Heard on the Street: There's Something About Albertsons ... In Southern California

"The Insider" is a new, regular - weekly -to- fortnightly (every two weeks for the non-bilingual) - feature in Fresh & Easy Buzz. "The Insider" will be exploring all aspects of what's happening in - and what he's hearing about - the food and grocery retailing business, with a focus on - but not limited to - California, Nevada and Arizona - the three states where Tesco has its Fresh & Easy Neighborhood Market fresh food and grocery stores.

The Insider: Heard on the Street

The Southern California - and beyond - rumor mill (and I mean informed people, not just the "usual suspects") has been buzzing since late February of this year with talk that Supervalu, Inc. is up to something - or somethings - with its Albertsons chain in Southern California.

Here's a summary of the buzz heard on the street:

1. Supervalu plans to sell its Albertsons chain in Southern California.

The Insider doesn't think that's going to happen.

Why? Supervalu owns and operates about 463 Albertsons banner supermarkets in Southern California, Nevada and the Northwestern U.S. If it sold the Southern California Albertsons chain, doing so would reduce its presence and total store count in the Western U.S. by about 40% - which is a very significant reduction in volume, and would result in a loss of efficiencies for Supervalu in its western U.S. operations, not to mention a dramatic drop in sales. Albertsons also owns the 14 store (13 in Southern California, one store in San Francisco) Southern California-based Bristol Farms upscale grocery chain.

2. Supervalu is looking to sell - and/or close - some of its under-performing Albertsons stores in the Southern California Market.

This is a more logical and likely scenario than number 1 - and really not much of a big deal - unless the number of stores it were to sell is significant.

Supermarket chains sell under-performing stores all the time, to a greater or lesser degree. And Supervalu has been selling some of its stores on the east coast this year. Further, Supervalu closed about a dozen poorer-performing Albertsons stores in Southern California last year, so selling or closing some stores in the region this year wouldn't be without recent precedent

Therefore, unless the number of stores sold or closed (or a combination of the two) is significant - say 25%-30% or more of the total Southern California store-count - I don't see this, if it occurs, as a big story.

Selling 25%-30% or more of the total store-count would be significant because it would reduce Southern California Albertsons' annual sales volume considerably, which would then likely reduce the chain's market share considerably.

Albertsons is the third-largest grocer in Southern California by market share. It has a slightly over 12% share.

Kroger-owned Ralphs is tops (with slightly over 19%), followed by Safeway's Vons (15%).

Trader Joe's is fourth (6.33% share), and Stater Bros. is fifth, with an estimated 6.07% share. There are regional differences though in Southern California. For example, in the Inland Empire region, a huge market area, Stater Bros, which is headquartered in the area and has the majority of its 159 stores there, tops Albertsons, Vons and Trader Joe's, and is neck-and-neck with Ralphs.

Albertsons lost the most business among the large Southern California chains last year. Its market share dropped by almost one-third of a percentage point in 2009, while Ralphs'
increased slightly, and Vons remained steady.

Trader Joe's market share grew considerably, which is what put it into fifth place at the end of last year. Stater Bros share declined just slightly.

Rounding out the numbers, Smart & Final is sixth in Southern California with an estimated 3.23% share, followed by Whole Foods at around 3.1%, and Superior Grocers and Walmart at an estimated 3% each.

Walmart's share is so low because it has very few stores in Southern California that sell food and groceries, a situation it's trying to change as fast as it can by converting about 50-60 of its discount stores into supercenters, along with proposing new supercenters throughout the region.

Although it has about 80 of its 159 stores in Southern California to date, Tesco's Fresh & Easy hasn't registered any significant market share numbers thus far. Significant would be at least 2%.

[Note: Supervalu has converted a handful of the Albertsons stores in Southern California to the Lucky banner, a brand name it obtained when it acquired it's share of then Boise, Idaho-based Albertsons Inc. a few years ago. In January 2006, Albertsons Inc. was purchased by a consortium of investors including Supervalu, Inc., which acquired about 1,100 Jewel, Acme, Shaw’s, and Albertsons stores in Southern California, the northwest, the inter-mountain region, and Florida; Cerberus Capital, which acquired 600-plus Albertsons stores in Northern California (now owned by Save Mart Supermarkets), the Rocky Mountains, Florida and Texas; and CVS Pharmacy, which acquired the Osco, and Sav-on drug chains the company owned and operated.]

3. Supervalu is planning to convert some of its Albertsons stores into its hard-discount Sav-A-Lot stores, owning some corporately and franchising others to independent operators.

This is the scenario - based on the rumors I've distilled into the three summaries above - The Insider believes is the most likely to occur.

For example, I could see Supervalu doing a demographic study of the neighborhoods surrounding all of its Albertsons stores in Southern California, and then selecting a number of the stores best suited for the Sav-A-Lot format, based on the demographics, to be converted into the smaller-format, hard-discount Sav-A-Lot.

In fact, I think this is what Supervalu should do in Southern California: Make Albertsons a slightly smaller (by store count), leaner, meaner and more focused supermarket chain, while building Sav-A-lot as a price-impact player in the region, starting with converting a bunch of the less-performing Albertsons stores into the first batch of Sav-A-Lots - along with opening up new Sav-A-Lot units, both corporately-owned and franchised to independent operators. New Albertsons stores can be built at a low rate when good location opportunities arise.

Doing this also fits nicely into Supervalu's plans to double the size of its hard-discount Sav-A-Lot chain from 1,200 stores to 2,400 over the next five years. [CEO: Supervalu to Open 100 New Sav-A-Lot Stores This Year; Strategy to Double Store-Count to 2,400 in 5 Years in Place

Supervalu should also look closely at opening Sav-A-Lot stores in urban "food desert" neighborhoods in Southern California - and in other U.S. cities - like South and East Los Angeles and other urban areas in the region underserved by grocery stores offering groceries and fresh foods at reasonable prices. Such a strategy fits well with the Sav-A-Lot target shopper, who makes under 45,000 annually, and with the Sav-A-Lot no frills, price-focused retail format.

My model would give Supervalu a three-chain, multi-format strategy in the Southern California market. Albertsons would be its mid-range - but tightly focused - supermarket chain, hard-discount Sav-A-Lot would be its price-impact format, and Bristol Farms its higher-end, upscale play.

I would then focus on growing Sav-A-Lot aggressively, along with tweaking Albertsons in a variety of ways.

Having this option is far superior for Supervalu in a tough, highly competitive market like southern California than having just one horse - Albertsons.

Let's see if any of the above summaries play out with Supervalu's Albertsons over the coming weeks and months in Southern California.

Let's also see if Supervalu employs a strategy in Southern California anything like the three-format, three chain model I've outlined above.

WinCo Foods' Entry Will Put the 'Ultra' in the Already 'Hyper-Competitive' Metro Phoenix, Arizona Market

Metropolitan Phoenix, Arizona Market Report: Analysis & Commentary

Early this year we posted a "tweet" on our Twitter.com site, in which we predicted Idaho-based grocery chain WinCo Foods was planning to enter the Arizona market, starting with a few stores - the first opening likely in 2011 - in the Metropolitan Phoenix market region.

Our knowledge came as the result of information we first started receiving from sources in December 2009 that WinCo had set its sights on the hyper-competitive Metro Phoenix market.

Additionally, before posting our tweet, we checked in with a source at WinCo Foods via e-mail. And although the source said they couldn't "confirm" WinCo was "planning" to open one or more stores in the region, they said they could tell us "WinCo is very interested in getting into the Arizona market," which is about as good of a non-confirmation, confirmation as you can get.

