Another Planned New Location For Tesco's Fresh & Easy in San Francisco Bay Area: Market to Be Retail Anchor of New Development in Hercules, CA

.The artist's rendering above is of the Market Town portion of the New Town Center planned development in Hercules, California. If you look closely you can see the Fresh & Easy logo on the building in the back, far right, in the foreground of the multi-story yellow building framing the Fresh & Easy retail space. Look at the water tower in the drawing. You can see the Fresh & Easy logo adorning it as well. If you double click on the drawing you can enlarge it and view it better. [Source: Artist's rendering from Collier International Commercial Real Estate Consultants, City of Hercules Web site.]

Upcoming New Markets Special Report: Northern California - San Francisco Bay Area

Tesco's Fresh & Easy Neighborhood Market is planning to locate one of its Fresh & Easy small-format, combination grocery and fresh foods markets in a major planned new mixed-use development called Market Town at New Town Center, which is near the waterfront in the Northern California East Bay Area city of Hercules, which is located in Contra Costa County.

The Fresh & Easy store will be the food and grocery retail anchor of the Market Town project, which is the first phase of the larger, more comprehensive "new town-style" New Town Center development.

Market Town is a mixed-use project centered around an attractively designed and landscaped town square, surrounding by the Fresh & Easy store space and other retail spaces, commercial office buildings, and residential units. The design is inspired by what's often referred to by urban designers as "new urbanism."

According to our commercial real estate sources, the City of Hercules and a marketing brochure being distributed by the Colliers International Commercial Real Estate Consultants firm, which is marketing the New Town Center development and working with Tesco's Fresh & Easy Neighborhood Market on its store space, the Fresh & Easy market will have a prime retail storefront, right next to a yet to be named non-grocery retailer, right off of the town square, which is the centerpiece of the pedestrian-friendly plaza or courtyard that is the centerpiece of the first phase Market Town at New Town Center design.

Colliers International has offices in Northern California in the cities of Fairfield, Gilroy, Oakland, Pleasanton, San Francisco Peninsula, Redwood City, San Jose, Santa Rosa, Walnut Creek (all in the Bay Area) and Stockton (Northern San Joaquin Valley). [Related story - April 13, 2009: Despite Postponing its Northern California Launch Again Earlier This Year Tesco's Fresh & Easy Planning Third San Francisco Store; First Stockton Unit.]

[You can view and download the complete New Town Center development design plans from the city of Hercules Web site here.]

Hercules isn't one of the 18 planned San Francisco Bay Area Fresh & Easy store locations Tesco has announced or confirmed to date. It's also not one of the numerous planned Bay Area store sites Fresh & Easy Buzz has uncovered and reported on to date.

Therefore, the Hercules, California planned Fresh & Easy store in the Market Town at New Town Center development is another new unit Tesco has on tap for Northern California's San Francisco Bay Area, even though the retailer has postponed its launch into the region. [See our recent April 13, 2008 story here: Despite Postponing its Northern California Launch Again Earlier This Year Tesco's Fresh & Easy Planning Third San Francisco Store; First Stockton Unit. Note the links at the bottom of the story as well.]

The Market Town at New Town Center planned development sits on a site near the city's waterfront that currently serves as a Park-N-Ride lot for various forms of public transportation services, including BART (Bay Area Rapid Transit), the electric train system that links most parts of the nine-county Bay Area with San Francisco. People park their cars at the site and then commute to work or elsewhere using BART and other forms public transportation.

Locating grocery stores in such "new town-design" developments isn't anything new for United Kingdom-based Tesco, which owns and operates El Segundo, (Southern) California-based Fresh & Easy Neighborhood Market. The retailer, which is the third-largest in the world after number one Wal-Mart Stores, Inc. and number two Carrefour, which is headquartered in France, has built and opened Tesco stores in the United Kingdom in numerous such developments.

The fact that construction hasn't yet started on the development and isn't expected to for quite some time, perhaps not until 2010, according to a commercial real estate source, is actually a good thing for Fresh & Easy in Northern California at this point in time, since it has postponed its launch into the region, doesn't have a Northern California distribution center yet completed, and has a number of store sites in the Bay Area that it has now leased for well over a year, but has not yet remodeled or built.

Those sites include a vacant, former Albertsons supermarket on Bird Avenue in San Jose and a vacant, former Vallerga's Market (a multi-store independent based in Napa) supermarket in Napa.

We first reported that Tesco had acquired the San Jose and Napa sites for Fresh & Easy stores in January, 2008, 15 months ago. The Bird Avenue location in San Jose has had only minimal work done on it to date, mostly a new roof and a couple other things. Work on the vacant building in Napa has yet to begin, as of March, when we last received a report on the status of the site from one of our correspondents in the California wine country city.

It's our analysis that locating a Fresh & Easy market in the Market Town at New Town Center development could be a winner for Tesco's Fresh & Easy Neighborhood Market. It's good niche store location strategy, going where a grocery store is needed in a new development rather than doing what it has done a bit too often in the past, which is to grab up a vacant supermarket or former drug store building in some cases just because it is there. Perhaps the store location learning curve is tightening at Fresh & Easy after having a couple years experience in California, Nevada and Arizona under its belt?

And If the planned mixed-use development eventually fills up with commercial and office workers, which is likely to be the case, that could be a very good captive audience for Tesco Fresh & Easy's fresh, prepared foods offerings.

Additionally, if a significant number of people move into residential buildings in the development that would offer Fresh & Easy, as the only grocery market in the center, an additional captive audience of food and grocery shoppers, particularly if the development retains its focus on pedestrian street life, as is depicted in the project designs and in the Colliers International marketing brochure, as well as in the development plans for the center.

Hercules and the surrounding Contra Costa County cities of Pinole and Crockett are part of a fairly fast-growing region of the East Bay Area where housing has been historically (and still is largely) less expensive (still higher than most regions of the U.S.) than it is in most regions of the Bay Area. It's also an area that has some of the last remaining industrial and semi-industrial types of businesses in the San Francisco Bay Area, which is home to about seven million residents.

Of course, the larger question is: When will Tesco's Fresh & Easy open its first store in the San Francisco Bay Area -- and in the nearby Northern San Joaquin Valley and the Sacramento-Vacaville region? We might have an answer or two to that question soon. Stay tuned.

[Fresh & Easy Buzz Editor's Note: Fresh & Easy Buzz thanks the San Francisco Bay Area-based Blog Waterfront Watch [www.waterfrontwatch.org] for providing helpful research and analytical assistance for this story.]

Selected Related Stories and Posts:

>April 17, 2009: Another Planned New Location For Tesco's Fresh & Easy in San Francisco Bay Area: Market to Be Retail Anchor of Planned New Development in Hercules

>April 13, 2009: Despite Postponing its Northern California Launch Again Earlier This Year Tesco's Fresh & Easy Planning Third San Francisco Store; First Stockton Unit.

>March 31, 2009: Despite Having Postponed its Northern California Launch Indefinitely; Tesco's Fresh & Easy Planning Third Store in Modesto, California.

>November 12, 2008: Analysis: Hard Times at Fresh & Easy - Northern California Expansion to Be Postponed or Shelved Do to Economy; But its Only a Symptom Not the Cause

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

>July 29, 2008: Tesco's Fresh & Easy and San Francisco's Tenderloin Redux: Upcoming Developments Offer First Mover Opportunity For Fresh & Easy or Competitors

>April 13, 2008: San Francisco: Cool Bay Breezes, A City Full of History, Cable Cars--And A 'Fresh & Easy' State of Mind

>November 20, 2008: Analysis & Commentary: Fresh & Easy Neighborhood Market and Tesco's Lowered Expectations

>April 18, 2009: Competitor News: Wal-Mart Close to Clearing First Major Hurdle For its 1.1 Million Square Foot Regional Distribution Center in Merced, California

>February 11, 2008: Tesco's Fresh & Easy Isn't the Only Food & Grocery Retailer With its Eyes on Bakersfield: Wal-Mart's Bakersfield Push and Central Valley, CA Strategy

>April 14, 2008: New Multi-Supercenter and Multi-Format Strategies Are Showing Wal-Mart to Be A More Agile Grocery Retailer in the U.S.

>March 19, 2009: Another Tesco Fresh & Easy Future Market City Bans the (Plastic) Bag: No Plastic Carrier Bags In Palo Alto, CA Supermarkets Starting September 18th

[Follow Fresh & Easy Buzz around on Twitter.com at www.twitter.com/freshneasybuzz.]

No Recession Blues For 'Beautifull:' Start Up Fresh, Prepared Foods Retailer 'Beautifull' Opens First Store in Bay Area; Says More Stores To Come

Northern California Market Region Report: Fresh, Prepared Foods Retailing

Tesco has postponed the Northern California market region launch of its Fresh & Easy small-format (10,000 -to- 13,000 square-foot) grocery and fresh, prepared foods markets indefinitely, saying the primary reason for doing so is the poor economy, as we've previously reported in Fresh & Easy Buzz.

But recession or not, the current state of the economy isn't stopping a San Francisco Bay Area fresh, prepared foods retail start up called "Beautifull" from opening the first store (pictured at top) of what it says will be numerous fresh, prepared foods markets it plans to open throughout Northern California's Bay Area region.

"Beautifull" is headquartered in the East Bay Area city of Emeryville, which is located just over the Bay Bridge from San Francisco. The fresh foods company has a central kitchen facility in South San Francisco, which is where all of the ready-to-eat and ready-to-heat fresh, prepared foods are made.

