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

The Sacramento, California-based Plumbers and Pipefitters Local 447 union is hitting former NBA basketball all-star and Sacramento native Kevin Johnson hard with a new website and series of mailers to voters as the Sacramento developer who is bringing a Fresh & Easy Neighborhood Market grocery store to land he owns in Sacramento's Oak Park neighborhood is battling the city's incumbent mayor Heather Fargo in a hot runoff election for Mayor of Sacramento.

On its website "No Way KJ," and in the direct-mailed brochures, the union details a series of allegations against Johnson that have dogged him in Sacramento for many years. Among these allegations include charges of sexual misconduct with underage girls, which he has never been prosecuted for, charges of being a slumlord, violations of city of Sacramento building codes, getting citations for failures to appear in court, charges of cover-up, and being under U.S. Federal Government investigation.

The website hits Kevin Johnson hard on these allegations and charges, including posting police reports it says are from police investigations of Mr. Johnson involving sexual relations with minors. It is important to note that Kevin Johnson is not currently charged with any crimes of any nature we are aware of, nor is he pending any sort of court trail we are aware of.

The Plumbers and Pipefitters Local 477 union's "No Way KJ" website even features a re-enactment of what it claims is a conversation between the former NBA All-Star, developer and candidate for Sacramento Mayor Johnson and a 16 year year old girl from the summer of 1995. the union website says the transcripts in its re-enactment are taken directly from the Phoenix, Arizona police report sex crimes unit that investigated the incident." Johnson played for the Phoenix Suns NBA basketball team at the time. Click here to view what the website calls "the Wiretap."

Additionally, the anti-Kevin Johnson website includes a listing of news reports regarding Johnson, along with a link to a newsletter so that readers and Sacramento voters can receive regular updates from the union on Johnson and the union's campaign to make sure he doesn't win the November runoff election against incumbent Sacramento Mayor Heather Fargo.

Kevin Johnson was the top vote getter in the June, 2008 election for Mayor of Sacramento, beating incumbent Mayor Fargo and all other contenders by a majority of votes. He received 46% of the vote, to Mayor Fargo's 40%.

However, Sacramento has a city law which requires the top vote getter in the mayoral race to receive 50% of the vote in the June primary election in order to be declared the winner. If this doesn't happen, the number one and number two vote-getters then go against each other in a runoff election in November.

As a result of Mr. Johnson not receiving 50% or more of the vote in June, he and incumbent Heather Fargo are facing off in the November election to see who will become Sacramento's Mayor.

Developer Johnson is favored to win over incumbent Mayor Fargo in November. In fact, he's been leading in local Sacramento polls by a wide margin since the June election. However, according to Sacramento political analysts we've talked to this week, Fargo seems to be gaining slightly on Johnson, in large part they said due to the aggressive campaign launched by the Plumbers and Pipefitters Local 477 union, which is being supported by other labor unions, groups and coalitions.

Kevin Johnson remains popular in Sacramento and still is the favorite to win the contest for Sacramento mayor in November at this point in time however, according to the latest polls being conducted in the city, along with analysis from local pundits.

Johnson and the construction trades labor unions have been at odds more than once in Sacramento, where the former NBA all-star was born and raised in the very Oak Park neighborhood where he is bringing a Tesco Fresh & Easy Neighborhood Market grocery store to on land he owns, since he returned to his hometown after retiring from the NBA and began a career as a developer.

Essentially, the issues have been over what the labor unions have claimed are at times anti-labor practices by Johnson at some of his developments and properties, a charge Mr. Johnson says is completely untrue.

Johnson also operates a non-profit community development organization called St. HOPE, which he founded 19 years ago in his hometown of Sacramento, and served as the CEO of until stepping down after winning the June primary, saying he needed to do so in order to focus on the November mayoral runoff election. And Johnson has focused on the election, working extremely hard in his goal of being Sacramento's next mayor.

St. HOPE, for which Johnson has received lots of praise for starting in Sacramento, is a large, multi-branched non-profit organization. It includes the St. HOPE Development Company, which focuses on lower-income inner-city Sacramento neighborhoods like Oak Park where Mr. Johnson is bringing the Fresh & Easy grocery store to land he owns in the neighborhood.

The non-profit organization also includes St. HOPE Public Schools, which currently operates a free pre-school through 12th grade charter school serving about 1,500 low-income students, and the Hood Corps, which was founded in the Oak Park neighborhood in 1999 and has as its mission to train and develop young, inner city youth to become leaders, along with working to improve their neighborhoods.

Lastly, St. Hope includes a Community Arts division, which built and operates the popular 40 Acres Art Gallery and facility in the Oak Park neighborhood, and restored and operates the historic Guild Theatre, which is an urban center in Sacramento for the performing arts and cinema.

The supporters of the St. HOPE organization and its various enterprises reads like a who's who list of national U.S. public organizations, figures and leading Sacramento business and professional leaders.

For example, the St. HOPE Public Schools are supported by the Bill and Melinda Gates Foundation, as well as the Walton Family Foundation, which is funded and run by the heirs of the Wal-Mart retailing empire, in addition to dozens more major corporations, foundations, groups and individuals. [You can view a listing here.]

The St. HOPE Academy, of which the public charter school is a part, counts among its supporters and contributors West Sacramento-based Raley's, the region's leading supermarket chain and its retired long time CEO Charles Collings, along with the Maloff brothers, who own the Sacramento Kings basketball team and Las Vegas casinos, Wells Fargo bank, Bank of America, and numerous others. [You can view other supporters and contributors here.]

Sacramento's Oak Park neighborhood, where Kevin Johnson was raised, has and is the focus of much of the St. HOPE organization's work. It's also been a major focus of Mr. Johnson's for-profit development business.

Oak Park has historically been one of Sacramento's poorest neighborhoods. Over the last few years, thanks in part to St. HOPE and an influx of younger, middle income residents who've joined with existing residents to form neighborhood organizations, the neighborhood has been undergoing a makeover, which has included adding new apartments and lofts, seeing houses get renovated, bringing in new retail stores and creating an arts community.

Oak Park has an extremely active group of residents who are working to improve and upgrade the neighborhood, including lobbying the city of Sacramento to improve the streets, sidewalks and public spaces, as well as working with St. HOPE, as well as with private developers and businesses, to bring in more new housing and retail businesses to the long neglected neighborhood.

This is where both Kevin Johnson and Tesco's Fresh & Easy Neighborhood Market come in. A coalition of Oak Park residents and supporters have been working for some time to bring a supermarket that offers basic groceries and fresh foods at affordable prices to the neighborhood, which is underserved by such food stores.

Last year, Tesco announced that one of the 19 initial Fresh & Easy Neighborhood Market small-format, combination basic grocery and fresh foods grocery markets it would open in the Sacramento Metropolitan region beginning early next year would be in the low-income, "food desert" Oak Park neighborhood.

Further, the Oak Park Fresh & Easy store will be built on land owned in the neighborhood by Sacramento mayoral candidate Kevin Johnson, who was a driving force in bringing the Tesco Fresh & Easy grocery store to the neighborhood.

The vast majority of Oak Park residents were thrilled with the announcement, and it helped Mr. Johnson, who was raised in the neighborhood, to galvanize support from neighborhood residents in the June mayoral election, which he won with 46% of the vote.

It's too early to tell is the campaign launched by the Plumbers and Pipefitters Local 477 union will derail Kevin Johnson's plans to be Mayor of Sacramento. Right now local Sacramento pollsters and pundits tell Fresh & Easy Buzz he still has a strong lead over incumbent Mayor Heather Fargo, in part they say because Mr. Johnson is riding the "change" wave being felt nationally in U.S. politics.