Glendale bound

Today, the Arizona Republic offers about as good of a non-WinCo Foods' spokesperson confirmation as a publication can get, in a story by staff writer Rebekah L. Sanders.

In the story, "Plan to put grocer at Glendale farm site irks neighbors," Ms. Sanders reports that a group of neighborhood residents in a semi-rural part of the Phoenix suburb of Glendale, Arizona, are objecting to a developer, and WinCo Foods', plans to locate one of the big (average 90,000 -to- 100,000 square foot) WinCo discount food and grocery stores on a vacant plot of land where the developer is planning a shopping center featuring the supermarket, four medium sized retail buildings, and 13 smaller shops. [Click here to read the Arizona Republic story.]

The project-area near Glendale is set to become a food and grocery retailing hot corner.

For example, Walmart is building a new (40,000 -to- 45,000 square foot) Neighborhood Market supermarket about one mile away.

Additionally, the CVS drug chain is building a new store nearby. CVS sells a fairly healthy selection of packaged food and grocery products, beverages (adult and non-adult) and perishables items in its drug stores. It also devotes about half of its weekly 12-page advertising circular to the promotion of consumables and non-foods packaged goods.

Evaluating the odds

Winco could be in for a fight from the neighborhood group in terms of gaining approval for its first Metro Phoenix store in Glendale, although the two members of the City Council, who's districts border the planned center, support the project, according to the Arizona Republic story. A similar group of neighborhood residents was successful in preventing retailer Target from building a 100,000-plus square foot store in the area a few years ago.

However, this was before Arizona's economy went into free-fall in 2008. With unemployment in the area at about 10%, it's going to be difficult for the City Council to say no to the project, particularly since WinCo employs about 300-400 workers in a single store. Those are 300 badly needed new jobs in the Glendale area. The odds: We put our money on approval by the council, perhaps with some minor changes to the current plan for the center.

What we know

We know (although they haven't confirmed it) that WinCo Foods is looking at multiple sites for stores in Metro Phoenix, and may already have decided on at least two additional locations, based on information from our sources. As a result, even if the neighborhood group is successful in getting the project killed when the Glendale City Council votes on it next month, the setback isn't going to stop Winco from entering the Metro Phoenix, Arizona market, with its mega-food and grocery stores.

WinCo Foods is a majority employee-owned company. In fact, just last week WinCo said it bought out the 10% of the company - the only part of Winco Foods owned by an outside investor - held by Seattle, Washington-based investment firm Endeavour Capital Management. WinCo said its employees now own 87% of the company, through its ESOP (employee stock ownership plan). The remaining 12% is privately-held by WinCo Foods under a different ownership structure.

WinCo is non-union, and since it's majority employee-owned - and the employee-owners have said no to being unionized more than once - we doubt that status will change in the foreseeable future, if ever, even though the United Food And Commercial Workers union (UFCW) has been trying to organize the owner-employees for many years.

WinCo puts the 'ultra' in 'hyper-competitive'

Metropolitan Phoenix, Arizona is arguably the most competitive food and grocery retailing market in the U.S. In our analysis it's not arguable.

WinCo Foods, which has 71 stores located in six western states - Washington, Idaho, California, Nevada, Oregon and Utah, and has opened about eight new mega-stores in the last 15 months - is one of the most competitive food and grocery retailing chains in the United States, particularly in the price-impact segment.

It's stores, which devote the majority of the 90,000 -to- 100,000 square feet to consumable and non-foods packaged goods - but not electronics, clothing and other general merchandise like Walmart and Target do in their mega-stores - are also destination markets, meaning that on average customers will come from many miles away to shop at them. This is one of the reasons why, with just 71 stores, WinCo has estimated annual sales of $4-$4.5 billion.

Once it gets just a handful of stores opened in Metropolitan Phoenix, we predict WinCo will begin to become a game-changer in the market. It will not only take sales from nearby - and not so nearby - Walmart Supercenters and Neighborhood Market supermarkets, but also from conventional supermarket chains like Kroger's Fry's, Safeway, Albertsons, Bashas', and even Tesco's Fresh & Easy and other grocers in the market.

This isn't to say Arizona and Metro Phoenix - and particularly market share leader Walmart -will be by any means be easy pickings for WinCo Foods.

And in terms of putting market share numbers up on the board, it will take numerous WinCo stores open and operating in the market before that can happen. Rather, in our analysis, WinCo will find, once it opens in the region, that the Metropolitan Phoenix food and grocery retailing market will be the most competitive - actually hyper-competitive - of all the markets it's in to date.

Let the fireworks begin. Stay tuned.

[Related story - December 29, 2008: Competor News: Winco Foods to Expand in California and Nevada in 2009; Put Aggressive Focus on Central Valley, Northern California and Northern Nevada.]

[Competitive related posts here. Past reports & analysis of the hyper-competitive Metro Phoenix, Arizona market here, here and here . Click the "older posts," "new posts" links at the bottom of each page at those above links as well.]

Thousands Get 'Cheesy' at Fresh & Easy Neighborhood Market Co-Sponsored Grilled Cheese Competition in Los Angeles

The Sunday Supplement

Well-over 10,000 grilled cheese sandwich lovers from all walks of life filled downtown Los Angeles, California on Saturday (April 24, 2010) for the 1st 8th Annual Grilled Cheese Invitational (not a typo), America's premiere grilled cheese sandwich-making competition and festival.

The grilled cheese-focused competition and festival was held from 12 pm -to- 6 pm at Los Angeles Center Studios, (1201 West Fifth Street) in downtown Los Angeles.

For $15 at the door - and a mere $10 in advance - grilled cheese "sammich" (the organizer's shorthand for sandwich) lovers and fun-seekers got to have a full day of cheesy fun. The event also included a food festival (and a beer garden) featuring a wide variety of goodies to eat and drink. Numerous other events also took place.

The grilled cheese invitational, which was created by Los Angeleno Tim Walker in 2003 and held in a residential loft downtown as a competition between the grilled cheesemeister-in-chief and some of his friends, has grown into a national movement dedicated to perfecting the art of the grilled cheese sandwich.

The Los Angeles competition has spawned numerous regional grilled cheese sandwich competitions across the U.S., such as one in Austin, Texas, which nearly rivals the Los Angeles flagship event in size. The Los Angeles invitational remains the "big cheese" though.

The humble (but increasing more upscale and therefore not 100% humble) grilled cheese sandwich has never been more popular than it currently is in the U.S. Not only are people making the sandwiches at home like never before - and using a variety of different cheeses rather than the standard American slice - but more and more restaurants of all types have and are putting grilled cheese sandwiches on their menus.

Additionally, restaurants focusing on grilled cheese sandwiches have opened in Southern California, New York and in a few other U.S. cities over the last couple years. [A few examples.] There's even a grilled cheese sandwich-focused food truck or two among the hundreds (some say thousands) of food trucks roaming the streets of Los Angeles every day.

Basically, the continued and increasing popularity of the grilled cheese sandwich in America is all about comfort (memories of childhood food), affordability and - taste.

For example, we enjoy a grilled-to-perfection (need to use butter) provolone or mozzarella grilled cheese, with a slice of tomato and a couple leaves of fresh basil (some sauteed mushrooms on occasion), on sliced sourdough bread.

For those comfort food times, we also like the traditional version (with real American cheese not "cheese food though), along with at least a half dozen other versions.

This points up another reason the grilled cheese sandwich is so popular - its like a blank canvas on which a sandwich-maker can create dozens of different versions, using various cheese varieties and other ingredients, limited only by his or her imagination, and some common culinary sense.

