Joe x Two: H-E-B Opens Second Joe V's Smart Shop Discount Grocery Market in Houston, Texas Today

Texas supermarket chain H-E-B opened its second Joe V's Smart Shop discount grocery store today. The store, like the flagship Joe V's which opened in May of this year, is in Houston, Texas. It's at Wallisville & Uvalde in East Houston, across town from Joe V's Smart Shop number one. Here's the grand opening ad.

The first Joe V's Smart Shop store, which is at 12035 Antoine Drive in Houston, was a test of the limited assortment discount format by H-E-B. The format passed the test, at least as far as doing good enough in Houston to warrant a second store in the city, according to Jose Villarreal , Joe V's general manager.

In September of this year Fresh & Easy Buzz correctly predicted H-E-B would open a second Joe V's Smart Shop store in the city. Read our story - September 12, 2010: Shout it Out Loud Joe: H-E-B Opening Second Joe V's Smart Shop Discount Grocery Store in Houston, Texas. Also see - August 26, 2010: What's Up With Joe? Texas Grocer H-E-B Planning 'Major Announcement' About its Joe V's Smart Shop Soon.

Shortly after the first store opened in early May of this year, iconic grocery chain Trader Joe's filed a lawsuit against H-E-B, asking a judge to order the grocer to cease from using the Joe V's Smart Shop name, arguing that it infringes on the Trader Joe's trademark. We're told the case is still pending. However, the court denied Trader Joe's initial request to order H-E-B not to use the Joe V's name pending a resolution of the lawsuit.

Although Texas-based H-E-B doesn't say it's the case, the grocer developed Joe V's in-part because of the movement of hard-discount grocer Aldi USA into its home market in 2009. Germany-based Aldi continues to open new stores in the Lone Star State, where it plans to have a significant presence.

The Joe V's Smart Shop stores are much bigger - four-to-five times bigger, in fact - than the 10,000-12,000 square-foot Aldi discount markets. The stores also offer more than twice as many SKUs - about 9,000 at Joe V's, compared to about 3,500 at Aldi USA.

H-E-B isn't a discount food and grocery retailer like Aldi is. Its two primary formats are superstore (H-E-B) and upscale-specialty (Central Market). However, there's only so much share of stomach and pantry, even in Texas. Therefore H-E-B, which has done an excellent job over the years with its superstores taking on mega-retailer Walmart in its home state of Texas, wants a discount format that it can strategically position against the Aldi small-format, hard-discount stores opening throughout the state. That format appears to be Joe V's Smart Shop - at least to the tune of two stores in Houston so far.

Related Stories

September 12, 2010: Shout it Out Loud Joe: H-E-B Opening Second Joe V's Smart Shop Discount Grocery Store in Houston, Texas

August 26, 2010: What's Up With Joe? Texas Grocer H-E-B Planning 'Major Announcement' About its Joe V's Smart Shop Soon

May 5, 2010: H-E-B Opens Joe V's Smart Shop Discount Prototype Grocery Store in Houston TX ... But Where's Joe?

May 6, 2010: Say it Ain't So Joe: Trader Joe's Tells H-E-B's Joe V's Smart Shop to Change its Name

May 20, 2010: H-E-B Tweaking Product Assortment at Joe V's Smart Shop Discount Grocery Store in Texas Opened May 5

May 20, 2010: 'The Insider': Welcome to Discountopia USA

What's Up With Joe? Texas Grocer H-E-B Planning 'Major Announcement' About its Joe V's Smart Shop Soon

New Format Development in the 21rst Century

We've been closely following Texas-based grocer H-E-B's Joe V's Smart Shop price-focused discount grocery store in Houston, Texas (12035 Antoine Drive) since before it opened in May of this year for four main reasons. Those reasons are:

H-E-B is among a handful of the best food and grocery retailers in the United States - and globally. Number two follows from that premise, which is that anything new H-E-B does - particularly when it's a brand new discount grocery store format like Joe V's, discount grocery retailing being something that H-E-B doesn't specialize in - warrants close following by any serious food and grocery retailing analyst and publication. Third: New formats matter. Innovation matters. And lastly, we plain just love new formats.

Below are our past stories about H-E-B's Joe V's Smart Shop:

>May 5, 2010: H-E-B Opens Joe V's Smart Shop Discount Prototype Grocery Store in Houston TX ... But Where's Joe?

>May 6, 2010: Say it Ain't So Joe: Trader Joe's Tells H-E-B's Joe V's Smart Shop to Change its Name

>May 20, 2010: H-E-B Tweaking Product Assortment at Joe V's Smart Shop Discount Grocery Store in Texas Opened May 5

>May 20, 2010: 'The Insider': Welcome to Discountopia USA

Inside Joe V's Smart Shop in Houston Texas: Joe V's has all of the traditional supermarket grocery and fresh foods departments. The format features a limited-item selection. The focus is on everyday low price, although H-E-B has a weekly advertising circular for Joe V's, offering specials. The Joe V's Smart Shop format also features price-focused in-and-out deals on non-foods items, like the comforters pictured above.

As you can see, it's been three months since we last wrote about Joe V's Smart Shop. But we've been following the store's development closely - perhaps closer than any other food and grocery retailing publication out there.

And something 'Big' is is about to happen in Joe V's land, deep in the heart of Texas.

That something big is a soon to be made "Major Announcement" by H-E-B about its Joe V's Smart Shop, according to Joe V's general manager Jose (Joe) Villarreal, who might or might not be the "Joe" behind the name of the start up, price-focused grocery chain's name? Or as he likes to day about Joe V's: "Are you ready to deliver the best Price Format Store in Texas"

Mr. Villarreal is sworn to secrecy in terms of publicly declaring he is that Joe. Therefore readers, you'll have to make your own determination on the judgement for now.

Jose (Joe) Villarreal is also sworn to secrecy on the content of what he says will be this upcoming "Major Announcement." But he says it will be "Big" - and that it's coming soon.

