Fresh & Easy Developing Smaller Version of its 3K Square-Foot 'Fresh & Easy Express' Format Stores

Breaking Buzz & Analysis

Tesco-owned Fresh & Easy Neighborhood Market is currently developing a 2,000 square-foot version of its 3,000 square-foot 'Fresh & Easy Express' convenience-oriented food and grocery market, according to multiple sources familiar with the project.

Fresh & Easy is constructing a prototype of the 2,000 square-foot store inside a space it controls near the 10,000 square-foot Fresh & Easy Neighborhood Market unit in Los Angeles' Eagle Rock Neighborhood.

El Segundo, California-based Fresh & Easy Neighborhood Market used that very same space to build a mock-up of its 3,000 square-foot 'Express' format stores, of which their are currently about 10 units, all in Southern California.

The new 2,000 square-foot market, called an F2 in Fresh & Easy speak - the 10,000 square-foot stores for example are referred to internally at Fresh & Easy as F10's, the 3,000 square-foot stores F3's, and the handful of 7,000 square-foot markets the grocer operates are F7's - is basically a scaled-down version of the 3,000 square-foot stores, according to sources who are familiar with the project.

For example, current plans call for smaller refrigerated, frozen food and produce cases than in the 3,000 square-foot stores as a way to compensate for the reduced square footage, according to our sources. Some types of cases and shelving also could be eliminated for the same reason, our sources say.

Neither Tesco or its Fresh & Easy Neighborhood Market chain have announced the development of the 2,000 square-foot stores. This is the first time Tesco's plans for a smaller version of the 3,000 square-foot 'Fresh & Easy Express' store is being reported.

Analysis

The first question any food and grocery retailing analyst or grocer worth his or her salt should ask upon reading this report is: 'Why a 2,000 square-foot version of what already at 3,000 square feet is a very small-format grocery market.?

The answer to that question, according to our sources (and to our reporting and analysis of Tesco and its Fresh & Easy chain for five years on) - and it's what we said was the primary driving force behind the 3,000 square-foot 'Express' format in our stories about the stores last year - is that Tesco's Fresh & Easy is searching for ways to reduce its new store development and opening capital cost while still growing its store count.

Since launching its California-based small-format fresh food and grocery chain in 2007, Tesco has always said it will break even financially with Fresh & Easy - which lost about $245 million in its most recent fiscal year and has lost about $1.5 billion over its five year history - by achieving scale, which means opening numerous stores over a short period of time.

For example, from 2006 to 2010 Tesco said it still planned to have at least 500 stores in four-to-five years, on its way to 1,000 stores over an about six or seven year period, which would be 2013-end-to-2014. It said this despite the fact it's paused opening new stores for many months at least three times in Fresh & Easy's five year history. The most recent period being at present.

But in 2011, not long after he took over as CEO of Tesco in March of last year, Philip Clarke said the United Kingdom-based retailer planned to open just 400 Fresh & Easy stores, which would allow Tesco to break even with its U.S. grocery chain by the end of its 2013 fiscal year, which ends February 2013.

Not many months later Clarke and Tesco changed those plans, saying instead of the 400 Fresh & Easy units needed to break even by the end of fiscal 2013, it had figured out a way to do so with just 300 stores.

But then earlier this year Clarke and Tesco pushed back Fresh & Easy's break-even time to the end of its 2014 fiscal year, at which time the retailer says it will then break even with Fresh & Easy Neighborhood Market. Tesco kept - so far - the 300 store number as the number of Fresh & Easy units needed to break even by the end of the 2014 fiscal year.

There are 199 Fresh & Easy stores in California, Nevada and Arizona.

Tesco's 2014 fiscal year-end is about two years away. That means it will have to build and open 101 stores between now and then to reach 300 units, which Clarke and company say is needed to break even at that time.

But Tesco has essentially stopped opening Fresh & Easy stores, with the exception of one or two here or there.

Instead, the retailer has embarked on a cost-cutting campaign of limited sorts with Fresh & Easy, which begs another key question any industry analyst or grocer should ask: "How can Tesco open 101 stores in two years - which is half as many as it's opened over the last five years - when beginning a couple months ago it essentially stopped opening new Fresh & Easy stores?

In fact, even if Tesco were opening Fresh & Easy stores at its high-point-pace, it would be near physically and logistically impossible, and not very smart, to open 101 stores in two years, particularly considering the continued poor performance of the California-based grocery chain and its need to reduce costs and raise margin at it to even come close to breaking even with Fresh & Easy

The answer to the question, as it pertains to the micro small-format store prototype being developed, isn't that Tesco is going to open 101 2,000 square-foot grocery markets - the format in development. For example, it's opened just 10 or so of the 3,000 square-foot Fresh & Easy Express stores in the year or so since the first unit was opened.

There are numerous reasons why they won't do so but here's a simple reason why if they do it won't help: The best 10,000 square-foot Fresh & Easy stores do about $150,000 in average weekly sales, and there aren't many of those units. That would mean the best of the 2,000 square-foot stores would do - at best - about 40,000 in weekly sales. If scale, as in growing sales by growing store-count, matters, 101 2,000 square-foot stores, even if they all were stellar performers, which they won't be, doesn't add up to a whole lot of annual sales when one looks at the big picture.

But hopes and dreams of reduced capital costs without considering the fundamental question - can 2,000 square-foot grocery stores operated the way Fresh & Easy operates them make any money - it appears spring eternal at Fresh & Easy Neighborhood Market.

Therefore, the Tesco-owned chain is developing a smaller version of its 3,000 square-foot 'Express' store, shaving 1,000 square feet off the store size.

Perhaps Tesco hopes it can "shrink" (in terms of store size) rather than grow (recall those days of a 1,000-store chain) its way to break-even with Fresh & Easy.

But size does matter. And a 2,000 square-foot grocery market, like all small formats - including 3,000 and 10,000 square-foot grocery stores - are fraught with problems when it comes to making money. Just ask Walmart - the now folded 'marketside by Walmart' stores and its fledgling small-format Walmart Express, which despite being 15,000 square-feet is having economic struggles endemic to many small-format grocery stores, particularly those run by chains without a history of operating such stores.

Or ask Safeway CEO Steve Burd, who put an end to the California-based supermarket chain's 'The Market' format (10,000-14,000 square-foot grocery markets ) after just two test units has been opened and operated for about one-year each. Both stores, in Long Beach and San Jose, California, remain open but Burd killed further development of the format over two years ago.

According to our sources, at present there isn't a set date for when - or if - the first 2,000 square-foot Fresh & Easy store will open. However, our sources say, Fresh & Easy already has a number of locations for the stores scouted out, although much of the grocer's real estate team was fired last Wednesday, which is an important indication of the future of Fresh & Easy Neighborhood Market's new store development plans.

Those plans: Little to nothing going forward for the rest of this year in terms of acquiring new store sites - there are already dozens of Fresh & Easy sites that have been sitting fallow for as long as four-to-five years - and opening new Fresh & Easy stores.

[Editor's Note: Fresh & Easy Buzz is an independent Blog, and is not affiliated with Tesco, Tesco's Fresh & Easy Neighborhood Market, or any of its competitors. No member of the Fresh & Easy Buzz editorial team has ever or currently works for Tesco or its Fresh & Easy Neighborhood Market chain.]

Getting Real in the Golden State: First Group of 13 Walmart Neighborhood Market Stores Opening in California This Fall

Walmart Neighborhood Market in California

We first reported in this July 2010 story [July 6, 2010: Walmart Looking for Store Sites in Northern California For 20,000 Sq-Ft Neighborhood Market by Walmart Prototype Store] that Walmart Stores, Inc. was looking for locations in California for its Walmart Neighborhood Market supermarkets, which range in size from about 30,000-45,000 square feet.

To date Walmart has operated its mega-supercenters and discount format stores only in California, many of which it's been converting over the last few years to hybrid supercenters offering food and groceries, but not its Neighborhood Market grocery stores.

We followed our July 2010 report and analysis piece up with other stories, like this one in January 2011 about the Bentonville, Arkansas-based global retailer's plans to launch its Walmart Neighborhood Market format in the Golden State. In the January piece and in others, we reported on specific locations in California where Walmart would be opening its Neighborhood Market stores.

It's been a long reportage road from our first reports in 2010 about the mega-retailer's plans to open Walmart Neighborhood Market supermarkets in California to the present.

But it's been a fruitful journey.

Why? Because Walmart Store's, Inc. has now announced - and in our case confirmed because many of the store locations it's announced are those we already reported on - the first Walmart Neighborhood Market locations it plans to open, beginning this fall, in California.

Inside a Walmart Neighborhood Market supermarket. Photo courtesy Walmart Stores, Inc.

Below are the locations of those 13 (Walmart obviously isn't superstitious) supermarkets, along with all the key data grocery industry wonks and consumers alike like to see.

