Smart & Final Opens Second SmartCo Foods Store Today in Metro Denver, Colorado

One of the numerous ways Smart & Final is advertising and promoting its SmartCo Foods chain launch in Metropolitan Denver, Colorado is with the mobile billboard seen above. In this photograph taken from a moving car, you can see the SmartCo Foods logo wrapped around two of the Denver Regional Light Rail System's cars. The "SmartCo Foods Train Car" is garnering lots of impressions - both of the general sort and of the kind referred to in the advertising business. [Photo credit: Cass Jupiter for Fresh & Easy Buzz.]

Southern California-based Smart & Final isn't letting any dust gather on the thousands of new grocery aprons it purchased earlier this year for the employees of it's first five SmartCo Foods stores, which are set to open in Metropolitan Denver, Colorado this year.

Today, less than three weeks after the opening of its first SmartCo Foods unit - a 57,000 square-foot combination supermarket, warehouse format and farmers market-style store - at 1442 South Parker Road in Denver, Colorado, Smart & Final opened the doors to its second unit, a 41,000 square-foot market in the Denver suburb of Aurora. The store is located in the Chambers Place Shopping Center in Aurora, at 5141 Chambers Road (at East Florida Avenue).

The other three initial SmartCo Foods stores - Smart & Final plans to open a total of 20-25 of the markets in Metro Denver over the next few years - are set to open before the end of the summer, according to our sources.

The locations of the three other Metro Denver stores are:

>1750 N. Main St., Longmont, Colorado
>16746 E. Smoky Hill Road, Centennial, Colorado
>3615 W. Bowles Ave., Littleton, Colorado

Welcome to the massive in-store farmers market. The produce departments in the SmartCo Foods stores take their inspiration from Smart & Final's Henry's Farmers Market format and stores. The Henry's format devotes considerable in-store square-footage to fresh produce. In addition to the massive bulk displays pictured above, the SmartCo produce departments also merchandise pre-packaged, value-added produce and related items (which you can see in the photograph's background), using multi-shelf refrigerated cases. The fresh produce item selection includes organic and local produce selections, in addition to conventional.

SmartCo Foods takes its inspiration from two formats Smart & Final operates - it's Smart & Final banner non-membership warehouse stores and its Henry's Farmers Market chain, along with including traditional supermarket elements to round out the three-part hybrid format.

Like it does with Henry's Farmers Market chain (based in Southern California), Smart & Final is operating the SmartCo Foods chain in a fairly independent manner. The retailer has set up a SmartCo division in Metro Denver, has an individualized website, and is marketing and promoting SmartCo as an autonomous chain in the market.

See our two previous stories on SmartCo Foods linked below for details:

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

>June 29, 2010: A Pictorial Look Inside Smart & Final's First SmartCo Foods Store in Denver, Colorado

140-year-old, City of Commerce, California-headquartered Smart & Final is aggressively advertising and promoting its SmartCo Foods chain launch in Metropolitan Denver. Its using billboard and transit vehicle advertising (see the photo at the top of the story), a focused public relations campaign and social media, along with conducting a full-court-press in-store special events program, featuring promos like a visit by the Denver Broncos Cheerleaders to the Denver store a couple weeks ago, free grocery bag give-aways, and loss leader item promotions designed to drive shoppers into the new stores.

For example, among the hot item promotions being offered at the two SmartCo Foods stores this week include:

Sweet, fresh white corn at 5 ears for $1.00; chicken leg quarters at 48 cents per pound; ground beef at $1.79 pound; ready-to-eat whole rotisserie chickens at $4.88 each; 24 pack canned Pepsi at $5.99; quart jars of Best Foods Mayo at $2.69; and numerous other items across all categories. You can see the current SmartCo Foods advertising circular here.

As we reported on June 28, Smart & Final plans to open SmartCo stores in Arizona and California before the end of this year.

If the retailer promotes the SmartCo launch in the two states as aggressively as it's doing in Metro Denver - and we're told it will - the openings should generate considerable excitement.

California (Southern and the Central Valley) and Arizona are Tesco Fresh & Easy Neighborhood Market's two, out of a total of three - Metropolitan Las Vegas, Nevada being the third - largest market regions. There are currently 98 Fresh & Easy markets in Southern California and the Central Valley, and 34 units in Metropolitan Phoenix, Arizona. There are 27 Fresh & Easy stores in Metro Las Vegas, Nevada.

Tesco plans to open nine new Fresh & Easy stores in September - seven in Southern California and two in the Fresno region in the Central Valley. [See - Fresh & Easy Neighborhood Market Confirms Our June 25 Report it Will Open Nine New Stores in September 2010]

The opening of SmartCo stores in California and Arizona will add an additional layer to two already hyper-competitive states when it comes to the retailing of food and groceries.

Meanwhile though, Smart & Final is concentrating on opening its other three SmartCo Foods stores in Metro Denver - and adding to the growing competition in the Rocky Mountain state and mile-high Metropolitan market region.

A Pictorial Look Inside Smart & Final's First SmartCo Foods Store in Denver, Colorado

Fresh & Easy Buzz Editor's Note: Yesterday in this story - June 28, 2010: Smart & Final to Open its New Format SmartCo Foods Stores in California and Arizona - we reported that City of Commerce (Southern), California-based Smart & Final plans to bring a version of its new-format SmartCo Foods' food and grocery store to California and Arizona, opening at least one store in each state later this year.

In yesterday's piece we also have a Sidebar-profile of the first SmartCo Foods store, which opened on June 23, at 1442 South Parker Road (at East Florida Avenue) in Denver, Colorado. Four more SmartCo Foods units are set to be opened this year in Metropolitan Denver. Smart & Final says it plans to open 20-25 of its new format stores in the Metro Denver region over the next couple years.

