Pro's Ranch Markets Opens Its Seventh Latino Format Supermarket in Metro Phoenix, Arizona

Metro Phoenix, Arizona Market Region

Family-owned grocery chain Pro's Ranch Markets opened its seventh supermarket (pictured at top) in metropolitan Phoenix, Arizona today. The new store, which like the chain's other Pro's Ranch Markets stores is a Latino or Hispanic format supermarket, is at 3145 West Glendale Avenue (35th & Glendale Avenue) in (western) Phoenix.

The new unit opened today makes nine the total number of Latino consumer-focused supermarkets operated by Pro's Ranch Markets.

Five of the seven Arizona Pro Ranch Markets stores are in Phoenix. Two of the units are located in the nearby cities of Mesa and Glendale.

There are two additional Pro's Ranch Markets supermarkets own by the grocer - one in Albuquerque, New Mexico and another unit in El Paso, Texas.

Pro's Ranch Markets is owned by veteran Southern California grocer Mike Provenzano Sr. and his four sons.

Provenzano, who's nickname is "Pro" and who's corporate entity is called "Pro & Sons," opened his first Latino format Pro's Ranch Markets supermarket in Phoenix in 2002. The grocer has opened a new store in the market nearly each year since then.

Pro's Ranch Markets is headquartered in the Southern California city of Ontario, even though the grocer no longer operates stores in California.

Provenzano and his sons originally operated stores in Southern California and in the Bakersfield area in the Central Valley, along with in Arizona, New Mexico and Texas. However, the company recently sold off the last of its California stores, two in Bakersfield, to Southern California-based Vallarta Supermarkets, which like Pro's Ranch Markets is a family owned, multi-store grocery retailer.

Provenzano Sr. says the chain's future focus will be on Arizona, New Mexico and Texas - and perhaps one or two other western states where Pro's Ranch Markets doesn't yet have stores. However, the grocer says it has no plans to open stores again in California, where it's corporate headquarters remains. Pro's Ranch also has a regional office in Phoenix, Arizona, where it coordinates operations for the now seven stores in the metro area.

In addition to operating the nine Hispanic format Pro's Ranch supermarkets, the Provenzano's have diversified the company into other types of retailing. Under the Pro's Ranch corporate structure the family also operates two laundromats in Phoenix - Ranchie Laundromat Phoenix #3 and Ranchie Laundromat Phoenix #4 - which are named after the grocer's mascot, Ranchie The Bull; a restaurant called Tradiciones, which is also in Phoenix; and Ranchie Fuel, a gas station in Texas, which is also named after the popular in-house mascot.

The Pro's Ranch supermarkets are big and packed with product from every category - from fresh meats and produce to packaged groceries and all kinds of in-store, fresh-prepared foods, with a Mexican and latin flair. (Read the two past stories linked at the end of this piece for more details on the stores.) Although the markets focus on Latinos, they're also shopped by consumers from many different ethnic backgrounds.

The Latino format supermarkets are also colorful and festive. But you don't have to take our word for it. Click here to view a selection of photographs from today's opening of the new Pro's Ranch Market store at 35th & Glendale Avenue in Phoenix, Arizona.

Related Stories

April 26, 2009: Sunday Feature: Pro's Ranch Markets' Set to Open Sixth 'Phoenix Ranch' Latino-Focused Phoenix Metro Region Supermarket in Mesa, Arizona On Wednesday

June 26, 2008: 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

Sunday Feature: Pro's Ranch Markets' Set to Open Sixth 'Phoenix Ranch' Latino-Focused Phoenix Metro Region Supermarket in Mesa, Arizona On Wednesday

Latino Food & Grocery Marketing and Merchandising: Metropolitan Phoenix, Arizona Market Region

Metropolitan Phoenix, Arizona might be the most competitive food and grocery retailing market in the U.S.

The Phoenix market region might be close to becoming, or could already be, overstored when it comes to the number of stores that sell food and groceries relative to the region's consumer population. There's only so much "share of stomach," after all.

And the Phoenix Metropolitan region, along with the entire state of Arizona, is without a doubt hard hit by the current economic recession, housing foreclosure crisis and credit crisis. Additionally, for the first time in decades, according to the U.S. Census Bureau, Arizona isn't gaining residents but actually losing some.

But these circumstances aren't stopping family-owned Pro's Ranch Markets, which is headquartered in Ontario (Southern) California and has a regional office and a warehouse in Phoenix, Arizona, from opening another one of its Latino consumer-focused supermarkets in Arizona, specifically in the city of Mesa, in the Phoenix Metropolitan region. And like its current five supermarkets in and around Phoenix, Pro's Ranch Markets' new Mesa store will fly under the Phoenix Ranch Market banner, the retail brand it uses for its stores in Arizona.

The new Phoenix Ranch Market supermarket is located at 1118 E. Southern Avenue in Mesa. It's set to open at 10 a.m. on Wednesday, April 29, according to veteran grocer and Pro's Ranch CEO Mike Provenzano Sr, who heads up the family-owned chain that's run on a day-to-day basis by his four sons: Michael, Steve, Rick and Jeff. It's a family affair.

