Hybrid 'Good Eats' Market-Cafe From Raley's CEO Michael Teel & Company Opens Today in Sacramento CA

Northern California Market Special Report

More than two years after we first reported on it, Sacramento, California-based Good Eats - formerly Good Eats Grocer - is today opening its first combination fresh-prepared foods, specialty grocery market and cafe at 3145 Folsom Boulevard in East Sacramento.

[Read our July 8, 2008 story: Upcoming New Markets Report-Sacramento: Former Raley's CEO Michael Teel and Partners Preparing Launch of New 'Good Eats Grocer' Small-Format Chain.]

Good Eats is a venture founded in 2008 by Michael Teel, the son of the owner of West Sacramento-based Raley's Supermarkets, Joyce Raley-Teel, and the grandson of its founder, the late Tom Raley, and his partner, Michael Ashker.

Teel, who was the CEO of Raley's from 1996 -to- 2002, left the supermarket chain to start up a Sacramento-based magazine publishing and media company, Prosper Media, with Ashker. Later the two started M2 Venture Partners, a venture capital firm where they operated jointly as managing partners. M2 stood for the fact both partners' first names are Michael. Good Eats is one of the companies the firm funded and started. The details are in our July 8 story linked at the top of this piece.

The two are no longer involved together in M2 Venture Partners. Ashker, a veteran investment banker, venture capitalist and entrepreneur, is now president & CEO of Blackfish Financial, chairman of Brushfire Media Group and principal/managing partner at Agility Partners. All are his ventures.

Good Eats has been spun out of the investment firm as a standalone company majority-owned by Michael Teel and his fiancée Julie Rollofson.

Teel was the CEO of Good Eats until January of this year, when he returned to Raley's as CEO following the resignation of Bill Coyne. Julie Rollofson became CEO at that time.

Raley's has been struggling in the competitive Northern California food and grocery retailing market, even though it has the top market share in the Metropolitan Sacramento market and is number three, after Safeway Stores and Save Mart's Lucky chain, in the San Francisco Bay Area.

Teel took over once again as CEO after being gone for eight years, as part of a strategy by the family to "right the (struggling) ship," as he put it after being named head of the family-owned supermarket chain, which has about 159 stores, and does about $3.5 billion in annual sales.

Rollofson helmed today's opening of the East Sacramento store since taking over as CEO Of Good Eats. She's planning a big grand opening in September.

The flagship Good Eats market was supposed to open in December 2009-January 2010 but was postponed in part because Michael Teel became CEO of Raley's in January 2010.

Joyce Raley-Teel, along with her husband Jim Teel, are the co-chairman of Raley's board of directors. Ms. Raley-Teel worked in various executive capacities at Raley's for decades before retiring a few years ago. Her husband, Jim Teel, also spent decades as a Raley's executive. He served as the chain's head of human resources for many years, then spent more years in the top senior executive ranks.

Investment banker, venture capitalist and media man Ashker has founded a number of companies in the Sacramento region, including Imerica Life & Health Company, Healthaxis and Courtlink.

As a venture capitalist he's also been involved in funding numerous companies. For example, he has served as a financial advisor for fast-growing Colorado-based grocery chain Sunflower Farmers Market. In 2007 Ashker structured a $30 million new package for the grocery chain through one of his investment funds.

The East Sacramento flagship Good Eats market is located in what was formerly the Andiamo restaurant, a popular spot for decades in the capital city. Good Eats gutted the building and has done extensive remodeling to turn it into the hybrid small-format fresh-prepared foods store/specialty grocery market/cafe.

The market offers: in-store-made hot and cold fresh-prepared foods of all types for takeout (there's also an eat-in area); fresh meats (and seafood), merchandised in full-service counters; fresh produce and flowers; a bakery; a deli featuring cheeses, lunch meats and related items; a wine shop and wine bar; an espresso bar/cafe; and a selection of shelf-stable specialty, natural and organic grocery items.

The Sacramento Good Eats market opening today actually isn't the company's first store. In early 2009 it opened its first fresh food/specialty grocery/cafe in Scottsdale, Arizona, naming it The Kitchen at Good Eats Grocer, in order to put an emphasis on the prepared foods emphasis of the format. The Sacramento store, like the company's name, is just Good Eats. "The Kitchen" has been dropped, as has"Grocer."

