Safeway Puts its Brand on Ice in San Francisco For the Holidays

Branding on ice: The Safeway logo covers the middle of the ice rink above.


Private Brand Showcase

Pleasanton, California-based Safeway Stores, Inc. is extending its brand to an outdoor venue that defines fun, excitement and entertainment during the November -to- January holiday season.

That outdoor venue is the Safeway Holiday Ice Rink in San Francisco's Union Square.

The popular ice rink in Union Square, a shopping area in the heart of the city that's packed with huge department stores like Macy's, Neiman Marcus, Bloomingdale's and Saks Fifth Avenue, along with scores of other retail shops, boutiques, restaurants and cafes, opened November 9, and runs until January 16, 2001.

Safeway, which has a long history of business - it has 14 supermarkets in the city of nearly 900,000 which is located about 30 miles from the Pleasanton corporate headquarters - civic and public involvement in San Francisco, has sponsored the Union Square Ice Rink since 2007.

In addition to the supermarket chain's lead and named sponsorship, a number of other businesses, such as department store retailer Macy's and Ghirardelli Chocolate Company, which was founded in the city-by-the-bay, along with a number of radio and television stations, have signed on as co-sponsors of the Safeway Ice Rink in Union Square.

As part of its sponsorship, Safeway Stores, Inc. is helping to keep the cost of using the ice rink low - tickets cost just $10 for adults and $6 for kids eight years-old or younger. Ice skate and hockey skate rentals, for those who don't have their own, which is probably a fairly high number of people in San Francisco where it's know to get chilly - but not that chilly - are $5 pair

There are also specialty group rates, starting for parties of 15 or more persons.

A portion of ticket proceeds are being donated to the Boys and Girls Clubs of San Francisco and the San Francisco Recreation and Parks Department.

And to make the day or night on the ice last a bit longer, there's even a photo booth at the union square ice rink, which is open from 10 a.m-11:30 p.m daily, where skaters can have their photographs taken for $2 a pop. The photos are printed out on the spot. The photo machine will also send a digital version to your e-mail address.


The logo above is used in various places around the ice rink to reinforce the Safeway brand and the grocer's sponsorship.

The Safeway sponsored and branded Union Square Ice Rink is also holding a number of special events for the public this month and in December.

The first event was the opening of the ice rink last week. The opening ceremonies, which were held from 9 a.m-10 .a.m on November 9, was hosted by "The Ghost of Christmas Past," a member of the cast of San Francisco's internationally renown American Conservatory Theater's annual A Christmas Carol production.

Among other opening morning festivities on the ice was a performance by the popular Irish tenor Michael Londra, who is currently staring in Celtic Yuletide at the Marines’ Memorial Theatre in the city. Londra performed his hit song "Beyond A Star."

Skaters enjoy the Safeway Holiday Ice Rink over the weekend.

On November 25 the Safeway Ice Rink will be a part of San Francisco's annual Christmas Tree Lighting ceremony at Union Square, which is held each year the day after Thanksgiving.

But in typical San Francisco style - and flair - the two other events planned for the Safeway Ice Rink are a bit less traditional.

On December 1, the rink is hosting Speed Dating Skating, which is an on-the-ice version of speed dating. The singles, which there are many of in San Francisco, are being invited to wear their most unusual holiday-inspired sweater as a way to "break the ice" and get conversations started, which in-turn might lead to a future date - or even one later that night.

There's also an interesting freebie included as part of the event: The first 100 singles to arrive get a mistletoe headband, which should spark a little more than just conversation while on the ice.

The "singles night" event happens to share a "branding" angle with one of Safeway's stores in San Francisco - although we're not sure the ice rink's producers were aware of it or had it top-of-mind when planning the event.

Safeway's store in the city's Marina District - where former chairman and CEO Peter McGowan, who also led the ownership group that kept the San Francisco Giants from moving out of the city over a decade ago, has lived for many years - is known as the "Singles Safeway" because of the number of single people who first met in the aisles of the supermarket. Many of those meetings led to a first date - and often two, three or more and, in some cases, even marriage.

In June Safeway Stores, Inc. held this event - Safeway Has A Picnic in San Francisco Featuring the 'World's Longest Picnic Table' to Showcase its 'Open Nature' Natural Foods' Brand - on the Marina Green, which is across the street from the Marina Safeway store in San Francisco.

But the city's unique style and flair really comes out in full bloom on 8 (8-9:30 p.m) when the ice rinks promoter is presenting Drag Queens on Ice.

Willy Bietak Productions, the producer for the Safeway Ice Rink in Union Square, tells us it's giving Santa a break for the night and instead it's invited a number of the San Francisco Bay Area's most colorful professional drag performers to skate and perform at the rink.

The promoter says its also inviting the public to don their own wigs and outfits and skate alongside the Drag Queens during the evening.

Prediction: Not only will it be a colorful evening but you can also bet the photo booth at the ice rink will be getting a lot of use and bringing in plenty of cash during the event.

Sponsoring the holiday ice rink is smart marketing and provides a major branding-plus for Safeway Stores in the San Francisco Bay Area and corporately, in our analysis.

Why? It's the holidays, a time of joy and family, it's an ice rink in San Francisco, a once-a year-event (although this year the city has two such outdoor rinks for the holidays) and its fun.

Therefore as the sponsor of the ice rink in Union Square, Safeway gets its eponymous brand, which it also uses in various versions as a product brand - Safeway, Safeway Select, Safeway Kitchens, Safeway Farms - on food, grocery and general merchandise products in its stores, associated with holiday joy, individual and family fun, a unique, once-a-year experience, and fun and happiness.

All the characteristics noted above pretty much sum up a marketer's dream list when it comes to branding.

