Despite Arizona Becoming the Land Where Retail Giants Are Opening Scores of Stores, Independents Fear Not - We Profile Two Such Entrepreneurs

Arizona Market Food Retailing Report: Small-Format Grocery and Fresh Foods Markets

Tesco is opening numerous small-format Fresh & Easy grocery and fresh foods markets (about 30 so far) in Arizona.

Wal-Mart operates over 30 of its Neighborhood Market smaller-format supermarkets in the state, and recently entered the market with its first four (and soon to be fifth) small-format Marketside combination grocery and fresh foods stores. More new stores of both formats are opening in Arizona.

Then there's Trader Joe's, which operates nearly 30 of its famous specialty markets in the state.

But these aggressive retailing giants, all operating their own versions of small-format, neighborhood oriented grocery and fresh foods markets, aren't stopping some independent food retailing entrepreneurs from opening their own new small-format fresh food and grocery concept markets in Arizona -- in these two particular cases in Tucson.

And, both new stores have a similar focus: They are neighborhood markets that put a major emphasis on locally-produced food products, fresh produce, convenience, natural and organic foods (but also conventional basics) and in-store fresh, prepared foods and beverages.

Local Harvest Marketplace - Tucson

Natural foods industry veterans (from the product marketing side) Philip and Sherry Ostrom-Luna recently opened there new small-format, natural and fresh foods market, Local Harvest Marketplace, at 3954 East Speedway Boulevard in Tucson.

Local Harvest Market features fresh produce, natural and organic groceries, ready-to-eat and ready-to-heat prepared foods all with a local focus, meaning most of the store's offerings are products produced locally in Arizona or nearby. The emphasis is on products produced and marketed by local companies, artisans and purveyors.

The market's prepared food and beverage offerings are extensive. There's a salad bar, sandwich bar, fresh smoothie bar, fresh juice and cider bar and cafe. All of the prepared food and drink items on the menu are prepared in-store using natural and organic products produced locally.

Local Harvest Marketplace also has an outdoor dining patio where customers can sit and eat and drink the store's fresh, prepared foods offerings. The store's owners say they will soon extend their fresh produce sales out into the patio, offering a farmers market for shoppers, featuring all sorts of local produce, from the afternoon and evening. They also plan to invite local artisans and craft makers to display and sell their handcrafted items at the open air market. Plans also call for having free entertainment on the patio in conjunction with the farmers market concept on Saturdays each week.

Since the market's emphasis is on local food, grocery and prepared foods items, they feel the patio farmers market will offer an additional opportunity to offer a greater selection especially of seasonal local fresh produce. Inviting the local artisans to sell their handmade items at the open-air farmers market also will enhance the local positioning and emphasis of the independent market they believe.

Maynard's Market & Kitchen - Tucson

A second new independent grocery and fresh foods market, Maynards Market & Kitchen, is set to open on December 12 in the Historic Depot in Tucson at 400 North Tool Avenue. The store is named after the famous San Francisco, California artist Maynard Dixon who lived for a time in Tucson. Some of his artwork graces the walls in Tucson's historic Depot building where the new market is located.

Below is how Maynards Market & Kitchen describes its format and philosophy:

THE CONCEPT IS SIMPLE. BUY LOCALLY WHEN YOU CAN. BUY RESPONSIBLY WHEN YOU CAN'T. WITH A SLANT FOR THE LOCALLY GROWN AND PRODUCED, MAYNARDS MARKET WILL CARRY AN ARRAY OF REGIONAL PRODUCTS ON OUR SHELVES AND AT OUR FARMERS MARKET. BUT WE DON'T STOP WITH VEGETABLES AND CHEESES. MAYNARDS IS A NEIGHBORHOOD MARKET WITH FRESH JUICES, PASTRIES AND COFFEES. HEALTHY GRAB AND GO AND SIMPLE NECESSITIES FROM ASPIRIN TO TISSUE. AND OF COURSE, GOOD WINES.

The new market is a combination basic grocery store and fresh and natural foods market, as the mission statement above describes. The store puts an emphasis on local products like Local Harvest Marketplace does but doesn't offer only food, grocery and non-foods items produced locally. Note the aspirin and tissue, for example.

The positioning of the new store is to be a neighborhood-oriented market where shoppers can get their basic essentials, along with being a more specialty and natural foods market where shoppers can find lots of organic and locally-grown fresh produce, in-store prepared fresh foods and specialty items.