Last week, and again this week, Smart & Final's SmartCo Foods is going all out in promoting its first store in Denver, Colorado. On grand opening day it even told shoppers they could have their cake - and eat it to. Slices of the massive sheet cake above were offered to the first customers in the store on grand opening day, June 23.

New food and grocery retail formats, by existing and new-to-the-market retailers, are a big deal in a big, mature national market like the U.S. - they don't happen all that frequently. And in many ways they're an even bigger deal in the Western U.S., which hasn't seen a new format of note since Tesco's entered California, Nevada and Arizona with its Fresh & Easy Neighborhood Market fresh food and grocery store format and (now 159) stores in November 2007.

Because new formats (and aded competition) matter, and because Fresh & Easy Buzz likes to be a source of "fresh" information for our readers, below is a look in pictures, to go with yesterday's SideBar profile, of the first SmartCo Foods store opened in Denver Colorado last week.

A Pictorial Look at the First SmartCo Foods Store in Denver, Colorado

The produce department in Smart & Final's Denver SmartCo Foods store, opened on June 23, is huge and offers an extensive selection of fresh produce and related items. It borrows the farmers market-style design and bulk produce item merchandising scheme from the company's Henry's Farmer's Market chain (see above) and combines it with supermarket-style upright shelving for packaged fresh produce and related items (see below).

Note the extensive number of packaged fresh produce and related item SKUs (above), in addition to all mounds of bulk produce (top photo).

The SmartCo Foods format, and first store in Denver, includes a large bulk foods department. The department is similar to those of grocers Western U.S. grocery chains WinCo Foods, headquartered in Idaho, and Sacramento, California-based Raley's.

Grand Opening Day (and Beyond) Events-Promotions

Skittles the Clown, a local favorite, keeps the little customers happy at SmartCo Foods' grand opening on June 23.

Top of two photos: customers line up at dawn, waiting for the store's doors to open at 6 a.m on grand opening day, June 23. SmartCo Foods gave the first 300 shoppers free grocery bags. Next: The patient customers head into the store at 6 a.m, when SmartCo Foods opens the doors of its first store in Metropolitan Denver, Colorado.

On grand opening day, June 23, SmartCo Foods donated $10,000 to two Denver-area non-profit groups, The Denver Scholarship Foundation and Denver Kids. Above, Myles Mendoza (right) accepts a $5,000 donation for the Denver Scholarship Foundation.

Glenna Norvelle (above) of Denver Kids, Inc. accepts a $5,000 donation from SmartCo Foods.

The popular Denver Broncos cheerleaders were on hand at the Denver SmartCo Foods store on June 26, signing autographs (above) and posing for photographs (below) for shoppers, along with creating a little heat among customers of all ages, shapes and sizes (above).

Smart & Final to Open its New Format SmartCo Foods Stores in California and Arizona

City of Commerce, (Southern) California-based Smart & Final opened the first of its new format SmartCo Foods food and grocery stores in Denver, Colorado on Wednesday, June 23 -- and on grand opening day of the 57,000-square-foot store, located at 1442 South Parker Road (at East Florida Avenue) in Denver, Smart & Final's president, Dave Hirtz, made additional news, telling members of the press and others that Smart & Final plans to open SmartCo Foods stores in California and Arizona later this year.

Although he wasn't specific, the first Arizona SmartCo Foods unit is set to be in the Phoenix Metropolitan region, according to our information.

The first California store will likely be in Southern California, where Smart & Final is headquartered, although Smart & Final also has plans to open SmartCo Foods stores in Northern California as well.

Smart & Final, which was founded in 1871 as a cash & carry grocer in downtown Los Angeles, operates its 247 non-membership Smart & Final banner and Smart Foodservice cash & carry stores throughout California, as well as in Arizona, Oregon, Washington, Nevada, Idaho and northern Mexico.

The company also owns the Henry's Farmers Market chain, which it acquired from Whole Foods Market, Inc. in 2008. There are currently 35 Henry’s Farmers Market and Sun Harvest Market (in Texas only) banner stores open and operating in Southern California and Texas.

The farmers market-style Henry's and Sun Harvest stores emphasize natural and organic products and fresh produce but also carry some conventional grocery products, as well as having fresh meat, bakery, deli-prepared-foods, bulk foods and non-foods departments.

Smart & Final is opening its first Henry's Farmers Market store in Northern California, in El Grove near Sacramento, in August. The company is growing the Henry's chain rapidly in terms of opening new stores. [June 5, 2010: Henry's Farmers Market Opening its First Northern California Store in August With A Big 'Local' Push]

Additionally, Smart & Final operates 33 small-format grocery stores under the Smart & Final Extra banner in California and northern Nevada. The Extra stores, unlike the Smart & Final non-membership stores which carry mostly club pack size items, offer about 5,000 SKUs of basic-pack food and grocery items, along with an assortment of club pack grocery products. The Extra stores have fresh produce and meat departments, delis, an in-store bakery and a selection of non-foods.

SmartCo Foods makes the fourth distinct format for Smart & Final, and in fact is a hybrid of its non-membership store format, Henry's and Smart & Final Extra. This was evident at the grand opening of the first SmartCo Foods store in Denver on Wednesday.

The 57,000 square-foot Denver, Colorado SmartCo Foods store, which is in a vacant Albertsons supermarket, is one part supermarket, one part warehouse club, and one-part farmer's market (the produce department primarily).

[Read the Sidebar at the end of this story.]

