Competitor News: Where is 'Wal-Mart America?' A Demographic Look and Analysis

Fresh & Easy Buzz Editor's Note: The official U.S. commission that reports whether or not the country is "officially" in an economic recession reported today that indeed the United States is in a recession -- and has been in one since December, 2007, making the current recession already the longest since the 1980's. Our analysis, and that of the majority of government and independent economists, is that there are worse times to come before the economy starts to gets better. We see the current recession lasting most likely all of next year.

Both Wall Street -- commercial banks and what's left of the once mighty investment banks -- as well as main street --the "Big Three" Detroit auto makers, chain and independent retailers of all formats, and nearly every other industry and business -- are feeling the pressures of the economic recession and related financial and credit crisis to different degrees, ranging from being on the verge of bankrupcy to having to make serious cutbacks, to seeing stock share values melt away, in the case of publicly-held corporations.

Mega-retailer Wal-Mart Stores Inc. is on fire though, despite and in part because of the serious economic recession.

The retailer is experiencing a consumer flight to its U.S. Supercenters and other format stores by food and grocery shoppers in general, along with by consumers of nearly all income levels looking for holiday shopping bargains. After all, who cares where you buy that Ipod for daughter Cindy or computer for son Chip for Christmas right now, as long as it's offered at the best price available. And few consumers can even afford such gifts for Christmas. For many its a trip to Wal-Mart for its $10 and $20 Christmas gift selections this year.

Wal-Mart has been growing its share of the food and grocery market in the U.S. over the last few years considerably, recently unseating Kroger Co. as the number one retailer of groceries in America on an overall, national basis.

And that was even before about the middle of this year when the retailer began experiencing considerably higher customer counts in its stores with a particular focus on shoppers buying food and grocery items at primarily Wal-Mart's Supercenters, but also at its Sam's Club stores and Wal-Mart Neighborhood Market supermarkets. Consumers have flocked to Wal-Mart for consumables in even greater numbers since late September and early October when the first signs of the financial crisis started to hit.

As a result, it appears when it comes to shopping at least, and perhaps even more, Wal-Mart is America right now.

Dante Chinni, who writes the Patchwork Nation Blog for the Christian Science Monitor takes a look at Wal-Mart in the United States in what he calls a "Patchwork Nation" in an excellent demographic analysis piece titled: 'Where is 'Wal-Mart America'? Below is that piece:

Where is ‘Wal-Mart America’?
Christian Science Monitor
Patchwork Nation blog
By Dante Chinni
December 1, 2008

The early returns from the holiday shopping weekend show some good news for retailers and quite a bit of good news for one in particular: Wal-Mart. With the holiday air heavy with economic angst, the store that promises “always low prices” is one of the few that is expected to post good numbers for the season.

But most retailers in America don’t elicit the strong love-hate reactions that Wal-Mart does. In some locales, residents welcome the hangar-sized megastores, seeking their low-cost TVs, clothes, and groceries. Others have voiced concerns about what Wal-Mart does to smaller local retailers and how the company treats its employees.

It is arguably a part of America’s culture wars, complete with a documentary by a liberal filmmaker that blasts the company and a robust selection of pro- and anti-Wal-Mart websites. Even last weekend wasn’t without controversy for the retailer, when early on Friday morning an employee was trampled to death at a Long Island store.

Given all the attention paid to the stores, is there such a thing as “Wal-Mart America”? If so, where does it reside?
More than 3,700 Wal-Marts are open for business in the United States, so it may be that the term “Wal-Mart America” is almost redundant. Still, when the store locations are analyzed through the lens of Patchwork Nation, differences among the sites emerge.

Of the 11 communities that represent the various county types in Patchwork Nation, all but one have a Wal-Mart less than 20 miles away. Some have multiple stores. (A Wal-Mart is a bit further down the coast from Lincoln City, Ore., which represents our small-town “Service Worker Center.”)

In terms of sheer numbers of stores, the wealthy, largely suburban “Monied ’Burbs” lead the way, with 885 Wal-Marts in their boundaries. But that’s largely due to the number of people that live there – roughly 85 million.

A better measure may be Wal-Marts per 100,000 people, and that method yields very different results. One finding: The stores seem to have their strongest base in communities with a conservative tilt.

The highest Wal-Mart-to-person ratio exists in the aging “Emptying Nest” counties (2.4 Wal-Marts for every 100,000 people) and in the socially conservative “Evangelical Epicenters” (2.0 Wal-Marts for every 100,000 people).

Also scoring high are the “Military Bastion” counties located around armed-forces bases (1.8 Wal-Marts for every 100,000 people) and rural agricultural “Tractor Country” counties (1.7 Wal-Marts for every 100,000). Both of those types tend to lean Republican.

For the most part, Patchwork Nation correspondents in Hopkinsville, Ky. (our “Military Bastion”), and Sioux Center, Iowa (our “Tractor Country” community), speak fondly of their local Wal-Marts.

Meanwhile, the reliably Democratic big-city “Industrial Metropolis” counties have the lowest Wal-Mart-to-person ratio – at just 0.5 per 100,000 people.

Also on the low end are the more politically divided county types: the “Monied ’Burbs,” the growing and diversifying “Boom Towns,” and the “Service Worker Centers” (all those places have 1.4 Wal-Marts per 100,000 people or less). Conversations we’ve had with residents in some of these communities reveal a negative value judgment about the chain.

For instance, in Eagle, Colo. (our “Boom Town”), debate abounds about “big-box store” development. But the discussion changes for many when the name on the “big box” changes. Talk about the arrival of, say, Whole Foods, and you’ll hear warmer words. You’ll hear something else about one of Sam Walton’s superstores.

In part to appeal to communities that are less interested in them, Wal-Mart has recently introduced a new logo and is hipping it up a bit. The approach also includes a new motto about “living better.”

In some communities that consider themselves progressive, criticism has risen over how the company treats and pays its employees. Look at Ann Arbor, Mich. (our collegiate “Campus and Careers” community), where some people have signed up to start a Boycott Wal-Mart Meetup Group. No Wal-Mart is within the city limits yet, but there is one in neighboring Ypsilanti, Mich.

Protests or no, Wal-Mart has established quite a foothold in those “Campus and Careers” counties (1.9 stores for every 100,000 people). Cash-strapped students are often among the most concerned with stretching their dollars.

Watching how Wal-Mart performs and grows in all these communities in the coming years could be telling. If the current economic downturn deepens, protesting against or boycotting a company that promises low prices may become harder for some. And the Wal-Mart battlefield in the culture wars may shrink.

Competitor News: Wal-Mart's Marketside Holds Big, Two-Day Pre-Thanksgiving Holiday Promotion at its Arizona Stores; More, Similar Events to Come

Phoenix, Arizona Metropolitan market region

Wal-Mart's new small-format Marketside grocery and fresh foods markets in the Phoenix, Arizona Metropolitan region cities of Gilbert, Chandler, Mesa and Tempe, held the first major promotional event since the four stores' grand opening events on October 4, when the markets officially opened last month.

Marketside, which operates as a separate division from Wal-Mart, Inc. and has a corporate office in Tempe, Arizona, billed the two-day promotional event, held over the November 15-16 weekend, as its 1rst annual pre-Thanksgiving holiday "Thanksavings Event."

The focus of the two-day promotion at all four Marketside stores was on fresh, quality foods at affordable prices, with an emphasis on the value proposition. The philosophy behind the event being shoppers can buy quality fresh foods and grocery products at the Marketside stores and do so for a reasonable price.

Wal-Mart's Marketside uses the tag line, "Deliciously Affordable" along with its "Marketside" logo. The theme of the promotion then was designed in part to reinforce this positioning, which all promotions should do. The two-day event though was pure soft-sell, full of freebies and light on the selling emphasis.

The two-day weekend promotional event was kicked-off on each day at 7am, with free cups of Peet's Coffee being given to all customers for free.