Walmart has other Neighborhood Market locations already booked in California, a couple of which are mentioned in our previous stories. In addition, the retailer is looking for more sites for its Walmart Neighborhood Market supermarkets throughout California.

We will be writing about Walmart's launch of its Walmart Neighborhood Market supermarkets in California from now until the end of the year, including reporting on some of those additional locations.

We'll be using this header: 'Walmart Neighborhood Market in California,' in those stories.

As of today we expect the first Walmart Neighborhood Market stores in California to open in the October-November time period. One of the first, if not the first unit, will be in Lincoln, California near Sacramento, where Tesco's Fresh & Easy Neighborhood Market opened a store in March 2012.

Walmart Stores, Inc. currently has 168 Neighborhood Market stores in the U.S., with plans to double the store- count over the next couple years. As we've said a number of times in Fresh & Easy Buzz, California will play a major role at Walmart in the growing of that store-count. Stay tuned.

[Read our extensive four-plus years of reporting, analysis and commentary about Walmart Stores, Inc., including its Walmart Neighborhood Market and other smaller format grocery stores at the following links: Wal-Mart, Wal-Mart Stores Inc, Walmart, Walmart Stores.]

The Walmart Neighborhood Market supermarket (an urban version) in Chicago's West Loop Neighborhood, which opened earlier this year. The store is about 31,000 square feet. Photo courtesy blog.chicagoarchitecture.info.

Walmart Neighborhood Market in California

Walmart Neighborhood Market - 13 Confirmed California Store Locations

Confirmation sources: Delia Garcia, Walmart West. Steven Ristivo, Walmart Stores, Inc., senior director of community affairs.

SOUTHERN CALIFORNIA

1. City: Los Angeles
County: Los Angeles
Address: Corner Grand Avenue and Ceasar Chavez Avenue. Downtown, on outskirts of Chinatown.
Square-footage: 33K. Ground floor of senior citizens' residential complex.
Current target opening: Early-to-mid-2013. Construction to begin summer 2012

2. City: Huntington Beach
County: Orange
Address: Corner Beach Boulevard and Atlantic Avenue. Former Rite-Aid drug store building
Square-footage: 31K
Current target opening: August 2012

3. City: Rancho Santa Margarita
County: Orange
Address: 30491 Avenida de Las Flores. Avenida de los Flores and Antonio Parkway
Square-footage: 33K
Current target opening: August 2012

4. City: Camarillo
County: Ventura
Address: Camarillo Town Shopping Center. 275 West Ventura Boulevard. Vacant Linens and Things building
Square-footage: 34-36K
Current target opening: Late 2012

5. City: San Diego
County: San Diego
Address: Logan Heights. Imperial Avenue between 21rst and 22nd Streets, near downtown. In historic former Farmers Market building. Neighborhood is underserved by grocery stores offering fresh food and groceries at affordable prices.
Square-footage: 48,800K
Current target opening: Late 2012/Early 2013

NORTHERN CALIFORNIA

San Francisco Bay Area

6. City: Pleasanton/East Bay
County: Alameda
Address: Meadow Plaza shopping center. 3112 Santa Rita Road. Santa Rita Road and Stoneridge Drive
Former Nob Hill Foods' (Raley's owned) supermarket building. Near Safeway Stores, Inc.'s corporate headquarters. Less than a mile from a Safeway store and a Fresh & Easy market.
Square-footage: 31K
Current targeted opening: Late 2012/Early 2013

7. City: San Ramon/East Bay
County: Contra Costa
Address: Country Club Village Shopping Center. 9100 Alcosta Boulevard. Former Ralphs' supermarket and La Asia supermarket building. Closest competitor: Save Mart-owned Lucky supermarket, less than one mile away.
Square-footage: 33-36K
Current target opening: Fall 2012

8. City: Hayward/East Bay
County: Alameda
Address: 2480 Whipple Road. Former Circuit City building
Square-footage: 33-35K
Current target opening: Late 2012/Early 2013

9. City: San Jose
County: Santa Clara
Address: Westgate Mall. 1600 Saratoga Avenue
Square-footage: 38K. Recently closed Safeway store
Current target opening: Fall 2012

Sacramento Region

10. City: Sacramento
County: Sacramento
Address: Taylor Center. 2700 Marconi Avenue. Marconi Avenue and Fulton Avenue. Former Goore's children's store building. Prior to 1999, when Goore's moved in, was a the American Stores' Inc. Lucky supermarket. Goore's closed in fall 2011.
Square-footage: 32-36K*
Current target opening: Late 2012/Early 2013

11. City: Granite Bay (Roseville border)
County: Placer
Address: Sierra Oaks shopping center. Douglas and Sierra College boulevards. Former Grocery Outlet store, plus additional square-footage attached to the building but previously not used by Grocery Outlet.
Square-footage: 43K
Current target opening: Late 2012-to-early-2013

12. City: Lincoln
County: Placer
Address: Highway 65 and Second Street. Former Rainbow Market building
Square-footage: 31-32K
Current target opening: Fall 2012

13. City: Modesto
County: Stanislaus
Address: Coffee and Orangeburg shopping center. Corner Coffee Road and Orangeburg Avenue. Former Dollar Superstore building (26K sq. ft.. Plus, former Leslie Pool Supply building next door (10K sq. ft.)
Square-footage: 36K.
Current target opening: Late 2012-to-early 2013

Fresh & Easy Neighborhood Market to Open 20-Plus New Stores in Early 2012 - We Have What's Not in the Press Release

Tesco's Fresh & Easy Neighborhood Market sent out a press release today in which it announced it's hiring for more than 600 jobs for over 20 new stores it plans to open from January-March 2012. You can view the release .

In the press release, which you can view here, Fresh & Easy Neighborhood Market listed 22 cities - 21 in California and Las Vegas, Nevada - where the 20-plus new stores will be located. But the Tesco-owned grocery chain didn't list the addresses of those 20-plus stores in the 22 cities.

But never fear, earlier this month we published a list (at the top-left of the blog) of 26 stores in California that Fresh & Easy Neighborhood Market is currently preparing for early 2012 openings, and has started hiring employees for.

In addition, we included six locations in Las Vegas that Fresh & Easy has been planning to open for a number of years but hasn't, instead closing six stores there a year ago this month. (See the store closing list at the top of the blog for the locations.)

As we note in the list, we don't suspect Fresh & Easy to open more than a handful of the six units in Las Vegas in the January-March 2012 time period. But, as the grocer noted in the press release today, it does plan to open one or more new store in Las Vegas in early 2012.

Below are the specific locations of the 26 stores Fresh & Easy currently plans to open in early 2012. There could be others coming up, and a couple might not make the cut by the end of March for currently unforeseen reasons. But we've identified the units using a variety of sources in our reporting, along with using various research tools.

To see the Las Vegas addresses, go here: Planned F&E Openings Jan-March 2012.

You'll see numerous publications write about Fresh & Easy's plans, announced today in its press release, but this is the only place you are going to obtain the specific locations - at least for a little while.

You can click here for Fresh & Easy's press release so that you can match up the cities listed in it with the addresses and cities listed below.

Southern California

1. Laguna Niguel - Crown Valley Parkway and Golden
2. Hermosa Beach - Pacific Coast Highway And 8th Street
3. Chula Vista - 3rd Avenue and J Street
4. Burbank - Victory Boulevard and Buena Vista
5. Santee - Mission Gorge and Cuyamaca
6. Torrance - Hathorn Boulevard and Carson Street
7. Costa Mesa - Harbor Boulevard and Gisler Avenue
8. Los Angeles - Figueroa Street and Jefferson Boulevard
9. Los Angeles - Canyon Avenue and Sherman
10. Los Alimitos - Valley View Street and Lampson Avenue
11. Moorpark - Los Angeles and Moorpark
12. Granada Hills - Balboa Boulevard and Millwood
13. Santa Barbara - Downtown: 336 North Milpas Street

Central California Coast

14. San Luis Obispo - South Street and Broad Street

Northern California

South Coast

15. Monterey - 2020 Del Monte Avenue

San Francisco Bay Area

16. Brentwood - Balfour Road and Fairview Avenue
17. San Francisco - Silver and Goettinggen
18. Mountain View - North Rengstorft and Middlefield Road
19. Antioch - Lone Tree Way and Gold Course Drive
20. San Jose - Holger and First Street (Downtown San Jose near Safeway's 'The Market' store)

Sacramento Region

21. Sacramento - 34th Street and Broadway
22. Sacramento - Watt Avenue & El Camino Avenue
23. Sacramento - Mack Road and Franklin Boulevard
24. Lincoln - Lincoln and Sterling Road
25. Elk Grove - Elk Grove Florin Road and Calvine Road
26. Folsom - East Natoma Street and Blue Ravine Road

We will be reporting on and writing about Fresh & Easy Neighborhood Market's early 2012 new store plans extensively in the coming days, weeks and months. But there are a few takeaways we want to leave you with from our specific location list above and Fresh & Easy's announcement today.