The first "Beautifull" store, or what the company calls a "fresh foodspace," opened on April 29 in San Francisco's Laurel Village Shopping District (at 3401 California Street @ Laurel) in a building that most recently housed a Cuban-themed cafe and for many years before that was home to a popular neighborhood diner called Ms. Brown's Feed Bag.

The building's interior space, which is no more than 5,000 square-feet in size, was gutted and turned into the "Beautifull" fresh foodspace" by noted restaurant and retail space designer Cass Calder Smith, who has designed some of San Francisco's most popular and trendy restaurants, including Restaurant Lulu and Terzo.

The "Beautifull" (note the second l in "Beautifull," as in a "full" tummy no doubt) format is devoted strictly to fresh, prepared foods of all kinds, ranging from comfort foods like macaroni and cheese, roast beef and meatloaf to more upscale offerings, along with a complete selection of ethnic entrees and side dishes, ranging from the basic to the exotic.

A sampling of the prepared foods items in the store includes: (entrees) ready-to-heat Prime Ribs of Beef, Spaghetti & Meatballs, Southwestern Style and Leek & Wild Mushroom Corn Frittata's, Thai Chicken Curry, Grilled Salmon, and Moroccan Chicken, for example, along with dozens of side dishes including various potato and rice-based sides, vegetable side dishes and much more.

The format also features ready-to-eat desserts of all types, along with numerous beverage offerings. [You can view the various prepared foods' offerings at the company's Web site here.

The ready-to-eat and ready-to-heat fresh, prepared foods at "Beautifull" are merchandised tray-pack-style in self-service refrigerated display fixtures with shelving (pictured above) and in bulk, in deli-style full-service refrigerated display cases staffed by employees.

The format's main focus is for take-out purchases. But customers can also eat in the store in a small dining area and outside at tables. Additionally, shoppers can place orders at the store for home or office delivery at a later time if they desire.

All of the fresh, prepared food items sold in the store are free of preservatives, added sugars, colorings, steroids and hormones, according to the fresh foods company. There are also organic offerings included in the entree and side dish product mix.

"Beautiful" says the three key attributes it's focusing on with its fresh, prepared foods are: "tasty, healthy and convenient." The retailer's tagline in fact is: "Real, Good Food."

And now that the company has opened its first store, it can bet shoppers will let it know "Real, Darn Fast" if it's meeting those three important criteria -- "tasty, healthy and convenient."

Staffed with experience, funded by major VC firms

"Beautifull" is the brainchild of serial entrepreneur Eric Greenberg. And the fresh, prepared foods company is far from a mom & pop operation.

Greenberg has put together a senior management team, board of directors and advisory board comprised of people with extensive experience in the retail food industry, culinary world, nutritional field, business development and finance.

Additionally, "Beautifull" is backed by two of Silicon Valley's leading and pioneering venture capital firms -- Mohr Davidow Ventures and Wilson Sonsini Goodrich & Rosati.

"Beautifull's" eclectic group of advisers includes: Larry Sonsini, the chairman and named partner of the Silicon Valley law firm and venture capital firm Wilson Sonsini Goodrich & Rosati; famous physician and food-nutrition guru Dean Ornish, MD; Brain Cornell, a former executive vice president and chief marketing officer for Safeway Stores, Inc. and the current CEO of the Michaels Stores, Inc. retail chain; noted San Francisco chef and caterer Paula LeDuc; and Ben F. Barnes, the former Speaker of the House for the Texas House of Representatives, former Lt. Governor of Texas, and former assistant to President Lyndon B. Johnson in the 1960's. Today Ben Barnes is a consultant and investor. [Click here for a complete list of the company's board members and advisers.]

The fresh, prepared foods company's senior management team includes a group of people with extensive experience in food retailing-merchandising, business operations, the culinary trades, finance and related sectors.

In addition to Eric Greenberg, "Beautifull's" founder, chairman and CEO, who has started a number of companies in the high-tech space, the company's president and chief operating officer is Matthew Janopaul, who has extensive experience in operations and finance.

John Mitchell, a professional chef and a former director of operations-food service for natural foods grocery chain Whole Foods Market, is "Beautifull's" senior vice president for product development & merchandising

In charge of "Beautifull's" retail operations as senior vice president for retail operations is Michael O’Keefe. O' Keefe has extensive retail operations experience in the restaurant-food service industry and most recently owned and operated his own consulting firm, Reality Check Consulting, where he worked with restaurant and food service companies in the retail operations, finance and related segments of their businesses.

On the culinary side of the business, veteran chef and food product developer Donna Insalaco is "Beautifull's" senior vice president for Culinary R&D and the corporate executive chef, overseeing prepared foods product development and preparation.

[Click here for a complete list of the company's senior management members, along with their bios.]

Retailer plus supplier to other grocers

"Beautifull" has a three-part business model and marketing strategy.

Supplier: The fresh foods company sells its fresh, prepared food products to other retailers. It currently supplies 32 San Francisco Bay Area independent supermarkets and natural foods stores with fresh, prepared foods made at its South San Francisco facility, for example, and has additional new retail customers lined up.

Online retail and delivery: "Beautiful" also offers its fresh, prepared foods directly for sale to Bay Area consumers online on its Web site, and delivers the orders to homes and offices.

Brick & mortar retail: The fresh foods company's third and what will be its most aggressive strategy is its retail store development, the first unit of which is the San Francisco "Beautifull" fresh foods market it opened on April 29, in San Francisco's Laurel Village Shopping Center.

"Beautifull" also is in the process of developing a commercial catering division which will feature its fresh, prepared foods.

'Beautifull:' The brick and mortar retailer

San Francisco's Laurel Village is a specialty foods center of sorts.

For example, along with the new "Beautiful" fresh, prepared foods market, the center includes the Cal-Mart supermarket, a very popular independent supermarket that focuses on specialty foods but also offers basic food and grocery items, including lots of fresh produce and fresh meats offered from an old-fashion, butcher shop-style service meat department.

Cal-Mart has been a fixture in the Laurel Village center for over 60 years. It's a part of "old San Francisco." The supermarket had a complete new interior design and upscaling in the 1990's, making it "old San Francisco" with a modern look.

There's also an upscale meat-seafood market/specialty grocery store just a few doors down from the "Beautifull" fresh food store and the Cal-Mart supermarket. Cal-Mart is at one end of Laurel Village and "Beautiful" is at the other. All three of the food stores are within just a couple minutes walk from each other.

The neighborhood also has numerous top-quality restaurants offering foods from a wide-variety of ethnic and regional cuisines.

Because of the variety of its offerings, Laurel Village is a food shopping venue not just for neighborhood residents but also for many residents from other neighborhoods in San Francisco.

'Beautifull:' The supplier

One the supply side of "Beautifull's" business model, the fresh, prepared foods company is aggressively trying to gain new retail customers and increase sales of its ready-to-eat and ready-to-eat entrees and side dishes with its existing grocer-customers.

It's hired food and grocery industry veteran Brett Johnson as its vice president of retail and foodservice sales. His mission is to built the fresh foods company's fresh, prepared foods sales with retail grocers. Johnson worked on the retail side of the industry for Safeway Stores for 10 years. He also previously worked in sales and marketing for Ready Pac Produce, a major California-based fresh produce company.

As mentioned earlier, "Beautiful" is currently supplying 32 San Francisco Bay Area independent supermarkets and natural foods stores with its fresh, prepared entrees and side dishes.

Among these retail customers include some of the region's most popular and highest-volume independent supermarkets and natural food stores such as: G & G Market (Santa Rosa, California); Mill Valley Market (Mill Valley); Berkeley Bowl (Berkeley); Petaluma Market (Petaluma); Delano's IGA (two stores: San Francisco and Fairfax in Marin County); Real Foods (two stores in San Francisco); Sonoma Market (Sonoma); and a number of others.

"Beautiful" started out by supplying grocers and offering its prepared foods items online for sale, with and home and office delivery, which it still does. With the opening of its first retail store it's now launching the third phase of its business model and marketing plan -- it's own brick and mortar retail fresh, prepared foods stores.

Marketing and selling the prepared foods items to grocers as a supplier makes good sense in our analysis because the company needs to create as much sales volume as it can in order to be able to offer the ready-to-eat and ready-to-heat foods at affordable prices in its stores. The only way to do this without opening multiple stores rapidly is to develop other markets for the products in order to create volume. Other grocers, as well as foodservice customers, equal those other markets.

We're more skeptical of the viability of selling the products online and via telephone ordering, with home and office delivery. The expenses of this particular model, especially with lower volume orders, is hard to make work, particularly when gasoline gets back up closer to $4 a gallon. And it will at some point.

But it could work out. After all, home pizza delivery is a low sales volume model. But it works for scores of pizza chains and independent pizza shops that do home and office delivery.

At present though the online ordering, home and office delivery model (as part of "Beautifull's" three strategies or models) probably is a good marketing strategy in and of itself as a way to generate consumer trial and create brand identity for the "Beautiful" brand, even if the cost of doing so exceeds the profit margin. (We have no information regarding if the cost does exceed the profit margin of home delivery regarding the company.)

The 'Beautifull' flagship store: Retail price points

We put the pricing of the prepared foods items in the "Beautifull" store just-opened in San Francisco in the mid-to-upper range. The fresh, prepared foods item retail price points aren't as low as those offered by Tesco's Fresh & Easy and many other supermarkets, for example. But the price points are about the same, and in the case of a number of items are lower, than those offered at many upscale supermarkets, natural foods stores and specialty markets in the Bay Area which offer fresh, prepared foods.

