Competitor News: Safeway Stores, Inc. launches its Own Commercial Real Estate Development Division; CEO Burd Says Bad Times Offer Opportunity

Pleasanton, California (San Francisco Bay Area)-based Safeway Stores, Inc., which operates about 1,750 supermarkets under various banners in the U.S. and Canada, including over 500 supermarkets under the Safeway and Vons banners in California, Nevada and Arizona where Tesco's Fresh & Easy Neighborhood Market has its stores, has created a new real estate development division and business that has so far reviewed 36 projects for possible development and is working actively on a handful of the projects, company CEO Steve Burd (picture at top) told analysts during an investor conference last Thursday at Safeway headquarters.

"The opportunities [to develop undervalued real estate] are pretty extraordinary right now for people who can step up to the table", Burd said at the meeting. In other words, Safeway sees the current economic downtown as an opportunity in the commercial real estate space for the company.

The Safeway CEO offered an example of the type of projects Safeway is reviewing. For example, one project "might be" Safeway developing a shopping center where it operates a grocery store, and leasing or selling the retail space surrounding the store. Safeway Stores, Inc. would retain ownership of its grocery store in that center, according to Burd.

The new commercial real estate development business is part of Safeway's expansion beyond its core food and grocery retailing business under Burd's leadership as CEO.

For example, the company created its Blackhawk gift-card business, which started as a small in-house gift card marketing business, selling Safeway store and third-party gift cards in the chain's supermarkets. Blackhawk has now grown into one of the largest gift-card marketing companies in the U.S., marketing and selling third-party gift cards to retail chains nationally as well as via the Internet.

Additionally, earlier this year Safeway created a brand marketing and distribution arm in which it is marketing its O' Organics and Eating Right store brand food and grocery products to other retailers and grocery wholesalers in the U.S., as well as globally.

O' Organics has sales in Safeway supermarkets in the U.S. and Canada of about $500 million. Eating Right is approaching that same sales volume. To put that in scale compared to Tesco's Fresh & Easy in the Western U.S., sales at the grocery chain's about 103 grocery markets are currently in the $400 million range, which is about $100 million less than the 2008 sales of Safeway's O' Organics store brand in its supermarkets. That's not a knock on Fresh & Easy -- it's a start up venture. Rather its merely a comparison in scale to on of the big chains it is competing directly against.

France's Carrefour chain, the number two global retailer after Wal-Mart (Tesco is number three globally) already is selling many of the O' Organics branded items in its stores in Asia. Safeway will soon announce additional retailers outside the U.S., along with some in the U.S., that will offer the brand, along with the Eating Right brand, in their stores.

This summer Safeway created a corporate health care subsidiary based on the programs the retailer has implemented within the company that have resulted in substantial health care cost savings for Safeway, which offers health care plans to all of its employees.

Add the commercial real estate division to this fast-growing non core retailing aspect of Safeway Stores, Inc.

Safeway owns lots of real estate, especially in California and elsewhere in the Western USA. The grocery chain also develops lots of real estate by virtue of the fact its supermarkets generally serve as retail anchors in shopping centers. As a result, it makes logical sense for the company to get into the commercial real estate business since the synergies with its core supermarket retailing business are obvious.

As Burd mentioned at the analysts meeting last Thursday, part of the motivation for getting Safeway into the commercial real estate business has to do with the numerous undervalued properties available at present, with the financial crisis and economic recession in full bloom. Additionally, the residential foreclosure crisis has spread significantly into the commercial sector, particularly in the Western U.S., which means there currently are numerous properties on the market at deep discounts.

Big supermarket chains like Safeway, Tesco, and others are at an advantage because the business generates lots of cash flow compared to other types of businesses, as well as compared to other forms of retailing. Therefore this cash flow makes it easier for the big chains to have cash available to invest in areas like commercial property development.

Further, having its own commercial real estate arm offers some real cost savings for Safeway in terms of developing new retail store sites and now in creating new shopping centers in which it can anchor with its supermarkets.

Halloween 2008: A 'Great Pumpkin' You Likley Won't Find in the Supermarket Produce Department This Halloween; Or Ever

Every October for the last 35 years, San Francisco Bay Area-based Safeway Stores, Inc. sponsors the Half Moon Bay Pumpkin Weigh-Off competition in that coastal city in the Bay Area.

Safeway, which operates over 600 supermarkets in California, Nevada and Arizona (and nearly another 1,200 more throughout the U.S. and Canada), awards the first-place winner of the Pumpkin-growing competition grand prize money of $6 per pound for the winning mega-gourd. The grocery chain also awards prize money to the top finalists.

That can be lots of money since the winners are really giant pumpkins.

The food and grocery industry Blog Natural~Specialty Foods Memo has a piece today -- Halloween 2008 -- about the 2008 Safeway-sponsored Half Moon Bay, California Pumpkin Weigh-in competition and it's winners (including the grand prize winner), which you can read by clicking the link here.

The winner and his giant pumpkin is pictured at the top of this post. But you have to read the story at the link in order to find out his name, how big of a winning pumpkin he produced, and how much in grand-prize money he won.

Trick or Treat ...

Happy Halloween!

Southern California Market Report: Safeway Stores,'the market by Vons' Mass-Mails First Advertising and Promotional Flyer to Vons Club Card Members

Safeway Stores, Inc. has mass-mailed its first promotional flyer for its first small-format grocery store, "the market at Vons," which opened in Long Beach, California in May.