Beginning at 10am the stores held a turkey coloring book contest for kids, as well as having balloon artists at each store who made Thanksgiving-themed and other balloon creations for the kids. Artists also created washable tattoos (lots of turkey tattoos we are told) for the kids attending the event with their parents. All the children's activities were free.

Not everything was for the kids though. Also beginning at 10am, all four Marketside stores kicked-off an all-day, store-wide food sampling even with a sweet-treat theme, which included free cookies, cakes, pies and other desserts from the markets' in-store fresh bakeries. Each store also featured a professional chef who conducted holiday-themed cooking demonstrations all day on both of the two days until 6pm.

At noon, the Marketside stores held a free Tri-Tip barbecue in the stores' parking lots, featuring the grilled beef and side-dishes prepared by the in-store chefs. The Marketside stores have in-store kitchens where all of the fresh, prepared foods are made.

During the free barbecue, and until 6pm on both weekend nights, the stores featured a live jazz guitarist in the parking lot.

Marketside used the promotional event with all the freebies as a way to introduce new customers to the small-format (15,000 -to- 20,000 square foot) combination basic grocery and fresh and specialty foods stores. The retailer also used the two-day event to promote lots of Thanksgiving holiday food and grocery items in-store with numerous displays and discount priced items.

A Marketside store manager told Fresh & Easy Buzz the free Tri-Tip parking lot barbecue, which the retailer promoted in-store and through the media in advance, drew a large crowd to the store, including many people who said it was their first visit to that particular Marketside unit.

The store manager also said Marketside plans on doing more of these major promotional events throughout next year, particularly around various holidays and similar themes.

The Marketside store manager added that the stores are putting increased emphasis on value, focusing on the message that the stores offer premium quality fresh, prepared foods for affordable prices, as well as basic grocery items competitively priced.

For example, the Marketside stores offered and promoted a value-based prepared Thanksgiving dinner for 4 -to- 5 people which featured a turkey breast, one side-dish, a vegetable and dessert for $20. The stores also offered whole turkeys and more complete full holiday meals, but promoted the more minimal $20 Thanksgiving meal because it wanted to offer a value-based offering in the current recessionary economy, which is hitting the Phoenix Metropolitan region particularly hard.

The Marketside stores also put a focus on offering traditionally-purchased Thanksgiving holiday national brand grocery items like Swanson Chicken Broth, fresh and canned yams, stuffing mix and other key holiday groceries at a discount in the stores in the weeks leading up to Thanksgiving, which was last Thursday.

An employee at the Marketside store in Mesa, Arizona told Fresh & Easy Buzz the kids' events on Saturday and Sunday -- the balloon art, free tattoos and turkey coloring contest -- were popular, as was the Tri-Tip barbecue, adding that a couple customers commented that they hadn't had a free lunch in sometime. Perhaps that goodwill will translate into those "free lunchers" becoming regular customers of the store.

The four Phoenix Metro region Marketside grocery and fresh foods markets opened in early October of this year. In addition to the four stores, Wal-Mart is building a fifth Marketside market in Peoria, Arizona, which also is in the Phoenix region and not far from the existing stores. The Peoria Marketside could open before Christmas. If not it will open in early 2009.

Additionally, as we've reported, Wal-Mart Marketside stores under development in San Diego County in Southern California -- one in downtown San Diego and another in the nearby city of Oceanside. Based on our sources, which have been very good thus far, Wal-Mart has at least an additional three sites in Southern California either locked-in or about to be locked-in for its Marketside markets.

Based on our information, the downtown San Diego and Oceanside Marketside stores will likely open early next year.

Once Wal-Mart has its first 10 Marketside markets open -- the soon to be five in Arizona and five in Southern California -- the retailer plans to look closely at the format and stores' performance to date at that time, make changes if needed, and then go from there with a strategy of either opening additional stores or not.

We do know that Wal-Mart has identified numerous potential Marketside sites -- in Arizona, Southern California, the San Francisco Bay Area in Northern California and elsewhere -- that it can pull the trigger on pretty rapidly if it decides to go forward aggressively (or even moderately) opening additional Marketside small-format grocery and fresh foods markets after it evaluates the first ten next year.

As we've written all along about Wal-Mart's strategy with Marketside, unlike Tesco's with its small-format, convenience-oriented Fresh & Easy grocery and fresh foods markets, it's never been the Bentonville, Arkansas-based retailer's plan to aggressively open hundreds of the small-format "Small-Marts" at a super-rapid pace -- over say a two year period of time. Instead, for Wal-Mart Marketside is a part of the giant retailer's multi-format U.S. food retailing strategy, which includes its Supercenters, Sam's Club stores, Wal-Mart Neighborhood Market supermarkets and other formats in development.

Additionally, the economic recession in the U.S., which we just found out today is (1) an official recession and (2) has been going on since December, 2007, has put the major focus at Wal-Mart Stores, Inc.'s USA division on three things: value, value, value; as customers are flocking to its Supercenters and Sam's Club formats primarily during these bad economic times.

In fact, Wal-Mart is testing a smaller-format Sam's Club, which might even be a non-membership store in its final development, as well as developing another completely new discount food and grocery format store.

As best we can find out thus far, the new discount format store, which would put a major emphasis on selling food and grocery products, is likely somewhere between a Supercenter, Sam's Club and Wal-Mart Neighborhood Market supermarket in terms of format and size. We hope to report additional information about the potentially new format as we learn more.

Meanwhile, as we wrote about last week, Wal-Mart CEO Lee Scott is retiring from his position and will be replaced by Mike Duke, currently the company's head of global operations, at the end of January, 2009. Marketside was developed under Lee Scott's leadership and it will be interesting to see what Duke does with the format once he takes over.

Since he has headed Wal-Mart's international operations for a number of years, Duke is very familiar with small-format stores such as Tesco's Tesco Express in the United Kingdom and Eastern Europe as well as German hard discounters Aldi and Lidl, along with the overall convenience grocery and fresh foods store trend in Europe over the last few years. Therefore he comes to Marketside with an overall understanding of the various varieties of small-format markets both in the U.S. and globally.

But since all along, as we've written about frequently, Wal-Mart's strategy for Marketside has been to get about 10 of the stores up and running, then evaluate the format and store performance, then go from there, it's likely in our analysis Mike Duke will follow that same strategy (full evaluation then decide on a going forward strategy for Marketside) as Wal-Mart's new CEO.

Of course, once that process is completed, his final decision as to if and how to go forward could be a much different one that would have been made by outgoing CEO Lee Scott.

The industry will have to wait for some time for that decision to play out though.

Meanwhile, all indications we have is that Wal-Mart's Marketside division, based out of Tempe, Arizona, plans to continue to focus on its "Deliciously Affordable" position for the Marketside stores, including more promotions similar to the two-day "Thanksavings Event," as well as launching a retail branding and advertising campaign for Marketside, as we reported here.

Competitor News: Target Corp. Planning to Dramatically Expand Food and Grocery Offerings in All of its U.S. Target Discount Format Stores

At least you can say Target Corp. CEO Gregg Steinhafel is a man with a plan -- or two.

Steinhafel, the CEO of the extremely popular until the U.S. financial meltdown and recession hit Target Corp., which operates mostly target discount stores but also a number of Super Target Supercenters that feature a complete selection of fresh, perishable and shelf-stable food and grocery products along with general merchandise items, was ready with two key strategies yesterday when he announced the company's nearly 24% drop in its quarterly profits, which was the retailer's fifth consecutive drop in quarterly profits. The good news for Target is that the nearly 25% drop in profits was actually less than analysts had estimated it would be for the quarter.

In a conference call yesterday with analysts and the press, Steinhafel said Target is already in the process of doing two things -- lowering the prices across the board on the food, grocery, non-food and general merchandise products it sell in its Target discount stores and Super Target combination grocery and general merchandise Supercenters and, even more interesting for the retail grocery industry (and consumers), is preparing to launch an "aggressive test" of a substantially expanded food and grocery product offering in all of its U.S. Target discount stores.