The "Beautifull" fresh foods market has only been open for two weeks, which gives the company plenty of time to adjust its retail pricing.

The current retails are probably fine or close to fine for the flagship store in San Francisco's Laurel Village, as price is less of a consideration in the neighborhood than it is in many other parts of the city and the Bay Area. Plus, San Franciscans' in general spend a greater percentage of their income on food, both by choice and not by choice.

By choice, San Francisco is a food lovers city, including when it comes to food and grocery shopping. The city is among the top U.S. cities in per-capita consumer purchases at the grocery store. That's one of the reasons there are so many upscale markets and specialty food stores in San Francisco.

Not by choice has to do with the fact that chains such as Safeway, which operates numerous supermarkets in San Francisco, as well as stores in nearly every other city in the region, charges slightly higher retail prices on nearly every item sold in its San Francisco and Marin County supermarkets than it does in its East Bay Area stores, for example. This type of pricing system is called "zone pricing."

Under the system, items in Safeway's stores in higher income counties and cities like San Francisco and Marin County have slightly higher retail price points than at the supermarket chain's stores in middle or lower income Bay Area cities. It's important to note that the cost of doing business for retailers in cities like San Francisco is also higher than it is in most if not all of those East Bay Area cities. For example, building rents are generally higher. Local taxes are most-often higher. And other costs of doing business tend to cost more.

As "Beautiful" looks to other neighborhoods in San Francisco and to additional cities in the Bay Area for its additional store locations -- although there are plenty of even more upscale and higher income neighborhoods in San Francisco and in numerous cities in the Bay Area it can focus on for the near to medium-term -- it might have to adjust its retail pricing downward in order to be more competitive with other retailers offering fresh, prepared foods.

However, since "Beautiful" is a niche fresh, prepared foods retailer, price is far less important compared to taste, quality, nutritional content, product selection and convenience, in relative terms of course. For example, we wouldn't suggest raising the current retail price points.

Price is currently more important in the economic recession, particularly since many shoppers are buying far less prepared foods and opting more for basic food and grocery purchases and cooking at home.

But the Bay Area is among the best performing U.S. regions -- and the best in California -- in the current recession. For example, California's unemployment rate is now 11.4%. The overall U.S. unemployment rate is approaching 9.0%. But San Francisco's jobless rate is at about 7.0%.

Fresh, prepared foods retailing abounds in Bay Area

There is no "fresh, prepared foods retailing gap" in the Bay Area. The region is full of supermarket chains, independent grocers, natural foods stores (and chains like Whole Foods), specialty markets, food halls and other retail venues that offer extensive selections of fresh, prepared foods to go, much of it prepared right in store.

In fact, the San Francisco Bay Area is home to numerous pioneering U.S. grocers in terms of fresh, prepared foods category retailing and merchandising.

Just a few of these pioneering grocers in the prepared foods category include the regional supermarket chains Andronico's Markets, Mollie Stone, Draegers, Lunardi's and Cosentino's, along with a number of other regional chains and numerous multi and single-store Bay Area independents.

An example that illustrates the pioneering nature of these Bay Area grocers is that in 2007-2008 when Wal-Mart Stores, Inc. was researching its small-format Marketside grocery and fresh foods markets, which feature an extensive selection of fresh, prepared foods made in-store, the development team led by former Wal-Mart executive David Wild based itself in the San Francisco Bay Area for a considerable amount of time, researching these and other pioneering prepared foods retailers in the region, picking up ideas for the Marketside format. Wal-Mart has four of the Marketside stores currently open. All four stores are in the Phoenix, Arizona Metropolitan region.

"Beautiful," with its fresh, prepared foods retailing concept and first store, adds yet another category player to the rich San Francisco Bay Area fresh, prepared foods retailing scene.

If Tesco's Fresh & Easy Neighborhood Market does decide to start opening some of its numerous planned Bay Area grocery and fresh foods stores this year -- a number of the stores are completed and sitting empty -- this fresh, prepared foods retailing super-competitive climate is something the grocer must be prepared for since a significant portion of Fresh & Easy store sales depend on its extensive fresh, prepared foods offering. And that's the case with or without an economic recession. [Suggested reading - May 6, 2009: Tesco Fresh & Easy Northern California Market Region Update.]

[Readers: Click here to read a selection of previous stories and posts from Fresh & Easy Buzz on fresh, prepared foods category merchandising and retailing.]

[Photo Credit: Beautifull. Examiner.com]

[Follow Fresh & Easy Buzz around on Twitter.com at www.twitter.com/freshneasybuzz.]

Upcoming New Markets News: Tesco to Locate Yet Another Fresh & Easy Store in San Francisco Bay Area; 21 Thus Far By Fresh & Easy Buzz's Reporting

Tesco's Fresh & Easy Neighborhood Market USA has inked a deal for another new store location in Northern California's San Francisco Bay Area even before the small-format grocer's first store has opened in the region.

Fresh & Easy Buzz has learned from the California Department of Alcoholic Beverage Control that Tesco has applied for an off-sale beer and wine license for a new Fresh & Easy store at 5550 Coast Highway in the San Mateo County city of Pacifica, which is just 12 miles south of San Francisco (and five miles from San Francisco International Airport) on the coastal peninsula. [Read and learn more about Pacifica here.]

The application, filed by Fresh & Easy Neighborhood Market, Inc., which is Tesco's U.S. corporate entity for its Fresh & Easy combination basic grocery and fresh foods markets, is still pending approval by the California ABC.

But that's merely a procedural formality generally. Unlike obtaining licenses for the off-sale retailing of hard liquor in California, obtaining an off-sale beer and wine license in the state is normally a matter of applying and paying a fee for retailers, except in situations where a particular city or neighborhood objects to having another store which sells beer and wine. In those cases, an appeal process can delay a retailer from obtaining the license, as well as even having it denied in some instances.

The Fresh & Easy store at 5550 Coast Highway is part of a new shopping center currently being developed in Pacifica, according to the city mayor's office. A city spokesperson said the city and its Chamber of Commerce have been trying to lure additional food retailers to the coastal city for some time, and were pleased Tesco is locating one of its small-format Fresh & Easy grocery markets in the city.

The Pacifica store will be Tesco's first Fresh & Easy grocery market to be located in San Mateo County. Thus far, the retailer has confirmed 18 San Francisco Bay Area locations for its Fresh & Easy small-format, convenience-oriented grocery stores.

In addition, Fresh & Easy Buzz has discovered two other planned locations, both in the East Bay Area city of Vallejo, in addition to this latest store site in Pacifica.

That brings the total number of Fresh & Easy combination basic grocery and fresh foods markets to 21 to date for the San Francisco Bay Area.

Tesco plans to open its first Bay Area stores at the earliest at the end of this year. However, it's most likley the first stores in the region won't start opening until early 2009.

Here is a list of the 18 San Francisco Bay Fresh & Easy store locations confirmed thus far by Tesco:

>Antioch: Somersville & Buchanan roads; Lone Tree & Golf Course
>Concord: Clayton & Ygnacio Valley roads
>Danville: Diablo Road & Interstate 680
>Fairfield: Beck Avenue & West Texas Street
>Hayward: Mission Boulevard & Rousseau Street; A Street & Hesperian Boulevard
>Mountain View: Middlefield Road & Rengstorff Avenue
>Napa: Jefferson Street & Imola Avenue
>Oakland: 73rd & Bancroft avenues
>Oakley: Laurel Road & Ohara Avenue
>San Francisco: Third Street & Carroll Avenue; Silver Avenue & Goettingen Street
>San Jose: Bird & Minnesota avenues; Almaden Road & Curtner Avenue
>Sunnyvale: Tasman Drive & Fair Oaks Avenue
>Vallejo: Oakwood Avenue & Springs Road
>Walnut Creek: Ygnacio Valley Road & San Carlos Drive

Read here about the two additional Fresh & Easy grocery store locations, both in Vallejo, that Fresh & Easy Buzz has discovered, along with this new store location in Pacifica.

With 21 Fresh & Easy store locations locked-up in the San Francisco Bay Area--and more to come--before even the first store is opened, Tesco is demonstrating it plans to be a serious food and grocery retailing player in the nine county, seven million resident-strong region.

As we regularly write on Fresh & Easy Buzz, Tesco's retail store strategy with its Fresh & Easy grocery markets is all about "critical mass"--opening stores within about two miles of each other in the market regions it picks to enter, like it's doing currently in Southern California, the Metropolitan Las Vegas, Nevada region, and in the Phoenix, Arizona Metropolitan market.

The strategy is no different for the upcoming new San Francisco Bay Area Market. That strategy also includes opening a thus far confirmed 19 stores in the Sacramento region, which is connected by major roads to the Bay Area. It's about a two hour drive from San Francisco to Sacramento, for example. Further, the closest Bay Area county is only about a 40-minute drive from Sacramento.

Under this "critical mass" retail store strategy--think Starbucks for coffee retailing and Rite Aid and Walgreens in drug retailing for example--Tesco will be locating more stores in both the Bay Area and Sacramento regions of Northern California. In fact, Fresh & Easy Neighborhood Market representatives are currently out in the markets negotiating additional leases at present. You will read about those new store locations here first.

