Preview: Fresh & Easy Neighborhood Market is Headed to Save Mart Supermarket's Hometown of Modesto

Tesco's Fresh & Easy in Northern California - 2011
News/Analysis

Tesco's Fresh & Easy Neighborhood Market is preparing to open its first store, pictured above and below, in the Northern California city of Modesto on Wednesday, March 23.

The store, one of four units Tesco's Fresh & Easy currently has planned for Modesto and next door Ceres, is in a shopping center at 1717 Oakdale Road (at Lancey Drive) in Modesto, which has a population of about 205,000 residents and is located in the Northern Central Valley. [The photographs were taken by a Fresh & Easy Buzz correspondent on January 30, 2011. The store is completed and ready to open Wednesday.]


[See the following linked stories for details about the four Modesto and Ceres locations Tesco's Fresh & Easy has plans for stores at currently - May 10, 2008: New Markets: Tesco's Fresh & Easy to Move Into Modesto, California Market; Open its First Store in the City Early Next Year; November 6, 2008: Upcoming New Markets News: Tesco Will Open A Second Fresh & Easy Store in Modesto, California; March 31, 2009: Despite Having Postponed its Northern California Launch Indefinitely; Tesco's Fresh & Easy Planning Third Store in Modesto, California; and November 3, 2010: Tesco's Fresh & Easy Neighborhood Market Plans New Store in Northern Central Valley, California City of Ceres.]

Modesto is a little over an hour's drive from the San Francisco Bay Area city of Concord, where Tesco opened a Fresh & Easy store yesterday. [See - March 16, 2011: Fresh & Easy Neighborhood Market Opens Stores in Concord and Vacaville Today; Makes Five Markets in Northern California.]

Fresh & Easy Neighborhood Market acquired the Oakdale Road and Lancey Drive location in 2008, as we reported in this story - November 6, 2008: Upcoming New Markets News: Tesco Will Open A Second Fresh & Easy Store in Modesto, California.

The building was most-recently home to a Save Mart supermarket, which was the anchor retailer in the shopping center. However, the Modesto-based chain, which is the second-largest grocer in Northern California after Safeway Stores, Inc., closed it some years ago after building and opening a bigger and more modern supermarket a little over half-a-mile away at 2601 Oakdale Road (at Floyd).

Save Mart, which operates 241 stores in Northern California, northern Nevada and as far south as Bakersfield in the Central Valley and has about $5 billion in annual sales, is headquartered in Modesto, where it's one of the city's top private sector employers.

Save Mart Supermarkets is privately-held. It's majority-owner is Bob Piccinini and his family. Picinini is a Modesto native and resident. His father Mike and a partner, Nick Tocco, founded the chain in the 1950's, opening the first store in Modesto. In the 1980's, shortly after he became president of Save Mart, Picinini, who is chairman and CEO of the chain, bought out the Tocco family in order to have a controlling interest in Save Mart.

Save Mart had about 40 stores, all in and near Modesto, when Bob Piccinini took over the chain in the 1980's. Today the retailer's 240-plus stores are located throughout Northern California and northern Nevada, and in the Central Valley from Stockton and Modesto south to Bakersfield.

Four years ago Piccinini's Save Mart bought the Albertsons Northern California division from then-owner private equity firm Cerberus. The stores, which are located primarily in the San Francisco Bay Area but also in the Sacramento region and elsewhere in Northern California, were re-branded Lucky about a year later.

The Lucky name has a long history in Northern California, where supermarkets under the banner operated for decades. However, Albertsons Inc., which was acquired by Supervalu, Inc., Cerberus and CVS Pharmacy a number of years ago, acquired American Stores in the 1980's and a few years later changed all of the Lucky banner stores in Northern California to Albertsons. When Save Mart bought the division from Cerberus, rights to the Lucky name and brand were part of the deal. Save Mart decided to change all the Albertsons banner stores back to Lucky, rather than using Save Mart, because research found the Lucky brand still had significant equity among consumers in Northern California.

