First Reported Here January 2010: Walgreens' Launches Fresh Foods Program in San Francisco Bay Area

Fresh and fresh-prepared foods at Walgreens.


Just as we said it would do in this story - Walgreens' Eyeing San Francisco For Fresh Foods Program: Could it Strike Category Gold in the City By the Bay? - published back on January 25, 2010, drug store chain Walgreens is launching its fresh and fresh-prepared foods program in the San Francisco Bay Area, where Tesco's Fresh & Easy Neighborhood Market started opening its first batch of stores in March.

There are currently 11 Fresh & Easy fresh food and grocery markets in Northern California. Nine of the units are in the San Francisco Bay Area. The other two units are in Modesto, in the Northern Central Valley, and Vacaville, which is about midway between the Bay Area and Sacramento.

Walgreens' is launching its fresh and fresh-prepared foods program to start in about 30 stores in the Bay Area as a test, which is what it did in Chicago. The drug chain has hundreds of stores in the region, including 64 units in San Francisco alone, so the potential store base from which it can offer fresh foods is extensive.

The first batch of stores (15 units) getting the fresh foods sections include 13 units in San Francisco, one store in nearby Daly City and a unit in San Rafael (Marin County), according to Wagreens' media relations specialist Robert Elfinger and our sources at the Deerfield, Illinois-based drug chain.

Elfinger has released a list of the initial 15 out of the about 30 Walgreens' stores in the Bay Area that are set to have fresh and fresh-prepared foods sections in by the end of June 2011. The list is at the end of this story.

The fresh and fresh-prepared foods sections include a selection of fresh produce and meats; ready-to-eat foods like sandwiches, salads, wraps, sushi and other items; and fresh, ready-to-heat entrees, side-dishes, soups and other offerings. See the photograph at top.

Fresh foods and particularly fresh-prepared foods are a major offering at Tesco's Fresh & Easy. In fact, it's a fair analysis to say - and Tesco has said it - that fresh-prepared foods are the key offering or attempted point-of-differentiation the Fresh & Easy format is premised on.

In our January 25, 2010 story we said San Francisco would be the main initial focus in the nine county Bay Area for Walgreens. It is.

Two of the 13 San Francisco Walgreens' stores, including one at 25 Point Lobos/43rd Avenue at Lands-End in the Outer Richmond District that already has the fresh and fresh-prepared foods section and offering in-store, are nearby the first two Fresh & Easy stores Tesco plans to open in the city.

The other Walgreens' store that soon will be offering fresh and fresh foods and that's near a soon-to-be-opened Fresh & Easy market is at 5300 Third Street in the Bayview District.

The 43rd Avenue Walgreens' store is 11 blocks from the Fresh & Easy market we've reported Tesco plans to open June 22 of this year. [See - May 10, 2011: Breaking Buzz: Fresh & Easy Neighborhood Market Plans to Open First San Francisco Store at 32nd and Clement June 22.]

The Walgreens' unit at 5300 Third Street in the city's Bayview District is just down the street from the Fresh & Easy store at 5800 Third Street Tesco currently plans to open August 24, as we reported on May 14 here: Breaking Buzz: Fresh & Easy Neighborhood Market Plans August 24 Opening For Third & Carroll Store in San Francisco's Bayview District.

It's no mere coincidence Walgreens' is launching its fresh foods program in the Bay Area now. The program is quarterbacked by two former executives of Tesco's Fresh & Easy Neighborhood Market - Brian Pugh and Jim Jensen.

In fact, our January 6, 2010 report (here) - Breaking Buzz: Corporate Director of Fresh Foods Jim Jensen Leaves Tesco's Fresh & Easy - that then director of fresh foods at Fresh & Easy, Jim Jensen, had left the grocery chain and was joining Walgreens - and former Fresh & Easy vice president of retail operations Brian Pugh - at the chain's headquarters in Deerfield, Illinois was responded to eight days later when Pugh, who recruited Jim Jensen to the drug chain from Tesco's Fresh & Easy, confirmed our report by announcing Jensen had joined Walgreens' to head up its fresh foods program as corporate divisional manager of fresh foods.

[See the two stories linked here for details - January 15, 2010: Just-Exited Tesco Fresh & Easy Fresh Foods Director Jim Jensen to Head New Fresh Foods Initiative at Walgreens Drug Chain; and Thursday, January 21, 2010: Walgreens' Announces Hiring of Former Fresh & Easy Fresh Foods Director Jim Jensen; Confirms Our January 6 Report.]