Note: For a Chronology of various reports, stories and analysis Fresh & Easy Buzz has written about Tesco Fresh & Easy's march from Southern California to Northern California, read this piece, "Fresh But Never Easy: Tesco's Long But Rapid South-North March in the Nation-State of California."

Fresh & Easy Neighborhood Market Bags New Store Location in San Francisco's Mission District

Breaking Buzz 
Tesco's Fresh & Easy in Northern California - 2011

Tesco's Fresh & Easy Neighborhood Market has inked a deal with the building's landlord to renovate and move into the former Delano's IGA Markets' grocery store (pictured at top) at 1245 South Van Ness Avenue (at 23rd Street) in San Francisco's Mission District, Fresh & Easy Buzz has learned.

Delano's IGA Markets closed the Mission District store along with four others in December 2010. See our stories - November 30, 2010: DeLano's IGA Markets Closing Five Stores in San Francisco & Marin County; Fairfax, Davis Units to Remain Open (For Now); and November 29, 2010: Veteran Grocer Harley DeLano's 'DeLano IGA Markets' Chain On the Verge of Closure in San Francisco Bay Area.

We reported on and wrote about Fresh & Easy Neighborhood Market's attempt to bag the South Van Ness Avenue location in this January 26, 2011 story: Fresh & Easy Neighborhood Market is On A Mission - In San Francisco's Mission District.

In addition to Fresh & Easy Neighborhood Market, locally-based salvage and discount grocery chain Grocery Outlet has been vying for the location at 1245 South Van Ness Avenue in San Francisco. Grocery Outlet, which is headquartered just across the bay from San Francisco in Berkeley, is fast-growing, aiming to double its store count over a five year period that began in 2009.

According to our sources, Tesco's Fresh & Easy has won out and has or will be signing a multi-year lease with landlord of the vacant Delano's IGA Markets store at 1245 South Van Ness Avenue.

The Mission District location will be Fresh & Easy Neighborhood Market's fourth site in San Francisco.

On Wednesday, June 22, United Kingdom-based Tesco opens its first Fresh & Easy store in the city, at 32nd and Clement street in the Outer Richmond District.

The second Fresh & Easy market is set to open in San Francisco on August 24. The store is in the 5800 Third Street residential housing development at 3rd Street and Carroll Avenue in the city's Bayview District.

We broke the news on the opening dates of Fresh & Easy's two San Francisco stores. Read our story here - May 23, 2011: Fresh & Easy Neighborhood Market Confirms Our Reports First Two San Francisco Stores to Open June 22 and August 24, 2011

Tesco's third Fresh & Easy store location in San Francisco is at Silver Avenue and Goettingen, which is in the Portola District.

The grocery chain has yet to begin renovations on the vacant building in the Portola District, which formerly housed a Cala Foods supermarket. Tesco's Fresh & Easy leased the property in late 2007-early 2008.

The Mission District location at 1245 South Van Ness, which will be the fourth Fresh & Easy location in San Francisco to date based on our reporting, was also home to a Cala Foods supermarket, which was closed by Kroger Co. a number of years ago.

Delano's IGA Markets took over the location a few years ago, along with the other four it closed late last year, from Kroger's Cala/Bell Markets division, which has just one store left in Northern California, at 1095 Hyde Street on Nob Hill in San Francisco, which it's closing at the end of this year.

Kroger's Southern California-based Ralphs/Food 4 Less operates the Foods Co chain of discount warehouse stores in Northern California, which it's in the process of growing in terms of developing and opening new stores. (Click on this link Northern California Special Report to read about Kroger's plans for Foods Co in Northern California.)

Kroger Co. decided a number of years ago to close the Cala/Bell Markets chain. It sold or closed all of the about 25 Cala Foods and Bell Market stores (all were in the San Francisco Bay Area) over a period of a few years, except for the remaining unit in San Francisco.

Related Stories

February 17, 2011: Mollie Stone's Markets Planning to Open Newest Store in San Francisco First Week in March

January 26, 2011: Fresh & Easy Neighborhood Market is On A Mission - In San Francisco's Mission District

January 13, 2011: Mollie Stone's Markets Taking Over Closed 18th Street Delano's IGA Market in San Francisco's Castro District

January 28, 2011: Mollie Stone's Markets Confirms Our January 13 Report; Announces New San Francisco Store Via Twitter & Facebook

November 30, 2010: DeLano's IGA Markets Closing Five Stores in San Francisco & Marin County; Fairfax, Davis Units to Remain Open (For Now)

November 29, 2010: Veteran Grocer Harley DeLano's 'DeLano IGA Markets' Chain On the Verge of Closure in San Francisco Bay Area

January 26, 2011: Fresh & Easy Neighborhood Market is On A Mission - In San Francisco's Mission District

Plus: see (click on) the following links for additional, related stories: Fresh and Easy Northern California, Fresh and Easy San Francisco Bay Area, Northern California, Northern California Special Report, SF Bay Area.

A Whopping 15 of Whole Foods Market's 41 New Stores in Development are in California - And Nine of The 15 Are In Northern CA

Northern California Special Report: San Francisco Bay Area & Sacramento Metro-Markets: Analysis

Hybrid natural-conventional grocery chains Sprouts Farmers Market, which is privately-held, and Henry's Farmers Market, which is owned by Smart & Final, aren't the only competitors of Tesco's Fresh & Easy Neighborhood Market in Southern California and Arizona that are putting a big new store opening focus on Northern California's San Francisco Bay Area and Sacramento metro-market regions. [See - May 8, 2010: Sprouts, and Likely Henry's to Beat Fresh & Easy to Northern California Despite it's Big Head Start.] No sir, indeed.

Natural and organic grocer Whole Foods Market, Inc., is focusing the majority of its U.S. new store development efforts on California - and specifically on Northern California's San Francisco Bay Area and Sacramento metro-market regions.

Whole Foods currently has 15 new stores planned for California, out of a total 41 new U.S. stores currently in development. Of those 15 planned new California stores, nine are set for Northern California - all in the Bay Area and Sacramento regions - and six are planned for Southern California.

Whole Foods Market currently operates 58 stores in California - 29 in Southern California, 28 in Northern California, and one in Fresno, in the Central Valley.

Eight of the nine new stores in development are in the San Francisco Bay Area. One is in Folsom, which is in the Sacramento area.
In contrast, the next closest U.S. state in terms of planned new stores is Texas, which is the grocer's headquarters state, where Whole Foods' currently has five new stores in development.

Below are the nine new stores in development for Northern California. If more than one store is in the same city, the address is listed.

San Francisco Bay Area

1. Albany
Albany is in the East Bay Area, next to Berkeley, and just over the Bay Bridge from San Francisco. This will be Whole Foods' first unit in the city. Whole Foods' Northern California region headquarters is located in just a couple miles from Albany, in the city of Emeryville, where the grocer also has a store.

2. Lafayette
Lafayette is in Contra Costa County, near Concord and Walnut Creek. The affluent city is located about 15 miles east of Albany, and about 35 miles from San Francisco. This will be Whole Foods first store in the city.

3. Mill Valley (Blithedale)
Mill Valley is in Marin County, about four miles north of San Francisco over the Golden Gate Bridge. Whole Foods has an existing store in the city at 414 Miller Ave, which it opened in the early 1990's. The store, just 14,000 square-feet in size, is near the top in the chain in terms of sales-per-square-foot.

The new Mill Valley store is about twice the size of the existing unit. Whole Foods will continue to operate the existing store, having two units in the community. The existing $14,000 square-foot Mill Valley store does so well, at least $400,000 a week, that Whole Foods' believes a second store in the small, but very affluent, city of about 20,000 is warranted. Whole Foods co-president Walter Robb got his start with the grocer at the 414 Miller Avenue store in Mill Valley in 1991 1990's as the store's manager.

4. San Francisco (Castro District)

5. San Francisco (Haight/Stanyan)
Whole Foods currently has four stores in San Francisco, ranging in size from about 55,000 square-feet to it's newest store in the Noe Valley neighborhood, which is only about 14,000 square feet. The two new stores will bring the store-count up to six. The Haight-Ashbury neighborhood (yes, that Haight-Ashbury) store will be a bit under 20,000 square-feet. It's going into an existing vacant building that formerly housed a Cala banner supermarket owned by Kroger Co, which the company closed.

The Haight-Stanyon store will be a sales barn burner for Whole Foods. The neighborhood has perfect Whole Foods Market demographics. Plus, it will be the biggest and most comprehensive grocery store in the neighborhood. The store site sits right across from a major entrance to Golden Gate Park. There's a McDonalds right across the street. The foot traffic is extensive, which also means lots of sales of fresh, prepared, grab-and-go foods for the future Whole Foods unit. The University of California Medical School, research hospital and research facility, which has a daytime population of about 40,000, is also just blocks away. We're told the store could open before the end of this year.

6. San Jose (Alameda)

7. San Jose (Blossom Hill)
When opened, the two units will be Whole Foods' first stores in San Jose, which at close to a million residents is the largest city in the Bay Area. San Francisco is second with about 850,000 residents. The natural grocer has numerous stores in cities close to San Jose but none to date in the city.

8. Santa Rosa (Coddingtown)
Whole Foods has one existing store in Santa Rosa, which is in the north Bay Area, about 35 miles from San Francisco. That store, which is at 1181 Yulupa Ave, will remain open, giving the grocer two units in the city. Santa Rosa is where the late Charles Schultz, the creator of the Peanuts comic strip and the iconic Charlie Brown character, was born and lived his entire life. He passed away in Santa Rosa a few years ago.

