Despite Having Postponed its Northern California Launch Indefinitely; Tesco's Fresh & Easy Planning Third Store in Modesto, California

Central Valley, California Market Region Report - Modesto, CA

Despite having postponed its launch into Northern California indefinitely, Tesco's Fresh & Easy Neighborhood Market is planning a third store in the Northern San Joaquin Valley city of Modesto.

That store, a built-from-the-ground-up unit, is located in rural south Modesto, on Crows Landing Road near Whitmore Avenue.

There's currently a "Fresh & Easy Coming Soon" sign up at the store construction site, which is situated near a shopping center on Crows Landing Road that contains a Burger King fast food restaurant.

Crows Landing Road is a long, mixed-use commercial retail and industrial strip that ties the southern portion of Modesto into its downtown. The location of the Fresh & Easy market is at the far southern end of the commercial strip, in an area that's on the urban-rural edge of south Modesto. There are numerous orchards and other agricultural fields near the store site.

South Modesto is an interesting mix of commercial businesses, industrial firms and mostly single-family residential housing. The area has a very high Latino population. Many of the retail stores along Crows Landing Road cater to Hispanic shoppers, for example.

In terms of retail, along with a number of Latino grocers and bakeries, there's Hispanic-focused general merchandise stores, a number of used car lots, fast foods restaurants, service stations, a large retail-wholesale produce market and a Starbucks cafe with a drive-through window, which is located near the future Fresh & Easy grocery store location.

The neighborhood also has numerous industrial and wholesale distribution businesses. For example, the Winco Foods supermarket chain has a 700,000 square foot distribution center not far from the Fresh & Easy store site. There's also a number of small manufacturing businesses in the area.

The Stanislaus (Modesto is the county seat of Stanislaus County) County Jail is also located on Crows Landing Road, not far from the future Fresh & Easy store, along with a golf driving range, which also is near the site of the future Fresh & Easy market.

It's a very mixed use commercial, residential, industrial and agricultural part of the city. In urban planning terms it can be characterized as an urban fringe area.

Along with the city's Airport District, South Modesto has the highest percentage of low income residents in Modesto, according to the city's Economic Development Department. Most of the housing in the neighborhood is older and is among the most affordable in the city of 205,000. Stanislaus County has a population of about 520,000. Modesto is the county's largest city.

South Modesto also has, along with the Airport District neighborhood, the highest percentage of city residents receiving federal, state and county government financial assistance, such as welfare, WIC vouchers and food stamps, according to the city of Modesto.

At 16.9% (February numbers), Stanislaus County, along with next door Merced County (19% unemployment rate), has among the highest unemployment rates in California, if not in the U.S. The region has been hit hard by the housing foreclosure crisis. Merced and Stanislaus have been among the top five-highest per capita counties in the U.S. for housing foreclosures for over a year. California's overall unemployment rate for February was 10.5%

The south Modesto area has an even higher unemployment rate than the city of Modesto and Stanislaus County does as a whole. Estimates are that about 21% of the residents in the area are without jobs at present.

The city of Ceres, which has a population of 43,000, is near the Crows Landing Road future Fresh & Easy store location. Wal-Mart is currently building a 200,000 square foot combination food and general merchandise Supercenter in Ceres, just a few miles from the Fresh & Easy site. The Supercenter is slated to open later this year, according to the City of Ceres planning department.

As we've previously reported, Tesco currently has two other Fresh & Easy store sites planned for Modesto. One of those stores, located in the Sylvan Square Shopping Center in a former supermarket, was supposed to have opened by now. However, little if any work has been done to convert the vacant building set to house the Fresh & Easy market. Read our May 10, 2008 story: New Markets: Tesco's Fresh & Easy to Move Into Modesto, California Market; Open its First Store in the City Early Next Year.

The second location, at 1717 Oakdale Road in Modesto, also is slated to go into a vacant supermarket building. However, work on remodeling the building has yet to begin. Read our November 6, 2008 piece here: Upcoming New Markets News: Tesco Will Open A Second Fresh & Easy Store in Modesto, California.

The Crows Landing Road location, planned Modesto store number three, has some initial construction work started on it. The site is fenced-in and the "Fresh & Easy Coming Soon" sign is clearly visible from Crows Landing Road.

