More on the Northern California Rural Strategy: An Existing Ford Auto Dealership in Grass Valley, CA Could Become A New Fresh & Easy Market

Downtown Grass Valley, California (pictured above) is considered a model for small towns and cities in the U.S. The city has retained the downtown's historic character as one of California's Gold Rush-era towns while at the same time adding a modernistic touch such as the use of colorful facade awnings.

Upcoming New Markets News: Northern California

Earlier today we wrote in this post, "Despite Postponing its Northern California Launch, Fresh & Easy Continues to Grab New Locations in the Region, Including Going Rural," about Tesco's Fresh & Easy Neighborhood Market signing a lease for a new store location in the Goldtown Plaza Shopping Center in the small (13,732 population) Northern California town of Oroville in Butte County.

In the piece we said, among other things, this signals an interesting and important strategy for Fresh & Easy in Northern California, where the grocer has yet to open a store and has postponed its new market launch, because it indicates the retailer is pursuing a rural sub-region strategy along with its current metropolitan region store location strategy for the Northern California market.

In addition, we suggested in the piece now that Tesco has signed a lease for one of its small-format, convenience-oriented grocery and fresh foods markets in a more rural region in Northern California -- Oroville in Butte County -- you could look for it to do more of the same, along with continuing to pursue its metropolitan region focus in the market.

The Union newspaper, which serves Northern California's Nevada County, north of Sacramento, reports today a Tesco Fresh & Easy market could be going into a location in the Nevada County city of Grass Valley which has for years been home to the city's Ford auto dealership. The dealership is moving to the nearby and larger city of Auburn.

Don Neronde, the co-owner of Grass Valley Ford, 'announced Wednesday he is relocating his Ford dealership to Auburn from Grass Valley at year-end, as was widely expected, but he said in an interview that Fresh & Easy is a leading candidate to build a store where Grass Valley Ford has been located, as well as another store in Brunswick Basin (a part of Grass valley),' according to the story in The Union by staff writer Jeff Pelline.

"It won’t be vacant long,"said Neronde, referring to his dealership at 800 S. Auburn St. in Grass Valley.

Note the potential second Fresh & Easy store location (Brunswick Basin) in the city as well.

You can read the entire report from The Union here.

The story mentions that Rite Aid also is interested in the Grass Valley Ford site. This makes since for two reasons: The Ford dealership is too large for a Fresh & Easy market all by itself and the grocery chain often locates its Fresh & Easy stores next door to a drug chain store like Rite Aid or Walgreens. Each chain could take half of the dealership and remodel the building into their respective stores, something Fresh & Easy has done numerous times with a variety of vacant buildings.

An interesting aside is that the story quotes a Fresh & Easy spokesperson as saying the retailer is just in its "early stages" in Northern California. [The quote: "People from Fresh & Easy are expected to visit the area again later this month, Neronde said. A spokesman for Fresh & Easy said the store’s expansion in Northern California was in the “early stages,” but he pointed out the store had announced plans for 19 sites in the Sacramento region earlier this year.]

Fresh & Easy is far from "in the early stages" in Northern California. Tesco has been signing leases for stores in Northern California since early -to- mid 2007, and originally planned to have its first batch of stores open in the region well before the end of this year.

As we've reported, that target was changed to early 2009. That launch date has now been postponed. Based on our sources we believe the first Fresh & Easy stores in Northern California are likely to open in mid-2009. But that's in flux at the present. [We aren't faulting the reporter for The Union regarding the quote, by the way. He was merely reporting what the spokesperson told him. And from the spokesperson's perspective, we suppose one could say "in the early stages" since no Fresh & Easy stores have yet to open in Northern California.]

Regarding Fresh & Easy potentially going into the Grass Valley Ford Dealership location, we did some checking with sources today, and it's far from a done deal yet. We learned the grocery chain is interested but has yet to sign anything, not even a letter of intent. Perhaps Ford dealer Don Neronde has some strong verbal agreements though, which it does sound like from the optimism or positive attitude he expresses in the story in The Union.

There also are other parties interested in the Ford dealership site. The dealership also isn't currently zoned for a retail food store. That situation could be changed by the city of Grass Valley though.

Grass Valley is an interesting city. It's a small town of about 12,000 residents. Those residents are a mix of natives and transplants, many from the San Francisco Bay Area who have moved to the town because of its natural beauty, counter-cultural nature in many ways, it's strong artistic community, and its low cost of housing (at least a decade ago) compared to the Bay Area. The population has grown by 21% since 1990, which demonstrates the growth from the Bay Area and other region migrants.

The Sierra foothills town, which was one of the places where much gold was discovered during the 1800's California Gold Rush, has an attractive and historic downtown district which you can read about here.

Grass Valley and Nevada County also are tourist destinations. The region also is on the way to the northern Nevada resorts of Lake Tahoe and Reno (gambling, ski resorts, ect.). Therefore Grass Valley, Auburn and other towns in the region draw travelers from the Sacramento region (which is just a little over an hour way), the Bay Area and other parts of Northern California on a regular basis. This greatly benefits the region's restaurants and to a lessor degree food and grocery retailers.

The current population of Nevada County is just over 100,000 residents.

Like Oroville, Grass Valley is much more rural than the metropolitan regions -- the Bay Area and Sacramento/Vacaville -- where Tesco's Fresh & Easy Neighborhood Market has thus far focused its store locations on. Grass Valley and Nevada County are contiguous to Sacramento though (a little over an hour away), and midway between that region and northern Nevada, where Tesco also plans to open some of its Fresh & Easy grocery and fresh foods markets.

Grass Valley and Oroville, which are about three hours apart in very different regions, both are small towns, each having fewer than 14,000 people. Butte County (Oroville) and Nevada County (Grass Valley) both also are small counties for California; Nevada County having just over 100,00 residents and Butte County with just slightly over 200,000.

Obviously Tesco is now interested in the more rural parts of Northern California as well as the metropolitan regions, which makes sense because as we've been writing all along, the retailers strategy, correct or incorrect, is what we call "critical mass," picking select regions -- Southern California, Metro Las Vegas, Nevada, Metro Phoenix, Arizona and now Northern California -- and then creating sub-regions within those markets and opening Fresh & Easy small-format, convenience-oriented neighborhood grocery and fresh foods markets within about 1.5 -to 2 miles from each others in those given neighborhoods.

We will have more to say about this strategy in light of the fact the first batch of Fresh & Easy stores have now been open slightly over a year, in an upcoming piece.

Despite Postponing its Northern California Launch, Fresh & Easy Continues to Grab New Locations in the Region, Including Going Rural

Upcoming New Markets News: Northern California

Fresh & Easy Neighborhood Market may be postponing it launch into the Northern California market as CEO Tim Mason has said and Fresh & Easy Buzz has reported. However, that postponement isn't stopping Tesco's small-format, convenience-oriented grocery and fresh foods Western U.S. chain from grabbing new store sights in the region.

According to a report today in the Oroville Mercury Register newspaper, Tesco's Fresh & Easy Neighborhood Market has signed a lease to locate a store in a 14,550 square foot space in the Goldtown Plaza Shopping Center in the rural North Central Valley city of Oroville, which is in Butte County.