Sacramento Metro Region

9. Folsom
This will be the grocer's first store in Folsom. Whole Foods has two existing stores in the Sacramento metro-market region: one in Sacramento and another in Roseville, which is next door to Sacramento. The Folsom store will be Whole Foods' first in the Sacramento region in some time.

The photographs above and below are of the extensive fresh, prepared foods area in the Whole Foods Market store near downtown Oakland, California, which opened in September 2007. The store has a unique design, inspired by Europe's food halls. The store's fresh, prepared foods offering, which includes both self-service and full-service features and an eat-in area called "Market Bistro," includes: hot and cold bars featuring foods from around the world; a chef’s case offering take-home salads, entrees and side-dishes by the pound; a meat carvery and salad toss station; pizza made on site in a stone hearth oven; extensive rotisserie selections, salad and soup bars; made-to-order sandwiches, pre-packaged selections of grab-and-go foods; and more. Learn more here.

The remaining Whole Foods Market stores currently in development in the U.S. are in the following states: Connecticut (3 stores); Colorado (1); Delaware (1); Georgia (2); Hawaii (1); Maryland (2); New Jersey (1); New York (2); North Carolina (1); Ohio (1); Pennsylvania (1); Tennessee (1); Utah (1); Vermont (1); Virginia (1); and Washington State (1).

The 41 new U.S. stores currently in development by Whole Foods range from about 65,000 square-feet to under 20,000 square-feet in size. Who says a grocer can't do both big and small formats?

The 41 total planned new stores, including the 15 for California and nine for Northern California, are as of May 9, 2010.

"In development" means Whole Foods Market, Inc. has signed a lease for a site or entered into an agreement with a developer to build a store on a site. The 41 stores are mostly new construction, but some are vacant buildings acquired by the grocer.

A number of the 41 stores in development will be opened by Whole Foods this year. Those not opened this year will be opened in 2011.

Whole Foods Market, which has annual sales of $8 billion, currently operates 280 stores in the U.S., Canada and the United Kingdom. Six stores are in Canada and five are in London, UK. The rest are in the U.S.

Fresh - but not easy - eyes are on Northern California

As we said at the end of our piece yesterday about Sprouts and Henry's opening their first Northern California stores, the region is shaping up as being one of the most interesting to watch in U.S. food and grocery retailing this year - and into 2011.

For example, in addition to Whole Foods, Sprouts and Henry's Farmers Market, other grocers in the region, including Safeway Stores, Save Mart's Lucky, Winco Foods, Walmart and others, are increasing their competitive activity, something we will be reporting on and writing about in upcoming posts. (Look for the 'Northern California Special Report' sub-head in the coming days and weeks.)

Meanwhile, United Kingdom-based Tesco has yet to say publicly if it plans to open any of its 37 (19 in the Sacramento-Vacaville region and 18 in the San Francisco Bay Area) confirmed Fresh & Easy store locations in Northern California, which it first announced in early 2008. [See - April 19, 2010: Tesco Debating Whether to Launch Fresh & Easy Into Northern California This Fiscal Year... or Wait]

There are a few unconfirmed Fresh & Easy sites in Northern California as well, which we've reported on. [April 13, 2009: Despite Postponing its Northern California Launch Again Earlier This Year Tesco's Fresh & Easy Planning Third San Francisco Store; First Stockton Unit]

With all the increased activity and competition in Northern California since Tesco announced its plans to enter the market with Fresh & Easy in early 2008, Fresh & Easy's senior management team in El Segundo, (Southern) California (and Tesco CEO Terry Leahy at home in the UK) has to ask itself a serious question, in our analysis: 'If it doesn't enter the market this year, might not it lose its window of opportunity?'

We argue this is a valid concern for three key reasons:

(1) Having so many Fresh & Easy store sites sitting empty in Northern California for so long raises serious questions about the viability of Fresh & Easy in the communities where those store locations are. Many residents are asking if the grocer ever plans to open the stores, for example.

(2) Existing food and grocery retailers in Northern California have now had two-plus years to go to school on Fresh & Easy. As a result, many that were concerned about the new competition coming to Northern California are now far less concerned. By still not entering the market so long after announcing its plans to do so, Fresh & Easy has essentially given these grocers a free-pass in terms of preparing defensive strategies against it.

(3) The increased competition in the San Francisco Bay Area and Sacramento metro-markets - in the form of new entrants and organic growth by existing chains like Safeway, Walmart, Winco Foods, Costco, Lucky Stores, Whole Foods and others since 2008 - is going to make it even more expensive and difficult for Tesco's Fresh & Easy to launch into Northern California, particularly in the areas of price competition and marketing expenses.

For example, in 2008 -to- mid 2009, Safeway Stores, Inc., the market share leader in the San Francisco Bay Area, had yet to fully adjust its pricing and promotional strategies to take into account the trading down nature of many shoppers, even in the Bay Area and elsewhere in Northern California, brought about by the recession. Safeway has done so now in Northern California, lowering thousands of prices and promoting far more aggressively. This is also true of Save Mart's Lucky chain, which is number two in market share in the Bay Area. Save Mart is also number two in the Sacramento metro-market, after Raley's.

In 2008 -to- mid-2009, Modesto, California-based Save Mart Supermarkets was still in the process of integrating its acquisition of the nearly 200 Northern California Albertsons stores it bought from Albertsons LLC, which is owned by the private equity firm Cerberus Capital Management, in 2007. Since then Save Mart has fully-integrated the stores, including changing the banner to Lucky, a name it acquired with its purchase of the Albertsons stores.

The old Salt Lake City, Utah-based American Stores Company grocery chain used the Lucky banner in Northern California for decades. When the no longer existing Boise, Idaho-based Albertsons Stores Inc. chain, which was acquired by Cerberus and Supervalu, Inc. three years ago., bought American Stores in the 1990's, it changed the name of the then Northern California Lucky stores to Albertsons. Save Mart changed back to the Lucky name when it bought the stores because it had strong brand equity during all the years it was used, particularly in the Bay Area and Sacramento metro-markets, where the majority of the Lucky stores are located.

The new entrants and overall increased competition, particularly from Walmart, which has been and is converting some of its discount format stores in Northern California into supercenters that offer a full selection of food and groceries [See - September 15, 2008: Wal-Mart Expanding its Discount Store-to-Supercenter Conversion Program As Part of its Strategy to Grab Even More Food and Grocery Sales Market Share, also will mean Fresh & Easy will have to focus on offering very low prices and hot promotions in the region, which means low margins. Combine that with start up costs, and the grocer can plan for significant losses in Northern California for some time, on top of the significant losses it's already generating.

Walmart also continues to look for vacant retail buildings in the 75,000 -to- 100,000-plus square-foot range in Northern California, in which it can put "hybrid" supercenters, like the one it opened in Modesto, California in the fall of 2008. [See - April 25, 2008: Going Smaller: Wal-Mart Might have Found A Solution or Two to Much of the Opposition to its Mega-Supercenter Stores in the USA]

Further, Walmart is also open to building smaller than traditional from-the-ground-up supercenters in the region, where it has little food and grocery sales penetration and wants a whole lot more. [See- June 27, 2008: Wal Mart Has Created A New, More Upscale Supercenter Store Design Prototype; Submitting Plans For the Stores Selectively in U.S.] [May 6, 2010: Going Smaller & Getting 'Hybrid': Walmart's Smaller Supercenter in Vacant Retail Buildings Strategy Began in 2008]

The nine county San Francisco Bay Area, the most populous region in Northern California with over seven million residents, is also home to numerous multi-store independents like Andronicos Markets, Mollie Stones, Lunardi's, PW Supermarkets (about 35 stores combined with just those four) and others, which have an upscale-specialty focus, yet also offer a full-selection of conventional food and grocery items.

These multi-store independents and others have gone head-to-head with Safeway and the other major grocery chain players in the Bay Area for decades. They continue to do well overall and will do even better as the recession ends and Bay Area shoppers start trading with higher-end grocers even more frequently than they already do, which already is rather frequently.

It's our analysis Tesco is asking itself this fundamental question right now regarding launching Fresh & Easy into Northern California this year: 'Should it invest the money now and go forward, which means an even greater financial loss for fiscal year 2010/11 than the about $253 million its projecting, or should it wait until some time in 2011, hoping that between now and then its fortunes improve in its existing markets?' [See - April 20, 2010: Strong Group Revenue & Profit For Tesco... But $253 Million Loss at Fresh & Easy]

That's the 64,000 question. The answer to the question whether launch into Northern California this year or wait until sometime in the future will in no insignificant way demonstrate how much overall confidence Tesco has in Fresh & Easy, we believe.

[Editor's Note: The San Francisco Bay Area and Sacramento regions in Northern California are shaping up to be two of the hottest food and grocery retailing metro-markets to watch this year, for a variety of reasons. We will be doing just that. Look for additional, upcoming news stories, analysis pieces and commentary on the markets and Northern California in general, in Fresh & Easy Buzz. Look for the 'Northern California Special Report' sub-head, like at the top of this piece. ]

Fresh & Easy Locking-Up Leases For Northern California Invasion

As we've reported before, Tesco's Fresh & Easy Neighborhood Market plans on entering Northern California in a big way, beginning later this year--and really making a big splash in the region in 2009. Currently, the grocer has stores in Southern California, Arizona and the Las Vegas, Nevada metropolitan area.