The new 61,320 square-foot Phoenix Ranch Market in Mesa is geared to Latino consumers. However, the store, like all of the grocer's other 11 supermarkets, also offers an ample selection of traditional "American" brands and products, and an abundance of fresh produce, meats, prepared foods and more, which appeal to consumers regardless of their ethnic background.

The Mesa Phoenix Ranch Market store will make 12 supermarkets in four states for the Provenzano clan and their extended family of employees to date.

In addition to the Mesa store set to open on Wednesday, the Provenzano family currently operates: five existing stores in the Phoenix Metro region (all under the Phoenix Ranch Market banner); four supermarkets in California's Central Valley (banners: Arvin Ranch Market, Delano Ranch Market, Bakersfield Ranch Market #1, Bakersfield Ranch Market #2); one store in El Paso, Texas (Pro's Ranch Market-El Paso) and one supermarket in Albuquerque, New Mexico (Pro's Ranch Market-Albuquerque). The Central Valley cities' names where the four stores are located are the same as the store names - Arvin, Delano and Bakersfield, California.

Pro's Ranch will be opening another new Phoenix Ranch Market supermarket in the Phoenix, Arizona Metro region next year. [See our June 26, 2008 story here: 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.]

Pro's Ranch Markets also owns a Mexican restaurant in Phoenix, Arizona called Tradiciones.

A peek inside the new Mesa Phoenix Ranch Market

In addition to having aisles and shelves full of dry grocery, household and health and body care products geared to Latino shoppers, along with brands and items for shoppers of all ethnic backgrounds, the new Mesa store offers a wide-variety of in-store fresh foods and other specialty departments. Below is a peek inside the nearly-62,000 square foot Latino-focused Phoenix Ranch Market set to open on Wednesday, April 29, in Mesa, Arizona:

>The new Mesa store will have an in-store fresh bakery. The bakery will feature all varieties of authentic Mexican fresh-baked breads, desserts, pastries and more. It also will offer basic breads and items like donuts and the like.

Additionally, the in-store bakery will be staffed by cake decorating specialists who will prepare customized specialty cakes (birthdays, graduations, ect.) for customers.

>The supermarket has a large in-store Cocina (fresh, prepared hot foods; cocina means kitchen in Spanish) and a homemade tortilla factory, delivering hot bread and piping hot tortillas throughout the day. The in-store Cocina (see its menu sign above) really amounts to having a number of Mexican and Latin American-style restaurants all rolled up into one in-store area, offering numerous hot foods and dishes from throughout the region.

About the store's centerpiece Cocina and in-store tortilla-making factory, Mike Provenzano Sr.(who's often called "Mike Pro" for short by many in the grocery industry; hence the Pro's Ranch name) says: "The smell of fresh baked bread will greet you at the door. We will be making over 100,000 stone ground tortillas every day. This is home cooking at its finest."

>The store will feature a large meat department -- with both self-service meat cases and a full-service meat counter staffed by butcher's like the one pictured above, in one of the grocer's supermarkets -- that specializes in offering all of the types and cuts of meat used in Hispanic cuisine. "The meat market will also prepare carne asada for BBQ's and hand cut customer orders," Mike Provenzano Sr. says.

There's also an in-store Cremeria where many varieties of fresh, homemade sausages will be made and displayed for sale.

>There's a fresh juice and Aguas Frescas section in the store (part of the Cocina) where the drinks are made daily, along with an in-store fresh fruit bar for grab-and-go refreshments.

>Two other in-store fresh, prepared foods departments are: a complete seafood taco bar and a taqueria and torta meal station.

>And to top it all off, the supermarket has its very own in-store ice cream shop or station. The ice cream station will feature regular flavors of ice cream but specialize in the types and flavors of ice cream popular with Hispanic consumers -- and of course enjoyed by most all consumers, particularly in Arizona where Latino culture and cuisine is eaten by pretty much every resident, be they Italian, Irish, Asian or Heinz-57 American. About forty percent of Arizona's total population is Hispanic.

>The store will also have a complete check-cashing kiosk where customers can cash their checks. Latino consumers often prefer to cash their paychecks and other types of checks at the supermarket, rather than at a bank. Hispanic consumer-focused grocers like Pro's Ranch know this all too well. Therefore they not only welcome check cashing in their stores, they encourage it, and create special stations in the stores to make it easier for shoppers (and for the store' staff) to do so.

Focus on fresh

Latino consumers love fresh: produce, meats, bakery, seafood, dairy and more. Mike Provenzano Sr, says the new Mesa store will cater to this love of fresh foods in spades.

The fresh produce department is the centerpiece of the store. It will offer pretty much every type of fruit and vegetable Latino shoppers desire, along with numerous basic produce items consumers of all ethnic backgrounds, as well as Hispanics, desire.

It should be noted that Latino consumers, particularly second and third generation, and first generation who've been in the U.S. for sometime, adopt culinary likes just like Americans of all ethnic backgrounds do, along with retaining a love of traditional Hispanic foods.