From the report: 'Fresh & Easy Neighborhood Market had sent a letter of intent to locate in the plaza. Now, Bud Tracy of Tracy Realty said the owners of Gold Town Plaza signed a lease and returned it to the company on Monday.

Peter Blasingame, a broker at Tracy Realty, said in spite of a slower economy, businesses had been interested in coming into the plaza at the corner of Oro Dam Boulevard and Washington Avenue. The Fresh & Easy store will probably come in the summer of 2009.'

Read the entire story from the Oroville Mercury Register here.

Oroville is located north of Sacramento in Butte County near the well-known university town of Chico.

Unlike the Sacramento Metropolitan region where the grocery chain has thus far confirmed it will open 19 Fresh & Easy markets, Oroville is in a rural part of Northern California.

The town's current population is only 13,732 -- it's a small rural town in an agricultural region.

Butte County, of which Oroville is the county seat, is famous for being rice country -- the heart of California's rice-growing region. Numerous other crops are grown in the region as well. Butte County has a current population of about 225,000. The biggest city is Chico, with about 75,000 residents.

Thus far, the vast majority of the 46 (and now 47) Northern California Fresh & Easy store locations we've identified (Tesco's Fresh & Easy has confirmed 37 of those locations -- 19 in the Sacramento/Vacaville region and 18 in the Bay Area) are in more urban, metropolitan regions -- the San Francisco Bay Area, the Sacramento/Vacaville Metro region, Monterey County, and Modesto in the Northern San Joaquin Valley.

The Oroville location signals that Fresh & Easy also is pursuing a rural-region store location strategy in Northern California along with its metropolitan region strategy. We say rural rather than suburban because the Butte County region isn't suburban.

Fresh & Easy could find a niche in some of these rural Northern California cities, such as Oroville and others, not so much for the basic groceries, fresh produce and fresh meats sold in the stores, but rather more so for the prepared and organic foods offerings, since at least in the case of Oroville there aren't any supermarkets that offer these categories in any significant way, particularly at discount prices.

Chico, which isn't far from Oroville in Butte County, is a different story, for example. It's a college town, home to a major California State University campus, and thus has numerous supermarkets and natural foods stores that offer strong prepared foods selections, along with extensive natural, organic and specialty foods category offerings.

So far, Oroville is the smallest city (and most geographically rural) we've found in which Tesco has locked-in a lease for a Fresh & Easy combination grocery and fresh foods market. Therefore, in our analysis this signals the start of a rural store location strategy now combined with the retailer's metropolitan region strategy for Northern California.

This is a significant development because it indicates the grocery chain wants to appeal to what is the vast variety of Northern California consumers, which range from Bay Area urbanites and Sacramento suburbanites, to more rural consumers and regions.

The Oroville location also signals Tesco's move into a new sub-region of Northern California. To date the primary focus has been primarily on the San Francisco Bay Area and the Sacramento/Vacaville Metropolitan region, which are contiguous. The secondary focus has been on the Northern San Joaquin Valley -- Stockton, Modesto (which is near both the Bay Area and Sacramento) -- and in a very limited way on the Monterey Bay Area, where thus far we've only discovered one store location, in the city of Seaside near Monterey. Fresh & Easy hasn't confirmed that location.

Butte County is a natural, northern progression geographically from the Sacramento region but its also qualitatively different because of its more rural nature.

In our analysis, we believe you will see Tesco looking at additional rural areas in Northern California as a way to achieve its "critical mass" store location strategy in the market, even though at present the grocery chain has postponed its launch into the new market region.

We do wonder though, why Fresh & Easy is locking up new store locations in Northern California? It has postponed its launch into the region at least three times. Originally, the Northern California stores were to start opening in mid-to-late 2008. That was changed to late-2008 -to- early 2009. Now the launch has been postponed again.

One thing all experienced food retailers know is that once you actually open stores in a new market region you are able to look at the market in a very real and different way.

It seems to us that locking in so many locations in various sub-regions in Northern California before opening even one store in the market could be a prescription for failure (at least for numerous stores, the locations of which were chosen pre operations in the market) in that it requires far too much guess work.

Instead, better to stop, say after locking-in 47 or so stores (we would have stopped at half that then opened some and went forward), and then wait until you actually open a few grocery markets before going forward with more new sites, is our analysis. It's what we would do, especially in Northern California, which is a very dynamic, difficult and super-competitive market, even for those with lots of experience in it.

In fact, had Tesco done something similar -- not pre-booked so many store locations before opening even one store -- in Southern California, Nevada and Arizona, we bet they never would have put Fresh & Easy stores in a number of the current locations where leases were signed long before the first store opened.

Why? Because many are bad locations, which is one reason such stores are underperforming. It's hard when using such a shotgun approach so far in advance of having some operational experience in a market to pick good locations when choosing so many so fast and so far in advance. Even the best store location pickers don't have that kind of crystal ball. But perhaps Tesco has a grand stategy in doing it this way in Northern California, like it did in the existing three markets, that we just aren't aware of.

Swearing-In of New Sacramento, CA Mayor Kevin Johnson Delayed A Few Hours Over A $2.2 Million Tesco Fresh & Easy Agenda Item

Sacramento Mayor Kevin Johnson. The former NBA star recently sold a land parcel for the proposed Fresh & Easy market in Sacramento's Oak Park neighborhood for $1.1 million. [Photo Credit: Sacramento Bee, 2008.]

Upcoming New Markets News: Northern California - Sacramento

Tesco's Fresh & Easy Neighborhood Market continues to affect local politics in Sacramento, California even though the grocer has yet to open its first store in the city.

Sacramento's new mayor, city native, former NBA basketball all-star and now retired Sacramento developer Kevin Johnson, was supposed to be sworn-in as the city's new mayor at yesterday afternoon city council meeting. However, at the last minute there was a change of plans because of an item on the council's agenda that it was determined posed a conflict of interest for the new mayor.

That item was a proposal that the city of Sacramento redevelopment agency allocate $2.2 million dollars to a Tesco Fresh & Easy store development project in North Sacramento, according to a story in the Sacramento Bee newspaper.

As Fresh & Easy Buzz reported in this piece, now Sacramento Mayor Kevin Johnson's Kynship Development Company recently sold a vacant land parcel in the city's Oak Park neighborhood (a separate project from the North Sacramento one mentioned above) for $1.12 million to Tesco's Fresh & Easy for a new store the grocery chain plans to build and open in the neighborhood -- the very neighborhood Kevin Johnson was raised in and where he operates the St. HOPE Academy non-profit community development foundation which he founded when he returned to Sacramento after retiring from the NBA a few years ago. Johnson has severed his ties with the foundation now that he is the city's mayor.

It was the fact Mayor Johnson's company sold this Oak Park neighborhood parcel to Tesco's Fresh & Easy that caused City Attorney Eileen Teichert to determine there would be a conflict of interest if Mayor Johnson was sworn in at the start of the Tuesday afternoon city council meeting, thereby being present to hear and vote on the $2.2 million dollar proposed city contribution to the North Sacramento Fresh & Easy project.

Therefore, instead of being sworn in as Sacramento's new mayor during the afternoon meeting as planned, instead Kevin Johnson was sworn-in at 6pm that evening, avoiding any conflict of interest regarding the Fresh & Easy proposal.