The advertising sheet, which was mass mailed to members of Vons' Club Card who live not only in the neighborhood where the store is located but also to residents who live a considerable distance away from the grocery store, introduces the Long Beach small-format grocery market as "Your neighborhood store (that) offers the best of everything."

The front of the advertising flyer, as you can see in the photograph at the top, features a picture of a bicycle with a basket full of groceries on it, with the tag line: "a refreshingly simple way to shop." The picture reinforces the messages of simplicity, conveniece, neighborhood, community, and the environment.

The messages are then elaborated on inside the flyer, pictured directly below, along with featuring items at promotional prices.

Below is the full text or copy inside of the mass-mailed promotional flyer:

welcome

Your neighborhood store offers only the best of everything.

a refreshingly simple way to shop

The Market by Vons is designed with a simple layout, so its easy to find what you're looking for. It's the perfect place for you're "fill-in" shopping or to grab a quick and delicious meal or snack.

the big little store

We offer a wide range of products, including fresh produce, meat and seafood, ready-to-enjoy meals, freshly baked goods and other everyday basics. So you can find everything you need but less of the things you don't, like long lines and 12 different kinds of ketchup.

no extra charge for convenience

You can expect the same great service and everyday value prices you'll find at Vons.

we want to be a responsible neighbor

Our store is 100% wind powered and is actively involved in programs that benefit our community.

have a taste

We offer samplings of our products daily. We'd like to help you discover what's in store in a delicious way.

Safeway is offering 10% off every item in "the market by Vons" small-format grocery store in the advertising flyer for the entire month of July.

In addition to the across the board 10%-off deal, the flyer promotion offers five features at fairly substantial discounts above 10%. These features are: A package of Safeway's private label Eating Right healthy brand fresh mixed lettuce greens, offered for free with no minimum purchase; $2-off any of Safeway's popular O' Organics store brand organic food and grocery items in the store; $3 off of the regular price of Safeway's Signature Cafe in-store roasted ready-to-eat whole chickens; and two deals on wines.

Safeway's Southern California Vons division has preloaded these promotions into all of the Vons Club Cards so that when shoppers purchase the items at the Long Beach "the market by Vons" store the promotional prices will automatically be reflected at the point-of-sale.

In the advertising flyer, under the "a refreshingly simple way to shop" header, Safeway mentions "The Market" is great for "your fill-in shopping." This is the retailer's positioning of the small-format "The Market" stores as we first reported here.

Unlike Tesco's Fresh & Easy Neighborhood Market, which is positioning its small-format (10,000 -to- 13,000 square foot) Fresh & Easy combination basic grocery and fresh foods Fresh & Easy stores as everyday or primary shopping neighborhood grocery markets, Safeway is positioning its "The Market" small-format (15,000 -to- 20,000 square foot stores) as more upscale, "fill-in " shopping venues as part of a multi-format strategy. In Southern California that multi-format strategy including Vons supermarkets and superstores, Vons Pavilions supermarkets, which have an upscale and specialty foods focus, and now the small-format "The Market" format, the first store of which is "the market by Vons" in Long Beach.

The Long Beach "The Market" store has come under some criticism since opening in May for having prices which some shoppers say are just too high in general, while others have commented the small-format store's prices are higher than those at traditional Vons supermarkets in Southern California.

Fresh & Easy Buzz has learned two things in this regard.

First, Safeway is adjusting the pricing in the Long Beach "market by Vons" store to make sure its generally in line with the everyday pricing at nearby Vons supermarkets.

Second, we've learned Safeway plans to mass mail flyers like this first one on a regular basis in order to create a value proposition for "The Market," along with positioning the format as convenient, quality and community-oriented.

In the mass-mailed advertising piece, Safeway says the Long Beach store is powered 100% by renewable wind power. The grocery chain is achieving this by buying wind power credits for 100% of all the energy the store consumes. Safeway has been doing this for some time for the stores throughout the U.S. in which it operates fueling or gas stations alongside the supermarkets. Every Safeway fueling center is powered by wind energy in the form of Safeway buying wind power credits equally the energy used by those gas stations.

As Safeway opens more "The Market" format stores, the retailer plans to put a major emphasis on the dual and compatible concepts of the environment and community with the small-format stores.

Green issues are front and center currently at Safeway. In addition to the wind power credits, Safeway is in the process of putting solar panel arrays on about 35 of its supermarkets in Northern California. The solar panels are designed to provide about 35% of a stores total energy use. Additional panels are set to be installed on more stores in Northern California as well as on a number of stores in Southern California.

Safeway also is converting its entire trucking fleet from traditional fossil based diesel fuel to biodiesel fuel, made from vegetable oils. The retailer initiated this program last year, before the price of diesel fuel soared, primarily for environmental reasons. However, with diesel fuel edging towards $6 a gallon, the economics of converting its huge trucking fleet to biodiesel should pay off well for the grocery chain much faster than it anticipated they would.

More on Safeway's 'The Market' Format: 20-Year Food Retailing Industry Vet Offers Observations and Analysis on 'the Market by Vons,' Long Beach, CA

Inside Safeway's 15,000 square foot "the Market by Vons" in Long Beach, California. The store, the first of the small-format, opened on May 15.

On May 15, we wrote this piece about the grand opening of Safeway Stores, Inc.'s first "The Market" small-format (15,000 square feet) food and grocery store in Long Beach in Southern California, called "the Market by Vons." The format averages 15,000 -to- 20,000 square feet.