However, according to residents of the neighborhood, there hasn't been much if any construction work going on at the Fresh & Easy site recently.

This isn't a surprise to Fresh & Easy Buzz because it's our analysis that it's very unlikely Tesco will open any of its Fresh & Easy markets in Northern California this year, based on our reporting and research.

The Crows Landing Road location is substantially different than the other two Modesto store sites. Those two locations are in urban, middle-class residential neighborhoods. Plans call for those two Fresh & Easy stores to be housed in now vacant buildings in those neighborhoods that have a long history of being supermarket locations.

On the other hand, not only is the planned Crows Landing road location in a much lower income part of Modesto, the area also is very rural.

On the plus side, there are few full-service grocery markets in the area. There's a Latino-focused supermarket a few blocks away, located in what was once a Save Mart supermarket, along with a couple smaller Hispanic grocery stores and a convenience store not far away.

The part of Crows Landing Road where the Fresh & Easy site is located gets a considerable amount of daily commuter traffic. Numerous residents of smaller cities surrounding Modesto work in the city and use Crows Landing Road to get to and from work each day. That's why, for example, the Starbucks in the area is mostly a drive-through cafe.

In our analysis, based on the lack of full-service grocery markets in the Crows Landing Road neighborhood, along with the fact the area is a rural part of the city with a high percentage of low-income residents, the planned Fresh & Easy store therefore qualifies as a "food desert" location. "Food deserts" are neighborhoods underserved by grocery stores that offer a decent selection of fresh foods and groceries at affordable prices.

Interestingly, the residents we talked to about the planned Fresh & Easy market on Crows Landing Road in Modesto all thought it was either a conventional convenience store or fast food restaurant.

When told it was a combination grocery and fresh foods market, all were very surprised.

But it could be a moot point in the near -to- medium term since it doesn't look like plans call for the store to be completed soon.

However, the Crows Landing Road location does make three locations thus far for Tesco's Fresh & Easy in Modesto.

Fresh & Easy Neighborhood Market has not confirmed any of the three locations for Modesto, nor announced their existence.

However, Fresh & Easy Buzz has documented the three sites in multiple ways, including visually, as well as through our commercial real estate sources, and through the California Alcoholic Beverage Control Department, for the Oakdale Road and Sylvan Square stores, because Tesco's Fresh & Easy applied for beer and wine permits for those two locations.

Based on our reporting and research though, its unlikely any of the three Modesto Fresh & Easy stores, along with those elsewhere in Northern California, will open this year. Stay tuned.

Linkage - Related stories:

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

>November 6, 2008: Upcoming New Markets News: Tesco Will Open A Second Fresh & Easy Store in Modesto, California

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

>September 15, 2008: Wal-Mart Expanding its Discount Store-to-Supercenter Conversion Program As Part of its Strategy to Grab Even More Food and Grocery Sales Market Share

>December 29, 2008: Competitor News: Winco Foods to Expand in California and Nevada in 2009; Put Aggressive Focus on Central Valley, Northern California and Northern Nevada

>February 11, 2009: Tesco's Fresh & Easy Isn't the Only Food & Grocery Retailer With its Eyes on Bakersfield: Wal-Mart's Bakersfield Push and Central Valley, CA Strategy

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

Upcoming New Markets News: Central Valley - Modesto, CA

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

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

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

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

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

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

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

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

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

Fresh & Easy moves north

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

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

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

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

New developments in Modesto market

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Modesto market share leaders

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

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

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

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

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

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

Independents and other players

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

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

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

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

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

Trader Joe's has one store in the city.

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

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

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

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

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

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

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

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

Fresh & Easy Buzz has learned Tesco's Fresh & Easy Neighborhood Market will open its first small-format, convenience-oriented grocery store in the Central Valley city of Modesto, California early next year.

The Fresh & Easy grocery market will be located in part of a building occupied until earlier this year by independent grocery store Michotti's Marketplace, which closed for lack of business, according to Tom Klein of San Francisco-based Crosspoint Realty Services, owner of the Sylvan Square shopping center where the building and future Fresh & Easy Neighborhood Market grocery store is located.

Klein says the building which formerly housed the independent supermarket is about 30,000 square feet.