Smart & Final's planned entry into Southern California and Arizona with SmartCo Foods later this year will add yet another layer of competition into two of the most hyper-competitive markets in the U.S. Smart & Final operates its non-membership warehouse stores in Southern California and Arizona, and its Henry's and Smart & Final Extra stores in Southern California, but the new SmartCo Foods format is significant as a new entry in the markets because its hybrid supermarket/warehouse store/farmers market style format, in a good-sized retail box, is the equivalent of being a new retailer, since it doesn't mimic Smart & Final's other formats.

Smart & Final's push into Southern California and Arizona comes only shortly after we reported that Idaho-based WinCo Foods is planning a major push into Arizona, beginning in Metropolitan Phoenix. [See - April 27, 2010: WinCo Foods' Entry Will Put the 'Ultra' in the Already 'Hyper-Competitive' Metro Phoenix, Arizona Market and May 3, 2010: Winco Foods is 'Moving Fast-Forward' With Metro Phoenix, Arizona Market Entry]

WinCo also announced this month that it plans to build a huge 1 million-plus square-foot distribution center in Southern California as part of its major growth plans in the region.

Employee-owned WinCo Foods launched a major Western USA growth strategy in 2008, as we reported on and wrote about here: December 29, 2008: Competor News: Winco Foods to Expand in California and Nevada in 2009; Put Aggressive Focus on Central Valley, Northern California and Northern Nevada. Read more here.]

For Tesco's Fresh & Easy Neighborhood Market, which has the majority of its current 159 stores in Southern California and Metro Phoenix, Arizona, the addition of Smart & Final's new SmartCo Foods stores in the two regions - along with WinCo Foods' entry into Arizona and planned store growth in Southern California - means yet another competitor to deal with as Fresh & Easy works towards stemming its loses, which were $253 million in the fiscal year ended on February 27, 2010. Tesco estimates a similar loss for fiscal year 2010/11, which end in early 2011.

It also means added competition to all of the other grocers - and in the respective markets overall -particularly those in the value-based and discount niches, in Southern California and Arizona, the degree of which will depend on how many SmartCo Foods stores - and how fast it opens them - Smart & Final plans to open in the two regions.

WinCo Foods plans to open numerous new stores in Southern California and Arizona over the next five years.

Based on the fact Smart & Final is opening five SmartCo Foods stores in Metro Denver between this month and December (five month period), and plans to have 20-25 over the next couple years, it's likely the retailer's plans for Southern California and Metro Phoenix are similarly ambitious. It takes numerous stores in a region in order to achieve any efficiencies and critical mass, after all.

Sidebar: A Look at the First SmartCo Foods Store in Denver, Colorado

City of Commerce, (Southern) California-based Smart & Final opened its first new format SmartCo Foods store (pictured above) on June 23, at 1442 South Parker Road (at East Florida Avenue) in Denver, Colorado. The store is the first of five SmartCo Foods stores Smart & Final plans to open this year in Metropolitan Denver. The retailer says it plans to open between 20-25 SmartCo Foods stores in Colorado over the next couple years.

SmartCo Foods is a brand new format for Smart & Final, although more correctly it's a hybrid of the retailers current three formats - its small-format Smart & Final non-membership warehouse stores, it's natual and organic foods-focused Henry's Farmers Market, and its Smart & Final Extra smaller-format supermarkets.

The 57,000 square-foot Denver SmartCo Foods store, which is in a vacant Albertsons supermarket is one part supermarket (Smart & Final Extra), one part warehouse club (Smart & Final club format), and one-part farmer's market (Henry's).

The format and store offers basically everything a regular supermarket does in terms of departments and products, although the SKU count is a bit less (about 30,000 total SKUs) than traditional supermarkets operated by say Safeway Stores or Kroger offer. But in addition to regular pack groceries, SmartCo also features a club-pack department (pictured above), which is nearly as big as the 15,000 -to- 20,000 square-foot flagship Smart & final banner non-membership stores the retailer operates.

Additionally, borrowing from the Henry's Farmers Market format, the produce department in SmartCo Foods is expansive, and is designed to look like a version of a farmers market. The department offers both conventional and organic fresh produce items. Another leaf SmartCo Foods takes from Henry's is that the store features a bulk foods department. SmartCo also offers nearly the complete selection of the retailer's Sun Harvest private natural and organic brand, which includes products across all dry grocery and perishable categories.

The supermarket-side of SmartCo is influenced in part by Smart & Final's Extra format, as well as by the traditional American supermarket fromat in general.

Here's a look at what the store offers in terms of its departments and features:

The produce department - offers a selection of fresh fruits and vegetables, including both conventional and organic items, with a focus on value pricing. In an effort to support local Colorado growers, SmartCo Foods says it's making an effort to carry locally-grown produce, which is something its Henry's Farmers Market chain focuses on.

The meat department - is staffed by trained meat cutters. It features Cattleman’s Finest (a private brand Smart & Final uses) beef products as well as a broad selection of high-quality pork and poultry products, and fresh and frozen seafood. The meat department is self-service style. Most of the fresh meat is packaged in the department.

The in-store deli - offers ready-to-eat prepared sandwiches and other grab-and-go items, a variety of fresh salads, entress and side dishes, along with a large assortment of deli meats and cheeses.The in-store bakery - features a full-selection of breads, muffins, pastries, cakes and cookies baked fresh in-store daily.

Bulk foods - features bulk bins filled with a variety of grains, healthy snacks and other unpackaged items.

Health & Beauty - offers a full selection of conventional health and beauty products as well as Smart & Final's Sun Harvest brand vitamins, supplements and beauty care products made with natural ingredients.