Tesco's Fresh & Easy brings the bread as co-sponsor

Tesco's Fresh & Easy Neighborhood Market signed on as one of the sponsors of yesterday's Los grilled cheese competition, which the organizers call "the best thing to happen to sliced cheese since sliced bread," this year.

In fact, speaking of sliced bread, Fresh & Easy's official title as a sponsor for the competition was "Official Bread Sponsor."

The "Exclusive Cheese Sponsor," (yes, the head cheese) of the event was Oregon-based Tillamook Cheese company." Tillamook also was the lead sponsor of the grilled cheese competition.

Additionally, there was an "Official Potato Chip" sponsor - Boulder Canyon Natural Foods - and an "Official Soft Drink" sponsor - Izee Sparkling Juice.

And what self-respecting grilled cheese sandwich competition wouldn't include an "Official Tomato Soup" sponsor? Not this one. That honor went to another Oregon-based company - Pacific Natural Foods. [Full sponsor list.]

As part of its sponsorship of the grilled cheese extravaganza, Tesco's Fresh & Easy received prominent mention at the event, such as signage and other forms of media. And of course the sponsorship is touted by the grilled cheese competition's organizers on the event website here.

Additionally, at the event yesterday, members of the Fresh & Easy team were passing out $5-off store coupons. We were told by an event organizer that every person attending the 1st 8th Annual Grilled Cheese Invitational was to get one of the Fresh & Easy coupons.

One of the highlights of yesterdays grilled cheese festival and competition was the "Cheesy Costume Contest," which was added for the first time this year. The contestants for that competition turned out in a variety of very creative costumes. Trust that Wisconsin's famous "Cheese Heads" had nothing on this group.

Even more interesting, there was a "Cheese Calling Contest," which was similar to a hog calling contest but without the oinking or the odor. Although some squealing was reported to have been heard during the contest.

We suggest signing on as a sponsor of the grilled cheese competition and festival was a good marketing move to do for Fresh & Easy Neighborhood Market.

First, the demographic of those attending the grilled cheese festival yesterday skewed to younger and more urban. This is the demographic we've found to most like the Fresh & Easy format, and to shop most frequently at the stores.

Additionally, being the official bread sponsor of the event provides Fresh & Easy the opportunity to do some creative merchandising and marketing in the coming weeks. Good merchandising and marketing is all about integration, after all. And event sponsorship offers that opportunity for a grocer.

For example, the grocer should consider a major promotion featuring all of the various items that can be used to make grilled cheese sandwiches - numerous varieties of cheese and bread, butter, tomatoes, fresh herbs and on and on. Along with the main ingredients Fresh & Easy can feature some of the endless varieties of products that go well with a grilled cheese sandwich - soups (especially tomato), snack chips, pickles, beverages and the like.

If Fresh & Easy Buzz were advising Tesco's Fresh & Easy, we would suggest the grocer partner with the other food and beverage sponsors of yesterday's grilled cheese invitational - Tillamook Cheese, Boulder Natural Foods (potato chips), Pacific Foods (soups) and Izee (sparkling juices) - along with adding some additional (besides bread) Fresh & Easy store brand items that relate to the grilled cheese sandwich theme - and build displays featuring the items in all of the stores.

We'd include on the displays colorful point-of-purchase signage touting the event and the winners, which will be announced tomorrow.

We would also tout the promotion in the weekly Fresh & Easy Neighborhood Market advertising flyer with a headline reading something like this: "The winners of the Los Angeles grilled cheese sandwich competition use Fresh & Easy brand bread." All of the grilled cheese sandwich themed promoted items would then go below the headline in the ad flyer. (We actually would have done the displays and promotion leading up to the event, putting the promotional focus on the then upcoming grilled cheese competition. But its not too late. The grocer could just put the focus on the winner aspect, as mentioned.)

Third and last, we suspect starting tomorrow (yes, were early), Saturday's grilled cheese invitation will get lots of press attention in the Southern California media. That's because tomorrow, April 26, is when the event's organizers will announce the winners of the grilled cheese competition in its various categories.

That could (and should) create some buzz in the market for Fresh & Easy, assuming it makes sure to be mentioned as a sponsor of the event by contacting members of the print and broadcast consumer press in Southern California starting early tomorrow morning.

Fresh & Easy Buzz hasn't seen a press release to date from Tesco's Fresh & Easy Neighborhood Market about its sponsorship of the grilled cheese sandwich competition. That's a mistake on the part of the grocer's marketing and public relations staff, since there's real local news and human interest value in the grocery chain's sponsorship of the event, by virtue of the fact there's lots of interest in the event in general.

Finally, sponsoring the event shows good community relations and involvement by Fresh & Easy, which is a solid positive, even if it can't be quantified in terms of sales volume.

Since the announcement doesn't come until tomorrow (April 26, 2010), we can't end this piece with a list of the winners of the big grilled cheese competition.

But tomorrow you can go to the grilled cheese invitational website for a list of all the winners of yesterday's downtown Los Angeles grilled cheese sandwich competition.

Meanwhile, a grilled cheese sandwich sounds like a pretty good idea for today's lunch.

Breaking Buzz: Tesco's Fresh & Easy to Accept WIC Vouchers at its East Adams Store in South Los Angeles

Fresh & Easy Buzz has learned that Tesco's Fresh & Easy Neighborhood Market is planning to start accepting WIC (Woman, Infant & Children's Program) Vouchers at its store located at 1025 East Adams Boulevard in South Los Angeles (pictured above), possibly as early as this weekend, but most-likely beginning next week.

The system is in place at the store to process the paper WIC Vouchers, and employees have posted the signs announcing the Fresh & Easy market will soon start accepting the vouchers from poor mothers.

As of today, store employees did not know the exact date when the East Adams Fresh & Easy would begin accepting WIC.

The store, which is located in one Los Angeles' lowest-income neighborhoods, will be the first Fresh & Store to accept the WIC Vouchers, which are provided by the State of California and the federal government to the poorest of poor mothers, so that they can purchase nutritious foods and beverages like infant formula, whole milk, whole grains breads and cereals, fresh produce and other similar items for their children.

Since 2008, Fresh & Easy Buzz has been writing about and arguing in the blog that Tesco's Fresh & Easy Neighborhood Market is making a mistake from both a business (added sales) and ethical grocer standpoint by not accepting WIC Vouchers in its 159 fresh foods and grocery markets located in California (Southern and Central), Metropolitan Phoenix, Arizona and southern Nevada.

Fresh & Easy Buzz was the first food and grocery retailing-focused publication to report the fact that Tesco's Fresh & Easy doesn't accept the WIC Vouchers, despite the fact nearly all of its competitors do.

Additionally, we've been the only publication to focus on the issue, offering analysis on it, and detail the benefits to Fresh & Easy, along with the communities the grocer serves, of its accepting WIC, such as in this 2008 piece - December 29, 2008: Tesco's Fresh & Easy, 'Food Deserts' and WIC Vouchers; A 'Year-End' Analysis & Commentary.

Most recently, on February 23, 2010, we wrote and published this piece - Food Deserts & WIC Vouchers: Half A Loaf For the New Fresh & Easy Store Opening Tomorrow in South Los Angeles - about the opening of the then new Fresh & Easy store in South Los Angeles and the WIC issue - the same store at 1025 East Adams that will soon accept WIC. We received a considerable number of e-mails and tweets (at our @FreshNEasyBuzz address on twitter) from readers in Los Angeles, including comments from a couple of rather highly-places elected and other officials in the city, along with a couple state officials.

Additionally, more than one reader told us they had sent the piece to local elected officials in Los Angeles and to the California WIC Association, the state body that administers the WIC program.