We checked with the Sacramento City Clerk's office. Johnson was sworn-in last night and presided over the city council's evening session as mayor. The spokesperson told us at press time no decision has yet been made about giving the North Sacramento Fresh & Easy project the $2.2 million in redevelopment money.

There could be a problem going forward with Mayor Johnson's voting on any development or other issues involving federal dollars to Sacramento. That's because following a federal probe earlier this year into how Johnson's St. HOPE Academy used federal funding, the mayor-elect and St. HOPE were placed on a list of entities that can't do business with the federal government.

City Attorney Eileen Teichert says however mayor Johnson will not be precluded from voting on issues involving federal funding. But there does seem to be some confusion over this since she told the Sacramento Bee that 'she did not know how Johnson's presence on the list would affect the city, but that she was confident that it "won't affect the city's ability to accept funding." She said the only other issue is "how much disclosure we have to do to whatever federal agency we're applying for funds."'

Since Johnson is no longer in charge of St. HOPE academy though it appears he should be able to vote on such matters. However, according to the City Attorney its likely he will recuse himself from voting on any matters, including the $2.2 million redevelopment grant, involving Tesco's Fresh & Easy Neighborhood Market.

Tesco has confirmed plans to open 19 of its small-format, convenience-oriented Fresh & Easy combination grocery and fresh foods markets in the Sacramento/Vacaville Metropolitan region, including a number of units in the city of Sacramento, as Fresh & Easy Buzz previously has reported and written about frequently.

However, Tesco's Fresh & Easy recently announced it will postpone its launch into the Northern California market. This isn't the first time the grocery chain has done so. The first Fresh & Easy stores in Northern California -- the San Francisco Bay Area and Sacramento region -- were originally supposed to start opening in the middle of this year. The retailer then postponed the launch, saying the first stores in Northern California would open at the end of this year, only to change that to early in 2009. Right now our analysis is the first Northern California Fresh & Easy markets, if they open at all in 2009, won't open until about the middle of next year.

Fresh & Easy CEO Tim Mason says the main reason for postponing the Northern California launch is because of the current recession and financial crisis in the U.S. However he also says it is because the retailer's Northern California distribution center in Stockton is behind schedule in being completed. The facility is needed in order to supply the Northern California stores. The Stockton distribution center is nowhere near completed at present. Therefore it isn't likely any Fresh & Easy stores in Northern California could open before mid-2009 even if the grocery chain wanted to do so, which isn't the case anyway.

Meanwhile, as we reported previously, the Oak Park Neighborhood Association, which is comprised of a group of residents who live in the neighborhood, recently won a number of concessions from Fresh & Easy regarding the design of the proposed Oak Park store. At an October hearing before the City of Sacramento Design Review Board, the members of the board agreed, after hearing a presentation from Dustin Littrell of the Oak Park Neighborhood Association, to write those changes into the final approval of the Oak Park Fresh & Easy.

Tesco agreed with the board's decision, even though it went all the way to the hearing wanting to keep the store's design the way it was, and went ahead and in partnership with the sites developer bought the vacant Oak park parcel for the $1.6 million from now Sacramento mayor Kevin Johnson's Kynship Development Company.

What will be interesting to see now that so much has transpired regarding Fresh & Easy and Sacramento's new mayor, who beat the city's incumbent mayor Heather Fargo by a wide margin in the November election, is if the Oak Park Fresh & Easy market will end up getting built, and if so, when.

Meanwhile, after being sworn-in as Mayor of Sacramento the sometimes controversial but very popular Kevin Johnson has already hit the ground running, which isn't surprising since he was famous in the NBA for his hard-running style on and off the basketball court. The new mayor already has named the key members of his leadership team, along with announcing what he calls an open and transparent government initiative, in which he pledged to make the city's business and his own business interests open to the public.

Mayor Johnson also has said he plans to be a major player in California regional public policy issues and politics. California elects a new Governor in 2010. Could Kevin Johnson possibly be thinking about a run? As Mayor of Sacramento he already is just down the street from the state capital after all.

Johnson was the change candidate in the November election for Sacramento voters, winning a mandate to do just that -- change how the city is run from what the incumbent Heather Fargo was doing. We expect him to shake things up in the capital city. It should be interesting, as should Fresh & Easy's future in Sacramento.

Reader Resources

Related posts from Fresh & Easy Buzz:

>Monday, November 17, 2008: Sacramento City Design Board Agrees With Oak Park Group on Design Changes For Proposed Fresh & Easy Store; Escrow Closed on $1.1 Million Parcel

>November 12, 2008: Analysis: Hard Times at Fresh & Easy - Northern California Expansion to Be Postponed or Shelved Do to Economy; But its Only a Symptom Not the Cause

>November 16, 2008: Tesco Fresh & Easy CEO Tim Mason Says He's 'Deliriously Happy' With the Chain's Progress Thus Far; We Prefer Andy Grove's 'Only the Paranoid Survive'

>Wednesday, October 8, 2008: Putting the 'Neighborhood' in Neighborhood Market: 'Localism' and Tesco's Proposed Fresh & Easy Neighborhood Market in Sacramento's Oak Park

>Tuesday, October 7, 2008: Sacramento's Oak Park Neighborhood Association Files Appeal On Design of Proposed Neighborhood Fresh & Easy Store; Hearing Set For Oct.15

>Wednesday, October 15, 2008: Hearing Tonight For Sacramento, CA Neighborhood Group's Appeal of Design of Fresh & Easy Store Proposed For Their Oak Park Neighborhood

>July 16, 2008: Fresh Feature: A Former NBA All-Star Who Wants to Become Mayor, A Trade Union, And A Future Tesco Fresh & Easy Grocery Store In Sacramento, California

>April 29, 2008: Tesco's Fresh & Easy an Issue in Sacramento, California Mayor's Race A Year Before its First Store in the Capital City Even Opens

>March 7, 2008: Former NBA All-Star and Sacramento Native Kevin Johnson is the Driving Force Behind a Fresh & Easy Market in Sacramento's Oak Park Neighborhood

>February 28, 2008: News & Analysis: Tesco's Fresh & Easy Confirms 19 Store Locations for the Sacramento-Vacaville Region in Northern California

>February 13, 2008: Leading Democratic Candidate for President Barack Obama Joins Group in Asking Tesco's Fresh & Easy to Put More Stores in Underserved Neighborhoods

>February 8, 2008: Retail Memo: Tesco Fresh & Easy Insight: A New Store Blooms in Compton, CA.; F&E's Chicagoland March; a Sacramento Neighborhood and F&E Get Hitched

>February 8, 2008: Read this February 8, 2008 piece from the blog Natural~Specialty Foods Memo about one of Fresh & Easy's stores which will go in the low-income Oak Park neighborhood in Sacramento.

>September 23, 2008: Food Retailing, Society & Economics: 'Food Deserts' and Public Health

Upcoming New Markets News: Tesco Will Open A Second Fresh & Easy Store in Modesto, California

Upcoming New Markets News: Central Valley - Modesto, CA

Tesco's Fresh & Easy Neighborhood Market plans to locate and open a second Fresh & Easy grocery and fresh foods store in the Central Valley, California city of Modesto, Fresh & Easy Buzz has learned.