Many Bay Area television and radio stations are co-sponsors of the Safeway Holiday Ice Rink in Union Square. Each year since 2007 these and other local broadcast and print media outlets provide millions of dollars worth (if it were paid advertising) of free publicity for the event - and thus to Safeway Stores' as the sponsor.

It's all third-party endorsement publicity as well - television coverage of the skaters and special events at the rink, radio stations producing and airing live remotes from the venue, photographs and stories in the local papers -which is much more powerful from a marketing perspective than paid advertising is.

Putting its Safeway brand on ice in San Francisco, which is the "go to" city for residents of Northern California, where Safeway is the market share leader with about 250 supermarkets (the second highest U.S. division in gross sales after Vons' in Southern California), is not only a "cool" thing for Safeway Stores, Inc., to do, it's also good business - and smart branding.

Related Stories

October 26, 2011: Farms ... at Safeway? Grocer Launches its Newest Private Brand ... 'Safeway Farms'

June 19, 2011: Safeway Has A Picnic in San Francisco Featuring the 'World's Longest Picnic Table' to Showcase its 'Open Nature' Natural Foods' Brand

May 28, 2011: At The 'Brand Factory': Safeway Stores' Launches Newest Private Brand - 'Safeway Kitchens'

February 7, 2011: Getting There First...Plus, Are Tesco's Fresh & Easy and Safeway Traveling Down A Similar Private Brand Aisle?

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

April 8, 2011: The Branded 'Signature Cafe' in Safeway Stores' Soon to Open 'Social Safeway' in Washington D.C. Should Turn A Few Heads

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

Click on this link - Safeway Stores Inc. - to read additional stories about Safeway.

Click on this link - private brand showcase - to read past stories in our 'Private Brand Showcase' feature.

Trader Joe's Introduces 'Wasabi Arugula' ... Minus the Wasabi

Private Brand Showcase

Trader Joe's, which we often refer to as an iconic grocer because of its rabid fan base and creative private brand development and merchandising, has introduced an interesting new addition to its eponymous store brand fresh, packaged produce line - Trader Joe's Wasabi Arugula.

What makes the new Wasabi Arugula item interesting isn't so much what's in the bag though. Instead, it's what's not inside that grabbed our attention.

Trader Joe's Wasabi Arugula doesn't include actual wasabi. Instead, what's inside the bags is a spicier version of the common arugula, also called rocket lettuce, that's sold in many U.S. supermarkets and grocery stores.

The grocer, which has about 360 stores in the U.S., already offers basic arugula or rocket lettuce under its Trader Joe's brand, packaged in cello bags similar to the new "Wasabi Arugula". Therefore, when its private brand development team and the marketers at the corporate offices in Southern California decided to introduce the spicier arugula variety under the same brand, they needed a catchy name. TJ's specializes in catchy names for its various private brand products, after all.

Enter wasabi, that extremely popular - except among the faint of palate - Japanese condiment (it's Japanese horseradish to be specific) - that's not only the staple at every sushi bar in the world but also provides a special kick when paired with many types of foods (and with other condiments like mayonnaise). it's also a catchy and fun word to say. If you don't believe us, say Wasabi fast three times straight right now.

The result: Trader Joe's Wasabi Arugula. And below the product name on the package a tag line says: "Arugula with a little extra punch."

The Wasabi Arugula packaging isn't deceptive. It makes no claim of containing actual wasabi - although including a packet of wasabi salad dressing would make some lovers of the Asian condiment do back flips of joy.

But when spotting the package of Trader Joe's Wasabi Arugula in the produce case from a slight distance away in the grocery aisle (point-of-purchase), the first thing that does come to mind is: "Interesting, arugula with wasabi." That is, until you pick the package up and look at it closely. In other words, the name (the hook) works to draw shoppers' attention to the product. That's good brand marketing.

The 7oz bags of Trader Joe's Wasabi Arugula sell for about $2.39-$2.59, depending on where the particular TJ's grocery market is located in the U.S.

We didn't see any cross-merchandising of chopsticks near where the Trader Joe's Wasabi Arugula was displayed in the refrigerated produce case. Doing so might be a cute idea though, in keeping with Trader Joe's whimsical merchandising philosophy.

Related Stories

November 9, 2011: Glatt to Meet You Paisan - Kosher 'Meats' Italian at Mollie Stone's Markets

October 28, 2011: Move Over Chipotle - Fresh & Easy Neighborhood Market Introduces its Own Brand of Burrito Bowls

October 26, 2011: Farms ... at Safeway? Grocer Launches its Newest Private Brand ... 'Safeway Farms'

>View all the past stories in our Private Brand Showcase feature at these links - private brand showcase, private brands showcase.

Chief Marketing Officer Uwins Out in Top-Level Reshuffling at Tesco's Fresh & Easy Neighborhood Market

Simon Uwins, chief marketing officer for Tesco's Fresh & Easy Neighborhood Market since early 2006 when the United Kingdom-based global retailer set up shop in El Segundo, California, is out as part of a top-level management reshuffling by Tesco's CEO, Philip Clarke, and Tim Mason, CEO of Fresh & Easy and Tesco group deputy CEO/chief marketing officer.

In addition to his position as chief marketing officer, Uwins was one of Fresh & Easy Neighborhood Market's senior corporate officers. He reported directly to CEO Mason.

Mason announced Uwins' departure from Fresh & Easy and parent company Tesco Wednesday at the grocery chain's Town Hall meeting.

The Town Hall meetings, which include the full office staff and are broadcast to employees at the Riverside distribution campus, are held weekly at 1 p.m at Fresh & Easy's corporate office in El Segundo, California

Neither United Kingdom-based Tesco or Fresh & Easy Neighborhood Market has publicly announced Uwins' departure. As a matter of policy, Fresh & Easy doesn't announce when senior executives or employees at any level leave the company. Additionally, Fresh & Easy doesn't as a practice announce new hires at any level.