The grocer is asking local residents for their ideas on its Web site prior to the store's opening on December 12, and plans to seek regular customer input as part of its operating philosophy. The market also wants to feature as much fresh produce and food and grocery products as is possible from local growers and purveyor.

Local dreams and independent means

Both Local Harvest Marketplace and Maynards are tapping into the increasingly popular local foods movement in the United States. While the current recession may have pushed aside "local" as a key priority for many consumers in favor of price at this particular point in time, it remains a fast-growing movement and concept. In addition, in many cases, including fresh produce, local actually is cheaper than non-locally produced foods.

Local is an important concept in Arizona because the state produces lots of fresh market crops as well as has numerous specialty and natural foods companies. The concept is growing from one that originally touted primarily eating locally-produced foods for the quality and taste factors to a much larger concept of buying and eating locally-produced because of the economic benefits doing so brings -- more jobs in the region, tax money for local governments, greater economic development, ect.

The fact that the entrepreneurs we've profiled in this piece have and are opening their respective small-format, independent food and grocery markets in the current recession shows the dynamism of food retailing in the U.S. It also shows food retailing entrepreneurs are willing to stake their money and future on a retail concept they believe in -- in these cases neighborhood stores with a local focus -- even though grocery retailing giants Tesco (Fresh & Easy) and Wal-Mart (Marketside) are opening their own versions of small grocery and fresh foods markets all around them.

Welcome to the Phoenix, Arizona Metropolitan region food and grocery retailing market, which is fast becoming one of the most interesting, dynamic and competitive markets in the U.S.

Reader Resources

Related posts from Fresh & Easy Buzz:

>Friday, October 17, 2008: Phoenix, Arizona Metro Market Report: Gilbert, Arizona Independent Liberty Market Fears Not the Tesco and Wal-Mart Invasion of its City

>Wednesday, April 30, 2008: Raising Arizona and Getting Local in the Neighborhood: State's First 100% Locally-Produced Wine Offers Win-Win for Tesco's Fresh & Easy Arizona Stores

>Monday, October 27, 2008: Category Management Report: Fresh & Easy Conducting Wine Category Review and SKU Rationalization; We Offer Some Analysis

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

>Friday, March 14, 2008: Is Tesco's Fresh & Easy Neighborhood Market Venture Fledgling Even Further? More Analysis and Commentary

What Others Are Saying: 'Central Valley Business Times': California's Farmers' Markets Are Booming on 'Buy Local' Trend

From: Central Valley Business Times

SACRAMENTO
May 27, 2008

Farmers markets in California are increasing in popularity. Coordinators say there has been a big jump in consumer numbers in the last 18 months, as more people decide to buy food locally.

“We’re seeing an influx of new consumers coming to our markets. Even in May, we’re doing mid-August numbers in terms of customers,” says Dan Best, coordinator of the certified farmers markets of Sacramento. “I think it’s largely because of the ‘buy local’ concept. It used to be organic. Now, local trumps organic.”

In addition, more people would like to know who grows the food they eat, and they want it as fresh as it can be, Mr. Best says.

Farmers like the markets as it provides them the cash flow to keep their businesses operating.

“It’s kind of a rough way to try to sell your crop but yet it’s cash money and it’s right now, there’s no waiting for it. So a lot of growers have found it’s a good way to make their farm viable,” says Mr. Best.

The problem now is finding new locations with space for new markets.

For more information about California's Certified Farmers' Markets click here.

Upcoming New Markets Special Report: Raley's Increasing 'Local Foods' Efforts in Sacramento and Northern California Market Regions

Sacramento, California-based family-owned regional supermarket retailing powerhouse Raley's is expanding it's already aggressive local foods merchandising and marketing programs in a number of ways, clearly visible in its stores and in it's multi-media advertising.

Among the increased local foods merchandising and marketing efforts the 129 store regional supermarket chain is making include:

>Labeling all foods grown or produced within a few hundred miles from its Sacramento, California base with eye-catching "locally-grown" and "locally-produced" shelf signs. This includes fresh produce, meats, perishables and dry grocery items, including natural, organic and specialty foods offerings.

>Labeling foods grown and produced in California, but farther than a few hundred miles away from its Sacramento base, with "Grown in California" shelf signage.