If you read our February 23, 2010 piece - Food Deserts & WIC Vouchers: Half A Loaf For the New Fresh & Easy Store Opening Tomorrow in South Los Angeles - along with the others linked at the end of this post, you can see we've offered extensive analysis and argument as to why Tesco's Fresh & Easy is missing the boat from both business (added sales) and ethical perspectives by not accepting WIC Vouchers in its stores.

It now appears Fresh & Easy's CEO Tim Mason and his senior management team has come to agree with our analysis and arguments - perhaps aided by some encouragement from members of the South Los Angeles community, and a realization that they've been turning down potentially added sales in the stores.

And now that Fresh & Easy has revamped the front-end point-of-sale system at its store at 1025 East Adams in South Los Angeles, so the store can now start accepting WIC Vouchers, we suggest the grocer quickly work out any bugs that might appear in the system, and then start accepting WIC Vouchers at all of its stores, starting with the Compton Fresh & Easy, which like the East Adams market in South Los Angeles is located in a low-income, inner city neighborhood in which many poor mothers could benefit from being able to use their WIC Vouchers at their neighborhood Fresh & Easy.

When Fresh & Easy does have WIC in place at all of its stores, senior management will wonder why they didn't think of it sooner. But, as the old saying goes: 'Better late than never.' We will, however, leave out the one about old dogs being unable to learn new tricks, since it's obviously wrong in this case.

Linkage: Fresh & Easy, WIC Vouchers, food deserts:

February 23, 2010: Food Deserts & WIC Vouchers: Half A Loaf For the New Fresh & Easy Store Opening Tomorrow in South Los Angeles

February 20, 2010: Fresh & Easy Store Opens its Doors in South Los Angeles

July 2008: Tesco's to Open A Fresh & Easy Grocery Market in Low Income, Underserved South Central Los Angeles Neighborhood.

July 11, 2008: 'Food Desert' Neighborhoods and Southern California: More on the Fresh & Easy Store Planned For South Central Los Angeles

July 15, 2008: Fresh Food to Bloom in An Inner-City Food Desert: Tesco's Fresh & Easy Breaks Ground For New Store in Underserved South Los Angeles Neighborhood]

March 20, 2009: Federal Government Spending Bill Increases WIC Voucher Program Dollars by $1.2 Billion; 21 Percent Increase

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

December 29, 2008: Tesco's Fresh & Easy, 'Food Deserts' and WIC Vouchers; A 'Year-End' Analysis & Commentary

September 7, 2008: Analysis & Commentary: Should Tesco's Fresh & Easy Put An Asterisk Next to its Motto? Yes; Unless it Corrects Four Operational Omissions.

June 3, 2008: Fresh & Easy Buzz Redux: Barack Obama to Tesco's Fresh & Easy in Our February 13 Piece: 'Build More Stores in Underserved Neighborhoods'

May 12, 2008: Food Deserts: Coalition to Create 'Blue Ribbon' Commission, Draft Report to Encourage Grocers to Open Stores in Underserved Los Angeles Neighborhoods

February 13, 2008: Leading Democratic Candidate for President Barack Obama Joins Group in Asking Tesco's Fresh & Easy to Put More Stores in Underserved Neighborhoods

September 23, 2008: Food Retailing, Society & Economics: 'Food Deserts' and Public Health

August 11, 2008: Arizona Region Market Report: Which Food Retailer Will Seize the Opportunity Offered by the Lack of a Grocery Store in Downtown Tempe, Arizona?

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

July 15, 2008: Fresh Food to Bloom in An Inner-City Food Desert: Tesco's Fresh & Easy Breaks Ground For New Store in Underserved South Los Angeles Neighborhood

July 2, 2008: Tesco's to Open A Fresh & Easy Grocery Market in Low Income, Underserved South Central Los Angeles Neighborhood

July 11, 2008: 'Food Desert' Neighborhoods and Southern California: More on the Fresh & Easy Store Planned For South Central Los Angeles

July 6, 2008: Former NBA Great Earvin 'Magic' Johnson is Working His Business Magic in Urban, Inner City Neighborhoods; We Offer An Idea For Tesco's Fresh & Easy

May 28, 2008: Las Vegas Market Report: A 'Food Desert' Neighborhood to Get A New Grocery Store; But it's Not A Fresh & Easy Neighborhood Market

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

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

April 30, 2008: (Grocery) Storeless in Seattle: Food Deserts in Urban and Inner-City Seattle, Washington; Might be a 911 Call to Tesco's Fresh & Easy?

April 27, 2008: New Study Points to Increasing Urban 'Food Deserts' In North America: Locating Stores in 'Food Deserts' A Part of Fresh & Easy's Strategy

April 29, 2008: Tesco's Fresh & Easy an Issue in Sacramento, California Mayor's Race A Year Before its First Store in the Capital City Even Opens

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

March 7, 2008: Former NBA All-Star and Sacramento Native Kevin Johnson is the Driving Force Behind a Fresh & Easy Market in Sacramento's Oak Park Neighborhood

February 19, 2008: Tesco's Fresh & Easy Serving as an Economic Stimulus Package of Sorts for California's Troubled Commercial Retail Real Estate Industry

February 10, 2008: Tesco's Fresh & Easy Opens Latest New Store in 'Food Desert' City of Compton, California

CEO: Supervalu to Open 100 New Sav-A-Lot Stores This Year; Strategy to Double Store-Count to 2,400 in 5 Years in Place

Supervalu Inc. plans to open 100 new small-format, hard discount Sav-A-Lot grocery markets this year, president and CEO Craig Herkert said today during the company's reporting of its fourth quarter and fiscal year 2010 sales and earnings.

The 100 new Sav-A-Lot stores will be a mix of corporate-owned/operated and independent-owned/operated units, Herkert said. He wouldn't offer a precise breakdown on the percentage of corporate vs. independent for the 100 new stores.

Supervalu, which also owns and operates a grocery wholesaling division serving independent grocers, franchises its Sav-A-Lot stores to independent owners, along with owning and operating the stores corporately. The company handles all of the logistics, distribution, marketing and merchandising support functions for the independent Sav-A-Lot store operators, for which the operators pay it an annual fee. In return, the independent operators agree to follow specific operational and marketing guidelines laid out by Supervalu.

The company opened 22 Sav-A-Lot units in the fourth quarter of 2009, according to Herkert.

The CEO said the 100 new store target this year is a speeding up of the grocery chain's expansion plans first formulated in mid-2009.

Supervalu plans to open about 15 new Sav-A-Lot stores in the first quarter of this year, slightly more than that in the second quarter, and the balance of the stores, to reach 100, in the last half of the year, Herkert said today.

Additionally, the CEO confirmed today that his plan to double the current Save-A-Lot store count of about 1,200 stores over the next five years is in place as a strategy and is being implemented. This is a very ambitious and major initiative. That would work out to opening in the neighborhood of 240 new stores on average in each of the next five years, for a total of about 2,400 Sav-A-Lot units.

"We are developing the internal expertise and skills to ramp up to a pace that will allow us to more than double in five years. Our newest Save-A-Lot stores are doing quite well, with sales averaging 10% above our internal projections, and initial capital costs 10% below our best spend rate," Herkert said today. "The Save-A-Lot team has had good success controlling capital by utilizing existing storing periods, aggressively negotiating construction bids, and leveraging internal architectural and engineering expertise."

Supervalu, which owns and operates about 2,300 stores in the U.S. under various banners - including the Albertsons and Bristol Farms chains in Southern California and a handful of Sav-A-Lot stores located in Southern and Central California where Tesco's Fresh & Easy is headquartered and has the majority of its 150-plus fresh foods and grocery markets - reported its fourth quarter and fiscal year 2010 sales and profits today.