Simon Uwins, 52, was part of the original team of senior executives who came with Mason to set up and launch Fresh & Easy Neighborhood Market in 2006. Prior to that he worked at Tesco's global headquarters in Cheshunt, United Kingdom, where he was a marketing executive.

As part of Uwins' departure as chief marketing officer at Fresh & Easy, Clarke and Mason have reshuffled the organization chart, making a number of changes.

John Burry, Fresh & Easy's chief commercial officer (head of buying and merchandising), is assuming overall responsibility for both the commercial and marketing functions at the Tesco-owned fresh food and grocery chain.

Like Uwins, Burry is one of the original members of Fresh & Easy's senior management team. He is also a senior corporate officer of Fresh & Easy Neighborhood Market.

The commercial department has two directors - grocery and fresh foods - who report directly to Burry. Below them are category managers, who are direct-reports to the directors. The category managers have buyers and assistant buyers directly reporting to them.

One of the two directors (the other is Larry Biggerstaff), Tim Lee, the trading director for fresh foods (produce, meat, deli/fresh-prepared foods) is vacating that position and will be working with John Burry to transition the marketing function at Fresh & Easy into the commercial department, according to our sources.

Lee won't be replacing Uwins as chief marketing officer but rather assuming many of his day-to-day marketing management duties. He will continue to report to Burry.

Tim Lee came to Fresh & Easy from Tesco in the UK in early-2010, replacing Jim Jensen, who left to take a position heading up drug chain Walgreens' new at the time fresh foods program. Lee's focus at Tesco in the UK was as a produce category manager and director.

According to our sources, Lee has 9-10 months left on his original assignment contract at Fresh & Easy. He will be using that time in the new position, which straddles commercial and marketing, our sources tell us.

Ian Fletcher, who runs Fresh & Easy's fresh-prepared foods kitchen operation, is replacing Lee as director of fresh foods, according to our sources.

Fletcher, who originally worked in the UK, has been with Fresh & Easy for a number of years. His wife, Karen Fletcher, was the beer, wine and spirits category manager at Fresh & Easy Neighborhood Market from 2007 until this summer, when she resigned. She too previously worked for Tesco in the UK. The Fletcher's were married not long after coming to Fresh & Easy at the start up stage. John Burry was the best man at the their wedding in Hawaii.

Rounding out the reshuffling, Mark Lodge will take over management of Fresh & Easy's corporate kitchen operation when Ian Fletcher moves into the director of fresh foods position, replacing Tim Lee, according to our sources.

Lodge is currently an employee of the kitchen operation, which is Fresh & Easy's central commissary at the Riverside County, California campus facility, where the ready-to-eat and ready-to-eat fresh-prepared foods sold in its 184 stores in California, Nevada and Arizona are prepared and packaged.

From a balance sheet perspective, the reshuffling will save Fresh & Easy one senior-level executive salary and benefits package, which is that of the departed Simon Uwins. Some of that savings will be taken up by probable pay raises going to Ian Fletcher and Mark Lodge in their respective new positions. Tim Lee is likely a wash, and it's unlikely Burry will be getting a raise as part of assuming the overall responsibility for marketing, in addition to keeping his commercial department duties.

Tesco's Fresh & Easy has lost a number of key middle management-level employees at its El Segundo, California headquarters over the last 60 days, according to our sources.

The employees include: a key director/manager in the grocery chain's logistics and supply chain department; a category manager/buyer who was playing a major role in heading up Fresh & Easy's new in-store bakery program, which is still in its infant stages; and a veteran-senior level  member of its information technology (IT) department.

All three of these employees left to take new jobs in the food and grocery industry, according to our sources.

Simon Uwins currently plans to remain in the U.S. rather than returning to the UK, according to our sources.

Tesco currently has no immediate plans to name a new chief marketing officer for Fresh & Easy either, our sources tell us, instead combining the marketing function and department with commercial under the direction of John Burry, as reported and detailed above.

Additionally, since Fresh & Easy's CEO, Tim Mason, is also Tesco's chief marketing officer and is based at the grocery chain's headquarters in Southern California, he will likely play a strong hand in the U.S. operation's marketing, since in the position, which he was named to in March of this year when Clarke became CEO of Tesco, he has the ultimate responsibility for all of Tesco's corporate marketing.

Therefore the new structure - no chief marketing officer at Fresh & Easy - has, at least theoretically, the effect of flattening the organizational chart at the senior level when it comes to the marketing function at Fresh & Easy Neighborhood Market and the headquarters office in El Segundo, California, where Mason is based.

Glatt to Meet You Paisan - Kosher 'Meats' Italian at Mollie Stone's Markets

Although the item won't be introduced until early next year, Mollie Stone's is giving Fresh & Easy Buzz and our readers the first look at the label for its Nonna Luisa brand organic tomatoes, above.


Private Brand Showcase

Central to the 26-year run of success for privately-owned Mollie Stone's Markets, which operates nine supermarkets in the San Francisco Bay Area, is its format, which combines a strong selection of everyday food, grocery and general merchandise essentials - what it calls neccessity shopping - with a healthy assortment of specialty, gourmet, ethnic, natural, organic and fresh-prepared foods, which it calls passion shopping.

In many ways the format is the brand for Mollie Stone's.

And speaking of branding, a growing and evolving aspect of the grocer's neccessity and passion shopping approach and format - the stores are neither basic supermarkets or specialty markets - is its focus on private brand development, merchandising and promotion.

For example, although Mollie Stone's has only nine-stores, the grocer, which is majority-owned by partners Mike Stone and Dave Bennett, has three private product brands of its own - Mollie Stone's, which it uses on assorted dry grocery items, fresh meats, produce and baked goods; Mollie O Organic (for organic products); and Nonna Luisa, which is the retailer's Italian foods' brand.