>Increasing the number of exclusive deals it signs with local farmers, buying the local growers' entire fresh produce crops, and touting the locally-grown fresh fruits and vegetables by building massive displays in store produce departments, running large front page ads for the local items in the retailer's weekly newspaper advertising circular, and often running full-page color ads in the major daily newspapers in the grocer's market regions featuring such local produce such as corn on the cob, strawberries, melons and other fruits and vegetables grown by local farmers.

Raley's contracts for the entire crop of a given grower (which can be expensive), which are grown by top-quality farmers, because locally-grown produce is now so popular in California that it gives the retailer a major competitive advantage to do so. It touts not only the local aspect of the fresh produce items, but the exclusivity to Raley's as well.

>Working closer with local natural, organic and specialty foods' producers and vendors by authorizing their local food and grocery products in the stores, promoting the local items more extensively, and partnering with the local producers at special events like community food fairs and charitable events designed to increase awareness and sales of locally-grown and produced food products.

>Creating more "local foods" in-store displays and cross merchandising the local items both by meal complementary merchandising techniques and by local region.

>Offering locally-grown fresh produce at reasonable prices rather than doing what some food retailers do and selling them for a premium.

>Conducting more frequent in-store local foods sampling events, often having numerous local foods producers, including farmers, do the tastings in the stores at the same time.

Raley's, which is the food and grocery sales market share leader in the Sacramento region market, and has stores under the Raley's, Bel-Air Markets, Nob Hill Foods and Food Source banners elsewhere in Central and San Joaquin Valley, north of Sacramento, in the San Francisco Bay Area and in Nevada, has long positioned itself--and is--as the local grocer, even though the chain has grown to 129 stores and nearly $4 billion in annual sales.

Along with its extensive--and increased--local foods merchandising and marketing commitment, the supermarket chain has a charitable foundation that gives millions of dollars to charities in Sacramento and the other Northern California regions where it operates stores.

In addition to the foundation, the corporation itself donates millions of dollars in cash and in-kind food donations to non-profit groups, charitable organizations and food banks and pantries throughout Northern California and Nevada.

The grocer also has a program in which customers can select a card in either $5, $10, or $20 amounts at each checkout lane as a way to make a donation to local food banks. Shoppers select the card while waiting to get checked out, give it to the store clerk as she rings up their purchases, the clerk scans the card, and the amount goes into a special account, 100% of which is donated to programs to feed the hungry. Raley's matches a portion of the total funds donated by customers each year.

Raley's also funded Sacramento's fairly new state-of-the-art baseball stadium for the city's super-popular Sacramento Rivercats minor league baseball team. The baseball stadium, called Raley Field, is packed every night during the season with families who as far as they are concerned believe the local minor league team is every bit as enjoyable to watch as a major league baseball team is.

Raley's runs all sorts of promotions in conjunction with the team and stadium. The grocer also gives out hundreds of tickets during the season to lower income families and children. To say the River Cats are a hot ticket is the understatement of baseball season. They draw more fans on many nights than a lot of major league baseball teams in parts of the U.S. do.

Raley's was a first-mover in California and national food retailing in terms of getting into local foods merchandising and marketing in a serious and major way. The added efforts and programs started by the grocer a few months ago and increasing even more recently are positioning the chain as one of the foremost local foods food retailers in the U.S.

It's paying dividends for the supermarket chain as well; that's why Raley's continues to add more elements and aspects to its local foods program.

Others like Safeway Stores, Inc. Whole Foods Market, and numerous regional chains, multi-store independents, single-store independent grocers and natural foods retailers also are into local foods merchandising in a big way in California.

In fact, those few food retailers who aren't "going local" are really at a big disadvantage, as most grocers and California market observers will tell you the local foods movement is growing much faster than the organic foods movement is in the Golden State.

In part that's because the organic foods movement is more mature, and still is growing considerably. But that's really only a small part of the equation. the major reasons the "buy local" is growing faster than the organic consumer movement right now in California is because it hits on so many hot buttons important to the state's consumers. These include freshness of product, price, environmental concerns, food safety concerns, desire to support local agriculture, and many more.

Raley's own research identified this growing movement some time ago, and that along with the best indicator, sales of locally-grown and produced food products in the grocers stores, is encouraging the family-owned supermarket chain to grow its local foods merchandising and marketing programs even more.