However, they also tell us Kevin Johnson is a popular resident of Sacramento, as well as popular candidate for mayor. His story--Sacramento boy from the low-income Oak Park neighborhood who becomes an NBA all-star, only to return to his hometown, start a successful development company and non-profit organization, then run for the city's highest office--is the stuff of the American (and Sacramento) dream.

Having Kevin Johnson as the land owner of the future Fresh & Easy grocery store in the Oak Sacramento neighborhood has been rather good politically and from a public relations standpoint for Tesco's Fresh & Easy Neighborhood Market USA thus far. It's created a higher than would have been profile for the retailer in the region prior to its opening its forst Sacramento-area store.

Whether the Plumbers and Pipefitters' campaign will tarnish Kevin Johnson's image among Sacramento voters enough to lead to his defeat by the not extremely popular incumbent Sacramento Mayor Heather Fargo is unknown. However, between now and November, Sacramento political experts say the campaign--including the negative campaigning--is only going to heat up.

Meanwhile, depending on which way the Sacramento mayoral campaign goes in the remaining months, and ultimately which candidate wins the November runoff election, it could either possibly result in putting Tesco's Fresh & Easy Neighborhood Market in a sweet spot--building the Oak Park store on land owned by the city's new Mayor--or put it on the defensive--locating the Oak Park Fresh & Easy on land owned in the neighborhood--by a tarnished candidate for mayor, who ended up losing the November election because of an aggressive campaign led by a labor union, which is allied with the United Food and Commercial Workers Union (UFCW), which itself is conducting a campaign of its own against non-union Fresh & Easy Neighborhood Market USA.

It going to be an interesting four months or so leading up to the November election in Sacramento, and at Tesco's Fresh & Easy Neighborhood Market headquarters in Southern California as well, as the retailer prepares to open its first grocery stores in the Sacramento region possibly as earlier as the end of this year, but more likely in early 2009.

Related Posts:

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 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

Upcoming New Markets News--San Francisco Bay Area: Fresh & Easy Loses Out on San Carlos, CA Store Site to Local Independent Grocer Brothers

Members of the Bianchini family are long time independent food and grocery retailing veterans in the San Francisco Bay Area's Peninsula and South Bay regions.

Many decades ago, the late Al Bianchini was one of the first independents in the region to make a move from operating a mainstream independent supermarket, to more of an upscale and specialty foods-oriented store, as a way to survive against the big chain's which were building and opening stores all around his Bianchini's Market in the high-income city of Portola Valley, near Palo Alto and not far from the Stanford University Campus in the South Bay Area.

When Mr. Bianchini passed away, his sons Chris and Kevin who together already operated an 8,000 square foot grocery store, Foodville Market in nearby San Carlos, which also has an upscale and specialty foods flair to it, took over the larger Portola Valley store from their father.

The Bianchini brothers have done well with both stores, despite even more chain supermarkets opening all around them. In fact, since 2006 the brothers and partners have been searching for a location for a larger supermarket in San Carlos, to replace their current 8,000 square foot Foodville Market. San Carlos has a population of 30,000 residents. However, it's located on the urbanized San Francsico Peninsula and has tens of thousands more residents right on its city borders.

They've now found their dream location. The independent grocer brothers will be moving their Foodville Market into new, expanded digs. They've just signed a 30-year lease for the former Bell Market store in a prime location in San Carlos at 810 Laurel Street. The store was part of the Kroger Co.-owned Cala Foods/Bell Market chain, which Kroger decided to close down a few years ago, selling off individual stores and closing a few it couldn't sell.

The move isn't a huge one for the brothers physically since their current store is located nearby at 616 Laurel Street. However, it's a huge move for the independent grocers in every other way.

At 20,00 square feet, the old Bell Market store is more than twice the size of their popular and very busy current market, which will allow the independent grocers to offer an expanded selection of basic groceries, specialty and natural foods, and in-store service departments to their customers.

The move also is big for the brothers because with the relocation to the former Bell Market site, the grocers will change the name of the store from Foodville Market to Bianchini's Market, so that it reflects the family name and matches the flagship store of that name in Portola Valley, which was founded by their father.

The Bianchini brothers beat out a number of other grocers who were bidding for the old Bell Market store's lease, including Tesco's Fresh & Easy Neighborhood Market, which wanted to put one of its 10,000 -to- 13,000 square foot combination basic grocery and fresh foods grocery stores in the location.

Fresh & Easy Buzz is very familiar with the Bell Market store and location. It would have been a perfect spot for Fresh & Easy in San Carlos, as it is a very high profile and accessible location.

The Bell Market thrived at the 810 Laurel Street location for decades, doing far more sales per square feet than the supermarket industry average. Kroger didn't close the store there because it couldn't sell it. Rather, the building is owned by a landlord who wasn't able to come to terms with any of the potential buyers Kroger had lined up at the time it was closing down its about 25-store Cala/Bell Markets operation in the Bay Area. Rather than keep the one store open, Kroger just decided to close it down.

Laurel Street is considered the happening street in San Carlos. There are other retail stores, professional offices, cafes, and other popular venues along the heavily pedestrian and vehicle traveled street. San Carlos is an upper-income city, where a three bedroom, two bath, 1,300 square foot house sells for about $650,000.

The former San Carlos Bell Market store also would have been a key Bay Area location for Fresh & Easy in that there aren't many other supermarkets or grocery stores nearby, which always was a big plus for the store during the many years it was open in the location.

But Fresh & Easy's loss is the brothers Bianchini's gain. And the partners plan to remodel the old Bell Market store in a first class way.

The Bianchini's have hired famed San Francisco Bay Area food and grocery store architect John Sutti to create a new interior for the store. Sutti and his firm, John Sutti Associates, have designed and built nearly all of the Whole Foods Market stores in the Bay Area, designed markets for upscale Bay Area grocers like Andronico's Markets, Draegers, Mollie Stone and numerous others, and is known for its signature "Sutti touch" when it comes to creating unique store interiors and exteriors, particularly with an upscale flare.

Among the features the Bianchini brothers plan to include in their new 20,000 square foot supermarket is a high-end deli and prepared foods department, salad and other food bars, a top-quality cheese department, and other specialty touches. The store will sell plenty of basic groceries as well, along with lots of specialty and natural foods items.

Meanwhile, all might not be lost for Tesco's Fresh & Easy in San Carlos. The current Foodville Market at 616 Laurel Street, which the brothers Bianchini are leaving for their new 20,000 square foot store once it's remodeled, also is in an excellent location.

Although at 8,000 square feet the current Foodville Market is 2,000 square feet smaller than the 10,000 square feet Tesco likes to have as a minimum for a Fresh & Easy grocery store, that's not really an obstacle because the great location more than compensates for the less than desired minimum 10,000 square feet, in our analysis. Further, finding any place to locate a grocery store in compact San Carlos is very difficult. That's why 616 laurel is a winner.

Additionally, The Bianchini's have shown lots of business can be done in that 8,000 square feet at 616 Laurel. (We've been told by a good source that the brothers are doing over $200,000 a week in their 8,000 square foot Foodville Market.)

With some simple tightening up, Tesco could easily put a Fresh & Easy store in the current Foodville Market building at 616 Laurel without losing much at all in the way of features. In fact, it would be a good thing for Tesco's Fresh & Easy to try, perhaps experimenting with localizing the store to the community while remodeling it.

In fact, since the San Francisco Bay Area is a much different region geographically (denser and more compact) compared to Southern California, Metropolitan Las Vegas and the Phoenix Arizona region where Tesco currently has its Fresh & Easy stores, it's likely there will be many locations, like the current Foodville Market, which are a bit smaller than 10,000 square feet, but would make excellent locations for Fresh & Easy grocery stores. This is particularly true in compact San Francisco, where even 10,000 square feet of available retail space is difficult to find in most neighborhoods.