In March of this year Good Eats closed the Arizona unit, which was located in The Shops at Gainey Village center in Scottsdale, after just over a year in operation. Good Eats offered no specific reason for the closing.

In an August 18, 2008 piece - Small-Format Food Retailer 'Good Eats Grocer' Signs Leases For Two More Store Sites; Five More Stores in the Pipeline For the Sacramento Metro Market - we noted that Good Eats had signed leases for two additional locations in the Sacramento region. We also quoted Michael Teel, who said Good Eats had plans for an additional five units in the region. One of the two stores with signed leases was later given up. It's the site of the decades popular Corti Brothers supermarket in Sacramento. The Corti family was in a dispute at the time with the landlord of the building over renewing the lease. The grocer and its landlord came to terms on a new lease. Corti Brothers remains open - and popular. The details are in the August 18 piece.

It's unclear at present if and when Good Eats plans to go forward with opening the additional markets in the Sacramento region. However, since taking over early this year, Julie Rollofson appears to be working towards that goal. As such, we wouldn't be surprised if an announcement of a second unit or more comes before the end of this year.

We also won't be surprised if some synergies between Raley's and Good Eats appear in the not too distant future.

It's not going to be easy for Good Eats to succeed though. But it has a chance if it executes well, focuses on customer service and doesn't offer too high of price points for the fresh-prepared foods and other food and grocery items it's offering.

On August 19, Tesco's Fresh & Easy Neighborhood Market announced the first eight stores it will open in Northern California in 2011. None of the first eight stores are in the Sacramento region. The nearest unit is in Vacaville, which is about 45 miles from Sacramento. Fresh & Easy is shooting for a February 2011 opening for the first batch of stores. [See - August 21, 2010: April 2010 Prediction Correct: February 2011 Target to Open First Eight Fresh & Easy Neighborhood Market Stores in Northern California and August 19, 2010 - Tesco Will Open its First Eight Fresh & Easy Neighborhood Market Stores in Northern California in 'Early 2011.']

There are 18 Fresh & Easy locations in the Sacramento Metro region (one in Sacramento/Vacaville, for a total of 19 confirmed) that Tesco has confirmed to date, and a couple we've discovered in our reporting. See our Northern California Fresh & Easy Store List. Therefore, we expect some of the Sacramento area stores to be opened later in 2011.

Fresh & Easy Neighborhood Market is also in the process of obtaining additional future store locations in the Sacramento region and throughout Northern California.

Fresh-prepared foods are a central focus of the Fresh & Easy format and stores. As such, when the stores start opening in the Sacramento region, the market will get an added dose of competition in the growing ready-to-eat and ready-to-heat fresh foods retailing segment. Stay tuned.

Below are the stories thus far in our '2010 Northern California Market Special Report' series:

August 22, 2010: The Insider: Challenges & Opportunities: Tesco's Fresh & Easy Neighborhood Market Will Supply its Northern CA Stores From its Riverside County DC in Southern CA

August 21, 2010: April 2010 Prediction Correct: February 2011 Target to Open First Eight Fresh & Easy Neighborhood Market Stores in Northern California

August 19, 2010: Tesco Will Open its First Eight Fresh & Easy Neighborhood Market Stores in Northern California in 'Early 2011.'

August 17, 2010: Henry's Farmers Market 'Beats' Fresh & Easy Neighborhood Market to Northern California Despite Multi-Year Head Start; Elk Grove Store Opens Tomorrow

July 29, 2010: Tesco's Fresh & Easy Neighborhood Market Putting Together List of Managers Interested in Transferring to Northern California

July 25, 2010: Safeway to Start Construction on New Pleasanton, California Flagship Store Soon; Thanksgiving 2011 Target Opening

July 22, 2010: 'The Insider' - After Four Years in the High Weeds in Northern & Central California, Kroger Co. is Emerging to Grow its Foods Co Chain

July 21, 2010: Vacant Fresh & Easy Neighborhood Market Store in Pacifica, California Has the City's Mayor in a Pickle

