Sprouts Farmers Market-Henry's Farmers Market Deal Negotiations Continue; End-Game Could Be Near

The Insider - Heard on the Street

In my column on Wednesday (January 5, 2011) I wrote about talks and negotiations going on between representatives of Arizona-based Sprouts Farmers Market and Apollo Management/Smart & Final, regarding a possible acquisition of the Smart & Final-owned Henry's Farmers Market chain by privately-held Sprouts. Private equity firm Apollo Global Management owns Smart & Final, which is based in City of Commerce, California.

You can read the full column at this link - January 5, 2011: Will 2011 See Sprouts Farmers Market Acquiring Henry's Farmers Market? 'The Insider' Says it Could Be in The Cards.

Below are a few things I've learned since Wednesday, along with some other new information and analysis about a combined Sprouts and Henry's.

First, since the column appeared on Wednesday, serious talks and negotiations have continued between representatives of Sprouts Farmers Market and Apollo/Smart & Final, regarding a potential purchase of the Henry's Farmers Market chain by Sprouts. However, as of today, no deal has been done.

Based on current information, I don't expect the talks to result in a deal announcement in the next few days, if there is one, although unless one is directly participating in negotiations of this kind it's impossible to know the rate in which progress is actually being made. Instead, based on what I've learned, if a deal is done, expect it to be announced around the January 14-21 time period, at the earliest. And of course, it's possible a deal agreeable to both parties won't be reached. It's the nature of the acquisition negotiation dance, after all.

However, based on the information I have at this point in time, things are pointing more in the direction of a deal happening between the two parties rather than one not happening.

I've also learned that since publication of the column on Wednesday, Apollo/Smart & Final has told a select number of senior-level employees (beyond those doing the negotiating) that talks are going on about the possible sale of Henry's Farmers Market to Sprouts Farmers Market.

If the deal does happen, acquiring Henry's Farmers Market will roughly double Sprouts' store count and its annual sales. It will also bring back home some family food retailing history for Stan and Shon Boney, two of the four founders of Sprouts Farmers Market. Shon Boney is the CEO of Sprouts. His father Stan Boney is chairman of the board.

Stan Boney is Henry Boney's son and Shon Boney is the grandson of the "Henry" who started the Henry's Farmers Market format and chain. It was first called Boney's Marketplace in the early 1980's. In 1997 the family renamed it Henry's Marketplace, after Henry Boney's first name, changing it from the family's last name. Not long after Wild Oats Markets Inc., which Whole Foods Market, Inc. acquired in 2007, bought Henry's in 1999, it renamed the chain Henry's Farmers Market.

In late 2007-early-2008, Stan and Shon Boney and team at Sprouts Farmers Market set a strategic goal of having 100 stores open and operated in the Western and Southwestern U.S. in five years - late 2012-to-early 2013.

Sprouts Farmers Market is halfway there today. But a 2011 acquisition of or merger of some kind with Henry's Farmers Market would, along with the new stores Sprouts has set to open this year, put it well over the 100-store mark far in advance of that late 2012-early-2013 marker.

Sprouts Farmers Market, which is headquartered in Phoenix, Arizona, currently has its 54 stores in Arizona, Colorado, California and Texas. The Henry's Farmers Market chain has its stores in California and Texas. The California stores are under the Henry's Farmers Market banner, while the Texas stores are called Sun Harvest Farmers Market.

On of Sprouts' key strategic goals is to have more stores in California. Its been opening numerous new stores in Southern California since 2009, for example, and opened its first store in Northern California last year. Shon Boney has also said publicly he would like to have more stores in the San Diego region in far-Southern, California, where Sprouts Farmers Market has only a handful of units.

All but 11 (the Sun Harvest units in Texas) of Henry's 46 stores are in California. And all but one of the California stores, the grocer's first unit in Northern California, which like Sprouts Farmers Market, Henry's Farmers Market opened in 2010, are in Southern California, including a number of units in the San Diego area, a key strategic factor for Sprouts.

The California connection described above, along with the fact Henry's Farmers Market has the 11 Sun Harvest stores in Texas, where Sprouts Farmers Market has major growth plans, are the primary reasons CEO Shon Boney and Sprouts' board of directors, which in addition to chairman Stan Boney and son Shon includes the other two co-founders of the chain, Scott Wing and Kevin Easler, is in a nutshell why the retailer sees a good strategic fit in buying Henry's Farmers Market.

Lastly, it's important to note Sprouts Farmers Market and Henry's Farmers Market are essentially equals in terms of respective store-counts and annual sales. This logically should lead some readers to ask how privately-held Sprouts Farmers Market could come up with the money or financing to acquire it's near-equal-in-size Henry's.

The answer to this is to keep in mind that the owner of Smart & Final, and thus its Henry's Farmers Market chain, is a private equity firm, Apollo Global Management. As such, there exist a myriad of ways a private equity firm such as Apollo can structure deals with potential buyers like Sprouts Farmers Market, including owning an interest in Sprouts as part of the deal, helping to arrange financing, helping to bring in other investors, and so on. Private equity firms like Apollo buy, work to add value to, and then sell companies and entities like Henry's Farmers Market. And there are many ways to sell or spin off such companies and entities, including finding a match with a solid potential mate - another farmers market-format kissing cousin grocery chain, for example - and then making that match work in terms of financing and the like. That's the art of the deal.

I'll have more on the potential Sprouts-Henry's deal if and as new information warrants.

- 'The Insider'

[Editor's Note: 'The Insider' column appears regularly in Fresh & Easy Buzz. The opinions in the columns are those of 'The Insider,' and not necessarily shared by Fresh & Easy Buzz. Below are links to 'The Insider's' first column of 2011, and to a selection of 2010 columns, published in Fresh & Easy Buzz.]

~January 5, 2011: Will 2011 See Sprouts Farmers Market Acquiring Henry's Farmers Market? 'The Insider' Says it Could Be in The Cards

2010 columns

~December 30, 2010: Seven Predictions For Tesco's Fresh & Easy Neighborhood Market For 2011

~October 27, 2010: Save Mart CEO Bob Piccinini Poised to Make it to the 'Bigs' as Member of Golden State Warriors' Ownership Group

~October 8, 2010: Incoming Tesco CEO Philip Clarke Needs to 'Imagine' When it Comes to Fresh & Easy Neighborhood Market USA

~September 13, 2010: Reading Philip Clarke's Tea Leaves: Might A Mixed Corporate/Franchise Model Be in Fresh & Easy Neighborhood Market's Future?