We reported exclusively in this story on September 22, 2008: - Key Personnel Breaking News: Co-Vice President of Retail Operations Brian Pugh No Longer Employed At Tesco Fresh & Easy Neighborhood Market - that Pugh, who was initially Fresh & Easy's vice president of retail operations and later became its co-vice president of retail operations, sharing the position with Jeff Adams, had left the Tesco-owned fresh food and grocery chain. Prior to joining Fresh & Easy Pugh worked for United Kingdom-based Tesco in a couple of its other global divisions.

Three months later on December 22, 2008 Walgreens' announced Brian Pugh had joined the chain in a new position, vice president of format development. [See our story - Breaking News: Mega-Drug Chain Walgreens' Hires Former Tesco Fresh & Easy USA VP of Operations Brian Pugh For New VP of Format Development Position.]

In March 2008 Walgreens' promoted Pugh to vice president of merchandising. He's responsible to a significant degree operationally for the drug chain's increased focus on food and grocery items in the stores over the last couple years, along with the fresh foods emphasis at retail, for example. [See - March 2, 2008: Walgreens' Promotes Former Tesco Fresh & Easy Exec Bryan Pugh to VP Merchandising Position; Move Fits Drug Chain's Current Strategic Focus.]

Like they did during their tenure at Fresh & Easy, Pugh and Jensen have been working very closely together on implementing and rolling out Walgreens' fresh and fresh-prepared foods program, which currently is in about 200 stores in metro Chicago, New York City, including units of the Walgreens'-owned Duane Reade chain which already had its own similar program when Walgreens' acquired last year, and a couple other places in the U.S.

Along with the list of 13 Bay Area locations (out of the initial 30) released by the Walgreens' spokesman, we've  learned from a good source that a number of the remaining 17 units the drug chain is implementing its fresh foods program in are near some of the nine Fresh & Easy stores Tesco has opened in the San Francisco Bay Area so far this year.

For example, don't be surprised if the Walgreens' store located right next to the (click here to see a photo) Fresh & Easy store in Danville isn't soon offering fresh produce, grab-and-go sandwiches and salads, sushi, a selection of fresh meats, ready-to-heat entrees and side dishes and the other fresh and fresh-prepared foods - all very similar to what Fresh & Easy Neighborhood Market offers - in the store.

In fact, if you've ever seen any of Walgreens' private brand ready-to-heat entrees created by Jensen and his team, like the Lasagna Bolognese pictured above, you might be tempted to nickname them "Son of Fresh & Easy." Below is Fresh & Easy's private brand Lasagna.

When Jim Jensen was director of fresh foods at El Segundo, California-headquartered Tesco's Fresh & Easy Neighborhood Market he had overall buying/merchandising responsibility for fresh produce, meat, and deli/ fresh-prepared foods. That responsibility included fresh-prepared foods brand development in conjunction with the grocer's culinary team.

Further, don't be surprised if you see fresh and fresh-prepared foods pop up in a Walgreens' store - or two or three - in San Jose, including at stores near the two Fresh & Easy stores Tesco has opened in the city so far this year.

Walgreens' stores in Concord, Walnut Creek, Hayward and a couple other Bay Area cities - all near Fresh & Easy stores opened in March and April of this year in the cities - are looking pretty good for new fresh and fresh-prepared foods installations down the road as well.

We'll have more news, along with some in-depth analysis, about Walgreens' initial 30-store fresh foods and fresh-prepared foods program roll out in the San Francisco Bay Area in the next couple days.

As we said in our story published in Fresh & Easy Buzz 16 months ago, the San Francisco Bay Area region is a major focus for Walgreens with its fresh foods program.

That's because, as we also said in the January 25, 2010 story, the region offers great opportunities for retailers that offer fresh-prepared foods.

But in addition to that primary reason, there's a secondary one - the Tesco Fresh & Easy angle - which we've laid out for you a bit in this story - and in our past coverage and analysis (see the links below) of how Walgreens' fresh foods program relates to Tesco's Fresh & Easy via the Pugh and Jensen history and angle.

We'll have more to come. Stay tuned.

Related Stories

>April 11, 2010: When it Comes to Fresh, Prepared Foods, New York City's Duane Reade is Simply 'deLish' for Walgreens

>January 6, 2010: Breaking Buzz: Corporate Director of Fresh Foods Jim Jensen Leaves Tesco's Fresh & Easy

>January 15, 2010: Just-Exited Tesco Fresh & Easy Fresh Foods Director Jim Jensen to Head New Fresh Foods Initiative at Walgreens Drug Chain

>Thursday, January 21, 2010: Walgreens Announces Hiring of Former Fresh & Easy Fresh Foods Director Jim Jensen; Confirms Our January 6 Report

>January 22, 2009: Neighbors by Location Only: Will Mega-Drug Chain Walgreens' New Focus on Consumables and 'Affordable Essentials' Rob Sales From Tesco's Fresh & Easy?