Unable to pry anything further out of the man outside of resorting to water boarding, Fresh & Easy Buzz has decided to attempt to predict what the upcoming "Major Announcement" from H-E-B about its Joe V's Smart Shop just might be. Our five predictions go from most likely to least likely below:

1. H-E-B will announce it plans to open a second Joe V's Smart Shop store in the Houston, Texas region.

2. H-E-B will announce it's settled the trademark law suit filed by grocer Trader Joe's - in which TJ's argues the Joe V's Smart Shop name is an infringement on the Trader Joe's name, asking a court to order H-E-B to cease from using the Joe V's name for the store - and therefore can continue using the Joe V's Smart Shop name for the chain.

See: Say it Ain't So Joe: Trader Joe's Tells H-E-B's Joe V's Smart Shop to Change its Name. The case is still in court. The court has permitted H-E-B to continue using the Joe V's Smart Shop name until the case is settled or a decision ordered by the court.

3. H-E-B will announce it will change the name from Joe' V's Smart Shop to something else. See number two.

4. H-E-B will announce it plans to open a second Joe V's Smart Shop store in Texas, but outside of the Houston Metro region.

5. Jose (Joe) Villarreal will announce (perhaps at a "Major" press conference) that he is indeed the "Joe" behind the Joe V's Smart Shop name. An executive of Trader Joe's, attending the press conference, will shout: "Say it ain't so - Joe," over and over again, following Joe Villarreal's announcement.

Since the announcement is coming soon, we encourage the many food and grocery retailing experts and keen industry observers who read Fresh & Easy Buzz to chime in using the comments link below.

Which one of our predictions do you think is correct? None? What's your prediction?

H-E-B Tweaking Product Assortment at Joe V's Smart Shop Discount Grocery Store in Texas Opened May 5

Discount Format Food & Grocery Retailing

A mere two weeks after opening its first Joe V's Smart Shop discount grocery store in Houston, Texas on May 5, San Antonio, Texas-based grocery chain H-E-B this week is giving the new store's product assortment a bit of a tweaking, Fresh & Easy Buzz has learned.

The product assortment adjustment started on Wednesday (May 19), and is based on feedback and other inputs the grocer has gleaned over the two weeks Joe V's has been open, according to Joe Villarreal, the general manager of H-E-B's Joe V's Smart Shop division.

We aren't surprised family-owned H-E-B would be doing a product assortment adjustment only two weeks after the discount format grocery store opened. H-E-B is among the most fastidious and best retail grocery merchandisers in the U.S. It's a good - and smart - sign at the smart shop.

Additionally, since Joe V's Smart Shop is a new format for H-E-B, and it's first price-focused discount grocery format to boot, it makes good and logical sense in our analysis for the grocer to tweak the store's product assortment so early in the game, and continue doing so regularly.

Since Joe V's is a limited assortment discount format - the store carries about 9,000 SKUs -regular product assortment adjustment is even more important for H-E-B, or for any other grocery chain that operates a limited assortment format, because with a limited assortment a retailer has to obtain the maximum sales bang from far fewer SKUs than a typical supermarket carries. For example, the average U.S. supermarket, which averages 46,755 square-feet, carries 46,852 SKUs, according to the Food Marketing Insitute's research. FMI is the leading trade organization for the U.S. food and grocery retailing industry.

That H-E-B, which was founded 105-years ago and does $15 billion in annual sales in about 300 stores in Texas and Mexico, is adjusting the Joe's V's Smart Shop product assortment so early is a sign the grocer understands the importance of item optimization when it comes to operating a limited assortment discount grocery format.

Fresh & Easy Buzz has heard from a few readers who've visited the Joe V's Smart Shop store in Houston in the two weeks it's been open. All of the readers told us the store was extremely busy during their visits.

Big reusable grocery bag giveaway at Joe V's

H-E-B is also taking an aggressive approach with Joe V's. Smart Shop in the area of reusable shopping bags.

During the store's first eight opening weeks, which started on May 5, the grocer is giving each shopper who makes a single item qualifying purchase four free reusable grocery bags, according to general manager Joe Villarreal. (Here's an example of a qualifying item.) The purpose of this aggressive approach is to equip as many customers as possible with reusable bags at no charge, so they can bring the bags with them to the store on return trips, thereby dramatically reducing the amount of single-use plastic carrier bags Joe V's uses on an ongoing basis.

H-E-B's Joe V's smart shop division initially considered not offering single-use plastic carrier bags at the store at all, according to Joe Villarreal. However, it later decided to offer them, but to give out the reusable bags for free as a way to encourage regular use of the bags by customers.

The free reusable bag promotion also fits into what is a key promotional feature at H-E-B's Joe V's Smart Shop, which is what the grocer calls its FREEBIE! And the tagline is: "There's always something free at Joe V's."

And yes, Jose Villarreal, or Joe which he uses in e-mail correspondence, is the person and name, at least inspirationally, behind the Joe V's Smart Shop format and store name, although neither H-E-B or Mr. Villarreal has stated Joe V's Smart Shop is directly named after its general manager, Joe Villarreal.

Related stories from Fresh & Easy Buzz:

May 5, 2010: H-E-B Opens Joe V's Smart Shop Discount Prototype Grocery Store in Houston TX ... But Where's Joe?

May 6, 2010: Say it Ain't So Joe: Trader Joe's Tells H-E-B's Joe V's Smart Shop to Change its Name

Say it Ain't So Joe: Trader Joe's Tells H-E-B's Joe V's Smart Shop to Change its Name

Analysis & Commentary

Yesterday we reported on and wrote about Texas grocery chain H-E-B opening its first Joe V's Smart Shop discount grocery store at 12035 Antoine Drive in Houston, Texas. Our story - May 5, 2010: H-E-B Opens Joe V's Smart Shop Discount Prototype Grocery Store in Houston TX ... But Where's Joe?

