Farms' brand of upscale specialty food retailing has a following in selected, higher-income communities and neighborhoods.

Additionally, with only the one unit in the Bay Area, it's difficult to do much in the way of cost-effective marketing and merchandising since the economies of scale aren't there for Bristol Farms with just the single-store in San Francisco.

Over the years there's been talk about closing the San Francisco unit. However that's not happened. This fact offers another good reason why it could make logical sense for the "new" Bristol Farms to look north for future stores.

Unified Grocers, Bristol Farms' supplier, also has a division in Northern California, which supplies the one store in San Francisco. As such, supplying additional stores in the region would pose no problem and would be seamless.

In fact, Unified Grocers is breathing much relief that Davis and company has acquired Bristol Farms, which means the wholesaler will be able to continue to supply the 14 stores, which provides a healthy amount of revenue for the retailer-owned wholesale grocer. For example, had Supervalu sold Bristol Farms to a self-distributing chain instead of the employee group and Endeavour Capital, that would likely have ended the supply agreement with Unified, or at least limited it.

We know this to be true because over the summer our sources - the same ones that informed our July 22, 2010 Tweet to Ms. Berg - told us Unified was considering investing with Davis and the other Bristol Farms executives if doing so was required to keep the chain independent. Having once owned Bristol Farms as part of a then move to own and operate retail grocery stores along with being a wholesaler, Unified wasn't crazy about doing so, but was considering it. However, with the backing of Endeavour Capital, such a move wasn't needed.

Look for a new round of interesting food and grocery retailing to come from the "new" Bristol Farms.

First off though the new owners have some top and bottom line concerns to address, as the recession has hurt sales at the upscale chain as many of Bristol Farms core customers have been trading down to more mid and lower-priced grocers like Kroger's Ralphs and Safeway's Vons, along with others.

Additionally, the competition in the upscale and specialty niche in Southern California has and is only getting more competitive. Whole Foods Market and Trader Joe's, for example, continue to add stores in the region. And hybrid niche players like Sprouts Farmers Market, Henry's Farmers Market and Tesco's Fresh & Easy continue to open numerous new stores throughout Southern California, including in cities where the 12 Bristol Farms stores are located.

Davis and his team are creative and innovative grocers though. As owner-executives who now have a personal financial interest in Bristol Farms' success and growth, coupled with Endeavour Capital as an investment partner, which understands the grocery retailing business because of its track record in the industry, and freed from being a step-child of Supervalu, Inc., things should be looking nowhere but up for Bristol Farms in the months and years to come.

And thanks in part to Twitter and Ms. Berg - but particularly to our sources - we pretty much had the acquisition deal story nailed over three months ago in our July 22, 2010 Tweet.

Suggested additional reading

April 29, 2010: Heard on the Street: There's Something About Albertsons ... In Southern California

June 27, 2010: The Insider: Will Tesco Acquire Supervalu, Inc. and Change its 'Fresh & Easy' Game in America?

October 18, 2010: Supervalu's Small-Format, Hard-Discount Save-A-Lot Food Stores Chain is California Bound

Notes to above:

>In the April 29 piece linked above our 'The Insider' columnist offered a strategy for Supervalu, Inc. in Southern California. He also noted a possible sale of Bristol Farms.

>In our October 18 story linked above we reported on and detailed Supervalu's push with its small-format Save-A-Lot chain in California. Cash from the sale of Bristol Farms will help fund that strategy.

>'The Insider' also mentions Bristol Farms in his June 27 column linked above. By the way, he says a Tesco acquisition of Supervalu, Inc. isn't in the cards at present. He will have an upcoming column on the topic soon.

Heard on the Street: There's Something About Albertsons ... In Southern California

"The Insider" is a new, regular - weekly -to- fortnightly (every two weeks for the non-bilingual) - feature in Fresh & Easy Buzz. "The Insider" will be exploring all aspects of what's happening in - and what he's hearing about - the food and grocery retailing business, with a focus on - but not limited to - California, Nevada and Arizona - the three states where Tesco has its Fresh & Easy Neighborhood Market fresh food and grocery stores.

The Insider: Heard on the Street

The Southern California - and beyond - rumor mill (and I mean informed people, not just the "usual suspects") has been buzzing since late February of this year with talk that Supervalu, Inc. is up to something - or somethings - with its Albertsons chain in Southern California.

Here's a summary of the buzz heard on the street:

1. Supervalu plans to sell its Albertsons chain in Southern California.

The Insider doesn't think that's going to happen.

Why? Supervalu owns and operates about 463 Albertsons banner supermarkets in Southern California, Nevada and the Northwestern U.S. If it sold the Southern California Albertsons chain, doing so would reduce its presence and total store count in the Western U.S. by about 40% - which is a very significant reduction in volume, and would result in a loss of efficiencies for Supervalu in its western U.S. operations, not to mention a dramatic drop in sales. Albertsons also owns the 14 store (13 in Southern California, one store in San Francisco) Southern California-based Bristol Farms upscale grocery chain.

2. Supervalu is looking to sell - and/or close - some of its under-performing Albertsons stores in the Southern California Market.

This is a more logical and likely scenario than number 1 - and really not much of a big deal - unless the number of stores it were to sell is significant.