They also love and buy brands like Coke, Colgate, Wesson Oil and the like that consumers of all ethnic backgrounds do. As a result, Hispanic consumer-focused retailer's like Pro's Ranch merchandise far more than strictly Mexican and Latin American brands and items in their stores.

And as a result of that fact, Latino consumer-focused format supermarkets are increasingly drawing consumers of all ethnic backgrounds, although Latino shoppers remain the core focus, to them for a variety of reasons: low prices, lots of fresh foods, specialty produce, meats and seafood not available at mainstream supermarkets, and the Mexican and other Latin prepared foods offered. Mexican food is about as mainstream as food can get in the U.S. -- especially in the Western U.S.

The fresh meat and seafood department at the new Mesa store is huge by traditional standards, and offers an extensive variety of items. Fresh Meat, fish and seafood (like produce) are signature departments in any supermarket worth its salt that caters to Latino shoppers.

And when it comes to fresh fish and seafood, Mike Provenzano Sr. is making a major claim about his new store in Mesa. He says the supermarket's expanded fish department will carry the largest variety of fresh fish and seafood of any store in Phoenix. If that turns out to be the case, we suspect the selection will appeal to shoppers of all ethnic backgrounds.

The new Mesa Phoenix Ranch Market store also offers numerous local touches, according to Provenzano Sr. The signature feature of those local touches from a store design perspective is a large wall mural of the early years of Mesa, Arizona that faces the checkout stands in the store's front end.

The store, like the grocer's other five stores in the Phoenix area, will carry a strong selection of produced-in-Arizona fresh foods, groceries and other items.

Mike Provenzano calls the new Mesa supermarket and its format an "upscale" market for the Mesa consumer. While Latino consumers remain his primary target, he clearly wants to draw shoppers of all ethnic backgrounds into the new supermarket.

"My family puts their heart and soul into these stores. My sons and I are proud of the communities we are in and want to give back to the neighborhoods that we work with," he says. "We take great care in building each store, providing the best food and service anywhere."

Food retailing as festive theatre

The Provenzano family and team believes food and grocery retailing and merchandising is as much festive theatre as it is mass marketing and merchandising.

For example, the small chain has its own official mascot, "Ranchie the Bull." "Ranchie" (pictured above with a produce clerk posing for a photographer) visits each of the 11 (soon to be 12) stores regularly, putting a particular focus on and giving most of his attention to the little shoppers in each supermarket.

In fact, "Ranchie the Bull" even has his own "kids' club" for Pro's Ranch Markets' youngest shoppers. [You can learn more about the "kids' club" here.

Rumor has it that "Ranchie" will be front and center and trolling the aisles for new and existing little members of his "kids' club" when the new Mesa store's opening on Wednesday.

Pro's Ranch Markets' also creates retail theatre in its stores by hosting numerous special events and promotions. They bring in Mariachi bands and Latin folkloric dancers, have food sampling activities throughout the store, and regularly do other special activities and hold special events designed to create a festive atmosphere in the stores, appealing to all of a shopper's senses.

Merchandising as theatre also is a key part of the retailer's strategy. A few of the techniques used include: building massive waterfall and other types of abundant displays in the produce department; having its tortilla-making machines visible so shoppers can watch workers making the tortillas; and using service meat and fish cases along with self-service, with attractive displays of meat and fresh fish and seafood displayed on ice.

By combining festive visual merchandising techniques with in store theatre like "Ranchie the Bull", Mariachi bans, festive decorations, food demonstrations and more, Pro's Ranch has been successful in building a pretty strong return customer base. The store prices are good -- but many shoppers also come back for the festive retail theatre. We suspect that many also return to see "Ranchie the Bull."

The Pro's Ranch stores also put a premium on customer service, both in the full-service departments, at checkout, in special areas like customer service and the check cashing kiosks, and throughout the store. Car carryout of shoppers' purchases is available if requested. Clerks are in the aisles to help shoppers. And the service departments like bakery, seafood and the like are well-staffed. It's one of the points of differentiation the grocer uses to compete against the mega-chains.

Service focus: Over 400 store employees

The grocer held a job fair in the Mesa store's parking lot on April 9-10 designed to hire about 400 employees for the new supermarket. That's a healthy number of employees, even for a 62,000 square-foot supermarket.

As an example, It takes about six small-format Fresh & Easy markets to equal the nearly 62,000 square-foot Mesa Phoenix Ranch Market. Each Fresh & Easy store employees 22-30 workers. So six Fresh & Easy stores combined (the square footage equal to the supermarket) at most employee 180 workers. That's less than half of what the new Phoenix Ranch Market will employee. That's an example of what we mean by a focus on service. The store is also expected to be very high volume.

A whopping 2,200 job-hunters attended the event to via for those about 400 jobs. CEO Provenzano Sr. said the grocer hired over 400 of the job seekers, nearly all of them from the neighborhood surrounding the store, to work in the new supermarket.

