Sprouts Farmers Market to Open Second Northern California Store in Roseville No Later Than Mid-April

Shoppers packed the Sprouts Farmers Market store, above, in Sunnyvale, California on grand opening day, June 2, 2010. The store is Sprouts' first in Northern California. It's also the grocer's milestone 50th store.

Phoenix, Arizona-based Sprouts Farmers Market, which we've reported (here) is in talks to acquire the Henry's Farmers Market chain from its owners, Apollo Global Management/Smart & Final, plans to open its second store in Northern California no later than mid-April of this year, Fresh & Easy Buzz has learned. The grocer hasn't yet announced the store's opening date.

The store, which we've reported on and written about previously, is in the Stanford Ranch shopping center in Roseville, California, which is in the Sacramento, California metropolitan area.

Sprouts is renovating a vacant building in the center, which previously was home to a Linens N' Things home furnishings soft goods store, for what will be its second farmers market-style format, natural and organic products-focused grocery store in the Northern California region.

Sprouts Farmers Market opened its first store in Northern California, a 30,865 square-foot market at 111 E. El Camino Real in Sunnyvale, on June 2, 2010. Sunnyvale is in the famed Silicon Valley, near San Jose, in the South Bay Area region. [See - June 5, 2010: Sprouts Farmers Market Opens First Northern California Store in Sunnyvale; Strikes Up Partnership With Local Non-Profit Farm

As we've previously reported, Sprouts has a third location, in the East Bay Area city of Dublin, which it also hopes to open in 2011.

The grocery chain is also searching for numerous additional store sites throughout Northern California, putting a focus on the San Francisco Bay Area and the Sacramento metropolitan region.

Timing is key

The timing of the early-to-mid April opening of the Sprouts Farmers Market store in Roseville co-insides with the opening date of Boulder, Colorado-based Sunflower Farmers Market's first Northern California store, which just happens to be in Roseville. The Sunflower Farmers Market stores are very similar in format and customer-positioning (not to mention name) to Sprouts Farmers Market.

The Sunflower Farmers Market store in Roseville is set to open in early 2011, according to CEO Mike Gilliland. [See - December 7, 2010: Sunflower Farmers Market Confirms Our Report It's Headed to Northern California; Roseville Store to Open April 2011 and December 9, 2010: Launching Sunflower Farmers Market Into Northern California is a 'Second Act' of Sorts For Founder-CEO Mike Gilliland.]

Like Sprouts, Sunflower Farmers Market has plans to open numerous stores in Northern California. Also like Sprouts Farmers Market, Sunflower is focusing its search for additional Northern California store locations in the Sacramento metropolitan and San Francisco Bay Area regions.

Henry's makes three - maybe

Smart & Final-owned Henry's Farmers Market, which opened its first store in Northern California at 8211 Laguna Boulevard in Elk Grove near Roseville in August 2010, has also been considering opening a store in Roseville. However, in light of the current negotiations between Sprouts Farmers Market and Henry's owners, private equity firm Apollo Global Management/Smart & Final, we can't report at this time that those plans remain in consideration.

Henry's Farmers Market currently has a proposal for a second Northern California store before the planning commission in Walnut Creek, California, which is in the Easy Bay Area, not far from Dublin, where Sprouts' planned third Northern California store is located. As far as we've been able to learn, those plans are still going forward at Henry's.

The planned Walnut Creek Henry's location would be a perfect fit for Sprouts Farmers Market, should the grocer's talks to acquire Henry's Farmers Market, which continue to go on this week, result in the privately-held, Arizona-based chain's buying Henry's.

New stores 'sprouting' up all over the region

The Sacramento region, including Roseville, is set to see an influx of new food retailing players and grocery stores this year, and into 2012.

In addition to new arrivals Sprouts, Henry's Farmers Market (summer 2010), which could soon be a combined Sprouts-Henry's, and Sunflower Farmers Market (in April), Tesco's Fresh & Easy Neighborhood Market currently has over 20 planned store sites in the Sacramento region (see our list here.) [Also see - November 22, 2010: Tesco's Fresh & Easy Neighborhood Market Plans Five New Stores in Northern California's Sacramento Region.]

Tesco's Fresh & Easy plans to open its first 12 stores in Northern California (none of the 12 are in the Sacramento region though) starting in March-April of this year. (click here for additional details on Fresh & Easy in Northern California.)

However, based on our most recent information, we don't expect the Tesco-owned fresh food and grocery chain to open any of its Sacramento-area stores until, at the earliest, late 2011. And it's possible the first stores in the region won't open until early 2012. [See - December 27, 2010: First Look at the Pacifica, California Fresh & Easy Neighborhood Market Store, One of the First Opening in Northern California in Early 2011 and December 14, 2010: Fresh & Easy Neighborhood Market to Open 5800 Third Street 'Flagship' Store in San Francisco Later in 2011 Than Originally Announced.

Additionally, Whole Foods Market, which has a store in Roseville and one in Sacramento, plans to open its third store in the Sacramento metro region this year, in Folsom.