Save Mart is the dominant grocer in Modesto, both in terms of number of stores and market share. It operates five Save Mart banner supermarkets, a Maxx Value Foods hard-discount format supermarket (on Paradise Road in the western part of the city), which so far the only store in what is a smaller-sized version of its Food Maxx discount warehouse format, and one Food Maxx discount warehouse store in Modesto.

Another privately-held and fairly local (90 minute drive from Modesto) chain, West Sacramento-based Raley's, is Save Mart's leading competitor in Modesto.

The other leading major chain food retailers in Modesto are: Walmart (one supercenter and a discount format store), Safeway, Winco Foods, Trader Joe's, Costco, Grocery Outlet and 99 Cents Only, all with one store each respectively in the city.

Modesto also has numerous multi and single-store independents that operate stores of various different formats, from upscale (O'Brien's Markets; two stores) and mid-range (Sam's Food City), to hard-discount (Cost Less Food Co.; three units).

Additionally, a new independent and locally-owned grocer, Green's Market, which specializes in in-store prepared ready-to-eat and ready-to-heat fresh-prepared foods, opened a small-format store this month in downtown Modesto. The store also offers a selection of fresh produce, perishables and groceries, putting a emphasis on locally-produced, natural/organic and specialty-oriented products.

Raley's, which operates stores under the Raley's (superstores), Bel-Air, Nob Hill (supermarkets) and Food Source (discount warehouse format) banners, has four Raley's superstores in Modesto.

And like Save Mart, one of Raley's four Modesto stores is located about half-a-mile from the soon-to-be-opened Fresh & Easy store at Oakdale Road and Lancey Drive.

The photo above of the inside of the Fresh & Easy store at 1717 Oakdale Road in Modesto, which is set to open March 23, was taken by a Fresh & Easy Buzz correspondent on January 30, 2010, shortly after work began on the store's interior.

The Save Mart supermarket that's a little over half-a-mile from the Fresh & Easy location at 1717 Oakdale Road is about 40,000 square-feet. The nearby Raley's superstore is about 50,000 square-feet. In contrast, the Fresh & Easy market at Oakdale Road and Lancey Drive is, like all of the grocer's fresh food and grocery markets, 10,000-12,000 square-feet.

The Fresh & Easy store opening at 1717 Oakdale Road on Wednesday isn't the first location the grocer acquired in Modesto. Rather, as we were the first publication to report nearly three years ago in this story - May 10, 2008: New Markets: Tesco's Fresh & Easy to Move Into Modesto, California Market; Open its First Store in the City Early Next Year - that honor goes to the Sylvan Square shopping center in Modesto, where Tesco signed a deal to put a Fresh & Easy market in half the building, which is about 30,000 square-feet, that formerly housed independent grocer Michotti's Marketplace, which closed in early 2008.

Fresh & Easy originally planned to make the Sylvan Square center store its first unit in Modesto. However, that was back in the days when Tesco planned to launch into Northern California in early 2009 rather than early 2011. [See - May 10, 2008: New Markets: Tesco's Fresh & Easy to Move Into Modesto, California Market; Open its First Store in the City Early Next Year. Those plans have changed, however. Fresh & Easy decided last year to make the Oakdale and Lancey store its first in the city.

It will be interesting to observe how the two family-owned and locally-based chains, particularly Save Mart, which is Modesto born, bred and based, behave from a competitive standpoint when the Fresh & Easy store at 1717 Oakdale Road, which essentially will be in the middle of the Raley's and Save Mart stores, both being only about half-a-mile away, opens on Wednesday.

Save Mart Supermarket's is known to get very aggressive with new (and existing) competitors coming into its home-base Modesto territory. Among the defensive moves the local chain could make, for example, is to except Fresh & Easy's discount store coupons at its Oakdale Road Save Mart store, like Kroger-owned Fry's is doing in Arizona, as we detailed in this recent story - January 29, 2011: Fry's Food Stores Brings Back 'Competitor Coupon Match' Promotion; Accepting Fresh & Easy Neighborhood Market Coupons in Arizona.

