Fresh & Easy Buzz is Away Working on A Special Project... Returning On December 8, 2009

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Memorial Day 2009 - A Day of Remembrance: In Honor of Those Who Made the Ultimate Sacrifice in Service to Their Country

The Tomb of the Unknowns [soldiers] (pictured above) at Arlington National Cemetery in Arlington, Virginia, located across the Potomac River from the nation's capital, is a memorial to all of the American service members who fought and died in foreign wars but who've never been identifield.

The Tomb of the Unknowns, which was established in 1921, contains the remains of one unidentified soldier from World War I, World War II, the Korean War and the Vietnam War.

The Tomb of the Unknowns, which is considered hallowed ground, is guarded 24 hours a day, seven days a week, 365 days a year, by a dedicated military honor guard.

The inscription on the marble tomb simply reads: "Here Rests In Honored Glory An American Soldier Known But to God."

President Barack Obama lays a wreath at the Tomb of the Unknowns at Arlington National Cemetery this morning. [Photo Credit: Charles Dharapak/AP. May 25, 2009.]

Friday Frolic: Liberty Market Top 'Food Star;' Phoenix Ranch Market Chain and Asian Grocer Among Newspaper's '50 Stars of Arizona Food World' List

Arizona Region Market Report

Gilbert, Arizona's independent Liberty Market supermarket (pictured at top) has been picked as the Number 1 "food star" in the Arizona Republic newspaper's just-published 2009 list of what it calls the "50 Stars of Arizona's Food World."

Liberty Market is just one of three Arizona food retailers to make the list. The other two are the Latino-focused Phoenix Ranch Markets chain and Lee Lee Oriental Supermart, an Asian specialty format supermarket in Peoria, Arizona.

The daily newspaper published its "Top 50" list in yesterday's (May 21) edition.

Here's what the Arizona Republic says about Liberty Market, it's top "food star."

Liberty Market
"Since 1935, Liberty Market has been a Gilbert fixture. For decades, it was the only grocery store in town. Then it became the grocery store no one went to, and now the market-restaurant is the Gilbert headquarters of chic, cozy eats: gourmet olives and cheeses for sale, wood-fired pizza to order, pressed sandwiches, fizzy Italian sodas and red velvet cake. Think La Grande Orange, suburban style. It's the creation of Joe Johnston, the brains behind Coffee Plantation and another Gilbert landmark, Joe's Real BBQ. 230 N. Gilbert Road, Gilbert. 480-892-1900." [Web site: libertymarket.com.]

Fresh & Easy Buzz last wrote about Gilbert, Arizona's Liberty Market in this October 17, 2008 piece: [Phoenix, Arizona Metro Market Report: Gilbert, Arizona Independent Liberty Market Fears Not the Tesco and Wal-Mart Invasion of its City.]

Tesco's Fresh & Easy Neighborhood Market, which now has five of its small-format, convenience-oriented combination grocery and fresh foods Fresh & Easy markets in the Phoenix Metropolitan region city of Gilbert where Liberty Market is located, and about 30 stores in Arizona, didn't make the Arizona Republic's food star list. The newest Fresh & Easy unit in Glibert (number five), at Higley & Queen Creek in the city, opened on March 26.

Wal-Mart also has one of its four small-format combination grocery and fresh foods Marketside food markets in Gilbert, Arizona. [October 3, 2008: Wal-Mart Opens First Four Small-Format Marketside Fresh Food and Grocery Stores Tomorrow Morning in Gilbert, Chandler, Mesa and Tempe, Arizona.] Marketside isn't an Arizona "Top 50" food star either, according to the newspaper.

In addition to the retail food markets, the newspaper's "Top 50" list includes restaurants-chefs, a public market, pubs, food companies, wineries, individual foodies and other purveyors of all varieties of foodstuffs.

[You can view the Arizona Republic's complete "50 Stars of Arizona's Food World" list here.]

Here's what the Arizona Republic says about Phoenix Ranch Market, its number 18 selection, which is owned by Southern California-based Pro's Ranch Markets:

Phoenix Ranch Market
"This high-energy California-based grocer packs its markets with tortillas made fresh daily, thirst-busting aguas frescas, vats of crema, a seafood bar with as many as 10 varieties of shrimp and an 80-foot case stocked with traditional Mexican meats. The produce department offers the best local selection of fresh and dried chiles. Too busy to cook? Stop by the expansive takeout restaurant for carnitas, Guerrero-style tacos, red-chile beef or seafood tostada. 1602 E. Roosevelt St., Phoenix, 602-254-6676; 5833 S. Central Ave., Phoenix, 602-276-3800; 5802 W. Thomas Road, Phoenix, 623-247-0362; 6730 W. Camelback Road, Glendale, 623-247-4200." [Web site: prosranch.com.]

The Phoenix Ranch Market stores are located in and around Phoenix, Arizona.

Fresh & Easy Buzz recently wrote about the newest Phoenix Ranch Market Latino-focused supermarket, which is in Mesa, Arizona. You can read our story here: [April 26, 2009: Sunday Feature: Pro's Ranch Markets' Set to Open Sixth 'Phoenix Ranch' Latino-Focused Phoenix Metro Region Supermarket in Mesa, Arizona On Wednesday.] The Mesa Phoenix Ranch Market store is now open.

The Arizona Republic also gave a "Top 50" nod to the Lee Lee Oriental Supermart in Peoria, Arizona (number 25).

Here's what the newspaper writes about the Asian specialty supermarket:

Lee Lee Oriental Supermart
"No, you're not in Asia - you're in Peoria. But it's easy to lose your bearings wandering the aisles of amazing Lee Lee Oriental Supermart. Just about every Asian country is represented, from Indonesia to Singapore, the Philippines to Thailand. The range of products is breathtaking. The high-quality produce section can stop you in your tracks, both for the staggering variety of greens, fruit and vegetables and for the astonishingly low prices. Check out the live fish and handsome seafood counter. The meat case displays animal parts you'd never see at your neighborhood American supermarket. And the shelves are packed with noodles, oils, vinegars, sauces, pastes and beverages. Lee Lee is like the Grand Canyon: You have to spend some time here to truly appreciate it. So make sure you stop and smell the Chinese long beans. 7575 W. Cactus Road, Peoria, 623-773-3345; 2025 N. Dobson Road, Chandler, 480-899-2887."

The downtown Phoenix Public Market, a collection of numerous retail fresh foods, specialty grocery and prepared foods purveyers all under the same roof, is also one of the "Top 50" on the list. [Web site: phoenixpublicmarket.com.]

Arizona's food banks also get a mention as one of the state's "food stars," and rightly so. The Arizona food banks, like those in many other states, have seen some of their busiest times in history over the last year as the recession and unemployment has hit Arizona hard.

The "Top 50" list is an interesting mix of businesses and individuals, all having a single focus, which is to bring food to Arizona residents in a variety of ways and formats, focusing on doing it the best way they can.