>December 22, 2008: Drug Chain Walgreens to Slow New Store Growth; Despite Tesco Fresh & Easy's Recent Announcement to Do Similar, We Suggest An Analogy is Misplaced

>December 22, 2008: Breaking News: Mega-Drug Chain Walgreens Hires Former Tesco Fresh & Easy USA VP of Operations Brian Pugh For New VP of Format Development Position

>September 22, 2008: Key Personnel Breaking News: Co-Vice President of Retail Operations Brian Pugh No Longer Employed At Tesco Fresh & Easy Neighborhood Market

Below are the 15 Walgreens' stores in the San Francisco Bay Area set to have fresh foods and fresh-prepared foods offered in-store by the end of June 2011. Source: Walgreen Company.

San Francisco
1344 Stockton Street

100 Sansome Street

116 New Montgomery

275 Sacramento Street

450 Powell Street

30 Market Street

456 Mission Street

1301 Market Street

2690 Mission Street

3400 Cesar Chavez Street

5300 Third Street

25 Point Lobos Avenue (Richmond District store)

3001 Taraval Street

Daly City (San Mateo County)
Westlake Shopping Center

San Rafael (Marin County)
830 Third Street

Walgreens Eyeing San Francisco For Fresh Foods Program: Could it Strike Category Gold in the City By the Bay?

News & Analysis

Drug chain Walgreens is looking closely at San Francisco, California as one of the first major U.S. cities in which to launch its fresh foods (ready-to-eat foods and probably some ready-to-heat as well) program, Fresh & Easy Buzz has learned.

As we first reported in this January 6, 2010 story, former Fresh & Easy Neighborhood Market director of Fresh Foods Jim Jensen left the Tesco-owned chain on December 30, 2009 to take a job with Walgreens at its corporate headquarters in Illinois. Fresh & Easy is based in the Southern California city of El Segundo

Jensen's new position at Walgreens is as the drug chain's new corporate divisional manager of fresh foods. See our stories here for details. Both the division and the position are new at Walgreens.

Jim Jensen is joining Brian Pugh, the former vice president for retail operations at Tesco's Fresh & Easy, at Walgreens. Pugh is the vice president of merchandising at the drug chain, a position which includes responsibility for the consumables categories, including the new fresh foods focus.

San Francisco: The City

San Francisco would be a good and logical choice as one of the first major U.S. cities for Walgreens to launch it's fresh, prepared foods program for a number of reasons:

>Geography and dense population: San Francisco is a compact city, just 47 square miles in size. It's also a highly dense city. San Francisco has a population of about 850,000 residents living in those mere 47 square miles. In addition, because San Francisco is a headquarters city, it's estimated it has a daytime population of about 2 million.

>Strong retail real estate: Walgreens has a whopping 64 drug stores in San Francisco, including having at least one store in just about all of the city's many neighborhoods. This is powerful retail real estate penetration. San Francisco is a city of neighborhoods.

>Prime demographics: San Francisco's population skews young. It also has a high percentage of single people. These two demographics are excellent for the retail merchandising of ready-to-eat and ready-to-heat fresh, prepared foods of all types. In other words, San Francisco is a grab-and-go and more fresh foods merchandising heaven.

Additionally, San Francisco has among the highest income of all U.S. cities. It's in the top five.

But even more important, San Franciscans spend a higher percentage of their income on prepared foods of various types than do residents of nearly any other U.S. city. New York City and Boston being the two closest.

San Francisco has a much higher proportion of people living in apartments than it does single family houses. This phenomenon also lends itself to higher purchases of ready-to-eat and ready-to-heat fresh foods.

Add to this the fact that San Francisco is a walking and public transit city, which means frequent grab-and-go eating, and you can begin to see the reasons why making the city one of its first markets in which to launch its fresh, prepared foods program would make good and logical sense for Walgreens.

San Francisco's high daytime population - they all have to eat lunch - also offers an added incentive for a chain like Walgreens to add fresh, prepared foods to some or all of its 64 stores in the city. These suburban commuters work downtown in the city's financial district, but also at the many media companies in the South of Market neighborhood, as well as in numerous neighborhoods throughout the city. Their are Walgreens stores in nearly all of these neighborhoods.

Pictured above is a Walgreens store in San Francisco's South of Market neighborhood. The store is the retail anchor of a mixed-use office and residential building, which offers a ready-made customer base for grab-and-go prepared foods.