As an example of Save Mart's competitive streak, in December 2010, when it converted a Save Mart store on Paradise Road in west Modesto into its first (and currently only) Maxx Value Foods discount supermarket, the grocer launched a price and promotional war campaign against a nearby store owned by Modesto-based multi-store discount grocer Cost Less Food Co., targeting the Cost Less store on Carpenter Road in Modesto, which is the retailer's closest unit to the Maxx Value store on Paradise Road. Modesto-based Cost Less Food Co. has eight stores. Seven units are in the Central Valley and one store is in Jackson, which is in Amador County in the foothills.

Save Mart's price war campaign started with a full-page advertisement in the local daily newspaper, the Modesto Bee. In the advertisement Save Mart published a price-comparison survery that stated its prices on a chosen market basket of groceries is cheaper than the same one at the Cost Less store, showing receipts for comparable items purchased at both stores in the ad.

A few weeks later Cost Less fired back, running not a one page but instead a double truck ad in the paper, offering a survey with twice the number of items Save Mart used in its market basket sample and showing that its Cost Less store on Carpenter Road is the cheaper of the two stores, based on purchases of like items at both stores.

These types of surveys depend on the items a retailer selects to include in the market basket. And since its a self-selection process it can be easily manipulated. Consumers should beware of such surveys and retailers should be cautious in using them.

In December Save Mart Supermarkets also started running (and continues to do so) a weekly full-page ad for its Paradise Road Maxx Value Foods store in the paper's Wednesday food section, which is something Cost Less has been doing for a number of years. The ad, just like Cost Less Foods' full-page advertisement, features about 10-12 "loss leader" food and grocery items offered at or below cost.

Two other possible defensive moves Save Mart Supermarkets could make vis-a-vis the nearby Fresh & Easy market at 1717 Oakdale Road would be to offer to match or beat all advertised and everyday prices at the Fresh & Easy, which is something Save Mart already does at its Food Maxx discount warehouse stores, where its policy is to meet or beat the prices of all its competitors.

Additionally, since Save Mart is headquartered right in Modesto (about a 10-minute drive from its own and the Fresh & Easy store on Oakdale Road) it can easily offer store-specific deals at the Oakdale Road store only, targeted to Fresh & Easy, like it's doing with the Paradise Road Maxx Value Foods store against Cost Less.

Or...Save Mart could nothing more than it's already doing, which in some ways would be bad news for Fresh & Easy since it would signal that Save Mart doesn't find the new entry owned by the world's third-largest food retailer, Tesco, a serious threat to its store half-a-mile away and its hometown dominance in Modesto.

Save Mart operates supermarkets and Food Maxx units in the Fresno and Bakersfield areas where Fresh & Easy Neighborhood Market has 14 stores, so the chain is familiar with the Fresh & Easy format and operations.

Raley's, in addition to being a superstore operator, is a pioneer and leader in ready-to-eat and ready-to-heat fresh-prepared foods merchandising, a category that comprises a significant portion of Fresh & Easy's offering.

Raley's introduced a new line of pre-packaged refrigerated ready meals and sides in October of last year, which it's added to its already extensive selection of packaged and bulk deli-style merchandised ready-to-eat and ready-to-heat fresh-prepared foods. [See - October 30, 2010: Raley's Launches New 'Raley's TO GO' Pre-Packaged, Refrigerated Fresh-Prepared Foods Line.] The new pre-packaged line was launched in part because of Tesco's moving into Northern California this year.

All of Fresh & Easy's fresh ready meals and sides are pre-packaged. We expect Raley's to defend its prepared foods turf at the nearby store once the Fresh & Easy market at Oakdale and Lancey opens. We also expect Raley's, like Save Mart, to defend its turf across all categories at the Modesto store.

It should be an interesting competitive triangle; the Fresh & Easy market at 1717 Oakdale Road, the Oakdale Road Save Mart store and the nearby Raley's superstore, all located about half-a-mile from each other. And it begins on Wednesday, March 23, when the first Fresh & Easy store in Modesto opens at 1717 Oakdale Road. Stay tuned.

Related Stories

[Readers: Click on the following links - Fresh and Easy Northern California, Tesco's Fresh and Easy in Norcal 2011, Northern CA Launch, Northern California, Northern California Market Region, Fresh and Easy San Francisco Bay Area and Northern California Special Report - for related stories about Tesco's Fresh & Easy Neighborhood Market in Northern California.]