~September 3, 2010: How the California Grocers Association and its Members Can Snatch Victory From the Jaws of the Defeat of California's Plastic Bag Ban

~August 22, 2010: Challenges & Opportunities: Tesco's Fresh & Easy Neighborhood Market Will Supply its Northern CA Stores From its Riverside County DC in Southern CA

~July 18, 2010: When it Comes to Northern California - its Competitors are Rome Burning and Tesco's Fresh & Easy Neighborhood Market is Nero Playing the Fiddle

~July 13, 2010: A Few Words on The Life and Death of Veteran Southern California Grocer Roger K. Hughes

~June 27, 2010: The Insider: Will Tesco Acquire Supervalu, Inc. and Change its 'Fresh & Easy' Game in America?

~June 12, 2010: Will Phil Clarke Shake Things up at Fresh & Easy Neighborhood Market USA When He Becomes Tesco CEO in 2011?

~May 20, 2010: Welcome to Discountopia USA

~April 29, 2010: Heard on the Street: There's Something About Albertsons ... In Southern California

Fresh & Easy Neighborhood Market Hopes 'eatwell' Makes For A Healthy 2011

Private Brand Showcase
If it's about 'eatwell' - you read it here first

In September 2010 Fresh & Easy Buzz reported that Tesco's Fresh & Easy Neighborhood Market would be introducing a number of new ready-to-eat and ready-to-heat fresh-prepared foods SKUs, and a couple items in other categories, under its 'eatwell' healthy foods brand, in January 2011. [See - September 10, 2010: Fresh & Easy Neighborhood Market Extending its 'eatwell' Healthy Foods' Brand Into Frozen Food Category and September 27, 2010 - First Items in Fresh & Easy Neighborhood Market's 'eatwell' Brand Frozen Foods Line Arriving in Store Freezer Cases This Week.]

Fresh and Easy Neighborhood Market is doing just that.

Additionally, in this piece - January 4, 2011: Fresh & Easy Neighborhood Market Kicks Off 2011 With an Appeal to 'eatwell' - on Tuesday, we reported that some of those new items were set to be introduced this week.

They are.

Further, we said in the story on Tuesday that Fresh & Easy Neighborhood Market would feature the 'eatwell' brand, along with many of the new items in the line, in its weekly advertising circular, which came out a day later, on Wednesday, January 6.

The items are in the weekly ad, which started yesterday.

The ('eatwell') 411

Today, Tesco's Fresh & Easy Neighborhood Market announced the introduction of 11 new 'eatwell' brand items for 2011 - 10 fresh, refrigerated ready-to-eat or ready-to-eat SKUs and one Caesar salad dressing. The new 'eatwell' fresh-prepared foods items include: salads, wraps, soups, pasta dishes and meals. You can view a listing of the 11 new items here.

Additionally, although it's not mentioned in the press release, Fresh & Easy Neighborhood Market has extended its 'eatwell' brand SKU-count in the shelf-stable dry grocery category, adding a new item, 'eatwell' veggie crackers, to its existing two items in the line, canned turkey and vegetarian chili.

The veggie cracker (in a 7 ounce box) SKU is the first of what Fresh & Easy plans to be a line of snack crackers, and most-likely eventually other self-stable snacks, according to our sources, under its 'eatwell' healthy foods' brand.

Brand ('eatwell') extensions

Fresh & Easy Buzz was the first publication to report that the fresh food and grocery chain, which has 155 stores in California, Nevada and Arizona, had extended its 'eatwell' brand into the dry grocery category. We did so in this August 2010 piece - August 18, 2010: Fresh & Easy Neighborhood Market Extending 'eatwell' Healthy Foods' Private Brand Into Dry Grocery Category.

We were also first to report Tesco's Fresh & Easy extended brand 'eatwell' into the frozen foods category. (See the two September 2010 stories linked in the first paragraph of this piece at top.)

In our story on Tuesday (January 4), we said Fresh & Easy Neighborhood Market would be featuring its 'eatwell' healthy foods' brand, including the frozen meals and many of the new items, in its weekly advertising circular, which broke on January 5 and runs until January 11.

The grocer has done just that. You can view the 'eatwell' feature in Fresh & Easy's current weekly ad here.

More ('eatwell') to come

We've said since we first broke the news in April 2010 about the development and launching of the 'eatwell' brand by Tesco's Fresh & Easy Neighborhood Market, which it started out using for fresh-prepared foods only, that it was the grocer's plan to make its "healthy foods" private brand, and extend it into numerous additional categories, which so far include dry grocery and frozen foods, in addition to fresh-prepared foods.

That process will continue, along with the development of new 'eatwell' items in the fresh-prepared foods, shelf-stable dry grocery, frozen foods and refrigerated foods categories.

Stay tuned.

Recent stories in 'Private Brand Showcase'

January 5, 2011: Safeway Adds 'Open Nature' to its Natural-Organic-Healthy Foods' Private Brand Portfolio

January 4, 2011: Fresh & Easy Neighborhood Market Kicks Off 2011 With an Appeal to 'eatwell'

Click here to read a selection of stories from 'Private Brand Showcase' in 2010. See the headline links at the end of the post.

Safeway Adds 'Open Nature' to its Natural-Organic-Healthy Foods' Private Brand Portfolio

Private Brand Showcase

News/Analysis/Commentary

Safeway Stores, Inc. is rolling out a new natural foods private brand, 'Open Nature,' this week, starting with a variety of packaged products in the fresh poultry and meat categories.

The first 'Open Nature' brand items, which the grocer bills as "100% natural," are in the fresh poultry category, and include fresh boneless/skinless chicken breasts and a line of 12 ounce packages of chicken sausage, in a variety of flavor combinations.