Target discount stores currently carry a limited assortment of food and grocery products, both national brands and many under the retailer's Market Pantry (price store brand) and Archer Farms (natural, organic and specialty line) private label lines. The majority of the food and grocery items are shelf-stable, with an emphasis on staples and the snack, beverage and household supplies categories.

Target discount stores also sell milk, eggs and a limited assortment of dairy, deli, frozen and refrigerated items in the perishables segment.

The Super Target stores, which for those who aren't familiar with them are sort of an upscale version of a Wal-Mart Supercenter, carry everything a supermarket carries and more.

"We are going to continue to push and test aggressively a multitude of food expansions in remodels and other test stores to make sure that we fairly understand where it works and where it doesn't work," Target Corp. president and chief executive officer Steinhafel said in a conference call discussing third-quarter results yesterday. He added it was too early to assess the results of a small test of the expanded food offering near the company's headquarters near Minneapolis, Minnesota.

To put it simply, Target Corp. is looking to the Wal-Mart model -- lots of consumables at discount prices -- to help it hold off any serious decreases in profit like the near-24% drop-off reported yesterday. Just a year ago this was not something target was considering. But severe financial crisis and economic recessions tend to focus all retailers on price -- and consumables if they are able to offer them or expand a current offering.

Target is the second-largest U.S. discount chain in terms of annual sales. Wal-Mart Stores, Inc. is number one.

Wal-Mart and Target are competitors but prior to the severe economic downturn in the U.S. upper-middle income and higher earning consumers tended to favor Target over Wal-Mart. However, many of those shoppers have been traded off to Wal-mart over the last couple months.

Additionally, unlike Wal-Mart which operates thousands of combination food and general merchandise Wal-Mart Supercenters, Target doesn't operate many Super Target stores nationally, which therefore doesn't allow it the advantage of selling consumables in the same volume Wal-Mart can.

But that's only a part of the picture. The fact is Target has never had much of a success with its Super Target grocery and general merchandise Supercenters. In fact, in the mid-to-late 1990's the retailer seriously considered selling the Super Target stores and getting out of the Supercenter format business completely. But it ultimately decided to keep the format and stores. It did very little with the Super Target format until about five years ago when it began building and opening new stores, including targeting new markets like California with the combination food and general merchandise stores.

Wherever there's a Wal-Mart Supercenter nearby though, the Super Target store almost always comes in second place. Perhaps a new focus on food and grocery products at discount prices in its discount stores will focus Target better on the food and grocery segment, thereby also having a positive effect on the Super target stores.

The new Super target stores opened this year are attractive and well merchandised, including the fresh foods and grocery departments and offerings. The retailer also has remodeled a number of its existing Super Target units, improving them greatly.

Target also has made much improvement in just the last two years on its Market Pantry (conventional and price line) and Archer Farms (natural, organic and specialty) store brands. The retailer has been offering 15% off line item promotions on the Archer Farms store brand items regularly over the last three months. However, in the current economic climate our analysis is sales and profit lies in the Market Pantry price line, offering it at prices below supermarket store brands if possible. Over the last month Target has been featuring an increasing amount of Market Pantry food items in its weekly full-color advertising book.

Food and HBC continue to be fast-growing areas for Target, which should be good news for the retailer's plans to expand the categories in its discount stores. The two sectors combined had sales growth of about 10% in the quarter, said Douglas Scovanner, executive vice president and chief financial officer. The company said the increased consumables mix put pressure on margins, although overall gross margins were still up 52 basis points.

Target's new, expanded focus on food, groceries, HBC and household consumer packaged goods in its discount stores is going to add competition to the current mix already out there for sure. target has discount stores throughout the U.S. Therefore from a location standpoint one can find a store nearly everywhere in the country near a supermarket or two. This will particularly be the case if target can get its pricing a bit lower overall than it currently is in both the discount and Super Target format stores.

The numbers: Target Corp.'s Net income fell 23.8% in the quarter, which ended Nov. 1, to $369 million, on revenue growth of 1.9%, to $15.11 billion. Same-store sales were down 3.3%. Year to date, net income fell 11.9%, to $1.6 billion, on revenue gains of 4.4%, to $45.39 billion.

Competitor News: Wal-Mart Lowering Prices on Holiday Items and Staples; New Formats Coming; Online Grocery Sales; Hundreds of New Stores FY 2009-2010

Eduardo Castro-Wright, CEO of Wal-Mart USA, was feeling his retailing oats a bit yesterday at the Morgan Stanley retail conference in New York City. He also made news at the conference, which is something he seems to enjoy doing despite Wal-Mart's generally tight-lipped culture. Yesterday's Morgan Stanley retail conference was broadcast over the Internet.

"I've read and heard most of the (retail) industry is struggling," Castro-Wright said to a few laughs from attendees during his presentation at yesterday's retail conference.

"But Wal-Mart is seeing positive trends," the head of Wal-Mart Stores, Inc.'s North American operations told analysts and others attending his presentation . "Customers now are shopping more frequently (primarily because of cheaper gasoline) and there hasn't been a significant change in how much they spend during each visit," he said.

Earlier this month Wal-Mart reported a nearly 10% rise in quarterly profits as consumers appear to have flocked to the discounter's stores. This despite the severe economic recession, and despite the fact other combination grocery and general merchandise mass merchandise retailers like Target and Costco reported losses for their respective most recent quarters.

Holiday food and grocery price reductions every week

Castro Wright said Wal-Mart is rolling back prices on many food and grocery items for the Thanksgiving and Christmas holidays, meaning numerous (particularly holiday-related and staple items) grocery prices in all of the retailer's stores beginning this week are even lower overall than they were last week, he said. The rollbacks will remain in place for the Christmas holidays as well, Castro-Wright said.

In addition, every week between now and Christmas Wal-Mart will do additional price rollbacks on food, grocery, general merchandise and holiday-oriented items and products, Castro-Wright said.

Addressing the current cutback in consumer spending across the board in the U.S., including on food and groceries, the Wal-Mart USA CEO said: "The consumer will spend when you have the right prices and offerings. So with Christmas coming, I thought I would give you a little confidence."

More new formats

Eduardo Castro-Wright also talked about Wal-Mart's expansion in the U.S. for the company's 2009 (current) and 2010 fiscal years at yesterday's Morgan Stanley retail conference.

Breaking a little news he said the mega-retailer is currently working on developing a new "high efficiency" retail format that would have higher sales per square foot than some of its current stores. According to our sources this is a smaller version of the Supercenter.

The executive said Wal-Mart also is looking at using smaller-sized stores to enter markets where it does not have a presence today, this includes its new 100,000 square foot smaller Sam's Club prototype store it's been testing, along with its new small-format Marketside fresh foods and grocery stores (four open so far in the Phoenix, Arizona region as we've reported), its 43,000 square foot Wal-Mart Neighborhood Market supermarkets, and its new hybrid Wal-Mart Supercenters, the first of which opened in Modesto, California last week.

Fresh & Easy Buzz has been writing all year that Wal-Mart will use its new small-format Marketside and other new, smaller-format stores to penetrate market regions such as the San Francisco Bay Area in California, as well as urban regions in the state like Los Angeles and San Diego, where it has little opportunity to locate mega-Supercenters because of both geographical limitations and objections by city governments and community groups to the giant stores. [You can search "Wall-Mart" in the Blog's search box for a selection of those posts.]

At about 100,000 square feet that Supercenters, which is in a remodeled vacant retail building, is about 80,000 square feet smaller than the average-size Wal-Mart Supercenter. It's "hybrid" because it's in a formerly vacant building rather than being built from the ground up which is what Wal-Mart historically does with its Supercenters. Despite the smaller size the Modesto hybrid Supercenter has a full supermarket inside, offering a complete assortment of fresh foods and groceries. About 40,000 square feet of the total 100,000 square feet of the store is devoted to food and grocery items. The remaining 60,000 square feet contains general merchandise products just like a larger Supercenter.

Adding food and grocery items to Walmart.com

Castro-Wright didn't address it during the conference yesterday but Fresh & Easy Buzz has noticed Wal-Mart has listed thousands of food, grocery and non-foods items on its Walmart.com Web site, indicating the retailer will soon be offering food and groceries at its online store, along with all of the other products it sells there.