Earlier this year Stone and Bennett also introduced the first item in what we call their "personal brand." That brand is Mike & Dave's, taken from the partners' first names. The first product is Mike & Dave's Wing Sauce.

Mike & Dave's is technically a fourth private brand for Mollie Stone's. But we call it a "personal brand" because not only is it named after the two partners who serve as each others wingmen, but they're also marketing the brand to other retailers via wholesalers and distributors, in addition to selling it in the nine Mollie Stone's stores. Therefore it's a venture product brand for the partners in addition to one sold in their stores.

There will be additional items under the Mike & Dave's brand, according to Dave Bennett, who is the retail operations, marketing and buying/merchandising-focused half of the ownership team. Stone focuses on the overall running of the chain from a headquarters perspective, along with finance, administration, new store development and other related tasks.

Mollie Stone's, which has its headquarters office near the bay in the Marin County town of Mill Valley - its stores are in San Francisco (three units) and (one each in) Sausalito, Greenbrae, (Marin County), Burlingame, San Bruno, San Mateo (San Francisco Peninsula) and Palo Alto (Silicon Valley) - is currently beefing-up its private brand offerings as part of that neccessity shopping/passion shopping overall brand its been developing since Stone and Bennett founded the small but high-volume chain in 1985.

For example, this week the grocer is introducing a line of fresh-cut Glatt Kosher meats under its Mollie Stone's private brand in a number of its San Francisco Bay Area stores, including the three small in size but high in sales volume markets it operates in San Francisco.

The Mollie Stone's brand Glatt Kosher meat line features a selection of  in-store cut, prepared and packaged cuts of beef roasts and steaks, ground meats and other varieties, as you can see in the photos above and below.

Kosher foods are a specialty of Mollie Stone's - and a passion of co-owner Bennett, who is one of the leading kosher category mavens in the food and grocery business.

For example, earlier in Mollie Stone's history, Bennett managed the Palo Alto store in addition to being involved in running the other stores the partners' operated at the time.

Over the years Bennett and his team at the Palo Alto supermarket created one of the most extensive kosher category product assortments of any chain or store in the Bay Area.

They also focused on enhancing the kosher offering for the key Jewish holidays, which has resulted in the Palo Alto location becoming a shopping venue for many Jewish consumers from throughout the nine-county Bay Area, particularly during the key Jewish holidays like Passover. There are nearly 7 million residents in the region, many of whom are observant Jews.

But Bennett isn't a kosher-centric kind of grocer when it comes to private brands or products of any kind, nor is Mollie Stone's a on-trick food retailer when it comes to ethnic and specialty foods and its own brands.

For example, Bennett tells us Mollie Stone's is in the process of growing its Nonna Luisa Italian foods private brand, which is named after the most important member of any Italian household, not to mention the entire culture. That person, of course, is Nonna (grandmother).

The grocer, according to Bennett, is in the process of adding two new items to its small but growing Nonna Luisa private brand line, both imported from Italy - shelf-stable Gnocchi and Organic San Marzano tomatoes. The label for the tomatoes is pictured at the top of this story.

Bennett tells Fresh & Easy Buzz the new items are will be introduced in the nine Mollie Stone's stores between January-March of next year. There are currently pasta, oils and vinegars under the Nona Luisa brand.

We aren't surprised Mollie Stone's has decided to grow its Nonna Luisa Italian foods' brand because, just as Bennett is the in-house kosher foods maven, the grocer also has its own in-house Italian foods maven, who's also a mensch, and has been with Stone and Bennett since nearly the beginning in 1985, when Mollie Stone's Markets' was founded.

That maven, mensch and Italophile, all rolled up into one, is Angelo Demante, who's managed the Sausalito Mollie Stone's grocery market  since it opened in 1988.

Demante, who's worked in the food and grocery retailing business for over a half century, not only is and speaks Italian, he knows the Italian foods' category inside-out, and regularly creates in the Sausalito store some of the best-looking Italian food product displays we've seen, particularly during holidays such as Columbus Day, Easter and Christmas, when many Italian specialty foods are popular and in demand.

In fact, we're told by a source we're only identifying as Deep Clerk that Demante, who may be the oldest-in-age but youngest-in-spirit - particularly when it comes to the Italian foods category - supermarket store manager in America, may already have an end-cap picked out in the Sausalito store for the new Nonna Luisa brand Gnocchi and canned tomatoes set to be introduced early next year.

If Mollie Stone's can make the launch happen in January, the timing could be perfect: Angelo Demante, the grocer's Italian foods' maven and mensch, can simply replace boss and kosher category maven Dave Bennett's current holiday kosher foods end-cap with his own, featuring the two new Nonna Luisa items imported from Italy, which would be another great way for kosher to meet Italian at Mollie Stone's Markets'.

Related Stories

May 16, 2011: 'Wing Man-to-Wing Man' - Mollie Stone's Markets' 'Mike & Dave' Create, Set to Launch 'Personal Brand' Wing Sauce

June 23, 2011: Mollie Stone's Markets' Owners' Eponymous Mike & Dave's Wing Sauce Grows Display Wings

July 14, 2011: Mollie Stone's Markets' Takes Next Step in its Social Media Journey By Hiring First In-House Manager

August 4, 2011: Mollie Stone's Markets' Year of Passionate Improvement Continues With Launch of New Website Tomorrow; But There's Also More In-Store

Read additional stories about Mollie Stone's Market here.

You can view all the stories in our Private Brand Showcase feature, including our most recent about Safeway Store's new private brand and Fresh & Easy's new burrito bowls, here.

Roll Up Times Two? Sprouts Farmers Market In Talks With Sunflower Farmers Market About Possible Acquisition

The Insider - Heard on the Street

Representatives of Arizona-based Sprouts Farmers Market and Colorado and Arizona-based Sunflower Farmers Market are engaged in discussions about a possible acquisition by Sprouts of Sunflower, which operates 35 farmers market-style grocery stores in eight Western U.S. states, according to my sources.