Safeway Stores, Inc. was issued a U.S. trademark for 'Open Nature' - which as a non-organic natural foods brand fits in-between its popular 'O Organics' brand and its 'Eating Right' healthy foods' brand from a positioning standpoint - in June 2010, for use on products in the meats and processed food products; staple food products; and light beverage products segments, according to the filing with the federal trademark office.

Among the product categories included under the brand trademark include: soups; jams; jellies; potato-based and vegetable-based snack foods; and frozen entrees consisting primarily of meat, fish, poultry or vegetables, which means Safeway likely plans to extend the brand into categories beyond fresh meat and poultry.

The "100% natural" designation Safeway is using for 'Open Nature,' which is a brand claim used by numerous brand marketers and retailers, unlike the term "organic," which is regulated by the federal government, has no official or 100% agreed upon definition, although there's a consensus of sorts in the food industry as to what "natural" products should contain, nebulous as that definition may be.

Consumers though, with the exception of those very savvy in food product labeling and ingredient knowledge, have little concept as to what "natural" or "100% natural" means when they see it on a food label, which makes sense because as noted there's no officially regulated or objective definition as to what the attributes actually mean. It can be buyer beware.

Safeway, however, provides it own definition of "100% natural" on the labels of its new 'Open Nature' brand fresh poultry items. That definition includes the following attributes:

>Raised without antibiotics
>No added hormones
>All vegetarian fed
>No artificial ingredients
>Minimally processed

Keeping 'Open Nature' and '100% natural' honest

Let's take an evaluative look at each of the five brand product attributes as they pertain to the fresh boneless/skinless chicken breasts and the line of flavored chicken sausage.

1. Raised without antibiotics

This is a positive "natural" product attribute, since antibiotics are used in the raising of chickens by many farmers and processors. As such, it's an attribute that adds value.

2. No added hormones*

The U.S. federal government doesn't allow hormones to be used in the raising of poultry or pork. Therefore, while this attribute might serve to communicate to consumers who aren't aware of this law that the chicken breasts and the chicken in the sausage line are free from hormones, we can't call it a positive brand attribute of 'Open Nature,' since it's merely a marketing message because federal law doesn't allow hormones to be used in raising poultry or pork in the first place.

To Safeway's credit, it puts an * at the end of this attribute, and offers a label note communicating that federal law prohibits the use of hormones in the raising of poultry and pork.

3. All vegetarian fed

It's not clear by "all vegetarian fed" if Safeway means no grains of any type are fed to the chickens branded under the 'Open Nature' "100% natural brand."

Since grain is the primary feed for chickens, we doubt if the birds are vegan. Therefore, since vegetarian diets can also include grain, the attribute is positive only in so far as communicating to consumers that the birds aren't fed a diet that also includes meat-based feed.

There's some validity in this because some lower-end chicken is raised using various feeds, mixed with grains, that at times has been know to contain meat-by-products. But it's a fairly meaningless product attribute in our analysis.

4. No artificial ingredients

This is a good attribute in that many chicken products are injected with water or a saline solution to plump the birds up. In fact, this is a major issue in the poultry industry.

For example, the California Poultry Industry Federation, which represents the majority of poultry companies based in California, has been trying to get the federal government to prohibit the use of the term "natural" on whole chickens, chicken parts like breasts, and value-added chicken products that have such added artificial ingredients.

The California companies don't inject water or saline solutions into their birds. However, most other states allow it. The "no artificial ingredients" attribute is also valid in the case of value-added items like the 'Open Nature' chicken sausage because some brands include artificial ingredients in the product.

5. Minimally processed

This attribute has little meaning in our analysis. It suggests a semantic "naturalness" but in the case of fresh poultry and even the value-added chicken sausage line, one wouldn't expect the products to be highly-processed in the first place, would they?

Additionally, in terms of consumer information, there's really no definition of what "minimally processed" means. Rather, the definition is somewhat subjective, although a good rule of thumb, for example with chicken sausage, is that if the price of the product is extremely low, the product itself is most-likely more highly-processed than a more expensive product of the same kind. But even that rule of thumb is subjective.

Brand strategy: 'Open Nature' and the LOHAS consumer

Safeway's development of the 'Open Nature' natural foods brand, which in our analysis and opinion is an evocative and potentially strong brand name, is part of the retailer's strategy to appeal to and target what the Natural Marketing Institute (NMI) has identified as the LOHAS - (Lifestyles of Health and Sustainability) consumer.

These "ethical" shoppers, which the NMI says comprises about one-fifth of all U.S. consumers, have a high degree of concern about health and the environment, and the ways the two are related. It's a lifestyle attribute rather than a demographic metric, like income, education-level and so on, although various demographic attributes like "college educated" and "higher income" do tend to correlate highly with those identified as LOHAS consumers.

The grocer's 'O Organics' and 'Eating Right' food and grocery brands, along with its 'In-Kind' brand of health and body care products, which was introduced in late 2010, and now its 'Open Nature' natural foods brand, are all part of the portion of Safeway Stores' private brand portfolio that's driven by the LOHAS consumer segment.

Safeway's other numerous private brands serve different positioning and marketing purposes, such as price-focused ('Safeway') and premium-focused ('Safeway Select').

In its private brand development and marketing department at corporate headquarters in Pleasanton, California, Safeway Stores' marketers and merchandisers working on the brands noted above talk often about appealing to what's also referred to as the "in me, on me, around me" consumer. These are folks, basically the same cohort as the LOHAS consumers, who care to a very significant degree about the types of foods they eat, the kinds of products they use on their bodies, the social and environmental issues surrounding how foods and non-food packaged goods are made, and how those combined factors or variables integrate with the communities they live in.

Safeway's fast-growing organic and locally-grown produce program, along with its across the board sustainability programs, are also targeted from a marketing positioning perspective to these LOHAS, "ethical" or "in me, on me, around me" consumers, who on a mass scale are the bread and butter customers of Whole Foods Market, Inc., for example.

As part of Safeway's LOHAS consumer-targeted private brand portfolio, brand 'Open Nature' fits a niche between 'O Organics' and 'Eating Right.' 'O' Organics hits both the organic and natural attributes; 'Eating Right' the healthy foods' hot button and; by virtue of that attribute also the natural foods hot button in most cases. 'Open Nature' focuses on the natural-foods-but-not-organic segment, which allows for a lower price point than the 'O Organics' brand items but still appeals to many aspects of the LOHAS consumer's values.