New Foods At Fresh & Easy: Los Angeles' 'Homeboy Bakery' and Tesco's Fresh & Easy Could Be A Match 'Made in Heaven'

Twenty years' ago, the Rev. Gregory Boyle, a Jesuit Priest currently tending his flock at Dolores Mission Church, which is the poorest Catholic parish in Los Angeles, decided to find jobs for local gang youth as a means to get them to leave the gangs and live a better life.

The Rev. Boyle met with scores of local business leaders and owners in Los Angeles, pitching them his plan. However, gang violence was such in Los Angeles and the surrounding area, as it still is today, that only a few business people were willing to take the good father up on his proposition to hire the ex-gang members at their companies and small businesses.

But the Rev. Doyle didn't give up. Rather, like a good entrepreneur who also just happens to be a man of the cloth, he decided to start his own enterprise as a way to offer gang members a way out of the cycle of violence, imprisonment and family strife that comes with gang membership.

Doyle received an introduction to the Hollywood movie producer Ray Stark and pitched his idea to the movie mogul, which was to open a bakery called "Homeboy Bakery" that would offer gang members who were willing to leave their gangs jobs.

Stark liked the plan, and signed on, providing the initial financing to get "Homeboy Bakery" started. That was 16 years ago.

The Rev. Doyle didn't trade in his Priest robes for a bakery apron. However, over the last 16 years he has gradually built up the bakery and some related enterprises while continuing his duties as a Parish Priest.

Read more about the Rev. Gregory Boyle and Homeboy Bakery here.

Today, "Homeboy Bakery" and its related "Homeboy Enterprises", which includes the "Homegirl Cafe" operated by former female gang members, a silk-screening T-shirt business, a maintenance and janitorial company, and a retail store, wants and needs to grow.

The Rev. Boyle just invested $3 million for brand new, state of the art equipment at the bakery, has signed a contract with a couple new foodservice businesses, and is looking for more customers for the bakery's high-quality breads, pastries and related baked goods items.

Fresh & Easy Buzz tasted Homeboy Bakery's baked goods at the "Homegirl" Cafe earlier this year while in Los Angeles, and can say...the baked goods are good.

The Rev. Boyle's goal in terms of expanding the bakery and related businesses is a simple one he says: "The more business we can bring in, the more jobs we can create. The more jobs we can create means the more former-gang members we can create. He says he knows numerous gang members who want to leave their respective gangs but see no job opportunities available to them.

The bakery currently has nearly 30 former gang members working at it; the "Homegirl" Cafe has about 27 former "homegirls" operating and working at it; and the other enterprises employee dozens more ex-gang members.

Since Tesco's Fresh & Easy Neighborhood Market plans on bringing in about 250 new food items, a few more might not hurt. Especially in the fresh baked goods category; and especially locally-produced fresh baked goods.

We think taking a look at buying fresh baked goods from Los Angeles' Homeboy Bakery offers Fresh & Easy a win-win trifecta:

(1) It allows the grocer to improve the stores' current selection of fresh baked goods, which is needed according to numerous customers we've talked to.

(2) Doing so allows the Southern California stores especially to get deeper into "local foods" merchandising and selling, which is a prescription for increased sales. Taken together, locally-produced baked goods, produced by a company ("Homeboy Bakery") working hard to solve a major social problem, is a powerful one-two marketing punch.

(3) Buying from and selling "Homeboy Bakery" baked goods at Fresh & Easy will win the hearts, minds and pocketbooks of numerous consumers in the region, who will praise Fresh & Easy's efforts towards helping the good father eliminate gangs one homeboy at a time through becoming a customer of the bakery's. Much of that praise will come in the form of customers buying the baked goods in the Fresh & Easy stores we believe.

There's also a practical element to the scheme: baked goods is one category that needs to be procured locally due to the products' short shelf life. In other words, buying from "Homeboy Bakery" not only makes good business and community relations since, it also makes good procurement and logistics sense as well.

There's also a myriad of promotions Fresh & Easy could do jointly with Homeboy Enterprises and Bakery. Fund-raisers, bake-offs, and more.

The partnership would also help Fresh & Easy with its many critics in Southern California, including the coalition that wants the retailer to sign what it calls a "community benefits" compact for responsible retailing.