Yesterday, we reported Safeway is in negotiations with the developer of a 22 story high rise condominium tower in downtown San Jose, California in the San Francisco Bay Area to put its second "The Market" format store on the ground floor of that residential building, as the retail anchor for the development.

Today, we bring you the observations and analysis of "the Market by Vons," Safeway's first small-footprint food and grocery store, in Long Beach, California.

The piece below is written by a 20-year retail food and grocery industry veteran, and regular Fresh & Easy Buzz reader and correspondent. The analysis was offered to Fresh & Easy Buzz via email based on our request of the writer to visit the store and offer our readers his observations and analysis. The writer is active in the retail food industry in Southern California at present, so asked we not use his name, which we are honoring.

Below in italics are the industry veteran's observations and partial analysis of Safeway's "the Market by Vons," which opened a little over two weeks ago in Long Beach, California. The piece was written on June 3, based on a June 2, 2008 visit to the store:

I went into "the Market by Vons in Long Beach yesterday....interesting store, but I really don't think it will compete that much with F&E (or Trader Joe's) unless they really start expanding and promoting their ready meals and carry more healthy products.

Here are my observations:

There wasn't very good signage over the prepared meals: salads, entree's, etc.

They really need to promote the fact that the products are fresh and were created by their restaurant chef .

I did like the presentation of the salads, especially the large round bowls and the safety seal that said "handcrafted."

The rest of the prepared meal presentation was just "OK" and I feel they really need to tout the fact that they were created by a chef.

I also don't think they will compete with F&E unless they do more organic and healthy entrees without preservatives. By the way...the code date on the salads (at "the Market by Vons") were 6/3...so I know there has been a lot of complaints about the short shelf life on F&E products...but the salads only had 1 day shelf life remaining. In addition, I couldn't find any code dates on the entrees, so I'm not sure if this is a good or bad thing in the eyes of the consumer.

I really liked all the tasting stations scattered about the store. In addition, all the employees were very friendly and made a special effort of saying "hi, can I help you." It actually almost felt like overkill, like there were too many employees with not enough to do. [Fresh & Easy Buzz Editor's note: Safeway Stores, Inc. has a corporate policy, which started in the late 1990's, in which every employee must say hello to every customer that employee comes into contact in the store.]

I did like how they presented the produce "in the round." It seemed pretty easy to find the produce you were looking for and everything looked fresh.

As for the dry grocery items...again, I was surprised by the lack of healthy products. Most of the products were run of the mill top brands, and very little private label. Once again, if they want to compete with F&E or trader Joe's (and who said they did?), then I think they need to have more unique healthy products in the store. They most certainly have a larger sku count then F&E does because their shelving is higher and not as deep, and they are displaying the product out of the case.

I did find the checkout rather confusing. They had self checkout and service checkout, but it was confusing because at the beginning they had a roped off section and it was hard to tell which line you needed to get into for which. It looks like they decided to go with about 50% self-checkout and 50% service checkout. I went with the service checkout (in retrospect I wish I had gone with the self so I could see how easy it was), but I got in the wrong line!

I found the pricing to be higher than a typical Vons' supermarket (maybe my imagination), and higher than F&E. But if the product was on promotion, it seemed closer to the F&E pricing.

I thought the atmosphere was very nice in the store, low mellow music (not sure if F&E is still piping in loud music in the stores, but I personally don't like it). Overall, I really felt 'the Market by Vons" in Long Beach was pretty much just a grocery store shrunk down with a few nice benefits (tasting stations, bread cutting, etc).

Fresh & Easy Buzz will be publishing additional observations and analysis--including an original piece we are working on based on two long visits to "the Market by Vons" to date--in the upcoming days. Stay tuned.

Breaking News: Safeway Stores, Inc. Nearing Negotiation End-Game For its Second Small-Format 'The Market' Store Site; This One in San Jose, California

Safeway Stores, Inc. is negotiating with the developer of the 88, a new 22-story high-rise condominium tower (pictured at left) in downtown San Jose, in Northern California's San Francisco Bay Area, to put one of its new "The Market" small-format grocery stores on the ground floor of the urban residential tower, Fresh & Easy Buzz has learned.

The 88 high-rise residential tower, located on San Fernando Street in downtown San Jose, is being developed by a partnership of San Francisco-based WMS Group and CIM Group. The residential tower will open this month.

Despite the residential housing bust hitting most parts of the U.S., downtown San Jose is experienced a boom, with about 1,000 new residential units coming on line in the last year. There are about 4,000 more in various stages of development for the downtown.

Safeway isn't confirming the negotiations with the high-rise condominium developer.

However, Fresh & Easy Buzz has checked with two commercial real estate industry sources in the region--one was the one who gave us the initial tip about Safeway looking for locations in the San Jose area for a small-format grocery store concept which we published in a piece in December, 2007--and both confirmed Safeway and the developer of the 88 urban residential tower in downtown San Jose are negotiating over Safeway's putting a "The Market" small-format grocery store on the building's ground floor to serve as the retail anchor of the project.

Additionally, we talked with the real estate agent selling units in the new condominium project. She confirmed the negotiations were going on and said she has told potential residents that what she called a "mini Safeway" was likely going to anchor the building's ground floor.