Foodservice & Business - carries a large assortment of practical products, which include: catering supplies, paper and party products, straws, cutlery, portion cups, hot cups, cold cups, clear cups, serving trays, and commercial-strength cleaning supplies. The department is positioned to small business foodservice operators as well as consumers.

Warehouse Savings - features club-pack items offered primarily on an in-and-out basis, value-priced. The products include: paper goods, beverages, packaged foods and groceries and more.

At 57,000 square-feet (the other four stores set to open this year range from about 45,00o to the same size) SmartCo is Smart & Final's largest store format to date. The Smart & Final non-membership stores and range from about 15,000 -to- 20,000 square-feet, the Extra stores aren't much larger, and the Henry's and Sun Harvest stores are in the 20,000 -to- 35,000 square-foot range.

The other four Colorado SmartCo Foods stores soon to open are located at:

>5141 Chambers Road in Denver

>3615 West Bowles Ave. in Littleton

>16746 E. Smoky Hill Road in Centennial

>1750 North Main St. in Longmont

The SmartCo Foods website is here. Check out the opening week ad specials, like whole chickens for 59 cents a pound, $1.49 per-gallon milk , eggs for 79 cents a dozen and more here.

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

Phoenix, Arizona Metro Region Market Report

Gilbert, Arizona could become Tesco Fresh & Easy Neighborhood Market ground zero.

The grocery chain plans to open its second small-format, convenience-oriented Fresh & Easy grocery and fresh foods market in the Phoenix Metropolitan region suburb of Gilbert right after the new year, on January 7, Fresh & Easy Buzz has learned. That store, the second Fresh & Easy in the city, is at Greenfield and Warner roads in the city of about 210,000 residents.

Two Fresh & Easy markets is far from a charm for Gilbert though. Tesco plans to open a third store in the city in the fall of 2009. That Fresh & Easy market will be at Gantzel and Ocotillo roads in the city's Queen Creek neighborhood.

Wal-Mart has one of its small-format, convenience-oriented Marketside combination grocery and fresh foods markets in Gilbert as well. The Marketside store opened in October.

Both Tesco's Fresh & Easy and Wal-Mart's Marketside stores are positioned as neighborhood grocery and fresh foods markets. Fresh & Easy markets average 10,000 -to- 13,000 square feet. The Marketside stores are 15,000 -to- 20,000 square feet.

Both retailers small-format stores sell basic groceries, fresh foods like meats, produce, dairy/deli and frozen, as well as a selection of non-foods.

Both Fresh & Easy and Marketside put an emphasis on selling ready-to-eat and ready-to-eat fresh, prepared foods. The difference between the two operations is that Fresh & Easy's prepared foods are made at a central kitchen in Southern California then shipped to the Arizona stores. Wal-Mart's Marketside stores have kitchens right in-store where the fresh foods are prepared. The stores also have a small eating area inside, along with tables outside, where people can eat if they choose.

In the basic grocery segment, Wal-Mart's Marketside stores offer mostly national and regional manufacturer's brand food and grocery items. About 85% of the stores grocery product mix is manufacturer brands and about 15% store brands. Tesco's Fresh & Easy is the opposite -- about 60-65% of the grocery items are store brands and about 30-35% are manufacturer's brands.

Fresh & Easy stores feature mostly pre-packaged fresh produce. On the other hand Wal-Mart's Marketside offers mostly bulk fresh produce with some branded, pre-packaged like salad mixes and other value-added items.

Wal-Mart has no plans to open a second store in Gilbert, Arizona in the near future.

The retailer has Marketside stores so far in the nearby Phoenix Metro region cities of Mesa and Chandler, and in Tempe, in addition to the store in Gilbert.

A new Marketside store is set to open soon in Peoria, Arizona, which isn't far from Gilbert.

That store will likely be Wal-Mart's last in Arizona for the immediate term. The retailer plans to open 10 Marketside stores -- about five in Arizona and five elsewhere (at least two of those five thus far being in the San Diego region in Southern California, both set to open early next year) -- and then evaluate the format and the 10 stores performance before going forward with additional Marketside grocery and fresh foods markets.

But for Tesco's Fresh & Easy, Gilbert looks like gold, as it will soon have three of the small-format, convenience-oriented combination basic grocery and fresh foods stores in the city.

Phoenix, Arizona Metro Market Region Report: 'The Big Surprise' -- Surprise, Arizona Ground Zero For New Food and Grocery Store Openings

Surprise, Surprise......Surprise, Arizona that is.

Welcome to the city of Surprise, Arizona, in the Phoenix Metropolitan region's west valley area.
What's so interesting or surprising about Surprise, other than its name, you ask?

Well, the city just happens to be ground zero for new food, grocery and club stores this year and next. That's all. There's a whole lot of competition brewing in Surprise.

On Friday, the residents of Surprise, Arizona ,which has about 100,000 people and is located 45 minutes from downtown Phoenix, finally got a grocery retailing surprise they had been hoping for since 2007. That new, much desired, grocer is Trader Joe's, which the residents of Surprise voted as the city's "most-wanted" new retailer of any format in a survey conducted by the city's economic development department in 2007.

The city's economic development department conducted the survey to gauge residents most-desired retailers. Trader Joe's topped the list overwhelmingly at number one.

And surprise, just one year later, the residents of Surprise have had their retail wish fulfilled.

On Friday, November 7 a new Trader Joe's market opened in Surprise, Arizona.

The specialty grocer, known for selling low-cost natural and specialty products and fresh foods, closed its Sun City, Arizona store at 13602 N. 99th Avenue and moved 7 miles to 14095 W. Grand Ave. in the fast-growing city of Surprise.