It would be ironic if, having lost out to the Bianchini brothers for the former Bell Market site in San Carlos, Tesco's Fresh & Easy Neighborhood Market were to turn around and grab the lease on the 8,000 square foot building at 616 Laurel Street which currently houses Foodville Market, and which is not too far down the street from what will become the new Bianchini's Market at 810 Laurel Street, in the old Bell Market store in San Carlos.

Such are the kinds of twists, turns and ironies that help make food and grocery retailing so interesting.

Resources:

View San Carlos, California's Laurel Street here on Google Maps. Click here to read stories from Fresh & Easy Buzz about Tesco Fresh & Easy Neighborhood Market's upcoming plans for the San Francisco Bay Area.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Upcoming New Markets Special Report: Raley's Trying Out New, Smaller Footprint Supermarket Format in Central Valley, California City of Oakdale

West Sacramento-based Raley's Family of Fine Stores is trying out a new, smaller-format (about 40,000 -to- 45,000 square feet) supermarket concept under the new "Raley's Fresh Market" banner in the northern San Joaquin Valley city of Oakdale, in Northern California's Stanislaus County, Fresh & Easy Buzz has learned. Previously the supermarket chain has only used the Raley's name on its superstore format stores.

Oakdale, which calls itself the "Cowboy Capital of the the United States" because it holds one of the largest annual rodeos in the U.S., as well as has the most national competitive rodeo champions in the nation, is a small city of about 20,000 residents, located right next door to Modesto, which has a population of about 210,000. Stanislaus County currently has a population of about 500,000. The three-county northern San Joaquin Valley region, comprised of San Joaquin, Stanislaus and Merced counties, has a population of about 1.4 million residents.

As we reported in this piece earlier today, Raley's, which currently operates about 129 supermarkets and warehouse stores under the Raley's, Bel Air Markets, Nob Hill Foods, Food Source and now Raley's Fresh Market banners, is looking for new store sites throughout Northern California and in the Reno/Sparks/Lake Tahoe region in northern Nevada.

The new Raley's-owned store in Oakdale, called Raley's Fresh Market, is at 40,000 -to- 45,000 square feet much smaller than most of the modern day Raley's banner stores, which range from about 55,000 -to- about 75,000 square feet. It's also unique in that the "Fresh Market" banner store is located in a former supermarket building the retailer remodeled for its Oakdale store.

For example, nearly every new Raley's, Bel-Air, Nob Hill Foods and Food Source store the grocery chain has opened in recent years has been a brand new, built from the gound up supermarket, or in the case of Food Source, a discount warehouse format store.

The Oakdale store also is the first time Raley's has used the "Fresh Market" name along with its Raley's name on a supermarket.

The Oakdale store previously housed an independent supermarket named Oak Ridge Fresh Market, which was a spin-off by the owners of the building's previous grocer, Richland Markets, which built the building and operated a Richland Market banner supermarket in it for a number of years.

Richland Markets, a long-time family-owned area multi-store independent, has been selling off most of its seven supermarkets in the cities of Modesto, Turlock, Ceres and Oakdale over the last few years due to family succession and competitive issues, according to a Modesto-area food broker and regular Fresh & Easy buzz reader.

Just recently, Richland Markets agreed to sell two of its remaining three supermarkets to another locally-based multi-store independent, discount grocer Cost Less Foods, leaving Richland left with only its flagship supermarket in Turlock, which is a city of about 75,000, located 10 miles from Modesto, according to the local area food broker.

The decision to locate the store in a vacant supermarket building and to try out the new Raley's Fresh Market banner name was made for a couple of different but related reasons, Fresh & Easy Buzz has learned.

We've learned Raley's decided to acquire the vacant building this spring--the Oakdale Raley's Fresh Market just opened a few weeks ago--and turn it into a new format using the Raley's Fresh Market name for three primary reasons.

First, the store is located right across the street from a Save Mart supermarket. Savemart, which is headquartered in Modesto and operates supermarkets throughout the Central Valley under the Save Mart banner and warehouse stores under the Save Maxx banner--along with supermarkets in the San Francisco Bay Area under the Lucky banner (it acquired those stores in its 2006 acquisition of Albertson's, Inc.'s Northern California Division)--is the market share leader in the northern San Joaquin Valley.

When Save Mart acquired Albertsons Inc.'s Northern California stores in 2006 (close to 200 supermarkets), for the first time the Modesto-based chain entered Raley's home turf market of Sacramento. Prior to that, Save Mart had never opened a Save Mart banner supermarket in the Sacramento market, even though its only about 65 -to- 70 miles from Modesto. The retailer always had stores as close as 20 miles from Sacramento, so going into Sacramento would not have been unusual.

Additionally, Raley's only operated a handful of stores (literally two or three only) in Save Mart's home market region of Stanislaus, San Joaquin and Merced counties.

Further, Raley's and Save Mart are partners in a grocery distribution warehouse located in the Northern San Joaquin Valley city of Lathrop. The two chains even shared the same private label, Sunny Select, as their respective store brand, until Raley's started converting most of its store brand items to the Raley's label a couple years ago.

Raley's also uses the Nob Hill Foods brand for store brand specialty and premium foods items. Raley's still sells items in certain categories under the Sunny Select brand. Save Mart continues to use it as its primary store brand across all categories.

However, with Save Mart's arrival with multiple supermarkets in the Sacramento regional market following its acquisition of Albertsons Northern California Division, Raley's got its competitive juices flowing and decided to hit Save Mart a bit harder than in the past in its home base. In the last year, Raley's has opened brand new Raley's banner superstores in Modesto and in Riverbank, which is a right next door to both Modesto and Oakdale. Raley's now has three Raley's superstores in Modesto, one in Riverbank and now the Raley's Fresh Market in Oakdale.

The Oakdale location right across the street from the Save Mart supermarket was too good to pass up for Raleys as part of its upping the competitive ante on Save Mart on its home turf.

Second, since the Raley's Fresh Market store building is smaller than a normal Raley's banner superstore (and is more a supermarket), Raley's decided it would have to limit the assortment it normally puts in its Raley's banner stores. Therefore, the retailer wanted to differentiate its name by adding "Fresh Market" to it, among other reasons fro choosing the name.

Additionally, Raley's wanted to go head-to-head with the Save Mart across the street on price and value, which meant offering lower everyday prices than it does in its Raley's superstores, along with deeper store-specific promotions. Therefore, the format tweaks required by the smaller store footprint, along with the name change, are allowing the retailer to focus more on price and price promotions in the Raley's Fresh Market in Oakdale, without creating confusion in terms of its merchandising and pricing in the Raley's superstore format stores.

Lastly, since the store is in a smaller footprint as well as existing building, its overhead and operating costs are much lower for Raley's than is the case with its newer Raley's banner superstores, which at about 55,000 -to- 70,000-plus square feet not only are bigger, which consumes more energy, but also feature lots of refrigerated and frozen cases in them. Therefore, it can offer lower everyday prices and hot promotions, which it is, designed to undercut the Save Mart across the street. In general, Save Mart supermarket prices tend to be a bit lower everyday than Raley's supercenter prices are.

Since the supermarket's previous tenant, the Oak Ridge Fresh Market, used "Fresh Market' in its name, Raley's also decided to use it as part of its new banner (or hybrid Raley's banner perhaps is a better way to phrase it) because the supermarket chain felt it allowed for some consistancy in the tranistion from the previous grocer to Raley's.

The Oakdale Raley's Fresh Market is a conventional supermarket essentially with a few twists. For esxample, it puts a much stronger emphasis on fresh foods--meats, produce, prepared foods--than a traditional 40,000 square foot supermarket does.

Price and heavy promotion also are part of the store's focus. Since opening, the store has been conducting numerous hot, store-specific promotions, which have included heavy couponing, free gasoline cards to customers who spend a certain amount of money per-purchase, deep discounts on fresh foods and groceries, and other heavy price and value-oriented promotional campaigns.