The talks and negotiations have been going on for slightly over a week, although perhaps longer, according to the information I have.

I stress ... What's going on are discussions of a real and serious nature, but a deal between the two grocery chains has not been reached as of today, according to my sources.

Sprouts and Sunflower operate very similar farmers market-style format grocery stores.

Both privately-held chains focus on offering value-priced natural and organic food, grocery (across all store categories) and related products in their respective stores, which also are about the same size, averaging about 28,000 to 33,000 square feet. Both chains also use fresh produce as a key proposition, building their store formats and product offerings, which are nearly identical, around large produce departments designed to look like an indoor farmers market.

It was just 10 months ago when I first reported (here) that representatives of Arizona-based Sprouts Farmers Markets and then Irvine, California-based Henry's Farmers Markets were engaged in talks involving an acquisition/merger deal between the two farmers market-style grocery chains, which share a common family tree.

In a series of follow-up columns - and in various news stories by Fresh & Easy Buzz published in January and February, we further reported and developed the story, adding new information about the deal talks between private equity firm Apollo Global Management which owned Henry's through its Southern California-based Smart & Final LLC retail company and is now the majority-owner of Sprouts, and Sprouts Farmers Market.

On February 15 of this year Smart & Final announced an agreement to sell Henry's Farmers Market to Sprouts, in a deal that would make the owner of Smart & Final and Henry's the majority-owner of Sprouts.

According to my sources, Apollo Global Management owns slightly more than 50% of Sprouts Farmers Market. The rest of the food and grocery retailing company, which currently operates 106 stores in four Western U.S. states, is owned by members of the Boney family (the founding family of what became Henry's Farmers Market) - Stan Boney is chairman and his son Shon is CEO - who founded Sprouts, two other co-founders, Scott Wing and Kevin Easler who also serve on the board, and nearly 200 investors, ranging from a few who own a good-sized stake in the grocer, to the majority who own small shares. The various investors existed prior to the Henry's Farmers Market deal with Apollo.

In my April 15 column I reported that the deal between the two parties would be final on April 18. [April 15, 2011: Sprouts Farmers Market's Acquisition-Merger of Henry's Farmers Market to Be Final On Monday, April 18.]  Also see: January 24, 2011: 'The Insider' - End-Game Could Be Near in the Sprouts Farmers Market-Henry's Farmers Market Deal Talks.

On April 18, 2001, Sprouts Farmers Market confirmed the deal was final in an announcement. [April 18, 2011: Sprouts Farmers Market Confirms Our April 14 Scoop: Sprouts' Acquisition-Merger of Henry's Farmers Market Final Today.] At that point the mainstream business and grocery industry trade press all wrote stories about the deal, although a couple publications picked up the reporting in Fresh & Easy Buzz prior to the April 18 public announcement by Sprouts and Apollo Global Management.

Sunflower Farmers Market was founded in 2002 by Michael Gilliland and some partners.

Gilliland is the former co-founder and CEO of Wild Oats Markets, Inc., which was acquired in 2007 by Whole Foods Market. Gilliland had left Wild Oats and started Sunflower Farmers Market before the Whole Foods acquisition of Boulder, Colorado-based Wild Oats, which at the time was the Austin, Texas-based chain's main competitor in the the natural-organic food and grocery retailing space.

He served as CEO and was the public and media face of Sunflower Farmers Market until February of this year, when he resigned that position and his seat on the board after being arrested in Phoenix, Arizona and charged with solicitation of a minor prostitute for the purpose of sex.

Gilliland has plead innocent to the charges. He was originally supposed to go to trial in Maricopa County Superior Court (Arizona) on August  9. However, he has requested and received three continuances from the court since then, for trial dates set for September, then October and now November 14, which is his current trial date.

The reason Gilliland and his attorney have given the court for the continuances, according to court documents I've seen, is that the co-founder and former CEO of Sunflower Farmers Market, who still owns shares in the chain, has been traveling out of state. He has a pre-trial conference set for tomorrow (November 7), in advance of his scheduled November 14 trial in Arizona.

Sunflower Farmers Market, which although it maintains its corporate headquarters in Boulder, Colorado where the chain was founded also has an operations-oriented headquarters facility in Phoenix, Arizona where Sprouts is headquartered, hasn't let the controversy surrounding Gilliland's arrest and resignation prevent it from carrying on its operations and rapid growth strategy, which has been in place for a few years.

Immediately following Gilliland's resignation as CEO and from the board on February 10, 2011 - which was two days after his arrest - Sunflower's board began distancing the grocery chain from Gilliland. Two days later on February 12, Sunflower's board, which is headed by Bennett Bartoli, named then-president Chris Sherrell acting CEO. In late April the board made Sherrell permanent CEO of Sunflower Farmers Market.

Along with naming Sherrell as acting CEO on February 12, Bartoli and the board said in a statement that Gilliland would no longer have any involvement with the chain he co-founded and up until his arrest has been the public face of.

The board also said in the announcement that Gilliland and the board said in a statement that Gilliland would no longer have any involvement with the chain he co-founded and up until his arrest has been the public face of. The board also said in the announcement that Gilliland was now a  "minor investor" in Sunflower Farmers Market. All past articles featuring Gilliland - and there were many - posted on the Sunflower Farmers Market website, for example, were removed the day he resigned, as part of disassociating him from the chain and its image.

Since Gilliland's resignation and Sherrel's taking over as CEO in February, Sunflower Farmers Market has launched into two new market regions, opening two stores in Northern California and one unit in metro Tulsa, Oklahoma.