Last night we heard via e-mail from a reader who visited the store yesterday. He told Fresh & Easy Buzz there was a big crowd at the new store - and new format for grocer H-E-B - for the Cinco de Mayo grand opening. There was plenty of free food and lots of bargains offered, he said. It was a good, strong grand opening for H-E-B's Joe V's, according to the reader, who works in the food and grocery industry in a sales capacity.

But not all is good for H-E-B and the fictitious Joe V's beyond yesterday's grand opening.

The other Joe - Trader Joe's - is striking back. The local Houston Business Journal is reporting that Monrovia, California-based iconic grocer Trader Joe's filed a cease-and-desist order on April 26, just days before yesterday's grand opening, against H-E-B regarding its use of the "Joe" name for the new Joe V's Smart Shop discount format store.

The publication reports that, "according to documents filed with the U.S. District Court in Austin, Texas, Trader Joe’s is demanding that H-E-B 'immediately cease and desist its use of the word Joe in the proposed business name Joe V’s Smart Shop and in the associated promotional materials for the store,' and threatened to 'pursue any and all available legal remedies' if those demands were not met."

But H-E-B begs to differ.

On April 29, H-E-B responded to the Trader Joe's legal complaint by filing a declaratory judgment petition asking the federal judge to determine that "there is no likelihood of confusion, mistake or deception as to the source or sponsorship of H-E-B’s goods or services sold and planned to be sold under the Joe V’s name," reports the paper

"H-E-B contends that the only common element between the Joe V’s name and the Trader Joe’s name is 'Joe,' a term in which Trader Joe’s has no exclusive rights," an H-E-B spokesperson told the reporter. Further: "The name 'Joe' is an extremely common surname, and is widely used by many retail businesses, including in the grocery and food fields," he said.

Trader Joe's doesn't operate any stores in Texas - yet.

The full Houston Business Journal story is here.

Ironically, we lead our May 5 piece by making an analogy between Trader Joe's and H-E-B's Joe V's. Below is our lead paragraph:

"Unlike the "Joe" in the name of the iconic Southern California-based grocery chain Trader Joe's, which represents a real person - founder Joe Coulombe - the "Joe" in Joe V's Smart Shop, the name of the new discount grocery store concept by Texas-based grocery chain H-E-B, is a creative fiction, designed to personalize the popular privately-held grocer's new warehouse-style discount format, the prototype store of which opened today at 12035 Antoine Drive in Houston, Texas."

But it wasn't mere irony that lead us to choose that particular lead. Trader Joe's is vigorous in protecting its trademark name, including the use of "Joe" or "Trader" (and not just together in the same name) by grocers and any other business, regardless of the context.

When we first heard about H-E-B's Joe V's a couple months ago, one of the first things that came to mind was a challenge from Trader Joe's. We've even exchanged e-mails with a regular reader from Texas over the Trader Joe's-Joe V's name irony topic over the last few weeks.

We wrote about Trader Joe's trademark vigor in these two stories in the blog published on January 15, 2009: [Small-Format Food Retailing USA: The Big Apple Won't Be A Two-Trader City: Judge Says No to Gristedes' 'Trader John's' 'Trader Joe's' Knockoff and Small-Format Food Retailing USA -Trader v. Trader: Gristedes Complies With Judge's Order; Covers Up 'Trader' Portion of its 'Trader John's' Store Sign]. In this instance Trader Joe's was successful in forcing New York City's Gristedes supermarket chain from using the name "Trader Johns" on a new concept, small-format grocery store it opened last year in the city.

We aren't trademark lawyers here at Fresh & Easy Buzz. But it seems to us that the Gristedes "Trader John's" name was clearly an attempt to cash in on the Trader Joe's name, although the owner and CEO of Gristedes, billionaire John Catsimatidis, is named John.

But the use by H-E-B of the name Joe V's Smart Shop doesn't appear on the face of it to be an attempt to rip off the Trader Joe's trademark. Perhaps the use of Joe V by the grocer has some subliminal motivation behind it in terms of resonating in consumers minds. After all, "Joe," as in its usage in any variation when it comes to grocery stores, seems to be perceived as pure gold. But it's unclear to us that Trader Joe's is on solid footing in its legal attempt to get H-E-B to change the store's name. But then, we aren't trademark lawyers, so we'll have to wait and see. But a legal fight to the end over the name clearly is something that's likely to happen if H-E-B sticks to its guns.

Interestingly, in our piece yesterday we had some fun about the fact the Joe V of H-E-B's Joe V's Smart Shop is a creative fiction, unlike the Trader in Trader Joe's, who is a real person, founder Joe Coulombe, who sold the grocery chain to Germany's Albrecht brothers, of Aldi ownership fame, many years ago. Theo Albrecht is today the sole owner of Trader Joe's. He and his brother Karl both own Aldi, but under a separate ownership structure.

In the Houston Business Journal report, Armando Perez, the senior vice president for H-E-B in Houston, comments that the Joe V’s brand is based on the name of an H-E-B executive who was instrumental in developing the new concept over the past two years. We take Mr. Perez's word for that - but he's on the record in more than one instance saying the Joe V's name was created in order to personalize the new discount grocery chain. Other H-E-B executives have also said there's no real Joe V. Perhaps the H-E-B executive was an inspiration?

So we ask: Will the real Joe V please stand up?

The Trader Joe's cease-and-desist order against H-E-B and it's Joe V's Smart Shop is worth following. When it comes to its name, Trader Joe's, like fast food chain McDonalds, is willing to spend whatever it takes and devote whatever time is required to win. That it decided to challenge Joe V's suggests Trader Joe's will fight the name like a hungry dog going after a prime rib bone.

We said this in the last paragraph in our story about Joe V's yesterday: "The Joe V's format and prototype store will be an interesting development, from one of the most interesting and successful grocers in the U.S., to observe and follow closely. We will be doing just that.

But we have to admit, we didn't know it would get so interesting - so fast.