Mike Provenzano Sr. is a veteran grocer in California and the Western U.S. He's served in numerous leadership positions in the California Grocers Association (CGA) and has been a pioneer in advocating for and leading independent grocers in California, Arizona and elsewhere in the west.

He's also won food retailer of the year awards in California and Arizona for his store formats, merchandising and community service focus.

Excited about opening his first store in the city of Mesa, Pro's Ranch Markets' CEO Mike Provenzano Sr. says: "The Provenzano family is very excited to be embraced by the neighborhood and the community, and look forward to continue the strong relationship developed with our customers, highlighting each visit as a shopping experience. We are grateful to the City of Mesa, and the civic and neighborhood leaders for opening the doors to our family business."

Independent spirit alive in competitive Arizona

Arizona, and particularly the Phoenix Metro region which Mesa is a part of, might be a white-hot competitive food and grocery retailing market, but Mike Provenzano Sr. -- who ran mainstream supermarkets for many years before focusing on Latino consumer-focused grocery merchandising, and who understands and has taught his four sons through example that food retailing is festive theatre as well as mass merchandising -- is game, along with his four sons and the rest of the team, to stake millions of dollars on the new supermarket in Mesa and the next new store to open next year in the region.

Along with big chain-owned food and grocery retailing -- Wal-Mart, Kroger's Fry's, Safeway, Albertsons, Basha's, Costco, Target, Tesco's Fresh & Easy, Trader Joe's, Whole Foods Market and others -- independent grocery retailing is a factor and force in Arizona. And Pro's Ranch Market is staking a claim to that sector with the opening of its latest store on Wednesday.

Tesco's Fresh & Easy Neighbohrood Market has a store in Mesa.

Next format explosion: Latino-focused grocery retailing

With about 40% of Arizona's residents being of Hispanic heritage, along with the fact that Latino culture is a central part of Arizona's passed and present, there's still a strong niche in the state and in the Phoenix Metro market for new Hispanic-focused format retail stores and supermarkets, in our analysis.

Additionally, because Latino culture, including its cuisine, has such a central influence on all Arizona residents (consumers) regardless of their ethnic background, there's an added opportunity in Hispanic food and grocery product marketing and merchandising in the state and in the Phoenix Metropolitan market region.

This opportunity includes non-Hispanic format grocers that put a serious marketing and merchandising effort on attracting Latino consumers into their stores and offering them a selection of products and store departments that appeal to their likes and needs, be they Mexican-American, from Central America or elsewhere. (The majority of Latinos in Arizona are either from Mexico, or their parents or grandparents were born in that next door country. But their is a significant percentage of Arizona residents that come from other parts of Latin America as well.)

Wal-Mart believes that to be the case, which is why it has chosen Phoenix, Arizona as one of the first two states and market regions, the other being Houston, Texas, to launch the first two stores in its new Hispanic-focused format grocery market, "Supermercado de Walmart." The Phoenix "Supermercado de Walmart" unit will go into a current 39,000 square-foot Wal-Mart Neighborhood Market supermarket that the retailer is converting into its Hispanic-focused format Phoenix supermarket.

Latino-focused ethnic food and grocery retailing, like all forms and formats of food and grocery retailing in the Metropolitan Phoenix market continues to intensify and heat up.

We see Hispanic or Latino-focused retailing as the next exciting grocery retailing front to explode in Metro Phoenix, along with elsewhere in Arizona, despite the less than desirable factors we listed in the first three paragraphs of this story.

Stay tuned.

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.

Arizona Region Market Report: A Fresh & Easy Buzz Flashback - Tesco to Locate New Fresh & Easy One Mile Outside Downtown 'Food Desert' Tempe, Arizona

On August 11, 2008 we wrote this story, "Arizona Region Market Report: Which Food Retailer Will Seize the Opportunity Offered by the Lack of a Grocery Store in Downtown Tempe, Arizona?" In the piece, which you can read completely by clicking on the title above, we explored the fact downtown Tempe, Arizona (pictured above) is underserved by supermarkets that offer basic groceries and fresh foods at affordable prices despite having gone through a resurgence in recent times. That resurgence is ongoing today.

The city of Tempe, Arizona, which is located in the Phoenix Metropolitan region, has been trying to lure a grocer to open a store in the city's downtown for a number of years. Downtown Tempe has few supermarkets that offer a selection of basic groceries and fresh foods at affordable prices, making it what's commonly referred to as an urban "food desert."

It appears our piece written a little over three months ago was rather prescient. Well, close to it. Just one mile away from being very prescient in fact.

According to the city of Tempe, it looks like Tesco's Fresh & Easy Neighborhood Market has plans to open one of its small-format, convenience-oriented grocery and fresh foods markets close to the city's downtown core, about one mile away.

The grocery chain plans to open a Fresh & Easy store in what soon will be a vacant building at the southeast corner of Mill Avenue and Broadway Road in the city. The location is right on the outskirts of downtown Tempe.