Modesto's second Fresh & Easy market will be located at 1717 Oakdale Road in the city, in a building that formally housed a Save Mart supermarket. Save Mart built a new, larger store nearby some years ago and closed the older, smaller store at the location.

Fresh & Easy will remodel the building, turning it into one of its small-format, combination basic grocery and fresh foods markets.

The shopping center where the new 1717 Oakdale Road Fresh & Easy store will be located includes a Big Lots general merchandise discount store next door, a dry cleaner, pizza parlor, Mexican restaurant, Chinese restaurant, nail salon, Rent-A-Center store, insurance office and a Bank of America, according to a regular Fresh & Easy Buzz reader who lives in Modesto and knows the local food and grocery retailing market better than most industry professionals.

Tesco's Fresh & Easy has applied to the State of California Alcohol and Beverage Control Department for an off-sale beer and wine permit for the store at the 1717 Oakdale Road location. There's also an application sign on the window of the empty building in the shopping center. The application was first made on September 23 of this year.

The 1717 Oakdale Road Fresh & Easy will be the grocery chain's second location in Modesto, a city of about 205,000 located in the Northern San Joaquin Valley, in Stanislaus County.

Stanislaus County has a population of about 500,000. Modesto is the county seat and the largest city in the county. Modesto's motto is: "Water, Wealth, Contentment, Health," as the arch at the top of this story depicts. The arch is located as the gateway to downtown Modesto.

We reported in this May 10, 2008 story, "New Markets: Tesco's Fresh & Easy to Move Into Modesto, California Market; Open its First Store in the City Early Next Year," about Tesco's plans to open its first Fresh & Easy Neighborhood Market store in Modesto. That store will be located in the city's Sylvan Square Shopping Center in a building that previously housed an independent supermarket, Michotti's Marketplace, which closed, sighting competitive pressures in the market.

Crosspoint Realty Co., which is in charge of the Sylvan Square center and building, is dividing the former Michotti's Marketplace supermarket building, which is about 30,000 square feet, roughly in half. The Fresh & Easy store will take up about 13,000 square feet of the building when completed.

Fresh & Easy moves north

Locating a second Fresh & Easy store in Modesto is a part of Tesco's California strategy. The retailer is moving north from its current Southern California store base into the Central Valley, Sacramento region and the San Francisco Bay Area as part of its strategy to be a major statewide food and grocery retailer in the Golden State.

The first two Fresh & Easy markets in the Central Valley will open next month on December 3 in Bakersfield, as we reported in this piece yesterday.

Tesco will open additional Fresh & Easy stores throughout the Central Valley, from Bakersfield and Fresno in the south valley and on north to Stockton, beginning next year, along with beginning to open units in the Sacramento/Vacaville region and San Francisco Bay Area.

The grocery chain also will open its Northern California distribution center next year in Stockton, which is located about 30 miles from Modesto in the Northern San Joaquin Valley, as we reported here on March 8 of this year.

New developments in Modesto market

There have been a number of changes and new developments in the Modesto, California food and grocery retailing market in just the seven months since we reported on the first Fresh & Easy coming to the city in our May 10 story.

The "big" development is that mega-retailer Wal Mart Stores, Inc. will open its first Supercenter in Modesto in about two weeks, on November 14.

The Modesto Supercenter is a first for Wal-Mart nationally in the U.S. in that it is the retailer's first hybrid big box store. Rather than being built from the ground up, the Modesto Supercenter is located in a former warehouse food store building of about 100,000 square feet, which is about 80,000 square feet smaller than the average size of a Wal-Mart Supercenter.

The 100,000 -to- 105,000 Supercenter however will have all of the same departments a typical 180,000 -to- 200,000 square foot unit has. The departments will just be smaller and scaled down to fit the reduced square footage of the store.

Wal-Mart has one of its discount format stores already in Modesto. Those stores though don't sell fresh produce or meats. They also offer only a limited assortment of dry grocery products and a small selection of perishables, primarily basic dairy and deli items.

The mega-retailer is in the process of building a huge Supercenter in nearby Ceres, which shares a southern border with Modesto. Ceres has a population of about 45,000. But the new Supercenter there when open also will draw from residents of Modesto, since the two cities are right next to each other. The Ceres Supercenter, which is a new construction, will be about 200,000 square feet when completed. It is set to open in 2009.

Wal-Mart Stores, Inc. also has a proposal on the table to built a regional distribution center in the city of Merced (Merced County), which is about 30 miles from Modesto. The new distribution center would serve Wal-Mart stores, including Supercenters with food and grocery products, throughout the Central Valley and Northern California.

As a result of building this new distribution center, Wal-Mart will attempt to locate many more Supercenters -- and perhaps some of its other format stores like Sam's Club, Wal-Mart Neighborhood Market supermarkets and it's new small-format Marketside that sell food and grocery products -- in the region in the coming years.

Another significant change in the Modesto market was the recent sale of two supermarkets in the city by local independent grocer Richland Markets to another local, multi-store independent, Cost Less Foods Company, in late August, early September.

Richland Markets was for decades a major food and grocery retailer in Modesto and the surrounding communities, where it operated six full-service supermarkets. Over the last few years Richland Markets has sold off its stores. After selling the two Modesto stores last month, the independent grocer is now left with just one, in Ceres.

Cost Less Foods now operates three stores in Modesto, along with one in next door Oakdale and another in nearby Turlock, which is about 10 miles from Modesto. The retailer also operates a couple more stores outside the Modesto market.

Cost Less is a privately-owned grocery chain. It operates on an everyday low price merchandising philosophy but also features about a dozen "super hot" weekly specials in a weekly full-page advertisement it runs in the food section of the Modesto Bee, the major daily paper in the market.

For example, in its advertisement this week, which broke yesterday, the discount grocery chain is offering chicken fryer leg quarters for 49 cents pound, boneless pork chops for $1.28 pound, Roma tomatoes for 58 cents pound, Kraft 32oz Mayonnaise for $2.28 each, and Betty Crocker Hamburger Helper for just 98 cents a box, along with another seven items at similar hot prices.

Generally, Cost Less Foods has the lowest advertised items when its dozen are so weekly promoted items are also ran in competitors weekly advertising circulars, which often is the case.

Another change in the Modesto market was the closure a few months ago of R-N supermarket, one of the city's last remaining larger independent supermarkets. The store's owners said increasing competition and higher rents were the reason they were closing the store.

The R-N supermarket building is currently vacant. It isn't very far from the Sylvan Square Shopping Center site where the first Modesto Fresh & Easy market is going. According to a commercial real estate source in Modesto, there has been talk of Tesco's Fresh & Easy possibly locating what would thus far be its third Modesto store in that now vacant building. However we have found no confirmation of that at present however.

Modesto market share leaders

In terms of market share leaders, Modesto-based regional supermarket chain Save Mart still holds that honor in Modesto and the surrounding market region.

Save Mart, which operates over 200 supermarkets in the Central Valley and Northern California under the Save Mart (in the valley) and Lucky banners (in the San Francisco Bay Area and Sacramento markets), along with a discount warehouse chain called FoodMaxx, has seven stores in Modesto -- five Save Mart supermarkets and one FoodMaxx warehouse unit.