Supervalu said it returned to profitability in its fourth quarter. Fourth-quarter earnings for the grocer were $97 million, or 46 cents a share. In contrast, in the same period last year, the company lost $201 million.

Additionally, the grocery company reported full-year fiscal 2010 net sales of $40.6 billion, and net income of just $393 million.

[You can read the full financial release issued today here for full financial details, along with this summary report by Dow Jones.]

Herkert said the company expects similar results for fiscal year 2011.

Supervalu Inc. has been struggling for a number of years. In fact, one can time its problems as beginning soon after its acquisition of the majority of then Boise, Idaho-based Albertsons Stores Inc.

This multi-year struggle is in part why Herkert, a grocery retailing veteran who prior to taking the position at Supervalu was a senior executive at Walmart, came aboard as Supervalu's CEo in May 2009.

Before joining Walmart he spent 23 years with the old Boise, Idaho-based Albertsons Stores Inc. and the no longer existing Salt Lake City, Utah-based American Stores. Albertsons acquired American Stores. Later on Supervalu acquired Albertsons. As a result, some might say its "all in the family" for Craig Herkert, with Walmart being a mere detour.

Shortly after taking the leadership reins last spring, Herkert decided to refocus Supervalu's strategy to emphasis its small-format, hard discount Sav-A-Lot format and banner, hence the aggressive new store expansion program doesn't come as a surprise to us.

But opening 200-plus new Sav-A-Lot stores a year for five years is big, surprise or no surprise.

Strong Group Revenue & Profit For Tesco... But $253 Million Loss at Fresh & Easy

United Kingdom-based Tesco plc today reported strong overall group revenue and profit for its 2009/10 fiscal year, which ended on February 27, 2010.

However, the global food and general merchandise retailer reported a loss of $253 million, on sales of $544 million, for its Fresh & Easy Neighborhood Market USA fresh foods and grocery chain for the fiscal year.

That's a loss of $45 million more than the $208 million loss Tesco reported for Fresh & Easy in its 2008/09 fiscal year. Fiscal year 2008/09 revenue for Fresh & Easy was $305 million. [Related post - April 19, 2010: Tesco Reports Fiscal 2009 Results on Tuesday, April 20; Estimated $250-$259 Million Loss For Fresh & Easy]

This higher loss is troubling for Tesco because central to its strategy for Fresh & Easy is the concept that by adding numerous additional stores fairly rapidly, which it did over the last year, and thus increasing its sales volume, it would narrow the amount of money it's losing with Fresh & Easy.

Revenue did increase considerably (as you can see above) from fiscal 2008/09 -to- 2009/10 - primarily because of the numerous (about 30) new Fresh & Easy stores opened during the period, rather than via same-store-sales growth. But rather than decreasing, the fiscal 2009/10 dollar loss amount increased in 2009/10, over 2008/09, as detailed above.

Tesco CEO Terry Leahy said today the retailer expects its fiscal year 2010/11 loss for Fresh & Easy to be about the same as the $253 million for fiscal year 2009. Leahy added he believes the losses for Fresh & Easy have peaked, meaning he doesn't expect the fiscal year 2010 loss to be higher than the $253 million. Tesco's fiscal 2010/11 year began on February 28, 2010.

The CEO also announced today that Tesco plans to open 50 new Fresh & Easy stores in fiscal year 2010/11, which started on February 28 and ends in early 2011.

Tesco: Strong group revenue and profit

Tesco plc's profit for the fiscal year rose to 2.33 billion pounds ($3.58 billion) from 2.13 billion pounds ($3.22 billion) a year earlier.

Fiscal year 2009/10 revenue increased 5.6% to 56.91 billion pounds ($87.5 billion) from 53.9 billion pounds ($82.82 billion) in the prior financial year, which included one extra week.

[Click here for a complete summary of Tesco's fiscal year 2009/10 financials. Click here for an interview with Tesco CEO Terry Leahy, along with a webcast of the financial results.]

Fresh & Easy Buzz will be publishing a detailed analysis piece, focusing on the Fresh & Easy loss and Tesco CEO Terry Leahy's 50% sales increase projection for fiscal year 2010/11, at the end of the week. Stay tuned.

Tesco Debating Whether to Launch Fresh & Easy Into Northern California This Fiscal Year... or Wait

News & Analysis

Tesco is debating whether or not to begin opening the first of its planned Fresh & Easy stores in Northern California later this year, or to further postpone its launch into the market until 2011, Fresh & Easy Buzz has learned.

Tesco first announced its plans to open an initial 37 Fresh & Easy markets in Northern California - 18 in the San Francisco Bay Area and 19 in the Sacramento-Vacaville region - in early 2008, not long after its first stores opened in Southern California, Arizona and southern Nevada. [Click here for a list by address of the 37 confirmed Northern California Fresh & Easy locations. There's also some additional, non-confirmed, planned locations we've discovered and reported on]

The first stores in these two Northern California markets were planned to be opened in mid-to-late 2008.

However, Tesco postponed its plans later in 2008, suggesting it would wait until 2009 to launch into the northern portion of the Golden State.

Again in 2009 Tesco postponed opening stores in Northern California, sighting the economic recession as its official reason for doing so.

To date, over two years after announcing its plans to move into the San Francisco Bay Area and Sacramento-Vacaville market regions, Tesco has yet to open any stores in the north state. It is and has been paying the monthly rent and related expenses on the planned locations for these two-plus years however.

Most of the 37 confirmed Northern California locations are vacant retail buildings in which Tesco's Fresh & Easy is or planned to remodel. A few of the sites are new, from the ground-up construction, such as the planned location at Third & Carrol Street in San Francisco and the planned site in Sacramento's Oak Park neighborhood, for example.

A handful of the 37 Northern California store sites, along with at least one non-confirmed store in Pacifica, near San Francisco, which is completed and has been sitting vacant for well over a year, could be opened in short order.

However, the majority of the planned Northern California store locations are still in various stages of remodeling and construction. And in many cases work has been on hold at the locations for a very long time.

Work on some of the planned Fresh & Easy sites, such as a vacant building to be remodeled in Napa, California, which was formerly a branch of three-store local independent grocer Vallergas Market, and the planned built from the ground up store in Sacramento's Oak Park neighborhood, for example, haven't had any work done on them at all to date.

We also know of one location - in the Edgewood Shopping Center that's being remodeled in Palo Alto, California, which Tesco's Fresh & Easy never confirmed but the developer did confirm to us in 2009 - that the retailer has now decided not to go forward with at all.

The project's developer told Fresh & Easy Buzz earlier this year that Tesco's Fresh & Easy pulled out of the project and that a new grocer-anchor is being sought.

At issue for Tesco is whether or not it wants to make the substantial investment required to launch into Northern California this year.

This major investment includes opening and staffing its planned distribution facility in Stockton, California, along with the labor costs to staff the stores it opens, plus marketing and all other related costs required of a grocer when it launches into a major new market region such as Northern California.

And since both the San Francisco Bay Area and Sacramento-Vacaville markets are big and very competitive, rest assured the start up costs for Tesco will be massive.

The costs also will be high for Tesco because it will be marketing for and distributing to only a handful of stores in Northern California for a considerable period of time. From a logistical and marketing perspective, a retailer needs critical mass - a significant number of stores - before it can achieve any efficiencies in terms of logistics and other costs.

For example, with over 150 stores (159 at the end of April) in Southern California, Arizona and southern Nevada to date, based on the current sales volume, which we estimate at about $500-$600 million annual, Tesco has yet to achieve the type of critical mass out of its Riverside County distribution center that it both wants and needs.