Tesco's Fresh & Easy has applied for a beer and wine off sale liquor license at the location. Additionally, the retailer plans to go before the Tempe City Council on Thursday night with a proposal to remodel the soon to be vacant building, according to the city of Tempe.

The off sale beer and wine permit application shows the proposed Fresh & Easy market's address as 83 E. Broadway Road. That building is currently occupied by a Walgreens drug store. But a spokesperson for the city of Tempe says the Walgreen's is relocating this Thursday into a newly constructed building just down the way from the current store at the same intersection, just in the southwest corner. Therefore the building will become vacant for Tesco to remodel into one of its 10,000 -to- 13,000 square foot Fresh & Easy grocery and fresh foods markets.

Walgreen's is making the move because it wanted a larger and more modern store in the neighborhood.

While the proposed Fresh & Easy market isn't actually in the "food desert" downtown core of Tempe, being only one mile away will offer downtown residents a much more convenient location for grocery and fresh foods shopping than is currently available to them downtown.

Additionally, since one of the publicly stated strategies by Tesco for its Fresh & Easy stores is to locate a percentage of the stores in "food desert" communities and urban neighborhoods, opening a store just one mile from downtown Tempe, which is underserved by supermarkets, helps the grocer better fulfill this strategy than it has to date.

Only two of the current 102 Fresh & Easy markets in Southern California, Metropolitan Las Vegas, Nevada and Metro Phoenix, Arizona are located in what can be called underserved or "food desert" neighborhoods. Those stores are both in Southern California -- one in Compton the other in the Eagle Rock district of Los Angeles. The grocery chain is building a third store in a neighborhood underserved by food and grocery stores in a South Los Angeles low-income neighborhood.

Tesco has one Fresh & Easy market in Tempe. That store, at Baseline and Kyrene roads in the city, opened in September of this year. Their are currently about 30 Fresh & Easy grocery markets in the Phoenix, Arizona Metropolitan region.

It's not surprising Tesco's Fresh & Easy would locate the store on the outskirts of downtown Tempe in a building being vacated by Walgreen's. Fresh & Easy Neighborhood Market has located many of its current stores next to or near Walgreen's drug stores in all three of the markets its in. The grocer also has modeled its "critical mass" retail strategy -- opening numerous stores within a couple miles of each other -- after Walgreen's, which uses that strategy nationally in the U.S., which we were the first publication to point out and write about.

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.

Tesco Confirms it Will Open Eleven New Fresh & Easy Stores in The Phoenix, Arizona Region; Will Bring Store Count in Market to 38 Once All Open

Tesco's Fresh & Easy Neighborhood Market USA will add 11 new stores (plus an additional previously confrirmed store opening on November 13) to the 26 it already has open in the Phoenix, Arizona Metropolitan region, the grocery chain confirmed today in a press release.

Below are the locations of those 11 new Phoenix area stores:

• 12th & Bell, Phoenix
• 91st Ave & Union Hills, Peoria
• 35th Ave & Camelback Rd, Phoenix
• 51st Ave & Glendale, Glendale
• 48th St. & Ray, Phoenix
• 48th St. & Carefree Highway, Phoenix
• 91st Ave & Northern, Peoria
• Cotton & Greenway, Surprise
• Cooper & Warner, Gilbert
• 99th Ave & Lower Buckeye, Phoenix
• Alma School & Ray, Chandler

In addition, a new Fresh & Easy fresh foods and grocery market will open on November 13 at Gilbert & Guadalupe in the Phoenix suburb of Gilbert, the company says.

Tesco already has an existing store in Gilbert at 1537 South Higley Rd.

Back on October 13, Fresh & Easy announced in this press release that the store at Gilbert & Guadalupe was open and located in a former vacant supermarket building the grocer remodeled. It appears including that Gilbert store in that October 13 release was premature since the grocer is now announcing the very same store will open on November 13 in its press release issued today.

One of the 11 new stores confirmed today also is located in Gilbert, at Cooper & Warner Streets. That will bring the total number of Fresh & Easy stores in the city to three.

Gilbert is one of the four Phoenix Metro region cities (along with Chandler, Mesa and Tempe) where Wal-Mart opened one of its first four small-format Marketside combination grocery and fresh foods stores on October 4.

Wal-Mart also plans to open a Marketside store in Peoria, Arizona, perhaps by as early as the end of this year. That will be Wal-Mart's fifth Marketside store in the Phoenix Metro market.

Two of the 11 new Arizona Fresh & Easy stores listed above happen to be located in Peoria as well. It should be interesting to observe how well (and competitively) Wal-Mart's Marketside and Tesco's Fresh & Easy play together in Peoria.

Some of the 11 new Fresh & Easy stores will open before the year is over. Others will open in early 2009.

The opening of the new store in Gilbert on November 13 will bring Tesco Fresh & Easy's Arizona store count to 27. The addition of the 11 new stores in the region confirmed today by the grocery chain will take that total store count number to 38 in the Arizona market.