As we reported in January, Safeway Stores, Inc. hired the Cornish & Carey commercial real estate firm to find the grocery chain up to an initial five locations in the South Bay Area region for its "The Market" format stores. It looks like the new 88 condominium high-rise residential tower in downtown San Jose will become one of those five sites, based on the information our sources have provided. [Read a recent, March, 2008, update on Safeway's small-format activity here. This was before the first "The Market" store opened in Long Beach, California two weeks ago.

As we reported on May 15 here, Safeway opened its first small-format "The Market" format store in Long Beach in Southern California on May 15. That 15,000 square foot store, called "the Market by Vons" because Vons is the banner Safeway operates in Southern California, is located in a former Vons supermarket building which the grocer decided not to convert to its Lifestyle supermarket format--which it's doing to all of its supermarkets in the U.S.

Tesco's Fresh & Easy Neighborhood Market plans to open 18 of its small-format, combination grocery and fresh foods grocery markets in the San Francisco Bay Area beginning either at the end of this year or more likely in early 2009. The leases for the 18 stores are inked, and the stores are being either built or empty buildings the retailer acquired for the stores are in the process of being renovated for the Fresh & Easy format.

Nearly all of the produce items merchandised in the Long Beach, California "the Market by Vons" are bulk, unlike Tesco's Fresh & Easy Neighborhood Market, which pre-packages nearly all of its produce in plastic tubs or plastic bags.

Four of the 18 Bay Area Fresh & Easy stores will be in the South Bay region: two in San Jose, one in nearby Sunnyvale, and one in Mountain view.

Inside "the Market by Vons," Long Beach, California. the design and merchandising scheme pictured above is the basic interior package for Safeway's "The Market" format.

During the grand opening of "the Market by Vons" in Long Beach on May 15, Safeway Stores' Rojan Hasker, president of Lifestyle stores and new concepts for the grocery chain, said the retailer is currently looking at an initial 25 locations to start for its small-format grocery stores. Not all those locations will be in California. Some also will be in the food retailer's other market regions such as Arizona, the Pacific Northwest, Colorado and elsewhere.

The "Signature Cafe," like the one pictured above in the Long Beach, California "the Market by Vons," is fresh, prepared foods central in the small-format food stores.

The way "The Market" format stores will work is they get their full name based on the banner Safeway operates in a particular market, hence "the Market by Vons" in Southern California. In Northern California, as well as in the Pacific Northwest, Colorado, Arizona and the Washington D.C./Maryland/Virgina region, all markets where Safeway operates under the "Safeway" banner, the small-format stores, which average about 15,000 -to- 20,000 square feet, will be called "the Market by Safeway." In Chicago they will be "the Market by Dominick's;" in Alaska "the Market by Carrs," and so on.

The Long Beach "the Market by Vons" is getting a generally positive but also somewhat mixed reaction by customers. Most store shoppers we've spoken with say they like the format, it's design, feel and ambiance. Most also said they liked the product selection: a combination of basic store brand and national brand grocery items, specialty, natural and organic foods, fresh produce and meats, cheeses, wines and some non-foods items. "The Market" format also has a cafe called the "Signature Cafe," which is the name of Safeway's upscale store branded fresh, prepared foods items sold in its Lifestyle format supermarkets. The cafe features fresh, prepared foods for take out.

Specialty and gourmet cheeses are merchandised in display cases like the one pictured above in the Long Beach, California "the Market by Vons," in Safeway's "The Market" small-format grocery stores.

A number of customers of "the Market by Vons" weren't too pleased with the pricing however, saying it is much higher than Trader Joe's or Tesco's Fresh & Easy in their analysis. A few even mentioned they thought the pricing higher than a traditional Vons supermarket in Southern California.

We compared the prices on some items from "the Market by Vons" with those at a Trader Joe's outlet and a Tesco Fresh & Easy store not to far away from the Long Beach store. The prices on "the Market by Vons" items were higher; about 13% higher than the comparable items at Trader Joe's and about 15% higher than those comparable items at Fresh & Easy.

Safeway's 15,000 square foot "The Market" format grocery stores, like in "the Market by Vons" in Long Beach, California pictured above, feature wood burning hearths in-store in the bakery area. The hearths are used to bake fresh bread, cooked-to-order pizzas and other prepared foods items right in-store.

However, "The Market" format is much more upscale than either Trader Joe's or Fresh & Easy. It's a small-format extension of Safeway's evolving Lifestyle format, which is looking more like a Whole Foods Market store with each new Lifestyle format store the retailer opens. Therefore, we aren't sure of Safeway is too concerned that their prices are 15% or so higher than the two small-format food and grocery retailers mentioned above. While we were in the store, a number of shoppers referred to it as a "mini Whole Foods market."

In fact, Safeway's communications vice president Brain Dowling told us the positioning of "The Market" small-format stores is as secondary, "fill-in" shopping venues rather than as primary ones like Tesco wants its Fresh & Easy small-format grocery stores to be, or as specialty and natural foods category-killer store like Trader Joe's markets are.

And of course, the first store, "the Market by Vons" in Long Beach, has only been open about two weeks, which gives Safeway plenty of time to play around with its retail pricing scheme, as well as the format's merchandising selection, just like Tesco's Fresh & Easy Neighborhood Market is doing.

Photo Credits: From top-to-bottom. The first "the Market by Vons" photo is courtesy: Los Angeles Times. The remaining "the Market by Vons" photos are courtesy: Orange County Register.