For example, Safeway currently has the 'Open Nature' "100% natural" boneless/skinless chicken breasts on promotion in its western U.S. stores, for $4.49 per pound. In contrast, when it runs its 'O Organics' organic boneless/skinless chicken breasts on ad, the promotional price-point is usually $5.99 pound, at the lowest end. Not all of the LOHAS-typed consumers can afford to pay $5.99 a pound for organic chicken breasts. But perhaps many of them can afford to pay $4.49 for the 'Open Source' "100% natural" version, trading off the organic attribute for the price savings, while still satisfying many of their values and needs.

Expect to see Safeway roll-out additional 'Open Nature' brand items, first in the fresh poultry and meat categories, but also in other product categories, throughout 2011.

Also expect to see the grocer add numerous new items to its other LOHAS consumer-focused brands - 'O Organics,' which with sales of over a $1 billion annually is the highest-grossing organic foods brand in the U.S., 'Eating Right,' and 'In-Kind' - throughout this year.

Recent and 2010 stories in 'Private Brand Showcase'

January 4, 2011: Fresh & Easy Neighborhood Market Kicks Off 2011 With an Appeal to 'eatwell'

December 23, 2010: New Items Show Fresh & Easy Neighborhood Market's Niche-Specialty Category Private Brand Development Focus

December 21, 2010: New 'Marketside' Brand Fresh Food Items From Walmart - Part Deux

December 18, 2010: Walmart Launches New 'Marketside' Fresh Food Lines - Plus A 'Fresh' Campaign to Create Brand Buzz

December 13, 2010: House (Sparking) Cider Rules at Fresh & Easy Neighborhood Market

October 30, 2010: Raley's Launches New 'Raley's TO GO' Pre-Packaged, Refrigerated Fresh-Prepared Foods Line

October 16, 2010: Fresh & Easy Neighborhood Market 'Bags' the Humble and Nutritious Plantain For A New Snack Chip Item

October 16, 2010: Fresh & Easy Neighborhood Market's Private Brand Kids' Cereal Wins Bronze 'Pentaward' in 2010 Packaging Design Competition

October 9, 2010: 'Use Me': Should Reusable Packaging Be Part of Tesco's Sustainable Private Brand Offering? A Student-Designer Thinks So

September 27, 2010: First Items in Fresh & Easy Neighborhood Market's 'eatwell' Brand Frozen Foods Line Arriving in Store Freezer Cases This Week

September 4, 2010: Fresh & Easy Neighborhood Market Unveils New fresh&easy 'goodness' Brand Items and Packaging

August 29, 2010: Fresh & Easy Neighborhood Market Expanding its fresh&easy 'goodness' Co-Branded Line; Launching Numerous New Items

August 18, 2010: Fresh & Easy Neighborhood Market Extending 'eatwell' Healthy Foods' Private Brand Into Dry Grocery Category

July 21, 2010: 'Sipsational' & 'Quenchtastic': Safeway Introduces New 21-Flavor Line of Soft Drinks Under 'refreshe' Private Brand

July 17, 2010: New Fresh & Easy Neighborhood Market Clock-Shaped Private Brand Candy Line Hits the Shelves at Fresh & Easy

July 12, 2010: Tesco Launches Private Brand 'Lasagne Sandwich' in the UK Today...With No Apologies to The Earl of Sandwich

June 24, 2010: New Fresh & Easy Clock Logo-Shaped Candies Are A Pretty Sweet IdeaMay 11, 2010: Tesco Might Want to Get 'fresh & naked' at 'fresh & easy'

April 2, 2010: Fresh & Easy's New 'EatWell' Healthier Fresh, Prepared Foods Brand to Hit Stores on April 7

April 11, 2010: When it Comes to Fresh, Prepared Foods, New York City's Duane Reade is Simply 'deLish' for Walgreens

February 22, 2010: Food, Drug Retailers With Stores in California, Nevada & Arizona Honored for Private Label-Store Brands' Excellence

Will 2011 See Sprouts Farmers Market Acquiring Henry's Farmers Market? 'The Insider' Says it Could Be in The Cards

The Insider - Heard on the Street

If my sources are correct - and they're right far more often than they are wrong - one of the first, if not the first, major U.S. food and grocery retailing industry acquisitions to happen in 2011 could be the purchase of the Henry's Farmers Market chain, which is owned by Smart & Final, which is in-turn owned by private equity firm Apollo Management, by privately-held competitor Sprouts Farmers Market.

Smart & Final is based in City of Commerce, (Southern) California. Its Henry's Farmers Market chain has a separate corporate headquarters, in the nearby Orange County city of Irvine. Sprouts Farmers Market is based in Phoenix, Arizona.

My sources, who've asked to remain anonymous for occupational and other related reasons, tell me the deal, which is in discussion between the parties, could happen soon, although it hasn't been finalized and therefore isn't a "done deal."

Behind the potential sale are two key recent motivators, as well as a basic private equity strategy, for Apollo Management, which owns Smart & Final and thus Henry's Farmers Market.

The first recent motivator is that the private equity firm lost at least $40-$50 million (and possibly more), according to my sources, on Smart & Final's SmartCo Foods venture in the Denver, Colorado market in 2010.

Smart & Final opened five SmartCo Foods stores in metro Denver over a three month period, starting in June 2010. In November, less than five months later, it announced it was closing all five stores and pulling out of the market. The five stores are all now closed. [You can read Fresh & Easy Buzz's reports on the move here.]

Second, Apollo plans to launch some sort of public stock offering later this year, and as a result has been evaluating its portfolio of owned companies more closely than it normally would over the last few months.

Additionally, private equity firms like Apollo Management buy companies and entities like Henry's Farmers Market for the express purpose of adding value and eventually selling them. That's how the firms make money for their investors. Apollo has followed that path with Henry's, investing a considerable amount of money in Henry's since acquiring it in October 2007, for the purpose of improving and growing the chain, with the hope doing so will add value and thus result in a profit when it sells it.