And it's interesting, but not a surprise, to note that the three food retailers named to the "Top 50" list are all independents. After all, when it comes to features and offerings like product selection, specialty focus and fresh, prepared foods, independents have historically lead the way among American grocers.

That's good -- and likely rather tasty -- food for thought as we enter the Memorial Day holiday weekend.

Breaking Buzz: Tesco's Fresh & Easy Issues Another New Discount Store Coupon ($10-off $50 Though); We Told You the Coupons Would 'Be Back'

Tesco's Fresh & Easy Neighborhood Market has issued another one of its discount store-coupons.

However, the just-issued (yesterday) store coupon is a $10-off total purchases of $50 or more discount voucher, unlike the typical $5-off purchases of $20 or more and $6-off purchases of $30 or more discount store coupons the grocery chain normally distributes to shoppers.

Additionally, instead of having a multi-week (nearly one month) shelf-life like the $6-off purchases of $30 or more direct-mailed paper coupon that Fresh & Easy distributed on April 28, the new $10-off ($50) store coupon is good only for about one week. The $6-off coupon mentioned above expires on May 25. [See- May 1, 2009: Fresh & Easy Brings Back $6-Off Deep-Discount Store Coupon; Latest Version Good For Nearly One Month; New Promo Strategy Didn't Last Long.]

Fresh & Easy posted the new $10-off total store purchases of $50 or more discount coupon on its Web site yesterday. The store coupon, posted on the grocer's Web site here, expires on May 24.

Perhaps Tesco's Fresh & Easy's senior management read Fresh & Easy Buzz's two recent stories about the grocery chain's once again aggressive distribution of its discount store coupons, along with our past pieces in which we suggested that two key elements of using discount store coupons as promotional vehicles are:

>To increase shopper market basket size -- achieved by making the minimum purchase amount required to redeem the coupon more than $20 or $30 -- and;

>Duration -- that instead of having a nearly one month shelf-life like the April 28 -to- May 24 $6-off Fresh & Easy store coupon does, making the expiration date about three days -to- one week, so that an incentive is created for the shopper to use the coupon within a shorter period of time, which is what grocery retail promotions are designed to do in the main.

The new $10-off purchases of $50 or more store coupon meets both of our criteria: It pegs the minimum customer purchase required to redeem the store coupon at $50 rather than a mere $20 or $30, and the coupon's shelf life is for about one week, rather than for two, three or even nearly four weeks, time periods most typically used by Tesco's Fresh & Easy.

You can read our two recent stories on the topic at the links below:

>May 1, 2009: Fresh & Easy Brings Back $6-Off Deep-Discount Store Coupon; Latest Version Good For Nearly One Month; New Promo Strategy Didn't Last Long

>May 7, 2009: 'They're Back' in Full-Force: Tesco's Fresh & Easy Adds New $6-Off Online Coupon to Just-Recently Direct-Mailed $6-Off Coupon; Tough to 'Terminate'

As you can clearly read in the stories, we even suggested a $10-off purchases of $50 or more value store coupon as one of the recommended options. Both the $10-off ($50) and the $6-off ($30) coupons provide a 20% discount to shoppers if they purchase the minimum amounts -- $50 and $30. But the $10-off ($50) discount store coupon provides Fresh & Easy with an added $20 in total purchases if a shopper desires to use the coupon.

In our stories, particularly the May 7, 2009 piece, we also said that the discount store coupons would be back in force for Fresh & Easy. And they are. Back-to-back in fact.

The new coupon comes on the heels of one of the two $6-off purchases of $30 or more Fresh & Easy store coupons reported on in our May 1 and May 7 stories that's still out there and alive. That coupon doesn't expire until May 25, actually one day after the new $10-off ($50) store coupon expires.

In addition to posting the $10-off store coupon on its Web site yesterday, as well as alerting members of its "Friends of Fresh & Easy" e-mail data base to the offering, the grocery chain promoted the new $10-off store coupon this afternoon on its Twitter.com feed with this "tweet:"

Hello Savings! hello coupons! http://tinyurl.com/pyznotabout 7 hours ago from Netvibes, directing its Twitter followers to the online coupon on its Web site.

From early February until April 28, Tesco's Fresh & Easy attempted to dramatically reduce the volume of the discount store coupons it distributes, both via its paper fliers direct-mailed to consumers homes and on its Web site, as we discussed in our May 1 and May 7 stories linked above.

During this time period, we are aware of only about three store coupons having been issued by Fresh & Easy. They all were either $5-off ($20) or $6-off ($30) coupons. (See our May 1 and May 7 stories for more details.)

That may still sound like a significant number of the discount coupons for the grocer to issue in a three month period. But compared to the past -- from the time the first batch of Fresh & Easy stores opened in November 2007 until early February 2009, the grocery chain almost always had these discount store coupons circulating, mostly mailing them to residential households every couple weeks (often including two or three in one flier), posting the coupons online, and even handing them out to shoppers in multiples in the stores until the end of 2008. Store coupon mania would be a fair term for the practice.

Tesco Fresh & Easy's senior management members and its company spokespeople even said in early 2009, via the company Web site Blog and on its Twitter.com feed, that the grocer was cutting back and perhaps even eliminating the discount store coupons completely.

As we said in our two early May stories -- the store coupons are back. The plans to dramatically reduce or eliminate distributing the coupons obviously hasn't work.

The 20% store coupon's 20% discount comes out of Tesco Fresh & Easy Neighborhood Market's profit margins. This is unlike the case with manufacturers' "cents off" item coupons, which virtually every grocery store excepts but not Fresh & Easy, the discounts of which are paid for by the maker and marketer of the given product.

With manufacturer-issued "cents off" item coupons, grocers send the coupons to a clearing house on a regular basis and are paid back the face value of the coupon (50-cents or $1) plus a three cent or so per coupon handling charge, by the company that issued the coupon.

Expect to see more of the discount store coupons throughout the summer because Tesco's Fresh & Easy needs the sales they bring to its stores, which is why the discount store coupons are back in force.

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

Strategy Session: Tesco's Fresh & Easy Needs to Move From its One Store Brand Fits All Strategy to A 'Three Brand' Store Brand Strategy

Tesco's Fresh & Easy Neighborhood Market uses its fresh&easy private label brand on every store brand item in its stores regardless of retail price point or ingredient profile, including premium, specialty, natural and organic products, as the photogrpah above offers an example of. We suggest the grocery chain create two new store brands: One for premium-specialty products and another for natural-organic items, thus giving the retailer what we call a three brand store brand strategy.

Analysis & Opinion: Tesco's Fresh & Easy Neighborhood Market and its Store Brand(s)

Tesco's Fresh & Easy Neighborhood Market currently uses a one brand name fits all strategy for its store brand merchandising and marketing strategy, with just one very minor exception.