Here's what we know about the Fresh & Easy Northern California invasion plan to date:

>Tesco has confirmed only one location in Northern California thus far. That site is in the Bayview-Hunters' Point neighborhood in San Francisco. The neighborhood is a low-to-moderate income one, and has a majority African American population, although that is changing rapidly as younger generations of African Americans move out of the city to the outlying regions where homes are more affordable.

Fresh & Easy store executives held a ribbon cutting ceremony at the Bayview-Hunters' Point location late last year, along with San Francisco mayor Gavin Newsom, and members of a neighborhood group who've been trying to get a grocery store that sells fresh foods in the neighborhood for at least a decade. Tesco has signed a lease for the site. The store will be the retail anchor of a brand new mixed-use, primarily residential condo and apartment development on Third Street in the neighborhood. Additionally, A San Francisco city official and a commercial real estate agent told us they know of at least two other sights in the city of nearly 800,000 that Tesco Fresh & Easy representatives are currently negotiating for.

>Tesco has signed a lease for a location in the city of San Jose, the largest city in the Bay Area with nearly one million residents. The Fresh & Easy store will be on Bird Avenue in a former Albertsons supermarket. Tesco will remodel the empty supermarket building to fit its Fresh & Easy format. Further, our commercial real estate source, and a San Jose city government sources, tell us Fresh & Easy is looking at as many as 3-4 more locations in the city for its combination basic grocery/fresh, prepared foods grocery markets.

>Tesco has signed a lease for a store in Fairfield, California. The Bay Area city is located about 40 miles from San Francisco on the freeway route to Sacramento. Fairfield is about 70 miles from Sacramento.

>Tesco is looking to make the east Bay Area city of Oakland its retail beachead in the Bay Area. The grocer has already locked-up a lease for at least one store site, and is in the process of negotiating for another. Additionally, a commercial real estate source told us he has talked with Tesco about 2-3 other potential locations in Oakland for Fresh & Easy stores. A local Oakland city government official also said at a recent Bay Area economic forum that Fresh & Easy has told her that they want to locate as many as five stores in the City, which is located just over the Bay Bridge from San Francisco.

>Tesco has signed a lease in Concord's Clayton Valley Shopping Center, where it plans to open a Fresh & Easy grocery market in 2009. The leased building in the center is about 14,000 square feet. Concord is in the east Bay Area, about 15 miles from Oakland.

The above locations are all in the Bay Area, and are what we have confirmed as "done deals" for Fresh & Easy stores to date.

Tesco is negotiating over numerous other sights throughout the Bay Area however. According to our commercial real estate and city and county government sources, the grocer is looking in the east Bay Area cities of Hayward, Walnut Creek, Antioch, Oakely, Pittsburg, Pleasanton, Dublin and Livermore, (in addition to Concord and Oakland), where it plans on having one or more stores per-city.

Further, in addition to San Jose, the grocer also is discussing locations in the south Bay Area cities of Fremont, Redwood City, Menlo Park, San Mateo and Burlingame.

Basically, Fresh & Easy is using a similar "ring the bay" strategy for its upcoming Bay Area launch as it currently is using in Southern California. That strategy is to locate stores all over the region, creating a critical mass of the small grocery stores throughout cities and neighborhoods. We refer to this as a "Starbucks" or "Walgreens" strategy. The coffee retailer and drug store chain have used this "critical mass" retail strategy to much success in California and elsewhere.

In addition to the nine-country San Francisco Bay Area, which has a population of about 7 million people, Tesco also is negotiating with commercial real estate people for Fresh & Easy store sites in the Sacramento metropolitan region, which currently has a population of about 3 million. This includes stores in Sacramento itself, and in the nearby suburbs of Woodland and Davis, as well as others.

Tesco also plans to locate a small distribution center in the central valley city of Stockton, which is about 45 miles from Sacramento. Stockton also is about an hours drive from San Francisco. The distribution center would service Fresh & Easy stores in the Bay Area and throughout Northern and Central California.

In addition to locating the distribution center in Stockton, our sources tell us Fresh & Easy representatives are looking for store locations in the city of Stockton, and in the nearby cities of Tracy, Lathrop, Manteca and Modesto. The region from Stockton and Tracy to Modesto, has over 1 million residents.

Tesco's number-one priority in Northern California clearly is the San Francisco Bay Area. Second is the Sacramento region, and third is the rest of Northern and central California.

Based on discussions with commercial real estate people, government officials and other sources, we think Tesco plans on opening about 30-50 Fresh & Easy stores in Northern California by the end of 2009.

Tony Bennett Has Nothing on Whole Foods Market When it Comes to Loving San Francisco...That City By the Bay

The 2001 Market mixed-use project features a 30,000 square-foot Whole Foods market store as its ground-floor retail anchor, with 82 residential condominium units above.

Northern California Market Special Report

Singer Tony Bennett, who's signature song is "I Left My Heart in San Francisco," has nothing on Whole Foods Market when it comes to loving that cool, grey 'City by the Bay.'

In this May 9, 2010 story - A Whopping 15 of Whole Foods Market's 41 New Stores in Development are in California - And Nine of The 15 Are In Northern CA - we reported that 15 of Whole Foods Market, Inc.'s current 41 new stores in development in the U.S. are in Northern California, with all but one of those 15 units being in the nine-county San Francisco Bay Area, home to about 7 million residents. Since we published the story, one of the 15 stores in development - the Mill Valley unit on Blithedale (the second Whole Foods' store in the city) has opened. [See our June 14, 2010 feature story: Newly-Named Whole Foods Market CO-CEO Walter Robb Comes Full Circle With the Opening of the New Store in Mill Valley CA.]

One of the 15 Northern California stores (14 are in the Bay Area) in development included in our May 9 piece is a future Whole Foods Market unit in San Francisco's Castro District. Since we ran the story, we've learned considerable details about the store's location. And the future store will be a good one for Whole Foods, based on those details, and our knowledge of the market and neighborhood.

The future Whole Foods Market store, which will be at 2001 Market Street (at the corner of Dolores Street) in San Francisco, is part of a major sustainable and neighborhood-oriented mixed-use (residential-commercial) development called 2001 Market. The project is a partnership between The Prado Group real estate development company, Whole Foods Market, architect's William McDonough + Partners and BAR Architects, and Lanscape design firm April Phillips Design Works.

The artist's rendering above depicts the neighborhood-friendly design of the planned 2001 Market Street ground-floor anchor Whole Foods Market store.

The 2001 Market development is proposed as an urban mixed-use project which offers high-quality housing located above a planned 30,000 square-foot neighborhood-oriented Whole Foods Market store. The Whole Foods' unit is being designed to be neighborhood and pedestrian friendly, including having features like bicycle parking, so shoppers in the neighborhood, which has lots of foot traffic, can bike back-and-forth to the store.

The neighborhood is actually more commonly referred to as Upper Market rather than the Castro District, which is next door. But the two areas overlap, so are often referred to synonomously.

Here's how the developer and design team describes the development's mission:

"The goal of the 2001 Market project is to bring people, housing, community-serving retail, and social vitality to this prominent corner site. With sustainability as a core value."

[Read what the developer and design team have laid out as the vision for the 2001 Market project here]

The development, which as currently planned has 82 residential condominiums above the 30,000 square-foot ground floor Whole Foods Market store, would replace what is the currently vacant S&C Ford auto dealership. The auto dealership has been vacant for some time, and the City of San Francisco is anxious to see the site developed. The grocer is the retail anchor for the development.

Developer The Prado Group says it expects to present the plans for 2001 Market to the San Francisco Planning Commission in September 2010. If approved, the developer and design team plan to start construction in mid-2011, with a target date for the Whole Foods' store opening in early-2012, followed by the 82 residential units coming on line in mid-2012.

[You can learn additional details about the project, including viewing a number of artist renderings of the proposed development and ground floor Whole Foods market store, at the developer's 2001 Market website.]

Whole Foods Market currently has four locations in San Francisco, in the following neighborhoods:

>Franklin, at 1765 California Street

>Potrero Hill, at 450 Rhode Island Street

>South of Market, at 399 4th Street

>Noe Valley, at 3950 24th Street

The stores range in size from 44,000/45,000 square-feet (Potrero Hill), to about 14,000 square-feet (Noe Valley).

The Noe Valley store is the newest Whole Foods Market unit in San Francisco, having opened in late 2009. The 14,000 square-foot store is already doing nearly $600,000 in weekly sales, according to our sources.

The Noe Valley neighborhood is highly dense. It's also home to many professionals who have among the highest average-income levels in the city.

The store, which previously was home to a Kroger-owned Bell Market, which was part of the Cala/Bell chain that Kroger folded up in the Bay Area, selling some stores and closing others, is the only substantial grocery store in the highly-populated neighborhood, which also has perfect Whole Foods Market demographics: a high-percentage of college educated residents, thousands of foodies and organic food devotees, and an abundance of young professionals.

Whole Foods Market plans to open a fifth store in the City by the Bay, either at the end of 2010 or in early 2011. That unit will be in the Haight-Ashbury neighborhood, located in a building that previously was home to a Kroger-owned Cala Foods store. The 2001 Market store will make five Whole Foods units in San Francisco.

The Austin, Texas-based natural and organic foods grocery chain is also looking for additional store locations in San Francisco, as it is throughout the Bay Area and in Northern California, beyond the 15 stores in the region it currently has in development.