First, the four Southern California stores in italics in our list above - Laguna Niguel, Hermosa Beach, Burbank and Los Angeles - are Fresh & Easy Express units.

The first 'Express' store, at La Cienega Boulevard and 18th Street in Los Angeles, opened November 2. [See - November 2, 2011: Open in Los Angeles: A Look at the First 'Fresh & Easy Express' Store; and  November 1, 2011: Analysis: Tesco Opens First 'Fresh & Easy Express' Store Tomorrow in Los Angeles ... So What ... ?

Also key is the fact that Fresh & Easy will be intering three new market regions when it opens the stores in San Luis Obispo (Central Coast), Monterey (Northern California's South Coast) and Sacramento. We will be writing more about this development in an upcoming story.

Lastly, there are currently 184 Fresh & Easy markets. Tesco CEO Philip Clarke has said the United Kingdom-based retailer needs 300 Fresh & Easy units open and operating by February 2013 in order to fit with his strategy of breaking even with Fresh & Easy by the end of the 2012/13 fiscal year, which is over in February 2013, 16 months from now.

If Fresh & Easy opens 30 new stores (we will error on the high side to be more than fair) by the end of March 2012 - for a total at that time of 214 units - it will need to open 86 stores from April 2012- February 2013, an 11 month period, in order to get to Clarke's magic 300 units, give or take a handful of course.

It's an achievable task - but neither easy nor in many cases advisable. Tesco has opened under 50 new stores so far in 2011, for example.

The 600-plus new jobs Fresh & Easy says its hiring for, all but a handful in California, is good news for the Golden State, which still has the second-highest jobless (over 12%) rate in the U.S. The highest:  Ironically ... it's Nevada, at 14%-plus.

'The Insider' Offers Some Advice He Suggests the New Owners of Northern California's Andronico's Markets Should Take Post-Haste

All six of the stores still have signs saying Andronico's Market, like on the San Francisco store above, despite the fact the grocer changed the name to Andronico's Community Markets over a year ago. For 'The Insider' this is a blessing in disguise because he says the new ownership needs to bag the Andronico's Community Markets name and return to Andronico's Markets, with an emphasis on Andronico's, similar to how it's depicted on the sign above.

The Insider - Heard on the Street

In my October 18 column - May-to-October at 82-Year-Old Andronico's Markets: New Owner, 2 Stores Closed ... Now What? - I reported that an investment fund led by Renovo Capital and created by it and Rosewood Private Investments got the green light from the Oakland, California division of the U.S. Bankruptcy Court to acquire 82-year-old grocer Andronico's Markets, which has its headquarters next to and above its store in San Francisco and operates six stores in the Bay Area region, down from a high of 14 units less than a decade ago and two stores shy of the eight it operated until closing two units this year - one grocery market in Palo Alto, California, closed in July, and the store on University Avenue in Berkeley, closed yesterday.

Three of the existing Andronico's stores are in Berkeley - on Shattuck Avenue, Solano Avenue and Telegraph Avenue. The other two units are in Los Altos, in the South Bay Area, and San Anselmo, which is in Marin County in the North Bay.

On Friday, October 28, the day before the closing of the University Avenue store in Berkeley - the university city that's been home base for Andronico's since it was founded in 1929 by Greek Immigrant Frank Andronico - Renovo Capital partner Scott Lavie and Andronico's CEO, Bill Andronico, who is Frank's grandson and has been running the chain since the 1980's, publicly announced the closing of the deal and sale of Andronico's to the investment firms and their fund, following the approval by the bankruptcy court, as I reported on in my October 18 column.

The purchase price, as I noted on October 18, was $16 million.

Renovo Capital has already invested about $5 million in Andronico's in the form of secured debtor-in-possession financing, which was part of its strategy to keep Andronico's alive financially and operationally until it could complete the acquisition through the court proceedings, which began in August.

The closing of the University Avenue store in Berkeley was also a part of the deal worked out with the court.

The store's about 20 employees have been told by the new owners that they can apply for jobs at the remaining six Andronico's stores. However, that's more theoretical than a reality for all or most of the workers because the last thing the new ownership wants and needs to do is add to rather than reduce Andronico's labor costs, considering the small chain's debts of $10-$15 million are about equal to its assets, according to the Chapter 11 filing.

Renovo's Lavie and Bill Andronico, who is staying on for now to continue running the 82-year-old chain that bares his family's name, said Friday, as they've said previously, that the new ownership plans to invest cash to improve the stores and the small chain's operations.

Here's what Bill Andronico said on Friday: "I want to thank our loyal customers, our committed employees and our faithful vendors who have worked with us through this difficult chapter in the company's history. I am pleased that Renovo Capital's purchase will allow us to improve our standing in the market and build on the strong brand my family has built over three generations."

Bill Andronico is the third generation of the Andronico family to run the grocery chain, having taken over for his father John in the 1980's. John Andronico took over from his father, Frank Andronico, who in 1929 founded Andronico's with a small grocery store on Solano Avenue in Berkeley, the site of one of the three existing stores in the city.

Here's what Scott Lavie, a Renovo Capital partner who's been heading up the Andronico's deal said as part of the same announcement on Friday: "Andronico's will continue to operate six locations: three stores in Berkeley and markets in San Francisco, San Anselmo and Los Altos. Renovo is committed to investing into the store's physical infrastructure to update the facilities and ensure that the stores continue to improve the quality of service for which they have historically been known. As part of this effort, key members of Andronico's executive management team will be retained to manage the company and its operations."

Lavie added this in the announcement: "We are excited about the opportunity for improvement in Andronico's stores to better serve our customers." The acquisition of the Andronico's brand was based on its market cache, and in combination with Renovo's ability to invest in the stores and employees, we want to ensure that Andronico's continues its commitment to excellence and delivering value to our customers for generations to come."

According to the August bankruptcy filing, Andronico's was doing about $120-$130 million in annual sales at the time, which is considerably less than half the annual sales the chain was doing at its 14-store peak, based on sales figures I'm aware of from the early-to-mid 2000's.

In my October 18 column I offered some analysis and informed opinion on what I think the future might hold for Andronico's under the new ownership, if you care to take a look, here.

The "key members" of Andronico's executive management team that Scott Lavie says in the quote above will be retained by the new ownership potentially include, in addition to Bill Andronico: Steve Epidendio, Justin Jackson and Anthony Gilmore.

Last year Bill Andronico brought the three men, all former Whole Foods Market guys, along with another Whole Foods' alum, John Clougher, into the then family-owned chain to help him raise financial capital and turn the chain around.

Claughter, who has been the president and COO of Andronico's since then, reporting to Bill Andronico, is leaving to become the CEO of A.G. Ferrari Foods, a small specialty grocery chain that Renovo Capital and Rosewood also recently bought out of bankruptcy. (See my October 18 column for details).

Claughter, who is leaving to head A.G. Ferrari Foods as noted above is the former president of Whole Foods Market's Pacific Northwest Region, which includes Oregon and Washington State.

Jackson, who's held the title of executive vice president at Andronico's since last year, was the first Whole Foods Market alum Bill Andronico recruited last year. Most recently prior to that he was vice president of purchasing for Whole Foods' Pacific Northwest division.

Epidenio, who managed one of the Andronico's stores for about nine years, from the 1980's-to-early 1990's, later went on to become vice president of retail operations for Whole Foods Market's Northern California division. His position at Andronico's since last year has been as the grocer's vice president of operations.

Lastly, Anthony Gilmore, who was president of Whole Foods' Northern California region from 2004-2007 and worked for the natural-organic foods' chain from 1996-2007 before leaving in 2007 to take a job titled vice president of corporate lifestyle, new concept development and corporate perishables, at Pleasanton, California-based Safeway Stores, Inc., has since last year been Andronico's chief strategist and chief administrative officer.

From 2007-2010 at Safeway Stores' headquarters in the San Francisco Bay Area city of Pleasanton, Gilmore worked on, among other projects, the development of the grocer's "The Market" small-format fresh food and grocery chain.

Safeway opened its first "The Market" store in Long Beach, California in 2008, followed by a second unit in San Jose in 2009.

Safeway's CEO, Steve Burd, decided not to go forward with the small-format stores, which are very similar in format to Tesco's Fresh & Easy Neighborhood Market, as Fresh & Easy Buzz has reported. Not long after that decision by Burd, Gilmore, who worked for Safeway as a retail clerk and store manager for 19 years before joining Whole Foods Market, left the Pleasanton-based chain to join his fellow Whole Foods' alums at Andronico's.

There are additional details about the industry backgrounds of the former Whole Foods Market alums in my May 30, 2011 column about Andronico's  - 82-Year-Old Grocer Andronico's Needs A Sugar Daddy of Sorts: 'The Insider' Suggest Tesco and its Fresh & Easy Neighborhood Market Might Fit the Bill - if you're interested.