Lastly, but far from least, my sources say Sprouts Farmers Market is interested in buying Henry's as a way to grow it business, as well as gaining the secondary bonus of taking one of its three similar format competitors off the market. Sprouts, Henry's and Sunflower Farmers Market all operate very similar formats and stores in the Western U.S.

According to my sources, Apollo Management doesn't currently have Smart & Final up for sale.

The Sprouts Farmers Market and Henry's Farmers Market formats are nearly identical - kissing cousins if you will - and not by accident.

The Boney family, members of which also founded Sprouts Farmers Market in 2002, created the Henry's Farmers Market format, a combination natural-organic-conventional food and grocery store, with a focus on fresh produce merchandised farmers market-style in departments that comprise about a third of a store's total square-footage, decades ago in Southern California.

The first "Henry's" (in terms of the format's inspirational origins) was a fresh produce stand operated under the name "Boney's," which was started on a street corner in San Diego by Henry Boney, in 1943.

Henry Boney's plans didn't include just owning a fruit stand. In the 1950's he branched out, owning and operating three grocery stores in Southern California: Boney's, Bradshaw's and Superama.

In 1956, the Boney family sold the grocery stores and switched formats, opening and building a chain of convenience stores called Speedee Mart, which it sold eight years later, in 1964, to Southland Corp/7- Eleven.

A little over a decade later, in 1976, the entrepreneurial Boney family started a health-food chain, Windmill Farms, which it later sold.

Shortly after selling Windmill Farms, the family started the Boney's Marketplace natural foods' store chain in Southern California, which it renamed Henry's Marketplace in 1997, after Henry Boney's first name, replacing the family's last name as the banner for the stores.

Wild Oats Markets Inc. purchased Henry's Marketplace in 1999, and renamed it Henry's Farmers Market.

Whole Foods Market, Inc. acquired Wild Oats in 2007. One of the first things Whole Foods did after the deal was to sell the Henry's chain, which consisted at the time of 35 Henry's Farmers Market (in Southern California) and Sun Harvest banner stores, to Apollo Management -owned Smart & Final for $166 million. The deal, which was completed in October 2007, also included a distribution center in Riverside County, California.

In 2002, two members of the very same Boney family founded the Sprouts Farmers Market chain in Arizona, along with Scott Wing and Kevin Easler. Stan Boney, the senior member of the family, is the chairman of the board, and Shon Boney is the CEO of Sprouts. Wing and Easler serve on the board. Doug Sanders runs the day-to-day operations of Sprouts, as its president and chief operator officer, reporting to Shon Boney. The first Sprouts Farmers Market store opened in Chandler, Arizona in 2002.

Like the Henry's Farmers Market format and stores, the Sprouts format and stores offer mostly natural and organic products, along with some conventional, and put a major focus on fresh produce, which is merchandised "farmers market-style" in departments that comprise about a third of the stores' total square-footage. A third "farmers market-style retailer is fast-growing Sunflower Farmers Market, which shares a history with both Sprouts and Henry's.

Since acquiring Henry's in October 2007, Smart & Final has added numerous stores, remodeled many existing units, and last year opened the first Henry's Farmers Market store in Northern California, in Elk Grove near Sacramento. A second Henry's store is planned for Walnut Creek, which is in the East Bay Area, about 35 miles from San Francisco. Plans for the store are currently being reviewed by the city.

Additionally, Smart & Final created a new natural and organic private brand for the Henry's stores, called Sun Harvest, which is the name of the stores the chain operates in Texas. The Sun Harvest brand, which has won a number of awards, replaced the former "Henry's" brand, which was the grocer's previous store brand of natural and organic food and grocery products.

Interestingly, Smart & Final has had plans since early-to-mid 2010 to expand the Henry's Farmers Market chain into Idaho, opening the first store in downtown Boise in late 2011 or early 2012. But in late December 2010 the retailer pulled out of the deal, deciding not to sign the lease for the Boise location, where it planned to put the first Idaho store, which it had been negotiating terms on for months. A Smart & Final spokesperson told a Boise television station in late December the retailer decided instead to focus on opportunities closer to home, meaning California and Texas, rather than entering Idaho. But my sources say the decision, which came on the heels of the SmartCo Foods store closures in Denver, has more to do with the possible sale of the Henry's Farmers Market chain to Sprouts Farmers Market, rather than a decision not to open stores in Idaho.

Sprouts Farmers Market, the larger of the two (but not by much) "farmers market-style" format chains in terms of total number of stores, currently has 54 stores in four states: Arizona, California (southern and northern), Colorado and Texas. The stores range in size from 23,000-37,000 square-feet. Annual sales at fast-growing Sprouts Farmers Market are approaching $1 billion, according to my sources.

Like Henry's, Sprouts opened its first store in Northern California, in the Bay Area city of Sunnyvale, in 2010. It has plans to open numerous additional stores in its newest market over the next couple years, including a store in Roseville, near Sacramento, this year, and in Dublin, which is in the Bay Area, in 2011 or 2012.

Sprouts is also making a major push in Texas, its second-newest market after Northern California. So far it plans to open three new stores in Texas this year.

Apollo Management-Smart & Final-owned Henry's Farmers Market currently operates 46 stores in two states - 37 units under the Henry's Farmers Market banner in California and nine stores under the Sun Harvest banner in Texas. The size of the Henry's and Sun Harvest banner stores are very close to Sprouts in terms of square-footage, averaging about 21,000 square-foot at the smaller end, to about 33,000 square-foot at the larger-end.

I estimate Henry's current annual sales to be in the $550 million-$650 million range, based on a variety of source information. The sales information isn't publicly released by the company.

If the deal to acquire Henry's Farmers Market goes through, Sprouts Farmers Market will nearly double both its store count - from 54 to 100 (not counting the new stores both chains plan to open this year) - and annual sales, which will make it not only a much bigger player in the natural-organic retailing sector, but also overall in the Western U.S. food and grocery retailing industry.

Some of the Henry's and Sprouts stores in Southern California are located fairly close together, so I suspect Sprouts Farmers Market would need to sell or close around a half dozen-to 10 or so units - it could be a Henry's store or an existing Sprouts unit, depending on a few variables - in the region if the acquisition becomes a reality.