What Others Are Saying: The LA Times on Safeway's New Small-Format 'Market by Vons' Grocery Store in Long Beach, California

Above is a photograph of the inside of the Long Beach the Market by Vons. Notice a couple things: The fresh produce in the store is bulk and displayed farmers' market style--as is the norm in California food retailing--rather than packaged like it is at Tesco's small-format Fresh & Easy grocery stores. Second: notice the store shelving/gondolas. The shelving is more high-profile, modern-supermarket-style rather than the warehouse store-type shelving Fresh & Easy stores use. The end-caps in Safeway's "The Market" format stores, like this one, also are made of wood, which is stained a deep, rich color. (Photo: Rick Loomis. Courtesy: Los Angeles Times.)

On Thursday, May 15 Fresh & Easy Buzz reported on the opening of Safeway Stores, Inc's first small-format grocery store, it's 15,000 square foot the Market By Vons, in Long Beach, California.

Read our breaking news piece, "Safeway Opens its First Small-Format 'The Market' Grocery Store Today in Long Beach, California here.

Today's (Saturday, May 17) edition of the Los Angeles Times has a story in the business section by business staff writer Jerry Hirsch about the store, which as we wrote in our piece is located in an older Vons supermarket which Safeway decided was too small and out of date to turn into one of its Lifestyle format supermarkets.

The Market by Vons is located on Ocean Blvd. in the Belmont Shore neighborhood in Long Beach.

Rather than attempt to convert the older Vons supermarket into a Lifestyle format Vons, Safeway decided to remodel it and convert it into its first "The Market" small-format, basic grocery, specialty and fresh, prepared foods grocery store.

Safeway will be converting other such stores in its market regions to the small-footprint, somewhat upscale "The Market" format. For example, in Northern California, the Pacific Northwest, Arizona and Colorado, the stores will be called the "Market by Safeway." In other regions like Chicago, the "Market by Dominick's," and the like, depending on the particular retail banner the grocery chain operates in a given market region.

The stores are sort of a hybrid basic grocery store, fresh, prepared foods and specialty foods' market, similar to Tesco's Fresh & Easy, but also different in look and kind.

In terms of the upscale and specialty products category perspective, Safeway has lots of experience in the categories from operating its Vons' Pavillions format supermarkets in Southern California for many years.

The Pavillions' banner stores, which Safeway obtained when it acquired the Vons chain and has continued to open additional supermarkets under the banner since then, also was in-part one of the inspirations for the food and grocery retailer's Lifestyle format, which it's in the processing of converting--except those stores it turns into "The Market" or decides to close--all 1,740-plus of its supermarkets in the U.S and Canada into. The retailer has converted about 70% of its total supermarkets into Lifestyle format stores to date.

There are numerous synergies between the Lifestyle format--which is a mix of basic food and grocery products value-priced, along with fresh, prepared foods and specialty, natural and organic offerings, with a big emphasis on "fresh," including produce and meats.

Read today's LA Times story, "Safeway Tries Downsizing to Better Fit Local Needs," here.

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.

Safeway CEO Steve Burd: 'I'm Not Particularly Worried About Tesco's Fresh & Easy Grocery Stores in California'

Safeway Stores, Inc. CEO Steve Burd, speaking at the Bank of America 2008 Consumer conference today in New York, said he is not "particularly worried' about Tesco plc.'s California invasion with its small-format Fresh & Easy Neighborhood Market grocery stores.

California is Safeway's home turf. The grocery chain has its corporate headquarters in the San Francisco Bay Area city of Pleasanton and operates about 750 stores in California and Arizona, under the Safeway, Vons, Pavillions and Pak N' Save banners. California and Arizona are Tesco's two primary market regions for its Fresh & Easy grocery markets.

Burd said that according to Safeway's research, each one of the 10,000 square foot -to- 13,000 square foot Fresh & Easy grocery stores that open within 1.5 miles of a Safeway supermarket has only 10% of the impact of the opening of a standard sized supermarket.

Just in case though, Safeway plans to open the first four or five of its own small format (15,000 -to- 20,000 square feet) convenience-oriented grocery stores this summer in the San Jose region in the Bay Area. [Read our recent March 5 piece about Safeway's new, small-format store development here.]

Tesco, the third-largest retailer in the world, has thus far opened 58 of its small-format, convenience-oriented Fresh & Easy grocery markets in Southern California, Arizona and the Metropolitan Las Vegas, Nevada region. The stores feature a limited-assortment of Fresh & Easy store brand and national brand everyday grocery items, along with specialty, natural and organic groceries. The grocery markets also sell an extensive selection of prepared foods, merchandise fresh produce and meats, wines and craft beers, fresh flowers, and a limited assortment of non-foods items.

The United Kingdom-based grocer also has signed leases for an initial 18 Fresh & Easy stores in the San Francisco Bay Area, along with inking deals for 19 of the grocery stores in the Sacramento region. The Northern California stores are expected to start opening perhaps as early as the end of this year but more likely beginning in early 2009.

At today's Bank of America conference, Safeway's Burd also said the grocery chain, which operates 1743 stores in the U.S. and Canada, will start to focus more on "everyday value pricing" rather than its current focus on "high-low" or promotional pricing.

That's fairly big news for the retailer. Burd said promotional pricing can and does drive people into the stores. However, he reminded conference attendees that in 2005 he said creating lower everyday pricing on a wide variety of items was the chain's goal since launching its "Lifestyle" format and store remodeling program in 2005.