The Oakdale Raley's Fresh Market also is offering customers a $5 back on every $25 spent promotion currently, along with coupons for free items like fresh eggs, meats, produce items and other food and grocery items throughout the store.

Save Mart hasn't stood still though. It recently fired back with a thick coupon book specific to the Oakdale Save Mart location across the street, offering higher coupon values on many of the same items the Raley's Fresh Market offered in its coupon book. Save Mart also last week launched a special promotion in which it gave a gas rebate of $40 in the form of a gas card to the first 500 customers to spend $40 on groceries in the store.

Raley's has now come out with another thick coupon book for the store; which no doubt will be met by another similar one from Save Mart. Oakdale shoppers, and from what we are told those from surrounding towns, are definately benefiting from the competition between the two across the street situated grocers.

A Raley's spokesperson recently told Fresh & Easy Buzz it's possible the grocery chain may open more Raley's Fresh Markets of approximately the same size as the Oakdale store in other cities, in vacant supermarket buildings. However, she said the Oakdale store currently isn't any sort of test for rapidly rolling out a smaller-format, Raley's Fresh Market banner chain of stores anytime soon. However, the retailer isn't ruling out more, similar stores.

As we reported in this May 10 piece, Tesco plans to open its first Fresh & Easy Neighborhood Market grocery store in Modesto next year in a currently vacant building which most recently housed an independent supermarket that went out of business earlier this year.

That building, which is about 30,000 square feet, is set to be split in half by the shopping center's owner, with nearly half of it then remodeled into a Fresh & Easy small-format grocery store. Ironically, that now out of business Modesto independent supermarket, Michotti's Marketplace, bought the store (the business not the building) from Richland Markets, which is the same retailer that built and operated the Oakdale store the new Raley's Fresh Market is now located in.

We also know from our commercial real estate sources that Tesco Fresh & Easy Neighborhood Market is currently searching for additional store sites in Modesto and in the surrounding cities and towns.

Additionally, as we reported here, Tesco plans to locate its Northern California Fresh & Easy distribution center facility in Stockton, which is about 30 miles from Modesto. Stockton and Modesto (as well as Sacramento)--and the other cities mentioned above--are all conveniently connected along California Highway 99.

In terms of Fresh & Easy's entrance into the Modesto-Oakdale area, the Raley's and Save Mart price fight and competitive battle in the small city of Oakdale should give Tesco some idea of how much these two regional supermarket chains want to protect their respective hometown turf--the Sacramento region where Raley's is headquartered and the northern San Joaquin Valley region where Save Mart in headquartered.

Raley's, with about 129 stores, has annual sales of about $3.5 billion, while Save Mart, which has more than double Raley's total store count, had sales of nearly $6.5 billion in its latest fiscal year.

Both chains are far and away the current market share leaders in their respective headquarter regions. Additionally, Save Mart, with its acquisition of Albertsons Northern California divsion, the stores of which it now operates under the Lucky banner, is the number two market share leader in the San Francisco Bay Area, after number one Safeway Stores, Inc.

Upcoming New Markets Special Report--Northern California: Sacramento-based Raley's On A Growth Spurt; Looking For Multiple New Store Sites

Sacramento, California-based Raley's, a multi-banner and multi-format operator of 129 supermarkets and warehouse stores in Northern California and Nevada, is currently looking to expand its store count in both regions, Fresh & Easy Buzz has learned.

Commercial retail real estate sources in Northern California first tipped Fresh & Easy Buzz off that Raley's was looking for locations for new stores in the regions, with a particular focus on Northern California, including its hometown Sacramento and Central Valley markets.

Kent Haggarty, who is heading up the search for West Sacramento-based Raley's, confirmed the grocery chain is looking for locations in Northern California and Northern Nevada, but says he isn't at liberty to say exactly where and how many.

Raley's operates four retail banners. It's number one banner is Raley's, which are 55,000 -to- 80,000 square foot combination food and non-foods superstores, featuring large natural foods departments, a wide-variety of in-store, fresh prepared foods, and extensive selections of specialty, gourmet and ethnic food and grocery products, along with basic groceries and lots of non-foods and general merchandise items.

The stores also have large in-store bakeries and pharmacy's. Additionally, most of the Raley's banner superstores also have in-store eating venues and cafes. Newer Raley's banner stores also have gasoline fueling stations next to the stores.

The format is upscale but value-based in that the Raley's banner isn't a specialty supermarket but rather a combined basic supermarket and upscale specialty store. Raley's banner stores are located all over Northern California and Nevada.

The Sacramento-based supermarket chain, which is the leader in market share in the Sacramento Metropolitan region, also operates the Bel-Air Markets banner. Bel-Air stores are upscale supermarkets which average from about 30,000 -to- 50,000 square feet.

The stores carry a complete selection of food, grocery and non-foods items, lots of specialty and natural foods products, and in-store fresh, prepared foods. They have in-store bakeries, eat-in venues and cafes, all in an upscale but complete supermarket format.

Raley's acquired Bel-Air, which was the grocer's leading competitor in the Sacramento area, in the late 1980's from the Wong family. Most of the stores are located in Sacramento and surrounding areas.

The third supermarket banner Raley's operates is Nob Hill Foods. Raley's acquired then Gilroy, California-based Nob Hill in the 1990's from the Bonfante family, which operated the family-owned chain for about 65 years.

The Nob Hill banner is an upscale supermarket format similar to Bel-Air. The stores are about the same size on average (newer stores are in the larger range for both the Nob Hill and Bel-Air banners) and merchandised in a similar manner.

The Nob Hill banner supermarkets are located in the San Francisco Bay Area and central coast region, along with a couple in the Central Valley in Northern California. This is due primarily to the fact these were the chain's historical market regions when owned by the Bonfante family before the Raley's acquisition.

Lastly, Raley's operates about a dozen warehouse format discount stores under the Food Source banner. These stores are essentially basic warehouse format stores--cement floors, warehouse shelving--with a slightly upscale twist compared to a Food-4-Less or similar warehouse stores, for example. The focus of the Food Source stores is price and value.

Raley's, with about 129 stores currently in the four formats, does nearly $4 billion in annual sales. Our sources tell us the Raley's banner will be the one the grocery chain expands primarily in Northern California and Northern Nevada.

The new generation Raley's banner stores are big: about 65,000 -to- 80,000 square feet, and as mentioned include fueling stations as part of the format.

Raley's recently opened two new Raley's banner stores in the Northern San Joaquin Valley in Northern California. These stores include a new service the food retailer is trying out, which is a drive-up quick customer pick-up service for grocery orders. Customers can place their grocery orders online and then pick them up curbside at a special location outside the store. A clerk wheels the grocery order out and puts it in the customer's car. The customer pays for the order as part of the online ordering process.

Tesco plans to start opening an initial 40 of its small-format, combination discount basic grocery and fresh foods markets in Northern California starting either at the end of this year or more likely early in 2009.

Fresh & Easy Buzz has identified 21 Fresh & Easy grocery store locations in the San Francisco Bay Area thus far, 18 of which Tesco's Fresh & Easy Neighborhood Market has confirmed, and 19 stores set to open in the Sacramento Metropolitan region. The company has confirmed all 19 of those stores. The retailer is currently looking for additional store sites in both Northern California market regions.

Raley's is the food and grocery market share leader in the Sacramento Metro market, as well as being the number two leader in the northern San Joaquin counties of San Joaquin, Stanislaus and Merced, after number one Save Mart, Inc., which is based in Modesto, about 70 miles from Sacramento.

The Sacramento-based chain also is a major player in parts of the San Francisco Bay Area, as well as in the southern coastal region of Northern California and in northern Nevada.