The executive management team - Bill Andronico, Epidenio, Jackson and Gilmore - is deep with experience in food and grocery retailing, including in Northern California's San Francisco Bay Area. But it also might be a bit to collectively expensive for the new ownership and for Andronico's balance sheet, even though there will be some savings on the expense side with John Claughter's move over to nine-store A.G. Ferrari Foods, which Renove bought out of bankruptcy for less than $2 million dollars.

Assuming all or most of the executive team is retained, based on the extensive experience and individual talents of each of the members, they have a shot at turning Andronico's around, assuming they do some out of the box thinking and implementation - no wholesale Whole Foods Market format cloning, for example - and are able to strike a fine balance between creating a strategic blueprint for going forward that combines the best elements of Andronico's successful food and grocery retailing history with much needed changes in how the chain has been operating for the last decade.

Andronico's knows merchandising - and executes it extremely well. As an example, take a look at the produce department merchandising pictured in the photographs above and below. The photos were taken November 27, 2009, at one of the six remaining stores. [Photo credit: Willo O'Brien.]

I'm not the foremost expert on Andronico's, if such a thing exists. But I've been a close observer of the grocer and the markets it operates its stores in for nearly three decades.

Therefore, I'm going to offer a list of five key action steps the new ownership needs to have the executive team start and focus on post-haste (immediately), as in beginning on Tuesday. On Monday they all need to go out in the stores, interact with shoppers, and give away free treats to kids in the stores for Halloween - along with an action timeline, if its serious about saving the six-store chain - and eventually growing it.

There are additional things to focus on - but this is a list to get busy on starting Tuesday morning.

Here goes:

1. Dump the Andronico's Community Markets name and go back to Andronico's Markets, which has been the grocer's name since it changed it from Andronico's Park & Shop in the 1980's.

Adding "Community" to the name of the stores add zero-value to Andronico's, its marketing position or operations, in my analysis. In fact, it's a determent. I see it as added word baggage and meaningless semantic clutter.

Customers and residents of the San Francisco Bay Area call the chain "Andronico's," and have done so for decades. Even before the family changed the name of the stores from Andronico's Park & Shop to Andronico'sAndronico's." In fact, that's one reason the grocer dropped "Park & Shop" from the name.

The name "Andronico's" (not Andronico's Community Markets) has brand equity with shoppers in the Bay Area, which is one reason Renovo says they bought the grocer out of bankruptcy. Why mess that up?

Further, the exterior signs on the six stores still say Andronico's Markets. Dropping "Community" from the name will not only fit with what shoppers already call the stores, it will save a ton of cash because it will eliminate the need to buy and install new store signage, which is an expensive proposition, particularly for a fledgling small grocery chain. It's money that should be put to better and higher uses by the new ownership.

Conversely, keeping the Andronico's Community Markets name but keeping the Andronico's Markets signs on the stores, which has been the case for over a year since the name change, creates brand dissonance among consumers. It's also extremely poor marketing and branding.

Additionally, if these two reasons aren't enough - and they are - dumping the Andronico's Community Markets name, which the new executive team created and changed the name of the company and stores to last year, apparently in an attempt to tell shoppers that the grocery chain that's been family-owned and community-based for 82-years was now really community-based, gives the new ownership a great press release headline story.

My press release story headline would read something like this: "Back to the future at Andronico's: New owner takes back the Andronico's Markets' name because it's meant 'community grocer' for eight decades."

Timeline: Launch by Friday, November 4.

2. Evaluate each of the stores ... using a metaphorical microscope.

The San Francisco store (Inner Sunset District) is an excellent location. The new owners need to nurture it.

The Shattuck Avenue Andronico's unit in Berkeley is a good location. The store on Solano Avenue (Berkeley) is decent-to-fair. The Telegraph Avenue (Berkeley) unit is mediocre - but has potential to improve.

The benefit in Berkeley is the three stores give Andronico's brand, advertising and promotional synergy and reach. But the stores have to perform on their own, and do so against major and increasing competition, in order to justify keeping all three open.

Regarding the stores in San Anselmo and Los Altos, unless they're performing better than I'm told (neither has ever been a sales barn-burner by the way), I would put them under the microscope closely. I would be asking 'Would closing one or both of these stores and using the savings to grow business at the remaining stores (and possibly adding a new location) be a better alternative than keeping them open?'

Were I crafting the strategy for Andronico's, there's a scenario I would look at closely.

Here it is: There's a potentially good location available to Andronico's in San Francisco, which is the vacant Delano's IGA Market store (about 15,000 square-feet) in the city's Richmond District. The store, at 6333 Geary Boulevard (at 27th Avenue), has been has been vacant since last year, when owner Harley Delano closed it, along with four other units, because of financial struggles. (see here for details.)

Tesco opened one of its Fresh & Easy markets not far away (at 32nd and Clement) in June of this year. That store has been doing fairly well since opening four months ago.

However, in my analysis the highly populated Richmond District could support a grocery store in the former Delano's building, particularly one that offers a strong mix of everyday grocery items, along with specialty and fresh foods offerings.

One problem with the Fresh & Easy stores is they only offer about $5,500 SKUs in the 10,000 square-feet of selling space. About 65% of those items are the chain's private brands. And of the remaining 35%, about half the items are nationally branded packaged food and grocery items. As a result, most shoppers can't get all they desire at a Fresh & Easy store, particularly when it comes to their favorite national grocery brands.

The former Richmond District Delano's location is just across Golden Gate Park from Andronico's supermarket in the Inner Sunset District. But the distance is such that few if any residents who live in the Richmond District cross the park to shop at the Andronico's, instead shopping at a Safeway supermarket in the neighborhood, along with another unit not far away on La Playa at Ocean Beach, and at the now-opened Fresh & Easy store.

What I would seriously look at would be potentially closing one of both of the two worse-performing (taking into consideration the future performance potential the stores have) Andronico's stores (which could easily be the San Anselmo and Los Altos units or the Telegraph store in Berkeley as I've noted previously) and then putting a new store in the vacant Richmond District Delano's building, assuming the costs of doing so were within reason. A decent monthly lease and the like. (I have no affiliation with the landlord of the building.)

Doing so would give the new ownership five or six stores - three units in Berkeley and two in San Francisco, under the two-store closing scenario, with one additional unit (total of six) under the one-store closing scenario.

Depending on relative performance, keeping the San Anselmo store in Marin County (the one-store closing strategy), which is much closer to San Francisco and Berkeley geographically than the Los Altos store is, would make the best sense from a synergy perspective because the six units would all be located in fairly close geographical proximity.

Berkeley, San Francisco and San Anselmo are all clustered fairly close together. Los Altos is farther out in the South Bay Area, next door to Palo Alto where Andronico's closed the store in July.

The type of store I envision for Andronico's in the former Delano's building is a smaller version (with some differences) of its Inner Sunset-San Francisco supermarket, which is nearly 30,000 square-feet.

The Richmond District-San Francisco Andronico's would carry at least 20,000 SKUs, with a mix of basic groceries, specialty-natural-organic products and fresh prepared foods.

Mollie Stone's Markets, which took over one of the former five Delano's stores, the unit in San Francisco's Castro District, offers that many SKUs in the store, which only has 9,000 square-feet of selling space. The former Delano's in the Richmond District has at least 12,000 square-feet of selling space, based on my estimate.

I would go stronger proportionately on the basic grocery category and item mix (essentials) in the hypothetical Richmond District Andronico's store than Mollie Stone's has done with its store in the Castro District (which has a good mix for the neighborhood) because the Richmond isn't as strong demographically for specialty-natural organic and fresh-prepared foods, a specialty of both Mollie Stone's and Andronico's, as the Castro District neighborhood is.

Were I directing strategy at Andronico's I would use the Castro Mollie Stone's store, along with an edited version of the Inner Sunset Andronico's supermarket, as the basis of my blueprint for the Richmond District Andronico's new unit. The Richmond District neighborhood also has a substantial Asian-American population (primarily Chinese but also others), so I would make sure to focus on the Asian foods category across all of the store's departments, particularly dry grocery, produce and fresh meat.

The hypothetical Richmond District Andronico's in my plan would be very much a basic grocery store - rather than a specialty grocery store with a selection of everyday products - with a major focus on fresh produce and meats, a lot of everyday food and grocery essentials, and a decent selection of specialty-natural-organic items, along with a small but very comprehensive ready-to-eat and ready-to-heat fresh-prepared foods offering, which historically is a category Andronico's has been a pioneer of in the Bay Area and even nationally in the U.S.

Timeline: Start the analysis now. Make a decision fast.