Retailer Jo-Ann Fabrics and Crafts and club store chain Costco took second and third on the Surprise Economic Development Department's 2007 survey, the results of which city officials printed out on postcards and distributed at the International Council of Shopping Centers conference in September 2007 as a way to market Surprise to retailers, a spokesperson for the city's department explained to Fresh & Easy Buzz recently.

Trader Joe's was one of the retailers given a postcard, showing them at the top of Surprise residents' choices, at the conference. A mere two months later, Trader Joe's officials announced they would open in the Surprise Valley Station plaza shopping center near Parkview Place and Grand Avenue in the city, and close the Sun City store.

But just because they didn't score at the top of the Surprise residents list in the 2007 like Trader Joe's and Costco did, that isn't stopping a host of other food and grocery retailers from attempting to surprise the residents of Surprise, Arizona by opening new stores in the city.

For example, Tesco will open its first Fresh & Easy combination grocery and fresh foods market in El Mirage, next door to Surprise.

And mega-retailer Wal-Mart, which also likes to surprise, opened one of its 40,000 -to- 45,000 square foot Neighborhood Market supermarkets at Reems and Greenway roads in Surprise, in April of this year.

It therefore shouldn't be a surprise then if when the Fresh & Easy Neighborhood Market opens early next year, the residents of the Surprise area will see a battle of the "neighborhood markets," Tesco's and Wal-Mart's respective versions, perhaps taking the town by surprise.

But Wal-Mart isn't just going "neighborhood" in surprise. The retailer also is building one of the Wal-Mart Neighborhood Market's big brothers, a Sam's Club club store, in Surprise. The Sam's Club big box store, which will open next year, is being built at Bell Road and Loop 303 in Surprise.

That the Sam's Club is coming to town was actually a surprise to many of the residents of Surprise, Arizona. As you recall, at the top of their survey wish list, right after Trader Joe's, was their desire to have a Costco club store come to Surprise. And since they got their Trader Joe's so fast, just a year after the survey, many residents just naturally thought a Costco would come next -- and soon.

But, a Sam's Club is pretty close to a Costco. Same format, same size, same merchandise mix. Both sell lots of fresh foods and grocery products. Some differences though, but not all that many in the bigger scheme of things retail.

But guess what? Word is Costco is looking into Surprise. Perhaps the residents won't be unpleasantly surprised after all. They just might end up getting that Costco, retailer wish list item number two, right after Trader Joe's.

Meanwhile, residents of Sun City, which is primarily a retirement town with lots of high income retirees, are mourning the loss of their beloved Trader Joe's, which was the very first Trader Joe's store to open outside of California where the chain was founded and still is headquartered.

We're told groups of Sun City retirees already are putting together once a week, regular car pools so they can travel the 14 mile round trip from Sun City to Surprise so they can continue to stock up on specialty and natural food and grocery items.

This won't come as a surprise to Trader Joe's. The knew that by closing the older store in Sun City and building a new, larger and more modern Trader Joe's in fast-growing Surprise, they would gain an entire new core of shoppers, the Surprise residents, while still maintaining most of their existing customer base in Sun City, since it's only seven miles away.

Shoppers regularly drive 30 -to- 60 miles round trip throughout U.S. metropolitan areas to shop at Trader Joe's stores. They've become a regional food shopping destination far beyond a local one.

The Surprise Trader Joe's will also draw shoppers from the nearby cities of El Mirage, Peoria and others close by in the metropolitan region.

Are only question is, with all of these new food and grocery stores open and opening in Surprise, along with the city's existing supermarkets, will they all be able to make it? (Well, we know Trader Joe's will based on that survey.) That's a surprise none of these retailers want to discover.

In the case of Tesco's Fresh & Easy, it appears to us the grocer needs to do plenty of pre-opening marketing and PR in Surprise. After all, the vast majority of the city's residents, as evidenced by their choices in the 2007 survey, are Trader Joe's fans and lovers.

Then there's Wal-Mart's Neighborhood market, which is already open. Then the Sam's Club coming to town. Lots of competition.

Wal-Mart is popular throughout Arizona. It operates over 100 Supercenters, Sam's Club's, Wal-Mart Neighborhood Markets and its newest format, Marketside, the small-format grocery and fresh foods stores similar to Tesco's Fresh & Easy, in the state.

Wal-Mart is becoming the dominant multi-format food and grocery retailer in the Phoenix region -- and in the entire state of Arizona. That shouldn't come as a surprise though since Arizona, and particularly the Phoenix Metropolitan market, has been one of the mega-retailer's top-five strategic growth markets in the U.S. for the last five years -- and continues to be for the next few years.

Wal-Mart has numerous stores in all of the formats mentioned above set to open next year. The retailer also has numerous stores in the pipeline set to open in 2010.

Additionally, Wal-Mart currently has four Marketside stores in the Phoenix Metro region cities of Gilbert, Mesa, Chandler and Tempe. A fifth Marketside is being built in Peoria, Arizona at present. Peoria is just a few miles from Surprise. But if you've been reading closely, that probably doesn't surprise you. Critical mass all around, for Wal-Mart as well as Fresh & Easy.

But Tesco is building a strong presence in the Phoenix Metro region as well. With 26 Fresh & Easy stores to date in the region -- and more coming -- it's beginning to build significant retail critical mass.

But -- can the upcoming Fresh & Easy store win the love of the residents of Surprise (and El Mirage), Arizona, like Trader Joe's has? That is the question for Fresh & Easy...and the others who didn't make the top of the survey list but want to offer residents of the city a food and grocery retailing surprise anyway.