The Lifestyle format has proven successful for Safeway. In fact, last year Burd announced the grocery chain would remodel all of its supermarket banner stores to fit the format. In January, Burd said the chain had about 65% of its stores now converted to the Lifestyle format.

Today, Burd said a series of ongoing cost reduction measures and improved business processes will make it possible for Safeway to this year start its focus on the "better everyday value" pricing program.

New Details and Analysis About Safeway's Small-Format Summer SF Bay Area Surprise for Tesco's Fresh & Easy Neighborhood Market

We were one of the first publications to report last year that Pleasanton, California-based Safeway Stores, Inc. was developing a new, small-format (15,000 -to- 20,000 square feet) grocery store similar to Tesco's Fresh & Easy Neighborhood Market, which the San Francisco Bay Area headquartered supermarket chain plans to initially open in the San Jose area sometime this summer.

Tesco plans to open an initial 18 of its small-format, combination basic grocery/semi-upscale fresh foods and specialty grocery stores in the San Francisco Bay Area beginning in late 2008, or more likely in early 2009. A number of these 18 initial stores will be located in the South Bay Area, in San Jose and the surrounding communities.

Since we reported the Safeway small-format grocery store development story, we've been following Safeway's development process closely, doing research and talking to as many industry--and industry-affiliated--sources as we can. As a result we've learned some additional facts about the new small-format grocery stores likely to open in July or August, 2008

Small-format stores will likely open in July or August, 2008

First, based on information from our various sources, we believe the first of the four -to- five pilot Safeway small-format grocery stores will open in either July or August of this year in the San Jose area. Part of Safeway's reason for wanting to open the stores this summer, is so that the retailer can have the intial stores opened for a significant period of time prior to Tesco entering the market in either late 2008 or early 2009.

It was initially believed Tesco would open the first of its Bay Area Fresh & Easy stores this summer. However, Tesco says it won't open stores in the region until 2009. We still believe its possible Tesco will try to open a few Fresh & Easy markets in the Bay Area in late 2008. The first store location lease (of the 18 signed to date) the British retailer signed in the Bay Area was for an empty Albertsons supermarket building on Bird Avenue in the city of San Jose, which it will remodel into a Fresh & Easy Neighborhood Market store.

Safeway wants to have its small-format grocery stores open and doing business before Tesco's Fresh & Easy even comes to town, so to speak. By opening the first stores in July or August of this year, it could give Safeway anywhere from six months to close to a year of retail operations before the first key is even turned in a Fresh & Easy store door by Tesco in the Bay Area.

Safeway small-format grocery stores: A few snapshots

We don't have a complete picture of what the Safeway small-format grocery stores will look like in terms of design or overall product mix. However, based on conversations with sources and much analysis ,we do have some pieces of the puzzle filled out thus far.

In terms of design, we expect something fairly upscale inside and out. However, the stores aren't going to be super upscale. Rather, they will be attractive in terms of design but also somewhat utilitarian looking. They aren't designed for only high-end consumers.

In October, 2007 Anthony Gilmore, the former Northern California Region President for Whole Foods Market, Inc. resigned his position with the supernatural foods grocer to accept an executive position with Safeway Stores, at its corporate headquarters in the East Bay Area city of Pleasanton. (Gilmore actually began his retail grocery career years ago with Safeway Stores, Inc.)

While leading Whole Foods' Northern California division, Gilmore completed an aggressive and varied new store opening program for the supernatural grocer in the region. His strength was in being able to organize and lead the development of "new generation" Whole Foods' stores, giving each of the new stores its own local flair.

For example, under Gilmore Whole Foods' Northern California built its biggest and most comprehensive food store in Campbell, California, which is located in the famed Silicon Valley, and is only a few miles from San Jose. This store, which is now called the Northern California flagship, is nearly 80,000 square feet. It's a double-story superstore, filled with numerous in- store dining venues, a wine bar, a mini day spa, and much more. The store also fits its location well, both in design and in its product mix.

Further, Gilmore lead the creation of what is arguably Whole Foods' most innovative store to date: its European-style market hall store in downtown Oakland, California. The store, which opened in October, 2007, is designed like a European food hall, yet contains all of the departments--and more--the supernatural grocer is famous for.

In addition, Gilmore pioneered the building of Whole Foods' lifestyle-oriented superstores as retail anchor stores for upscale multi-unit housing developments in the city of San Francisco.

For example, the newest San Francisco store, which is located in the hip, up-and-coming Potrero Hill neighborhood, is the ground floor retail anchor of a huge, high-end condominium development which is becoming a very popular place to live in the city. The store design is modern, like the condo project, but also incorporates the history of the neighborhood. Among the store's unique features are an indoor-outdoor wine bar and bistro which features a DJ who spins tunes for customers on weekend evenings.

Gilmore's charge in his position at Safeway is primarily retail format development and merchandising. He's been working on the chain's successful lifestyle format, including a project which involves creating a "second generation" lifestyle format for Safeway's supermarkets. Some of these "second generation" developments are already beginning to show up in the retailer's new lifestyle stores.

What we refer to as the "second generation" aspects include more upscale design and interior packages--colors, flooring, shelving, and the like--and added in-store features like the fresh nut bars and similar new in-store venues appearing in a number of the grocery chain's recently opened lifestyle supermarkets.