Sunflower opened its first store in Northern California, which was also its first unit in the Golden State, in Roseville near Sacramento on May 11. The second Sunflower market opened last month in Modesto, California. Modesto is in the Northern Central Valley, about 100 miles from Sacramento.

The farmers market-style format grocery chain so far plans to open four additional stores in Northern California next year (in spring and summer) - one unit in Sacramento, two stores in San Jose, and one unit in nearby Mountain View. It's been looking for additional store locations in Northern California as well, with a focus on the San Francisco Bay Area and metro Sacramento regions.

On August 21 Sunflower Farmers Market opened its first store in Oklahoma. That store is in Oklahoma City.

Oklahoma City has recently become ground zero for natural-organic food retailing chains. For example, in July the Natural Grocers' chain opened a store in Oklahoma City. And on October 12 Whole Foods Market opened a store there. The new 35,000 square-foot Whole Foods market is about a mile from the about 28,000 square-foot Sunflower market opened in August.

Sunflower currently has a second store scheduled to open in Oklahoma in early 2012. That unit is in Edmond.

With the addition of stores in California (all currently in and planned for the northern part of the state) and Oklahoma this year, Sunflower Farmers Market now operates 35 stores in eight states in the Western U.S. - Colorado (12), Arizona (7), New Mexico (6), Nevada (2), Texas(2), Oklahoma (1), Utah (3) and California (2).

The grocer also currently has a few planned new stores in the pipeline in its existing market regions. For example, Sunflower announced in late October that its planning a 28,000 square-foot store in the Rimrock Crossing Shopping Center in Grand Junction, Colorado.

Sunflower already has plans to open its thirteenth store in its home state next year. That store, at East Colfax Avenue and Garfield Street in the Denver area, is currently set for a late 2012 opening, CEO Chris Sherrell said in the October press release.

I also know from my sources that in addition to searching for numerous future locations in Northern California, as I've noted, Sunflower also has been looking for more additional store sites in all eight states but most particularly and aggressively in Oklahoma and Utah, along with Northern California.

Until fairly recently Sunflower was focusing on searching for numerous new locations in Texas, where Sprouts has been opening and has added numerous stores with the acquisition of Henry's Sun harvest markets in the state, which were part of the deal this year.  But more recently Sunflower has switched that focus and emphasis to next door Oklahoma.

Sprouts Farmers Market currently has 106 farmers market style grocery stores in four western states - Colorado, Arizona, California and Texas.

Assuming the price was right, An acquisition of Sunflower Farmers Market would be fairly positive from synergistic standpoint  for Sprouts and Apollo, which as I've said in my previous columns earlier this year wants to grow the chain rapidly.

For example, Sprouts has no presence in four of the Western U.S. states where Sunflower has its 35 stores - New Mexico, Utah, Nevada and Oklahoma.

While Sprouts could enter these states fairly rapidly if it wanted to because its decentralized distribution system makes doing so easier than for a self-distributing chain - Sprouts uses a natural-organic foods wholesaler to distribute the majority of products to its stores - an acquisition of Sunflower would obviously make that entry immediate, giving it six stores in New Mexico, three units in Utah, two stores in Nevada and one unit plus more on the way in Oklahoma.

Acquiring such an existing store base makes it easier for a grocer to locate and open additional stores at a faster pace then entering from scratch does.

It also immediately adds sales to the bottom line.

Another plus for Sprouts is that Sunflower has no stores in Southern California, where the majority of its stores now are because of the Henry's acquisition. Therefore, there would be no duplication in Southern California, a key market for Sprouts, with an acquisition of Sunflower Farmers Market, and therefore no need to close any existing stores.

Another plus is Northern California, where both Sunflower and Sprouts are expanding rapidly. Sprouts currently has four stores in the region - one each in El Grove and Roseville near Sacramento, and two in the San Francisco Bay Area, in Sunnyvale (South Bay area) and Dublin, which is in the East Bay Area.

So far Sprouts Farmers Market has two stores set to open in the region next year. Those stores are in Walnut Creek, which isn't far from Dublin in the East Bay Area, and Citrus Heights, which is in the Sacramento metro area, just like El Grove and Roseville are.

Sprouts is also currently in the approval process with the city for a store in Santa Rosa, which is in the North Bay Area. Additionally, the farmers market format grocer is looking for numerous additional store locations in Northern California.

The four stores Sunflower Farmers Market plans to open next year in Northern California are all potentially good fits - and locations - for Sprouts. The two units in San Jose and the one store in Mountain view are near the existing Sprouts market in Sunnyvale, for example, and Sprouts Farmers Market currently doesn't have stores in any of the two cities.

Further, the two stores Sunflower Farmers Market plans to open in Sacramento next year fit into Sprouts' focus on the Sacramento metro region. At present it has no stores set to open in 2012 in Sacramento proper. The two planned Sunflower units would give it two such stores. Citrus Heights, where Sprouts will open a store in early-to-mid-2012, is right next door to Sacramento, and Elk Grove and Roseville, where Sprouts and Sunflower both have existing stores, are nearby.

The Sunflower store in Roseville is far enough geographically from the Sprouts unit that I think Sprouts Farmers Market could probably keep it in operation, were an acquisition to become reality. It could even operate it under the Sunflower name, which might not be a bad idea if it were to keep it open.

Regarding Colorado and Arizona, Sprouts' top two states in terms of store-count along with California - which also are where Sunflower Farmers Market has 19 of its 35 stores (12 in Colorado with 2 more planned, and 7 in Arizona - there is some location duplication but it's actual fairly limited, according to my analysis.

A few Sunflower Farmers Market units in each state may need to be closed. Some of the stores might also be able to be operated under the Sunflower banner, although I think Sprouts would eliminate it like they've done with the Henry's banner. But the minimal duplication is manageable as I see it - and far from a deal stopper.