I see the store duplications or redundancies to be of lessor concern in Texas, where Sprouts has only opened a handful of stores thus far. Sprouts would probably keep all or nearly all of the nine Sun Harvest stores and re-brand them under the Sprouts Farmers Market name.

I'm less sure Sprouts would re-brand the 37 Henry's Farmers Market stores "Sprouts Farmers Market," particularly right away, although eventually doing so makes more sense than it does to not do so. Most likely, if the acquisition does become reality, Sprouts will keep the Henry's Farmers Market name for a while at least, perhaps even considering using it as a second banner. However, based on information from my sources, I doubt if the grocer has even made that decision yet.

As of today, sources tell me the deal is being discussed but hasn't been finalized, which is important to note, as the devil is always in the details, particularly when it comes to acquisitions.

I'll have more on the potential Sprouts-Henry's deal if and as new information warrants.

- 'The Insider'

[Editor's Note: 'The Insider' column appears regularly in Fresh & Easy Buzz. The opinions in the columns are those of 'The Insider,' and not necessarily shared by Fresh & Easy Buzz. This is 'The Insider's' first column for 2011. Below are links to 'The Insider's' 2010 columns, published in Fresh & Easy Buzz.]

~December 30, 2010: Seven Predictions For Tesco's Fresh & Easy Neighborhood Market For 2011

~October 27, 2010: Save Mart CEO Bob Piccinini Poised to Make it to the 'Bigs' as Member of Golden State Warriors' Ownership Group

~October 8, 2010: Incoming Tesco CEO Philip Clarke Needs to 'Imagine' When it Comes to Fresh & Easy Neighborhood Market USA

~September 13, 2010: Reading Philip Clarke's Tea Leaves: Might A Mixed Corporate/Franchise Model Be in Fresh & Easy Neighborhood Market's Future?

~September 3, 2010: How the California Grocers Association and its Members Can Snatch Victory From the Jaws of the Defeat of California's Plastic Bag Ban

~August 22, 2010: Challenges & Opportunities: Tesco's Fresh & Easy Neighborhood Market Will Supply its Northern CA Stores From its Riverside County DC in Southern CA

~July 18, 2010: When it Comes to Northern California - its Competitors are Rome Burning and Tesco's Fresh & Easy Neighborhood Market is Nero Playing the Fiddle

~July 13, 2010: A Few Words on The Life and Death of Veteran Southern California Grocer Roger K. Hughes

~June 27, 2010: The Insider: Will Tesco Acquire Supervalu, Inc. and Change its 'Fresh & Easy' Game in America?

~June 12, 2010: Will Phil Clarke Shake Things up at Fresh & Easy Neighborhood Market USA When He Becomes Tesco CEO in 2011?

~May 20, 2010: Welcome to Discountopia USA

~April 29, 2010: Heard on the Street: There's Something About Albertsons ... In Southern California

Fresh & Easy Neighborhood Market Kicks Off 2011 With an Appeal to 'eatwell'

Private Brand Showcase

In August 2010 we reported that Tesco's Fresh & Easy Neighborhood Market had extended its 'eatwell' healthy foods private brand into the dry grocery category, from an initial launch of the brand in the fresh-prepared foods category earlier in the year, by creating a canned turkey chili item. [See - August 18, 2010: Fresh & Easy Neighborhood Market Extending 'eatwell' Healthy Foods' Private Brand Into Dry Grocery Category

We followed that exclusive report up a month later in early September with a story - September 10, 2010: Fresh & Easy Neighborhood Market Extending its 'eatwell' Healthy Foods' Brand Into Frozen Food Category - detailing how Tesco's Fresh & Easy planned to further extend the 'eatwell' brand into the frozen foods category. And in this piece a couple weeks later - September 27, 2010 - First Items in Fresh & Easy Neighborhood Market's 'eatwell' Brand Frozen Foods Line Arriving in Store Freezer Cases This Week - we documented our September 10 report.

Today, many months later, Tesco's Fresh & Easy Neighborhood Market is formally announcing and promoting the new 'eatwell' canned turkey chili and its "new" line of 'eatwell' frozen meals, in its "Friends of Fresh & Easy" e-mail newsletter, which you can view here. The e-mail promotional piece went out today to members of "Friends of Fresh & Easy."

In the promotional piece, pictured at top, Tesco's Fresh & Easy says: "We expanded our eatwell line to make eating better even better. So you'll now find more ready meals, salads, sandwiches, and soups, along with all-new items like snacks and frozen meals. Each eatwell item is made with 25% or less of the daily recommended value of calories, total and saturated fat, and sodium.* Best of all, they're just as affordable as they are delicious."

The frozen meals line and canned turkey chili in the promotional piece are the items Fresh & Easy Buzz reported on five months ago.

Some of the new 'eatwell' brand fresh-prepared foods items in today's 'Friends of Fresh & Easy" promotional piece were introduced late last year. However, most of the refrigerated ready-tp-eat and ready-to-heat items are brand new, being introduced for the first time this week. Fresh & Easy Buzz was the first publication to report on Fresh & Easy Neighborhood Market's plans to launch the 'eatwell' brand last year. [See - April 1, 2010: Tesco's Fresh & Easy to Launch New 'EatWell' Brand Lower-Sodium, Fewer-Calorie Prepared Foods Line and April 2, 2010: Fresh & Easy's New 'EatWell' Healthier Fresh, Prepared Foods Brand to Hit Stores on April 7.]

In our September 2010 stories about the extension of the 'eatwell' brand into the frozen foods category, we noted that Fresh & Easy Neighborhood Market planned to introduce additional fresh-prepared foods items under the healthy foods' brand in early 2011. The ready-to-eat and ready-to-heat items mentioned above are the first of those new items for the new year.

Fresh & Easy is also working on additional 'eatwell' brand items in the dry grocery and frozen foods category, according to our sources, including shelf-stable snacks and potentially condiments and dressings.

Additionally, the grocer is considering extending its 'eatwell' private brand into perishable foods other than ready-to-eat and ready-to-heat and frozen. Such items could include refrigerated dairy, salad dressing and similar items.

As we've noted in past stories, Fresh & Easy's brand strategy behind 'eatwell' is to make it a multi-category healthy foods' brand similar to what Safeway Stores has done with its 'Eating Right" brand, which Safeway uses across all product categories, including dry grocery, perishables, prepared foods/deli, produce and fresh meat.