July 18, 2010: 'The Insider' - When it Comes to Northern California - its Competitors are Rome Burning and Tesco's Fresh & Easy Neighborhood Market is Nero Playing the Fiddle

July 14, 2010: Tony Bennett Has Nothing on Whole Foods Market When it Comes to Loving San Francisco...That City By the Bay

July 6, 2010: Walmart Looking for Store Sites in Northern California For 20,000 Sq-Ft Neighborhood Market by Walmart Prototype Store

June 28, 2010: Smart & Final to Open its New Format SmartCo Foods Stores in California and Arizona

June 26, 2010: Tesco Planning to Announce in July When First Northern California Fresh & Easy Neighborhood Market Stores to Open

June 14, 2010: Newly-Named Whole Foods Market CO-CEO Walter Robb Comes Full Circle With the Opening of the New Store in Mill Valley CA

June 5, 2010: Sprouts Farmers Market Opens First Northern California Store in Sunnyvale; Strikes Up Partnership With Local Non-Profit Farm

May 29, 2010: Going Rural: Fresh & Easy Neighborhood Market to Build First Store in Los Banos, California

May 28, 2010: First Phase of Fresh & Easy Neighborhood Market-Anchored Condo Development in San Francisco's Bayview Set For Completion in June

April 19, 2010: Tesco Debating Whether to Launch Fresh & Easy Into Northern California This Fiscal Year... or Wait

May 9, 2010: A Whopping 15 of Whole Foods Market's 41 New Stores in Development are in California - And Nine of The 15 Are In Northern CA

May 8, 2010: Sprouts, and Likely Henry's to Beat Fresh & Easy to Northern California Despite it's Big Head Start

May 6, 2010: Going Smaller & Getting 'Hybrid': Walmart's Smaller Supercenter in Vacant Retail Buildings Strategy Began in 2008

April 19, 2010: Tesco Debating Whether to Launch Fresh & Easy Into Northern California This Fiscal Year... or Wait

Small-Format Food Retailer 'Good Eats Grocer' Signs Leases For Two More Store Sites; Five More Stores in the Pipeline For the Sacramento Metro Market

Upcoming New Markets News: Northern California--Sacramento

It doesn't look like Tesco's Fresh & Easy Neighborhood Market will get the small-format grocery store fresh, prepared and organic-specialty foods market all to itself when it starts opening the first of it currently 19 planned grocery stores in Sacramento and the surrounding region in Northern California early next year.

On July 8 we reported the former CEO of Sacramento-based Raleys (supermarket chain), Michael Teel, had founded a small-format combination fresh, prepared and natural-specialty foods retailing company called Good Eats Grocer, headquartered in Sacramento. Teel left Raleys in 2002 to form his own advertising agency and then started a new business venture firm.

Teel, who is an heir to the family-owned 130-store, $3.5 billion a year Raley's food and grocery retailing mini-empire (his mother is the daughter of Raleys founder Tom Raley, Michael Teel's late grandfather), and partner investment banker and entrepreneur Michael Asker, signed a lease for the first Good Eats Grocer small-footprint food market which will be located in Sacramento's landmark Adiamo building at 3145 Folsom Blvd, as we wrote about in our July 8 piece.

The Adiamo building once housed the Rosemount Grill restaurant, which was a favorite of Sacramento's corporate chiefs and politicos, including Michael Teal's grandfather Tom Raley.

Michael Asker, Teel's partner in Good Eats Grocer, is the investment banker who arranged the much-publicized $30 million in new financing earlier this year for fast-growing small-format natural foods chain Sunflower Farmers Market, which is opening numerous stores in Arizona (and in other states), which is one of the three current markets for Tesco's Fresh & Easy, along with Southern California and Nevada.

Teel and Asker, who together operate a firm called M2 Venture Partners (M2=two Michaels) of which Good Eats Grocer is a part, are remodeling the Adiamo building into their small-format Good Eats Grocer bistro and market format. That format puts at its center high quality fresh, prepared foods, along with offering a selection of natural, organic, specialty and gourmet food and grocery products.

