Safeway, Kroger Co. and UFCW Union Agree to Extension in Colorado Store Worker Contract Dispute; We Suggest A 'No Loser' Policy in Negotiations

Food & Grocery Retailing and Organized Labor: News, Analysis, Commentary

Safeway Stores, Inc.'s Colorado division and the United Food & Commercial Workers (UFCW) union avoided a potential employee strike at Safeway supermarkets in the western state when the grocery chain decided to extend its just-expired union contract until May 30, giving the retailer and UFCW local 7, which represents the store workers, more time to negotiate a new contract.

Safeway operates over 100 supermarkets in the Colorado Rocky Mountain region.

Safeway Stores, Inc. issued a statement today announcing the contract extension.

Colorado Safeway store workers voted yesterday in favor of a strike but have agreed to continue to work under the old contract, which expired at 11:59 p.m. Saturday, May 9, until a new contract can be agreed upon or the May 30 contract extension deadline is reached, according to Kristine Staaf, a spokesperson for Safeway Stores.

Safeway's Colorado Rocky Mountain division isn't the first supermarket chain in the state to extend its contract with the UFCW over the weekend.

Yesterday another supermarket chain with stores in Colorado, Kroger Co.-owned King Soopers, decided to extend the union contract for its store-level employees to May 30 after being offered the opportunity to do so earlier in the week by UFCW local 7.

Safeway-Colorado and Kroger's King Soopers-Colorado had previously agreed to a mutual pact in which if employees of one chain or the other went out on strike, the other chain would then lock out its store-level workers in return. This has become a common strategy among unionized supermarket chains in the U.S. when the UFCW threatens a strike if a new contract isn't agreed upon within a certain timeline.

Such an agreement won't be needed between now and May 30 however, since employees for both chains have indicated they plan on working through contract negotiations, at least until May 30.

The contract negotiations and threat of an employee strike come at an obvious difficult time --the recession, massive unemployment, and the financial crisis -- for both the two grocery chains and their employees.

The union and its employees want a slight wage increase under the proposed new contract.

The two grocery chains want wages kept where they currently are under the new contract.

The union wants certain changes to the employee pension system, chief among them is changing the age in which store-level workers are eligible to start receiving their pensions, from the current age of 55, to age 50.

Safeway and Kroger's King Soopers want to keep the minimum retirement age right where it was in the just-expired contract -- at age 55.

Safeway Stores' and Kroger/King Soopers' Colorado divisions are the two leading supermarket chains in the the state. Albertsons, also unionized, is number three.

Fresh & Easy Buzz Analysis and Commentary

Unionized supermarket chains like these three pay store-level employees with one-year of full-time experience from about 30% to as much as 50% more per hour than what non-union grocery and mass merchandiser chains like Wal-Mart, Target, Costco, Trader Joe's, Tesco's Fresh & Easy, Colorado-based Sunflower Farmers Market, Whole Foods Market and others do.

The hourly wage for a full-time journey-level retail clerk at a unionized supermarket chain in the Western U.S. is about $20 an hour. They also receive a higher hourly wage when they work on Sunday and on holidays.

The unionized supermarket chains also offer workers a defined benefit pension plan.

The non-union chains generally offer 401-k-type of plans in which the employer matches a certain percentage of a store worker's contribution.

A UFCW-affiliated union chain employee with 30 years' of full-time service can retire after such service and collect as much as $40,000 annually in pension benefits every year he or she is alive post retirement.

Additionally, the UFCW-union supermarket chain health plan is among the best of any business sector, at any level, in the United States. Compared to most health plans the unionized supermarket clerks have more choice, lower employee contributions and minimal co-payments.

There's a growing frustration among the CEO's and others at unionized supermarket chains like Safeway, Kroger, Supervalu, Inc. and others because the fastest-growing retailers of food and groceries, the ones nipping hard at their heels, are non-union.

In Colorado this challenge from non-union retailers especially includes Wal-Mart with its Supercenters, Costco with its big box stores that sell fresh foods and groceries, and Target with its discount format stores and Super Target stores, which are similar to a Wal-Mart Supercenter.

To a lessor but important extent it also includes increased competition from the non-union and fast-growing natural foods-grocery hybrid chains Sunflower Farmers Market and Natural Grocers, both which are based in Colorado.

These non-union chains, which generally pay lower hourly wages and offer less in employee benefits than do unionized Safeway and Kroger, have been and continue to open new stores in Colorado, putting pressure on the unionized chains.

The unionized chains argue that because these non-union retailers pay employees less and offer fewer benefits, it puts them at a competitive disadvantage when it comes to retail pricing. Despite that fact, Safeway and Kroger are both rather competitive with Wal-Mart and Costco on price -- and are actually lower overall than Target.