There are no prices on the food and grocery items at Walmart.com as of yet. However we're told by a good source the prices are coming soon. Our source also tells us Wal-Mart will ship the items via UPS and Federal Express, just like it ships all of the general merchandise products it sells via its Web site. Amazon.com sells a huge selection of food, grocery and beverage products on its Web site, and ships them via these same carriers as well, for example.

Add another national format -- actually more of a product line extension to Walmart.com -- to the mega-retailers multi-format food and grocery retailing empire: online grocery retailing. Its cheap -- no stores, cheaper marketing costs and the like -- and its national. More importantly it will provide Wal-Mart with yet another niche or piece of the multi-format puzzle in its all out battle to dominate food and grocery retailing in the U.S., where it now is the national market share leader.

Hundreds of new U.S. stores in FY 2009 and FY 2010

The Wal-Mart USA CEO also said yesterday despite the fact the company has cut back the number of new stores across all formats it plans to open in the U.S. in its 2009 (current) and 2010 fiscal years, it doesn't mean the retailer plans to be merely playing around the edges in terms of new store openings.

In fiscal year 2009 (the current fiscal year) Wal-Mart plans to launch 191 new stores of various formats -- Supercenters, Sam's Club stores, Neighborhood Market supermarkets, Marketside small-format food stores and others -- according to Castro-Wright. That compares to the 218 new units Wal-Mart opened last fiscal year (2008).

In fiscal year 2010, Castro-Wright said Wal-Mart will launch between 142 -to- 157 new units in the U.S.

Considering the size of most of the Wal-Mart format stores, particularly Supercenters and Sam's Club stores, that's still a whole lots of retail square footage for the 2009 and 2010 fiscal years. Additionally, that's a whole lot of new square footage in what many say is a mature retail market, the United States.

Castro-Wright said Wal-Mart would focus the majority of these new stores on what he called 15 "opportunity markets" in the U.S. that the retailer has identified and says account for nearly 40% of total retail sales. Various market regions in California, Nevada and Arizona, the three states where Tesco operates its 102 small-format, convenience-oriented grocery and fresh foods markets, are included among the 15 "opportunity markets" Wal-Mart is putting its major new store development focus on in the 2009 (current) and 2010 fiscal years.

Phoenix, Arizona Metro Market Region Report: 'The Big Surprise' -- Surprise, Arizona Ground Zero For New Food and Grocery Store Openings

Surprise, Surprise......Surprise, Arizona that is.

Welcome to the city of Surprise, Arizona, in the Phoenix Metropolitan region's west valley area.
What's so interesting or surprising about Surprise, other than its name, you ask?

Well, the city just happens to be ground zero for new food, grocery and club stores this year and next. That's all. There's a whole lot of competition brewing in Surprise.

On Friday, the residents of Surprise, Arizona ,which has about 100,000 people and is located 45 minutes from downtown Phoenix, finally got a grocery retailing surprise they had been hoping for since 2007. That new, much desired, grocer is Trader Joe's, which the residents of Surprise voted as the city's "most-wanted" new retailer of any format in a survey conducted by the city's economic development department in 2007.

The city's economic development department conducted the survey to gauge residents most-desired retailers. Trader Joe's topped the list overwhelmingly at number one.

And surprise, just one year later, the residents of Surprise have had their retail wish fulfilled.

On Friday, November 7 a new Trader Joe's market opened in Surprise, Arizona.

The specialty grocer, known for selling low-cost natural and specialty products and fresh foods, closed its Sun City, Arizona store at 13602 N. 99th Avenue and moved 7 miles to 14095 W. Grand Ave. in the fast-growing city of Surprise.

Retailer Jo-Ann Fabrics and Crafts and club store chain Costco took second and third on the Surprise Economic Development Department's 2007 survey, the results of which city officials printed out on postcards and distributed at the International Council of Shopping Centers conference in September 2007 as a way to market Surprise to retailers, a spokesperson for the city's department explained to Fresh & Easy Buzz recently.

Trader Joe's was one of the retailers given a postcard, showing them at the top of Surprise residents' choices, at the conference. A mere two months later, Trader Joe's officials announced they would open in the Surprise Valley Station plaza shopping center near Parkview Place and Grand Avenue in the city, and close the Sun City store.

But just because they didn't score at the top of the Surprise residents list in the 2007 like Trader Joe's and Costco did, that isn't stopping a host of other food and grocery retailers from attempting to surprise the residents of Surprise, Arizona by opening new stores in the city.

For example, Tesco will open its first Fresh & Easy combination grocery and fresh foods market in El Mirage, next door to Surprise.

And mega-retailer Wal-Mart, which also likes to surprise, opened one of its 40,000 -to- 45,000 square foot Neighborhood Market supermarkets at Reems and Greenway roads in Surprise, in April of this year.

It therefore shouldn't be a surprise then if when the Fresh & Easy Neighborhood Market opens early next year, the residents of the Surprise area will see a battle of the "neighborhood markets," Tesco's and Wal-Mart's respective versions, perhaps taking the town by surprise.

But Wal-Mart isn't just going "neighborhood" in surprise. The retailer also is building one of the Wal-Mart Neighborhood Market's big brothers, a Sam's Club club store, in Surprise. The Sam's Club big box store, which will open next year, is being built at Bell Road and Loop 303 in Surprise.

That the Sam's Club is coming to town was actually a surprise to many of the residents of Surprise, Arizona. As you recall, at the top of their survey wish list, right after Trader Joe's, was their desire to have a Costco club store come to Surprise. And since they got their Trader Joe's so fast, just a year after the survey, many residents just naturally thought a Costco would come next -- and soon.

But, a Sam's Club is pretty close to a Costco. Same format, same size, same merchandise mix. Both sell lots of fresh foods and grocery products. Some differences though, but not all that many in the bigger scheme of things retail.

But guess what? Word is Costco is looking into Surprise. Perhaps the residents won't be unpleasantly surprised after all. They just might end up getting that Costco, retailer wish list item number two, right after Trader Joe's.

Meanwhile, residents of Sun City, which is primarily a retirement town with lots of high income retirees, are mourning the loss of their beloved Trader Joe's, which was the very first Trader Joe's store to open outside of California where the chain was founded and still is headquartered.

We're told groups of Sun City retirees already are putting together once a week, regular car pools so they can travel the 14 mile round trip from Sun City to Surprise so they can continue to stock up on specialty and natural food and grocery items.

This won't come as a surprise to Trader Joe's. The knew that by closing the older store in Sun City and building a new, larger and more modern Trader Joe's in fast-growing Surprise, they would gain an entire new core of shoppers, the Surprise residents, while still maintaining most of their existing customer base in Sun City, since it's only seven miles away.

Shoppers regularly drive 30 -to- 60 miles round trip throughout U.S. metropolitan areas to shop at Trader Joe's stores. They've become a regional food shopping destination far beyond a local one.

The Surprise Trader Joe's will also draw shoppers from the nearby cities of El Mirage, Peoria and others close by in the metropolitan region.

Are only question is, with all of these new food and grocery stores open and opening in Surprise, along with the city's existing supermarkets, will they all be able to make it? (Well, we know Trader Joe's will based on that survey.) That's a surprise none of these retailers want to discover.

In the case of Tesco's Fresh & Easy, it appears to us the grocer needs to do plenty of pre-opening marketing and PR in Surprise. After all, the vast majority of the city's residents, as evidenced by their choices in the 2007 survey, are Trader Joe's fans and lovers.

Then there's Wal-Mart's Neighborhood market, which is already open. Then the Sam's Club coming to town. Lots of competition.

Wal-Mart is popular throughout Arizona. It operates over 100 Supercenters, Sam's Club's, Wal-Mart Neighborhood Markets and its newest format, Marketside, the small-format grocery and fresh foods stores similar to Tesco's Fresh & Easy, in the state.