3. Conduct the category and pricing reviews next week. Make changes rapidly.

The new ownership needs to focus more than Andronico's has in the recent past on customizing the store's product mix to location. For example, with the opening last year of the Whole Foods Market store nearby in the Haigh-Ashbury District, Andronico's should beef-up its everyday grocery product offerings at its store in San Francisco's Inner Sunset District. Whole Foods doesn't carry everyday groceries - Tide, Charmin, Kelloggs, Coke and the like - and doing so is a competitive advantage Andronico's should better capitalize on in the store, which is its best-performing unit out of the six grocery markets.

The new ownership needs to look at each of the six stores in this way. Localize, localize, localize, when it comes to product categories and merchandise mix.

Timeline: Begin next week. Implement before year-end.

4. Go back to a weekly advertising circular. Add substance back.

One of the major cutbacks Andronico's made was to reduce its once very substantial weekly advertising circular to one that's a fraction of the former flyer. Its also reduced the promotional frequency of the circular from weekly to about one every three weeks. That won't cut it in the very competitive Bay Area markets where its stores are located.

Therefore, one of the first things I would do is bring back the substantial, weekly circular. However, I would put an equal focus on distributing digital, non-paper versions of the weekly ad - company website, Facebook, ect. - as I would paper versions, which are generally direct-mailed to households our included in Tuesday or Wednesday editions of local newspapers.

Timeline: Break the new, expanded ad for the Thanksgiving holiday sales week. That's about two weeks from today.

5. Hold a "Thanksgiving" community celebration at each store, thanking shoppers for sticking with Andronico's through tough times - and letting them know better days are coming soon.

Timeline: A week before the Thanksgiving Holiday. It is a "thanksgiving" celebration, after all.

This is just a start. But the five action items are good ones for the new ownership to put on the "to do" list, to be tackled starting Tuesday morning. I'll take a look at Andronico's, and my list, again before the end of the year.

Note: In my first column about Andronico's financial difficulties, on May 30, 2011, I strongly suggested to president Bill Andronico and his senior management team that they start using social media, particularly Facebook and Twitter, post-haste, as a low-cost, potentially high-impact way to talk to customers and shoppers specifically about what's going on with the company and generally as a way to communicate about and promote the stores.

Three weeks later, on June 20, Andronico's became active with a Facebook page, and over the last few weeks has been posting a variety of information on it on a regular basis - and doing a good job of it.

Additionally, on July 29 Andronico's set up and account on Twitter - @andronicos1 -  and has benn regularly posting tweets as a way to talk to customers and promote the stores.

I haven't (intentionally) has any direct communication with the members of the Andronico's senior management team, but the timing of the launch on Facebook and Twitter is definitely interesting, based on the playbook I've been suggesting for the grocer.

It's also something the senior management team should have been doing a long time ago. But, as a wise man (or it could have been women) once said ... Better to be late to the party than to have never attended. Social media offers a lot of potential for Andronico's if used regularly and in a creative way.

Related Stories

October 18, 2011: Look for Fresh & Easy Neighborhood Market to Grab Closing University Avenue Andronico's Supermarket in Berkeley CA ... If it Can

October 18, 2011: May-to-October at 82-Year-Old Andronico's Markets: New Owner, 2 Stores Closed ... Now What?

May 30, 2011: 82-Year-Old Grocer Andronico's Needs A Sugar Daddy of Sorts: 'The Insider' Suggest Tesco and its Fresh & Easy Neighborhood Market Might Fit the Bill

>Also see the following links - Mollie Stone's Markets, DeLano's IGA Markets - for additional related stories.

>You can read all of our 'The Insider' columns at this link -  The Insider - along with all past coverage about Andronico's here.

82-Year-Old Grocer Andronico's Needs A Sugar Daddy of Sorts: 'The Insider' Suggest Tesco and its Fresh & Easy Neighborhood Market Might Fit the Bill

The Insider - Heard on the Street

Last week the San Francisco Chronicle and a couple papers in nearby Berkeley published brief stories in which they reported eight-store, family-owned grocery chain Andronico’s Community Markets is having financial problems.

The reports were based on e-mails sent to the papers from suppliers/vendors the grocer owes money to on a past-due basis.

It's true the grocer is past-due to the vendors. But Andronico's financial struggles aren't a new development, as reading the reports might suggest. Instead, the grocer's financial difficulties began in earnest in late 2005-2006, becoming very serious in 2009, and remaining so today, due primarily to too much debt, increased competition and later the economic recession.

The 82-year-old upscale-oriented eight-store independent, headed by CEO Bill Andronico and founded in 1929 by his grandfather, Frank Andronico, moved on April 26, 2011 from its longtime headquarters located at 1109 Washington Avenue in Albany near Berkeley to a suite of offices above and next to its store (pictured above) on Irving Street in San Francisco’s Inner Sunset District.

The lease on the Albany digs, where Andronico's has been for about 25-years, was up May 1. The grocer didn't renew it, instead deciding wisely to save some cash by utilizing what is a fairly decent amount of office space at the San Francisco location, which is its best overall performing store out of the eight supermarkets it operates - four in Berkeley, and one unit each in San Francisco, Palo Alto, Los Altos and San Anselmo.

Palo Alto and Los Altos are in the South Bay Area, not far from San Jose. San Anselmo is in Marin County.

In the past Andronico's rented out some of the office space above and attached to the supermarket in San Francisco's Inner Sunset District.

The store is the only supermarket in the densely-populated neighborhood, which among other things is home to the University of California at San Francisco, a medical professions' campus which has a medical school, school of pharmacy, graduate school of health sciences, a major research hospital and additional research institutes.

Since I've known about Andronico's serious financial problems since 2009 - and its overall financial struggles since 2006 - I thought I would offer some details, analysis and commentary on the topic and issue for Fresh & Easy Buzz readers, many of whom are very familiar with Andronico's Community Markets, which until last summer was known simply as Andronico's Market, and before that as Andronico's Park & Shop.

The signs on the Andronico's stores still say Andronico's Market, even though the name of the chain and stores were changed to Andronico's Community Markets last summer. I'm told by a person in a position to know at Andronico's there are no current plans to put up new signs because of the expense of doing so.

First off, last week Bill Andronico responded to the San Francisco Chronicle with an e-mail, which was published May 26.

According to the May 6 item in the paper, Bill Andronico wrote in the e-mail that the grocer is looking to "recapitalize" and to "bring in lending/investor partners to replace the existing lender group and, additionally, provide growth capital." (You can read the rest of his e-mail as published in the Chronicle here.)

There's really nothing new about Andronico's trying to bring in new investors and raise capital. It brought in new money a decade ago, which is how from the late 1990's to the early 2000's  it built a new store and fresh foods facility in Emeryville (East Bay), two very upscale and expensive-to-construct stores in the East Bay Area cities of Danville and Walnut Creek, and how it financed the remodeling of the San Francisco store in 2008, along with doing a few other things.

Additionally, the grocer has been seriously trying to raise money from existing and new investors for at least six years that I'm aware of. It continues to try.

The first major sign Andronico's was having serious financial difficulties beyond those that surfaced in 2005-2006 was when in 2009 it let a number of category managers and buyers go at its then headquarters in Albany. The grocer had established a well-staffed professional category management system in the late 1990's, after having just a couple grocery buyers, a produce buyer, meat buyer and small prepared foods headquarters' staff prior to that.

Shortly after the cutbacks, Bill Andronico brought in former Whole Foods Market executive Justin Jackson as a consultant. Before joining Andronico's, Jackson was the vice president of purchasing for Whole Foods Market's Pacific Northwest Region

As part of his job, Jackson, who is executive vice president of Andronico's, recruited a new senior management team, largely comprised of ex-Whole Foods Market guys from the Pacific Northwest and Northern California divisions.

That team includes: John Clougher, Andronico's president and COO; Steve Epidendio, vice president operations; and Anthony Gilmore, who's titles are chief strategist and chief administrative officer. Bill Andronico remains CEO.

Clougher is the former president of Whole Foods' Pacific Northwest Region. Epidendio was the vice president of retail operations for Whole Foods Markets' Northern California division. He was previously a store manager for Andronico's for about nine years, from the late 1980's to early 1990's, later joining Whole Foods Market in Northern California.

Anthony Gilmore was recruited by Jackson and Clougher to Andronio's. Just prior he was vice president of corporate lifestyle, new concept development and corporate perishables at Pleasanton, California-based Safeway Stores, Inc., from 2007 until leaving in 2010, where among other things he worked on the development of its "The Market" small-format stores, which Safeway has stopped opening. There are two "The Market" stores - one in Long Beach, California, the other in San Jose. [See - October 15, 2010: Safeway Shelving 'The Market' Small Store Format; Won't Be Part of its Strategy Going Forward.]

Gilmore, who has 34-years experience in the food and grocery retailing business, most of it at Safeway and Whole Foods Market - and most of those years in Northern California - was president of Whole Foods' Northern California Region from 2004-2007. During his tenure in the position he was responsible for leading the development of numerous new Whole Foods locations in Northern California, many of which opened this year and last.