It's important to note that neither Safeway or Kroger has been or is talking about breaking the union. Nor are they complaining. But they have a valid argument, one the UFCW should take seriously we believe, about the competitive advantage afforded the non-union competitors.

Safeway Stores' and Kroger Co.'s stores in Arizona, Nevada and California aren't affected by the contract negotiations or threatened strike. The divisions in these respective Western States --the three states where Tesco's Fresh & Easy operates its 120 non-union grocery and fresh foods markets -- operate under separate contracts.

Safeway Stores, Inc. operates 500-plus supermarkets in California, Nevada and Arizona under the Safeway and Vons banners.

Kroger Co. operates about the same number of stores in the three states. It's banners in the three states are: Ralphs (Southern and Central California), Food 4 Less (Southern California, Nevada); FoodsCo (Northern California) Smith's Food & Drug (Nevada) and Fry's (Arizona).

Additionally, both Safeway and Kroger operate hundreds of additional supermarkets in other Western U.S. states, including in addition to Colorado, in Oregon, Washington State and elsewhere in the west.

The fact that non-union retailers have been gaining on unionized supermarket chains is best demonstrated by looking at the changes in the ranking of the top-five retailers of food and groceries over just the last four -to- five years.

Just four years ago Kroger Co. (unionized) was the number one retailer of food and groceries in the U.S., followed by non-union Wal-Mart at number two, Supervalu, Inc. (unionized) at number three and Safeway Stores, Inc. a (unionized) number four.

Today, non-union Wal-Mart is the number one food and grocery retailer nationally in the U.S. Kroger (unionized) is number two. Non-union Costco is number three Unionized Supervalu, Inc. is fourth and Safeway Stores, Inc. (unionized) is number five.

Non-union Wal-Mart and Costco have been the two fastest-growing chains among these top five in terms of annual sales volume.

Additionally, Aldi USA and Whole Foods Market, Inc., both multi-billion dollar a year grossing non-union chains, and both among the top-25 largest chains in the U.S., have grown faster on a percentage basis than any unionized supermarket chain in the U.S. over the last five years.

American workers are seeing wage stagnation greater than ever in recent history during this recession. In fact, such wage stagnation has been going on for at least the last five years.

And of course, most American workers just want to hold on to their jobs right now, since finding a new one at present reminds one of that old song: " (Dream) The Impossible Dream."

Such are the realities facing Safeway Stores, Inc., Kroger Co., the UFCW union and the employees of Safeway's Colorado stores and Kroger's King Soopers supermarkets this weekend.

All sides in the negotiations should be extra considerate of one another in these tough times, we suggest. Give and take must be the order of the day. It's not a time for winners and losers. The stakes are too high for all of the stakeholders involved.

And, with all due respect to the UFCW... Is this really a good time to be arguing for the retirement age for unionized supermarket clerks to be reduced from age 55 to 50? We get it -- the more folks that retire at age 50 the more new jobs open, at least theoretically. That could backfire though, actually, in the form of employers freezing openings.

It's just that the move is rather tin ear we think for the current times. Right now the vast majority of Americans in their late fifties and early sixties, including those at retirement age now, will have to postpone retirement because they can't afford it.

Therefore, along with a couple other reasons, we aren't sure arguing for unionized grocery clerks to get the same retirement benefits at age 50 that they now get when they retire at 55 if they choose to is a good move in terms of gaining public support. Not to mention getting continued support from unionized supermarket chains.

Related Stories from Fresh & Easy Buzz:

>April 13, 2009: Analysis: Major Retailers Costco, Whole Foods Market and Starbucks Propose Employee Free Choice Act 'Third Way' Compromise; What About Fresh & Easy?

>February 13, 2009: Labor & Food Retailing: Kroger Co. Chains Sign New Contract With the UFCW Union in Vegas; What Happened to the UFCW Tesco Fresh & Easy Campaign?

>November 10, 2008: Food Retailing & Organized Labor: Tesco's Fresh & Easy Gets Some Company as the UFCW Union Launches Campaign to Unionize Wakefern's PriceRight Banner

>November 4, 2008: U.S. Organized Labor, Including the UFCW Union, is Feeling Good Tonight About A President Obama and Stronger Democratic Majority in Congress

>October 28, 2008: The UFCW Union, Tesco's Fresh & Easy, U.S. Labor Relations, and Next Week's Presidential and Congressional Election

>October 2, 2008: Tesco Fresh & Easy Denies Huntington Beach Store Employees Request to Be Recognized As A Union Store; Next Step Likley to Be Open Ballot Election

>September 26, 2008: News & Analysis: Employees At Two More Fresh & Easy Grocery Stores Could Soon Request UFCW Union Recognition From Tesco's Fresh & Easy