Below is how Michael Teel describes Good Eats Grocer:

"Good Eats Grocer is a natural-organic crossover market that sources the finest quality foods at incredible prices. We have designed our stores to be smaller, and more intimate with an overriding emphasis on the customers’ convenience and ease of access. We offer a great selection of natural and specialty foods from around the world and a huge variety of take-home meals and dinner solutions for the family."

In our July 8 piece, we also reported the flagship store going in the Adiamo building is merely the first of what the partners plan to be a regional chain of Good Eats Grocer food markets, starting first in Sacramento and the surrounding metropolitan area and then perhaps going from there to other parts of Northern California if the initial stores do well.]

Now, a story in yesterday's Sacramento Bee, the details of which we've confirmed with Good Eats Grocer, reports Teel and company have secured leases for two more food markets.

Additionally, Teel says the company has five more Good Eats Grocer stores in the pipeline (all in the Sacramento Metropolitan region), which would bring to eight the number of stores currently planned to open next year in Sacramento and the surrounding area. And that's just thus far. The partners are moving fast, having only inked the lease on the first store a few months ago.

The second of the three Good Eats Grocer stores in which the company has signed leases for is in what now is the Corti Bros. specialty foods supermarket at 5810 Folsom Blvd. in East Sacramento.

Corti Bros. is a 61 year old pioneering independent supermarket in Sacramento. Darrell Corti, who runs the store, and his brothers were the first grocers to introduce specialty, gourmet, artisan and local foods to Sacramento shoppers in a serious way. In addition, Darrell Corti, who is an internationally renowned wine expert, has created one of the finest wine retail shops in the Sacramento region at the family-owned Corti Bros. specialty supermarket.

Corti Bros. lost the lease on the 61 year old Sacramento store due to a failure between the grocer and the building's landlord to reach agreement on new lease terms. Good Eats Grocer picked the lease up and will be putting its second store in the building made famous for specialty foods and wine merchandising not only in Sacramento but nationally in the U.S. by the Corti Bros.

Darrel Corti, who in addition to running the store is an international specialty foods and wine consultant and judge for some of the most prestigious wine competitions globally, is such a foodie that each year for decades he has a commercial kitchen prepare to his special recipe an orange marmalade produced from Seville oranges from the family's own orange trees, creating not only a local foods product but a Corti Bros. Estate Orange Marmalade as well. The marmalade, which is ready at about Christmas time each year, is sold out before it even hits the store's shelves.

Teal and company have some pretty large grocery aprons to fill in that location, home for 61 years to arguably Sacramento's most innovative grocer. Darrel Corti says he is close to finding a new location for the family-owned Corti Bros specialty supermarket, most likely in Sacramento.

The third Good Eats Grocer store will be located in Sacramento's popular and fast-growing Midtown neighborhood, which is increasingly becoming the trendy residential and commercial neighborhood in the capital city. It has lots of art galleries, cafes, shops and other businesses which encourage pedestrian traffic, which makes it a good location for a combination small-format fresh, prepared foods and natural-specialty foods market like Good Eats Grocer we believe.

Tesco is building a Fresh & Easy grocery market in Sacramento's Oak Park neighborhood, which is fairly close to where the Good Eats Grocer store is going in Midtown.

Teel hasn't announced the locations of the five additional small-format food markets, likely because those locations aren't finalized yet.

We do know at least some of the five will be in Sacramento, and that the grocer also has looked at locations in nearby Davis, home of the University of California at Davis, along with a few other Sacramento suburbs. Whole Foods is opening a new natural foods store in Folsom, next door to Sacramento. Don't be surprised if Good Eats Grocer opens one of the additional five stores in Folsom, where Tesco also plans to open a Fresh & Easy store next year.

Good Eats Grocer stores won't sell basic grocery items like Tesco's Fresh & Easy Neighborhood Market combination fresh foods and basic grocery stores do. About half of the product selection in Fresh & Easy stores consists of basic food and grocery items (about 65% under the fresh & easy store brand and about 35% supplier brands), along with some basic non-foods items. The other half consists of fresh produce, meats and other perishables, along with natural, organic and specialty grocery items, wines and beers.