Apparently, Fresh & Easy wasn't ready to announce or promote the 'eatwell' frozen food line last year - instead saving it perhaps for the beginning of the new year so it could use it as a "Healthy New Year" promotional hook, which is exactly what it's doing with the "Friends of Fresh & Easy' promotional mailer today. Additionally, as a heads up, look for many of the 'eatwell' healthy foods items to be in Fresh & Easy's new weekly advertising circular, the first one for 2011, which comes out tomorrow.

Readers of Fresh & Easy Buzz, didn't have to wait until now though, or until they visited a Fresh & Easy market, to learn about the 'eatwell' brand dry grocery and frozen category brand extensions because we reported the news, along with providing analysis and added information, in August and September of 2010. We call that "private brand intelligence."

[Private Brand Showcase is a regular feature of Fresh & Easy Buzz. In it we report on, write about and offer analysis and commentary on the fast-growing private or retailer brand (sometimes called private label) movement, along with featuring various private brand products being offered by Tesco's Fresh & Easy Neighborhood Market and other food and grocery retailers. This is our first 'Private Brand Showcase' piece for 2011. Below is a selection of 2010 stories.]

December 23, 2010: New Items Show Fresh & Easy Neighborhood Market's Niche-Specialty Category Private Brand Development Focus

December 21, 2010: New 'Marketside' Brand Fresh Food Items From Walmart - Part Deux

December 18, 2010: Walmart Launches New 'Marketside' Fresh Food Lines - Plus A 'Fresh' Campaign to Create Brand Buzz

December 13, 2010: House (Sparking) Cider Rules at Fresh & Easy Neighborhood Market

October 30, 2010: Raley's Launches New 'Raley's TO GO' Pre-Packaged, Refrigerated Fresh-Prepared Foods Line

October 16, 2010: Fresh & Easy Neighborhood Market 'Bags' the Humble and Nutritious Plantain For A New Snack Chip Item

October 16, 2010: Fresh & Easy Neighborhood Market's Private Brand Kids' Cereal Wins Bronze 'Pentaward' in 2010 Packaging Design Competition

October 9, 2010: 'Use Me': Should Reusable Packaging Be Part of Tesco's Sustainable Private Brand Offering? A Student-Designer Thinks So

September 27, 2010: First Items in Fresh & Easy Neighborhood Market's 'eatwell' Brand Frozen Foods Line Arriving in Store Freezer Cases This Week

September 4, 2010: Fresh & Easy Neighborhood Market Unveils New fresh&easy 'goodness' Brand Items and Packaging

August 29, 2010: Fresh & Easy Neighborhood Market Expanding its fresh&easy 'goodness' Co-Branded Line; Launching Numerous New Items

August 18, 2010: Fresh & Easy Neighborhood Market Extending 'eatwell' Healthy Foods' Private Brand Into Dry Grocery Category

July 21, 2010: 'Sipsational' & 'Quenchtastic': Safeway Introduces New 21-Flavor Line of Soft Drinks Under 'refreshe' Private Brand

July 17, 2010: New Fresh & Easy Neighborhood Market Clock-Shaped Private Brand Candy Line Hits the Shelves at Fresh & Easy

July 12, 2010: Tesco Launches Private Brand 'Lasagne Sandwich' in the UK Today...With No Apologies to The Earl of Sandwich

June 24, 2010: New Fresh & Easy Clock Logo-Shaped Candies Are A Pretty Sweet Idea

May 11, 2010: Tesco Might Want to Get 'fresh & naked' at 'fresh & easy'

April 2, 2010: Fresh & Easy's New 'EatWell' Healthier Fresh, Prepared Foods Brand to Hit Stores on April 7

April 11, 2010: When it Comes to Fresh, Prepared Foods, New York City's Duane Reade is Simply 'deLish' for Walgreens

February 22, 2010: Food, Drug Retailers With Stores in California, Nevada & Arizona Honored for Private Label-Store Brands' Excellence

Sunday Satire By Earl Grey: Soon to Be 'Ex-Governator' of California and Tesco's Fresh & Easy - A Match Made in Heaven?

By Earl Grey: Fresh & Easy Buzz's Occasional Satire & Humor Columnist

I have just two words - actually it's a famous name - for United Kingdom-based Tesco when it comes to promoting its Fresh & Easy food shops in California and nearby Nevada and Arizona: Arnold Schwarzenegger.

That's right, starting tomorrow the Austria-born body-builder, who then became a famous movie actor and celebrity, a position he used to become the two-term-Governor of California, is out of a job, replaced by another once two-term Governor, Jerry Brown.

And the change is just in time for Arnold - and the state - by the looks of California's poor economy, its high unemployment rate of over 12%, and its twenty-some billion dollar budget deficit. Some of the more optimistic residents around my new part-time residence in the Golden State say prosperity is just around the corner. But right now it's still looking and feeling to me a bit like the United Kingdom economically rather than like a place that's on the verge of entering a brave new economic world, at least in my neck of the woods, which I confess isn't Beverly Hills.

During his eight years in office, Governor Schwarzenegger took no salary, instead living off the tens of millions - and some say hundreds of millions - he made in Hollywood. He also paid for the cost, estimated to be about $6,000 a minute, it takes to fly his private jet back and forth from his home in Southern California to the state capital in Sacramento; doing so multiple times per week.

One thing is certain, you can say whatever you want about Arnold's performance running California - and much is being said about it - but what you can't say is that he made any money out of it. And, as a result of this fact, he needs a gig - and fast - in order to replenish the millions he spent out-of-pocket to support himself and his family in high style while serving as Governor of California for the last eight years. Not that he's hurting. But running California for eight years has been a personal money-loser for a man who's made a lot of it at everything he did before getting into politics.

A match made in Heaven?

Tesco, which has its Fresh & Easy food and grocery chain based in Southern California where it has about 106 of its 155 grocery markets, needs a hook to lure shoppers into its food shops. The soon to be former Governor of California needs a new gig. Therefore, I see a match made in Heaven.