That exception is that in February the grocery chain began merchandising a limited selection of fresh meat and poultry items under the "Buxted" store brand, which it's using as a value or price-focused store brand for the fresh meats category. (We haven't conducted any empirical research on the "Buxted" brand for the price-focused fresh items. But to us the brand name sounds far more "upscale" or "premium" to our ears than it sounds "value" or "low price." [See - March 9, 2009: An English Village, A British Fresh Chicken Brand and Tesco Fresh & Easy's New 'Buxted' Discount Fresh Meat Brand: What Do All Three Have in Common?]

All of the store branded items in the Fresh & Easy stores -- and store brands comprise about 60% of all the SKUs in the markets -- are branded with the fresh&easy name. This includes all store product categories -- dry grocery, perishables, packaged fresh produce (which is nearly all the produce in the stores), fresh, prepared foods, non-foods and fresh meats -- accept for the "Buxted" items.

Single store brand strategy a mistake

We think using the fresh&easy brand name only for its store brand items is a mistake for Tesco's Fresh & Easy.

The main reason this is our analysis is we argue that using a one store brand name fits all strategy allows for zero brand differentiation between discount or value-priced, natural and organic, and premium and specialty items in the stores. There's no brand differentiation among the store branded items based on their retail price, quality or ingredient contents. They are all fresh&easy.

It's our analysis that this unitary and undifferentiated store branding item strategy creates confusion in the minds of shoppers, as well as fails to offer Fresh & Easy the ability to differentiate -- and thus sell more -- it various products based on creating consumer perceptions built on the brand name, which is what packaged goods branding and marketing is all about after all.

The Safeway example

As an example, Safeway Stores, Inc. uses various brand names for its private label products depending on various criteria. The grocery chain uses the "Safeway" store brand name on its value-priced grocery and non-foods items.

It uses the "Lucerne" brand name on its value-priced dairy and perishable items.

And Safeway uses the brand name "Basic Red" for a line of store brand "branded generic" (meaning the most-price-focused line) items, such as paper goods and other non-foods products.

Safeway also has a separate brand name, "Safeway Select," for its perishable and dry grocery premium and specialty items.

Additionally, for Organic products Safeway uses the "O 'Organics" brand name, and it even has a separate brand name, "Eating Right," for its extensive line of healthy and natural items.

The Pleasanton, California-based supermarket chain also uses "Safeway Artisinal" for a select number of upscale specialty products in its fresh bakery and deli departments.

And it uses the brand name "Ranchers Reserve" to designate its Angus variety of store brand beef, for example.

While at this point in time we don't suggest Tesco's Fresh & Easy adopt as extensive of a store brand strategy as Safeway Stores' does -- after all Safeway has about 1,755 stores in the U.S. and Canada, with annual sales of over $40 billion, while Fresh & Easy has 120 stores with annual sales of about $300 million in the U.S. (although its parent Tesco has annual global sales of about $80 billion) -- our analysis leads us to suggest and argue that Fresh & Easy Neighborhood Market does need to expand its one store brand -- fresh&easy -- fits all products store brand strategy to, at a minimum, a three store brand strategy for now.

The three-brand store brand strategy

Here's what we suggest:

First, for now we would retain the fresh&easy store brand name.

We would use it as the chain's value-priced store brand across all categories -- from dry grocery and prepared foods, to fresh meats, perishables and fresh produce. In other words, instead of being "everything" like it is now, brand fresh&easy would be the chain's price-focused store brand.

We would get rid of the "Buxted" store brand. It's only a few months old and nobody likely would even notice if it was eliminated.

The brand name just is wrong for a price-focused fresh meats line in our analysis. It sounds stuffy, even upscale, rather than saying "value" or "low-price."

A new premium-specialty products' store brand

Now that we've established fresh&easy as the price or value-focused store brand, we would then create a new store brand for all of the premium and specialty items currently branded with the fresh&easy name. We would use the brand name across all store categories on items that fit the premium or specialty classification.

This premium and specialty category brand name should not have fresh&easy as a part of it. Rather, just as if it was a manufacturer-marketed packaged goods brand, it should merely have a name. For example, Target uses Archer Farms and Choxie for its premium and specialty store brand items. Kroger Co. uses "Private Selection" as its premium and specialty foods store brand.

Creating a new brand name for the fresh&easy premium and specialty food and grocery items does a couple key things for the grocery chain in the store brands arena.

First, it allows a merchandising separation between the price-focused (the fresh&easy store brand) items and the premium and specialty items. This is key in consumer packaged goods marketing.

Second, it allows Tesco's Fresh & Easy much more merchandising opportunities (which it would have to take advantage of to make work) than it now has.

For example, by branding its premium and specialty items with a new brand name, confusion no longer exists between say a lower priced (and quality) fresh&easy brand chocolate bar and a fresh&easy brand higher-quality premium chocolate bar in terms of the two same brand chocolate bars having significantly different retail price points and ingredient profiles. Consumers are used to premium items having different brand names than price-focused items.

Based on our research and observation we believe that such confusion exists among many consumers that shop at Fresh & Easy markets in regards to the unitary fresh&easy brand name regardless of the price or quality of an item. We think the shopper confusion exists across all fresh&easy branded item product categories and ingredient profiles. The chocolate bar example is merely a convenient and we think illustrative example.

Having separate brand names for store brand price-focused and premium-specialty items allows for better merchandising, pricing, merchandising and marketing strategies for a food retailer. In addition to lending to better product differentiation among shoppers, doing so also gives the retailer far more merchandising, retail pricing, marketing and promotional ammunition.

A new natural-organic products store brand

Next we would create a new, separate brand name for all of Tesco Fresh & Easy Neighborhood Market's natural and organic food and grocery items, including natural and organic fresh foods, which are currently branded under the fresh&easy name, like all of the grocery chain's store brand products are.

Like with the premium and specialty items, this allows for greater product differentiation in the minds of consumers. It also, like with the other examples, allows for far superior retailer merchandising, pricing, marketing an promotional strategies.

Right now, the only difference between a fresh&easy store brand conventionally-grown food item and an organic item is the price, along with the name "organic" (or "natural) being stamped on the fresh&easy item package. From a packaged goods merchandising and marketing perspective this creates confusion in the minds of shoppers.

For example, this is why Safeway created its hugely successful "O Organics" store brand, which it uses for its organic food and grocery items across all store categories -- from dry grocery and perishables to fresh produce. It's all about packaged goods brand marketing, regardless if its a retailer doing the brand marketing or a classic packaged goods company like P&G or Kraft.

In terms of creating a new store brand for its natural and organic items, Fresh & Easy actually might not even need to create the brand name. Instead it could purchase a brand name that has years of brand equity behind it in the natural and organic products segments.

How about the 'Wild Oats' brand: It's for sale?

Whole Foods Market, Inc. put up the "Wild Oats'" brand name and related intellectual property for sale in March, as a result of a settlement it reached with the U.S. Federal Trade Commission (FTC) regarding the anti-trust case filed by the agency over the natural grocery chain's 2007 acquisition of rival Wild Oats Markets Inc., which was based in Boulder, Colorado. [See- March 17, 2009: Store Location Strategy: Whole Foods Market-FTC Settlement Agreement Puts 32 stores on the Market; What Should Tesco's Fresh & Easy Do About it?]