H-E-B Opens Joe V's Smart Shop Discount Prototype Grocery Store in Houston TX ... But Where's Joe?

New Format Development

Unlike the "Joe" in the name of the iconic Southern California-based grocery chain Trader Joe's, which represents a real person - founder Joe Coulombe - the "Joe" in Joe V's Smart Shop, the name of the new discount grocery store concept by Texas-based grocery chain H-E-B, is a creative fiction, designed to personalize the popular privately-held grocer's new warehouse-style discount format, the prototype store of which opened today at 12035 Antoine Drive in Houston, Texas.

H-E-B's Joe V's in Houston is no frills inside and out. The store's exterior (above) looks more like a barn than a supermarket. The store's interior (below) is no frills and utilitarian all the way: cement floors, warehouse-style shelving and basic signage.

The Joe V's Smart Shop prototype store is 50,000 square-feet, according to H-E-B.

The premise and positioning of Joe's V's is no frills - it's discount all the way.

Here's the Joe V's mission statement and promotional tagline, for example:

We’re Joe V’s Smart Shop and we never met a low price we didn’t like! From farm fresh produce and top quality meats to everything in between, we have what you need for less. That way you don’t have to shop around. We’ve already done it for you! What’s our secret to low, low prices? We keep things simple and pass the savings on to you. After all, you know a great deal when you see one. That’s why we have outrageously low prices on the items you use every day. So come get to know us. After just one trip you’ll agree, “Those who know…save big with Joe.”

It clearly communicates a focus on price-value. It also takes a shot at communicating that personalization aspect in the last line, referring to the fictitious Joe.

Keeping with that no frills, discount focus, Joe V's Smart Shop also offers a limited item selection: about 9,000 SKUs, compared to the 37,000 -to- 40,000 SKUs carried in the H-E-B flagship stores, according to the retailer. At 9,000, that's still a bit more than double the SKU count of small-format grocers like Aldi USA, Supervalu's Sav-A-Lot and Tesco's Fresh & Easy though.

Joe V's item selection includes both manufacturers' national and regional brands and H-E-B's store brands.

The prototype discount market has all of the standard departments: dry grocery, perishables-dairy-deli, frozen foods, produce, meat-seafood and bakery. What you won't see in these departments at Joe V's though are the many upscale and higher-end items which H-E-B is known for offering in its flagship stores - and even more so in its very successful upscale-specialty format Central Market banner stores.

The new format's focus is on price-value: The discount price-value shopper is the target market for the fictitious Joe V.

In keeping with its no frills, discount positioning, Joe V's will have one of the first automated iCASH machines to be used in a U.S. grocery store. The machine, which H-E-B has been testing in some of its stores in San Antonio, Texas, allows customers to pay for their groceries using the self-service machine, while employees scan and bag their purchases at checkout. The iCASH machine accepts cash, debit and credit cards, WIC Vouchers and food stamps, all of which Joe V's is accepting. Joe V's also accepts manufacturers' coupons.

A key efficiency aspect of the The iCash machine, besides being a big time-saver, which equals employee labor savings, is it eliminates the need for employees to set up and balance the cash register tills through the day. The machine does that task automatically. The machines are used in a number of supermarkets in Europe.

Additionally, in keeping with the store's warehouse design style and shelving, all of the product to be shelved is brought out onto the floor on pallets, using a forklift. Hand stocking by store employees is kept at a bare minimum. This isn't a new concept. For example, warehouse formats like Food 4 Less and others have been doing it for decades. But it is labor-saving

An interesting note about the prototype Joe V's Smart Shop unit is that H-E-B owns the property where the store sits, along with the store building, and developed the shopping center anchored by it's first discount grocery market. H-E-B is in the process of leasing retail space it's built next to the store in the center.

The grocer also is leasing some space inside Joe V's to tenants. So far two are going in: Pronto Insurance and First National Bank, according to H-E-B. There's additional space available in the store for a couple others.

A key merchandising focus for H-E-B with Joe V's Smart Shop is on non-foods, general merchandise. For example, the Houston store is featuring the comforters pictured above for $5 each as part of its grand opening sale. The store is calling this promotional item, and some others, a "Facebook Deal" because it's promoting them exclusively on its Joe V's Facebook site. Notice the Facebook "f" logo on the signs in the photograph above, for example.

The store will offer lots of general merchandise, household and even durable goods items (comforters, clothing, electronics, yard furniture, ect.) on an in-and-out basis. We see shades of Aldi USA's "special buys" merchandising program in that regard, although it's important to note that numerous U.S. food retailers have used such merchandising long before Aldi set up shop in America. What makes it interesting regarding Aldi USA is it does so in a small-format box.

H-E-B is kicking off the Cinco de Mayo grand opening of its Joe V's Smart Shop store today by offering some hot promotional items in its advertising circular. Some of those items include: bananas at 3 pounds for $1; sweet corn at 8 ears for $1; chicken breasts for 67 cents pound; and assorted 16 ounce cans of vegetables at 3 cans for $1. [You can view the ad circular here.]

It's no accident, in our analysis, that H-E-B's opening of the first Joe V's store, in what could become a no frills, discount grocery chain, comes at a time when small-format, hard-discount Aldi USA is barnstorming its way throughout parts of Texas, opening numerous stores. Take a look here at Aldi so far in Texas. It's just getting started.

H-E-B has said Joe V's Smart Shop isn't a response to Aldi entering Texas. And since the first Joe V's is in Houston, where Adi has yet to open any of its hard-discount stores, we take H-E-B at their word on that - at least from a geographical standpoint.

But it only makes sense that at least a significant portion of Texas-based H-E-B's motivation in creating Joe V's would come from competitive concerns over Aldi's entering the state. In fact, if this isn't part of its motivation, we would be stunned, since H-E-B is one of the best and most competitive grocers in the U.S.

There's also significant and growing overall competition, including in and from the discount segment, in Texas - particularly in the Dallas-Forth Worth, Houston and Austin market regions - with more to come. The state is fast-becoming one of the most competitive food and grocery markets in America - from the discount format and mid-range segment, to the upscale and natural-organic format and segment.