The one thing Arnold has always been the best at - as a body builder, actor, businessman and Governor - is promotion, which from the looks of it is something Tesco needs a lot of for Fresh & Easy. And, even though his popularity rating as Governor haven't been too grand over the last year, once he's out of office, the great residents of the Golden State will take to loving Arnold in huge numbers once again, just like they did before he set foot in Sacramento.

It's just the way Americans treat their ex-politicians. Look at Bill Clinton, who was nearly impeached as President. Now he's a rock star. And even George W. Bush, who in his last term as President had an approval rating of about 22 percent, as low as it gets. Thanks to not speaking out in public much for nearly two years, plus a new book, "Bush 43," as they call him, is back in the high fifties and on his way to being thought of highly by 60% or so of the American public, after less than two years out of office. Were less kind in Britain. Just ask Gordon Brown.

It won't take the soon to be former Governor of California nearly that long to once again become a matinee idol - he too good at self promotion to let that happen. He's also not George W. Bush. Actually, he's more of a Bill Clinton in personality. Instead, mere months after Arnold leaves office, look for the "Terminator," who road into office eight years ago as part of the recall of then-Governor Grey Davis, to once again become the popular Californian he was before becoming Governor.

Tesco should take note of what I say. Sign Arnold up as the Fresh & Easy Neighborhood Market spokesman and pitch man before Walmart or Safeway get wind of my idea. He's a far better fit for Tesco's small food stores than he is for Walmart's mega-supercenters or Safeway's big supermarkets anyway. Arnold Schwarzenegger: A big man for a chain of small grocery stores.

I can see the once 'Governator' touting Fresh & Easy, beginning almost immediately.

For example, how about a television commercial where Arnold stands outside a small Fresh & Easy market, his big arms made to look like they're holding the store in them, and says: "I'm Arnold Schwarzenegger - and I'm here to 'Pump Up' Fresh & Easy?" His Austrian accent would also be a nice contrast to the British accent Tesco offers with its Fresh & Easy stores.

How about a YouTube video of the iconic Californian checking out his grocery purchases at one of Fresh & Easy's self-service checkout lanes? When the ex-Governor finishes checking out his groceries, he says: "Now that I have plenty of time on my hands, I love using the self-service checkout at Fresh & Easy," flashing his signature smile and ending with his trademark tag line: "Ill Be Back...To Fresh & Easy?" Arnold could also add in the video spot he loves self-checkout so much that as Governor he vetoed a bill that had he signed it would have ended self-service checkout at Fresh & Easy. You can read all about that here. Without a doubt, the video would go viral, as the kids say.

The promotional opportunities are unlimited. How about a line of "Arnold" brand energy bars (with his mug on the label), energy drinks, smoothies and other health and fitness related products exclusive to Fresh & Easy - and promoted by the man behind the private brand, Arnold Schwarzenegger. Talk about a "point-of-difference," as the grocery industry and brand management types like to call it.

Then there's product placement promotion. It's possible Arnold will star in another "Terminator" movie. Remember, he said he would be back. Also remember he needs to replenish his bank account after eight years in office. With Arnold as the spokesman for Tesco's Fresh & Easy, it would be a given that one or more of the little Fresh & Easy markets would make an appearance in what would be a huge box office blockbuster. Perhaps the script of the movie could even be written in a way that makes Fresh & Easy a hero in the film? Tens of millions of viewers. Positive placement. All because of Arnold.

It's all about what I like to call the "Arnold all over" campaign - on billboards, on the radio for Fresh & Easy, "guest-tweet" appearances on the Fresh & Easy Neighborhood Market Twitter feed, store visits - and on-and-on. If the message is truly the medium, then Arnold would be the message for Fresh & Easy. All Arnold, all the time. Done with taste of course.

Even if Tesco seizes the opportunity I've laid out for it, Arnold will still have to say yes to becoming the chief spokesman and pitchman for Fresh & Easy. And you can bet the offers have already started rolling in for the man spending his last night as the chief executive of the nation state of California, home to nearly 40 million people and the sixth-largest per-capita economy in the world, nearly as big as that of the entire United Kingdom.

My suggestion: Bring in the man with stature and the charm, Tesco CEO Sir Terry Leahy, who's retiring as Tesco's chief executive in March of this year.

Fresh & Easy is Sir Terry's baby. He launched it in 2006 but isn't going to see it become profitable during his tenure, if ever. But Sir Terry, who's the rock star of retail in Britain, and a man who can talk chief executive-to-chief executive with Arnold, as well as respective rock star-to-rock star, could seal the deal, without question. It would be Sir Terry's last big hurrah. And perhaps the best parting chance he has to help Fresh & Easy succeed in America.

It's pure magic, I tell you. Arnold Schwarzenegger, the Austrian immigrant, who has come to symbolize the American Dream, teamed up with the huge British retailer, Tesco, that wants a piece of the American Dream with its Fresh & Easy Neighborhood Market grocery chain. The big guy - Arnold - embracing the little Fresh & Easy markets against a world, or at least a California, Nevada and Arizona, of huge hypermarkets and supermarkets.

[Editor's Note: After a long but undeserved hiatus, our sometime satire and humor columnist, Earl Grey, has favored Fresh & Easy Buzz with a new submission to start off 2011. In a long e-mail explaining his hiatus, Earl, who over the past few years has divided his time between a flat in London and a home in Lake Havasu City, Arizona, where the original London Bridge was moved many years ago to serve as a tourist attraction, informs us that among other things, he' sold his winter home in Lake Havasu City in a "short sale" and has now bought a small winter home in California, which he says he got for a "steal" in a foreclosure sale. Since it's the start of a new year and his column topic is well-timed, even though it's been nearly a year since we've had a submission from Earl, we've decided to forgive him for his long absence, restore his byline on probationary status, and run his contribution. Note: The column is satire, or an attempt at it.]

A couple past columns by Earl Grey

January 29, 2009: Earl-Grey-At-Large: Fresh & Easy Buzz's Sometime Humor Columnist Drops in For A Bit Of Pre-Super Bowl Musing On 'Carnivores' V. 'Vegetarians'

November 27, 2008: Earl Grey Returns for the Holiday: Thanksgiving With A Slice of 'Rye'

Happy New Year From Fresh & Easy Buzz