The issue regarding launching Fresh & Easy into Northern California this year at all then comes down to investment versus added losses for Tesco.

Tesco reports its fiscal year 2009 sales and profit numbers tomorrow, Tuesday April 20, 2010. The United Kingdom-based global retailer says it estimates the full-year loss for Fresh & Easy will be about $250-$259 million. This is on top of a fiscal year 2008 loss of $208 million. We estimate Tesco has lost at least $700 million on Fresh & Easy Neighborhood Market thus far. [Related post - April 19, 2010: Tesco Reports Fiscal 2009 Results on Tuesday, April 20; Estimated $250-$259 Million Loss For Fresh & Easy]

Tesco's dilemma therefore is: Should it launch into Northern California this year, which in our analysis will cost the grocer even more money than it anticipates it will, or should it continue focusing on its existing stores, and opening new ones, in its current Southern and Central California, Metropolitan Phoenix, Arizona and southern Nevada market regions?

But on the up side, if the recession is really the main problem with Fresh & Easy's performance to date, then the Northern California stores should be opened as soon as possible since, as we've said and has been true since 2008, Northern California, especially the Bay Area, has been hit far less by the recession than Southern and Central California, Nevada and Arizona have and still are experiencing.

The decision, which according to our sources hasn't been fully decided as of yet by Tesco, will depend on just how much of a loss the retailer hopes to post in its 2010 fiscal year, when it reports those numbers in April of 2011.

Our conclusion: We predict Tesco will start opening some of its Northern California Fresh & Easy stores in the mid-to-late-third quarter -to- early fourth quarter of this year - or before the end of its current fiscal year, which ends in early 2011.

[Readers: Click here and here to read our extensive reporting and analysis on Tesco's Fresh & Easy-Northern California, as well as on the Northern California market in general.]

Tesco Reports Fiscal 2009 Results on Tuesday, April 20; Estimated $250-$259 Million Loss For Fresh & Easy

Fresh & Easy's parent company, United Kingdom-based Tesco plc, is set to report its fiscal year 2009 sales and profits tomorrow, Tuesday, April 20.

The global retailer will likely report a full-year loss of about $250-$259 million for its Southern California-based Fresh & Easy Neighborhood Market fresh foods and grocery chain.

Tesco offered the $259 million top-end loss estimate for Fresh & Easy months ago.

Offering the loss estimate was a smart move on the part of Tesco since, in our analysis, it serves as a form of inoculation, which we predict will serve to take some sting out of the media reports tomorrow and the days to follow on what is a significant loss at Fresh & Easy.

Fresh & Easy by the numbers

However, if Tesco reports a loss for Fresh & Easy that's much higher than the estimated $259 million - say even $5 million -to- $10 million higher - that will be, in our analysis, very bad news for the global retailing giant.

We don't suspect that to be the case though. Rather, we estimate the global retailer will report a slightly lower number than the estimated $259 million for its Fresh & Easy chain, which will have 159 stores in California, Nevada and Arizona at the end of April.

Either way - slightly more than $259 million or slightly less - right now we don't see much daylight for Tesco in the next year in terms of significantly reducing its losses with Fresh & Easy. Based on the chain's performance to date, we anticipate similar losses for its 2010 fiscal year.

Tesco plc's 2009 fiscal year ended in February 27, 2010.

It reported a loss of $208.05 million for Fresh & Easy in its 2008 fiscal year.

We estimate Tesco has lost at least $700 million so far on Fresh & Easy. Tesco set up shop in the U.S. in 2006. The first Fresh & Easy stores opened in November 2007.

Net positive fiscal 2009 for Tesco

In terms of its overall reporting tomorrow, most financial analysts that follow Tesco plc are expecting positive results.

Consensus estimates by London and Wall Street stock analysts are that it will report a strong, year-over-year (2009 over 2008) sales increase of 9%, and a pre-tax profit rise of just over 6%.

Tesco could also report tomorrow that it has reduced its substantial corporate debt significantly. For the past year the retailer has been selling some of its UK stores and then leasing them back in a program designed to generate capital and reduce debt

Tesco plc, which is the third-largest global retailing chain based on annual gross sales, derives 70% of its profits from its UK stores. It's the leading food and general merchandise retailer in the UK, with a 31% market share.

It's also a major player in the retail banking, insurance and mobile phone sectors in the UK.

Limited reporting data for Fresh & Easy

Don't look for Tesco to report many specifics (key indicators) - such as same-store-sales (like-for-like in the UK) or gross margin - about Fresh & Easy tomorrow - other than the overall total dollar loss amount for the fiscal year.

Fresh & Easy Buzz will be offering some analysis on Tesco and Fresh & Easy after the retailer's reporting on Tuesday. Stay tuned.

Tesco's Fresh & Easy Joins Kroger Co. in Holding Earth Month-Earth Day Reusable Bag Design Contest

"Imitation is the sincerest form of flattery."

The old saying above came to mind earlier today when we discovered Tesco's Fresh & Easy Neighborhood Market is launching a Design-A-Bag contest, beginning on April 19, and running until May 31.

The Design-A-Bag contest, which is timed to tie-in with Earth Month (April) and Earth Day(April 22), works this way: Shoppers design a reusable grocery shopping bag for Fresh & Easy as explained here. The chief criteria is the designer's own creativity. Participants then submit their reusable bag design to Tesco's Fresh & Easy by May 31, 2010.

Members of Fresh & Easy Neighborhood Market's "Friends of Fresh & Easy" e-mail group will vote on the finalists, which will be chosen by a panel of judges that's been selected by Fresh & Easy. There will be up to ten finalists, according to Fresh & Easy. The one receiving the most votes from the "Friends of Fresh & Easy" will bag the first place title.

The winning reusable bag will be offered for sale in all the Fresh & Easy stores.

Lastly (but far from least), the winning reusable bag designer will receive free groceries from Fresh & Easy for a year, in the form of $5,000 worth of the grocer's gift cards. The semi-finalists, those chosen by the judging panel but not named the winner by the "Friends of Fresh & Easy" folks, will each get a $100 Fresh & Easy neighborhood Market gift card.

[The full details of Fresh & Easy's bag design contest are here. Sign-up information is here.]

Now for the "imitation is the sincerest form of flattery" part.

Fresh & Easy Neighborhood Market competitor Kroger Co. - which operates the Ralphs and Food 4 Less chains in Southern and Central California; Fry's in Arizona; and Smith's Food & Drug in Nevada (the three states where Tesco has its Fresh & Easy stores) - has been conducting a shopper 'Design a Reusable Bag' contest for the last three years.

In fact, we wrote about Kroger Co.'s reusable bag design contest last year in Fresh & Easy Buzz. [Story link - May 1, 2010: Competitor News: Kroger Co. Launches Chainwide 'Design Your Own Bag' Contest Promotion; Invites Shoppers to Be 'Part of the Solution']

Kroger's 2010 contest began on April 12, and runs until May 21, at the chains listed above, along with all of its other U.S. banners

The retailer provides this section and complete template and tools on its website for consumers to use in designing their reusable shopping bags.

The winning reusable bag designer gets a $1,000 gift card. In addition, Kroger will sell the winning bag in its stores.

Along with the first place prize, Kroger Co. awards the top four bag design contest finalists a $250 Kroger gift card. Additionally, the five runners-up will receive a $100 Kroger gift card.

All contest participants receive a free electronic coupon for 99 cents, which they can use at any Kroger-owned store to obtain a free reusable shopping bag.

[Full information on how to participate in Kroger's reusable bag design contest is here.]