However, it's the food retailer's market share lead at home in the Sacramento market, where its corporate headquarters are located along with the greatest number of its stores, that Raley's will attempt to protect aggressively from any competitive attempts by Tesco's Fresh & Easy to steal market share away from the grocery chain. This includes price reductions if deemed necessary, based on the grocer's history of meeting competition head on, such as that currently being attempted by Safeway Stores, Inc. and Save Mart in the Sacramento Metropolitan region market.

However, by opening so many stores, 19, at one time (over a period of months of course), and with more new stores planned in the Sacramento area market, Tesco is showing it's serious about taking on the long time dominant grocery retail player in its hometown market.

While the Raley's stores (all banners) aren't similar to Fresh & Easy in that they are larger, far more upscale in design, sell lots of non-foods (especially the Raley's banner), offer far greater fresh and shelf-stable product selections along with a much more extensive prepared foods offering (prepared in-store), there's only so much share of consumer stomach in any given market. Therefore, Tesco's Fresh & Easy, with its low-price focus, could steal business away from Raley's, particularly in the basic grocery category.

Currently, Fresh & Easy's everyday low prices in its stores in Southern California, Nevada and Arizona are considerably lower than Raley's everyday prices on basic grocery items are. As a result, if Raley's maintains it current pricing once a critical mass of Tesco's Fresh & Easy stores open in the Sacramento regional market, it could find even its loyal customers cherry picking for grocery deals a bit at Fresh & Easy, then shopping at Raley's for fresh and other foods.

Raley's however has thus far fought off every major competitive challenge--and in the case of former competitor Bel-Air Markets, acquired it--come its way for decades. (The grocery chain will celebrate its 75-year anniversary in 2010.) Therefore, it will adjust and adapt its merchandising and pricing as it sees fit, if it believes Fresh & Easy begins to pose a threat to its market share dominance.

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

Tesco's Fresh & Easy Neighborhood Market USA has inked a deal for another new store location in Northern California's San Francisco Bay Area even before the small-format grocer's first store has opened in the region.

Fresh & Easy Buzz has learned from the California Department of Alcoholic Beverage Control that Tesco has applied for an off-sale beer and wine license for a new Fresh & Easy store at 5550 Coast Highway in the San Mateo County city of Pacifica, which is just 12 miles south of San Francisco (and five miles from San Francisco International Airport) on the coastal peninsula. [Read and learn more about Pacifica here.]

The application, filed by Fresh & Easy Neighborhood Market, Inc., which is Tesco's U.S. corporate entity for its Fresh & Easy combination basic grocery and fresh foods markets, is still pending approval by the California ABC.

But that's merely a procedural formality generally. Unlike obtaining licenses for the off-sale retailing of hard liquor in California, obtaining an off-sale beer and wine license in the state is normally a matter of applying and paying a fee for retailers, except in situations where a particular city or neighborhood objects to having another store which sells beer and wine. In those cases, an appeal process can delay a retailer from obtaining the license, as well as even having it denied in some instances.

The Fresh & Easy store at 5550 Coast Highway is part of a new shopping center currently being developed in Pacifica, according to the city mayor's office. A city spokesperson said the city and its Chamber of Commerce have been trying to lure additional food retailers to the coastal city for some time, and were pleased Tesco is locating one of its small-format Fresh & Easy grocery markets in the city.

The Pacifica store will be Tesco's first Fresh & Easy grocery market to be located in San Mateo County. Thus far, the retailer has confirmed 18 San Francisco Bay Area locations for its Fresh & Easy small-format, convenience-oriented grocery stores.

In addition, Fresh & Easy Buzz has discovered two other planned locations, both in the East Bay Area city of Vallejo, in addition to this latest store site in Pacifica.

That brings the total number of Fresh & Easy combination basic grocery and fresh foods markets to 21 to date for the San Francisco Bay Area.

Tesco plans to open its first Bay Area stores at the earliest at the end of this year. However, it's most likley the first stores in the region won't start opening until early 2009.

Here is a list of the 18 San Francisco Bay Fresh & Easy store locations confirmed thus far by Tesco:

>Antioch: Somersville & Buchanan roads; Lone Tree & Golf Course
>Concord: Clayton & Ygnacio Valley roads
>Danville: Diablo Road & Interstate 680
>Fairfield: Beck Avenue & West Texas Street
>Hayward: Mission Boulevard & Rousseau Street; A Street & Hesperian Boulevard
>Mountain View: Middlefield Road & Rengstorff Avenue
>Napa: Jefferson Street & Imola Avenue
>Oakland: 73rd & Bancroft avenues
>Oakley: Laurel Road & Ohara Avenue
>San Francisco: Third Street & Carroll Avenue; Silver Avenue & Goettingen Street
>San Jose: Bird & Minnesota avenues; Almaden Road & Curtner Avenue
>Sunnyvale: Tasman Drive & Fair Oaks Avenue
>Vallejo: Oakwood Avenue & Springs Road
>Walnut Creek: Ygnacio Valley Road & San Carlos Drive

Read here about the two additional Fresh & Easy grocery store locations, both in Vallejo, that Fresh & Easy Buzz has discovered, along with this new store location in Pacifica.

With 21 Fresh & Easy store locations locked-up in the San Francisco Bay Area--and more to come--before even the first store is opened, Tesco is demonstrating it plans to be a serious food and grocery retailing player in the nine county, seven million resident-strong region.

As we regularly write on Fresh & Easy Buzz, Tesco's retail store strategy with its Fresh & Easy grocery markets is all about "critical mass"--opening stores within about two miles of each other in the market regions it picks to enter, like it's doing currently in Southern California, the Metropolitan Las Vegas, Nevada region, and in the Phoenix, Arizona Metropolitan market.

The strategy is no different for the upcoming new San Francisco Bay Area Market. That strategy also includes opening a thus far confirmed 19 stores in the Sacramento region, which is connected by major roads to the Bay Area. It's about a two hour drive from San Francisco to Sacramento, for example. Further, the closest Bay Area county is only about a 40-minute drive from Sacramento.

Under this "critical mass" retail store strategy--think Starbucks for coffee retailing and Rite Aid and Walgreens in drug retailing for example--Tesco will be locating more stores in both the Bay Area and Sacramento regions of Northern California. In fact, Fresh & Easy Neighborhood Market representatives are currently out in the markets negotiating additional leases at present. You will read about those new store locations here first.

Note: For a Chronology of various reports, stories and analysis Fresh & Easy Buzz has written about Tesco Fresh & Easy's march from Southern California to Northern California, read this piece, "Fresh But Never Easy: Tesco's Long But Rapid South-North March in the Nation-State of California."

Upcoming New Markets Special Report: Upscale Palo Alto, California is Laying Out the Welcoming Mat to Grocers: Will Fresh & Easy Knock On the Door?

University Avenue, downtown Palo Alto, California.

Despite being in the heart of California's high tech Silicon Valley and home to Stanford University, the San Francisco Bay Area city of Palo Alto, California--which is one of the highest income cities in America (Palo Alto's median household income is more than twice the U.S. national average), along with being in the top three American cities in terms of having the most college graduate and post-graduate residents per-capita--keeps losing supermarkets.

Although far from a "food desert," in the last few years Palo Alto has seen a Lucky's and Albertson's (two chain branches) close, two independent supermarkets, Midtown Market and All-American Market, go out of business, and the local Palo Alto Co-op grocery store, which was started in the 1960's and operated for about four decades until just recently, close its doors.

There still remain supermarkets in Palo Alto of course: There's a Safeway Lifestyle format supermarket; an upscale Andronico's Market, which is part of a 10-store Bay Area family-owned chain; a Whole Foods Market; an upscale Mollie Stone supermarket, which also is a branch of a multi-store Bay Area-based independent; local JJ&F supermarket; and one or two other smaller grocery stores or marts. There's also a number of supermarkets within a few minutes drive from Palo Alto, as the city is located in an urbanized region.