Whole Foods is also scouting for additional store sites in the Sacramento region as part of a major new store growth initiative for Northern California, which its been undertaking for a few years, and accelerated in 2009-2010. [See - May 9, 2010: A Whopping 15 of Whole Foods Market's 41 New Stores in Development are in California - And Nine of The 15 Are In Northern CA

Further, as we reported earlier today, Walmart is close to acquiring its first smaller-format store location in Northern California, at Highway 65 and Second Street in the city of Lincoln, which is near Sacramento, and has plans to grab additional sites in the Sacramento region for the small-supermarket-style food and grocery stores. [See - January 10, 2011: Walmart 'Gets Real' With Smaller-Format Grocery Store Initiative in California; First Stores On Tap.]

One of the numerous Sacramento-area Fresh & Easy Neighborhood Market store sites is in Lincoln. Additionally, Tesco has two future Fresh & Easy stores planned for Elk Grove, where Henry's Farmers Market opened its Northern California flagship store in August 2010. [See - August 17, 2010: Henry's Farmers Market 'Beats' Fresh & Easy Neighborhood Market to Northern California Despite Multi-Year Head Start; Elk Grove Store Opens Tomorrow.]

Add to the mix popular discount retailer Target Corp., which is focusing aggressively on the Sacramento region with its "P-Fresh" food and grocery store initiative in Northern California. Target currently has "P-Fresh" grocery markets in 12 of its discount format stores in the Sacramento area, including in Elk Grove, Roseville and Lincoln, and has plans to add the markets inside additional general merchandise stores in the region this year. [See our September 26, 2010 story for details on Target's "P-Fresh" in Northern California: While Tesco's Fresh & Easy Neighborhood Market Postponed, Target Opened 42 'P-Fresh' Fresh Food and Grocery Markets in Northern California.]

Locally-based and family-owned supermarket chain Raley's, which has its corporate headquarters in West Sacramento, California, is the market share leader in the Sacramento region, followed by another family-owned chain, Modesto, California-based Save Mart Supermarkets, which operates supermarkets under its Lucky banner and discount warehouse stores under its FoodMaxx banner in the region. Safeway Stores, Inc., which is headquartered in the East Bay Area city of Pleasanton, about 90 minutes from Sacramento, is a close third in market share rankings in the Sacramento metro market, although its number one in all of Northern California.

Raley's, which has 134 stores and about $3.4 billion in annual sales, operates stores under the Raley's (super stores), Bel-Air (supermarkets) and Food Source (discount warehouse stores) in the Sacramento market region.

Sprouts' 'sprouting' new stores

Sprouts Farmers Market, which has 54 stores in Arizona, Colorado, California and Texas, currently has five new stores set to open this year. More new locations are set to be announced later this year.

In addition to the Roseville, California Sprouts market opening in April 2011, the four other announced new stores set to open this year are in Southern California - Westlake Village and Redondo Beach - and Texas - Fort Worth and Carrollton.

The Forth Worth store, which is at 4650 SW Loop 820 in the Overton Park Plaza shopping center, is set to open this month, on Wednesday, January 26.

Of course, if the discussions with Apollo Global Management/Smart & Final over acquiring the 46-store Henry's Farmers Market chain result in a deal for Sprouts Farmers Market, the Arizona-based chain, owned by members of the Boney family, the same family that started the Henry's chain, will nearly double its store count to over 100 units.

The Henry's Farmers Market stores are in California and Texas. The California stores - 36 in Southern California and one unit in Northern California - operate under the Henry's Farmers Market banner. The nine stores in Texas are under the Sun Harvest Farmers Market banner.

Meanwhile, regardless of which direction the deal negotiations end up going - they're looking positive for a deal right now, according to our sources - regarding a possible Henry's Farmers Market acquisition by Sprouts, the Arizona-base chain plans to continue to grow its store-count significantly in Northern and Southern California, along with in Texas (current major focus, along with California), Arizona and Colorado - plus potentially adding a couple new Western U.S. states - over the next few years.

Reader Resource

>Read our 2010 'Northern California Market Region Special Report' series here for a current primer on food and grocery retailing in the region. See the numerous linked stories at the end of the piece at the link.

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

Northern California Market Special Report

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Henry's Farmers Market Opening its First Northern California Store in August With A Big 'Local' Push

Smart & Final's Henry's Farmers Market chain puts a huge focus on fresh produce in its stores. The produce departments comprise about 25% of total store selling space and are the leading department in terms of category percentage of sales. Henry's offers 350 different varieties of fresh produce throughout the year, and an additional 100 or more in the summer. The stores carry conventional and organic produce, with a key emphasis on "locally-grown.

Northern California Special Report: Sacramento Metro-Market Region

Henry's Farmers Market, which is owned by Southern California-based Smart & Final but is operated independently in most regards, plans to open its first store in the Northern California city of El Grove near Sacramento earlier than it originally expected - in August rather than November 2010 - according to Janet Little, the grocer's nutritionist and spokesperson.