He went to work for Whole Foods in 1996 as the manager of its store in Palo Alto, California, where one of Andronico's eight stores is located. 

Gilmore later managed a store in Boulder, Colorado and was later promoted to regional vice president of the natural and organic-focused grocer’s Southwest Region, taking over as president of the division a short time after.

From 2002-2004 he was president of Whole Foods' Midwest division, getting promoted to president of the much larger Northern California Region in 2004.

Before joining Whole Foods Market in 1996, Gilmore spent 19-years working for Safeway Stores' in Northern California at the store-level, including as a store manager.

One of the casualties of the shake up at the grocery chain was the departure of Gary Wallner, who for 21-years was the face of Andronico's to the vendor-broker-supplier community. Wallner joined Andronico's in 1989 as a buyer-merchandiser, progressed to director of buying and merchandising, and then became vice president, which was the title he held when he left in May 2010.

In addition to Wallner, a couple other senior executives were let go in the reorganization.

One of the first things the new management team at Andronico's did last summer was to change the name of the chain, from Andronico's Market, to Andronico's Community Markets.

The change reflects the grocer's attempt to reposition the stores from their historic higher-end, upscale/specialty focus to a more community or neighborhood-oriented grocer. The stores still focus on specialty, natural, organic and fresh and fresh-prepared foods, along with offering basic groceries as they always have, but the group has been trying to tone down the upscale aspect in order to try to reach a broader customer base.

The recession that first hit in 2008 added to Andronico's financial problems, along with its debt load and the increased competition, because some its core-customers were forced to trade-down to grocery stores that offered lower prices. Although the Bay Area economy has improved somewhat since, as is often the case when  consumers start shopping around elsewhere, they continue doing it even when things get better economically, at best splitting their business among two or three food retailers.

The family-owned grocer has a history of name changes. For example, until the late 1980's-early 1990's the stores were called Andronico's Park & Shop Markets, then becoming Andronico's Market, the company name and store names until last summer.

Going Forward

First and foremost, Andronico's is looking for new investors - and money - plain and simple.

Additionally, the grocer has an experienced and seasoned senior management team.

Bill Andronico knows the Bay Area food and grocery retailing market extremely well, as does Gilmore and Epidendio, most particularly out of the others, although I question if Andronico's can afford as much high-priced talent as it has brought on in the senior management ranks.

For example, Bay Area competitor Mollie Stone's Markets (nine stores), which is privately-owned and very similar in format to Andronico's historic format positioning, has a much leaner management structure and team and is doing well despite the continued economic recession and competition from major chains and other independent grocers in the Bay Area. Mollie Stone's opened its ninth store in San Francisco's Castro District in March of this year, for example.

Andronico's has what in my analysis and opinion are three strong stores out of the eight it operates in the Bay Area. Those stores are its Inner Sunset supermarket in San Francisco and two stores in Berkeley - Shattuck Avenue and Telegraph Avenue - out of the four units in the Easy Bay Area city.

The other five stores are decent-to-marginal.

The two other Berkeley units, on University and Solano Avenues respectively, haven't been great performers for many years.

And Andronico's has and faces increased competition in Berkeley, where for decades it was the leading grocer with its four stores.

For example, Trader Joe's opened its first store in Berkeley this year. The TJ's store on University Avenue, not far from the Andronico's Communty Market unit on the same street, which leads to the world renown University of California at Berkeley campus, has taken a significant bite out of sales at the Andronico's store.

Additionally, local independent Berkeley Bowl opened a new store in the city last year. That and its existing store - the grocer is super-popular and focuses on fresh foods (particularly produce) as well as natural, organic and specialty products - have also hurt Andronico's considerably, as has the Whole Foods store (near the Telegraph Avenue Andronico's), which has come on stronger over the last few years, compared to its past performance.

Even though it's still a strong store, the Inner Sunset District Andronico's unit got some new competition earlier this year when Whole Foods Market opened a store a five minute drive away, at Haight and Stanyon streets in San Francisco's Haight-Ashbury District.

The Whole Foods' store went into a vacant building that for decades was home to a Cala Foods market, which was closed a number of years ago by Kroger Co., its owner. Ironically, the Haight and Stanyon Whole Foods store was one of the many locations acquired by Gilmore during his tenure as president of Whole Foods Market's Northern California division.

During the years the former Cala Foods building and now Whole Foods store was vacant, the Andronico's unit in the Inner Sunset gained added business and sales because the store was the nearest full-service supermarket for many people in the Haight-Ashbury neighborhood.

The Palo Alto, Los Altos and San Anselmo Andronico's stores are what I call decent-to-marginal performers, and are subject to becoming worse-performing with increased competition, which is coming everywhere in the Bay Area, with Trader Joe's, Sprouts Farmers Market, Whole Foods Market, Sunflower Farmers Market, Target and Tesco's Fresh & Easy Neighborhood Market all opening numerous new stores, along with continuing new store growth from Safeway and others, in the region.

Walmart also plans to start opening some of its new smaller-format Walmart Market and Walmart Express stores in the Bay Area, beginning later this year or in early 2012.

So what's Andronico's to do?

Option one is to bring in new investors with cash - this the grocer's preferred option because it desires to stay independent, according to my good sources - and not sell the 82-year-old chain bearing the family name, although investors do own a piece of it now.

When founder Frank Andronico stepped down, Bill Andronico's father took over. And when his Dad retired, Andronico, who's a graduate of the University of Southern California's Food and Grocery Industry Management Program and has worked in the family business for about three decades, became CEO. That's a serious and important legacy to uphold and maintain.

In its 82-years Andronico's has also been a innovator, no only in the Bay Area but nationally.

For example, it was one of the first grocers in the U.S. to offer fresh-prepared foods made in-store by chefs.

Andronico's was also one of, if not the first, grocers to install multi-shelved refrigerated produce cases in its stores. In fact, when it first did so many decades ago, such produce cases didn't exist, so the grocer had them custom made.

The family-owned chain also is a pioneer in specialty, gourmet, natural and organic food and grocery product merchandising and promotion. For example, long before Whole Foods Market opened its first store in the Bay Area in the 1980's, Andronico's was already firmly established as a leader in the then just-starting-to-emerge categories in the United States.

Andronico's was among the first wave of supermarkets in the U.S. that provided significant space on its shelves to natural and organic product brands like Lundberg (rice), Celestial Seasonings (tea), Newman's Own and many others, as well as to specialty and gourmet foods from abroad and at home.

Andronico's was also the first grocer I'm aware of that completely replaced the standard metal grocery shelving in its stores with wire Metro shelving, something that not long after it did so became popular among grocers in the Bay Area and throughout the U.S., thanks in part to Bay Area-based grocery store designer John Sutti, who built his considerable reputation in large part on the innovative store design work he did in partnership with the family in their stores.

A story: When Whole Foods Market co-CEO Walter Robb went to work for the then fledgling grocery chain in the early 1990's, his first task was to spearhead the renovation of a vacant building on Miller Avenue in Mill Valley, California that he previously had the lease on and had planned to turn into his own grocery store. But failing to raise the cash, Robb instead did a deal with Whole Foods' founder (and the other co-CEO) John Mackey, which was that in return for a little money and a job as the store's planner and then manager he would sell the lease to Whole Foods so the location could become the grocer's first store in Mill Valley.

It was a good decision for Whole Foods, Robb and Mackey. The 14,000 square-foot store has among the highest sales-per-square-foot of any Whole Foods unit - averaging about $550,000 a week in sales. Robb later became president of Whole Foods' Northern California Region. The Northern California Region has become a top-performer for Whole Foods. Mackey and Robb, who later became co-president of Whole Foods, went on to have a great working relationship, so much so that Mackey and the grocer's board named Robb co-CEO last year.

Robb (and Whole Foods) hired John Sutti and his firm to do the design work for the Miller Avenue store, which is one of two Whole Foods Market stores in the small town of Mill Valley (about 10,000 residents), in large part because Robb was impressed with the work Sutti did for Andronico's, who Robb called on for a couple years prior to that as a sales consultant for a number of Bay Area natural and organic products' companies. He also got had gotten to know Bill Andronico and the Andronico's stores fairly well prior to that as the manager of a natural foods store in Marin County.

Jean Greenfield, who for a number of years in the 1990's worked as Whole Foods' Northern California regional buyer out of a tiny converted closet, accessible by climbing a latter, atop a small loft in the backroom of the Miller Avenue store, later went to work for Sutti's retail store design firm. Whole Foods later established its Northern California headquarters in Emeryville, where it is today.

Bottom Lines(s)

Andronio's has been working hard on option one, bringing in new investors, for nearly one year now, since the new senior management team took over. So far - no new investors or cash.

This brings us to what I call option two, which would be an outright acquisition or major investment - controlling or significant minority interest - in Andronico's.