Meanwhile, Tesco's Fresh & Easy Neighborhood Market - which has three planned future store locations in San Francisco (two confirmed and one we've reported exists but is unconfirmed by the retailer) - 18 (confirmed) in the Bay Area, and 37 (confirmed) in Northern California as a whole, has yet to say when it plans to start opening some of its stores in the region. Based on our recent reporting, the grocer could announce its plans for Northern California by the end of this month. [June 26, 2010: Tesco Planning to Announce in July When First Northern California Fresh & Easy Neighborhood Market Stores to Open]

It's been well over two years since Tesco announced its planned 37 Fresh & Easy store locations in Northern California. The grocer originally planned to start opening some of the stores in late-2008/early-2009 but has continued to postpone the launch.

Meanwhile, in the two-plus years since Tesco's Fresh & Easy Neighborhood Market announced its plans - and 37 stores - in Northern California, much change - and growth by competitors - has occured in the market region.

Here's a snapshot:

>Modesto, California-based Save Mart Supermarkets completed its acquisition of the nearly 200 Albertsons supermarkets it purchased from Cerebus-owned Albertson's LLC, rebranding all the stores to the Lucky banner, as well as remodeling a number of the stores. The majority of the Lucky stores are in the San Francisco Bay Area and Metropolitan Sacramento regions - the two areas where the 37 future Fresh & Easy stores are located. Save Mart is now the number two market share leader in both of these markets. It's second to Safeway Stores, Inc. in the Bay Area and number two after market share leader Raley's in the Sacramento region.

>Bay Area-based Safeway Stores, Inc. has expanded and remodeled numerous supermarkets in Northern California - and has many more remodels in the works. The grocery chain also opened its first small-format (actually "smaller-format," since at 21,000-24,000 square-feet its considerably larger than the first unit, in Long Beach, California, which is about 15,000 square-feet) "The Market" store in San Jose, California (summer 2009). Safeway also has a handful of new stores proposed for Northern California, including a new flagship supermarket in the east Bay Area city of Pleasanton, where its corporate headquarters is located.

>Walmart Stores, Inc. has converted some of its discount format stores in Northern California into hybrid supercenters, which offer a complete selection of fresh food and groceries. More conversions are planned by Walmart, if it can get approvals by local governments. The retailer also has numerous new supercenters planned throughout Northern California, particularly in the Central Valley, in cities like Stockton, Ceres, Patterson, Livingston, Atwater and others.

Additionally, as we've previously reported, Walmart is in the market for vacant big box store buildings, ranging in size from about 75,000 -to- 100,000 square-feet, in the Bay Area. The retailer plans to turn these buildings into smaller-than traditional-size supercenters like the one it opened in the Central Valley city of Modesto in 2008. [See - May 6, 2010: Going Smaller & Getting 'Hybrid': Walmart's Smaller Supercenter in Vacant Retail Buildings Strategy Began in 2008 plus the links at the bottom of the post.]

Further, as we reported in this July 6, 2010 story - Walmart Looking for Store Sites in Northern California For 20,000 Sq-Ft Neighborhood Market by Walmart Prototype Store - Walmart is also searching for store sites in Northern California for it's 20,000 square-foot food and grocery focused prototype store.

>Southern California-based Trader Joe's has opened a number of new stores in Northern California in the last two-plus years, primarily in the Bay Area. Those new stores include its first unit in Berkeley, across the Bay Bridge from San Francisco, which opened a couple weeks ago. Trader Joe's has a number of new stores in development in Northern California, including a fourth unit in San Francisco's Castro district, not far from the planned Whole Foods at 2001 Market Street.

>Arizona-based Sprouts Farmers Market, which competes with Fresh & Easy in Arizona and Southern California, opened its first Northern California store in June in the south Bay Area city of Sunnyvale. More units are planned for the Bay Area and elsewhere in Northern California. [See - June 5, 2010: Sprouts Farmers Market Opens First Northern California Store in Sunnyvale; Strikes Up Partnership With Local Non-Profit Farm]

>Smart & Final-owned Henry's Farmers Market, which is a competitor of Fresh & Easy Neighborhood Market in Southern California, is set to open its first store in Northern California in late August 2010. That store will be located in Elk Grove, near Sacramento. Two of the 19 confirmed Sacramento-area Fresh & Easy stores are planned for Elk Grove. Like Sprouts Farmers Market, Henry's plans additional units in Northern California. [See - May 8, 2010: Sprouts, and Likely Henry's to Beat Fresh & Easy to Northern California Despite it's Big Head Start]

>Additional retailers, including Costco and Target, plus other smaller chains and independents, are growing their respective food and grocery retailing presence and store-counts in Northern California. For example, Costco is opening a few new stores in the region, along with adding additional food and grocery SKUs to its stores. Target is adding its P Fresh fresh food and grocery sections in some of its discount format stores in Northern California, as well as adding expanded grocery sections and SKUs in other units.

>Lastly, we've detailed Whole Foods Market's focus on Northern California, particularly the San Francisco Bay Area.

Speaking of Whole Foods - we think it's safe to say the grocer (and based on our snapshot above, numerous other grocers) is bullish on Northern California, and the Bay Area in particular. It's also fairly clear Whole Foods Market, like Tony Bennett, loves San Francisco - that cool, grey City by the Bay.

The Fresh & Easy Buzz 2010 Northern California Market Special Report Series:

July 6, 2010: Walmart Looking for Store Sites in Northern California For 20,000 Sq-Ft Neighborhood Market by Walmart Prototype Store

June 28, 2010: Smart & Final to Open its New Format SmartCo Foods Stores in California and Arizona

June 26, 2010: Tesco Planning to Announce in July When First Northern California Fresh & Easy Neighborhood Market Stores to Open

June 14, 2010: Newly-Named Whole Foods Market CO-CEO Walter Robb Comes Full Circle With the Opening of the New Store in Mill Valley CA

June 5, 2010: Sprouts Farmers Market Opens First Northern California Store in Sunnyvale; Strikes Up Partnership With Local Non-Profit Farm

May 29, 2010: Going Rural: Fresh & Easy Neighborhood Market to Build First Store in Los Banos, California

May 28, 2010: First Phase of Fresh & Easy Neighborhood Market-Anchored Condo Development in San Francisco's Bayview Set For Completion in June

April 19, 2010: Tesco Debating Whether to Launch Fresh & Easy Into Northern California This Fiscal Year... or Wait

May 9, 2010: A Whopping 15 of Whole Foods Market's 41 New Stores in Development are in California - And Nine of The 15 Are In Northern CA

May 8, 2010: Sprouts, and Likely Henry's to Beat Fresh & Easy to Northern California Despite it's Big Head Start

May 6, 2010: Going Smaller & Getting 'Hybrid': Walmart's Smaller Supercenter in Vacant Retail Buildings Strategy Began in 2008

Related Stories:

May 28, 2010: First Phase of Fresh & Easy Neighborhood Market-Anchored Condo Development in San Francisco's Bayview Set For Completion in June

April 13, 2009: Despite Postponing its Northern California Launch Again Earlier This Year Tesco's Fresh & Easy Planning Third San Francisco Store; First Stockton Unit

April 13, 2008: San Francisco: Cool Bay Breezes, A City Full of History, Cable Cars--And A 'Fresh & Easy' State of Mind

June 1, 2008: Upcoming New Markets Special Report: From Food Desert to Urban Oasis? Tuesday Election Could Change San Francisco's Bayview-Hunters Point Forever

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

July 29, 2008: Tesco's Fresh & Easy and San Francisco's Tenderloin Redux: Upcoming Developments Offer First Mover Opportunity For Fresh & Easy or Competitors

January 24, 2008: Fresh & Easy Locking-Up Leases For Northern California Invasion

January 30, 2008: Fresh & Easy Goes On the Record: Announces 18 Northern California Stores in the Bay Area

San Francisco: Cool Bay Breezes, A City Full of History, Cable Cars--And A 'Fresh & Easy' State of Mind

"No city invites the heart to come to life as San Francisco does. Arrival in San Francisco is an experience in living."

-American writer and poet William Saroyan, who once lived in San Francisco and was born about 200 miles away in the then small Central Valley farm town of Fresno.

"The coldest winter I ever spent, was a summer in San Francisco."

-American writer, humorist and riverboat captain Mark Twain. Twain lived in and worked for a number of years as a newspaperman in San Francisco.

If you're going to San Francisco, be sure to wear some flowers in your hair. If you're going to San Francisco, you're going to meet some gentle people there. For those who come to San Francisco, summertime will be a love-in there. In the streets of San Francisco, gentle people with flowers in their hair.

-From the 1967 song San Francisco (Be Sure to Wear Some Flowers in Your Hair) written by John Phillips of the rock band the Mama's & the Papa's and sung by Scott Mckenzie in 1967 during the Summer of Love in the city's Height-Ashbury District. The song reached number 4 on the Billboard top 100 list.

"We the peoples of the United Nations determined to save succeeding generations from the scourge of war, which twice in our lifetime has brought untold sorrow to mankind, and to reaffirm faith in fundamental human rights, in the dignity and worth of the human person, in the equal rights of men and woman and nation's large and small, and to establish conditions under which justice and the respect for obligations arising from treaties and other sources of international law can be maintained; and to promote social progress and better standards of life in larger freedom...

-From the Preamble of the United Nations Charter. The United Nation's was founded and its charter signed in San Francisco, California on June 26, 1945.

"One day if I do go to heaven...I'll look around and say, 'It ain't bad, but it ain't San Francisco.'"