Gilmore also was brought on, in part, to work on the small-format grocery store project, both from a format design and product selection and merchandising standpoint. Expect to see his input in how the 15,000 -to- 20,000 square foot grocery markets look, the products sold in them, and how they reflect the communities (localism) they are in. We expect some unique and creative flourishes in the store's design and product selection.

Prepared foods to be central to the small-format stores

Safeway is nearing completion of a line of fresh, prepared foods which it will begin rolling out in its lifestyle stores soon. The prepared foods' line includes ready-to-heat and ready-to-eat entrees, side dishes and grab-and-go type foods. Some of the prepared foods' items will be under the retailer's O' Organics brand, others under its Eating Right healthy foods brand, and still others under one or more new brands. These prepared foods items will be sold in all of the grocer's lifestyle stores--as well as in the new, small-format grocery markets, we believe.

The grocer already has extensive prepared foods offerings--which it has grown dramatically over the last couple years--for sale in its lifestyle supermarkets. For example, it offers fresh soups, sandwiches, pizzas and other items under its Safeway signature brand. The grocer also offers prepared entrees and side dishes under various store brands, along with many other ready-to-eat and ready-to-eat items.

A little over a year ago, Safeway bought a restaurant near San Jose, in Redwood City, California, called Citrine New World Bistro. The grocer has been using the restaurant--which features organic and healthy dishes and even uses the name O' Organics (Safeway's store organic grocery brand) in the menu--to develop and test items with consumers as a way to develop its fresh, prepared foods items.

Look for an extensive array of fresh, prepared food(including lots of organic) in the new small-format Safeway grocery stores. These items should range from basic, inexpensive items, to much higher-end gourmet items, which are being developed by professional chefs at the company-owned restaurant.

A limited assortment of discount groceries

In a conference call with supermarket industry analysts last week, Safeway CEO Steve Burd said because of the inflationary and recessionary nature of the U.S. economy, consumers are increasingly filling their shopping carts with cheaper groceries in his stores. He even said the company is seeing more shoppers buying generic groceries in Safeway-owned stores.

Safeway's stock tumbled to a 52-week low last week, even though the grocer's fourth-quarter profit met analysts expectations. Analysts--and Burd--attribute this decline in stock value to the current bad economic climate in the U.S., which like Burd argued to the analysts is causing middle-to-upper end consumers to buy more discount grocery products. During the conference call, Burd described the current rate of grocery inflation as "the highest I've seen in my 15 years as Safeway's chief executive."

We wouldn't be surprised to see Burd and company use the new, small-format stores to merchandise a limited assortment of private label and national branded basic grocery items along with the fresh, prepared foods and other offerings. We don't know this for a fact, and nobody at Safeway has gone on the record with us either confirming or denying this. Our view is based on discussions with numerous sources, as well as our own analysis.

Safeway has two strong selling value-positioned store grocery product brands. One is a low-end, near generic line, the other a mid-range brand. They also have Safeway Select, a premium, yet competitively-priced multi-category store brand, in addition to a number of other store brands.

In fact, these three--low-end, midrange and premium--store brands are the top market share sellers in many of their respective categories, such as various canned fruits and vegetables and other packaged goods. These product brands--like the Safeway retail brand--are strong in the Bay Area. Unlike Tesco's Fresh & Easy store brand, which will be new to the region, Safeway's brands have extremely strong equity with Bay Area consumers.

For example, the San Francisco Chronicle, the region's highest-circulation newspaper, runs a column in its food section every Wednesday in which it compares at least 10-12 grocery brands in a different grocery products category each week. Safeway's store brands (even the value brands) frequently place in the top three, beating out in many cases the top national brand in a given category, which sells for much more at retail than the Safeway store brand.

Safeway has a huge advantage over Tesco in this approach. First, the grocer knows the Northern California (and especially Bay Area) market inside-out. It's far-and-away the number one market share leader in the region. Second, the grocer has decades of market-specific scan data in its databases. This is an invaluable tool when choosing a limited basic grocery products selection for a store.

Finally, Safeway has over 20 years' of consumer data from its club card program. From a consumer-buying and behavior perspective, this information, combined with the market specific scan-data, can help the grocer not only choose the optimum limited-assortment basic grocery selection for its new, small-format stores, but also the club card data can guide the retailer in custom-tailoring the stores to each and every neighborhood.

This is powerful information that even the world's number-three retailer Tesco can't buy for any price. If they could, the retailer's Southern California stores would have a different basic grocery item product mix, and be tailored much better to the city's and neighborhoods they are located in.

What's in a name?

Lastly, and actually the most fun, is the question: What will Safeway name its small-format grocery stores? While we don't have any specific information from sources inside or outside of Safeway Stores, Inc. who can provide us with information credible enough for us to go on the record and give you the name Safeway's new, small-format grocery stores will go by, we are willing to go out on a limb and offer a potential or even probable name, based on three key factors we've identified and anlalyzed.

Those three factors are: First, Safeway Stores, Inc. likes the Safeway name and brand. All of its 271 stores in Northern California are branded Safeway, with the exception of a small division of warehouse stores called Pak 'n Sav. In addition, all of the grocery chain's stores in the Pacific Northwest, Arizona, Colorado and western Canada fly under the Safeway banner, as do the stores in the Washington D.C./Maryland/Virgina tri-state region.