Crosspoint Realty will divide the building in half, with Tesco taking about 15,000 square foot to remodel for its Fresh & Easy format. The real estate firm will lease the other 15,000 square feet of retail space to another tenant. The retail selling space for the Fresh & Easy grocery market will be about 13,000 square feet, which is about average for the chain.

The 30,000 square foot Michotti's Marketplace was the anchor retail tenant in the Sylvan Square shopping center. The center is located on the northeast corner of Coffee Road and Sylvan Avenue in the city of about 210,000 residents. Modesto is the county seat of Stanislaus County, which has a population of about 520,000.

The Sylvan Square shopping center currently has a Walgreens drug store, Ace Hardware store and a couple of restaurants in it, according to Crosspoint Realty's Klein.

Additionally, the commercial real estate firm is currently searching for a tenant for an empty 6,000 square foot building which is located between the building that will be the future home to the Fresh & Easy grocery store and the Ace Hardware store, Klein says. The building, which Klein says was home to and education-oriented supply store, has only currently become vacant, closing about a month ago.

Region experiencing economic pains

Modesto, Stanislaus County and the surrounding tri-county region, which includes San Joaquin and Merced counties, are currently experiencing difficult economic times.

The three counties have regularly been number one (Merced County), two (Stanislaus) and three (San Joaquin) in the U.S. in the number of home foreclosures nationwide, according to monthly statistics compiled by the U.S. department of Housing and Urban Development.

Home values in all three counties are 40 -to- 50% less than they were just two years ago. However, prior to about two years ago housing values soared in the region over the last decade, providing some cushion for people who were fortunate to have bought their homes 10 or more years ago. For those who bought homes in the area in the last few years though, things are tough.

Modesto and the surrounding region also has experienced a rapid growth in unemployment numbers since late last year. Stanislaus County's current unemployment rate of about 11% is nearly double the state of California's current average of about 6.3%. And, by comparison, the nearby San Francisco Bay Area, which has a much more diverse economy, is still and overall unemployment rate of about 4.6%.

The Modesto region historically has unemployment numbers that run three points or so higher than the state average do to the seasonal natural of the agricultural industry, which remains the area's number one source of economic activity, despite lots of diversification into manufacturing, services, health care and retail over the last 20 years.

Future Fresh & Easy location has interesting history

The building in Modesto's Sylvan Square Shopping Center where Tesco will open its first Fresh & Easy grocery store in the city early next year has a long history of food retailers doing business in it for years and then closing their stores for lack of business, according to a long time Modesto-based food broker and city resident who's a Fresh & Easy Buzz reader and correspondent.

In the 1970's to the 1980's the building was home to an Alpha Beta supermarket. Until the early 1990's, when it was acquired by then Salt Lake City Utah-based American Stores, Inc., Alpha Beta was a major supermarket chain in California. Albertsons, Inc. acquired American stores in the 1990's.

Albertsons, Inc. was acquired by SuperValu, Inc. and the Cerebus investment firm two years ago. Cerebus bought Albertsons' Northern California division of about 132 stores as part of the buyout deal involving SuperValu, Inc., then sold that operation to Modesto-based Save Mart., Inc.

Save Mart operates those stores under its Save Mart banner in the Central Valley and under the Lucky banner in the Bay Area. Save Mart currently operates about 255 supermarkets and warehouse stores under the Save Mart, Lucky, S-Mart and FoodMaxx banners in Northern California and the Central Valley.

The Sylvan Square Alpha Beta supermarket closed in the 1980's. A short while later a local multi-store independent, Richland Markets, took over the location and operated a Richland Market supermarket in the building for many years, according to the Modesto food broker and long time city resident.

Then, siting a lack of business at the store, Richland closed the unit in the late 1990's, he says. Michotti's Marketplace lease the location about six years ago and closed earlier this year, sighting a lack of business as its reason for doing so, according to our Modesto food broker correspondent and source.

When we told the long time Modesto resident and 30-plus year Northern California food broker Tesco's Fresh & Easy was putting a store in the now empty once again building, his response was one of caution and ambivalence.

He says the location is a tough one, evidenced by the failure of the previous grocers to make a long-term go of the site.