--The late Pulitzer Prize winning newspaper columnist for the San Francisco Chronicle, Herb Caen, from one of his thousands of columns. The late Herb Caen, aka Mr. San Francisco, was the city's biggest fan but also its sharpest and most respected critic. When Herb passed away in 1997, he was America's longest-running newspaper columnist. So beloved was Mr. Caen, that on the day of his passing, the city by the bay stood still when its residents heard the news. Hundreds of thousands of people memorialized Herb's passing in a celebration of his life called "Herb Caen Day" in San Francisco a week or so after his death. A mention of their name or business in Herb Caen's column was to modern day San Franciscans' what finding gold was to the city's residents during the famous California gold rush. Treasure.

San Francisco, CA--The Fresh & Easy Buzz team found ourselves in San Francisco last week on business. With a little down time between business meetings, appointments, lunches and dinners, we also found ourselves drifting into a "Fresh & Easy" state of mind.

Therefore, after a breakfast meeting and with a couple hours to kill before our next meeting, we decided to take a walk from the hotel, over to the site in the city's Bayview-Hunter's Point low-income neighborhood where Tesco plans to open next year one of its thus far two confirmed San Francisco Fresh & Easy Neighborhood Market small-format grocery stores. The second confirmed location is at Silver Avenue & Goettingen in the city.

After all...the sunshine was breaking out, despite a very chilly (common for the city) Bay breeze, and the Fresh & Easy construction site was about a 25 minute walk from the hotel...just the perfect distance to get the heart pumping; at least pumping faster then sitting in the hotel room working on a laptop computer would do.

That site, on San Francisco's Third Street corridor (Third Street & Carrol Avenue) is a large, mixed-use but primarily residential condominium building being constructed by a partnership of Goldman Sachs Urban Investment Group and Noteware Development.

Fresh & Easy will be the ground-floor retail anchor of the new residential development.

We can report progress is being made on both the residential portion of the development and on the ground floor Fresh & Easy grocery market.

In talking to a construction foreman at the sight, as well as using our own eyeballs, we estimate the Fresh & Easy store to be about 13,000 -to- 15,000 square feet in size.

It's slightly larger than most of the 61 Fresh & Easy grocery stores currently open in Southern California, Arizona and Nevada, which average about 10,000 -to- 13,000 square feet. It's also brand new construction. The majority (but not all) of the 61 grocery markets currently operating have been located in former retail supermarkets or drug stores, which Tesco has gutted and turned into Fresh & Easy Neighborhood Market stores.

We first visited the site some time ago when construction was just beginning. Much has been done since then, including on the Fresh & Easy portion. According to a spokesperson for the developer, Tesco's Fresh & Easy has purchased the approximately 15,000 square foot retail portion of the development at 5800 Third Street from the developers.

Back to the hotel, and off to meetings, then a lunch event...and more meetings. Our 'Fresh & Easy' state of mind" was essentially over for the duration of the business trip...or so we thought.

During a brief conversation with one of the participants after our lunch meeting, we learned the city of San Francisco had recently completed a study which among other things suggested the city of about 800,000 residents could support about 1.8 million additional square feet of full-service retail grocery in the 43 square mile city and county.

The 'Fresh & Easy' state of mind' was now reactivated. And, of course, when we had a little bit more down time, we talked to a city of San Francisco spokesperson so we could get the skinny on the study.

The study says the neighborhood in the city in most need of additional full-service grocery stores is the Bayview Hunter-Point neighborhood, where the ground-floor Fresh & Easy grocery market-- which will offer both basic groceries and fresh foods--is being constructed. We were aware of the shortage of grocery stores in the neighborhood--but being empirically-oriented, research always improves the knowledge base.

Additionally, according to the "Mayors' Report," which was released on April 1, the residents of Bayview-Hunter's Point spend about $14.5 million annually on groceries in other San Francisco neighborhoods and even in nearby cities because of the lack of stores that sell basic groceries and fresh foods in the neighborhood.

Then it was back to business...But our 'Fresh & Easy' state of mind' was still there; just in the back of the mind at present.

The next day, when an hour or so of downtime presented itself, we decided to call the Mayor's Office of Economic and Workforce Development and ask how things were going Tesco Fresh & Easy-wise in the city by the bay. You know: Are they continuing to scout out more store sites in San Francisco besides the two already leased, and the like? Triangulate data and confirm, we believe.

We had talked to that department's (and the city's) director of neighborhood development, Amy Cohen, before about Tesco's Fresh & Easy and the city. Ms. Cohen was instrumental in getting Tesco to agree to locate a store in the Bayview-Hunter's Point development we visited the day before and reported on above.

Before Tesco decided to locate a Fresh & Easy grocery store in the neighborhood, a coalition of community groups along with the city had been trying for over a decade to get a supermarket chain to open a new, full-service supermarket in the neighborhood. They all said no thanks. Tesco was the first, and only, to say yes when it decided to choose the Bayview-Hunters Point neighborhood as one of its first 18 Bay Area sites last year.

Ms. Cohen was out, but we talked to a department spokesperson, who confirmed what one of our Bay Area commercial real estate sources had told us weeks earlier, which is that Tesco is looking for additional store locations in the city of San Francisco for its Fresh & Easy grocery stores beyond the two locations it's already announced it will open sometime next year.

When we spoke with Ms. Cohen a little over a month ago or so, she told us she was working with Tesco to identify neighborhoods in San Francisco, like Bayview-Hunters Point, which are in areas where that additional 1.8 million square feet of additional needed retail grocery space identified in the Mayor's report is located. In other words, those urban "food deserts" in San Francisco where residents are underserved by grocery stores that offer a good selection of basic grocery items and fresh foods like produce and meats.

The trip was almost concluded, save for a dinner event to attend that night.There would be people from both the Bay Area food and grocery and commercial real estate industries at the dinner...so somehow we didn't think our 'Fresh & Easy' state of mind' was completely vanquished yet...and we were right.

At the dinner, which was held in the East Bay Area city of Pleasanton, we had conversations with two local grocery industry folks who work closely with Safeway Stores, Inc., which has its corporate offices in the that very same city of Pleasanton.

In conversation, we asked the two long-time Bay Area grocery industry veterans what they were hearing about Safeway's new, small-format grocery stores, which the grocery chain plans to start opening (the first four or five as a test) in the South Bay Area region this summer. From what we've been able to determine thus far, the stores will be located in San Jose and in the nearby cities of Mountain View, Sunnyvale, Redwood City and perhaps another.

Tesco plans to open 18 stores in the San Francisco Bay Area beginning in early 2009. Four of these stores will be in the South bay Area: two in San Jose, and one each in Mountain View and Sunnyvale. Plans call for more stores in the Bay Area, including the South Bay Area, as well.

Our local sources confirmed for us that they are hearing what we've been hearing: that Safeway still is on track to open four and maybe five of the new small-format (about 20,000 square feet based on what we've learned thus far) this summer. Most local observers don't expect the first store to open before July, with the other three or four opening over the rest of the summer.

Our dinner party sources also confirmed for us what other sources have been telling us for a few months now--and which we've reported here in Fresh & Easy Buzz--which is expect some interesting design elements and lots of fresh, prepared foods items--including some organic--in the new small-format stores.

As we reported some months ago, In October, 2007 Safeway hired Anthony Gilmore, the former regional president of Whole Foods Market, Inc's Northern California region to a corporate executive position at the company. His charge is to help innovate the design and merchandising elements of Safeway's new (and remodeled) Lifestyle format supermarkets, as well as lend his expertise in those departments to the design and merchandising of the new, small-format grocery stores.

It's not Gilmore's first time at Safeway. He got his start at the grocery chain decades ago as a courtesy clerk.

Under Gilmore's leadership at Whole Foods' Northern California, the supernatural grocer built and opened some of its most unique and popular U.S. stores over the last few years.

These markets include: the grocer's huge, 77,000 square foot flagship store in the South Bay Area city of Campbell; the Potrero Hill neighborhood store in San Francisco, which is the ground-floor anchor of a huge residential complex and among other things features an in-store market bistro restaurant and wine bar with an outdoor patio where a DJ spins tunes for customers; and the unique European Market Hall-style store in downtown Oakland, which is smaller than most new Whole Foods stores but because if its "food hall-like" design doesn't seem like it. All three of the stores were opened in 2007.

Each of these store's fit the neighborhoods they're located in perfectly in most ways. Expect to see some of Gilmore's touches in the new Safeway small-format grocery stores set to start opening this summer in he South Bay Area. Most specifically, look for them to be designed with their respective communities and neighborhoods in mind, with unique local touches in each one.

Further, look for a combination limited assortment basic grocery but also natural and specialty foods (both fresh foods and dry) picked using Safeway's extensive knowledge--and consumer database--of the Bay Area market, along with Gilmore's knowledge of the more upscale and natural foods consumer which he gleaned while running Whole Foods in the market.

Read our March 5, 2008 piece, "New Details and Analysis About Safeway's Small-Format Summer SF Bay Area Surprise For Tesco's Fresh & Easy Neighborhood Market," for some good background and analysis. (click here to read the piece.)

Bags and laptop packed, checked out of the hotel room, and in a state of mind more focused on getting home than on business or Fresh & Easy, we listened to some Sinatra on the player, followed by some 60's rock--including a little "British Invasion" band stuff-- then some cutting-edge 2008 San Francisco sounds recommended to us by a young, hip San Franciscan...Going from a business and Fresh & Easy state of mind, to a music-infused, near-ethereal state of mind...at least until the following morning, when it would be off to another western U.S. state for quick trip.