The city of Palo Alto, which has a (2007) population of about 62,000 (not including Stanford students which adds about 30,000 full-time residents to the city when school is in session), is currently sounding the alarm about it's ongoing loss of supermarkets however because another popular independent supermarket, the 60-year old JJ&F Market mentioned above, could potentially close its doors.

JJ&F is a mid-sized supermarket, which is the type and size of food stores the Palo Alto Planning and Transportation Commission and City Council wants to retain. The city also wants to attract new such supermarkets to Palo Alto.

Palo Alto, which is located about 35 miles south of San Francisco on the peninsula, has a pedestrian/public transportation/bicycle-first urban planning and transit policy, which means its city planning and zoning policies, including commercial and retail, are designed around the concept of being a pedestrian-friendly city, with the automobile coming last after walking, biking and riding public transportation. Although if you've ever seen the traffic in the city--not to mention all the BMW's and Mercedes-you would wonder if that policy is working.

Palo Alto's downtown is designed based on this policy. Main Street is very pedestrian friendly. The street is narrow and the sidewalks wide. Benches are all over the village-designed and perfectly landscaped streetscape, as are bike racks.

Palo Alto's Main Street--University Avenue pictured at the top of this piece which runs into Stanford University at one end and downtown Palo Alto at the other end-- and the downtown's side streets are packed with retail stores and shops of all kinds, as well as restaurants, cafes and trendy boutiques. When a storefront becomes empty downtown, which isn't often, it's filled quickly, even though Palo Alto has among the highest retail building rents in America.

Last night, the Palo Alto Planning and Transportation Commission sounded the alarm about the loss of grocery stores in the city. As a result, the city says it's going to create a policy specifically designed to retain existing grocery stores and attract new ones, especially those of a smaller to mid-sized format.

Sounds like a perfect opportunity for Tesco's Fresh & Easy Neighborhood Market, doesn't it?

Tesco will be opening 19 (18 confirmed by the retailer, one we recently reported on) small-format, combination basic grocery and fresh foods grocery stores in the Bay Area starting in early 2009. Tesco also is in the process of locating additional Bay Area store sites as we've reported in Fresh & Easy Buzz. Plans are to open far more than 19 Fresh & Easy stores over time in the nine-county Bay Area.

None of the 19 stores thus far are located in Palo Alto. One is located in nearby Mountain View and another in nearby Sunnyvale. Additionally, two thus far will open in San Jose, which is about 30 miles south of Palo Alto.

A piece in today's Palo Alto online, a community online news publication, describes the action the Palo Alto Planning and Transportation Commission said it plans to take to retain existing grocery stores and attract new ones to the city. Among the actions the commission plans on taking is the creation of a brand new zoning regulation, "G" for grocery, which would create land use and other incentives for grocers to locate stores in Palo Alto.

Read the piece: "Keeping grocery stores moves to top shelf. Without government incentives or requirements, food stores won't stay in town, Planning Commission members worry," by Palo Alto Online reporter Becky Trout here.

Rumor is Whole Foods Market is currently scouting Palo Alto for sites to open a brand new natural foods store in the city. The current Whole Foods Market store in Palo Alto, one of the retailer's first in the Bay Area, is an older, smaller store compared to today's format. Whole Foods Market, Inc. is in the process of doubling its current San Francisco Bay Area store count of 25 stores over the next three -to- four years.

We've also heard Safeway is eyeing Palo Alto, where Silicon Valley was born in the garage on Addison Street of one of the founders of Hewlett-Packard in 1938, as a possible location for one of its new "The Market" small-format (15,000 -to- 20,000 square feet) grocery stores.

As Fresh & Easy Buzz reported months ago, Safeway is looking for four initial locations in the South Bay Area for what will be "the Market by Safeway" combination basic grocery and fresh and specialty foods stores. As we reported here, Safeway is in current negotiations for its first Bay Area "the Market by Safeway" store in San Jose.

While it's not cheap to buy or lease retail space or to build and take over and renovate an existing building in the upscale city, Palo Alto seems a perfect opportunity for Tesco's Fresh & Easy in our analysis. The stores should appeal to Stanford students and Silicon Valley geeks alike, as well as the many retired people and young professionals in the community. If not, something is wrong.

Additionally, because of Fresh & Easy's small-format design, it would seem to fit perfectly into Palo Alto's ideal for a grocery store: smaller to mid-sized, pedestrian and public transportation-friendly, reasonably priced, and a few other criteria.

What would work in Palo Alto is a grocery store with affordable prices--the upscale Mollie Stone and Andronico's have rather upscale prices as well as products--while still offering a selection of specialty, natural and organic food and grocery items at the same time. Not everybody in the city is rich--there are lots of Stanford students and working people who earn high salaries but pay more than double the U.S. national average in rent for example--but nearly all of Palo Alto's residents are very food literate.

Fresh & Easy Buzz sees an opportunity staring Tesco right in the face on this one.

Upcoming New Markets Special Report: From Food Desert to Urban Oasis? Tuesday Election Could Change San Francisco's Bayview-Hunters Point Forever

The details--and the future--of Florida, USA-based Lennar Corp's. massive mixed-use development, detailed in the graphic above, will be voted on by San Francisco voters on Tuesday. Click her to view a larger version of the graphic.

After decades--some locals even say a lifetime--of neglect by the city, developers and the business community, San Francisco's Bayview-Hunters Point neighborhood--where Tesco is building a new Fresh & Easy grocery store which will be the retail anchor of a brand new residential condominium complex--is suddenly being flooded with local government and commercial attention.

[You can read more about the Fresh & Easy grocery store going into the Bayview-Hunters Point development in our March 13 piece, "San Francisco: Cool Bay Breezes, A City Full of History--And A Fresh & Easy State of Mind," here.]

History: A World War II shipbuilding dynamo

Bayview-Hunters Point, a historically African American neighborhood, has its growth origins in World War II when the U.S. government developed the now-closed naval shipyard on the waterfront in the neighborhood. The Hunters Point facility was one of the most productive ship-building facilities in the United States during the war effort, drawing thousands of workers from throughout the country to work at the shipyards, many who remained in the neighborhood after the war ended.

History: Changing economics and demographics

After World War II and throughout the 1950's, most Bayview-Hunters Point residents were homeowners, many able to buy their first homes in the neighborhood using the GI Bill. It was a moderate to low-income neighborhood, but primarily on the moderate income side. A 1,200 hundred square foot three bedroom one bath house sold for about $12,000 -to- $16,000 in the 1950's in the neighborhood. That same house today sells in the $600,000 -to- $700,000 range in the neighborhood, according to local residential real estate agents.

That majority home ownership trend began to change dramatically in the 1960's due to a variety of circumstances. In the 1960's and into the 1970's the city of San Francisco built numerous public housing developments in Bayview-Hunters point as part of then President Lyndon Johnson's war on poverty. At the time, the neighborhood was majority African American.

Throughout the 1960's and into the present, poverty in the neighborhood grew a bit, stayed the same a lot, but hasn't improved percentage-wise. The "projects" as they are called remain, although the city no longer builds large-scale "poor people only" public housing projects in the neighborhood any longer.

The modern era

Today, there still is a substantial African American population in the neighborhood--many of whom are the original homeowners or their children--along with many also living in the housing projects, and still others who are renters.

The demographic makeup of the neighborhood has changed much though. Hispanics or Latinos comprise a growing number of Bayview-Hunters Point's residents today. Additionally, there's been growth in the white and Asian population, as young San Franciscans have and are moving into the neighborhood since it's the most affordable district in a completely unaffordable for housing city.