The grocer is very successful with its H-E-B banner supermarkets and upscale Central Market chain. But it's flagship H-E-B supermarkets face somewhat of a competitive threat from Walmart and numerous other food and grocery retailers in Texas.

And of course there's Aldi, which has made Texas a major current and future focus, with plans to open a couple hundred stores in the state.

Therefore, it's a logical, competitive thing for H-E-B to create and test its own no frills, discount grocery store format named Joe V's Smart Shop (or another name), even though the "Joe" in its name is a creative fiction. We'll withhold judgement on the fictitious Joe V name for now.

H-E-B is using the Joe V's Smart Shop store as a prototype and, according to our information, isn't planning to open a second unit soon. Rather, it wants to study, analyze and tweak the first Joe V's for a while before opening another, or for that matter not opening any additional units, which seems "smart" in our analysis.

The Joe V's format and prototype store will be an interesting development, from one of the most interesting and successful grocers in the U.S., to observe and follow closely. We will be doing just that.

Competitor News: Supervalu Inc.'s Small-Format, No Frills, Extreme Value Sav-A-Lot Chain Beefing Up its Executive Ranks as Part of its Growth Program

Supervalu, Inc.'s small-format, no frills Sav-A-Lot grocery chain is beefing-up its senior management team as part of the discount grocer's growth strategy nationally in the U.S.

St. Louis, Missouri-based Sav-A-Lot, which operates nearly 1,200 small-format discount grocery markets in the U.S., has made four new headquarters hires and made a number of internal promotions as a way to grow the business both organically and through new store growth, Fresh & Easy Buzz has learned.

The new hires are:

Bill Gillispie. Gillispie has joined Sav-A-Lot as its new senior vice president of marketing and merchandising. A veteran of the U.S. food and grocery retailing industry, he previously held positions with Scotts Food, Cub Foods, and Jewel Food Stores.

Tom Lenkevich. Lenkevish has been named Sav-A-Lot's senior vice president of operations. He previously held management positions at Meijer, A&P, and Farmer Jack's. He also is a former Sav-A-Lot licensed franchise owner. Supervalu's Sav-A-Lot operates both company owned stores and stores franchised to independent owners.

Andrea Wagner. Wagner, a veteran marketer who previously worked in senior positions for Kroger Co. and H.E.B in Texas, has been named vice president of consumer brand strategy.

Vanessa Foster. Foster is Sav-A-Lot's new director of communications and community relations. She most recently managed community relations and multicultural marketing initiatives for the Cartoon Network children's television network.

The newly promoted-from-within Save-A-Lot executives are John Gerber, named as vice president of distribution; Mike Kemp, the retailer's new vice president of product segments (a new position); and Donna Mickens was named director of organization effectiveness.

Gerber, who's been with Supervalu since 1985, joined Save-A-Lot in 2002, and has held various roles in the company's distribution division.

Kemp joined Save-A-Lot in 2003, and has managed the company's procurement of meat and perishables.

Mickens will oversee executive-level development with a focus on succession planning and identification of key talent within the company.

The major new executive hires and promotions signals what we've been hearing for sometime; that Sav-A-Lot is looking to seriously grow its business both organically and through new store development.

The Supervalu, Inc. subsidiary already is the largest small-format, no-frills, limited assortment discount chain in the U.S. It has about 1,300 stores compared to Aldi USA's nearly 1,000, for example.

Aldi USA is on a major growth spurt however, adding 75-100 new stores a year over the next five years, in addition to moving into brand new markets like it recently did in Florida.

Sav-A-Lot's no-frills, small-format discount stores, which operate on an everyday hard discount model (the retailer calls them "Extreme Value Stores"), and stress the value proposition, but also promote and advertise, have been doing well in the current recessionary economy as shoppers search out the best bargains on food and groceries. In fact, Sav-A-Lot appears to be the bright estspot in Supervalu's multi-format and multi-banner lineup at present.

We've been hearing Sav-A-Lot plans on focusing more on opening new stores west of the Rockies, including in California where it has only a minimal presence with its small-format discount grocery markets. There are Sav-A-Lot stores in 40 states. If so, particularly if it puts a serious focus on Southern California, that wouldn't be great news for Tesco's Fresh & Easy, which is struggling to gain a foothold in Southern California, Nevada and Arizona with its small-format combination discount grocery and fresh foods stores.

If you look at the Sav-A-Lot store location map here for example, you will see very few stores in the Western U.S. Rather, the chain's stores are concentrated in the Midwest, south, Mid-Atlantic and eastern regions of the country.

The Western U.S. presents a huge opportunity for Sav-A-Lot, which as a single banner of Supervalu, Inc. is the fifth-largest grocery chain in the U.S. Supervalu is the second-largest retail grocery company in the U.S., after Kroger CO. (not including mass merchandisers like Wal-Mart and Costco).

'Go west' is something we're told has been mentioned often of late at Sav-A-Lot headquarters in St. Louis, Missouri, which ironically is considered the gateway city to the Western United States.

Sav-A-Lot sees lots of opportunity even in the current down economy, and in many ways because of it, for its extreme value merchandising position and no frills small store format, along with other operational and merchandising reasons.

The Sav-A-Lot stores average 14,000 -to- 18,000 square feet and carry about 1,200 food, grocery and non-foods items, including national brands and their own store brands.

The no frills, limited assortment markets also have "dollar departments" in -store, which essentially are like a small dollar or 99 cent-store-within-a-store.

The chain claims it saves shoppers 40% over the everyday cost of groceries at the average supermarket.

About 75% of the Sav-A-Lot stores currently are operated by licensees, which allows for the chain to have much lower capital expenses than it would if all of the stores were company-owned. Sav-A-Lot corporate handles all of the distribution (is self-distributing), marketing, logistics and related headquarters activities for these licensees, which are many cases are large groups rather single-store-owned independents.