Wal-Mart is becoming the dominant multi-format food and grocery retailer in the Phoenix region -- and in the entire state of Arizona. That shouldn't come as a surprise though since Arizona, and particularly the Phoenix Metropolitan market, has been one of the mega-retailer's top-five strategic growth markets in the U.S. for the last five years -- and continues to be for the next few years.

Wal-Mart has numerous stores in all of the formats mentioned above set to open next year. The retailer also has numerous stores in the pipeline set to open in 2010.

Additionally, Wal-Mart currently has four Marketside stores in the Phoenix Metro region cities of Gilbert, Mesa, Chandler and Tempe. A fifth Marketside is being built in Peoria, Arizona at present. Peoria is just a few miles from Surprise. But if you've been reading closely, that probably doesn't surprise you. Critical mass all around, for Wal-Mart as well as Fresh & Easy.

But Tesco is building a strong presence in the Phoenix Metro region as well. With 26 Fresh & Easy stores to date in the region -- and more coming -- it's beginning to build significant retail critical mass.

But -- can the upcoming Fresh & Easy store win the love of the residents of Surprise (and El Mirage), Arizona, like Trader Joe's has? That is the question for Fresh & Easy...and the others who didn't make the top of the survey list but want to offer residents of the city a food and grocery retailing surprise anyway.

Serendipitous Marketing & Cooking With the Trader: Trader Joe's Hits A Marketing Home Run Without Doing A Thing

Trader Joe Cooking
Special to Fresh & Easy Buzz from Cool News of the Day

A self-published cookbook featuring ingredients from Trader Joe's may be the surprise hit of the coming holiday season, reports Jeffrey A. Trachtenberg in the Wall Street Journal (11/3/08).

The book, "Cooking with All Things Trader Joe's" is not authorized by the retailer, but so far it has not done anything to stop it. The idea is that of two former M.I.T. classmates, Wona Miniati and Deana Gunn, who first published the book a year ago, and have since sold some 20,000 copies -- highly unusual for a self-published book.

The breakthrough came when a story about the book appeared in the Sacramento Bee, causing Borders Books to begin stocking it in "nearly all of its 522 superstores." Readers began asking for the book at the Borders store in Sacramento, sales took off, and Borders took note. Obviously, this isn't the way things normally work with cookbooks, sales of which "are primarily driven by chefs featured on the Food Network." Not only that, but cookbook sales in general are declining, down to 2,673 in 2007, versus 3,062 in 2006.

However, Wona and Deana clearly are onto something. As Wona explains: "I used to cook from scratch but as my career took off and I had kids, the time I had for cooking was squeezed out." At first Wona's garage was their distribution center, but the co-authors just shipped another 15,000 copies to retailers. The only real glitch is that Trader Joe's sometimes discontinues items featured in the cookbook, although Wona says that doesn't happen very often. In such cases, she and Deana post substitutions on their website, cookingwithtraderjoes.com. The co-authors say they've laid in a fresh supply of 50,000 copies for the holidays.

Cooking With TJ's & Serendipitous Marketing: A Fresh & Easy Buzz Analysis

We call this form of marketing serendipitous marketing, meaning essentially it's when by fortunate accident a third party(s) does a part of a company or retailers marketing and promotion for them, resulting in positive messages and outcomes.

It can also be called third-party marketing. But we like serendipitous marketing (which as far as we know we are the first to coin as a term) better because in cases like this with the Trader Joe's cookbook, the retailer had absolutely nothing to do with the book, accept that it created and operates such a popular specialty grocery chain that individuals like the authors of the book are motivated to write a cookbook featuring ingredients bought at the stores.

Third party marketing is less complete, or interesting. A company can be involved in third party marketing, which we also call stealth marketing, in that it can get a third party to do the marketing for it. Public relations using the media to write articles for a company is a form of third party marketing, for example.

Serendipitous marketing is far more powerful than third party marketing, or stealth marketing, or public relations though, because the farther a business is removed from the third party (as in not involved at all) doing the promoting, the stronger of a "third party" endorsement the particular business or retailer obtains from the consuming public.

For example, if Trader Joe's published or had published the cookbook itself, we likely might not even write about it. And if we did, we would devote maybe two or three paragraphs to it. But, as you can see, we are devoting far more ink (well, virtual ink) to the story than a mere few paragraphs. That's serendipitous marketing for you.

Serendipitous marketing also can lead to lots of "word of mouth" marketing, which is generally the best kind. There's hardly anything better than having people out there talking positively (which is the key) about your product or service, or retail stores.

For example, every person who receives a positive mention from a friend, family member, co-worker and the like about a particular grocery store, tells another (many others usually), who then tells another...and on and on. It's viral. Internet message boards, forums and Blogs can work in much the same way, although the messages aren't as powerful because they generally come from strangers. That's mattering less and less though as the Internet becomes more and more personal to us, which it is doing.

The reason serendipitous marketing leads to the best form of "word of mouth" is because it's serendipitous, meaning it's fortunately unplanned or controlled (by the company that gets the benefits from it like Trader Joe's with the cookbook) and comes from the grass roots -- from the bottom up rather than the top down. Such marketing messages, even the unintended, are the most powerful and believable.

Negative "word of mouth" marketing (negative word of mouth and viral messages) are as powerfully negative for a business as they can be powerfully successful.

In our title at the top we say: "Trader Joe's Hits A Marketing Home Run Without Doing A Thing." This is a bit of a play on words since hitting is certainly doing something.

Trader Joe's has done something, even though it has nothing to do with creating and marketing the cookbook. What the grocer has done is to create such a popular specialty grocery chain, along with such popular store brand products, that the batters/book authors (the home run analogy) are willing to hit the ball out of the park (writing such a book) because it's in their self interest to do so, along with the fact they love Trader Joe's. As a result, they provide strong third party marketing to the grocer in the process.

One caution for marketers: trying to combine serendipitous and stealth marketing -- such as getting a third party to market or promote your retail chain or business but trying to keep it a secret -- is a prescription for failure. It will eventually be discovered and any positive credibility, and increased sales, gained from it will evaporate, causing far more harm than any positive good that might have come out of the campaign before it was discovered. It also can seriously harm a company or retailer's reputation for a long period of time, which is a very bad thing.

And...serendipitous also means lucky or fortunate, which is something to hope for in all types of marketing activities.

Competitor News Break: CNBC 'Mad Money' Host and Uber-Investor Jim Cramer Declares Wal-Mart, Inc. the 'Ultimate Stock' to Buy

Jim Cramer, who is the host of the popular CNBC (Cable Business Channel) financial program "Mad Money," along with being one of Wall Street's most successful traders and stock pickers, just anointed Wal-Mart, Inc. stock as the "ultimate stock" to buy right now.

Here's what Cramer said a bit earlier on CNBC:

"September's been the worst retail month in memory," Jim Cramer said on today's "Stop Trading!" segment on CNBC.

But there is at least one opportunity in the space, he said. "It's all Wal-Mart (WMT Quote - Cramer on WMT - Stock Picks). Wal-Mart could end up killing everyone."

Wal-Mart is the "ultimate stock," he said. "There's really no other retailer to own other than Wal-Mart. It's just a gigantic, gigantic buy."

Cramer, who in addition to hosting "Mad Money" and appearing on other CNBC business and financial news programs, is a best selling author of investment books, as well as being an active investor.

The trader/business show host/author/investor has a huge following. His books regularly hit the New York Times' best seller list almost as soon as they are published.

Cramer also writes for the financial website Thestreet.com. You can read him here.

Additionally, institutional and individual investors listen to his advice closely, many even emulating the stock portfolio he has devised on his show "Mad Money." Cramer donates all of the profits from that portfolio to charity.

Cramer also has been calling the current Wall Street investment bank and financial crisis down the line since earlier this year, predicting even the demise of Bear Sterns and Lehman Bros. well before both investment banks went bankrupt.

He also has said Goldman Sachs might end up being the only major independent investment bank left standing on Wall Street. There are only two left -- Goldman and Morgan Stanley. The others (besides Bear and Lehman), such as Merrill Lynch, have been acquired by banks, in its case Bank of America.