The majority of the Wild Oats' stores (over 100 total) were based in the Western U.S., where Tesco's Fresh & Easy has its 120 combination grocery and fresh foods markets.

In our analysis, even though Wild Oats no longer exists as a food retailer -- it's stores are part of Whole Foods Market, Inc. now and all branded under the Whole Foods banner -- the Wild Oats' brand name still has equity, particularly in the Western States. Wild Oats was pretty strong in Arizona, Nevada and Southern California, which are the three market regions Fresh & Easy operates in.

The Kroger Co. also sold the Wild Oats' store brand natural and organic products in most of its U.S. supermarkets nationally for a number of years, under a special contract with then Wild Oats Markets Inc. Kroger only stopped doing so when it came out with its own store brand of natural and organic food and grocery products just a few years ago. In fact, Kroger "went to school" on the Wild Oats' branded items it sold in its stores, using the sales data and other related information to help it create its natural and organic store brand.

The Wild Oats brand name is still for sale. And we think it could probably be purchased for a fairly reasonable amount of money by a retailer such as Tesco's Fresh & Easy.

Under the settlement agreement, Whole Foods Market, Inc. and the FTC have establish a special trustee who is handling the sale of the "Wild Oats" brand, along with various stores being offered for sale. The trustee arrangement was designed so that Whole Foods Market can't hold out for a certain price for the brand, perhaps as a way to keep it off the market. [ Store Location Strategy: Whole Foods Market-FTC Settlement Agreement Puts 32 stores on the Market; What Should Tesco's Fresh & Easy Do About it?]

Summary

What we're suggesting at this point in time is that Tesco's Fresh & Easy move from its one brand name fits all store brand strategy -- everything branded fresh&easy -- to a three store brand name strategy -- the fresh&easy brand for price-focus (which would still be the majority of items in the stores), a new store brand name for premium-specialty food and grocery items, and a third new brand name for organic and natural products, including potentially buying the "Wild Oats brand from Whole Foods, or creating a new brand name outright.

We also suggest eliminating the "Buxted" store brand name for the reasons given earlier. We suggest this strongly as part of the three store brand name strategy.

The fresh&easy brand name would return to those price-focused chicken breasts and steaks that have been carrying the "Buxted" brand name since February of this year.

And since Fresh & Easy Neighborhood Market would be creating a new store brand name for all of its premium and specialty items (across all store categories), instead of using a name like "Buxted" for a handful of value-based fresh meats, it would then do the reverse: it would brand the more premium cuts of meat under the new premium-specialty store brand, which is how such a retailer store branding approach really should go anyway. You create a special brand name for your more upscale items rather than a new brand name for just a few price-focused ones.

Another alternative would be to create a new brand name for the premium fresh meats rather than use the new category-wide premium-specialty store brand name. Both options create differentiation.

But you want to "differentiate" the premium meat items, not the price-focused ones because, according to Tesco's Fresh & Easy, all of its fresh meat items -- like all of the fresh&easy branded items in the stores -- have everyday low prices. If that's true, then why a price-focused discount fresh meats brand -- "Buxted." Brand fresh&easy is "value" after all, isn't it? See the potential confusion? That's why you "new brand" the premium, not the majority fresh&easy brand meat and chicken items.

The same principle applies throughout the store categories.

Conclusion:

Our store brand strategic scenario for Tesco's Fresh & Easy is, as we said earlier, for this point in time. It takes into consideration the current (and near and mid-term future) number of Fresh & Easy stores and the chain's current limited sales volume. (You can't really do a Safeway program yet, if ever.)

But creating this three store brand strategy is very important for the grocery chain, particularly because Fresh & Easy relies so much on its store brand -- the 60% -to- 40% store brand to national brand SKU ratio.

As an example of another grocery chain that relies heavily on store brands, look to Trader Joe's, which like Fresh & Easy is a small-format retailer. The grocer has numerous, not one, store brands: multiple store brands for natural, for organic, for Italian products, for certain perishables, ect.

The small-format Aldi USA grocery chain also uses a multiple store brand strategy. It even has separate store brands for gourmet products, Asian foods and Italian food items, along with a store brand for price-focused items, and a couple others.

Tesco's Fresh & Easy publicly says the grocery and fresh foods chain's less than stellar sales to date are do almost completely to the current economic recession. The recession is also the reason it gives for dramatically slowing its new store openings and postponing indefinitely its Northern California market region launch.

We disagree.

In fairness we will attribute say 40% (and we feel that's liberal) of the performance problems at Fresh & Easy to the economic recession, which the grocer's senior management should remember will eventually be over.

That leaves the majority 60% due to internal factors however.

That 60% is simple in our analysis and opinion: It has to do with poor overall merchandising, marketing and operations strategy and implementation at Tesco's Fresh & Easy, the responsible parties being those at the very top of the corporate chart.

For example, the grocery chain still has very serious out-of-stock problems in many of its stores due to problems with its continuous replenishment ordering system and its supply chain logistics process. (more on that in detail in an upcoming piece in Fresh & Easy Buzz.)

On the operations end, Tesco's Fresh & Easy says the recession is the cause of its less than stellar sales performance but refuses to take manufacturers' "cents off" coupons or accept WIC (Woman's, Infants and Children's program) vouchers in any of its stores, even though manufacturer-issued coupon use is at a modern era all time high among consumers, and the U.S. Federal Government recently added nearly $3 billion dollars to the WIC program for poor mothers as part of the economic stimulus package. [Suggested reading - March 7, 2009: Analysis & Commentary: The Seven Retail Operations Changes Tesco's Fresh & Easy Neighborhood Market Needs to Make to Help it Get On the Success Track.]

And from a strategic merchandising and marketing perspective, Tesco's Fresh & Easy has thus far failed to come up with a solid, comprehensive overall merchandising and marketing positioning strategy for the Fresh & Easy format and stores, and then communicate such a strategy to consumers in its markets in a simple, clear way.

The grocery chain needs to address, define and then clearly communicate these types of marketing themes: What is Fresh & Easy -- the format? What makes Fresh & Easy Different - differentiation? Why should I shop at a Fresh & Easy store? What are the benefits of doing so?

These are all internal issues or problems, not economic recession-caused.

In addition, in our analysis the one brand fits all store brand strategy is one of these internal problems. It's far to simplistic, particularly for a retailer like Tesco, which is the third-largest food and grocery retailer in the world.

Many brand marketers and brand researchers, such as Tom Pirovano of AC Nielsen, believe that grocery chains should completely disguise their store brands, not using the name of the chain in the brand name at all.

For example, in a May 13 post in Nielsen's "The Shopper Wonk" Blog, Pirovano offers retailers 11 tips to grow their store brands. His tip number two is this: "Disguise your premium store brands. Many consumers still associate private label with cheap knockoffs. There – I said it. But what if they don’t know it’s a store brand? Look to position premium store brands as exclusive products like Choxie at Target and Canopy at Walmart." [You can read his full post here.]