However, he also says because of Fresh & Easy's small-format size and limited assortment merchandising operation, they might be able to succeed in the Sylvan Center because most of the shoppers in the neighborhood have always used the various grocery stores which have operated at the location as more limited, neighborhood or convenience shopping venues, rather than as their primary grocery store.

Of course, Tesco's positioning and goal with its Fresh & Easy stores is for the markets to be primary, and to a limited degree secondary, shopping venues for neighborhood residents. Therefore, if this long-time Modesto resident, food broker, and player in the local food and grocery retailing industry is right about the nature of how neighborhood residents have historically shopped the supermarkets in the location, Fresh & Easy will have its work cut out for it in terms of gaining primary shoppers to the Sylvan Square store.

Critical mass and Tesco in Modesto

Tesco's moving into the Modesto market isn't a surprise to Fresh & Easy Buzz. As we've written often, the retailer's goal in California, Arizona and Nevada, its current three market regions, is to build a "critical mass" of Fresh & Easy grocery stores in all three regions.

In March when we reported here that Tesco will built its Northern California distribution center in Stockton, which is only 30 miles from Modesto, we said the grocer was looking for store locations in Stockton, Lodi, Galt, Manteca, Tracy and Modesto, all cities within no more than 30 minutes of each other along Highway 99, the region's major transportation artery.

As we reported here in February, Tesco will open 19 stores in the Sacramento Metropolitan region starting early next year. One of those stores is in Galt, which we mentioned above.

The retailer also will start opening the first of 18 confirmed Fresh & Easy stores in the San Francisco Bay Area in early 2009, as we first reported late last year and Tesco confirmed in this piece we published on January 30.

Modesto is about 65 miles from Sacramento straight down Highway 99. Modesto also is only about 50 miles over the Altamont Pass to the East Bay Area city of Livermore and only about 90 miles from San Francisco.

Therefore, locating Fresh & Easy stores in Modesto and eventually the surrounding area is just part of what we call the grocery chain's "critical mass" store location strategy. Think Starbucks and Walgreens and Rite Aid drug stores in terms of how they locate stores within a couple miles of one another in key markets. Tesco's strategy in its market regions with Fresh & Easy is similar, just applied to grocery stores rather than coffee shops or drug stores.

Critical mass in the neighborhood

We also have reported, although Tesco has yet to confirm, the retailer plans to build at least an initial five Fresh & Easy grocery stores in the southern Central Valley city of Bakersfield and the surrounding metro region. Bakersfield is roughly half way between Los Angeles and Modesto.

We also reported here in March, that based on information from our commercial real estate sources in the area, Fresh & Easy representatives have been looking for store locations in the Fresno region. Fresno is less than an hours drive from Bakersfield, and only about a two hour drive from Modesto.

We also know Tesco is looking for a few sites in between Fresno and Modesto, in the Merced County region.

It's all about "critical mass." The long term California strategy for Tesco is to have stores throughout the state, about 1.5 -to- 2 miles apart, so the grocery chain can it hopes become sort of the de facto neighborhood grocery store for the states residents and grocery shoppers.

Longer term plans call for opening stores in the far north of California (thus far the farthest north stores confirmed are in the Sacramento region and the city of Napa), moving right in to Oregon and then Washington state.

Those plans have been put off a bit by Tesco for a few reasons: they've discovered just how hard it is to open a new store every three days in the U.S., Fresh & Easy store performance has been less than the retailer hoped it would be thus far, and the recessionary U.S. economy has made the British grocery chain more cautious than it was when it embarked on its Fresh & Easy venture, which at that time found the U.S. economy was doing well compared to its present state.

Modesto famous

Modesto is famous in agriculture, business and wine circles as being the home of the World's second-largest winery, 75 year old, family-owned E.J Gallo Winery, which has its corporate headquarters in the city.

Modesto also is the corporate home to Save Mart, Inc. one of the largest privately-owned supermarket chains in the U.S., with about $6 billion in annual sales and about 25,000 employees.

Save Mart and Gallo are Modesto's top two corporate employers, as well as being the leading philanthropic corporate citizens in the city and region.