Metro Phoenix Arizona Market Report: Tesco Opens Store Number Twenty in Phoenix Market; We Use That Milestone to Offer A Market Overview and Analysis

Phoenix, Arizona, the center of the Phoenix Metropolitan region and the Arizona city where Tesco opened its 20th Fresh & Easy grocery market this morning. The region has become arguably the most competitive food and grocery retailing market in the United States.

Tesco opened its 20th small-format Fresh & Easy Neighborhood Market grocery store in Arizona's Phoenix Metropolitan region at 635 West Indian School Road in Phoenix this morning. The grocery chain, which operates convenience-oriented combination basic grocery and fresh foods markets averaging 10,000 -to- 13,000 square feet, plans to have about 37 of the stores opened in the Phoenix Metro area by the end of this year.

As Fresh & Easy Buzz has written often, Arizona, and especially the Phoenix-West and East Valley market region, is arguably the most competitive food and grocery retailing market in the U.S.

Market share leaders include Safeway Stores, Inc., the third-largest grocery chain in the U.S., and Arizona-based Bashas, which operates over 160 supermarkets in Arizona.

Additionally, Arizona, and particularly the Phoenix Metro region market, is one of Wal-Mart, Inc.'s key growth markets in the U.S. The world's largest retailer and now the number one seller of food and groceries in America, has over 70 of its mega-Supercenters in the state, with numerous more either in the pipeline set to open soon, under construction or on the drawing board.

Wal-Mart also operates about 20 of its Neighborhood Market supermarkets in Arizona, most in the Phoenix Metro area. Those stores are about 45,000 square foot supermarkets which feature a complete selection of fresh foods, grocery products and non-foods items. Wal-Mart plans to open a number of new Neighborhood Market supermarkets in Arizona this year and in 2009.

Additionally, this fall Wal-Mart plans to open its first four small-format (about 15,000 square foot) Marketside combination fresh foods and grocery stores in Arizona. All four of the initial Marketside stores will be in the Phoenix Metropolitan region, each fairly close to an existing Tesco Fresh & Easy Neighborhood Market grocery store.

In addition to Safeway, Bashas, Wal-Mart and Tesco's now 20 Fresh & Easy small-format grocery stores, Fry's supermarkets also is a major player in the Arizona market, as is Albertsons, which is owned by SuperValu, Inc., the second largest U.S. supermarket chain in the U.S., after number one Kroger Co.

Not enough competition for you?

Toss in fighting tiger small-format natural and specialty foods retailers Sunflower Farmers Market and Sprouts Farmers Market, which in addition to selling lots of fresh produce and meats, along with natural and organic food and grocery products at discount prices, also offer extensive fresh, prepared foods selections in their respective stores, which average 15,000 -to- 30,00 square feet. Both Sunflower and Sprouts have about 20 stores each in Arizona, and have targeted the state for rapid new store expansion.

Still not enough competition?

Let's not forget Whole Foods Market, Inc., which has a number of stores in Arizona and is planning to open more in the next couple years.

And when it comes to small-format category killers and competitors, one can't leave out Trader Joe's, which has a major presence in Arizona with about 20 stores, with more on the way.

Then there is Costco Wholesale, which also has a significant presence in Arizona and is growing its store count in the state. Costco, which sells basic groceries as well as upscale specialty, natural and organic foods in its huge membership-required stores, along with quality USDA Choice grade meats at discount prices, takes business away from every type of format food retailer, even Wal-Mart's Supercenters.

Arizona, which has a overall Hispanic or Latino population of about 35 -to-40%, as well as being located right on the Mexican border, also has numerous Hispanic format supermarkets which offer an abundance of fresh foods and groceries specifically catering to Latino consumers, as well as offering many traditional American grocery brands and products.

These ethnic Hispanic supermarkets are category killers for traditional food retailers just as Costco is. With 35 -to- 40% of the food shopping public in Arizona of Hispanic ethnicity, for all intents and purposes these ethnic supermarkets can really be viewed as mainstream grocers in the state, since they appeal to such a high percentage of Arizona consumers.

It's against this super-competitive climate that Tesco is currently making Arizona and specifically the Phoenix Metropolitan region market one of its three target markets for its small-format combination basic grocery and fresh foods Fresh & Easy grocery stores, which operate on an everyday low-price strategy, as well as offering regular specials.

It's this combination--low everyday prices for basic groceries and fresh foods, combined with convenient shopping--that Tesco hopes will set its Fresh & Easy stores apart in the Arizona market.

However, the retailer is far from alone in that hope. Wal-Mart's Neighborhood Market stores, its soon to come Marketside markets, Trader Joe's, Sunflower Farmers Market and Sprouts Farmers Market all operate on a similar strategy, although there are significant qualitative format, merchandising and positioning differences among all these retailers.

However, the point is they all are going for a share of the Arizona consumers stomach, and doing so with various versions of convenience-oriented small-format stores. There's only so much share-of-stomach to go around.

And size doesn't matter when it comes to gaining share-of-stomach. In fact, the jury is still out on whether Arizona customers will shop small-format grocery stores like Fresh & Easy on a regular, primary basis, or if they will merely use them as fill-in or secondary and tertiary food and grocery shopping venues.

Wal-Mart is betting that is the case. The mega-retailer has designed and will be positioning when they open in the fall its Marketside stores as fill-in or secondary and tertiary shopping markets. It's using a three-format food retailing strategy in Arizona with its average 180,000 square foot combination grocery and general merchandise Supercenters, it's 45,000 square foot Neighborhood Market stand-alone supermarkets, and its more upscale 15,000 -to- 20,000 square foot Marketside combination fresh foods and grocery stores.