This business model is the one Sav-A-Lot is currently focusing the most on. However it also plans to continue opening new company-owned stores.

It should be interesting to watch Sav-A-Lot's development, especially as it pertains to the Western U.S., now that it has put in place a comprehensive, strong senior management team poised to grow the chain.

Guest Commentary: No Frills, Small-Format Hard Discounters May Win the Small-Box Sweepstakes

From the Fresh & Easy Buzz Editor's Desk: In our reporting, writing and analysis of small-format food and grocery retailing in the U.S. and globally, Fresh & Easy Buzz has discussed how the fastest-growing and empirically most successful small-format grocery chains in the U.S. to date have generally been what we refer to as the no frills, small-format deep-discounters like Aldi USA and Supervalu, Inc.'s Sav-A-Lot. Even Trader Joe's, a fabulously successful small-format specialty grocer uses many principles of the deep or hard discounters, applying those principles to the specialty and natural foods' categories.

In his editorial commentary in Supermarket News this week, editor-in-chief David Orgel discusses this issue, along with quoting a supermarket industry analyst who says in what we call the small-format food and grocery retailing revolution going on in America it will be the deep or hard discounters, in his analysis, who win not only the battle but also the war, to stretch a metaphor a bit.

Mr. Orgel also addresses the issue of store count growth for both SuperValu, Inc's Sav-A-Lot and Aldi USA, suggesting as the supermarket industry analyst he quotes offers that both these chains might just be growing too slowly.

We essentially agree with this analysis, believing each of these no frills, small-format deep discounters not only has much room to grow in regions where they each have numerous respective stores already, but even more so to grow into regions where they have little or no retail presence currently. This is particularly true for Aldi USA. Although it has about 950 stores in the U.S., not one of its stores are in the Western United States, which is a potentially lucrative market for the hard discounter. The west also is the fastest growing region in America.

Sav-A-Lot, with over 1,200 stores, has more of a national presence in the U.S. than Aldi USA in terms of geography. However, there is much room for Sav-A-Lot to grow its store count considerably. For example, the retailer has only a smattering of stores in California, which is a nation state all by itself with nearly 40 million residents.

Both Aldi USA and Sav-A-Lot have realized they can grow their respective store counts considerably. That's why Aldi USA announced late last year it plans to open 75 -to- 100 new stores a year for the next five years.

SuperValu, Inc.'s Sav-A-Lot isn't growing its store count as fast as Aldi USA is. However, the retailer has increased its new store development program and has told Fresh & Easy Buzz it has plans to increase the number of new stores in the development pipeline even more.

And although 2012 is a ways off, as we reported in this June 12, 2008 piece, "Breaking News and Analysis: German Small-Format Discount Grocery Chain Lidl is 'Coming to America' By 2012 Says Chief Executive Klaus Gehrig," the CEO of Aldi International's chief international small box hard discount competitor, German-based Lidl, says the no frills, deep discounter is planning to start opening stores in the United states in less than four years, and perhaps sooner.

Below is David Orgel's commentary on the small-box sweepstakes from this week's edition of Supermarket News.

Hard Discounters May Win Small-Box Sweepstakes
By DAVID ORGEL
Editor-in-Chief, Supermarket News
September 8, 2008

America has lots of problems, but a lack of stores isn't one of them. No presidential candidates are campaigning on the platform of accelerating the expansion of food retailers. Neither is that a goal for most grocers, which have cut back on new openings in recent years to ease the glut of stores. One exception is the growing interest in small formats from Tesco, Safeway, Wal-Mart and others that threaten to one day flood the market with new square footage in a smaller way.

However, there's actually one segment of retail, indeed of small-store retail, that may not have enough stores. That is the limited-assortment category, also referred to as hard discounting in some circles. This class of retail made a big splash in Europe, but in the U.S. its participants, chiefly Aldi (part of Germany's Aldi Group) and Save-A-Lot (a unit of Supervalu) have rarely commanded the spotlight despite noteworthy successes.

All of that may now be changing, largely because the U.S. economy's nosedive has led many consumers to seek out the lower-priced, private-label-heavy assortments offered in these outlets.

Which brings up the question of whether there are enough of these stores to satisfy shoppers. In this week's Part Two presentation of SN's Financial Analysts' Roundtable (see Page 22), John Heinbockel, managing director at Goldman Sachs, New York, contends that the demand for hard discounters may actually outpace the supply. Here are excerpts from his comments:

“The most promising small-box concept is an old one but an underdeveloped one in the U.S. — the hard discounter. … When you realize there are more than 15,000 dollar stores in the U.S. and only about 2,200 hard-discount stores targeting the much bigger retail food market, it's very clear there could be 6,000 or 7,000 or 8,000 hard-discount stores in the U.S. ultimately. … Aldi is probably growing too slowly, and so is Save-A-Lot, which may allow a third competitor to come into the market.”

I think Heinbockel is onto something here, although I have a hard time imagining the number of stores at the upper range of his prediction. Both Aldi, at close to 1,000 units, and Save-A-Lot, at about 1,200, are on expansion paths, although not the kind of growth that would add thousands of stores.

These retailers are also trying to enhance customer experiences. Aldi is focusing on improving the look of its stores, better integrating its brands across categories, and selectively expanding SKUs. Save-A-Lot is giving its operators more leeway to practice local marketing and is hoping to expand its base to include younger, urban and ethnic customers. These changes are important because hard discounters will encounter more competition in coming years. How these retailers execute their changes will determine if they solidify a larger base or stumble by testing too many new directions.

I would bet on these players because the stars seem to be aligned. When you look at all the retailers experimenting with a wide range of small formats, it's clear that the most proven of the small boxes — the hard discounter — has the best shot at success.