Irvine, (Southern) California-based Henry's originally planned to open the store at 8211 Laguna Boulevard in Elk Grove this fall, most likely in November. But progress in renovating the former Circuit City store has progressed even faster than the grocer hoped, and it's therefore planning to open the store two months from now, in August.

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

Smart & Final-owned Henry's, which currently has 39 stores operating under the Henry's Farmers Market and Sun Harvest Farmers Market banners in Southern California and Texas, puts a big emphasis on offering locally-grown and produced foods in its stores, particularly in the fresh produce category.

Local grower and vendor fair

The grocery chain plans on maintaining that "locally-grown" merchandising philosophy and focus in Northern California. In fact, next week its holding a Henry's Farmers Market vendor fair on Thursday, June 10, from 9 a.m. to 5 p.m., and on Friday, June 11, from 9 a.m. to 3 p.m. at the Hilton Garden Inn, 9241 Laguna Springs Drive in Elk Grove, according to Little. Executives from Henry's buying and merchandising staff will be at the two-day event to meet with potential vendors. The purpose of the vendor fair is to establish relationships with local and regional farmers and food producers.

"We are looking for tasty products that are healthy, all natural and-or organic and made with the highest quality ingredients," Little says. "We like working with vendors and sellers who can demonstrate the ability to work with a professional retailer, provide a solid means of distribution, hold adequate liability insurance and can guarantee product quality and safety," she notes in explaining the qualifications local growers and food companies need in order to sell their products in the Henry's stores.

Henry's has long-standing relationships with farmers and producers in Southern California and hopes to establish similar ties with growers in the Sacramento region, Little says.

That shouldn't be difficult to do: Northern California and the nearby Central Valley comprise the leading agricultural growing region in the U.S., as well a being a center for natural, organic, specialty and artisan food companies. Therefore there shouldn't be a shortage of potential vendors from the region for the vendor fair next week. In fact, the Henry's Farmers Market stores in Southern California already carry products from numerous Northern California-based companies, large and small, so many are already familiar with the Henry's format and stores.

Additionally, as we mentioned in our May 8 piece, Henry's Farmers Market is establishing a regional produce hub in Northern California, which will allow it to procure locally-grown produce and other foods to distribute to its first store and to the numerous other units it plans to open in the region.

Job fair

Henry's is following up next week's vendor fair with a job fair to collect applications in preparation for hiring employees to staff the Elk Grove store for its August opening. The job fair will also be at the Hilton Garden Inn and will run from 10 a.m. -to- 4 p.m. on June 22 through June 24, according to Little. Henry's says itplans on hiring about 100 employees for the store.

Going local: Fresh produce and more

Henry's local focus will go over very well in the Sacramento market. The region's two leading grocers (by market share), Sacramento-based Raley's (number one) and Modesto-based Save Mart Supermarkets, both put a major focus on selling locally-grown and produced food and grocery items, identifying the items as "local" with shelf signs in-store and promoting their respective local foods positioning in their weekly advertising circulars, and in radio, television and print advertisements.

Raley's operates under three banners in the Sacramento metro market, which El Grove is part of: Raley's and Bel-Air (supermarkets); and Food Source, a discount warehouse format. Save Mart operates its Lucky banner supermarkets in the Sacramento region, along with it's FoodMaxx discount warehouse stores.

Both chains are privately-held. Save Mart has 250 stores under the Save Mart, Lucky and FoodMaxx banners, with annual sales of about $6 billion. In addition to the three banners mentioned above, Raley's also operates supermarkets in the San Francisco Bay Area and southern coastal region of Northern California under the Nob Hill Foods name. Raley's has 139 stores and annual sales of about $3.4 billion.

The farmers market format

Similar to Sprouts Farmers Market, which opened its first Northern California store in the Bay Area city of Sunnyvale on June 2, Henry's puts a major focus on fresh produce in its stores, devoting about 25% of the store's selling area to the category. And like Sprouts, produce contributes a significant percentage of overall store sales for Henry's Farmers Market.

Further similar to Sprouts Farmers Market, Henry's format focuses on natural and organic products, but also sells a limited assortment of conventional food and grocery brands and items.

Henry's Farmers Market stores also have bulk foods departments, like Sprouts, and the fresh meat departments, like at Sprouts Farmers Market stores, in many cases have both full-service and self-service merchandising cases. Both Sprouts and Henry's grind their hamburger fresh in the stores rather than buying it factory pre-packaged and having it shipped to the stores, for example, stressing the "fresh" focus.

Lastly, like Sprouts Farmers Market, Henry's sells vitamins and nutritional supplements, non-foods items and fresh, prepared foods.