Supermarket chains sell under-performing stores all the time, to a greater or lesser degree. And Supervalu has been selling some of its stores on the east coast this year. Further, Supervalu closed about a dozen poorer-performing Albertsons stores in Southern California last year, so selling or closing some stores in the region this year wouldn't be without recent precedent

Therefore, unless the number of stores sold or closed (or a combination of the two) is significant - say 25%-30% or more of the total Southern California store-count - I don't see this, if it occurs, as a big story.

Selling 25%-30% or more of the total store-count would be significant because it would reduce Southern California Albertsons' annual sales volume considerably, which would then likely reduce the chain's market share considerably.

Albertsons is the third-largest grocer in Southern California by market share. It has a slightly over 12% share.

Kroger-owned Ralphs is tops (with slightly over 19%), followed by Safeway's Vons (15%).

Trader Joe's is fourth (6.33% share), and Stater Bros. is fifth, with an estimated 6.07% share. There are regional differences though in Southern California. For example, in the Inland Empire region, a huge market area, Stater Bros, which is headquartered in the area and has the majority of its 159 stores there, tops Albertsons, Vons and Trader Joe's, and is neck-and-neck with Ralphs.

Albertsons lost the most business among the large Southern California chains last year. Its market share dropped by almost one-third of a percentage point in 2009, while Ralphs'
increased slightly, and Vons remained steady.

Trader Joe's market share grew considerably, which is what put it into fifth place at the end of last year. Stater Bros share declined just slightly.

Rounding out the numbers, Smart & Final is sixth in Southern California with an estimated 3.23% share, followed by Whole Foods at around 3.1%, and Superior Grocers and Walmart at an estimated 3% each.

Walmart's share is so low because it has very few stores in Southern California that sell food and groceries, a situation it's trying to change as fast as it can by converting about 50-60 of its discount stores into supercenters, along with proposing new supercenters throughout the region.

Although it has about 80 of its 159 stores in Southern California to date, Tesco's Fresh & Easy hasn't registered any significant market share numbers thus far. Significant would be at least 2%.

[Note: Supervalu has converted a handful of the Albertsons stores in Southern California to the Lucky banner, a brand name it obtained when it acquired it's share of then Boise, Idaho-based Albertsons Inc. a few years ago. In January 2006, Albertsons Inc. was purchased by a consortium of investors including Supervalu, Inc., which acquired about 1,100 Jewel, Acme, Shaw’s, and Albertsons stores in Southern California, the northwest, the inter-mountain region, and Florida; Cerberus Capital, which acquired 600-plus Albertsons stores in Northern California (now owned by Save Mart Supermarkets), the Rocky Mountains, Florida and Texas; and CVS Pharmacy, which acquired the Osco, and Sav-on drug chains the company owned and operated.]

3. Supervalu is planning to convert some of its Albertsons stores into its hard-discount Sav-A-Lot stores, owning some corporately and franchising others to independent operators.

This is the scenario - based on the rumors I've distilled into the three summaries above - The Insider believes is the most likely to occur.

For example, I could see Supervalu doing a demographic study of the neighborhoods surrounding all of its Albertsons stores in Southern California, and then selecting a number of the stores best suited for the Sav-A-Lot format, based on the demographics, to be converted into the smaller-format, hard-discount Sav-A-Lot.

In fact, I think this is what Supervalu should do in Southern California: Make Albertsons a slightly smaller (by store count), leaner, meaner and more focused supermarket chain, while building Sav-A-lot as a price-impact player in the region, starting with converting a bunch of the less-performing Albertsons stores into the first batch of Sav-A-Lots - along with opening up new Sav-A-Lot units, both corporately-owned and franchised to independent operators. New Albertsons stores can be built at a low rate when good location opportunities arise.

Doing this also fits nicely into Supervalu's plans to double the size of its hard-discount Sav-A-Lot chain from 1,200 stores to 2,400 over the next five years. [CEO: Supervalu to Open 100 New Sav-A-Lot Stores This Year; Strategy to Double Store-Count to 2,400 in 5 Years in Place

Supervalu should also look closely at opening Sav-A-Lot stores in urban "food desert" neighborhoods in Southern California - and in other U.S. cities - like South and East Los Angeles and other urban areas in the region underserved by grocery stores offering groceries and fresh foods at reasonable prices. Such a strategy fits well with the Sav-A-Lot target shopper, who makes under 45,000 annually, and with the Sav-A-Lot no frills, price-focused retail format.

My model would give Supervalu a three-chain, multi-format strategy in the Southern California market. Albertsons would be its mid-range - but tightly focused - supermarket chain, hard-discount Sav-A-Lot would be its price-impact format, and Bristol Farms its higher-end, upscale play.

I would then focus on growing Sav-A-Lot aggressively, along with tweaking Albertsons in a variety of ways.

Having this option is far superior for Supervalu in a tough, highly competitive market like southern California than having just one horse - Albertsons.

Let's see if any of the above summaries play out with Supervalu's Albertsons over the coming weeks and months in Southern California.

Let's also see if Supervalu employs a strategy in Southern California anything like the three-format, three chain model I've outlined above.