It wouldn't be surprising if Wal-Mart, Inc. stock rises based on Jim Cramer's super-bullish words today on CNBC, in which he went as far as to say its the only retailer stock worth owning in terms of the retail sector, and went even further than that, calling it the "ultimate stock."

With so many institutional and individual investors looking for equities in which to put their money -- what's left after they've moved most of it to gold and cash of course -- Cramer's comments today could not only infuse Wal-Mart, Inc. with new investment capital, but be a nice boon to its current investors as well in terms of stock share value.

Tesco in the United Kingdom: Small Grocery-Postal Shop Fires Back Against Tesco's Competitve Pricing on the UK Island of Bressay

Fresh & Easy Buzz Editor's Note: When it comes to competition, Tesco, the United Kingdom's leading food and grocery retailer with about a 31% overall market share, has a "take no prisoners" approach.

UK-based international retailer Tesco, which is the third-largest retailer in the world, is the parent company of Fresh & Easy Neighborhood Market USA.

However, that Tesco focus is normally reserved for its competing chain store retailers, ranging from number two Asda (owned by Wal-Mart), number three Sainsbury's and number four Morrisons, to other significant competitiors like the Co-operative Group (now the UK's fifth-largest grocery retailer), Waitrose, the small-format discounters Aldi, Lidl and Netto, and a few others.

However, it seems Tesco also has had a ressesive "Goliath" gene hidden within its corporate culture, as the story reprinted below (in italics) from yesterday's Sunday Mail.co.uk seems to suggest.

Tesco recently opened one of its supermarkets on the small UK island of Bressay, which is just a seven minute ferry ride away from the island village's long-established independent combination post office/grocery store. The Isle of Bressay is one of the nation's scenic Shetland Islands.

Such mail/grocery shops are common in small English towns. In fact, we've run a number of posts from the Village Postmaster, who runs a similar shop in the village of West Essex. The Village Postmaster often writes in his blog, Village Counter Talk, about being an independent retailer in what he calls the land of Tesco.

In fact, we wonder what the blogger-postmaster-independent retailer thinks about this latest competitive battle, pitting Tesco against one of the UK's fighting independent small shop retailers and postmasters. Something tells us we will find out in the comments section when he reads this piece.

We know how Brian Law, who runs the independent postal shop on Brassay Island feels, based on the Daily Mail story reproduced below.

Mr. Law, 65, fired back at Tesco when it ran a full-page newspaper advertisement undercutting the prices on a number of food and grocery items sold in his store, by matching the Tesco prices with the exception of being 78-p (Pence) higher, which he says in his media piece--a huge poster on his store window--makes his ~20-p (British Pound) market basket actually cheaper than Tesco's because shoppers save on the cost of taking the ferry to the Tesco store seven minutes across the water.

That's pretty good gorilla marketing on shopkeeper Law's part we think. And, as we recall, David beat Goliath in that particular historic fight. History suggests David did so not because he was mightier than Goliath--far from it. But rather to a large degree because he had the support of the locals who generally love to see an underdog win.

From yesterday's Daily Mail-UK:

Bressay shopkeeper takes on Tesco
Aug 3, 2008 By Billy Paterson

THEY have 270,000 employees, 2300 UK stores and their turnover last year was £46.6billion.

But supermarket giants Tesco have sparked an amazing price war with their smallest rival...the post office on Bressay Island (employees: two).

The David v Goliath battle commenced when Tesco began trading in Lerwick on the Shetland Islands last month.

Brian Law, who has run the village shop for 15 years, saw customers lured by deals that have made Tesco Britain's biggest supermarket.

While they placed full-page colour ads in the local paper, Brian's marketing budget only stretched to a homemade poster in his shop window.

It claims £20 of goods advertised by Tesco - a seven-minute ferry trip from Bressay - can be bought from his Mail Shop for £20.78.

But Brian, 65, says their shopping will cost less as they will save on transport costs.

He said: "My catchment area in Bressay is 160 odd houses and 400 people.

"In the run-up to opening their store, Tesco ran an ad showing a shopping trolley with food, many their own brand, which cost less than £20. I decided not to take this lying down and got the magnifying glass out, listed the goods and went round our wee shop checking the prices we charge for the same items.

"The total cost came to £20.78. That may be more than Tesco but for someone to take their wife and car over to Lerwick on the ferry costs £11.10. By shopping with us, people will save £10."

Brian's poster states: "The same goods in the Mail Shop, Bressay, £20.78.

No travelling. No ferry fares. No queueing. No hassle. The choice is yours.

No Tesco own brands."

Brian, who runs the shop with his wife Ann, 57, said: "It was all a bit tongue in cheek. It is not as if we are in direct competition with Tesco but the locals had a laugh and we had a good positive response."

A Tesco spokesman said: "This shows competition is alive and well in the retail sector and the true winners are the customers in the Shetland Isles."

Shetland Islands Council have hired a consultancy firm to carry out a survey on Tesco's impact on the islands' retailers.

SHOPPING LIST

The £20.78 Mail Shop shopping list of equivalent items in the £20 Tesco trolley is:

>Kellogs Corn Flakes £1.89
>Twin-pack kitchen roll £1.09
>Walkers crisps, six-pack .99p
>Hovis loaf £1.48
>Birds Eye garden peas £1.35
>Fabric softener 85p
>Bleach ..79p
>Washing-up liquid 75p
>Del Monte orange juice 89p
>Robinsons fruit juice £1.09
>French stick 92p
>Litre of milk 84p
>2 kilos potatoes £1.45
>500g mushrooms £1.41
>500g Flora margarine 95p
>1 kilo bananas 1.50
>Twin-pack toilet roll 89p
>Six eggs 90p
>Sponge cake 75p

Southern California Region Market Report: The Coming 'Store Wars' in the High Desert Market; Kroger Co.'s Ralphs Lowers Prices, Ups Value Proposition

From the Fresh & Easy Buzz Editor's Desk: Retail grocery competition is set to seriously heat up in the Southern California high desert market region of Victor Valley.

The market region is a key one for Tesco's Fresh & Easy Neighborhood Market, which has its corporate headquarters and distribution center nearby. The U.S. division of the world's third-largest retailer is adding three new stores in the market in the next few months, with more planned after that.

But Tesco's Fresh & Easy isn't alone in targeting the market for new stores. Employee-owned discount supermarket chain WinCo, which operates big supermarkets featuring low everyday prices, is opening two new stores in the market, after just opening a new store recently in the region.

A SuperTarget, Target's Wal-Mart Supercenter-like combination food, grocery, hard and soft goods format, also is set to open in the high desert region market in Southern California. Target is making a major push into California with its SuperTarget format stores, after having little presence with the format in the nation's largest state since developing the mega-store format some years ago.

Speaking of Wal-Mart, the mega-retailer also is on its way to the market with plans to open five of its big box Supercenters featuring discount food and grocery products in the region. The stores will average about 180,000 square feet, with some being smaller and others exceeding 200,000 square feet in size.

Lastly, not to be outdone, Inland Empire and high desert region food and grocery sales market share leader Stater Bros. supermarkets says it plans to add new stores in the market as well. Stater Bros., which operates about 160 supermarkets in Southern California and is headquartered in the Inland Empire region, is considered to be one of the most price-competitive supermarket operators in Southern California. Stater Bros new stores average 55,000 -to- 70,000 square feet.

Grocery store wars in this Southern California market (Victor Valley) it will be.

The high desert region's daily newspaper, the Daily Press, has a piece this morning which talks about all the new stores from these various players set to open in the market. The piece is reprinted below:

Grocery store wars looming
Expert predicts grocery prices will drop with addition of Wal-Mart Supercenters
June 30, 2008
BROOKE EDWARDS Staff Writer

With the planned introduction of two more WinCos, five Wal-Mart Supercenters, a SuperTarget and three Fresh and Easy Neighborhood Markets - and little population growth predicted - competition between Victor Valley grocery stores is getting intense.