San Francisco's current mayor, Gavin Newsom, made improving Bayview Hunter-Point a major element of his campaign when he ran and was elected mayor of the City by the Bay. Since getting elected, Newsom has devoted more personal and city effort to the neighborhood--including redevelopment efforts--than all of the city's previous mayors have. His success is mixed however, according to neighborhood leaders and city hall watchers in the city.

This effort includes working with commercial and residential developers and the business community--before being elected mayor, Newsom was an entrepreneur who owned a chain of successful restaurants in the city, along with a winery in the Napa Valley--to create new housing and commercial developments--and jobs--in Bayview-Hunters Point.

Fresh & Easy and Bayview-Hunters Point

One of those developments is the large mixed-use retail and residential development--of which Fresh & Easy will be the ground floor retail anchor--on San Francisco's Third Street in Bayview-Hunters Point. As part of the city's and neighborhood's agreement with the developer, a portion of the condominium units in the building must be sold at below market rate prices. Current residents of the neighborhood also get priority in buying or renting the units as part of the agreement.

Since the early 1990's, a coalition of Bayview-Hunters Point community groups and the city has been trying to lure a grocery chain into opening a supermarket that offers basic groceries and fresh foods at affordable prices into the neighborhood. The only current such supermarket is a Kroger Co.-owned Foods Co banner warehouse store which has to serve tens of thousands of neighborhood residents and is at one complete end of the neighborhood, making a trip to that store from the other end of the neighborhood a long one for residents, many of who use public transportation.

Tesco's Fresh & Easy Neighborhood Market was the first grocer to say yes to the city and neighborhood coalition when it decided to build a new store inside the new Third Street project currently being constructed.

Tuesday's election could change neighborhood forever

On Tuesday, San Francisco voters will go to the polls in a special election which among other ballot measures includes to competing ballot initiatives--Propositions G and F--regarding a massive residential development for Bayview-Hunters Point proposed by Miami, Florida-based residential developer Lennar Corp.

The huge development would include low-rise residential, medium and high-rise residential buildings, research and development facilities, and retail and commercial development, along with space set aside for public use like parks and other recreational activities.

The development not only includes Bayview-Hunters Point but nearby Candlestick Point as well, which is where the San Francisco 49-ers' football team's 'Monster Stadium is located. There has been discussion about the development including a new stadium for the football team, which is threatening to move south to nearby Santa Clara if one can't get built in San Francisco. [The Bayview and Hunter's Point neighborhoods are technically two separate neighborhoods located side-by-side. However, everybody in San Francisco, including the city most of the time, includes them together as Bayview-Hunters Point.]

Dueling ballot measures

Proposition G is a ballot measure sponsored by the developer and a coalition of Bayview-Hunters Point community groups, the San Francisco Building and Construction Trades Council (the union group representing construction and trades workers) and the San Francisco Chamber of Commerce. The mayor also supports Proposition G, and the San Francisco Chronicle newspaper endorsed the measure over rival Proposition F on Friday.

Two Bayview-Hunters point neighborhood groups, Bayview ACORN (Association of Community Organizations for Reform Now) and SFOP (San Francisco Organizing Project) have signed a Community Benefits Agreement with developer Lennar which guarantees a certain percentage of housing in the development will be sold at below market rate, that neighborhood residents get priority in buying and renting the new housing, that the developer will hire and train a certain percentage of neighborhood residents to build the development, and a number of other conditions in return for the coalition's support of Propostion G and the developer.

Proposition F on the other hand is being supported by other Bayview-Hunters Point neighborhood groups who don't feel the Community Benefits Agreement offers enough to neighborhood residents. Proposition F gives the neighborhoods more control over the development and requires the developer to set aside more jobs for Bayview Hunters-Point residents, offer more units at below market-rate cost, and spells out a number of other criteria.

A number of San Francisco faith or religious organizations also are supporting Proposition F, as is a powerful member of the city's Board of Supervisors, and numerous other community groups and organizations.

Residents split over neighborhood's future

The Tuesday election on the development is splitting longtime Bayview-Hunters Point residents down the middle, according to San Francisco political analysts.

Today's San Francisco Chronicle has a piece for example in which it describes one such split between two African American woman, both who have lived in the neighborhood for over 50 years each respectively.

Read the story, "Props F, G split two longtime Bayview residents," here.

Strange bedfellows

The coalition between labor (the building trades union) and business (the Chamber of Commerce) is also an odd and unique one in San Francisco politics. Historically, labor and business in the city are nearly always at opposite sides of any political issue or ballot measure.

However, in Friday's (May 30) San Francisco Chronicle, Steven Falk, the CEO of the San Francisco Chamber of Commerce and Michael Theriault, the head of the San Francisco Building and Construction Trades Council, co-authored an opinion piece together urging San Franciscans to vote for Proposition G (the developer measure) rather than Proposition F (the opposing measure).

Read their Op-Ed piece, "Labor and business urge yes on G, no on F," here.

Two important leaders of the "Yes on F, No on G" campaign, Bayview-Hunters Point resident and coalition for Proposition F leader Joanne Abernathy, and Bishop Ernest Jackson, director of a nearby neighborhood outreach center and a affordable housing developer in the city, co-authored their own opinion piece arguing in favor of Proposition F over Proposition G, which they say (Prop. G) is a far more neighborhood-oriented measure.

Read their Op-Ed piece, "Change begins in the neighborhood; vote yes on F," here.

No shortage of 'coalitions' on either side

Meanwhile, two longtime Bayview Hunters Point residents and members of the neighborhood coalition that signed the Community Benefits Agreement with the developer Lennar Corp., say they want San Francisco voters to know all neighborhood residents and groups aren't opposed to Proposition G and in favor of Proposition F.

These two neighborhood leaders, Jackie Phillips and Eleanor Williams, co-authored a pro-Proposition F piece in that same Friday edition of the Chronicle titled, "What the Bayview community wants," which you can read here. In the piece they explain the Community Benefits agreement signed with the developer and argue why they support Proposition G.

You also can read the San Francisco Chronicle's pro-Proposition G editorial here.

The San Francisco Bayview, a popular newspaper based in the Bayview-Hunters Point neighborhood, is in favor of Proposition F and against Proposition G (the developers initiative). You can read what the paper has to say in favor of Proposition G here.

Welcome to San Francisco politics. This is the norm in the city rather than the exception.

Food retailing and the neighborhood's future

If Proposition G (the developer measure) passes over Proposition F, which is a toss-up at this point in time according to San Francisco political analysts, that means the huge mixed-use development would go forward theoretically as planned, meaning thousands of new residents, new industry and retail, as well as new jobs.

If Proposition F passes, Lennar Corp. says it likely will scrap the project, although many analysts in San Francisco say that might not be the case as the opportunity would still remain a lucrative one for the developer.

If the huge mixed-use development goes forward in the neighborhood as planned--or even if a scaled-down version goes forward--that would mean thousands of new potential customers for the Fresh & Easy grocery store set to open on Third Street and Carrol Avenue in Bayview-Hunters Point, on top of all the residents who already live in the neighborhood and those who will live in the condominiums above the new store when it opens next year, which is currently underserved by grocery stores.

Ironically, if such a massive development like Lennar's does go forward, which is likely in one form or another, it will probably draw other grocery chains to open stores in the neighborhood, such as locally-based Safeway Stores, Inc., which has a store (about 12 units total in the city of 825,000 residents) in pretty much every San Francisco neighborhood except Bayview-Hunters Point.

Graphic credits: The graphic of Lennar Corp's. proposed mixed-use development for the Bayview-Hunters point neighborhood in San Francisco was created by Todd Trumbull of the San Francisco Chronicle. Graphic: Courtesy of the San Francisco Chronicle.