Save Mart also has Save Mart banner supermarkets in the nearby cities of Riverbank, Oakdale, Ceres, Turlock and Patterson, along with one FoodMaxx store in Turlock.

Privately-held Save Mart, which has its corporate headquarters in Modesto, had sales of about $6.5 billion in 2007.

Sacramento-based Raleys, which also is privately-held, is gaining on Save Mart a bit in Modesto.

The 130 store chain, which operates supermarkets under the Raleys, Bel-Air and Nob Hill banners, along with a having it's own discount warehouse store chain called FoodSource, currently has four stores in Modesto, as well as one in Riverbank, Oakdale and Turlock, All of these stores are under the Raley's banner. The chain also has a store under the Nob Hill banner in the Stanislaus County city of Newman, which is about 25 miles from Modesto.

Independents and other players

O' Brien's Market, a three store locally-owned independent, is a vibrant force in Modesto as an upscale grocer. The retailer has two stores in Modesto and one in next door Riverbank. In addition to offering a full selection of basic food and grocery products in its supermarkets, O'Brien's puts a focus on selling specialty, natural and premium food and grocery products, and in-store fresh, prepared foods, along with baked goods.

O'Brien's is nearly the last vibrant independent left in the city however. And Modesto was once a thriving independent grocery store market.

Another independent, three-store Sam's Food City, which has been in Modesto and for decades, continues to operate and do well, according to local observers, although primarily as a neighborhood grocer, which there's certainly nothing wrong with. After all, that's Fresh & Easy's niche.

Sam's has one store in Modesto, one in Turlock and one in Livingston, which is about 20 miles from Modesto in neighboring Merced County. The stores niche is primarily lower-end and price and convenience-oriented.

Modesto also has a very popular Costco club store, which according to local observers does a very strong food and grocery business.

Trader Joe's has one store in the city.

The Winco supermarket chain also has a unit in Modesto. Winco stores are big and discount-priced. Winco also has a major regional distribution center located in Modesto. The fast-growing Idaho-based employee-owned chain is expected to build more stores in Modesto and the the surrounding area.

There's also a large Food-4-Less discount warehouse format store in Modesto/Ceres that does a brisk business, according to local market observers.

There are no natural foods chain stores in Modesto. However the city has a couple strong independent natural foods markets that do well, along with a number of smaller health/natural foods stores.

Since there isn't a Whole Foods or similar chain natural foods store in the city, Fresh & Easy could do well in the natural and organic categories since it offers a fairly decent selection of such products at affordable prices that will most likely be considerably cheaper than the existing independents in Modesto currently are selling similar items for.

Fresh & Easy's organic products selection is limited however since the small-format stores only carry about 3,500 total items. Therefore the larger, independent natural foods markets in Modesto should still continue to do well based on the fact they offer a much larger selection of items in a wider variety of product categories than Fresh & Easy can and does.

Tesco's Fresh & Easy Neighborhood Market has yet to publicly confirm the first Modesto Fresh & Easy store in the Sylvan Square center we reported on in March.

Fresh & Easy Buzz is the first publication to report on the second store at the 1717 Oakdale Road location.

Upcoming New Markets News: Tesco's Fresh & Easy Confirms Bakersfield, CA Stores; Says First Two Will Open Next Month on December 3rd, 2008

Upcoming New Markets News: Central Valley, California - Bakersfield

Tesco's Fresh & Easy Neighborhood Market announced today it will open the first of its thus far five confirmed stores in the Bakersfield, California Metropolitan region market on December 3, 2008, less than a month from today.

The two Fresh & Easy combination grocery and fresh foods markets set to open on December 3 will be in the city of Bakersfield. One store is at Olive Drive & Jewetta Avenue in the city, the other at Panama Lane & Stine Road.

Bakersfield is located in the southern portion of California's Central Valley

The two Bakersfield Fresh & Easy food and grocery markets will be the first California stores for the grocery chain outside of the Southern California market region.

Plans call for opening stores throughout the Central Valley, including the Fresno region north through Merced, Stanislaus, San Joaquin and Sacramento counties, and into the San Francisco Bay Area, as we reported and written about previously. [See the links at the bottom of this post for additional information.]

The other three confirmed Bakersfield Metropolitan region Fresh & Easy stores are at the following addresses in the following cities:

>Highway 46 & Griffith Avenue - Wasco, CA
>Brimhall Lane & Jewetta Avenue - Bakersfield, CA
>Cecil Avenue & High Street - Delano, CA

These three Fresh & Easy stores are set to open early next year.

Fresh & Easy Buzz first reported Tesco's Fresh & Easy would enter the Bakersfield region market and open stores there in this March 10, 2008 story: "Bakersfield, California Region Next Up On the Fresh & Easy Neighborhood Market New Store Parade."

Below are the five Bakersfield Metropolitan region Fresh & Easy store locations we reported on over eight months ago:

>Olive Drive and Jewetta Avenue, Bakersfield
>Brimhall Road and Jewetta Avenue, Bakersfield
>Panama Lane and Stine Road, Bakersfield
>Cecil Avenue and High Street, Delano
>Highway 46 and Griffith Avenue, Wasco

As you can see, we got all five locations right in March.

Today is the first time Fresh & Easy Neighborhood Market has publicly confirmed the five Bakersfield stores.

We also reported in our March 10, 2008 piece that "The first of the initial six Bakersfield region Fresh & Easy grocery stores could open as early as the end of this year."

Reader Resources

Related Posts:

>March 10, 2008: Bakersfield, California Region Next Up On the Fresh & Easy Neighborhood Market New Store Parade

>May 24, 2008: Upcoming New Markets Special Report: The Changing 'Face' of Retailing in Bakersfield, California

>May 15, 2008: Fresh But Never Easy: Tesco's Long But Rapid South-North March in the Nation-State of California

>March 26, 2008: Mid-Week Tesco Fresh & Easy Roundup

[Note: The stories linked above contain extensive information on the Bakersfield Metropolitan region in general and the Bakersfield food and grocery retailing market specifically.]

Related Posts: Central Valley

>May 14, 2008: Fresh & Easy Buzz Exclusive: Tesco's Fresh & Easy Neighborhood Market Plans to Open Five Stores In the Fresno, California Metropolitan Region

>May 10, 2008: New Markets: Tesco's Fresh & Easy to Move Into Modesto, California Market; Open its First Store in the City Early Next Year

>March 8, 2008: Fresh & Easy Neighborhood Market Northern California DC Likely to Be At Arch Road Site In Stockton

Fresh & Easy Corporate Reps to Meet With Pedro Point Pacifica, CA Neighborhood Residents to Address Concerns Over Store to Open in 2009

Pictured above is Pacifica's Linda Mar Beach, with the Pedro Point community overlooking it on the cliff above. Not a bad view to have from the Fresh & Easy grocery market set to open in the coastside neighborhood next year.