We agree in large part with Pirovano's analysis regarding store branding. But there are also very successful exceptions, particularly when using a chain name on one brand as part of a multi-store brand strategy such as what Safeway and Target are doing. Like Safeway, Target uses its name -- "Target" -- for its price-focused store brand of packaged goods, then uses the other brands like Archer Farms and Choxie.

In the case of Tesco's Fresh & Easy, it's our analysis that the fresh&easy store brand will work fine for the near -to- medium, and perhaps even long term, as the grocery chain's price-focused (which means majority item) store brand. In fact, as the price-focused store brand we think it offers some benefits to the grocery chain, particularly right now and over the next couple years, in the area of creating name awareness overall for the Fresh & Easy retail brand, which it needs as a relatively new entrant to the markets it's in.

But this is our position only as part of the three store brand strategy we describe in this piece.

Once the two new store brands -- the premium-specialty and natural-organic -- have been created and slotted, we then suggest Tesco's Fresh & Easy go from there to create additional store brands -- but in a very careful and methodical way over time -- that would add value, achieve stronger product differentiation and give more meaning to the store's merchandise mix and marketing strategy.

We haven't been extremely impressed with Fresh & Easy's from the top store brand strategy thus far. So we would strongly suggest bringing in consultants with actual experience in the Western U.S. markets, and in store branding, before doing any brand creation, such as the recent creation of "Buxted," which actually isn't a brand creation but the use of a brand from Tesco Fresh & Easy's fresh foods supplier, United Kingdom-based 2 Sisters Food Group, which is Fresh & Easy's in-house supplier.

This observation is also one of the reasons we think buying a brand like "Wild Oats" could be a very good idea for Tesco's Fresh & Easy, then rebranding all of its current (and new) natural and organic products under the "Wild Oats" brand. We would do this across all store categories -- from dry grocery to fresh, preapred foods. Any item that's "natural" or "organic" would get the "Wild Oats" brand.

We believe that moving to this initial three store brand strategy will better position Tesco's Fresh & Easy in the store brands arena in many ways, as we've detailed throughout this piece.

Doing so also offers a much richer ability to price, merchandise, market and promote store brands.

And most important, we think the strategy will over time provide much more shopper brand differentiation vis-a-vis the current single fresh&easy store brand, and that with all things being equal, the net result will be increased sales and more return customers to the Fresh & Easy markets, including many more consumers than currently is the case that will shop the stores in part because of its store brands selection.

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

Competitor News: Wal-Mart Clears First Major Hurdle For Proposed Mega-Distribution Center in Merced, CA; Chain's Regional Strategy Moving Forward

Regional Market Report: California's Central Valley & Northern California

In this April 18, 2009 story [Competitor News: Wal-Mart Close to Clearing First Major Hurdle For its 1.1 Million Square-Foot Regional Distribution Center in Merced, California] Fresh & Easy Buzz reported that Wal-Mart Stores, Inc. was close to clearing its first major hurdle towards its plans to build a mega-1.1 million square-foot regional distribution center in Merced, California, in the Golden State's Northern Central Valley region.

That initial hurdle has now been cleared by Wal-Mart: On April 27 a 90-day public comment period in which area residents could comment by letter pro or con to the City of Merced Planning Department about the proposed project's potential environmental and other impacts on the community and surrounding region ended.

As of the end of business on April 27 the City of Merced received 301 letters from area businesses, organizations and individuals regarding the planned 1.1 million square-foot Wal-Mart distribution center project, according to the city's planning department.

Next phase for Wal-Mart

The next phase of the now-ended public comment period has started.

That phase requires Wal-Mart's contract planning firm for the project, EDAW, to respond in writing to each of the 301 letters received by the CIty of Merced.

The 301 letters are a mix of comments in favor of and opposed to the proposed 1.1 million square-foot Merced Wal-Mart distribution center, according to the planning department. When we published our earlier story on April 18 there were about 50 letters submitted at that time, with the number of letters in favor of the project far exceeding the quantity of letters in opposition, according to the city's planning department.

Once the EDAW planning firm responds to all of the letters, the City of Merced Planning Commission will hold public hearings on the proposed project.

Those hearings could come soon, or much later, depending on how fast the planning firm responds to the letters, a process Wal-Mart is required to follow by law.

The hearings will include public input, allowing members of the public for and against the huge distribution center project to voice their opinions.

Wal-Mart Stores, Inc. has said it wants to break ground on the 1.1 million square foot distribution facility starting in early 2010.

The project, which Wal-Mart proposed in 2005, is to be built on 230 acres at Childs and Gerard avenues in southeast Merced, according to plans filed with the City of Merced Planning Department.

Wal-Mart Stores, Inc. says it estimates the distribution center will take about 18 months to complete.

If the planned mega-distribution center is ultimately approved by the planning commission, it then goes before the Merced City Council for discussion and debate -- and an eventual vote. In California, planning commissions, which are comprised of members appointed by the city council, only give advisory approval to projects. Elected officials must ultimately approve such projects.

Merced residents and others for and against the distribution center project also get a chance to voice their respective opinions at a public Merced City Council meeting before the elected officials vote on the project's approval or denial, according to the city.

Organized support and opposition groups

As we wrote about in our April 18, 2009 story, there are organized groups in favor of and against the proposed 1.1 million square-foot Wal-Mart distribution center project in Merced.

Leading the opposition to the proposed distribution center is a local organization called "Merced SWAT" (Stop Wal-Mart Action Team). You can read about the group's opposition to the project at its Web site here.

Another local group, the "Merced Alliance for Responsible Growth," also opposses the planned Wal-Mart distribution facility. There's overlap between this group and "Merced SWAT."

Two national anti-Wal-Mart groups have also joined the local organization, "Merced SWAT," in opposition to the proposed Merced Wal-Mart distribution center.

One of the two organizations is the well-know Wal-Mart watchdog group "Wal-Mart Watch." You can read what the group is saying about the proposed project at its Web site here.

The second national anti-Wal-Mart organization allied with the local Merced group is called "WARN" (Wal-Mart Alliance for Reform Now). The group says it's collaborating with "Merced SWAT" to oppose the 1.1 million square foot Wal-Mart distribution center project in Merced. Read what WARN has to say at its Web site here.

The proposed distribution facility project also has strong support in Merced however.

For example, a majority of the City Council has indicated it's in favor of the distribution center, which Wal-Mart says will bring 1,200 full-time jobs to Merced. The retailer says the facility will operate 24 hours a day, seven days a week.

Additionally, most of the city's and Merced County's business leaders are in favor of the project.

And informal polls of residents have shown widespread support for bringing the disctribution center and the estimated 1,200 new jobs to the city.

Lastly, a pro-distribution center organization called the "Merced County Jobs Coalitio"n is heading up support and lobbying efforts among proponents of the proposed 1.1 million square-foot Wal-Mart Merced distribution center.