Earlier this year Sprouts' said the acquisition-merger with Henry's would create a food and grocery retailing company with about $1-$1.2 billion in annual sales. I estimate, adding in new stores opened since the deal was finalized, along with those units planned for the first half of 2012, that Sprouts Farmers Market is on-track to have about $1.5 billion in annual sales soon.

Sunflower Farmers Market has annual sales of about $600-$650 million, based on information I've obtained from sources at the retailer over the last year.

Therefore, were a deal to be done between Sprouts and Sunflower - and I stress the two parties are only talking at this point - I estimate it would make Sprouts Farmers Market a grocery chain with about $2 million in annual sales, which is more than double Sprouts' annual sales before the Henry's deal happened this year.

What I know is that Apollo Global Management has the capital available to do a deal.

I also know it wants to grow Sprouts rapidly. Acquisitions make such rapid growth happen much faster than an organic growth-only approach does.

Sunflower Farmers Market is also in a state of flux, with the resignation of Gilliland, which is something it's managed well. The post-Gilliland Sunflower is open more to change than the chain was while he was still CEO, for example.

It also has investors in the company who when they made the investments a few years ago were then looking at an about five-year time horizon to get some pay back.

Sunflower is also growing rapidly, which takes a lot of cash - new stores, new employees, ect. Some of that growth can come out of cash flow and previous loans and investments. But the rapid new store growth plan Sunflower Farmers Market is following is also going to take new money, in my analysis and opinion.

So, based on what I've laid out above, the stage is set rather well - synergies, cash available, common needs - for an acquisition of Sunflower by Sprouts Farmers Market. But of course, the Devil is always in the details.

Most important, the farmers market style formats are near-identical, as was the case between Henry's and Sprouts. Apollo wouldn't have likely done a roll up of Henry's with Sprouts were the formats not virtually the same.

As such, a second roll up, this time of Sunflower, is the next logical step for Apollo/Sprouts.

It also eliminates the only remaining significant farmers market-style format competitor.

Many operators and investors attach significant value to this element alone when considering a deal. For example, a considerable amount of the motivation behind Whole Foods Market's acquiring Wild Oats in 2007, which was performing poorly but was its leading competitor in terms of directly related formats, was to remove it as a competitor, which is something co-founder and co-CEO John Mackey has stated publicly.

As of today what's going on between the representatives of Sprouts and Sunflower, who all know each other, particularly at the board and senior executive levels, is a real and serious discussion of a possible acquisition of the latter by the former. Executives at neither chain are confirming it, which is wise and as you would expect to be the case.

Stay tuned. I may have more soon.

- 'The Insider'

[Readers: Click here to read all past columns by 'The Insider' about the Sprouts'-Henry's deal. Also, click the following links - Sprouts Farmers Market and Sunflower Farmers Market - for related stories about Sprouts Farmers Market and Sunflower Farmers Market.]

Open in Los Angeles: A Look at the First 'Fresh & Easy Express' Store

Tesco's Fresh & Easy Neighborhood Market opened its first 3,000 square-foot Fresh & Easy Express fresh food and grocery market today.

The store is at La Cienega Boulevard and 18th Street in Los Angeles, California.

Read our story below on the blog or at this link - November 1, 2011: Analysis: Tesco Opens First 'Fresh & Easy Express' Store Tomorrow in Los Angeles ... So What ... ? - for news, analysis and perspective on Fresh & Easy's 'Express' format and stores.

We'll have more on Fresh & Easy Express before the week is over.

Below is a first look at the outside and inside of the first 'Express' format store, which opened this morning in Los Angeles.

[Photo credit here.]

Analysis: Tesco Opens First 'Fresh & Easy Express' Store Tomorrow in Los Angeles ... So What ... ?


First in a series on 'Fresh & Easy Express'

In January of this year we broke the news that Tesco's Fresh & Easy Neighborhood Market was developing Fresh & Easy Express, a smaller, edited version - about 3,000 square-feet of selling space in 4,000 square-feet of interior space - of its Fresh & Easy fresh food and grocery markets, which average about 10,000 square-feet (selling space).

[Read our January 23, 2011 story here: Tesco's Fresh & Easy Neighborhood Market Looking For Locations For New, Smaller-Format 4,000-to-5,000 Square-Foot Stores.]

We also correctly reported in the January story that Fresh & Easy Neighborhood Market was looking for locations for the stores, and was planning on opening one, and possibly more than one, of the units this year

The Fresh & Easy Express stores will offer most everything - dry grocery, packaged baked goods, frozen foods, perishables, fresh meats, produce, ready-to-eat and ready-to-heat fresh-prepared foods - the Tesco-owned grocery chain offers in its 183 standard-version Fresh & Easy Neighborhood Market stores, but in an edited departmental fashion, with a limited product assortment.

Late this summer, about seven months after we broke the Fresh & Easy Express news, Fresh & Easy's corporate spokesperson confirmed our January report, publicly announcing the grocer's plans to open Fresh & Easy Express stores - stores with the format we reported they would have in our January story.

Not long before Tesco's Fresh & Easy announced the 'Express' store initiative this summer, we reported and published a follow up piece to our January 23 story, in which we identified what Fresh & Easy's executive management team thought at the time would be the first Fresh & Easy Express store it would open this year. That store being in the San Pedro area of Los Angeles, California.

[You can read our July 30, 2011 story here: First 4,000 Sq. Ft. Fresh & Easy Neighborhood Market 'Express' Store Set to Open in Los Angeles' San Pedro Community This Year.]

Since we published our story, Tesco's Fresh & Easy has had problems and delays in obtaining certain approvals from government officials for the San Pedro-Los Angeles 'Express' unit, which has set back the store's completion (remodeling of a vacant building) and opening date timeline. Among the problems has been an objection by a group of neighborhood residents to the grocer's application to sell alcoholic beverages at the location.