Upcoming New Markets News: Northern California - Pacifica, San Francisco Bay Area

Representatives of Tesco's Fresh & Easy Neighborhood Market are scheduled to meet with members of the Pedro Point Community Association, a neighborhood group from Pacifica's Pedro Point neighborhood, at 7:30pm on Thursday, October 9 at the Pedro Point Firehouse at 1227 Danmann in the city to discuss concerns residents have about the Fresh & Easy grocery market which will be the retail anchor in a new shopping center being constructed in the neighborhood of about 300 households.

Fresh & Easy Buzz first reported Tesco Fresh & Easy Neighborhood Market's plans to locate a store in Pacifica at 5550 Coast Highway in this June 24 piece," Upcoming New Markets News: Tesco to Locate Yet Another Fresh & Easy Store in San Francisco Bay Area; 21 Thus Far By Fresh & Easy Buzz's Reporting." In fact some of the Pedro Point neighborhood residents told us via an email that reading our piece was how they learned what was going to go into the center which was breaking ground at the time.

Fresh & Easy Neighborhood Market has yet to publicly confirm the Pacifica store as one of its future San Francisco Bay Area sites, although as we reported there's a liquor license application from Fresh & Easy on file for the store location with the state of California, as well as a paper copy of the application on the store site. Additionally the city of Pacifica has confirmed the Fresh & Easy store location at the site -- and of course company representatives are meeting with neighborhood residents on Thursday evening.

Pacifica is a coastal community located on the peninsula just a few miles south of San Francisco. It has a current population of about 38,000. The median home price in the city is about $668,000. Believe it or not, Pacifica is considered one of the more affordable cities to live in on the Bay Area peninsula despite the median housing number. [Click here to view some additional statistics and data about Pacifica.]

Pedro Point residents' concerns

Residents of the neighborhood and members of the Pedro Point Community Association have a number of concerns about the Fresh & Easy store at the shopping center location, although most say they welcome a grocery store in the neighborhood since the only supermarket on their end (south) of town is a single Safeway store.

Among the chief concerns Pedro Point residents have about the Fresh & Easy store in the neighborhood are the increased traffic it will bring to the primarily residential neighborhood, the store's design and the non-union status of Fresh & Easy.

Here's what one leader of the neighborhood group says about the potential traffic problems the Fresh & Easy store and other businesses in the new center could cause, along with the store's design and the union/non-union issue:

"I don't know how familiar you are with our geography here, but the (Fresh & Easy) location is in a very small shopping center at the far end of town, right before you enter Devil's Slide and head south down the coast. The Devil's Slide tunnel will be finished in a few years, which will have a significant impact on commuting in this area. I assume they (Fresh & Easy) are counting on folks coming north from El Granada and Half Moon Bay to shop here, or at least stopping off on their way home from work. Many coastal residents already do that at Safeway.

"We (Pedro Point neighborhood residents) are concerned about increased vehicular traffic. The (Fresh & Easy) parking lot needs to be re-designed as the current traffic flow is illogical and dangerous. Even with improvements in design, we are concerned about the traffic impact as there is only one street into and out of our neighborhood and the shopping center opens on to it. We also have concerns about ensuring parking for the local businesses that will be remaining in the center. And of course we are concerned with the design of the store - I wasn't particularly impressed with the pictures I looked at of the store open in southern California this week.

"And I have concerns about the union stance being taken by the corporation, though I can't speak for others on this issue."

In terms of the traffic issue, one member of the Pedro Point neighborhood group says she plans to ask the Fresh & Easy representatives at the October 9 meeting for a plan from them detailing the ways they will improve parking at the store site as well as the traffic congestion she says will come from the store opening in the neighborhood.

Another key issue and concern neighborhood residents say they have about Fresh & Easy is its environmental credentials. Specifically a number of neighborhood residents are concerned about Fresh & Easy's policy of offering only free plastic grocery bags rather than the option of paper or plastic. They also are concerned about the use of plastic packaging for most of the fresh produce items (most all produce at Fresh & Easy is pre-packaged in plastic tubs or bags) and Styrofoam packaging for food service and meat merchandising uses.

The 'Green' Bay Area

Green or pro-environmental retailing issues are at the top of the list of many Bay Area consumers. The region was one of the first in the U.S. to initiate curbside recycling programs in the 1970's, for example. It's also home to many of America's top environmental organizations and activist groups including the Sierra Club, Nature Conservancy and others.

Bay Area consumers get "green." Survey after survey lists it right at the top of the list in terms of what's important to them when it comes to choosing where they shop for groceries and other goods. Bay Area supermarket chains and independents are among the "greenest" retailers in the nation, due in no small part to the demands of the region's consumers to be that way.

Numerous Bay Area cities are passing their own environmental laws as well. San Francisco has banned the use of plastic grocery bags in food stores over 10,000 square feet, for example. It's also phasing out the use of certain plastic and foam containers in food stores.

Oakland passed a ban on the plastic bags at supermarkets as well. But it's been overturned by a court based on a plastics industry lawsuit. The Oakland City Council is debating introducing new legislation on the issue.

Palo Alto recently passed a per-bag fee at supermarkets law on the single-use plastic bags. Emeryville a city near Berkeley is considering a ban as well, as are a number of other Bay Area cities debating ban and fee laws.

Since Tesco's Fresh & Easy stores offer only free plastic grocery bags at the stores and not the option of free paper, we believe if it carries this policy into the Bay Area it will be in for lots of fights from not only environmental and community groups but from city governments as well.

And of course Fresh & Easy will have to eliminate the plastic bags in San Francisco, maybe in Oakland, charge for them if it opens a store in Palo Alto and face other cities in the region that are sure to enact bans and per-bag fees sooner rather than later.

This is particularly true because a proposed California state law that would have charged shoppers in all California cities and counties 15 -to- 25 cents per plastic or paper grocery bag in supermarkets failed to come up for a vote in the California Legislature before the term was over because of the near three month long failure to pass a state budget. Finally doing so at the very end of the session took up all the effort and time of the Legislature. Therefore bills like the statewide bag-fee legislation and many others were just dropped and not voted on.

Additional concerns

Another key concern the Pedro Point neighborhood residents say they have involves the sale of alcoholic beverages at the Fresh & Easy store at night, or late at night.

How and what Fresh & Easy will do to control trash and litter at and near the store also is a concern neighborhood residents plan to take up with Fresh & Easy representatives at the Thursday night meeting. The Pedro Point neighborhood is considered the most affluent part of the city and its residents say they take great pride in keeping it clean and constantly improving it, which is one reason they started the Pedro Point Community Association.

Better late than never

A representative of the neighborhood group told Fresh & Easy Buzz they first began trying to get someone from Fresh & Easy to speak to the community association in early July of this year.

"After some runaround, we've finally been given the name of someone named Scott Whitney at Fresh & Easy and we've e-mailed him to ask him to come speak to us about the store," the Pedro Point Community Association spokesperson told us on July 17, nearly three months ago. It was some time before they heard back the association member says. The neighborhood group had requested and were hoping to have a representative from Fresh & Easy meet with the neighborhood group this summer rather than on October 9.

Food and grocery retailing in Pacifica

The Safeway supermarket is the only chain store in Pacifica. In addition to the Safeway there's a longtime independent supermarket, Food Town.