As of today, Tesco operates 96 small-format, convenience-oriented Fresh & Easy grocery and fresh foods markets in Southern California, Metropolitan Las Vegas, Nevada, and in the Phoenix, Arizona Metro region.

About half of the 96 stores are in Southern California, with the remaining stores located in the Las Vegas and Phoenix regions.

Phoenix, Arizona Metro Market Report: Gilbert, Arizona Independent Liberty Market Fears Not the Tesco and Wal-Mart Invasion of its City

Tesco recently opened it second Fresh & Easy grocery and fresh foods store in the Phoenix, Arizona Metro region city of Gilbert. Fresh & Easy markets are about 10,000 -to- 13,000 square feet.

On October 4, Wal-Mart opened one of its first four small-format (15,000 -to- 20,000 square foot) Marketside combination grocery and fresh foods markets in the city. The mega-retailer opened three other Marketside stores the same day in nearby Chandler, Mesa and Tempe. Tesco has Fresh & Easy stores in each of those cities as well.

Both Tesco's Fresh & Easy and Wal-Mart's Marketside stores put a major emphasis on selling ready-to-eat and ready-to-heat fresh, prepared foods, ranging from full dinners and side-dishes to sandwiches and snack items. Marketside makes its fresh, prepared foods items right in the store. Fresh & Easy's prepared foods items are produced at the retailer's central kitchen facility in Southern California and shipped to the stores.

Both Tesco's (the world's third-largest retailer) Fresh & Easy markets and Wal-Mart's (the number one global retailer) Marketside stores also sell a selection of basic and specialty food and grocery products, fresh produce and meats and related items.

In other words, two of the biggest retailers in the world have invaded Gilbert, Arizona with their respective small-format food and grocery stores. That's enough to give pause to any supermarket chain or independent grocer anywhere.

But the Gilbert invasion by the two big guys of food and grocery retailing hasn't scared off Gilbert's historic Liberty Market, an independent grocery store that's been open in the city since the U.S. Great Depression.

Liberty Market owner Owner Joe Johnston and his partners have just completed a major remodeling of the supermarket located in downtown Gilbert's historic Heritage District, transforming the grocery store into what Johnston calls an "urban marketplace."

The inside of the historic market features a mix of the old and new. There are modern-style clear exposed bulbs hanging from rustic ceiling beams built in the 1930s. On the same concrete floor originally poured in 1958 sit modernist tables with smooth black surfaces. Clean and sleek.

The remodeled market also features an in-store demonstration kitchen where shoppers can see what the chefs are doing through two large glass windows.

Among the modern equipment in the in-store kitchen is a Vulcan Oven in which artisan pizza's are baked for sale in the store.

A major part of Liberty Market's new urban flair includes lots of fresh, prepared foods from the kitchen. There are full ready-to-heat dinner entrees and side-dishes as well as ready-to-eat grab-and-go foods prepared right in the store.

The market also features an in-store espresso bar/cafe which owner Johnson says he wants to become a downtown Gilbert social hub as well as a place where the city's many commuters will stop off on there way to work. Also returning often after work to pick up prepared foods items for dinner produced by the in-store chef.

Professional chef David Traina is Johnson's partner in Liberty Market. He will be running the in-store kitchen, creating what he says will be a combination of basic comfort foods along with more adventurous offerings such as sweet potato salad and authentic Sicilian pizza's, among other offerings. There are fresh baked goods as well.

The market also has a retail section offering shelf-stable food and grocery products, perishable items and additional fresh foods.

Joe Johnson owns three successful restaurants in Gilbert. Therefore focusing on in-store-made prepared foods along with retail food and grocery items in the revamped Liberty Market is a natural for both him and chef Traina.

The historic market has had four owners since it opened in the 1930's. Johnson is the fourth and says he wants to be the last.

Although he has done extensive remodeling to Liberty Market, owner Johnson says it still retains its historic core. He's referring to the historic elements such as the concrete floor poured in 1958, the 1930's wood ceiling beams and other historic elements which have been retained in the store's remodeling.

The fresh food and grocery market is part of the revitalization of downtown Gilbert and its historic district.

Johnson and Traina say they fear not the big chain outlets that have recently opened in Gilbert. They believe their upscale yet historically-grounded Liberty market and its downtown location offer residents and shoppers not only convenient food and grocery items but restaurant-quality prepared foods items supported by Johnson's reputation as a successful restaurant operator in the city.

Additionally, It's also the only market in the downtown core of Gilbert. Downtown Gilbert been adding various new amenities like Water Tower Park, which is slated to open next month, and the Western Canal Trail, which is being completed and is scheduled for an early 2009 opening, according to Johnson.

These new public features, along with a number of new retail shops that have opened in downtown Gilbert in the last couple years, are expected to draw local residents as well as residents from outside the city to the downtown core., the market's owners believe.

Johnson and Traina say they are prepared for those new customers when they come, along with serving the residents of the entire city of Gilbert.

One of the unique aspects of food and grocery retailing in the U.S. is the independent grocer and his or her ability to survive and thrive in many cases right next door to mega-chains by finding one or more specialty niches, focusing on local tastes and styles, and offering superior service, along with a few other key things.