Lastly, a partnership with" Homeboy Bakery" also ties in with Tesco's stated goal and strategy of locating numerous of its Fresh & Easy grocery stores in food deserts or neighborhoods underserved by food stores offering a decent selection of groceries and fresh foods at reasonable prices.

In fact, one of Tesco's Fresh & Easy grocery stores is located in the Los Angeles County city of Compton, where the two gangs the Crips and the Bloods were founded, along with others.

The young men and woman the Rev. Boyle is trying to get out of gang life by giving them meaningful jobs in the main come from these inner-city Los Angeles food desert communities. What better way to help meet the food desert goal in an overall and comprehensive way.

The Rev. Doyle says he sees amazing changes in the former gang members working at the bakery. Many sound like MBA's he said, while others have become master bakers.

Oprah Winfrey has even featured "Homeboy Bakery" breads and sweets on her talk show; touting them as one of her "favorite sweet things." And Oprah doesn't suggest very many things to her audience; not unless they pass her stringent standards for quality.

What the good father needs now though are more retail and foodservice customers--like Fresh & Easy--for the commercial bakery, so that he can create more future MBA-like businessmen and woman and future culinary stars.

In addition to more information about Homeboy Bakery at this link, there also are links to its website, along with a slideshow from inside the bakery

Feature & Analysis: Tesco is Launching A Major 'Local Foods' Program in the United Kingdom; Why Not Do the Same At Fresh & Easy USA?

Tesco, the world's number three retailer and the number one food and grocery sales market share leader in its home country of the United Kingdom with about 32% of the nation's total retail food sales, is launching what appears to be the biggest local foods sourcing and merchandising program in the UK.

Last year, Tesco opened five new local foods' regional buying and marketing offices in the UK cities of York, Leicester, Plymouth, Peterborough and Horsham, making it the first supermarket chain in the UK to develop such an extensive regionally-based structure designed to procure and market locally-based food and grocery products.

Each of the five local offices has a buyer and marketing person who's jobs are to find and procure high-quality, locally-produced products to sell in Tesco's UK stores.

As part of its local foods procurement and marketing program, Tesco also has started holding "Meet the Farmer" local foods events in its UK supermarkets.

Since Tesco launched the program, called "Local Sourcing", last year, the retailer says it's five regional UK offices have thus far launched over 1,00 new, local food and grocery product lines in its stores, bringing the total number of locally-produced products the retailers sells currently to about 3,000. Tesco also says it's added 90 new local suppliers to its vendor list.

Tesco UK also has an executive in charge of the local sourcing program, Emily Shamma. Ms. Shamma says UK consumers want to buy quality local food and to support local producers by doing so.

Tesco customers also want to buy more local foods to cut down on food miles and the resulting carbon emissions, Shamma says.

Further, UK consumers see locally-produced foods as having overall superior quality to food products imported from elsewhere, as well as liking the idea they can know more about how the local products are produced (because the goods are local) compared to imported food and grocery products.

Tesco plans to further grow its local foods' sourcing and marketing program, according to Ms. Shamma. She says the retailer's goal is to sell more locally-produced food and grocery product lines than any other UK food retailer.

To further this aim, Tesco also has set up a fund designed to help small, local farmers expand their businesses. This is similar to what U.S.-based natural foods' retailer Whole Foods Market, Inc. is doing for small farmers in the United States as a way to promote small-scale agriculture and local food production.

Tesco has put ~1 million-p ($1.95 billion U.S.) in the fund to use to help give local farmers and producers a leg up in expanding their operations.

The British retailer also has created a local technical team in each of the five regional offices. The team offers and provides free help to the local producers in the areas of manufacturing, packaging, quality assurance and marketing. part of the reason for creating these dedicated technical teams is so Tesco can make sure the local producers have the means available to meet the retailer's overall product quality control standards for the goods it sells in its UK stores.

Samma also says Tesco doesn't just want to make local foods available in its stores to wealthy consumers. Rather, the goal is to make local fresh produce for example more affordable so that it's available for UK consumers of all income levels, she says.

Tesco's current goal is to sell ~400 million-p ($780 million U.S.) worth of locally-produced food and grocery products in its stores this year, with a longer-term goal of selling ~1 billion-p ($1.95 billion U.S.) worth of the locally-produced bounty by 2011.

Tesco PLC had gross sales internationally of about $84 billion U.S. in 2007.