All of the company's other banners--Vons, Pavillions, Dominicks, Randall's, Tom Thumb, Genuardi's and Carr's--were formerly independent chains which Safeway acquired, and as a result decided to keep the chain's names rather than change them to Safeway. The grocer sells its Safeway brand-named private label products, such as the Safeway Select, in all of these banner stores however.

The Safeway food retailing brand has strong consumer equity in Northern California, and especially in the Bay Area, where most of its stores are located, along with its corporate headquarters. As a result, we believe the grocery retailer is likely to use "Safeway" as part of the name for its new, small-format grocery stores when they open this summer.

Second, over the last four or five weeks we've floated a name for the small-format stores around to industry sources inside and outside of Safeway. We also have heard this name used by some Safeway suppliers, and others such as food brokers, who do regular business with Safeway at its corporate headquarters in Pleasanton.

While none of our sources (in the case of those outside Safeway) know for sure what the grocer will name the new, small-format stores, a number of them told us they've heard the name we put out there discussed among some serious industry people in Northern California. In terms of people inside Safeway (who didn't confirm or deny), the name we floated received some interesting responses. Not one of the insiders dismissed the potential name for the new, small-format stores we mentioned out of hand to us though.

All of this is purely anecdotal, and we aren't claiming otherwise. Rather, its merely one part of the three-part puzzle we are analyzing, along with a couple other factors. (Did you really think we would give you everything?)

The third piece of this three-part analysis puzzle involving the possible name for the small format, convenience-style grocery stores involves history. Many of our readers may not know this but there is a Safeway chain in the Middle Eastern country of Jordan. Safeway Jordan isn't owned by or affiliated with U.S.-based Safeway Stores, Inc.

However, there is an historic connection. U.S.-based Safeway Stores, Inc. once was an international food retailing company. Among it's international operations was Safeway plc. in the United Kingdom. Safeway Stores, Inc. USA sold UK-based Safeway a long time ago. And non- Safeway USA-affiliated Safeway plc. was recently acquired by Britain's Morrison's supermarket chain, which has nearly completed removing the Safeway banner from the stores in the UK.

Prior to selling UK-based Safeway plc. to Morrison's, the company owned Safeway Jordan and operated stores in that country and in Kuwait. In 2003, Safeway plc. sold its Jordan division to The Sultan Center (TSC), a Jordanian supplier and retailer of food, grocery, perishable and general merchandise items in the middle east. Jordan is a monarchy, so although it has a vibrant private sector, the ruling government family and business sectors are strongly tied-in together.

This is where the history gets interesting. Now, remember UK-based Safeway plc. was once long ago owned by USA-based Safeway, Inc. Safeway USA sold its UK operations to a group there who named it Safeway Plc. That group established Safeway Jordan, then sold the Jordan division to Jordanian-owned TSC.

TSC-owned Safeway Jordan operates three Safeway branded retail formats in that country. Those three retail grocery store formats are: Safeway service stores or supermarkets, which are similar to a western supermarket; Safeway Wholesale Center, which are a cash & carry-type format; and Safeway Express, which is a hybrid basic neighborhood grocery store/convenience store/food-service store.

Yes, you guessed it: we are suggesting (not stating as fact or saying we have any confirmation) there is a decent probability that Pleasanton, California-based Safeway Stores, Inc. will name its new, small format grocery stores, which will open this summer in the San Francisco Bay Area, Safeway Express.

There's an added caveat for Safeway Stores, Inc. in going with the Safeway Express name for its new, small-format grocery markets as well: Tesco, parent company of small-format Fresh & Easy Neighborhood Market, operates Tesco Express small format grocery stores throughout the UK and in other parts of Europe. These stores are the model from which Tesco created its Fresh & Easy grocery market format in the U.S. There are significant differences between the two formats--Tesco Express and Fresh & Easy--but also many similarities.

It would be ironic if Safeway names its new 15,000 square foot -to- 20,000 square foot grocery stores in the Bay Area--which will go head-to-head with Tesco's 10,000 square foot -to- 15,000 square foot Fresh & Easy grocery markets beginning at the end of this year or in early 2009--Safeway Express.

In many ways, using the Safeway Express name for the stores would set the stage for an all out premptive summer surprise by Safeway for Tesco's Fresh & Easy Neighborhood Market in the Bay Area and elsewhere in Northern California.

Note: If Safeway doesn't want to put its brand name (Safeway) on the small-format stores, or wants to use a fresher, more upscale natural and organic foods' sounding name, we think Citrine--like the company-owned restaurant--also might be a name in the running.

The tagline to the "Citrine" restaurant name, by the way is: 'Citrine: discover a new world of flavor.' Not too bad of a name for a chain of small-format grocery markets which would put an emphasis on fresh and natural, is it?

Wal-Mart and Safeway vs. Fresh & Easy

The blog Natural~Specialty Foods Memo has a piece in which the writer analyzes Wal-Mart Inc.'s plans to open its new MarketSide small-format grocery stores in Arizona later this year, Safeway Stores' plans to open similar small-format stores in Northern California, and how this new competition will affect Tesco's Fresh & Easy stores in both Arizona and California.

It's a good analysis, and we suggest reading it as a way to get a good lay of the land on what the blog calls the small-format food retailing revolution currently going on in the U.S. (read the story here.)

Additionally, the website retailwire has a discussion here about a similar topic, but with a primary focus on Wal-Mart's new MarketSide small-format stores, and a secondary focus on the competitive aspects of Wal-Mart vs. Tesco's Fresh & Easy.

Enjoy!