San Francisco: Fresh foods gold mine

Walgreens already sells a limited variety of fresh foods, such as milk, eggs, juices and other beverages, along with some perishable and frozen foods in its stores nationwide. However, by fresh, prepared foods we're taking about ready-to-eat items like sandwiches, snacks and desserts, and ready-to-heat items like pizza's, hot sandwiches and perhaps even entrees and side-dishes in a limited assortment.

San Francisco, which was where the successful gold miners spent their treasures during the great California Gold Rush in the 1800's, is one of the strongest markets in the U.S. for sales of ready-to-eat and ready-to-heat fresh, prepared foods. This includes sales at supermarkets, specialty food stores, corner grocery markets, convenience stores and at a vast variety of prepared foods venues like restaurants, kiosks and other outlets.

With its existing base of 64 stores in the city, if Walgreens were to introduce fresh, prepared foods in some or all of those stores, it would become a major retailer of ready-to-eat and ready-to-heat foods in San Francisco by virtue of the fact it covers those 47 square miles with a retail store unit blanket. Existing retail real estate is a powerful strategic tool to have.

For example, Supermarket chain Safeway Stores, Inc., which is headquartered just 30 miles from San Francisco in Pleasanton, has about 15 stores in the city. Of course Safeway's supermarkets, even its smallest units in San Francisco, are at least three times the size of the San Francisco Walgreens' drug stores. They also offer much more in the way of food and grocery selection.

But that's not what's most significant in this case, since little square footage is needed to merchandise a selection of fresh, prepared foods. What's key for Walgreens is that it has those 64 stores, which are located throughout the city, including in the downtown, as well as in San Francisco's many neighborhoods. This is the power of existing retail real estate we mentioned earlier.

Walgreens and Safeway have the most stores in San Francisco of any retail chain of any format we are able to find.

It's clear San Francisco offers considerable opportunity for Walgreens in the fresh foods space as it further develops and starts to launch its program.

Walgreen's isn't at present confirming or denying that it's looking closely at San Francisco as one of the first markets in which to rollout its fresh, prepared foods program, which we think will be mostly ready-to-eat-focused, but will also have some ready-to-heat items as a part of it.

Walgreens recently applied to the city of San Francisco for permits to sell alcohol at 34 of its 64 stores in the city. This is part of a national corporate move, to offer alcohol sales in more of its stores in the U.S., which is part of the drug chain's increased focus on offering more consumables for sale in its stores, which we first wrote about here in January 2009. The new fresh foods program is also part of that new consumables strategic emphasis.

Tesco's Fresh & Easy currently has two confirmed store locations in San Francisco - at 3rd Street & Carrol Avenue and at Silver Avenue & Goettingen Street. However, those locations have been confirmed by Fresh & Easy since January 30, 2008.

The fresh foods and grocery chain has twice postponed its Northern California launch since then. And Fresh & Easy has yet to announce if it will open any stores in Northern California, including the Bay Area, in 2010.

But it appears, based on our information, research and analysis, that Walgreens is thinking that if you are in San Francisco, you should have fresh foods in your stores.

Related stories from Fresh & Easy Buzz:

>January 6, 2010 Breaking Buzz: Corporate Director of Fresh Foods Jim Jensen Leaves Tesco's Fresh & Easy.

>January 15, 2010: Just-Exited Tesco Fresh & Easy Fresh Foods Director Jim Jensen to Head New Fresh Foods Initiative at Walgreens Drug Chain.

>Thursday, January 21, 2010: Walgreens Announces Hiring of Former Fresh & Easy Fresh Foods Director Jim Jensen; Confirms Our January 6 Report

>January 22, 2009: Neighbors by Location Only: Will Mega-Drug Chain Walgreens' New Focus on Consumables and 'Affordable Essentials' Rob Sales From Tesco's Fresh & Easy?

>December 22, 2008: Drug Chain Walgreens to Slow New Store Growth; Despite Tesco Fresh & Easy's Recent Announcement to Do Similar, We Suggest An Analogy is Misplaced

>December 22, 2008: Breaking News: Mega-Drug Chain Walgreens Hires Former Tesco Fresh & Easy USA VP of Operations Brian Pugh For New VP of Format Development Position

>Monday, September 22, 2008: Key Personnel Breaking News: Co-Vice President of Retail Operations Brian Pugh No Longer Employed At Tesco Fresh & Easy Neighborhood Market

[Graphic credit: The limited edition print of San Francisco's North Beach neighborhood with the Transamerica Pyramid building in the background is by Cao Yong Editions, courtesy of NCH Galleries.]