The locally-produced products Tesco has introduced in its stores just since last year when it opened the five new regional buying offices range from fresh produce like Yorkshire cucumbers and locally-raised fresh meat, pork and poultry products, to locally-produced ice cream and beer. The local foods initiative is across all store product categories, from fresh and frozen, to refrigerated and shelf-stable.

Tesco's main competitors in the UK--Wal-Mart-owned Asda, Sainsbury's, Morrisons, Waitrose, the Co-op and a couple others--also are to various degrees involved in local foods sourcing and marketing programs. Besides Tesco, probably Waitrose and Sainsbury's, followed by the Co-op, are the second, third and fourth most aggressive in local foods procurement and selling in their respective stores in the UK.

None of these competitors however has created as aggressive and as comprehensive local foods program as Tesco has with its five fully-staffed regional offices. And perhaps they don't need to. There are many ways to procure and sell locally-produced foods in their stores.

However, based on the fact Tesco has added 1,000 new locally-produced products in its stores, and 90 new local vendors to its roster in less than a year, it seems the regional buying office concept complete with the in-house technical teams is working well for the retailer--and for the local farmers and food producers who thus far have been able to get their goods into Tesco's UK supermarkets, which exist in nearly every city and town in the nation.

Tesco's Fresh & Easy USA and local foods

As regular Fresh & Easy Buzz readers are aware, we've argued regularly that one of the weaknesses--both from merchandising and sales aspects--of Tesco's current 61 small-format, convenience-oriented grocery stores in the Western U.S., is that the stores are not localized in terms of their features on a community and neighborhood basis and in their product mixes.

For example, we've suggested that on top of the basic Fresh & Easy store format, the grocery chain add some custom features based on where the store is located.

For example, some Southwestern-oriented and Latin-oriented flair for the Arizona stores as well as custom features in the Southern California stores to reflect the history, culture and demographics of the different regions and communities the stores are located in, rather than taking a cookie-cutter store design approach, which currently is the case.

We've also suggested strongly the Fresh & Easy stores need to sell more locally-produced food and grocery products--foods from California in the Southern California stores, more foods produced in Arizona in those stores.

There are thousands of fresh and shelf-stable locally-produced products available in both states that aren't currently for sale in the Fresh & Easy stores.

We aren't suggesting Tesco bring in thousands of these local products--the Fresh & Easy stores are limited assortment grocery stores after all. Rather, the retailer just needs to add a solid variety of locally-produced food and grocery items throughout store categories--from fresh produce, meats and dairy, to dry grocery, on top of its core fresh & easy store brand and limited number of national brands product mix.

The stores already have some locally-produced products, especially in the fresh produce category by virtue of the fact much fresh market produce is grown in the west. However, the selection is minimal and spotty, especially outside the produce category.

If Fresh & Easy Neighborhood Market begins a localization program like we suggest--and like Tesco is doing in the UK--it will find itself creating stronger bonds--and more business--with the consumers in its market regions.

All of the reasons given by Tesco's UK local foods sourcing chief Emily Shamma as to why the retailer is going big with local foods sourcing and marketing in the UK exist equally among U.S. consumers, especially in the Western U.S. where Tesco has its Fresh & Easy grocery stores.

California, Arizona and to a lessor degree Nevada are top U.S. farming states. Further, California's Central Valley is the world's number one agricultural producing region. Residents in these three states love locally-produced foods, and will even purchase them at a slight premium over foods from other parts of the U.S.

California also is the home of the local foods movement and has many food retailers like Whole Foods Market, Raley's, Safeway Stores, Bristol Farms, Gelson's and numerous others who are focusing extensively on procuring and selling locally-produced foods in their stores.

Both California and Arizona also are top specialty, natural and organic food and grocery product producing states in the U.S. Local producers in these two states produce everything from scores of types and varieties of fresh produce and locally-raised beef, poultry and pork, to nuts, milk, cheese, wine, breads, oils, shelf-staple grocery products of every kind and more.

Tesco could have an absolute field day procuring and selling locally-produced foods in California and Arizona for its Fresh & Easy grocery stores. And, it wouldn't take all that much too succeed at it if done right.

A careful and thoughtful addition of a few locally-produced food and grocery products in every category of products in the Fresh & Easy stores would have the overall effect of making a big difference in terms of achieving that "localization" formula we discussed earlier. The category-wide local foods product mix needs to be selected carefully however.