It's no accident the two chains have similar formats since Henry's was founded by the Boney family, members of which founded Sprouts Farmers Market in 2002. The family sold Henry's Farmers Market to Wild Oats many years ago. Wild Oats operated the chain for over a decade. When Whole Foods Market, Inc. acquired Wild Oats in 2008, it sold Henry's to Smart & Final because the store format didn't fit with its merchandising focus and strategic plans. Selling Henry's to Smart & Final also allowed Whole Foods to generate a nice chunk of cash to apply to the Wild Oats acquisition.

Henry's Farmers Market and Sprouts Farmers Market also have another thing in common when it comes to Northern California: Both grocers plan numerous additional stores in the region.

Tesco's Fresh & Easy Neighborhood Market has 19 confirmed future store locations in the Sacramento-Vacaville Metropolitan region. Fresh & Easy first announced those stores over two years ago. The fresh food and grocery chain originally planned to open the stores no later than early 2009. However, it's postponed its launch into Northern California indefinitely, as we've reported on and written extensively about in Fresh & Easy Buzz. [April 19, 2010: Tesco Debating Whether to Launch Fresh & Easy Into Northern California This Fiscal Year... or Wait

Fresh & Easy's officially stated reason for not yet opening any stores in Northern California (the grocer also has 18 confirmed stores in the San Francisco Bay Area) is because it has decided to wait until the economy improves before starting to open some of the stores in the region.

The economy has and is improving in Northern California. And although it isn't yet perfect, it's apparently good enough for Sprouts Farmers Market and Smart & Final's Henry's Farmers Market to feel confident enough to enter the market, Sprouts already opening its first store, and Henry's set top open its first Northern California unit just two months from now.

Related stories in our 2010 Northern California Special Report

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

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

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

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

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

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

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

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

Upcoming New Markets News: Northern California--Sacramento

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

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

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

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

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

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

Below is how Michael Teel describes Good Eats Grocer:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Upcoming New Markets Report-Sacramento: Former Raley's CEO Michael Teel and Partners Preparing Launch of New 'Good Eats Grocer' Small-Format Chain

A Sacramento, California business group called M2 Venture Partners, which is headed by Michael Teel, the former CEO of Sacramento-based supermarket chain Raley's, has leased and is currently remodeling a former restaurant site (formerly called Adiamo restaurant) in East Sacramento, which it plans to turn into its first small-format prepared foods bistro and natural-organic-specialty foods market of a chain of such stores, called "Goods Eats Grocer." The first "Good Easts Grocer" market is set to open by the end of this year.

That first "Good Eats Grocer" store--which will have a full kitchen and seating inside, as well as offering in-house fresh, prepared foods for takeout., along with selling natural, organic and specialty foods and groceries--will be located at 32nd Street and Folsom Boulevard in East Sacramento.

According to Teel, the East Sacramento "Good Eats Grocer" market will be just the first of a chain of such combination prepared foods bistros and natural-organic and specialty foods stores the enterprise plans on opening in the Sacramento area.

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

Teel's partner in M2 Venture Partners (the second Michael in M2) is well-connected Sacramento-based technology company entrepreneur, investment banker and former hedge fund founder and manager Michael Ashker.

"Good Eats Grocer" is just one of numerous enterprises M2 Venture Partners is involved in. Those various ventures include a partnership with the Raley's supermarket chain, along with ventures in the high technology, health care and media fields. Mr. Ashker also served as an advisor to fast-growing natural foods chain Sunflower Farmers Markets, arranging $30 million in new financing for the retailer through one of his investment funds last year.

Teel is fairly well connected in Sacramento himself, especially when it comes to food and grocery retailing. He is the only grandson of Tom Raley, founder of the Raley's supermarket chain, and is thus his generation of the family's only male heir to the family supermarket fortune. Raley's remains family-owned.

Michael Teel worked for the Raley's chain throughout his youth. In 1983 he left to pursue what he calls academic interests. Following that, he started his own advertising agency specializing in the food industry. He returned to Raley's in 1988. He rose to become president of the supermarket chain in 1996, and then became CEO in 1998, when long-time company CEO Charles Collings retired.

It was under Teel's leadership that Raley's experienced its biggest growth spurt, acquiring the Sacramento-based Bel-Air Markets chain, Raley's chief competitor in the Sacramento Metro market, and Gilroy-based Nob Hill Foods, a leading family-owned chain with stores in the San Francisco Bay Area and the south coastal region of Northern California. Raley's still uses both banners as its premium segment retail brands, and continues to grow them selectively with new stores.

Teel left Raley's a few years ago to pursue investment and entrepreneurial efforts like his M2 Venture Partners group, which the small-format "Good Eats Groce"r chain is a product of.

The two Michaels, Teel and Ashker, said they spent over a year formulating their concept for the prepared foods bistro-specialty foods market.

The partners also demonstrated how well-connected they are in Sacramento buy beating out Whole Foods Market, Inc. for the lease on the 32nd Street and Folsom Boulevard restaurant building and site in East Sacramento where the first "Good Eats Grocer" market will open.