Tough economic climate, high unemployment

Merced County, of which Merced is the county seat, currently has a whopping 20% unemployment rate, one of he highest in California. By comparison, California's overall joblessness rate is about 11.4%, and the current U.S. unemployment rate is just under 9%.

Additionally, Merced County, which up until about mid-2007 was one of the fastest-growing counties in California, has since early 2008 been one of the top-five counties in the U.S. in terms of having the highest per-capita housing foreclosure rates in the United States month after month. And its often been number one or two during this period, including just last month when it was the leading U.S. county in housing foreclosures, according to a number of firm's that track monthly foreclosures by county.

Local development watchers in Merced have told us in the recent past that they believe the planned Wal-Mart distribution center project will ultimately be approved by the City Council because new jobs are so desperately needed in the city and county.

However, it's important to note that since the April 27 public comment period on the project ended, the opposition groups have been gearing up considerably, including in the case of "Merced SWAT" recently hiring a Sacramento, California-based land-use lawyer to assist it in fighting the project, along with getting more aggressive with its public relations efforts.

Of course such opposition isn't anything new for Wal-Mart, particularly in California where it has had other distribution center proposals, along with numerous proposed mega-Supecenter stores, killed by opposition groups , cities and counties.

As a result, Wal-Mart is working closely with the City of Merced and with its allies in the city regarding its efforts to gain approval for the proposed 1.1 million square-foot facility. Supporters are touting the 1,200 new jobs and Wal-Mart is promising to spend additional monies in the city, buying supplies for the distribution center from local businesses and donating to a wide variety of groups and local organizations, as it does throughout the U.S.

There are three major retail grocery industry distribution facilities in Merced, so the proposed Wal-Mart facility would hardly be one of a kind if built, although it would be much larger than the existing three centers are.

Grocery wholesaler McClane Companies, which is owned by billionare Warren Buffett's Berkshire Hathaway conglomerate, has a large distribution center in Merced from which it distributes grocery products to convenience stores throughout California and other western states.

Pleasanton, California-based Safeway Stores, Inc. operates a private label manufacturing and distribution facility in the city.

And Modesto, California-based Save Mart supermarkets operates a fresh produce distribution center in Merced.

Strategic importance

The proposed 1.1 million square-foot distribution center is crucial to Wal-Mart's strategic plans to grow its store count and market share in Central and Northern California, particular in the food and grocery categories, in which it is only a minor player at present in the regions.

For example, read our story here - February 11, 2009: Tesco's Fresh & Easy Isn't the Only Food & Grocery Retailer With its Eyes on Bakersfield: Wal-Mart's Bakersfield Push and Central Valley, CA Strategy; and our piece here - September 15, 2008: Wal-Mart Expanding its Discount Store-to-Supercenter Conversion Program As Part of its Strategy to Grab Even More Food and Grocery Sales Market Share.

The Merced facility would distribute everything contained in a giant Wal-Mart Supercenter, including perishable and non-perishable food and grocery products.

Right now, the political odds-makers in Merced tell Fresh & Easy Buzz that their money is on the ultimate approval by the Merced City Council of the project in the city of about 80,000 residents. Merced County has a population of about 250,000.

First Lady in Merced today

And today is a big day for Merced.

First Lady Michelle Obama is set to make her first and only university commencement address this afternoon to about 500 graduates of the University of California at Merced, the University of California's newest campus, which opened in the city in 2005. The class graduating today is the first full graduating class since the school was opened four years ago.

Ironically, the graduating class lured the First Lady to speak at today's commencement by launching a student-initiated letter writing and video lobbying campaign directed at Mrs. Obama, which included sending her a special Valentine's Day invitation in February, which was an invitation she apparently couldn't resist.

Perhaps the proponents and opponents of the proposed Merced Wal-Mart distribution center project could learn something from the University of California at Merced class of 2009 when it comes to launching successful letter writing and lobbying campaigns? After all, out of the huge stack of 2009 commencement speech requests she received, the First Lady chose just one, UC Merced, where she will speak this afternoon.

The city and the campus are conducting a two-day weekend festival in conjunction with the First Lady's commencement speech. As many as 15,000 -to- 20,000 people are expected to attend the graduation ceremonies on campus. The four year-old campus currently enrolls about 3,000 students.

Those same Merced political odds-makers tell us that today and tomorrow the proposed Wal-Mart distribution center issue is taking second place as a topic of discussion among residents as the city gears up for and celebrates the First Lady's visit. But come Monday, local residents tell us the proposed distribution facility issue will be back front and center as the main topic of discussion around town and in the city's coffee shops and pubs.

The proposed Merced mega-Wal-Mart regional distribution center is a major topic of discussion among the region's grocers as well, as they know the facility means more Wal-Mart Supercenters and likely other Wal-Mart format food and grocery stores in the region. That's a competitive prospect most grocers aren't looking forward to.

Tesco's Fresh & Easy in the Central Valley

Tesco's Fresh & Easy Neighbohrood Market hopes to have a major impact on food and grocery retailing in California's Central Valley in the not too distant future.

Thus far, Tesco has three of its small-format, convenience-oriented Fresh & Easy combination grocery and fresh foods markets open in Bakersfield, which is in the southern Central Valley. The grocery chain plans to open at least six additional stores (four more in Bakersfield, one in Delano and one in Wasco) in Bakersfield and the surrounding region.

Fresh & Easy Buzz however is aware that at least two of the four additional Bakersfield Fresh & Easy stores have now been completed but are sitting empty and have yet to be opened by the grocery chain. Those two locations are at Brimhall & Jewetta and Hageman & Coffee in Bakersfield. The store in Delano also is completed but has yet to open. [February 11, 2009: Tesco to Open Third Bakersfield, California Fresh & Easy Store On February 25.]

Additionally, Tesco has at least 10 (seven in Fresno and three in nearby Clovis) Fresh & Easy markets slated for the Fresno Metropolitan region in the mid-Central Valley.

Tesco's Fresh & Easy hasn't opened any of the 10 Fresno-area Fresh & Easy stores despite the fact that some of the stores are completed and ready to open.

For example, the downtown Fresno Fresh & Easy market at Tulare and R Street, which we wrote about in this July 23, 2008 piece: [Fresno, California Fresh & Easy Grocery Store to Be First in Chain to Include Local, Community and Neighborhood Design Elements and Features] is completed but not yet opened.

Fresh & Easy has included the 10 Fresno stores as part of its indefinite postponement of its Northern California region launch, even though Fresno isn't technically in Northern California. Rather it's considered Central California. [See - November 12, 2008: Analysis: Hard Times at Fresh & Easy - Northern California Expansion to Be Postponed or Shelved Do to Economy; But its Only a Symptom Not the Cause. May 15, 2008: Fresh But Never Easy: Tesco's Long But Rapid South-North March in the Nation-State of California. May 6, 2009: Tesco Fresh & Easy Northern California Market Region Update ]

And in the Northern Central Valley, Tesco's Fresh & Easy thus far has three sites planned in Modesto, as we've previously reported. [See - March 31, 2009: Despite Having Postponed its Northern California Launch Indefinitely; Tesco's Fresh & Easy Planning Third Store in Modesto, California.]