Unlike Tesco's Fresh & Easy, stores which makes its prepared foods items at a central kitchen in Southern California and then ships them to the Arizona stores, Wal-mart plans to make all its fresh, prepared foods right in-store.

The retailer plans to argue in its marketing that this fact makes its prepared foods fresher than the competition. And in this case we know who the competition will be--Tesco's Fresh & Easy. Of course, this point of differentiation only has the potential of being successful for Wal-Mart's Marketside if its in-store fresh, prepared foods are "fresher," better tasting and healthier than Fresh & Easy's are. If they aren't perceived a such by consumers, it could backfire if Wal-Mart touts its in-store fresh, prepared foods "advantage."

Conversely to Wal-Mart, Tesco has positioned its small-format Fresh & Easy grocery stores as primary, neighborhood shopping venues, stating that its goal is to appeal to all shoppers and to have the stores shopped as primary food and grocery shopping venues.

Trader Joe's on the other hand doesn't expect or even position its specialty grocery stores to serve as most consumers' primary shopping venues. However, despite that positioning Trader Joe's sales in its 10,000 -to- 15,000 square foot stores exceeds the average sales per-square foot of most primary supermarkets in the U.S. In fact, with only about 300 stores currently, Trader Joe's is rated as the 25th largest supermarket chain by sales by the supermarket industry trade publication Supermarket News.

The fill-in, secondary and tertiary food and grocery shopping venue strategy also is the focus of Safeway Stores, Inc. with its new "The Market" small-format grocery stores.

This format, which so far is seen in one store called "the market by Vons" which opened in Long Beach, California in May, is an upscale, combination basic grocery, fresh and specialty foods store of about 15,000 square feet. The "The Market" format features fresh produce and meats, fresh, prepared foods, a selection of perishables and basic groceries, along with such features as an in-store hearth used to bake fresh breads and an in-store cafe called "Signature Cafe" which sells the fresh, prepared foods items.

As Fresh & Easy Buzz has reported, Safeway is currently negotiating to put its second and third "The Market" format stores in downtown San Jose, California and downtown Los Angeles.

The stores are named based on the name of the supermarket banner Safeway operates in a given market. For example, the chain uses the Vons banner in Southern California. Therefore the small-format stores are called "the market by Vons" in that market. Safeway also operates Vons supermarkets in Nevada.)

In Arizona, Northern California, Colorado, Oregon, Washington state and in other regions in the U.S., Safeway uses the Safeway banner. Therefore, if Safeway opens any of its "The market" small-format stores in Arizona, which is likely, those stores will go by the name "the market by Safeway," as will the San Jose store in Northern California.

Tesco is betting big on the Arizona market though, as it is in Southern California and the Las Vegas, Nevada Metro region.

Having 37 or so Fresh & Easy stores in the Metro Phoenix market by the end of the year should give Tesco, as well as its competitors, a pretty good idea as to consumer adoption rate of the notion of using the small-format, convenience-oriented Fresh & Easy stores as primary and to a lessor extent secondary, shopping venues.

Thus far, Arizona shoppers have not made the majority of the 20 Fresh & Easy stores their primary shopping venues based on our extensive observation and analysis. Rather, they are secondary and tertiary stores currently in the main.

However, the first Arizona Fresh & Easy grocery store hasn't even been open a year yet, and many of the 20 stores has been open for just a few months. (Store number 20 just opened today.) Therefore, it is far to early to tell if shoppers will adopt the small-format stores as primary and secondary shopping venues. However, by the end of the year, a good indication of that direction should be much clearer.

Further, with Wal-Mart opening the first four Marketside stores and more of its Neighborhood Markets, combined with Trader Joe's, Sunflower Farmers Market and Sprouts Farmers Market all opening different but also similar in some ways small-format stores, the end of the year also will bring a better assessment of the small-format food retailing climate in Arizona.

Lastly it's important to note in a food and grocery retailing market as competitive as Arizona's is, it can become hard to even determine what is and what isn't a primary shopping chain.

In fact, one could argue all of the food and grocery retailers in the super-competitive Arizona could potentially become secondary shopping venues since in such a market it could become the consumer norm, if it hasn't already, to shop at least two or three different chains regularly. Of course, the death in such a market then becomes being one of the primarily tertiary shopping chains if a retailers business model is built on being a primary and to a lessor extent secondary--but not tertiary--grocery retailer.

Sitting above all these retailers (and consumers) is a very poor U.S. economy which is being felt strongly in Arizona, California and other Western USA states that are experiencing higher than national average unemployment, gas prices and home foreclosures.

This poor U.S. economy is favoring food retailers like Wal-Mart and Costco that focus on low prices and value. This is evidenced by both retailer's recent sales and profit reports.

The current economy, especially in Arizona, Nevada and California, also should be favoring Tesco's Fresh & Easy, which offers retail prices comparable to Wal-Mart and Costco--and other discounters--on its fresh & easy store brand of groceries and fresh foods.

Based on the favorable prices on the fresh & easy brand, we aren't seeing the sales in the Arizona stores that we think should be happening. Of course, the fresh & easy brand, like the stores, are new and therefore have zero brand equity compared to Wal-Mart's, Costco's and Safeway's store value brands for example.

That could change with time. However, as we've suggested numerous times in Fresh & Easy Buzz, it's our analysis that in order for that sales situation to change in the retailer's desired more positive direction, Tesco needs to better position both the Fresh & Easy stores in Arizona (and in Southern California and Nevada for that matter) and the fresh & easy product brand better. It also needs to better communicate that brand message once it finds a better position for both the stores and the brand.