Whole Foods Market planned to acquire the building and then level it, purchase land surrounding the site, and build a large, multi-level Whole Foods natural foods superstore in the prized location. It would have been Whole Foods second Sacramento superstore. The supernatural grocer currently is looking for a new site for its second store in the city.

However, even though the Whole Foods Market, Inc. offer was a lucrative one, the family that owns the former restaurant and surrounding property, decided to go with the two local entrepreneurs instead.

Besides it's location, one of the key reasons the partners say they wanted the East Sacramento site for the first store of their chain, is because the existing restaurant building has a large, fully-well-appointed kitchen in it. M2 Ventures says it plans to make the kitchen area the centerpiece of the bistro and natural-organic-specialty foods market, completely remodeling the building around it to create the market. They will keep much of the existing building shell and interior because they want to preserve as much of the buildings local character as possible, they said.

The "Good Eats Grocer" market will feature a gourmet chef running the kitchen. Quality foods will be prepared and served in-store, as well as offered to go. Wines by the glass also will be offered in the bistro, and the market will sell an extensive selection of wines by the bottle, along with its selection of domestic and imported natural, organic, specialty, ethnic and gourmet food and grocery items.

Teel and Ashler also have brought in veteran specialty and gourmet foods retailer Carl La Force as chief operating officer for the "Good Eats Grocer" chain. He recently moved to Sacramento from Portland Oregon to join the company.

For the last few years, Mr. La Force has operated his own grocery and food service consulting firm He has over 30 years experience in the specialty and gourmet foods industry. For example, he was instrumental in the development and opening of the Metropolitan Market specialty and gourmet foods chain in Seattle, Washington.

Prior to that, he opened the flagship store of the upscale Larry’s Markets in Washington state. Mr. La Force managed the store for 5 years, getting numerous industry awards for innovative merchandising. According to Michael Teel, Mr. La Force also brings an unequaled passion for fine foods to "Good Eats Grocer." "He has spent the better part of his career developing contacts and networks of the obscure and pure traditional artisan producers of fine foods around the world," Teel says.

The "Good Eats Grocer" bistro-markets plan to offer a wide selection of artisanal natural, organic and specialty foods, along with more common brands and products in the categories.

Unlike Tesco's Fresh & Easy Neighborhood Market, which plans to start opening the first of an initial 19 of its small-format grocery and fresh foods markets in the Sacramento region in early 2009, the small-format "Good Eats Grocer" stores won't sell basic grocery items, according to M2 Venture Partners. Rather, the focus will be on the natural, organic and specialty items, along with the in-store prepared foods.

However, since a major portion of Tesco Fresh & Easy's offering is prepared foods, which are made in a central kitchen in Southern California at present and then delivered to the stores, the new prepared foods bistro and specialty market chain being started by the two local Sacramento businessmen will be a direct competitor for that portion of Fresh & Easy's offering.

In that way, the "Good Eats Grocer" format is more like Wal-Mart's upcoming Marketside small-format grocery and fresh foods stores, which the mega-retailer plans to start opening in the Phoenix, Arizona Metropolitan region this fall.

The Marketside stores will feature a kitchen in-store, along with seating for about 10 customers at a time. Prepared foods for takeout also will be offered at Marketside.

Marketside parts company with Good Eats there though and joins Tesco's Fresh & Easy in that it too will offer a selection of basic food and grocery items at discount prices like Fresh & Easy stores do.

However, based on information from our sources, it's likely Marketside will offer a greater selection of natural, specialty and gourmet foods than Fresh & Easy stores do, along with its assortment of basic food and grocery items.

M2 Ventures didn't provide a timetable regarding when it will start rolling out other "Good East Grocer" stores after the first one opens later this year. However, the company says their plans are for a fairly substantial retail venture with "Good Eats Grocer" in the Sacramento region, far beyond the one market set to open before the end of this year.

Teel's decades of experience at Raley's, which is a leading prepared and specialty foods grocer, should be put to good use in the new small-format food retailing venture. Additionally, since both partners are well connected in Sacramento's business, real estate and political world's, finding good locations for the combination prepared foods, natural-specialty foods markets should be much easier than it normally would be for an out of the area operator and retailer.

Further, since both Teel and Ashker also are extremely well known in Sacramento and the surrounding region, they should be able to garner lots of publicity for the venture prior to the first "Good Eats Grocer" store opening, and long after that.

Upcoming New Markets Special Report: Raley's Increasing 'Local Foods' Efforts in Sacramento and Northern California Market Regions

Sacramento, California-based family-owned regional supermarket retailing powerhouse Raley's is expanding it's already aggressive local foods merchandising and marketing programs in a number of ways, clearly visible in its stores and in it's multi-media advertising.

Among the increased local foods merchandising and marketing efforts the 129 store regional supermarket chain is making include:

>Labeling all foods grown or produced within a few hundred miles from its Sacramento, California base with eye-catching "locally-grown" and "locally-produced" shelf signs. This includes fresh produce, meats, perishables and dry grocery items, including natural, organic and specialty foods offerings.