I see two grocery chains this might make sense for - Tesco's Fresh & Easy Neighborhood Market and Bristol Farms - both of which are headquartered in Southern California and have stores in Northern California's Bay Area.

Bristol Farms and Endeavour

In October 2010 members of Bristol Farms' senior management team, including CEO Kevin Davis, along with investment firm Endeavour Capital bought the upscale 14-store chain from its then owner, Supervalue, Inc. Bristol Farms has one store in Northern California, in San Francisco, and is scouting the region, with a focus on the Bay Area, for potential future stores. [See - October 29, 2011: CEO Kevin Davis, Execs and Investment Firm Buy Upscale Southern California Bristol Farms Chain From Supervalu, Inc.]

Andronico's and Bristol Farms are very similar chains, even though the new team is trying to position Andronico's Community Markets more into the community or neighborhood market space - which to date in my analysis and opinion hasn't and isn't working.

Therefore, I see some definite synergies (and mutual opportunities) between the two grocers in terms of Bristol Farms/Endeavour Capital taking a look at Andronico's, as either an investment opportunity or acquisition.

Both grocers are also supplied by wholesaler Unified Grocers, which doesn't want to lose the Andronico's business.

Will Bristol Farms take a look? I would if at the helm. Would Andronico's be interested? One would think so.

One problem though: Andronico's is union. Bristol Farms is not. That means a deal of any kind is going to involve the United Food & Commercial Workers (UFCW) union on some level, which is something Bristol Farms would like to avoid.

Tesco and Fresh & Easy

The other opportunity I find most interesting is Tesco and its Fresh & Easy chain.

Andronico's offers the following to Tesco and its Fresh & Easy Neighborhood Market chain, which has opened 11 stores in Northern Californa (nine units in the Bay Area) so far this year, and opens its first store in San Francisco June 22, followed by its second unit in the city on August 24.

>Talent: Bill Andronico and Anthony Gilmore (and maybe one additional member of the senior management team), both know as much about the Northern California market region as most grocers operating in it do. That would be a big plus for Tesco and Fresh & Easy, which as a dearth of senior executives with experience in Northern California or elsewhere in the U.S.

>Fresh Foods: Andronico's has a, history of having among the finest fresh produce, meat and fresh-prepared foods programs not only in Northern California but in the U.S. Tesco's Fresh & Easy could benefit greatly from this expertise and experience.

>Store Locations: Tesco could utilize all eight of Andronico's stores.

What I would do as Tesco:

>Get rid of the Andronico's Community Markets name and go back to Andronico's Market, keeping the San Francisco, Shattuck Avenue-Berkeley and Telegraph Avenue-Berkeley stores under the Andronico's Market banner and format. Use it as the basis of a possible upscale chain down the road. Invest some money in the two Berkeley stores, although it need not be much as they are in pretty good shape.

>Change the University Avenue and Solano Avenue stores in Berkeley to Fresh & Easy Nieghborhood Market stores. Both locatons are about the same size as Fresh & Easy markets - 10,000-12,000 square-feet - and geographically fit the format best of the four.

>Also convert the San Anselmo, Palo Alto and Los Altos locations to Fresh & Easy stores.

Tesco's Fresh & Easy has no stores in Berkeley, which is one of the better cities in the Bay Area for the format.

Tesco's Fresh & Easy also doesn't yet have any stores in Marin County (San Anselmo), Palo Alto or Los Altos, all desirable locations.

Andronico's fresh-prepared foods program and the high quality of the products it produces could be helpful to United Kingdom-based Tesco overall, in the UK where it's a major player but far from the best - Marks & Spencer, Waitrose and Sainsbury's are better in my view - in ready-to-eat and ready-to-heat prepared foods' merchandising and globally in some of its other operations.

Lastly, Andronico's specialty-oriented expertise and historic upscale format might also be a benefit to Tesco in the UK if it ever decides to create an upscale format and position it against the nation's leading upscale-specialty-natural-organic grocery chain,Waitrose, and Whole Foods Market, which is opening additional stores there.

Union redux: Like Bristol Farms, Tesco's Fresh & Easy is a non-union food and grocery retailing chain. And, as readers of Fresh & Easy Buzz are well aware because we cover the issue more extensively and more in-depth than any other publication does, the United Food & Commercial Workers Union (UFCW) has been trying to unionize Fresh & Easy Neighborhood Market since early 2008. Therefore, the fact Andronico's is a union grocer could pose a serious barrier to Tesco making any sort of  investment in Andronico's - even buying it - should the UK-based global retailing giant-come-to-America consider my scenario.

The jury is still out on whether the Fresh & Easy format will succeed. Right now in my analysis the majority of the jury is voting no. But Philip Clarke and company might still be able still change that verdict, although the clock is ticking very fast.

Were I an advisor to Tesco CEO Philip Clarke and his deputy CEO Tim Mason (and I'm not and don't seek such a position), who's also CEO of El Segundo, California-based Fresh & Easy Neighborhood Market, I would tell then to call Bill Andronico post-haste and set up a meeting with him, Anthony Gilmore and the CFO, to start. The investment in time is well worth the potential outcome.

And, of course, Andronico's could benefit - starting with surviving - from an investment or more from Tesco. As such, were I advising Bill Andronico (and I don't), I would tell him not to wait to hear from Tesco CEO Clarke or his deputy Tim Mason. Instead, I'd suggest he reach out and ask for a meeting. Perhaps he already has - Philip Clarke was in San Francisco late last week, leaving the airport on Saturday to return to London?

if Andronico's had hired that social media director it's been advertising for on its website for nearly a year - I first saw the ad on the website in August 2011 and noticed Andronico's removed it about one week ago - it could communicate with Tesco on Facebook and Twitter, two important social media sites Andronico's has zero-presence on. See its Facebook site, for example, assuming it's actually the grocers.

If I were being paid the big bucks to turn a grocery chain like Andronico's around, one of the first things I would do is create a significant presence on Facebook, Twitter (Andronico's has neither that I can find) and a couple other social media sites. You can hire a talented college intern to help for near-nothing, for example.

The sites are free but potentially powerful. They also allow a grocer to address customers and potential customers directly and instantly - no need to send e-mails to third parties like local newspapers, which is so 20th Century.

Bill Andronico should call Mollie Stone's co-owner Dave Bennett, who understands the potential power of social media, and chat a bit. Then he should ask his numerous senior executives what they're waiting for on the social media front? After all, 82-year-old Andronico's needs and deserves solutions rooted in the 21rst Century, not the 20th.

A Sugar Daddy of sorts isn't needed for social media and many other low-to-no-cost operations, merchandising, marketing and promotional programs that are needed but I'm not seeing being implemented at Andronico's, which makes me wonder - are things that close to the end financially? Or is it time for another new senior management team? Or both?

It would be a shame to lose the 82-year-old chain completely. So time and much better effort from the senior management team seems to me to be of the essence.

'Walmart To Go' - Walmart Stores' Launches Test of Grocery Home Delivery Service Today in San Jose, California

The Insider - Heard on the Street

As the once popular song asked - "Do you know the way to San Jose?"

For mega-retailer Walmart Stores, Inc., which wants to sell more groceries than it's currently doing in the San Francisco/San Jose Bay Area region, and today launched an online-based grocery home delivery service in San Jose, California, the answer is - hopefully.

In my April 7, 2011 column - A Walmart Grocery Home Delivery Service in San Jose, California Wouldn't Likely Be Much to Write Home About - I wrote about Walmart's probable plan to test an online ordering-based fresh food and grocery home delivery service in San Jose, California. The story was first reported by Bloomberg News (here).

Walmart launched that grocery home delivery service test - which it's named "Walmart To Go" - today in San Jose, beginning with a website section attached to its Walmart.com site, where shoppers in the neighborhoods where the Arkansas-based retailer is conducting what it has announced is a "limited test," can order a selection of fresh food and grocery items and have the products delivered to their homes.

You can view the website, Walmart.com/togo, here. Click here for details on the website about "Walmart To Go."

Walmart is offering a limited assortment of fresh food and grocery items on its grocery home delivery site (which is in beta test mode at present) across the basic grocery store categories, ranging from fresh produce, meat, seafood and other perishables; to packaged food and groceries, health and beauty/body care, pet food and supplies, baby food; and household supplies like paper goods, cleaning products and relate non-foods items.

There's also a section on the site for promotional items (Rollbacks), offered at temporarily reduced prices.

Shoppers can also have their drug prescriptions filled using "Walmart To Go," and have the medications delivered to their homes, along with their groceries.

Walmart is currently charging $5 and up for home delivery. According to the website, the current minimum purchase amount required to get a grocery order delivered is $49.00.

As part of the launch, "Walmart To Go" is offering an E-Voucher that shoppers can use to get their first order delivered free of charge.

In order to find out if "Walmart To Go" delivers to their neighborhood, potential online shoppers in San Jose need to put their zip code into a section on the website. If the service is available in their neighborhood, it will let the user know.