Doing so also builds consumer loyalty. As Tesco's local foods guru Emily Shamma said about UK consumers wanting to buy locally-produced foods and support local farmers, so too do U.S. consumers want to do--and are doing--the same thing. This is particularly true among Western USA consumers in California, Nevada and Arizona, who count numerous local farmers and local food producers among their family members, friends, relatives and business associates.

Local foods procuring and advertising "locally-grown" on the menu also is big with mid-range to higher-end restaurants in the Western USA. These restaurants, especially the higher-end ones, are major food trend setters, and their local foods' initiatives have made buying and eating local even stronger among consumers in the region.

U.S. consumers also want to buy local foods for environmental, as well as for product quality and local farmer-producer-support reasons. And they're doing so. That's why local farmers' markets are so popular in the U.S., especially in the Western U.S. These local fresh fruit and vegetable farmers' markets, which also sell all sorts of other local food and grocery products, have grown by 50% in number and customer counts in just the last decade.

In California, a state with nearly 40 million people, nearly every city and small town has a farmers' market which starts in early spring and runs into the fall. Most big and medium cities even have farmers' markets that operate year-round. Further, most larger cities in the Western US have at least two or three--and often more--farmers markets, many of which operate every day of the week.

Americans also are buying local foods in significant numbers at grocery stores, as evidenced by the fast-growing trend among numerous supermarket chains, independent grocers and natural foods' retailers to stock as much of the locally-produced products as they can in their stores.

Many of these food retailers have created "local foods" shelf signs, which they put on every locally-produced product sold in their stores. These grocers also label all the local foods' items in their weekly advertising circulars with bright-colored flags which identify the advertised item as "Local."

Many of the supermarket chains, such as Whole Foods, Safeway, Raley's and others also are partnering with local farmers and local food producers directly, guaranteeing them the retailer will buy the farmers' entire crop of say sweet corn or melons in return for the exclusive marketing and selling of the local crop or products.

If you pay attention to weekly supermarket advertising circulars like we do, you'll notice in just the last year how many more chains and independents have started advertising and promoting locally-produced products every week, as well as how such major food retailers like Safeway Stores, Whole Foods Market and even mid-range chains have increased the number of local items they promote each and every week in their ads as well as in-store.

Local is big. In the Western USA, its rapidly becoming as big as organic.

The opportunity certainly exists for Tesco's Fresh & Easy Neighborhood market USA to launch a local foods initiative. After all, its stores are located in the heart of America's local foods-producing region, the Western USA. The Western U.S. also arguably is home to the most "local foods loyal" consumers in America.

Additionally, Fresh & Easy has the infrastructure and commitment to local foods' procurement and marketing from parent company Tesco's UK local initiative. All Fresh & Easy needs is a few American-bred, experienced local foods procurement and marketing experts to manage the program.

Going local is even going to be more imperative for Fresh & Easy next year when it enters the Northern and Central California markets of Bakersfield, Sacramento and the San Francisco Bay Area with about 43 or so stores, which will start opening in early 2009. Central and Northern California consumers are even more fiercely local foods-oriented than their Southern California, Nevada and Arizona neighbors.

Additionally, the economies of Central and Northern California are still heavily-based on agriculture, including small, local farmers and food producers.

Further, the "foodie" culture, especially in the 7-million resident-strong San Francisco Bay Area is increasingly demanding quality, locally-produced foods, and even in today's bad economic times a high percentage of Bay Area consumers are willing to pay a premium for foods produced locally in the region. Of course, these shoppers would love--and buy even more of--affordable local foods.

We believe an affordable local foods initiative done well, just like an affordable organic foods program executed well, could go a long way towards creating a strong identity and better positioning for Tesco's Fresh & Easy Neighborhood Market USA's small-format grocery stores and the Fresh & Easy brand in general.

There currently isn't a major food retailer of note in California, Arizona and Nevada offering organic and local foods at truly affordable retail prices, except Trader Joe's to a certain extent in the organic space, on a regular basis.

We believe based on our analysis if Tesco's Fresh & Easy could accomplish those two goals--creating and sustaining solid affordable organic foods and local foods' marketing and merchandising programs--the grocery chain would be helped greatly in its goal to succeed in the highly competitive Western U.S. retail food and grocery market.