>Labeling foods grown and produced in California, but farther than a few hundred miles away from its Sacramento base, with "Grown in California" shelf signage.

>Increasing the number of exclusive deals it signs with local farmers, buying the local growers' entire fresh produce crops, and touting the locally-grown fresh fruits and vegetables by building massive displays in store produce departments, running large front page ads for the local items in the retailer's weekly newspaper advertising circular, and often running full-page color ads in the major daily newspapers in the grocer's market regions featuring such local produce such as corn on the cob, strawberries, melons and other fruits and vegetables grown by local farmers.

Raley's contracts for the entire crop of a given grower (which can be expensive), which are grown by top-quality farmers, because locally-grown produce is now so popular in California that it gives the retailer a major competitive advantage to do so. It touts not only the local aspect of the fresh produce items, but the exclusivity to Raley's as well.

>Working closer with local natural, organic and specialty foods' producers and vendors by authorizing their local food and grocery products in the stores, promoting the local items more extensively, and partnering with the local producers at special events like community food fairs and charitable events designed to increase awareness and sales of locally-grown and produced food products.

>Creating more "local foods" in-store displays and cross merchandising the local items both by meal complementary merchandising techniques and by local region.

>Offering locally-grown fresh produce at reasonable prices rather than doing what some food retailers do and selling them for a premium.

>Conducting more frequent in-store local foods sampling events, often having numerous local foods producers, including farmers, do the tastings in the stores at the same time.

Raley's, which is the food and grocery sales market share leader in the Sacramento region market, and has stores under the Raley's, Bel-Air Markets, Nob Hill Foods and Food Source banners elsewhere in Central and San Joaquin Valley, north of Sacramento, in the San Francisco Bay Area and in Nevada, has long positioned itself--and is--as the local grocer, even though the chain has grown to 129 stores and nearly $4 billion in annual sales.

Along with its extensive--and increased--local foods merchandising and marketing commitment, the supermarket chain has a charitable foundation that gives millions of dollars to charities in Sacramento and the other Northern California regions where it operates stores.

In addition to the foundation, the corporation itself donates millions of dollars in cash and in-kind food donations to non-profit groups, charitable organizations and food banks and pantries throughout Northern California and Nevada.

The grocer also has a program in which customers can select a card in either $5, $10, or $20 amounts at each checkout lane as a way to make a donation to local food banks. Shoppers select the card while waiting to get checked out, give it to the store clerk as she rings up their purchases, the clerk scans the card, and the amount goes into a special account, 100% of which is donated to programs to feed the hungry. Raley's matches a portion of the total funds donated by customers each year.

Raley's also funded Sacramento's fairly new state-of-the-art baseball stadium for the city's super-popular Sacramento Rivercats minor league baseball team. The baseball stadium, called Raley Field, is packed every night during the season with families who as far as they are concerned believe the local minor league team is every bit as enjoyable to watch as a major league baseball team is.

Raley's runs all sorts of promotions in conjunction with the team and stadium. The grocer also gives out hundreds of tickets during the season to lower income families and children. To say the River Cats are a hot ticket is the understatement of baseball season. They draw more fans on many nights than a lot of major league baseball teams in parts of the U.S. do.

Raley's was a first-mover in California and national food retailing in terms of getting into local foods merchandising and marketing in a serious and major way. The added efforts and programs started by the grocer a few months ago and increasing even more recently are positioning the chain as one of the foremost local foods food retailers in the U.S.

It's paying dividends for the supermarket chain as well; that's why Raley's continues to add more elements and aspects to its local foods program.

Others like Safeway Stores, Inc. Whole Foods Market, and numerous regional chains, multi-store independents, single-store independent grocers and natural foods retailers also are into local foods merchandising in a big way in California.

In fact, those few food retailers who aren't "going local" are really at a big disadvantage, as most grocers and California market observers will tell you the local foods movement is growing much faster than the organic foods movement is in the Golden State.

In part that's because the organic foods movement is more mature, and still is growing considerably. But that's really only a small part of the equation. the major reasons the "buy local" is growing faster than the organic consumer movement right now in California is because it hits on so many hot buttons important to the state's consumers. These include freshness of product, price, environmental concerns, food safety concerns, desire to support local agriculture, and many more.

Raley's own research identified this growing movement some time ago, and that along with the best indicator, sales of locally-grown and produced food products in the grocers stores, is encouraging the family-owned supermarket chain to grow its local foods merchandising and marketing programs even more.

Regional Market Intelligence Report: Market Research Firm Trade Dimensions, Inc. Quantifies Latest Sacramento Region Grocery Market Share Percentages

On February 28, we wrote this piece, "News & Analysis: Tesco's Fresh & Easy Confirms 19 Store Locations for the Sacramento-Vacaville Region in Northern California." Our piece included an analysis of the Sacramento region grocery retailing market, including the competitive environment Tesco's Fresh & Easy will find when it opens its first stores in the area, either late this year, or more likely in early 2009.