I typed in a few different zip codes for various parts of San Jose. The site indicated "Walmart To Go" delivered to about 40% of the zip codes I  punched in. But I didn't do a random sample. Nor did I try all of the available zip codes for the city.

The prices on the assortment of items currently offered on "Walmart To Go" are about in line with what Walmart charges at its hand full of stores in the San Jose area.

The everyday retail price-points for most items, particularly basics like milk and eggs and popular items like 12-packs of Coke, range from being slightly lower to about the same, and in a few cases I noticed higher, than those everyday prices the two leading supermarket chains in the market region - Safeway Stores, Inc. and Save Mart-owned Lucky Supermarkets - charge for like and similar items in their respective stores.

For example, "Walmart to Go" is selling a dozen of its private brand large-size eggs for $1.68, which is about the same as at the two chains mentioned above do for their best-priced private label versions.

Other grocers and discount format stores in the area sell similar quality eggs for less than $1.68, while other grocers retail the item for more than $1.68.

Eggs, particularly large-size, are also regularly advertised by grocer's in the region, just as is the case in other parts of the country.

As an example, Save Mart has its Sunnyside Farms private brand large eggs on sale this week at its Save Mart and Lucky banner supermarkets at buy-one-get-on-free (BOGO). At that promotional price, the cost per-dozen comes out lower than $1.68. But it is a promotional rather than an everyday price.

Walmart's private label fluid milk is selling for $2.41 on the "Walmart To Go" site. That's considerably lower, for example, than what Safeway is currently retailing its Dairy Glen (the lowest-priced of its private label fluid milk brands) fluid milk for. As of today, Safeway is selling a gallon of the Dairy Glen milk for $2.89, and to get that price shoppers are required to purchase a minimum of two gallons.

Other retailers in the San Jose area sell similar gallons of milk for less than $2.89. However, at $2.41, the "Walmart To Go" price-point is among the lowest I've seen when doing price checks in the area.

Lastly, Coca Cola, in the popular 12-pack cans size (Classic, Diet, ect.), sells for $4.38 on the "Walmart to Go" site. That price is about the same as what the two chains and many other grocery stores in the region offer the popular soft drink variety for on an everyday price basis.

Like eggs, 12-packs of Coke are an item promoted and advertised regularly by grocers and other format retail stores. In fact, it's hard not to find one or more retailers in any given market in the U.S. that aren't advertising 12-packs of Coke at least two, and often three, weeks out of a month, particularly in spring and summer.

For example, Raley's Supermarkets, which operates stores under the Raley's and Nob Hill Foods banners in and around the San Jose region, is currently promoting the Coke SKU in its weekly advertising circular for $2.25, based on a minimum customer purchase of four 12-packs.

Eggs, fluid milk and Coca-Cola are among the ten top-selling products or items in U.S. grocery stores.

Safeway Stores is the market share leader in the San Francisco Bay Area, followed by Save Mart and Raley's.

Safeway Store's operates the only major online ordering-based grocery home delivery service in the San Francisco Bay Area. Safeway's delivery area includes San Jose.

Therefore, at least in the parts of San Jose where Walmart is delivering groceries to residences, Safeway will have a new competitor - "Walmart To Go" - although at present the assortment of products Walmart has available to online shoppers on the website doesn't come close to matching the assortment Safeway offers on Safeway.com. But Walmart can add items to its selection easily, which I suspect it will. It's just launched the service as a "limited test," after all.

A few things about "Walmart To Go ... before I go.

First, I like the name. It's short. It's descriptive. And it fits well with Walmart's emerging multi-channel (brick-and-mortar and online), multi- (brick-and-mortar) format food and grocery retailing strategy.

Under the new strategy, there's the supercenters -  the big guys, and the lead horse of the brick-and-mortar store pack.

Next is "Walmart Market", the name Walmart is changing all of its Neighborhood Market supermarkets to, as well as what it will call its new grocery markets in the about 30,000-60,000 square-foot range.

Lastly, there's the smaller guy, "Walmart Express," the name of its new convenience format grocery stores, which will be about 15,000 square-feet.

I think "Walmart To Go," as a name, fits nicely in that mix.

[There's also "Walmart on Campus," the retailer's tiny (about 3,000 square-foot) convenience store on the University of Arkansas campus. But it's really a one-store test for now. So I don't include it yet in the overall multi-channel/multi-format strategy.]

In terms of my lack of enthusiasm for a Walmart home grocery delivery service in San Jose - and it's limited to that region, by the way, as I look at each market region as unique and see some strong potential for such a service by Walmart in other parts of the country - as expressed in my April 7, column, it's still my analysis that from a sales standpoint, at least in the near-to-medium term, a Walmart grocery home delivery service in San Jose, and in most if not all parts of the Bay Area, isn't going to be much to write home about.

However, I like that Walmart is testing it.

And they are testing it in a smart way - just like they did with the "marketside by Walmart" small-format stores in metro Phoenix, Arizona (although I would have tested the stores in the San Francisco Bay Area and in urban parts of Southern California, for example, as I've said before) - which is to start with a very limited test, in this case the city of San Jose, and then see what happens. The investment is low, particularly for Walmart, and as such if the retailer decides not to go forward and expand the service, the loss will be moderate.

I also think in a longer-term sense a grocery home delivery service operated in certain parts of the U.S. could fit well within what is a growing and emerging online business at Walmart Stores.

Walmart's ASDA chain in the United Kingdom has a grocery home delivery service, so the concept isn't completely new to the chain. In fact, Walmart has transferred one or more executives from the UK operation to work on "Walmart To Go." The U.S. and the UK, where online-based grocery home delivery is much more popular, are very different animals though when it comes to the business.

The retailer is planning some interesting new developments online, including experimenting with using social media to help it improve the performance of its online shopping offering in a much more aggressive way than it is currently doing. If things go according to its plans, Walmart Stores will become a much more dominant online retailing force in the U.S. over the next couple years than it is at present.

On April 18, Walmart announced it has signed a definitive agreement to acquire Mountain View, California-based social media company Kosmix, which "has developed a social media technology platform that filters and organizes content in social networks to connect people with real-time information that matters to them," according to its two founders, Venky Harinarayan and Anand Rajaraman.

The two founders, whose first company, Junglee, was acquired by Amazon.com in 1998, have been involved in the social media space for a number of years, focusing on ways to better integrate social media with online shopping.

Harinarayan and Rajaramen, along with members of the team they assembled at Kosmix, are going to work for Walmart and will be part of a newly formed research and development operation the retailer has created in Silicon Valley, called @WalmartLabs.

Walmart says "it plans to expand the @WalmartLabs team and expects the new group will create technologies and businesses around social and mobile commerce that will support Walmart’s global multi-channel strategy, which integrates the shopping experience between bricks and mortar stores and e-commerce."

The @WalmartLabs operation is part of the retailer's Walmart.com division, which is based in Brisbane, a small city next door to San Francisco.

Mountain View, where Kosmix was based, is a 30-45 minute drive from Brisbane and less than 10 miles from San Jose. San Jose is under an hour's drive from the Walmart.com offices in Brisbane, depending on traffic conditions, of course.

I included the travelogue paragraph above in order to highlight the geographical - and human resource - synergies behind Walmart's launching the grocery home delivery service in San Jose, acquiring the Mountain View-based social media-based company, and setting up @WalmartLabs in Silicon Valley, which San Jose and Mountain View are part of.

From the human resource and talent angle, The San Jose -to- San Francisco geographical region is home to, among other top-flight social media companies (and start ups), Facebook (Palo Alto) and Twitter (San Francisco). It also has the human resource talent and infrastructure Walmart needs to become a leader in online shopping and in using social media to help it achieve that objective.

Walmart should be given credit for making the synergistic  moves. (I just don't think, in my experience and analysis, "Walmart To Go" will be very popular in San Jose from a sales perspective. But I could be dead wrong)

In addition to creating an e-commerce/social media research and development center, @WalmartLabs, putting the operation in Silicon Valley gives the retailer an added presence, along with having its Walmart.com facility there, in the Bay Area, where it plans to do all it can to become a serious player in food and grocery retailing over the next few years. And testing "Walmart To Go' in nearby San Jose does allow for the operation to be nearby both Walmart.com and the new @WalmartLabs start up.

According to my sources, the retailer is also looking at possibly testing "Walmart To Go" in at least one other part of the country, and perhaps even two regions. But for the immediate-term, my sources tell me, the focus will be on the limited test in San Jose, where Walmart wants to "find a way" to sell more groceries, and hopes one of those ways is through "Walmart To Go."

I will have more to say about "Walmart To Go" in a upcoming column, including hopefully some evaluations by one or two people who've tried the online ordering and home delivery service. Stay tuned.

- The Insider

Read 'The Insider's' past columns here.