Therefore, Good Eats Grocer and Fresh & Easy won't be identical competitors, at least 100% because Teel's food markets aren't going to sell the basic grocery items. However, a major portion of Fresh & Easy's offering is in the prepared foods and other fresh categories-- categories Teal's food markets will compete on--along with to a lessor but significant degree in the natural, organic and specialty grocer categories, as well as specialty wines and craft beers--all categories Good Eats Grocer stores will focus on extensively.

When Tesco first announced its plans to start Fresh & Easy over two years ago, it positioned it as a new retail offering for American consumers, with its focus on convenience shopping, low everyday prices on grocery items and fresh foods, and its emphasis on affordable fresh, prepared foods.

While the stores have numerous similarities to Trader Joe's markets, the big difference with Fresh & Easy is its emphasis on basic groceries at low prices. (Trader Joe's carries natural, organic and specialty foods and groceries but not everyday items.) The stores also carry a larger selection of fresh, prepared foods than Trader Joe's specialty markets' do, although that's changing as Trader Joe's is putting its "Joe's Shack" fresh, prepared foods kitchens in more and more of its stores.

However, less about 10 months since Tesco opened its first Fresh & Easy market opened in late October, 2007 (there currently are 71 stores), the retailer is seeing a proliferation of small-format food and grocery stores of multiple formats either opening or planning to open in its market regions.

There's Safeway with its "The Market" small-format grocery stores. One already is open in Long Beach, California, with more to come in California and likely in Arizona. Wal-Mart, Inc. which will open its first four small-format Marketside combination fresh foods and basic grocery stores in the Phoenix, Arizona region this fall. (Like Good Eats Grocer, the Marketside stores also will prepare foods right in-store, unlike Tesco's Fresh & Easy which prepares the foods at a central kitchen in Southern California then ships them to the stores in that region, Nevada and Arizona.

Additionally, on the small-format discount format side, SuperValu, Inc. is opening additional no frills discount Sav-A-Lot grocery stores in California. Save-A-Lot focuses on offering a limited assortment of basic grocery items and fresh foods, selling them for the lowest prices possible. There are 1,600 Sav-A-Lot stores in the U.S. The format has been around for many years, and SuperValu is putting increased emphasis on growing the chain throughout the U.S. beyond its already impressive 1,600 current store count.

Good Eats Grocer does not by any means pose a barrier to entry to Tesco's Fresh & Easy in the Sacramento Metro market. And let's not forget Fresh & Easy Neighborhood Market is owned by deep-pocketed Tesco, the third largest retailer in the world. But it does add yet another competitor--and in this case a significant one because of the small-format and in-store fresh, prepared foods focus--to the many established grocers already waiting for Fresh & Easy in the Sacramento Metro region market.

These competitors include Raleys, which is the number one market share leader in the market, Save Mart-owned Lucky stores (formerly Albertsons in Northern California), Safeway Stores, Inc., Wal-Mart Supercenters, Trader Joe's, Whole Foods Market, Inc., Super Target (soon to be coming to Sacramento), Winco (a large discount grocery chain), numerous warehouse format retailers, and many independents with formats ranging from discount to upscale.

Sacramento also is a very locally-based market, which in part accounts for hometown Raleys dominance, even in the face of stiff competition from giants like Wal-Mart and Safeway Stores. This local advantage or effect should help Michael Teel with Good Eats Grocer, since both he and partner Asker are extremely well known longtime Sacramento residents who have extensive business, political and charitable ties in the community and throughout Northern California.

But even more important than all that, Good Eats Grocer has to offer "good eats" at a decent price, as is the case with nearly every other food retailer except perhaps for Dean & Deluca and a couple others. If not, it won't succeed. After all, even organic and gourmet Whole Foods Market, Inc. has now put its stores on a value diet, focusing significantly on bringing shoppers value in these bad economic times.

Value is an area in which Tesco's Fresh & Easy can likely beat Good Eats Grocer in. But executing in the Sacramento market is going to require a localized approach in order to be successful. And that's a plus for Good Eats Grocer.

The competition continues to heat up in the Sacramento Market. Next year should be a very interesting one.