"I suspect that we will see in the upcoming two to three years a very serious grocery store war," said Joseph Brady, High Desert director of the commercial real estate group Colliers International Bradco.

In addition to its locations in Hesperia and Apple Valley, Fresh and Easy recently announced plans to build a store in Victorville at El Evado and Palmdale roads.

WinCo recently opened a store in Apple Valley, where manager Jill Ponder said business has been strong, and the chain has projects under way in both Victorville and Hesperia. The store offers highly competitive prices and bulk foods and is open 24 hours.

With the addition of the Wal-Mart Supercenters, spokesman John Mendez said, High Desert residents can expect to see prices drop at other major grocery stores.

"When you bring a Wal-Mart Supercenter into the equation, we introduce competition into that sphere," Mendez said, describing what has come to be known as the "Wal-Mart effect."

This includes affecting existing chain stores such as Vons, Albertsons and Stater Bros., which has the highest number of local stores, with seven in the Victor Valley.

"We've been serving desert kitchens for 30 years and we don't plan to go anywhere," said Jack Brown, president and CEO of Stater Bros. and a Victorville native himself.

Brown added, "One thing I've learned with the Mojave Desert is that you'd better bring your own water. As far as our competition goes, there's no water to spare."

While there are no current plans to add new Ralph's or Food 4 Less stores to the five existing stores in the Victor Valley, the chain's corporate spokesman Terry O'Neil said the quality, variety and pricing of their food keeps them more than competitive with the newer stores.

Still, O'Neil said, "We always look at what our competitors are doing, whether that means opening new stores, remodeling existing stores or the way we market our merchandise."
Brown said Stater Bros. also plans to continue building new stores as growth dictates.

"One of the great things about America is that the customer will always decide who the winner's going to be," he said.

Brady added, "Hopefully, at the end of the day, the consumer is the one that wins."

Southern California's high desert region market isn't the only part of the geographically diverse and heavily populated Southern California region where competition--especially from a price perspective--is heating up.

The Los Angeles Times is reporting Kroger Co.'s Ralphs supermarket chain, which is neck-to-neck with Safeway Stores, Inc.'s Vons chain for market share dominance in Southern California, is upping its value proposition by lowering the everyday prices on thousands of items, along with initiating other value-based programs. Ralphs currently operates 262 supermarkets in Southern California.

Ralphs also is changing its famous--and hugely successful in the past--double coupon program in Southern California, capping the total amount of savings a shopper can obtain from doubling the manufacturers' coupons in-store.

It seems odd in the current, poor U.S. economy, of which Southern California is currently one of the hardest hit regions in the country, that Ralphs would change the double coupon program while at the same time announcing a new value proposition retail program which includes lowering the prices of thousands of items, along with other everyday and promotional price-oriented programs. After all, coupon use is way up among consumers, and doubling those coupons as in the past with oout capping the shopper total savings would seem to be a strong value proposition as well as competitive tool for the chain in these times.

Therein lies the rub though. Southern California consumers have been increasing their use of manufacturers' coupons dramatically (and their doubling of them at Ralphs) during the current spike in food prices. Word is Ralphs has been hit pretty hard from a margin standpoint from this increase in use and doubling. Therefore, the retailer hopes that by capping the total amount a shopper can save under the program, it will still get a solid bang for the buck in terms of using the double couponing tool as a marketing strategy, whileat the same time also steming its margin hits from it a bit by limiting the overall savings of the most extensive users of the coupons.

Therefore, it appears the retailer (Kroger Co. corporate) decided it was a good time to eliminate the program (the Southern California market is one of the few remaining U.S. markets where double coupon programs still on), and instead adding a multi-pronged new value-based program to the Ralphs' stores.

Kroger Co. just turned in strong sales and profit numbers however for its latest quarter. The retailer's income in the first quarter that ended on May 24 increased by a solid 15%, to $386 million. Quarter sales increased 11% to $23.1 billion. Same store sales for Kroger Co. increased an impressive 5.8% for the first quarter.

Numerous analysts say they believe item price reduction and value propostion programs, similar to the one being initiated at Ralphs, Kroger Co. has initiated in a number of its other U.S. chains or banners played a big part in these solid first quarter sales and profit numbers.

It's important to note this is a Kroger Co. banner-wide and region-wide program overall, with certain tweaks to the value proposition depending on the chain and region. However, many of the elements of the Ralphs' program are specific to the white hot price competition currently going on in the Southern California market.

Read the Los Angeles Times' piece, "Ralphs supermarket chain lowers prices, clips coupon savings," here.

As we reported in this June 25 piece, Tesco plans to open at least 30 new Fresh & Easy Neighborhood Market small-format, combination basic grocery and fresh foods grocery markets in Southern California, Arizona and Nevada in the next 90 days, beginning on July 2, when the first new Fresh & Easy store opens in Manhattan Beach in Southern California.

About half of those 30 new stores to open in the next three months will be in Southern California. Since Fresh & Easy's positioning is to be a everyday low-price leader on the basic grocery assortment offered in the stores, the addition of these approximately 15 new grocery markets in Southern California, all premised on a value proposition, is only going to heat up the already price competitive environment in the market more so.

Look for more value-oriented programs and item price-lowering by the region's food and grocery retailers throughout the rest of this year. Food price inflation isn't going away soon, which means consumers are only increasingly going to be looking for even better deals, and shopping accordingly.

Further, with more new supermarkets coming online in the market--not just from Tesco's Fresh & Easy but also new Wal-Mart Supercenters, Stater Bros. supermarkets, new Vons' and Ralphs' stores, a couple new SuperTarget mega-stores, and many others--that competition is only going to further intensify throughout the Southern California food and grocery retailing landscape.

Phoenix, Arizona Metro Market Report: More Competition in an Already Hot Market as Pro's Ranch Markets Plans Two New Stores in Phoenix Metro Market

Studies conducted by U.S. organizations such as the Mexican-American Grocers' Association, Food Marketing Institute, the UCLA School of Business and others show fresh produce to be one of the top reasons Hispanic consumers give for choosing a supermarket. Variety, abundance (bulk rather than pre-packaged) and quality are the three key attributes most given by Latino consumers in these studies when it comes to the fresh produce category. Price is important but not at the top of the list. Value, top quality and super-fresh produce at a reasonable price, is what's most important. This is evidenced by the fact Hispanic consumers spend a higher proportion of their incomes on food than all other ethnic groups in the U.S. Above is Pro's Ranch markets famous "Ranchie the Bull" mascot in a store produce department with a produce clerk.

Southern, California-based multi store independent grocer Pro's Ranch Markets plans to open two new stores in the Phoenix, Arizona Metropolitan region, Fresh & Easy Buzz has learned.

Pro's Ranch Markets, which is owned by Southern California grocery retailing veteran Mike Provenzano Sr. and his sons Michael, Steve, Rick and Jeff, currently has four of its large, discount supermarkets, which put an emphasis on Hispanic food retailing, in the Phoenix region. The two new stores will bring that total to six of the supermarkets in the market, which average 55,000 -to- about 80,000 square feet in size.

The growing independent food retailer today is opening its first supermarket, a 79,000 square foot discount powerhouse with a special emphasis on Latino products along with basic supermarket offerings, in Albuquerque, New Mexico, its first location in that state.

The New Mexico store is the independent retailer's tenth location. along with the just-opened New Mexico store and the four units in the Phoenix, Arizona region, there are four Pro's Ranch Markets in the Central Valley, California cities of Bakersfield (2), Delano and Arvin, and a store in El Paso, Texas.

When opened, the two new Phoenix area stores will bring the growing multi-store independent grocer's total store count to 12.

Mike Provenzano Sr. says the grocer plans to open additional stores in Arizona and New Mexico, as well as in California, and perhaps in other western states.

The Pro's Ranch Markets stores put a major emphasis on merchandising produce and fresh meats, with huge departments for each category, and selling the items as cheap as possible.