But despite all these Central Valley sites, many of which contain completed Fresh & Easy markets, the grocer has to date only opened three stores in the vast region, all three in Bakersfield.

Merced is located between Fresno and Modesto. The city is about 45 miles from Fresno (to the south) and about 35 miles from Modesto (to the north).

Of course, it's hard to become a player in a market like the Central Valley if a grocer has stores completed but doesn't open them, as the Bakersfield and Fresno examples above indicate is the case for Tesco's Fresh & Easy.

Not opening a completed grocery store is seldom if ever done by U.S. food retailers. Having numerous empty store buildings that aren't producing sales or cash flow isn't considered to be prudent management in the food and grocery retailing industry, particularly for major chains.

For example, one would be hard-pressed to find a completed Wal-Mart store of any kind that doesn't have a definite opening date planned for it.

The same would be the case at Kroger, Costco, Safeway and virtually every other chain -- large or small -- we are aware of. It's just not an excepted practice. And most grocers rush to open a completed store rather than allow it to remain empty a day longer than they have to.

Linkage - Additional Related Stories:

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

>September 15, 2008: Wal-Mart Expanding its Discount Store-to-Supercenter Conversion Program As Part of its Strategy to Grab Even More Food and Grocery Sales Market Share

>December 29, 2008: Competitor News: Winco Foods to Expand in California and Nevada in 2009; Put Aggressive Focus on Central Valley, Northern California and Northern Nevada

>December 3, 2009: Tesco Opens its First Two California Fresh & Easy Stores Outside of Southern California in the Central Valley City of Bakersfield Today.]

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

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

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

>July 23, 2008: Fresno, California Fresh & Easy Grocery Store to Be First in Chain to Include Local, Community and Neighborhood Design Elements and Features

>May 14, 2008: Fresh & Easy Buzz Exclusive: Tesco's Fresh & Easy Neighborhood Market Plans to Open Five Stores In the Fresno, California Metropolitan Region

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

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

>September 29, 2008: Special Report: Wal-Mart, Inc. Studying Second Small-Format Food and Grocery Store Concept; the 'Bodega' or Modern Version of the Corner Grocery Store

>August 8, 2008: Analysis & Commentary: Wal-Mart's Marketside As Part Of it's Multi-Format Category-Killer Strategy Spells Trouble For Tesco's Fresh & Easy

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

Fresh Buzz - News & Notes About Tesco's Fresh & Easy Neighborhood Market: Fresh & Easy to Give $131,145 to Area Schools

Breaking Buzz: Tesco's Fresh & Easy Giving Out $131,145 to Southern California, Las Vegas and Arizona Schools: Proceeds of 'Shop for Schools' Fundraising Program-Promotion

Fresh Buzz has learned that the 494 Kindergarten through eighth grade schools in Southern California, Arizona and Metro Las Vegas, Nevada that participated in Fresh & Easy Neighborhood Market's "Shop for Schools" fund-raising program and promotion for public schools have raised a combined total of $131,145.

According to Tesco's Fresh & Easy, 322 elementary schools in Southern California participated in the fund-raising program, along with 86 schools in Arizona and 86 schools in Nevada.

Under Tesco Fresh & Easy's "Shop for School's" school fund-raising program, which ran from February 1 -to- March 31, 2009, the grocery and fresh foods chain pledged to donate $1 for every $20 a customer spends at a Fresh & Easy market during the program time period.

The participating schools can us the money they get from the program to purchase supplies and other needed items for their respective schools.

Kindergarten through eighth grade schools located within a three-mile radius of any Fresh & Easy store were invited to participate in the "Shop for Schools" program.

[Read our December 17, 2008 story for additional details: Fresh & Easy Neighborhood Market Launches 'Shop for Schools' Fund-Raising Program to Aid Schools Near its Stores.]

According to Tesco's Fresh & Easy, the participating Southern California-based schools raised a total of $81,724 during the February 1 -to- March 31 period. Mountain Meadows Elementary School in Moorpark, California was the top fund-raising school in Southern California.

Participating schools in Arizona raised $18,498. The Anasazi Elementary School in Scottsdale, Arizona was the top fund-raising school out of all of the schools in the state that participated in the "Shop for Schools" program.

And the participating schools in the Las Vegas, Nevada Metropolitan region raised $30,923 in the fund-raising program and promotion. Hayes Elementary School in Las Vegas, Nevada was the top fund-raiser in southern Nevada.

Besides getting all of the they money raised, the top three fund-raising schools mentioned above are each getting a $5,000 bonus donation, according to Tesco's Fresh & Easy.

Staff, students and parents of the participating schools encouraged friends and family to shop at Fresh & Easy stores from February 1 -to- March 31 through a variety of ways, including word of mouth, making posts on Blogs and social networking sites, and holding events, explaining that for every $20 spent at a Fresh & Easy market the grocer would donate $1 to their respective schools.

Store customers could designate to Fresh & Easy store-level employees the specific school where they wanted the $1 per $20 purchase to go, which most did.

Out and about

Fresh Buzz has also learned that members of Fresh & Easy Neighborhood Market's senior management team are out and about today presenting checks, including the $5,000 bonus checks, to the top-three schools: Mountain Meadows Elementary School in Moorpark, California; Anasazi Elementary School in Scottsdale, Arizona; and Hayes Elementary School in Las Vegas, Nevada.

Tesco's Fresh & Easy currently operates 120 small-format (10,000 -to- 13,000 square-foot), convenience-oriented combination grocery and fresh foods markets in California (Southern and Bakersfield), Metropolitan Las Vegas, Nevada and in the Phoenix Metro region in Arizona. There are 61 Fresh & Easy stores in Southern California and three in Bakersfield. The remaining 56 units are split about evenly between Metro Las Vegas and Metro Phoenix.

Fresh Buzz salutes Tesco's Fresh & Easy and all of the parents, school staff and students who raised a nice chunk of change through the grocer's "Shop for Schools" program so that the participating schools can have some needed extra money to buy supplies and other items for their schools -- items that they might not otherwise be able to afford.

Grocers and community

Numerous other grocers have and are conducting school fund-raising programs similar to Fresh & Easy's "Shop for Schools."

U.S. food retailers -- chains and independents -- conduct such programs not just as promotions designed to bring in additional sales, but because most understand that they are, just like schools, an integral part of the fabric of society, community and neighborhood.

Fresh Buzz thinks that's a good thing.

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

Fresh Buzz - News & Notes About Tesco's Fresh & Easy Neighborhood Market: 'Drought' Ends; Hollywood Fresh & Easy to Start Selling Beer and Wine

Breaking Buzz: After 16 Long, 'Dry' Months, Hollywood, California Fresh & Easy Store on Hollywood Boulevard to Start Selling Beer and Wine This Week

The Hollywood, California (7021 Hollywood Boulevard & Sycamore) Tesco Fresh & Easy store (pictured at top) will finally begin selling beer and wine this week, Fresh Buzz has learned.