For example, the city's brand new performing arts center which opened earlier this year is named the Gallo Center for the Arts. The Gallo family donated in the neighborhood of $15 -to- $20 million dollars towards building and having the state of the art performing arts facility named after them. The facility cost much more than the amount of the Gallo donation to built but the family were the single-largest donors and catalysts behind the project.

Gallo also gives money to every imaginable charity in the region, from feeding the hungry and supporting dozens of local charities, to funding medical research and providing college scholarships to high school students in need.

Save Mart, which was founded in Modesto over half a century ago, operates seven Save mart banner supermarkets and one FoodMaxx warehouse store in its home town, along with having stores in nearly every nearby city and town.

In addition to being one of Modesto's top two employers, Save Mart also is along with Gallo the cities other top philanthropist and supporter of community events and causes.

For example, this weekend one of Modesto's biggest events, the California Invitational Relays, is taking place at Modesto Junior College, the city's and region's community college campus. Save Mart not only is the main sponsor of the world renown track and field event, which is a qualifying stop for the upcoming Olympic Games, it was the local supermarket chain that stepped in and took over sponsorship of the event in the mid 1990's when it looked like its organizers would have to stop holding the annual track and field competition for lack of money.

Over the years under Save Mart's sponsorship, the event has become much more than a world renown track and field competition. Save Mart has brought major vendors/suppliers like Coca-Cola and the Kingsford Charcoal Briquets (Clorox Co.) and Budweiser Beer (Anheuser Busch) brands, along with numerous others, in as co-sponsors of the event.

This weekend, along with the world-class track and field competition, there's a nationally sanctioned BBQ grilling competition drawing world-class competitors from throughout the U.S., a parents' and kids' fun run event, a food fair, and other activities as part of the event, all coordinated by Save Mart. Further, all of the proceeds from the event go to the grocery chain's Save Mart Cares charity, and are used to support local community groups and organizations.

Through its charitable arm, Save Mart also donates millions of dollars each year to numerous groups and non-profit organizations in the region.

The retailer's annual United Way employee campaign also is the top corporate-producing one for the Modesto region's United Way office. Additionally, among its numerous charitable activities, Save Mart holds regular food drives in its stores for the region's food banks, and often matches the amount of food and grocery products its customers donate at the end of each in-store food drive.

These activities are just the tip of the iceberg in terms of the locally-based supermarket chain's charitable contributions.

Modesto also is the hometown of movie director and producer George Lucas, who now lives in the San Francisco Bay Area where his Lucasfilm empire is based. Lucas', who was born and raised in Modesto and still has family living in the city, based his iconic 1973 hit movie American Graffiti on his teenage years growing up in Modesto, where "Cruising McHenry Avenue" was the hip and cool thing to do.

Modesto infamous

Modesto also has an infamous side. Most recently, the city received worldwide attention as the place where a fertilizer salesman named Scott Peterson, who maintains he is innocent to this day as he sits on California's death row, was convicted of murdering his pregnant wife Laci Peterson.

Not too long before the Peterson case, Modesto was in the news on another infamous note because of a missing intern named Chandra Levy , who disappeared while working at a governmental internship in Washington D.C. Her remains were found and identified in 2002.

Part of the reason the case received such widespread publicity is because the Modesto region's popular at the time U.S. Congressman Gary Condit was found to be having an affair with Ms. Levy, right up until she disappeared from her Washington D.C. apartment. Condit lost his Congressional seat from the Modesto region over the affair, when a former supporter of his ran against him and won in the election following the news of his affair with the missing intern.

A growing city and region

Over the last 25 -to- 30 years, Modesto has grown from a small, primarily farm economy-oriented town of about 80,000 residents to a big central city of well over 200,000. Much of that growth is the result of San Francisco Bay Area residents who've moved to the city and surrounding region because housing costs are nearly 50% cheaper than in the Bay Area. Many of these residents commute to their jobs in the Bay Area daily.

The tri-county area--San Joaquin, Stanislaus and Merced counties--today have a population of about 1.4 million residents. The nearby nine-county Bay Area has nearly 7 million residents.

Combined, the two markets with over 8 million people, offer a food retailer the opportunity to sell lots of groceries. Both markets are very competitive food and grocery retailing markets as well, with respective healthy chain and independent food retailing sectors.