Pacifica Farmers Market is a popular independently-owned fresh produce and natural foods store in town. It features a large selection of fresh fruits and vegetables, including organics, along with a selection of shelf-stable and perishable natural and organic food and grocery products. There's also Sun Valley, which is another independent natural foods store.

Nearby Half Moon Bay also has a Safeway supermarket, along with a brand new 20,000 square foot New Leaf Community Market natural foods supermarket. New Leaf is a local, multi-store natural foods retailer based in Santa Cruz, California. Whole Foods Market, Inc. also is in the process of building a natural foods supermarket in Half Moon Bay, which will be its first in the city. There's lots of cross-shopping by consumers between the two nearby cities.

Pacifica also is located in a highly dense and urbanized region on the San Francisco peninsula. From Pacifica south about 60 miles to San Jose there's city after city -- Burlingame, San Mateo, Mountain View, Menlo Park, Palo Alto and through Silicon Valley to San Jose. This urban megalopolis of over 2 million residents (the nine county Bay Area has 7 million residents) is filled with supermarkets, natural foods stores and specialty markets.

Most residents of Pacifica, which is primarily a residential city, work outside the city, generally either somewhere on the peninsula or in San Francisco which is only about 12 miles away. As a result of this geographical and occupation fact, most residents are commuters who have different shopping patterns than one would expect is the case with consumers in a less urban region.

They often shop at supermarkets and natural foods stores near where they work, picking up groceries there on the way home to Pacifica.

Additionally, there's such a variety of different stores and formats in the region -- ranging from Costco and numerous chain supermarkets to Whole Foods Market stores, produce markets, farmers markets, upscale independents and specialty stores -- that Bay Area residents don't think twice about driving a few miles from the town they live in to multi-store and multi-format food and grocery shop. This is something any new food retailing entrant to the Bay Area grocery market needs to understand if it wants to succeed.

There's a niche in Pacifica for a convenience-oriented, small-format grocery and fresh foods store like Tesco's Fresh & Easy or a Trader Joe's though in our analysis, especially in the southern part of Pacifica where the Pedro Point Neighborhood is located.

But that neighborhood also has become one of the most desirable in the small coastal city, which reinforces the traffic congestion concerns residents have about the new center and the Fresh & Easy store.

Working cooperatively with neighborhood residents will be key to a successful Fresh & Easy store in Pacifica For Tesco's Fresh & Easy. It's a small, close-knit neighborhood and community that believes strongly in localism.

And Tesco's Fresh & Easy better get used to having highly-involved neighborhood groups as part of its Bay Area business model as it makes its entry into Northern California, and especially into the Bay Area.

Environmental, union and other issues and concerns all are at a higher level in the Bay Area than anywhere else in the Western U.S. This includes Arizona and Nevada -- and even Southern California -- the three markets where Tesco currently operates its 90 Fresh & Easy grocery stores in.

Sacramento's Oak Park Neighborhood Association Files Appeal On Design of Proposed Neighborhood Fresh & Easy Store; Hearing Set For Oct.15

Upcoming New Markets News Report: Northern California - Sacramento

Dustin Littrell, a member of the Oak Park Neighborhood Association and a resident of that Sacramento, California neighborhood where Tesco plans to build one of its 19 confirmed Fresh & Easy small-format, convenience oriented combination grocery and fresh foods stores in the Sacramento Metropolitan region, has filed a design review appeal on behalf of the group with the city over the store's design and related locational elements. The Sacramento-area Fresh & Easy stores are set to begin opening in 2009.

The appeal prevents Tesco's Fresh & Easy Neighborhood Market from doing any work on the site in the Oak Park neighborhood at Broadway & 34th until a hearing is held by the city of Sacramento Design Review Commission and a decision is made on the appeal, according to Matthew Sites, the design review team lead on the development for the city.

The neighborhood association met earlier this year regarding the design of the Fresh & Easy store in Oak Park, which is to be built on land owned by former NBA basketball star and current candidate for Mayor of Sacramento Kevin Johnson, as we've reported and have written about previously in Fresh & Easy Buzz.

Mr. Johnson faces incumbent Sacramento Mayor Heather Fargo in a winner take all election on November 4.

Kevin Johnson was born and raised in Sacramento's Oak Park neighborhood which historically has been a low-income neighborhood but is going through a gentrification process. When Mr. Johnson returned to live in Sacramento after retiring from the NBA a few years ago, he started his own development company, which included a non-profit community development division. He also founded the HOPE foundation non-profit for youth which is headquartered in Oak Park. Johnson also owns numerous rental houses and vacant land in the neighborhood, including initially owning the property the Fresh & Easy store is to be built on.

The outcome of the meetings held earlier this year by the Oak Park Neighborhood Association was a decision by the group to prepare its own version of what they wanted the Oak Park Fresh & Easy store to look like in terms of how it would and should fit into the style and scale of their neighborhood.

The neighborhood association then created what they call the "community's plan" for the store.

At its July 3 Oak Park Neighborhood Association meeting the plan was presented to the members in attendance and "was chosen unanimously by the members present over the Tesco Fresh & Easy Neighborhood Market plan" and design for the store in the neighborhood, Mr. Littrell told Fresh & Easy Buzz. A professional designer who lives in the neighborhood and is a member of the Oak Park Neighborhood Association then created a professional drawing of the group's design for the neighborhood Fresh & Easy store.

Mr. Littrell says the Oak Park Neighborhood Association met with representatives of Tesco's Fresh & Easy Neighborhood Market and presented the association's "community plan " to them. The company disagreed with the neighborhood residents version. The Oak Park neighborhood group then revised the plan, according to Mr. Littrell, taking into consideration some of the things in the plan that the Tesco Fresh & Easy representatives said they disagreed with from their perspective.

The neighborhood group then met with the Fresh & Easy corporate representatives a second time, presenting the revised plan to them at the meeting and hoping for some sort of compromise, according to Mr. Littrell and others who were in attendance.

Tesco's Fresh & Easy rejected the neighborhood group's revised plan, stating they decided to go with their original plan, which is the Fresh & Easy built from the ground up prototype store.
Tesco Fresh & Easy Neighborhood Market representatives then presented their original plan with some minor changes such as landscaping and a couple others to the city of Sacramento Design Review Board. That plan for the Fresh & Easy store was approved by Bill Crouch, who is the city of Sacramento's Design Director.

According to Mr. Littrell and other members of the Oak Park Neighborhood Association, the chief concerns the neighborhood residents have about the Fresh & Easy store design include: the store's size or footprint; the way it's located (the facing to the street) on the lot; the parking layout; and how the store area is landscaped. Each of these issues was addressed in their group's "community plan" for the neighborhood's Fresh & Easy grocery market. Fresh & Easy Buzz has read a copy of the neighborhood groups design plan.

The city of Sacramento has a design review process in which citizens like Mr. Littrell and groups such as Oak Park Neighborhood Association can file a formal appeal with the city's Design Review Board if they feel their concerns haven't been satisfied in meetings with developers or companies and businesses proposing new commercial developments like the Fresh & Easy grocery store in the Sacramento neighborhood.

Mr. Littrell filed such an appeal against the approved design of the Oak Park Fresh & Easy store. He says he did so, with the backing of the Oak Park Neighborhood Association's members, because at this point it is the neighborhood residents' only recourse.