Tesco's Fresh & Easy has upped the first-place prize money on Kroger however - $5,000 from Fresh & Easy, compared to $1,000 offered by Kroger Co.

Fresh & Easy Buzz is a proponent of increased consumer usage of reusable shopping bags as a way to decrease the use of single-use plastic and paper grocery bags at retail.

Contests like Kroger's - and now Fresh & Easy's - serve to create greater awareness of the issue of single-use bags and their environmental negatives, and hopefully lead to higher shopper usage of reusable bags.

And when it comes to programs by grocers designed to reduce their respective carbon footprints and improve the environment, imitation is not only the sincerest form of flattery, it also can have power in numbers.

Pictured above is the first-place winning design in Kroger's 2009 bag design contest. The bag was designed by Sherri N of Columbus, Ohio. Click here to view the first place bag, along with the four finalists and five runners-up in last year's contest

[Readers: Click here for a complete selection of posts on the reusable shopping bag topic and issue from Fresh & Easy Buzz.]

Tesco's Fresh & Easy on the Agenda Today at Cal State Fullerton Social Justice Summit in Southern California

With the exception of picketing at selected stores, primarily in the Fresno region in California's Central Valley and in Southern California, along with some fairly stealth behind the scenes organizing of workers, the United Food & Commercial Workers (UFCW) union has been rather quite over the last year in its now three year campaign to organize store-level employees of Tesco's Fresh & Easy Neighborhood Market.

But today, nestled among the various seminars and workshops on social action, grassroots organizing, community development, human rights and environmental issues at California State University Fullerton's 6th Annual Social Justice Summit in Southern California, one particular workshop stood out among all the others to Fresh & Easy Buzz: "Organizing for Respect, Dignity and Justice at Fresh and Easy Neighborhood Market," presented by Berny Enriquez of the United Food and Commercial Workers union.

The workshop - also billed as "Building Worker Power at Fresh and Easy," is being held from 11:30 am -to- 12:30 pm today in the Titan Student Union Building at the free, all day summit, sponsored by Cal State Fullerton's Volunteer and Community Service Center, which is located on the campus in Orange County.

The university center bills the annual event, which is attended by thousands of academics, political and religious leaders, members of organized labor, and regular citizens, as "providing a forum for people to exchange ideas about improving the state of our communities, offers space to dialogue about the obstacles to creating effective change, provides effective tools for social action, and offers tangible grassroots solutions."

The inclusion of the UFCW-Fresh & Easy workshop at today's event is interesting for a couple of key reasons.

First, it's the only workshop on the agenda at the Social Justice Summit that focuses specifically on an individual company - Tesco's Fresh & Easy Neighborhood Market.

Second, it's also the only workshop on today's agenda with a specific focus on organized labor and the organizing of non-union companies.

Both of these items are important in that (1) the UFCW chose Tesco's Fresh & Easy as the one out of the numerous (Walmart, Target, Whole Foods, Trader Joe's, for example) non-union food and grocery retailers it's attempting to organize to focus on at today's event; and (2) the organizers of the annual Cal State Fullerton Social Justice Summit invited the UFCW to present the Fresh & Easy organizing workshop at the event.

It's our analysis one of the reasons the UFCW has been less overt, particularly in Southern California where Tesco's Fresh & Easy is headquartered and where it has the majority of its stores, over the last year is because the retail grocery clerks' union has been putting more of a focus on building a grass roots, community-based coalition to help it achieve its goal of unionizing the grocery chain's store-level workers.

The participation in today's Cal State Fullerton Social Justice Summit is an example of these efforts. There have been other similar grass roots-type efforts of late for the UFCW.

Another reason, in our analysis, the UFCW has been less active in its Fresh & Easy employee organization efforts is because of the recession (high unemployment), coupled with the fact Tesco has been losing tons of money with its small-format, combination fresh foods and grocery chain. We estimate Tesco has lost at least $700 million on Fresh & Easy since 2006. The first stores opened in November of 2007.

Because of the high unemployment rates in California, Nevada and Arizona, where Tesco has its 152 Fresh & Easy stores, the UFCW took some flack for its very aggressive campaign in 2008 to early 2009. Since then the union has taken a much more low key approach in its efforts to organize the grocer's store-level workers, particularly on the public relations front.

However, the UFCW hasn't given up its efforts by any means, although many observers wonder why it went from such an aggressive campaign to such a low key one.

Tesco's Fresh & Easy was recently found by the National Labor Relations Board (NLRB) to have violated a section of the U.S. National Labor Relations Act, something we reported on in this March 4, 2010 story: Administrative Law Judge Finds Tesco's Fresh & Easy Violated Labor Relations Act in Ex-Store Employee, UFCW Union Complaint. Fresh & Easy says it plans to appeal the ruling.

Interestingly, the UFCW hasn't publicly gone after Tesco regarding the NRLB ruling. For example, the union hasn't issued a press release about the issue, nor has it used the ruling in its campaign to unionize Fresh & Easy in any demonstrable way.

Tesco Fresh & Easy's public position is that its store-level employees have the right to organize a union if they so desire, based on U.S. labor laws. However, the NRLB violation involves a lawsuit by a former Fresh & Easy employee who charged the grocer interfered with her right to do just that, which the judge in the case agreed was the case.

Thus far, there hasn't been a Fresh & Easy store where employees have called for an open ballot election for membership in the UFCW, which is the key step to being recognized as a union shop.

We predict once there's a marked improvement in the economies, particularly lower unemployment, of these three states - California, Nevada and Arizona - we will see a marked increase in the level and intensity of activity on the part of the UFCW in its Fresh & Easy organizing campaign.

Also look for increased efforts on the part of the union to build a strong, community-based coalition in Southern California, likely comprised of many of the organizations and individuals in attendance at today's Cal State Fullerton Social Justice Summit, as a way to improve its odds in organizing Fresh & Easy employees.

[Linkage: Click here for an extensive selection of past stories in Fresh & Easy Buzz about the UFCW union-Fresh & Easy topic and issue.]

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

Fresh, Prepared Foods Retailing & Merchandising

Walgreen Co. is - as of Friday, April 9 - officially the owner of New York's Duane Reade drug store chain, which with 258 stores in the New York City metro area is the number one drug channel retailer in the market.

That's a big bite out of the drug (and food and grocery) retailing apple for the drug chain in the "Big Apple."

Walgreens says it plans to operate the stores under the Duane Reade banner (perhaps not forever), which is a wise move considering the strong equity the name has in New York City. It's CEO, John Lederer, also is staying on for now.

Walgreen Co. has 70 drug stores under the Walgreens banner in New York City. The acquisition of the 258 Duane Reade units brings its total store count 328 in New York City, which makes it fae and away the leading drug chain in the region.

There are nearly 7,500 Walgreens stores in the U.S. The retailer had 2009 annual sales of $63 billion. Duane Reade had 2009 sales of about $1 billion.

Ownership of Duane Reade makes the drug retailer's plans to get into the fresh, prepared foods merchandising and retailing business much, much easier than it was just a mere two months ago, when the leading U.S. drug store retailer announced its intent to buy New York City's 50 year old iconic drug chain for $618 million and the assumption of its debt in a friendly acquisition.

Walgreen Co. had announced its plans to develop a fresh, prepared foods program just a few weeks prior to its February 17, 2010 Duane Reade acquisition announcement, by the way.

Fresh & Easy Buzz first reported on Walgreens' plans to get into fresh, prepared foods retailing in January of this year.