There are currently seven planned Fresh & Easy Express mini-markets, all in Southern California, set for openings beginning tomorrow through February-March 2012.

The locations of the seven stores are: Los Angeles - one unit near the University of South California campus, the San Pedro unit and the very-soon-to-be opened store at La Cienega Boulevard and 18th Street. Los Angeles County - one store each in Burbank and Hermosa Beach. Orange County - one mini-market in Seal Beach and a second unit in Laguna Niguel.

Tomorrow Tesco's Fresh & Easy is opening the La Cienega Boulevard and 18th Street store in Los Angeles as its first Fresh & Easy Express market.

We reported in this August 1, 2011 story - Six Fresh & Easy Neighborhood Market Stores in Southern California Being Readied For Openings - that Tesco's Fresh & Easy was preparing for an October or November opening for the store at La Cienega and 18th in Los Angeles.

The Los Angeles Fresh & Easy Express store opening on Wednesday, November 2 has about 3,000 square-feet of selling space inside an interior space of about 4,000 square-feet, which is the size we reported in January the 'Express' format stores would be.

Tesco has billed Fresh & Easy Express as a test.

However, Tesco CEO Philip Clarke and Fresh & Easy Neighborhood Market CEO Tim Mason, who is also Tesco's deputy CEO and chief marketing officer reporting to Clarke, have their respective fingers crossed that the 'Express' format stores - which take their inspiration from the existing Fresh & Easy grocery stores and the retailer's Tesco Express convenience stores in the United Kingdom - will not only do well but become a hit because they would like to have the micro-format option, which offers certain economies of scale on the expense side of the balance sheet, available to them as they work to grow Fresh & Easy's store-count from the current 183 units to 300 stores, a number they want to achieve by February 2013, but which based on an historical analysis model we've developed vis-a-vis Fresh & Easy we see them falling short of doing.

According to Clarke, Tesco needs to have about 300 Fresh & Easy stores open in order to break-even by the end of the United Kingdom-based retailer's 2012/12 fiscal year, which he says the El Segundo, California-based grocery chain will do. The end of the 2012/12 fiscal year is just 16 months away.

For all real and practical purposes, Tesco has until the day after Christmas 2012 to achieve break-even with Fresh & Easy. That's 13 months from today. The month of January 2013 and three weeks in February aren't going to be relevant in the bigger picture, terms of achieving break-even.

Tesco lost $113 million on Fresh & Easy in the first half of its 2011/12 fiscal year, which ended August 27, 2011. That's a 21%  improvement over the same period for the previous fiscal year. Tesco lost $151 million on Fresh & Easy Neighborhood Market in its 2010/11 fiscal half-year, and about $300 million for the full fiscal year, which ended February 27, 2011.

However, there's no guarantee the 21%-reduction in loss for the half-year ended August 27, 2011 is a trend.

We will be writing more about Fresh & Easy Express later this week and into next week. So for now we aren't going to get into extensive analysis on the format and its potential.

However, we don't believe the micro-format 'Express' stores or the format itself is even close to being a killer food and grocery retailing application for Tesco and its El Segundo, California-based Fresh & Easy Neighborhood Market chain.

We also believe that if the stores do on an operational basis what Fresh & Easy's CEO,Tim Mason, and the corporate spokesperson have said they will - which is, on the labor side, to employ the same number of workers (25-30) in the 3,000 square-foot stores as they do in the 10,000 square-foot stores, working the same number of average hours - and on the merchandising side, edit the selection and reduce the SKU-count considerably (Fresh & Easy stores offer 5,000-5,500 SKUs, which isn't many) - offering about 2,500-2,800 SKUs, like a good source told us earlier this year the 'Express' stores will do, that the economics of the micro-small-box stores will be  skewed in a failure direction  from the outset, regardless of such key operational variables like store location, pricing and promotion.

The solution: Fewer employees and employee labor hours per 'Express' store, and far more SKUs.

A store has to have considerably more turnover if it offers say 2,500 SKUs, compared to 5,000, for example.

The standard-version Fresh & Easy grocery markets suffer from too small average market sizes. Obtaining adequate market basket sizes is even more difficult to achieve in 3,000 square-feet than it is to do in 10,000 square-feet.

We've worked on small-box stores in the Western U.S. and extensively researched small-box food and grocery retailing economics (as it pertains to the industry in the U.S.) here at Fresh & Easy Buzz. Bottom line: It's a challenge for a chain to make money with 3,000 square-foot grocery stores.

Traditional convenience stores, which average far less than 3,000 square-feet in size in the U.S., can make money because they operate on much higher gross margins (selling products for considerably higher retail prices), which shoppers in the main accept as a trade off for what they perceive as "convenience," than grocery stores and supermarkets do.

The C-stores also have far lower operational expenses than grocery stores do, including in the area of employee labor.

But Tesco can't adopt the higher margin/higher-retail price model traditional C-stores use because Fresh & Easy Express is a smaller, edited version of its Fresh & Easy grocery stores. The name is on the store - Fresh & Easy Express - and the private brand products sold inside are the same as those in the 10,000 square-foot markets.

Therefore, were Tesco to try to offer significantly higher prices at the 'Express' stores, it wouldn't fly because consumers will compare the Fresh & Easy Express stores to the standard-version Fresh & Easy stores rather than to a traditional C-store, like 7 Eleven or Circle K, for example. The result: Damage to the Fresh & Easy brand.

We think it's a good idea for Tesco to experiment with the Fresh & Easy Express format though. But we would offer many more SKUs - we could easily get all 5,000-5,500 of the SKUs that are in the Fresh & Easy grocery markets in the 3,000 'Express' stores, for example, and it would look good, were we designing and merchandising the interior of the 'Express' format from scratch.

We'll be writing more about the Fresh & Easy Express format and stores in the coming days. Stay tuned.