For example, it isn't likely you would find an independent grocer spending big bucks to remodel a store in a city in the United Kingdom, where Tesco (UK's number one retailer) is based and where Wal-Mart owns the number two chain Asda, where there are two Tesco stores and one Asda unit. The chains today overwhelmingly dominate the UK food and grocery store business and market.

But independent retailers like Liberty Market open and remodel stores in such cities everyday in the U.S.

Gilbert, Arizona has units of other major chain grocers as well as the Tesco and Wal-Mart-owned stores. But that isn't stopping Liberty Market either.

The independent grocer believes it's found a niche, and that it will not only survive in a very competitive Gilbert, but that it will thrive. That's why the market's owners have taken the risk and invested in historic Liberty Market's remodeling, creating that "urban marketplace."

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.

Wal-Mart to Open Two More New 'Neighborhood Market' Stores in the Phoenix Metro Region; Still On-Track to Open New Marketside Stores This Summer

Wal-Mart, Inc., the world's largest corporation and retailer as well as being the number one national grocery sales market share leader in the U.S., plans to open two more of its approximately 45,000 square foot Wal-Mart Neighborhood Market supermarkets in the Phoenix, Arizona Metropolitan region this year and next.

Both of the new Wal-Mart Neighborhood Market supermarkets will be built in the city of Chandler, which is a suburb of Phoenix, and has about 240,000 residents. The Phoenix Metropolitan region of which Chandler is a part, is a contiguous metropolitan area, in which one city essentially runs into the next.

The two new store sights are at the southwestern corner of McQueen and Warner roads and at the northwestern corner of Chandler Blvd. and Cooper Road, according to Delia Garcia, a Wal-Mart spokeswoman. The stores also will be open 24 hours a day.

Tesco has Fresh & Easy Neighborhood Market stores located nearby the two new Wal-Mart Neighborhood Market locations.

The Wal-Mart Neighborhood Market format supermarkets, which are smaller than the average new supermarket being build by most U.S. retail grocery chain's today which average about 55,000 -to- 65,000 square feet, feature a complete range of food, grocery and non-foods' offerings, with a special focus on fresh produce and meats.

The produce, deli and bakery departments (above) inside a Wal-Mart Neighborhood Market supermarket.

Despite being about 10,000 square feet smaller than the average new supermarket being build today across America, Wal-Mart's Neighborhood Markets' still compare with the variety and product range selections these competing supermarkets offer.

The smaller-sized, neighborhood-oriented supermarkets are a part of the giant retailer's multi-format retail strategy, which includes its huge Supercenters, which average about 185,000 square feet and offer a complete selection of food and groceries as well as products in every category imaginable, its Wal-Mart basic discount stores, which on average are about 90,000 -to- 100,000 square feet and sell a limited selection of grocery products and perishable goods but no fresh meats or produce, and its soon to be opened brand new Marketside small-format (about 15,000 -to- 20,000 square feet), convenience-oriented grocery stores.

The first four or five Marketside stores, which Wal-Mart corporately says aren't designed to counter Tesco's small-format 10,000 -to- 13,000 square foot Fresh & Easy Neighborhood market grocery stores, but were indeed developed primarily for that purpose, are still on track to open this summer in the Phoenix Metro area, according to a Wal-Mart executive who asked we not use his name.

Wal-Mart currently operates nine of its 45,000 square foot Neighborhood Market supermarkets in the Phoenix/Easy Valley region. Additionally, three new stores are set to open soon. As a result, with the two new stores set for Chandler, that will bring the total number of Wal-Mart Neighborhood Market format supermarkets in the area to 14.

The Phoenix Metro region was one of the initial test market regions for Wal-Mart's Neighborhood Market smaller-footprint supermarket when the retailer created the format about seven years ago. Arizona also is one of the top three or four-best market regions regarding overall per-capita sales in the U.S. for Wal-Mart.

Tesco currently operates 17 of its average 10,000 -to- 13,000 square foot basic grocery and fresh foods-oriented Fresh & Easy grocery markets in the Phoenix/East Valley region. The retailer plans to open as many as 15 more of the grocery stores in Arizona before the end of this year.

Wal-Mart has been opening numerous new Supercenters and Neighborhood Markets in Arizona for the last couple years because it is one of the retailer's best U.S. market regions, as we mentioned above.

The region also is one of the fastest-growing areas in the USA. There's a demographic population shift in the U.S. from regions like the Eastern USA, to the sunbelt states like Arizona. Additionally, since Arizona shares a border with Mexico, it's growth is further being increased by immigration (documented and undocumented) from nearby Mexico.

Hispanics make up about 34% of Arizona's population, based on the latest data available from the U.S. Census Bureau, and it's the fastest growing ethnic group in the state.

Therefore, these are the primary reasons for Wal-Mart's strong growth and store expansion in the state, and especially in the Pheonix Metropolitan/East Valley region, where most of the state's population is concentrated.