Today's Sacramento Bee, the Sacramento region's major daily newspaper, has a similar story on the Sacramento area grocery retailing environment. The article in the paper's business section reports on a new study just released by the market research firm Trade Dimensions, Inc. which details the last six months of grocery retailing competitive activity in the Sacramento market.

Wal-Mart on a roll

Trade Dimensions' reports that the biggest gainer in the Sacramento region grocery retailing market is that brawny big-box bully from Bentonville, Wal-Mart, Inc. Wal-Mart, which only recently began opening its combined food and general merchandise Supercenters in the region, increased its share of the Sacramento-area market to 7.1%, from a meger 2.3 percentage points just a year earlier.

Wal-Mart has opened four new Supercenters in the market region in the last two years, and has plans to open two more soon. Wal-Mart has a number of its standard Wal-Mart discount stores in the region which sell a limited assortment of grocery products. However, Trade Dimensions, Inc.--like all retail grocery market research firms and analysts--only counts the retailer's Supercenters in terms of calculating market share numbers, since they are the format that offers a full-line supermarket inside the stores. Wal-Mart doesn't have any of its smaller, 45,000 square foot Wal-Mart Neighborhood Markets in the Sacramento area to date.

For retail grocery sales market share assessment purposes, the Sacramento market is defined as the following counties in the region: Sacramento, El Dorado, Nevada, Placer, Sutter, Yolo and Yuba counties in California, and Douglas County, which includes Carson City, Nevada in Northern Nevada. It's a population of over 2 million people.

Sacramento region market share leaders

Rounding out the retail grocery sales market share picture in the Sacramento market region, according to the Trade Dimensions' report are:

>Raley's. Raley's, which is based in Sacramento, operates 129 supermarkets under the banners Raley's Superstores, Bel-Air Markets and Nob Hill Foods. The chain also operates a fourth banner, Food Source, which is a discount warehouse store format. As we reported on February 28, Raley's is far-and-away the market share leader in the Sacramento region, with a 34.2% share of the market, according to Trade Dimensions.

>Safeway Stores, Inc. Safeway, the third biggest grocery chain in the U.S., has a 21.3% share of the Sacramento grocery market, according to the Trade Dimension's report. Safeway has its corporate headquarters in Pleasanton, California (Bay Area), which is about 70 miles from Sacramento. Safeway is the market share leader in Northern California, which includes the San Francisco Bay Area, along with the Sacramento area, and the other regions which comprise the northern-half of the golden state.

>Save Mart. Save Mart, which is a privately-held supermarket chain with its corporate headquarters in Modesto, California, which is about 60 miles from Sacramento in the Central Valley, has an 11.4% share of the region's grocery retail market. Save Mart's share of the area market dropped about 1.4% this year over last year, according to the report.

However, this is nothing to worry about for Save Mart. Three years ago it wasn't even a minimal player in the Sacramento region market. In 2006 it acquired Albertsons, Inc.'s Northern California division, which not only doubled the number of stores the grocer has, but doubled it annual sales from about $3 billion to a current $6.5 billion. The acquisition also put Save Mart into the Sacramento market for essentially its first time.

The 1.4% drop in market share is do to the fact Save Mart closed a couple of the older Albertsons' stores in the region, in addition to the fact it has had to remodel a number of the stores, and convert all of them to its Save Mart banner. We actually expect to see Save Mart's market share numbers increase by a few percentage points in 2008 because it's nearly done converting all of the area stores.

The Save Mart brand name is strong throughout the Central Valley, including in the Sacramento region. Additionally, the grocer is a value-based food retailer and promotes heavily. Additionally, the Sacramento area, like most of California, is currently experiencing bad economic times. This is a climate Save Mart has historically done very well in, compared to other grocery retailers.

Other key players in the region

Other players in the Sacramento Market, but not included in the Trade Dimensions' report, include Food-4-Less, a small chain of price-impact warehouse format big-box stores, Nugget Markets (which also owns the Food-4-Less chain), a multi-store locally-based independent which operates upscale supermarkets that feature basic grocery products, along with lots of specialty, natural and organic product offerings department-wide, Trader Joe's, which has a handful of stores in the region, and Whole Foods Market, Inc. Whole Foods currently has only one store in the market region, in Sacramento. However, the supernatural grocer is looking to open at least two more stores in the area in the near future.

Nugget Markets, which is based just outside Sacramento in Woodland, has been named one of the three best independent grocers in America by the supermarket trade publication Progressive Grocer. Additionally, the grocery retailer was named this year (and for the last three years) as one of the 100 best companies to work for (number 12 out of 100) in the U.S. by Fortune magazine in its annual "best companies to work for in the USA" survey.

Nugget Markets is growing rapidly and opening new stores in the region. The local grocer currently has eight of its upscale stores in the Sacramento area, with more on the way. While the Nugget stores are upscale in design and product selection, the grocer also puts a low-price emphasis on its everyday grocery product selections.