Beginning this week, the Hollywood Boulevard store will start offering beer and wine but not hard liquor, which requires a separate license.

The Hollywood Fresh & Easy market, which opened on January 23, 2008, until this week was one of just two Fresh & Easy units Fresh Buzz is aware of in Southern California that since opening haven't sold alcoholic beverages of any kind, including beer and wine. There are 61 Fresh & Easy stores in Southern California.

The other store, the Fresh & Easy market at 15230 Vanowen Street in the Van Nuys area of Los Angeles, still doesn't sell any alcoholic beverages. [Learn more here - October 9, 2008: Reader Reponse: Details on Tesco Fresh & Easy Stores Denied Licenses and Permits to Sell Spirits, Beer and Wine in Southern California.]

The reason the Hollywood Fresh & Easy market hasn't sold beer and wine (or spirits) until this week is because the retailer's applications for a liquor license and beer and wine permit for the Hollywood store were both denied after the Rite Aid drug store chain, which has a store next to the Hollywood Boulevard Fresh & Easy unit, opposed granting the store the permits because of an ordinance in the city that requires there only be a set number of stores within a given geographical area that are allowed to sell spirits, beer and wine.

The Rite Aid drug store next to the Hollywood Fresh & Easy sells hard liquor, wine and beer.

The issue has now been resolved regarding beer and wine only, allowing the Fresh & Easy market to start selling the adult beverages this week.

In Fresh Buzz's analysis the ability to now offer wine and beer for sale at the Hollywood Boulevard Fresh & Easy store is a plus for the grocer for a variety of reasons.

First, the neighborhood's demographics -- lots of younger consumers and wine and beer drinkers -- means added sales for the store. Many shoppers have complained since the store opened in January, 2008 about not being able to pick up a bottle of wine or a six pack of beer with their other purchases while in the store. Now they can.

Second, the Hollywood Boulevard neighborhood is a major tourist area. Hollywood tourists are known to sometimes enjoy a bottle of wine or a six pack of beer. Now when tourists shop at the Fresh & Easy store for prepared foods, they can add beer and wine to their purchases.

Additionally, since Tesco's Fresh & Easy offers numerous (over 60 SKUs) proprietary wine blends -- including its $1.99 a bottle ($2.99 in Nevada and Arizona) Big Kahuna brand Australian wine -- the store's wine category offerings will provide some differentiation to shoppers -- and for the grocer -- vis-a-vis the nearly next door Rite-Aid drug store's wine selection. This is a plus for the Hollywood Fresh & Easy store since its offerings aren't just a duplicate of the drug store's.

Fresh & Easy stores also sell numerous varieties of micro-brew beers, which also should appeal to the neighborhood's consumer demographics. The nearby Rite-Aid drug store offers fewer micro-brew beer selections than Fresh & Easy markets do, for example.

Lastly, Tesco's Fresh & Easy offers its own store brand version of the popular Corona brand beer. That Fresh & Easy store brand beer is called Taurino. The proprietary store brand beer is brewed in El Salvador and comes in a 12-pack.

Fresh & Easy often offers its Tourino store brand beer on sale, something that should appeal to the numerous struggling actors and screenwriters (and others) that populate the Hollywood Boulevard neighborhood near the Hollywood & Sycamore Fresh & Easy store. The 12-packs of Tourino beer sell for about $6.99 everyday at the Fresh & Easy stores.

Tesco's Fresh & Easy says the imported Tourino store brand beer is the top-selling beer brand at its grocery and fresh foods markets in California (Southern and Bakersfield), southern Nevada and Metropolitan Phoenix, Arizona.

Selling beer, wine and spirits is a sales plus for grocers because the items help to increase the average customer market basket size (total dollar amount per purchase), which is a key metric for food retailers. Shoppers pick up a bottle or two of wine with their food purchases and buy snacks and other complementary items along with their beer purchases, for example. It's a win-win for grocers.

Customers can now do so to their hearts (or palates) content beginning this week at the Hollywood Bloulevard Fresh & Easy grocery and fresh foods market.

Related Stories From Fresh & Easy Buzz:

>October 9, 2008: Reader Reponse: Details on Tesco Fresh & Easy Stores Denied Licenses and Permits to Sell Spirits, Beer and Wine in Southern California

>January 23, 2008: Big 'Hollywood Style' Premere Today for New Hollywood Fresh & Easy Store

>January 16, 2008: Fresh & Easy Goes Hollywood: New Store to Open Next Week

>February 18, 2009: Oscar Night Marketing: Fresh & Easy Scores A Gold With Just Out Academy Awards Night Tie-In News Release

>September 2, 2008: Fresh & Easy Gets Local; Creates Free 'Indie' Music Concert Series at its Hollywood, CA Store For September

>July 14, 2008: Breaking News & Analysis: CA Assemblyman Introduces 'Tesco Fresh & Easy Law' to Ban Stores With Self-Checkout-Only From Selling Alcoholic Beverages

>June 11, 2008: Out of His Compound and Hitting the Street; the 'Militant Angeleno' Shops and Reviews the Hollywood, California Fresh & Easy Grocery Store

>June 17, 2008: Celebrity Sightings: The Los Angeles Nomad Spots Long Tall (John) Salley at the Hollywood, California Fresh & Easy On Hollywood Blvd.

>February 10, 2008: the Haphazard Gourmet Girls Visit the Hollywood, California Fresh & Easy, and 'Love it Dahling'

>May 14, 2008: New Foods At Fresh & Easy: Los Angeles' 'Homeboy Bakery' and Tesco's Fresh & Easy Could Be A Match 'Made in Heaven'

>January 29, 2009: Breaking News: New-Wave, Hybrid Food-Grocery-Convenience Store 'Locali Conscious Convenience' to Open Tomorrow in Hollywood, California

>September 11, 2008: 'Locali Conscious Convenience:' New Small-Format Hybrid Convenience-Grocery Store Coming to Hollywood, California

>October 27, 2008: Category Management Report: Fresh & Easy Conducting Wine Category Review and SKU Rationalization; We Offer Some Analysis

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

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

Northern California Market Region Report: Fresh, Prepared Foods Retailing

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

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

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

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

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

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

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

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

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

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

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

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

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

Staffed with experience, funded by major VC firms

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

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

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

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

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

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

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

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

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

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

Retailer plus supplier to other grocers

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

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

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

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

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

'Beautifull:' The brick and mortar retailer

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

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

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

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

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

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

'Beautifull:' The supplier

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

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

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

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

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

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

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

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

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

The 'Beautifull' flagship store: Retail price points

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

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

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

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

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

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

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

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

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

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

Fresh, prepared foods retailing abounds in Bay Area

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

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

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

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

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

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

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

[Photo Credit: Beautifull. Examiner.com]

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