A hearing on Mr. Litrell's and the group's appeal was set by the city of Sacramento Design Review Board for September 17. However, according to Matthew Sites, the board's team lead, Tesco's Fresh & Easy requested the hearing be postponed until October 15, which the city's Design Review Board agreed on, according to Mr. Sites in a letter he sent to Mr. Littrell.

The new hearing has been set by the Design Review Board for October 15.

Along with representatives from Fresh & Easy and the Oak Park Neighborhood Association headed up by Mr. Littrell, representatives of Holloway Land Company, the developer of the parcel where the Fresh & Easy store is going in the neighborhood, also will attend the October 15 appeal hearing, according to the the design board's Matthew Sites.

Once each side is heard at the appeal hearing, the city of Sacramento Design Review Board will then weigh the Oak Park Neighborhood Association's arguments against the existing Fresh & Easy store design plan, along with those of Fresh & Easy in favor of its original plan, then arrive at a determination. Since its an appeal, the neighborhood group probably needs to make a stronger argument against the plan than Fresh & Easy likely has to make for it, since the city department previously approved the Fresh & Easy plan.

Sacramento's Oak Park neighborhood currently isn't served by a grocery store that offers basic groceries and fresh foods at affordable prices. Members of the neighborhood and Sacramento city officials have been trying for a number of years to bring such a grocer to Oak Park. When it was announced earlier this year that Fresh & Easy would build a store at the location, the news was greeted with much fanfare initially in the neighborhood, and city officials took credit for helping to bring the Fresh & Easy grocery store to the "food desert" neighborhood.

The big question now though is if Fresh & Easy wins at the appeal hearing and goes forward and builds the Fresh & Easy store in the neighborhood as planned using its original design without compromising with the neighborhood residents, what sort of loss of good will might that create in the neighborhood for Fresh & Easy?

For example, might residents of the neighborhood boycott the market because they feel it's design, street facing, parking and landscaping don't fit into the neighborhood properly? Such a boycott could hurt store sales dramatically, as well as become a major negative from a community and public realtions perspective.

Additionally, Mr. Littrell and other members of the neighborhood group argue the way the Fresh & Easy plan is at present creates a traffic safety problem. Could this become a major issue if there isn't some sort of compromise between Fresh & Easy's position and that of the neighborhood residents who desire changes in the store's design and siting, including some traffic mitigation measures?

The issue is a serious one from a local Sacramento and neighborhood perspective. Oak Park is one of the city's oldest and most historically rich neighborhoods. Many of its current residents moved into the neighborhood because they want to be part of turning it around. They've purchased abandoned houses and remodeled them. Other residents have started small businesses in the neighborhood.

Volunteerism also is big in Oak Park, ranging from arts programs for kids to other neighborhood-centered programs. Neighborhood localism and an appreciation for the neighborhood's history and culture is very important to most Oak Park resident and can be seen in various ways throughout the neighborhood, including public murals and in paintings and photographs in public buildings and businesses.

We will be following up on this story, reporting anything of interest prior to the appeal hearing on October 15, as well as reporting on the outcome of the hearing itself.

This is the first Fresh & Easy store development thus far we are aware of that's been opposed by a neighborhood group. A group of residents and city officials in Southern California's San Fernando Valley did recently oppose the selling of beer and wine by a Fresh & Easy store in their neighborhood. Fresh & Easy recently stopped selling beer and wine at that store, which is the only one of the current 90 stores that doesn't offer those beverages for sale.

[Note: The letter regarding the continuance of the appeals hearing from September 17 -to- October 15 is at this link: Broadway and 34th Continuance.pdf (459KB).]

Tesco's Fresh & Easy Adds Another Store to its Sacramento-Vacaville Market Region Portfolio in Northern California

Upcoming New Market News: Northern California--Sacramento/Vacaville Region

Tesco has locked-up a lease for an additional future Fresh & Easy Neighborhood Market grocery store in the Sacramento-Vacaville Metropolitan region in Northern California.

That store, which will be number 20 thus far in the region, will be located in the Sunset Shopping Center in Suisun City, which is in Solano County near Napa and located approximately on the border of what is considered the San Francisco Bay Area and the Sacramento Valley region, Fresh & Easy Buzz has learned from the Solano County Economic Development Corporation.

This will be Tesco's first Fresh & Easy grocery market in Suisun City. The store in the Sunset Shopping Center will be located in one half of a vacant former Albertson's supermarket in the center. The Fresh & Easy store will use about 13,000 -to- 14,000 square feet of the building, according to a spokesperson for the county's economic development corporation who has been involved in attracting new retail tenants to the shopping center.

Wiengarten Realty, which manages the center at Sunset Avenue and State Hwy 12, says there is a population of 92,900 people within a three mile radius (60,000 within two miles) of the center, with an average income of $68,354.

Tesco has publicly confirmed it plans to open 19 of its small-format, convenience-oriented Fresh & Easy Neighborhood Market combination basic grocery and fresh foods stores in the Sacramento/Vacaville Metropolitan region in Northern California. The first stores should open in early -to- mid 2009. [The graphic below shows where those 19 confirmed Fresh & Easy stores are located in the region.]

Vacaville is located about 35 miles from Sacramento. The region between Vacaville and Sacramento has increasingly become urbanized over the last 15 years or so from its once mostly rural past. In the 35 -to-40 mile stretch through the Sacramento Valley are cities such as Winters, Woodland, Davis and West Sacramento, all of which have nearly doubled in population in the last 15 years.

Vacaville also is about one hour's drive from the San Francisco Bay Area, where Tesco thus far plans to open 21 Fresh & Easy grocery stores beginning next year. The retailer has confirmed 18 of these 21 locations. Fresh & Easy Buzz has discovered an additional three, one in the city of Pacifica and two in the city of Vallejo, through our reporting. The combined population of the Bay Area and Sacramento/Vacaville region is about 10 -to- 11 million.

As we've discussed in previous pieces in Fresh & Easy Buzz, Tesco's strategy with its small-format Fresh & Easy grocery chain is to locate a "critical mass" of the stores in selected market regions, which to date include Southern California, Metropolitan Las Vegas, Nevada, and the Phoenix, Arizona Metropolitan region. There are 78 Fresh & Easy stores opened to date in these three market regions.

Tesco's Fresh & Easy is following this same strategy in Northern California. It's focusing on the nine-county Bay Area, then out to the Sacramento Valley via Fairfield and Vacaville. It's about a two hour drive for example from downtown San Francisco to downtown Sacramento.

From the Sacramento area, Tesco then is focusing on moving down Hwy. 99 into the Northern San Joaquin Valley, through the cities of Galt, Stockton, Manteca, Tracy and Modesto.

As we reported here, Tesco plans to open one store so far in the city of Modesto, which has a population of about 210,000. Additionally, a Fresh & Easy store also will open in Galt.

Tesco is locating its Northern California distribution center in the Stockton area, as we reported here. Thus far we haven't discovered any Fresh & Easy store sites in Stockton, Manteca or Tracy yet. But based on the retailer's "critical mass" store location strategy and plan for Northern California, we believe it's only a matter of time until we do.

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.