The stores have numerous service departments; particularly a number with a Hispanic merchandising flair. These include: an in-store bakeries which features huge tortilla machines that churn out homemade tortillas throughout the day and evening, as well as offering in-store baked Latino breads and pastries; in store seafood on fresh ice departments which include a seafood taco bar; fresh salsa bars; both self-service and old-fashion service meat departments; in-store fresh, prepared foods departments; and homemade specialties like in-store made chorizo and other Latino favorites.

The stores' produce departments carry all basic fresh fruits and vegetables, along with scores of Hispanic specialty produce items, nearly all merchandised in bulk and piled high farmers' market style.

The markets carry a complete selection of tradition foods, groceries and nonfoods as well. Although the supermarkets are geared from a merchandising aspect to Hispanic or Latino shoppers, their overall positioning also encourages shoppers of all ethnic backgrounds to shop the stores for groceries and fresh foods at discount prices.

About 40% of Arizona's population is comprises of Hispanics or Latino's, which makes "Hispanic-oriented supermarkets" actual mainstream rather than specialty since nearly half of the state's entire population is of that ethnicity.

As a result of this fact, food retailers who focus their merchandising and positioning to Hispanic consumers in Arizona are equal competition for general food and grocery retailers like Safeway, Bashas, Frys, Wal-Mart, Tesco's Fresh & Easy and the other food retailing chains and independents in the market.

Tesco currently has about 20 of its 61 small-format Fresh & Easy Neighborhood Market combination basic grocery and fresh foods markets in the Phoenix Metropolitan/East and West Valley regions of Arizona, with many more new stores set to open in the market in the next 90 days.

As we write about regularly in Fresh & Easy Buzz, Arizona, and especially the Phoenix Metropolitan market, is arguably the most competitive food and grocery retailing market in the U.S. at present. That market keeps getting even more competitive as food retailers large and small continue to add new stores in the area, heating up even further what alrady is a white hot competitive food and grocery retailing market.

Competitor News: Wal-Mart Executive in Charge of Small-Format 'Marketside' Format Development Leaving to Join UK Bicycle Retailer Halfords Group PLC

David Wild, Wal-Mart, Inc.'s senior vice president of business development and the company executive who's been in charge of its new small-format Marketside grocery and fresh food format stores, is leaving the world's largest retailer to accept a position as CEO of Halfords Group PLC, the United Kingdom's largest retailer of car parts and bicycles, according to a statement just released by the Redditch, England-based company.

Wild was named to the position of senior vice president of business development at Wal-Mart in January, 2007. He held other executive positions with the company prior to that appointment.

Wild, who spent 18 years with UK-based Tesco PLC, will start his CEO duties at Halfords Group PLC on August 4, according to the statement.

In an interesting twist, he succeeds former CEO Ian McLeod, who left the car parts and bicycle retailer to run Australian supermarket chain Coles Group Ltd. as CEO. Halfords Group PLC apparently likes food and grocery retailing CEO's, as its replacing one, Ian McLeod, with another, David Wild. McLeod and Wild aren't strangers either. Both worked for Wal-Mart in Germany before the mega-retailer exited the German market in 2006.

During his 18 years with Tesco PLC, Wild was heavily involved with the retailer's European expansion, including having a hand in the development of its successful Tesco Express small format combination convenience and grocery stores in Europe.

"He (David Wild) brings over 20 years' retailing experience, gained at two world-leading businesses (Tesco and Wal-Mart), and clearly has the skills and ability to move the company forward,'' Halfords Group PLC Chairman Richard Pym said in the statement. "We are confident that David will add tremendous value to Halfords.''

Wal-Mart put David Wild in charge of spearheading its Marketside small-format combination grocery and fresh foods store development project in part because of his extensive experience at Tesco, which has been an innovator in small format food retailing with its Tesco Express stores in the UK and elsewhere in Europe, and now with its Fresh & Easy Neighborhood Market small-format, convenience-oriented grocery markets in the Western USA.

Wild led the Marketside development team, as we first reported in late 2007, in San Francisco where the group first conducted extensive format and consumer research and planned, developed and honed the concept and format. Wal-Mart has an office near San Francisco where it operates aspects of its Wal-Mart.com business.

Wild has also been the corporate cheerleader for Marketside inside Wal-Mart, Inc., and was the one who championed having the stores' prepare fresh foods in-store in kitchens rather than having the fresh, prepared foods made at a central kitchen and shipped to the stores like Tesco is doing with its Fresh & Easy Neighborhood market stores.

Wal-Mart's first four Marketside stores are set to open in the Phoenix, Arizona Metropolitan region this summer, as we've reported in Fresh & Easy Buzz.

Additionally, as we reported here (just scroll down a bit at the link), Wal-Mart is looking for sites for the small-format Marketside stores in both Northern and Southern California. We also reported here that Wal-Mart is likely to be locating a Marketside store in this new development in Reno, Nevada.

Since the development phase for Marketside is complete, and the first four stores are set to open soon, its unclear if Wild's leaving Wal-Mart will be a setback for the retailer and Marketside. At this point, according to our Wal-Mart sources, operations is taking priority over development with Marketside, as the company has set up an office in Phoenix and is currently hiring managers and assistant managers for the four stores, along with getting the stores ready to open.

As the senior vice president of business development, Wild was preparing to move on to some new ventures in his position at Wal-Mart, therefore his timing in terms of leaving and accepting the CEO position at Halfords isn't likely to create a major shakeup with Marketside, although as the new format's head developer and cheerleader he will obviously leave somewhat of a void.

Wild isn't starting at Halfords Group PLC until August 4. And our Wal-Mart sources tell us in part that's because he wants to be around when the first of the Marketside stores opens in Arizona. In other words--and you read it here first--the first Arizona Wal-Mart Marketside grocery and fresh foods store will open before August 4, 2008.

Competitive Retailer Report: Second Quarter Net Income Flat For Stater Bros. Supermarkets Due In Part to Holding the Line on Price Increases

Stater Bros. Holdings, which operates the Stater Bros. supermarket chain with stores in Southern California's Inland Empire region and other parts of the Southland, reported flat earnings for the second quarter that ended March 30, 2008.

Stater Bros., which is the food and grocery sales market share leader in the huge twin-county (San Bernardino and Riverside) Inland Empire region where Tesco is making a major push with its Fresh & Easy grocery stores, reported net income for the 13-week second quarter of $13.5 million, which happens to be identical with the grocery chain's net income a year ago in the same quarter.

Second quarter sales at Stater Bros'. supermarkets however increased by 7% to $925.4 million, and same store sales 3.7%.

Year-to-date, the supermarket chain's net income rose 4.3% to $24.3 million, with sales up a respectable 5.5% to $1.9 billion and same store sales up 3.5%.

Phil Smith, executive vice president and chief financial and administrative officer, said gross profit margins fell 111 basis points to $27.68% in the quarter and 95 basis points to 27.80% in the half "due to not passing on inflation in product costs and investment of gross margin to increase sales.

In other words, Stater Bros. is holding the line on reflecting complete price increases (resulting in taking some gross margin hits when needed) due primarily to the poor state of the California (and U.S.) economy and soaring food inflation, along with related competitive pressures caused by these two factors.

Stater Bros. operates about 160 supermarkets in Southern California. about half the total number of stores are in the Inland Empire region counties of San Bernardino and Riverside. The remaining supermarkets are located in other parts of Southern California.

The twin-county Inland Empire region is a major target market for Tesco. The retailer plans to have about 45 of its small-format, convenience-oriented grocery stores open in the region by sometime in the middle of next year. It already operates numerous stores in the region.

Tesco's Fresh & Easy Neighborhood Market's corporate headquarters and huge 800,000-plus square foot distribution center also are located in the Inland Empire region, in Riverside County.

Last year Stater Bros. opened its own new corporate headquarters and mega distribution center facility--nearly 2 million square feet total--at a site on the former Norton Air Force Base in San Bernardino County. The distribution center is believed to be the biggest single-facility built to date in the U.S. by a supermarket chain, and allows Stater Bros. to grow its store-base considerably.

Stater Bros. has operated supermarkets in the Inland Empire region and other parts of Southern California for nearly 75 years.