In fact, Nugget offers shoppers what it calls its "Price Challenge." The food retailer invites any customer to purchase $100 worth of groceries at a competitor's supermarket. The shopper can then bring the $100 grocery purchase into a Nugget grocery store, and a clerk will scan the items at a register. If the Nugget total is higher than the total on the receipt from the store where the customer bought the $100 worth of items, Nugget Markets will give the shopper double the price difference, plus an extra $10.

All of the Nugget grocery markets have a "scorecard" on the wall above the front entrance which shows how many shoppers have taken the "Price Challenge," along with how Nugget measures up on the challenge with the competition. Note: they win the majority of the time.

Drug chains Long's and Walgreen's operate numerous drug stores in the Sacramento area. The stores--Long's more so than Walgreen's--sell limited-assortments of packaged groceries, lots of beverage products, and fresh dairy and frozen foods' products in their stores at discount prices. There also are a number of long-established independent grocers in the market region--such as upscale Corte Brothers Markets--which have their own local niches.

Wal-Mart the big growth factor in region

The big factor in the market however is Wal-Mart. With only a handful of Supercenters in the region, it's already controlling over 7% of the grocery dollar market share. When it opens its two newest Supercenters, that percentage should increase by at least two points based on the sheer volume the mega-stores do. We also know Wal-Mart has plans for more Supercenters in the market, if it can get them approved and built.

Wal-Mart hasn't even started to scratch the surface in terms of the number of Supercenters it wants to build and open in the market. It's biggest onstacle to doing so is that it faces opposition by cities and organized groups each time it proposes a new big-box store in the market. In fact, many cities in the area have enacted "big-box store" ordinances specifically designed to keep a Wal-Mart Supercenter out of their communities.

The Tesco Fresh & Easy factor

Tesco's Fresh & Easy Neighborhood Market, with an initial 19 stores in the region, is likely to inject additional competition into this already competitive market. However, one has to put the chain's entrance into the market in perspective relative to Wal-Mart. Fresh & Easy grocery markets average about 10,000 -to- 13,000 square feet. In other words, the 19 new Tesco Fresh & Easy stores in the region will add about 209,000 square feet of new retail grocery sales square footage to the market.

In contrast, Wal-Mart's Supercenters average about 215,000 square feet. About 40% of that square footage, or about 100,000 square feet is dedicated to merchandising food and grocery-oriented products. That means the two new Wal-Mart Supercenters set to open later this year in the Sacramento market will have roughly the same amount of overall square footage devoted to selling groceries as all 19 of the Fresh & Easy grocery markets will have.

Of course, total square footage is only one measure. The goal of Tesco with the Fresh & Easy stores is to locate in neighborhoods throughout a region, creating a "critical mass" of stores that will hopefully serve as the primary and secondary neighborhood grocer for the residents of those neighborhoods. In contrast, Wal-Mart Supercenters are generally located outside of residential neighborhoods, and require residents to drive a distance to shop at them.

Raley's won't just observe the new competition

Of course, local guy Raley's has for decades had the role of the Neighborhood grocer--even though its stores range from about 45,000 square feet -to- as big as 75,000 square feet. But in Raley's case, size doesn't matter. It is the local brand. [Read more about Raley's as the local brand in our piece here.] Trying to convert Raley's primary customers to a Wal-Mart Supercenter or a Fresh & Easy Neighborhood Market is no easy task in the Sacramento region. And, the locally-based chain isn't about to sit still and let it happen either. It's an innovator, and is planning some new innovations to meet all its new competition.

For example, Raley's recently introduced a service into some of its stores in which a shopper can place their grocery order online via Raley's website. The store then picks the customer's order, which the shopper pre-pays online using his or her credit card. When the customer arrives at the Raley's store, a clerk brings the grocery order out to the shoppers car, so she doesn't even have to go into the store to get her groceries.

Raley's also is very customer service oriented, a feature most Sacramento shoppers seem to like. Store clerks offer to carry every grocery purchase out to a shoppers car, for example. Additionally, the chain has a policy in which is will special order any item a customer wants for them, even if they don't carry it in any of their stores.

The West Sacramento-based grocery chain also is a long-time leader--not just in Sacramento but nationally in the U.S.--in natural, organic and prepared foods merchandising. Most of its stores have large, store-within-a-store natural products' departments, which are staffed with clerks who assist shoppers with any questions they might have. The departments carry an extensive selection of natural, organic and healthy foods across all dry grocery, beverage and perishable foods categories.

Raley's also is respected for its position on food safety, which leads to strong fresh produce and meat sales. It is one of the only supermarket chains in the U.S. which has all of its fresh produce inspected by a third-part professional company, which tests the produce items and certifies them as having either low or zero-detectable levels of pesticide residue. Raley's started this program after the infamous Alar chemical in apples scare in the U.S. in the 1980's, and has continued and even expanded the third-party testing program today.

You can read the full story,"Wal-Mart gains ground in Sacramento grocery stores," by the Sacramento Bee's Jon Ortiz here.