What Others Are Saying: 'Times-Herald' Vallejo, California: City Residents Are Shopping at Home More For Food and Groceries

Yesterday we reported here Tesco's Fresh & Easy Neighborhood Market USA plans to open two additional stores--besides the one already confirmed by the grocer at Oakwood Avenue and Springs Road--in the San Francisco Bay Area city of Vallejo.

Today's edition of the local area daily newspaper, The Times-Herald--which serves readers in Solano County where Vallejo is located, along with having distribution in nearby Napa County--has a story in which it suggests--and interviews local residents for--that Vallejo shoppers are shopping locally for food, groceries and other items, rather than going out of town.

The chief reason Vallejo residents are shopping at home is the soaring cost of gasoline at the pump, according to the story. Gasoline is currently about $4.20 a gallon in the San Francisco Bay Area.

Among the local shopping venues the Times-Herald piece says Vallejo residents are shopping locally at is the city's busy farmers' market.

For example, in the story, Bill Neads of the Vallejo Chamber of Commerce says the downtown farmers' market has been bustling.

"It was packed, elbow to elbow," Neads said. "I think people don't have the money to go out and are finding things to do to save gas."

Vallejo's state certified farmers' market, like those throughout California, sells a wide variety of fresh, local bulk fruits and vegetables, along with items like locally-produced honey, dairy products and even meats at affordable prices. Only farmers can sell at California state certified farmers' markets.

Additionally, Noemi Cavalli and David Roldan of Vallejo say in the story they've started cutting out unnecessary trips to stores out of town and use their bikes as much as possible to save on gas.

"We used to go to Wal-Mart in American Canyon (which is just a couple miles away from Vallejo), but now it seems like even if what they have is 10 cents cheaper, it will cost much more than that to get there," Roldan said. "Really, it has been in the last few months we are feeling the crunch from higher food prices."

As Fresh & Easy Buzz reported in this piece yesterday, Wal-Mart withdrew a city application to open a Supercenter in the city, after four years of contentious battles with the city and community groups over issues such as zoning, labor practices and others issues.

Another Vallejo resident, Peter Krewko, says in the story he stopped shopping at the local Safeway and now does most of his food and grocery shopping at the local branch of Grocery Outlet, a chain of salvage supermarkets which sells manufacturer overruns, slightly blemished goods, grocery products with label errors, and discontinued merchandise. Grocery Outlet is based in nearby Berkeley.

Kreko also says he is shopping regularly at the local farmers market.

"I have become very price conscious in the last few months," said Peter Krewko, who was visiting the downtown farmers market for the first time. "I am definitely sticking to stores here in Vallejo and have started shopping at discount places like Grocery Outlet instead of Safeway."

Krewko said he moved to Vallejo in October and is thankful there is a farmers' market with quality produce at affordable prices.

"It's not only great to have this here in the city for the value, but I also want to support our local farmers," Krewko said.

Read the full Times-Herald story, Vallejo shoppers stick closer to home," here.

Rising gas prices, especially in California where $4 a gallon is now the norm, could be good for Tesco's Fresh & Easy and its neighborhood grocer-oriented format in Vallejo. Fresh & Easy's low everyday price structure also could be welcome by Vallejo shoppers like Peter Krewko who are looking to save money and therefore shopping more at off-price and salvage type grocery stores.

Of course, since Fresh & Easy's produce is all pre-packaged rather than bulk like at the city's bustling farmers' market, that might not be a particularly popular category when the first store opens in the city early next year.

The open year-round Vallejo farmers' market is open on Wednesdays and Saturdays from June -to- September, and on Saturdays only the rest of the year. That schedule does offer food retailers opportunity to sell fresh produce in the city of 130,000, even though the local outdoor market seems to be gaining lots of popularity with shoppers.

Breaking News: Tesco Has Two New Fresh & Easy Stores in the Pipeline For San Francisco Bay Area; Brings Total to Date to 20 Units For the Region

Tesco's Fresh & Easy Neighborhood Market, which already plans to open a grocery store in the San Francisco Bay Area city of Vallejo as part of its first wave of 18 confirmed stores set to start opening in the region early next year, has two new additional store locations in the city in the pipeline, according to Susan McCue, an official with the Vallejo Economic Development Department.

The first Vallejo location, for which a lease has already been signed, is at Oakwood Avenue and Springs Road, as we reported here on January 30, 2008. That store is expected to open in the first quarter of 2009.

The other two Vallejo stores in Fresh & Easy's pipeline are expected to open sometime next year. We don't have addresses for the additional two stores yet, and the state of California Department of Alcohol Beverage Control says Fresh & Easy Neighborhood Market hasn't yet filed applications for off-sale beer and wine for the two Vallejo stores.

The city of Vallejo is aggressively courting new retailers to come to the city because its needs an infusion of sales tax monies in order to operate the city. Last month the city filed for bankruptcy, which is a rare thing for a municipal government to do in the U.S.

However, even after cutting expenses dramatically, the city couldn't find a way to make its revenue's meet it expenses, including it's current deficit, so it decided to file the bankruptcy petition and seek relief, giving it time to reorganize its municipal finances.

This is where new retail comes in for the city. In addition to Fresh & Easy, Vallejo is courting category-killer beverage and specialty foods retailer Beverages & More to open a store in the city.

Click here for an enlarged version of the map above

Beverages & More is based in nearby Walnut-Creek and has stores located throughout California and in other Western USA states. The stores offer a wide-variety of spirits, wines, beers, non-alcoholic beverages, specialty and gourmet foods (including some prepared foods) and related items like drinking glassware, candy, snacks and a limited assortment of non-foods items related to food and drink.

Food isn't taxable in California but alcoholic beverages and non-foods items are, so the city can collect its portion (a portion goes to the state) of sales tax revenues from the sale of those items in the Fresh & Easy and Beverages & More stores.

Vallejo was recently hit with a big potential retail sales tax revenue blow however, when Wal-Mart backed out of it's plans to locate a huge Supercenter in the city because of opposition from community groups. On Friday, Wal-Mart told the city it was withdrawing its application for a Supercenter in the city, after four years of trying to get the store built amidst lots of opposition from community groups and local small businesses.

Home Depot plans to locate a store in a former Wal-Mart discount store building in the city though, according to McCue, so that should be a boost to the city's sales tax revenue since nearly 100% of everything sold in a Home Depot has a sales tax.

Wal-Mart's change of plans for a Vallejo Supercenter could be good news for Fresh & Easy; unless Wal-Mart decides to put a couple of its new, small-format (15,000 square foot) Marketside banner combination basic grocery and in-store prepared fresh, prepared foods format stores in the city, which it might bring to California after the initial stores open in Arizona this summer, as we reported here. Of course, since the first Marketside stores haven't even opened yet, it's a moot point at present.

Meanwhile, the fact Fresh & Easy plans to open two additional stores in Vallejo for a total of three thus far in the city of about 130,000, demonstrates once again what we mean by what we call the retailer's "critical mass" retail store location strategy. That strategy is to locate a "critical mass" of stores close together (about 1.5 -to- 2 miles apart eventually) in key target market regions and in the cities in those regions. Think Starbucks' and Walgreens drug stores' strategies for example.

Having three--and possibly more down the road--grocery stores in a city the size of Vallejo is building fairly strong "critical mass," even if those stores average about 10,000 square feet like the small-format combination basic grocery and fresh foods Fresh & Easy stores do.

It also shows Tesco wants to be a major food and grocery retail player in the San Francisco Bay Area like it does in Southern California, Arizona and Nevada.

As we reported some time ago, Tesco's Fresh & Easy Neighborhood Market has plans to open far more than the initial 18 grocery stores its thus far has confirmed for the Bay Area. In addition to these two new Vallejo stores in the pipeline and set to open next year, there are more coming up in other Bay Area cities. We will be reporting on those additional new San Francisco Bay Area stores soon.