We were the first publication to report that Walgreen Co. had hired former Tesco Fresh & Easy Neighborhood Market director of fresh foods Jim Jensen to head the start up of its fresh, prepared foods program, something the drug chain confirmed shortly thereafter. [January 6, 2010 Breaking Buzz: Corporate Director of Fresh Foods Jim Jensen Leaves Tesco's Fresh & Easy.] [January 15, 2010: Just-Exited Tesco Fresh & Easy Fresh Foods Director Jim Jensen to Head New Fresh Foods Initiative at Walgreens Drug Chain.]

The reason Walgreens' development of its fresh, prepared foods program, which according to our sources is coming along nicely, just got easier for the chain is because Duane Reade has an impressive fresh, prepared foods program operating in some of its newest and most-recently remodeled stores in New York City, including its newest store on 8th Avenue (between 16th & 17th) in Manhattan's Chelsea district, and the location at 1350 Broadway (at 35th Street) in Manhattan, both of which we've visited.

The primary focus of Duane Reade's fresh, prepared foods merchandising is on offering an selection of packaged, ready-to-eat and ready-to-heat fresh, grab-and-go type foods under its own "deLish" private brand, merchandised in attractive and convenient refrigerated cases, like those pictured above and below. The ready-to-eat foods include sandwiches made by New York City prepared foods guru Eli Zabar (also pictured below), salads, ready meals, side dishes, snacks, desserts and more for all three meal occasions: breakfast, lunch and dinner.

The stores also feature a selection of fresh breads and baked goods merchandised in clear plastic display fixtures (pictured below).

All of its fresh, prepared foods items are made for and distributed to Duane Reade by local food vendors (like Eli Zabar) on a daily basis.

There's also a selection of manufacturer branded refrigerated fresh foods, along with a huge assortment of chilled beverages, in the stores' "grab-and-go" fresh foods area. Each store also has a fresh-brewed coffee station, like the one pictured below. Duane Reade's is a full-blown fresh, prepared foods program, not a mere hobby.

The stores look more like mini-supermarkets than they do traditional drug stores. (See below.) Think "channel bending" - one part small-format food store and one part convenience store, combined with a full drug store and pharmacy, with a fresh, prepared foods cherry on top. About all that's missing are fresh produce and traditional fresh meats. There are some convenience-type meats in the stores.

These newer and more-recently remodeled Duane Reade stores also feature an extensive selection of packaged foods, groceries, perishables and non-foods - which the chain has been adding in nearly all of its stores in various degrees depending on the available square footage of each respective store.

The key feature in these above product categories are Duane Reade's various food (and beverage) and non food private brands, which in our analysis and opinion are some of the best looking (design) and better quality store brands produced by retailers of any channel we've come across in recent times.

Duane Reade's fresh, prepared foods have been well-received in the New York City stores where they're currently being merchandised and sold. So much so in fact that including the category in its new and remodeled stores has been top priority for Duane Reade, which is something we're told will continue to be the case under Walgreens' ownership.

In fact, according to our sources, Walgreen Co. plans to speed up the process of putting fresh, prepared foods in the Duane Reade stores. It also plans to use the Duane Reade program as the blueprint for testing the sales of the ready-to-eat and ready-to-heat foods in some of its existing 70 Walgreens banner stores in New York City, starting fairly soon.

And of course, in terms of blueprints, the Duane Reade program is invaluable to the work ex-Tesco Fresh & Easy fresh foods director Jim Jensen and others are and have been doing for the last couple months in getting Walgreens' Fresh, prepared foods program developed.

New York City also happens to fit in very well with the drug chain's strategy for its fresh, prepared foods program, which puts an emphasis - but not exclusively by any means - on highly dense market regions like Manhattan, along with markets like Boston, Philadelphia, Chicago, San Francisco and others.

As we discussed in this January 2010 piece [Walgreens Eyeing San Francisco For Fresh Foods Program: Could it Strike Category Gold in the City By the Bay?] dense urban regions like New York City and San Francisco lend themselves well to grab-and-go and other forms of fresh, prepared foods merchandising and sales.

Walgreen Co. has lots of stores in both these cities (328 in New York City, population 13 million) and 64 in San Francisco, population 900,000) resulting in what in our analysis is an excellent formula for fresh, prepared foods retailing. That formula: Dense urban markets/ lots of people on the ground x having a high store count in such markets = a good grab-and-go prepared foods market. (The Walgreens store above is in San Francisco's South of Market neighborhood)

When it comes to fresh, prepared foods, Duane Reade gives Walgreen Co. not only the leading drug category market share in the number one urban market in the U.S. - New York City - it also brings the leading U.S. drug chain an already operating and largely successful fresh, prepared foods program right when it needs it most - during Walgreens' own category development stage.

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

Fresh, Prepared Foods Retailing & Merchandising

Safeway Stores' soon to open (May 6), completely remodeled (now 71,000 square foot) supermarket in Washington D.C's Georgetown neighborhood (pictured above) will include arguably the grocery chain's largest and most elaborate in-store branded "Signature Cafe" deli and fresh, prepared foods store-within-a-store to date.

In fact, take away the dry grocery, non-foods and fresh meat and produce departments, and it looks almost like Safeway's "The Market" prepared foods-focused small store format, two stores of which currently exist in Long Beach (opened in May 2008) and San Jose, California (opened in August 2009) respectively.

Of course, that's no accident: Safeway's Signature Cafe prepared foods brand, which the grocer has now extended as a brand for the deli and prepared foods departments in some of its newest built-from-the-ground-up and remodeled stores, is in large part the inspiration for its "The Market" small-format grocery stores.

And like Walmart, which is branding the deli and prepared foods departments in some of its supercenters and Neighborhood Market supermarkets "Marketside" - named after its small-format, fresh, prepared foods-focused stores and fresh, prepared foods brand of the same name - Safeway has figured out that a grocer doesn't need to build a small-format store all its own to be in the "store branded" ready-to-eat and ready-to-heat fresh foods business.

Rather, since both chains have existing mega-real estate in the form of thousands of U.S. stores, why not put that prepared foods store - be it "Signature Cafe" or "Marketside" - in existing stores, in the form of a branded store-within-a-store deli/prepared foods department and cafe.

The "Signature Cafe" in the soon to open two-story Georgetown Safeway (its Lifestyle format) store (pictured above), also called the "Social Safeway" because of the 'who's who' of Washington DC politicos and others that shop there, is indeed both a real eat-in cafe and a prepared foods store-within-a-store.

It's jam-packed with ready-to-eat and ready-to-heat fresh, prepared foods of all kinds. There's all of the Signature Cafe store brand ready-to-heat packaged entrees and side dishes, merchandised in self-serve refrigerated cases, for example.

There's also fresh, prepared foods (salads, entrees, snacks, sides and more) and deli items (lunch meats, cheeses and the like of every kind) merchandised in bulk, behind full-service cases. It's old fashion deli meets new-age self-serve prepared foods shop.

Add a mini-pizza parlor with fresh baked pizzas, a sandwich bar, and an Italian gelato bar to the mix.

There's also grab and go sections for other foods and beverages, along with separate pay stations, so that customers using the "Signature Cafe" don't have to use the store's central check outs in order to pay for foods they either eat-in or take-out. Think that store-within-a-store concept.

Additionally, there's a modern wood burning fireplace in the "Signature Cafe." Around the fireplace are numerous tables and chairs where customers can sit and eat. There's wide-screen flat-panel television screens and free WiFi in the cafe, which also has a balcony with a view of busy Wisconsin Avenue.

Of course, such features are only fitting for a store nicknamed the "Social Safeway."

Safeway closed the Georgetown store a little over a year ago for the remodeling. When it opens on May 6, we think its "Signature Cafe" deli and fresh, prepared foods store-within-a-store will turn a few heads, including perhaps a few in the food retailing industry.