Fast Growing Aldi USA: The Lure of Plain Vanilla, No Frills Food and Grocery Retailing

From the Fresh & Easy Buzz Editor's Desk: For the last two and one-half years (including a year and a half before the first stores even opened), United Kingdom-based Tesco has been in the news in the U.S., with banner newspaper headlines like "The British are Coming" appearing frequently, touting its small-format, convenience-oriented Fresh & Easy Neighborhood Market chain in the Western United States' of California, Nevada and Arizona.

The publicity blitz started well over a year before the first Tesco Fresh & Easy combination basic grocery and fresh foods market opened in late October, 2007 in the Southern California desert community of Hemet. The grocer continues to get considerable publicity. But much of it now is about whether or not the Fresh & Easy stores are failing.

That attention to Fresh & Easy neighborhood Market is far from a mere accident. Tesco has expended much effort and spent lots of money on public relations people and outside agencies in order to get America's myriad media outlets to write about the so called "British Invasion" in the form of the retailer's 10,000 -to- 13,000 square foot neighborhood grocery stores that sell a limited assortment of basic groceries (about 65% under the fresh & easy store brand) fresh meats, fresh produce, prepared foods, craft beers and wines and a few other category items. This media attention, which has decreased considerably of late though, is by design as Tesco decided to use the "free" media instead of paid advertising to create awareness of and for Fresh & Easy Neighborhood Market.

And, of course, without any of that public relations prompting, Fresh & Easy Buzz has done its fair share of drawing attention to Tesco's Fresh & Easy Neighborhood Market as the publication of record that covers, reports on, writes about and offers analysis of the fast-growing grocery chain with 75 stores in Southern California, Nevada and Arizona.

However, Tesco's Fresh & Easy is far from the pioneer of small-format food and grocery retailing in America. Those pioneers are America's independent grocers who've been operating small-format grocery stores and supermarkets since day one, and continue to do so today in a variety of formats and styles as varied as the U.S. itself is.

As far as chain grocers are concerned, Tesco is far from the first, the biggest or even the fastest-growing small-format grocery chain in the U.S.

There's SuperValu, Inc.'s Sav-A-Lot, which are no frills, small-format, limited assortment grocery stores located throughout America. There currently are more than 1,600 Sav-A-Lot stores in the U.S., and SuperValu is growing the chain fairly aggressively.

In terms of hybrid convenience-oriented combination grocery and fresh foods markets, Wawa, Inc., which is based in Pennsylvania, has been doing this sort of food and grocery retailing for decades in America. With about 500 stores located throughout the eastern U.S., Wawa is a pioneer in merchandising ready-to-eat and ready-to-heat prepared foods, along with a limited assortment of basic and specialty groceries, fresh foods and even traditional convenience store fare tossed into the mix.

Then there's the the U.S. division of German-based small-format, no frills discount supermarket chain Aldi, known in the U.S. as Aldi USA. It's arrived in America long before Tesco even thought about its British Invasion with Fresh & Easy, although the Aldi and Fresh & Easy store formats do have many qualitative differences, along with many similarities.

With about 950 stores located in the Midwest, Mid-Atlantic and eastern regions in the U.S., and with hundreds more to come in the next couple years, Aldi is taking America by storm. It's ranked by the industry trade publication Supermarket News as the 25th-largest supermarket chain in the U.S. by annual sales volume (about $5.8 billion in 2007); and that's with only 950 stores, each averaging only about 12,000 -to- 14,000 square feet in size, which is about a third of the size of an average U.S. supermarket being built today.

Family-owned Aldi also is a growing presence in the United Kingdom (where Tesco is based), where Tesco controls about 31% of that nation's food and grocery sales market share as its number one food retailer.

In the last two years, Aldi UK has been the leading percentage gainer in terms of annual market share growth, even though it remains a small player currently in the country with about 6% of total market share. That's because it has far fewer stores than the major players, Tesco, Wal-Mart-owned Asda (about 17% share), Sainsbury's (15%), Morrisons,(number four chain in the UK) the Co-operative group (number five) and others.

However, when one looks at the number of stores Aldi has in the UK, especially compared to Tesco which has about 1,700 in the small country, its market share is extremely impressive, as is its sales and market share growth rate.

Back in the U.S., 950-store Aldi USA is on a major growth spurt, opening 75 -to- 100 new stores a year for the next five years, according to CEO Jason Hart.

Currently, Aldi is making a push into Florida, where its recently opened its first stores, along with a new distribution center designed to serve the market. Aldi has big plans in the Florida market with its little stores, as well as continuing to open new stores throughout the Midwest, Mid-Atlantic and eastern USA regions.

So far Aldi has remained east of the Rocky Mountains, not yet venturing into the Western U.S. with its powerful no frills, small-format discount grocery stores. However, ther've been numerous rumors the grocery chain could do just that; cross the Rocky's into the Western USA states and food and grocery retailing market where Tesco is focusing its efforts in California, Nevada and Arizona with its Fresh & Easy grocery stores.

We've not been able to get anything definitive yet on this potential development regarding Aldi USA coming west. And we know it's not in the grocery chain's plans for 2009 and 2010.

However, after that, since the grocer wants to be a national presence in the U.S., crossing those Rocky Mountains into the Western U.S. market would only make logical sense. It also would shake up food and grocery retailing in the Western U.S. just like Aldi is in the rest of the country. And for Tesco's Fresh & Easy, it would be a competitive threat the retailer might not be able to combat.

There is a current Western U.S. connection to Aldi USA though.

Aldi is owned by a pair of interesting and reclusive brothers named Theo and Karl Albrecht. In the 1960's the brothers, who are now both in their 80's, divided their ownership of the chain in half because one wanted the Aldi stores throughout the world to sell cigarettes and the other didn't. Additionally, in 1979 Theo Albrecht bought the Southern California-based small-format discount specialty and natural foods grocery chain Trader Joe's from Joe Coloumbe (The Joe in Trader Joe's), the super-successful chain's founder.

With only about 312 stores in the U.S., the small-format (about 10,000 -to- 12,000 square feet) Trader Joe's stores do even more sales per-square-foot than the Aldi stores do, even though they don't offer basic grocery items.