In other words, the focus of Wal-Mart's Arizona expansion has little to do with any cause or effect from Tesco's big push into the state with its Fresh & Easy stores.

The one exception is the new Wal-Mart Marketside small-format grocery store venture. Based on extensive research and good sources, we believe the primary reason for creating the format was to serve as a check on any possible sales effect from the Fresh & Easy stores, which thus far hasn't occurred in the Phoenix Metro market, according to numerous sources, as we reported and laid out here on Wednesday.

We also believe Wal-Mart has increased it time-table for building and opening more of its 45,000 square foot Neighborhood Market stores in the region based on Tesco's entry--and rapid new store building program--into the market with its Fresh & Easy stores.

It's no mere coincidence that a number of these new supermarkets are being located not too far away from a Fresh & Easy grocery store. In addition, the four -to- five new Marketside grocery markets set to open in the region are all close to existing Fresh & Easy stores.

Regardless of the primary reasons for, or Wal-Mart's Phoenix Metro region growth strategy origins and timetables, the effect of the mega-retailer's actions in the market region will end up putting a retail "squeeze" effect on Tesco's Fresh & Easy Neighborhood Market grocery stores.

Here's why: First, Wal-Mart is super-popular in Arizona and especially in the Phoenix Metro/East Valley region. Its the only grocery retailer who is currently challenging local market share leaders Bashas' and Safeway Stores, Inc. for their respective market share dominance. Those two supermarket chains have been in the regions for decades before Wal-mart even entered with its first Supercenter. It's also the only grocery retailing player who has these two chains worried. In other words, the Wal-Mart brand is popular and solid in Arizona.

Second, Wal-Mart has opened a number of its mega Supercenter stores in the region in the last two years. These stores which average about 180,000 square feet and often are as big as 225,000 square feet, devote nearly 100,000 square feet of their space to food and grocery products in many cases. The Supercenter concept has proven to be a popular primary grocery shopping venue in Arizona, with many shoppers leaving their former supermarkets to shop at the stores. The Wal-Mart Supercenters have already started to create a tipping of the retail format shopping balance in the region.

Third, add to the Supercenter factor, the "Wal-Mart Neighborhood Market effect." The reason Wal-Mart is in the process of completing the building of three new Neighborhood Market supermarkets and planning to built two more in the region, is that because unlike is the case in many other parts of the U.S., the stores are doing very well in Arizona, particularily in the Phoenix Metro region. Along with the Wal-Mart Supercenters, they're taking market share away from Bashas' and Safeway.

Lastly, enter the new, small-format Marketside banner grocery stores. Combined with the Supercenters and Neighborhood Market supermarkets, these new 15,000 -to- 20,000 square foot, convenience oriented grocery stores will give Wal-Mart one more strategic bullet in its food and grocery retailing arsenal in the market region.

For example, the Supercenters serve a more regional or larger geographic area strategy. It takes shoppers coming from miles around the mega-stores to make them successful. As a result, there are just so many of the big-box stores Wal-Mart can open in a given market region; and the retailer has been pushing that envelope already in the Phoenix Metro area.

However, the 45,000 square foot Neighborhood Market supermarkets allow Wal-Mart to extend its retail brand--and number of stores--because the population requirements needed to make these stores successful are far-lower than those of a Supercenter. In part that's why they are named Neighborhood Markets. Therefore, Wal-Mart can use these stores as an in-between strategy, adding them in a neighborhood they think will work for this format but not a Supercenter.

Now, along comes Marketside, an even smaller-format grocery store at about 15,000 square feet than the Wal-Mart Neighborhood Market supermarkets are at about 45,000. The stores also will have some added twists, such as lots of fresh, prepared foods. Look for mini health and wellness centers in the stores possibly as well.

The addition of the Marketside format will allow Wal-Mart to fill a third niche as they warrant, which is the ability to pop a "little" Marketside grocery store in neighborhoods the retailer doesn't thing a Wal-Mart Neighborhood Market will do that well in but a Marketside grocery store might. The reasons for this could range from population size to demographics.

This combination of three formats for Wal-Mart in the Phoenix/Easy Valley market region in Arizona has the potential to really put the squeeze on Tesco's Fresh & Easy grocery stores in the market which currently aren't performing very well anyway.

There is a "Wal-Mart Effect" in every region where the giant retailer goes in the U.S. That's one of the reasons so many communities do everything they can to keep the retailer's Supercenters out of their respective towns and neighborhoods. The main opposition argument to the stores is that they hurt local businesses, which includes regional and local chain-owned supermarket stores.

Based on our analysis, the Phoenix Metropolitan/East Valley region is shaping up to be just about the most competitive grocery retailing region in the USA. Since this is Tesco's number-two most important target market for its Fresh & Easy Neighborhood Market grocery stores (Southern California which is nearly as competitive is number one), Tesco will have to sharpen its pencils, make some changes in the Fresh & Easy format, its merchandising, marketing and operations, if the retailer wants to succeed in this highly and increasingly competitive grocery market, in our analysis.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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