Tesco has an excellent marketing reputation in the United Kingdom and in some of the other countries where it operates. Therefore its potential to get it right with Fresh & Easy is there.

However, in our analysis, although we are seeing some progress, the retailer has yet to find a tight, solid marketing position for Fresh & Easy, and then develop a multi-media in-store and external marketing and merchandising program to communicate a message. Doing so by the start of next year seems to us to be crucial to the overall success of the retailer.

Don't bet against Tesco successfully doing that. However, time matters even to the world's third-largest retailer when it comes to losing money. Generally speaking, the start of year two marks a seminal point in terms of any start-up moving in to a less "start-up" phase if you will. Next year will mark that phase for Tesco with its Fresh & Easy Neigborhood Market USA.

The end of this year and the beginning of 2009 also will mark a time of having even more Arizona Fresh & Easy stores for Tesco. Of course, it also will mark a point in time in which all the retailers mentioned earlier will to one extent or another also have more stores open than they do now, particularly Wal-Mart, which is opening numerous Supercenters, Neighborhood Market supermarkets, and of course the new small-format Marketside food and grocery stores, throughout the rest of this year.

Wal-Mart is the fastest growing food and grocery retailer in terms of overall sales and new store square footage in Arizona. Every chain in the state sees it as the biggest threat to its business. In that regard, Tesco's Fresh & Easy is far from alone.

Phoenix, Arizona Metro Market Report: More Competition in an Already Hot Market as Pro's Ranch Markets Plans Two New Stores in Phoenix Metro Market

Studies conducted by U.S. organizations such as the Mexican-American Grocers' Association, Food Marketing Institute, the UCLA School of Business and others show fresh produce to be one of the top reasons Hispanic consumers give for choosing a supermarket. Variety, abundance (bulk rather than pre-packaged) and quality are the three key attributes most given by Latino consumers in these studies when it comes to the fresh produce category. Price is important but not at the top of the list. Value, top quality and super-fresh produce at a reasonable price, is what's most important. This is evidenced by the fact Hispanic consumers spend a higher proportion of their incomes on food than all other ethnic groups in the U.S. Above is Pro's Ranch markets famous "Ranchie the Bull" mascot in a store produce department with a produce clerk.

Southern, California-based multi store independent grocer Pro's Ranch Markets plans to open two new stores in the Phoenix, Arizona Metropolitan region, Fresh & Easy Buzz has learned.

Pro's Ranch Markets, which is owned by Southern California grocery retailing veteran Mike Provenzano Sr. and his sons Michael, Steve, Rick and Jeff, currently has four of its large, discount supermarkets, which put an emphasis on Hispanic food retailing, in the Phoenix region. The two new stores will bring that total to six of the supermarkets in the market, which average 55,000 -to- about 80,000 square feet in size.

The growing independent food retailer today is opening its first supermarket, a 79,000 square foot discount powerhouse with a special emphasis on Latino products along with basic supermarket offerings, in Albuquerque, New Mexico, its first location in that state.

The New Mexico store is the independent retailer's tenth location. along with the just-opened New Mexico store and the four units in the Phoenix, Arizona region, there are four Pro's Ranch Markets in the Central Valley, California cities of Bakersfield (2), Delano and Arvin, and a store in El Paso, Texas.

When opened, the two new Phoenix area stores will bring the growing multi-store independent grocer's total store count to 12.

Mike Provenzano Sr. says the grocer plans to open additional stores in Arizona and New Mexico, as well as in California, and perhaps in other western states.

The Pro's Ranch Markets stores put a major emphasis on merchandising produce and fresh meats, with huge departments for each category, and selling the items as cheap as possible.

The stores have numerous service departments; particularly a number with a Hispanic merchandising flair. These include: an in-store bakeries which features huge tortilla machines that churn out homemade tortillas throughout the day and evening, as well as offering in-store baked Latino breads and pastries; in store seafood on fresh ice departments which include a seafood taco bar; fresh salsa bars; both self-service and old-fashion service meat departments; in-store fresh, prepared foods departments; and homemade specialties like in-store made chorizo and other Latino favorites.

The stores' produce departments carry all basic fresh fruits and vegetables, along with scores of Hispanic specialty produce items, nearly all merchandised in bulk and piled high farmers' market style.

The markets carry a complete selection of tradition foods, groceries and nonfoods as well. Although the supermarkets are geared from a merchandising aspect to Hispanic or Latino shoppers, their overall positioning also encourages shoppers of all ethnic backgrounds to shop the stores for groceries and fresh foods at discount prices.

About 40% of Arizona's population is comprises of Hispanics or Latino's, which makes "Hispanic-oriented supermarkets" actual mainstream rather than specialty since nearly half of the state's entire population is of that ethnicity.

As a result of this fact, food retailers who focus their merchandising and positioning to Hispanic consumers in Arizona are equal competition for general food and grocery retailers like Safeway, Bashas, Frys, Wal-Mart, Tesco's Fresh & Easy and the other food retailing chains and independents in the market.

Tesco currently has about 20 of its 61 small-format Fresh & Easy Neighborhood Market combination basic grocery and fresh foods markets in the Phoenix Metropolitan/East and West Valley regions of Arizona, with many more new stores set to open in the market in the next 90 days.

As we write about regularly in Fresh & Easy Buzz, Arizona, and especially the Phoenix Metropolitan market, is arguably the most competitive food and grocery retailing market in the U.S. at present. That market keeps getting even more competitive as food retailers large and small continue to add new stores in the area, heating up even further what alrady is a white hot competitive food and grocery retailing market.