Trader Joe's is ranked 23rd, two places above its cousin Aldi USA, by the supermarket industry trade publication Supermarket News, even though it has one-third the number of stores as its cousin Aldi, and doesn't sell basic grocery items. In fact, most U.S.-based supermarket industry analysts rank Trader Joe's, which had sales of about $6.5 billion in 2007, as having the highest sales-per-square foot of any food and grocery chain in the U.S. You can do the math. A total of about 312 stores, averaging only about 10,00 square feet each, and $6.5 billion in annual sales. That's impressive sales per-square-foot for any format grocery chain, particularly one that focuses on natural and specialty foods.

Although Aldi USA gets lots of attention from industry publications and analysts like Fresh & Easy Buzz and industry trade publications like Supermarket News and a couple others, the mainstream U.S. business press writes very little about the no frills, small-format discount grocery chain. That's changing though.

This is how Aldi basically likes it. The retailer is very private and in a strategy 180 degrees different than Tesco's with Fresh & Easy, it sends out virtually no press releases and devotes little if any energy and money to public and media promotion.

Instead, Aldi USA focuses on merchandising in-store and promotion via a weekly printed and online advertising flyer featuring everything from basic grocery items, non-food items and fresh foods, to in-and-out promotional items like hardware, computers, furniture, clothing items and more.

However, the poor U.S. economy, which among its negative aspects are soaring food and grocery prices, has drawn the attention of not just consumers but of the mainstream media to Aldi USA and its low everyday prices and bare bones stores. Aldi stores have been reporting record customer counts and sales in the U.S. in the down economy as also is the case in the United Kingdom and the rest of Europe.

Despite Aldi USA's lack of media self-promotion, today's New York Times has an article about the fast-growing small-format, no frills discount grocery chain. The piece, titled "The allure of plain vanilla," provides a good overview of Aldi USA, along with some overall information about the company in general and how it's brand of no frills discount food and grocery retailing is fitting well into these bad economic times.

Should Aldi USA decide to come west over those Rocky Mountains in the next two years or so, we guarantee you the media attention level will be at high buzz, despite the grocery chain's low-key PR ways.

In the meantime, we wanted to bring you the piece from the New York Times about Aldi USA. Here it is below:

The Allure of Plain Vanilla

By ANDREW MARTIN
New York Times
September 6, 2008

LIKE its reclusive German founders, the supermarket chain Aldi doesn’t do much to draw attention to itself.

Its stores are small and spartan, with minimal décor and a limited selection of products. They are often found in nondescript shopping strips and lack the flashy signs and window displays of some competitors. Grocery carts cost a quarter apiece, which is refundable after the cart is returned.

But as the economy sputters and consumers look to save money, the privately held Aldi is suddenly emerging as a major force in the grocery business, one that some predict could one day rival Wal-Mart.

What makes Aldi so special is that, quite simply, its prices are cheaper than just about anyone else’s, including Wal-Mart’s. Where else can you buy an 18-ounce box of raisin bran cereal for just $1.49? Or a frozen pizza for $3.99? Or how about a DVD/CD player for $24.99?

Click here to read the complete article.

Tesco Creating Another New Store Format: No Frills, Small Format, Price-Impact

Tesco, parent company of Fresh & Easy Neighborhood Market, is back at the retail food store format drawing board, this time creating a new, small format, no frills, deep discount store designed to fend-off competition in Britain from German grocers' Aldi and Lidl's small format, deep-discount grocery markets, which have been growing in numbers and popularity in Britain, and taking market share away from Tesco's supermarkets.

London's Telegraph.co.uk reports today that Tesco, the third-biggest retailer in the world, began last summer converting an old warehouse owned by Jack Farmer, the retailer's founder, into a mock German discount store. The reason: To design a no frills, small format, limted assortment, discount format of its own to counter the Aldi and Lidl threat in the UK.

This is the same process Tesco used to develop its Fresh & Easy, small format grocery market chain in the U.S. The retailer acquired an old warehouse in the U.S., and used it to tinker around with various design and merchandising concepts until it arrived at what is today the Fresh & Easy store format.

In fact, according to our reading of the Telegraph.co.uk story--and some digging around over the phone with sources we did today--it sounds like the new Tesco small format, deep discount store prototype the company is currently working on might be at least one part Fresh & Easy.

That part is the low-price leader, basic grocery aspect of Fresh & Easy stores. Fresh & Easy stores open in the U.S. offer a limited assortment of private label and national brand basic groceries at very low prices--thus far lower overall prices than the supermarkets in the stores' trading areas in Southern California, Arizona and Nevada.

In fact, the format under design might be very similar to Fresh & Easy overall. Aldi and Lidl stores in Britain sell a limited assortment of high-end, specialty and natural/organic groceries and prepared foods in addition to basic groceries. The stores offer these upscale items at a super-low price as well. This is similar to Fresh & Easy stores, which combine the basic grocery concept in the stores with an extensive offering of fresh, prepared foods at reasonable prices, along with a limited selection of specialty, natural and organic groceries priced at a discount.

Aldi has about 900 stores in the U.S. They are small format, no frills stores similar to those the German grocer operates in Europe and elsewhere throughout the world. However, unlike the Tesco Fresh & Easy stores, (and unlike Aldi stores in the UK) Aldi's U.S. grocery markets don't offer much in the way of prepared foods or specialty and natural/organic grocery items. Lidl doesn't currently have any stores in the U.S.

Read the Telegraph.co.uk article, "Tesco Moves to Counter Aldi and Lidl," here.

Sidebar News: Tesco isn't waiting for its new, no frills, small discount store format to be finished: This week the retailer will begin to match Aldi's and Lidl's prices on over 2,000 items in its Tesco supermarkets in Britain. The giant retailer also just launched 300 no-frills Lidl and Aldi-style products, with another 200 items on the way. Read more here.