>September 17, 2008: Store Workers at Huntington Beach Fresh & Easy Demand Union Recognition From Tesco Fresh & Easy Neighborhood Market

>August 27, 2008: UFCW Union Reports Tesco Fresh & Easy Neighborhood Market's Prepared Foods Supplier to Labor Board For What it Says is Unfair Firing of Six Employees

>August 5, 2008: UNI Global Union Launches Tesco-Specific Alliance; Calls For Tesco Executives to Meet With UFCW Union Officials Over Fresh & Easy Neighborhood Market

>August 4, 2008: Pico Rivera, California City Council Members Boycott Fresh & Easy Store Grand Opening; Mayor Attends But Delivers Pro-UFCW Union Message to Execs

>July 30, 2008: UFCW Union Flyers On His Door Knob Cause Heat in 'The Pragmatic Chef's' Mental Kitchen; Others Wondering About the Negative Campaign As Well

>July 3, 2008: Mid-Week Fresh & Easy Roundup: Fresh & Easy Gets Caught in A Land Use Dispute; Those Near-Famous Mixed Grill Packs; More On Manhattan Beach

>July 4, 2008: Breaking News: UFCW Union Strikes Again With Anti-Tesco Fresh & Easy Brochure Drop in Neighborhood Surrounding New Manhattan Beach Store

>July 2, 2008: UFCW Union Pickets Out in Force This Morning At Manhattan Beach Fresh & Easy Store Grand Opening

>June 30, 2008: Breaking News: UFCW Union Launches Preemptive Anti-Tesco Fresh & Easy Brochure Distribution Drop on the Eve of Manhattan Beach Store Grand Opening

>June 26, 2008: Tesco 2008 AGM: Barack Obama Sends Second Letter to Tesco CEO Requesting the Company Meet With U.S. UFCW Union Leaders About Fresh & Easy

>June 22, 2008: Vocal Cast of Critics and Advocacy Groups to Attend Tesco's Annual General Meeting On Friday, June 27

>June 4, 2008: News and Analysis: UFCW Union Takes its Tesco Union Organizing Campaign Across the Pond to the United Kingdom Beginning Today

>March 26, 2008: United Food and Commercial Workers Union Begins its Spring 2008 Organizing and Communications Campaign Directed at Tesco's Fresh & Easy

>February 11, 2008: Supermarket Union President Asks Britain's Prince Andrew to Arrange A 'Sit-Down' With Tesco Fresh & Easy Neighborhood Market Senior Executives

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

Competitor News: Safeway Leverages Supplier Promo Monies to Fund 'Living Well Feeling Great' $10 Store Coupon On $30 Purchase Promotional Program

Retail Food & Grocery Promotions in the Economic Recession

Pleasanton, California -based (San Francisco Bay Area) Safeway Stores, Inc., which operates over 500 supermarkets in California, Nevada and Arizona under the Safeway and Vons banners, along with a handful of warehouse format stores in Northern California called Pak N Save and one small-format "the market by Vons" store in Long Beach, California, has launched a smart, value-based promotion in which the grocery chain is leveraging supplier promotional monies to offer shoppers deep-discount store coupons when they purchase $30 worth of various branded and Safeway store brand products.

Safeway customers who purchase $30 or more worth of over 3,000 specially designated items in the stores receive a $10-off store coupon from Safeway which is good on their next visit to the store. That's a deep-discount of over 30% for a customer if he or she purchases only $30 worth of the participating items. The coupon is applied to a customer's total purchases, regardless of what they buy, on their next store shopping trip.

Safeway calls the promotion "Living Well Feeling Great." See the graphic at the top.

The promotion's name ties-in with Safeway's overall marketing positioning mission statement and focus, which is "Safeway: Ingredients For Life." And Safeway calls its supermarket format the "Lifestyle Format."

Leveraging supplier dollars

The majority of the discount savings offered by Safeway in the store coupon promotion is funded by promotional monies provided by the numerous consumer packaged goods brand marketers-suppliers participating in the program.

Among the food, grocery and other packaged goods suppliers and brands participating in the promotion include: Coca Cola (soda and bottled water); Nabisco (crackers and cookies); Frito Lay (snack chips); Oscar Mayer (lunch meats and related items); Kraft (prepared meals); General Mills (Cheerios and other brand breakfast cereals) Colgate-Palmolive (a variety of household and health-body care branded items); Lysol (cleaning products); Horizon Organic (fresh organic milk and related dairy items); I Can't Believe It's Not Butter (margarine); Yoplait Yogurt; Simply Orange Juice; Amy's Organics (frozen organic foods); Dove Soap; and numerous other brands.

Safeway also is offering a select number of its store brands as part of the promotion, including its O' Organics organic foods brand, its Eating Right healthy foods brand and its new Bright Green store brand, which is a line of "green" household cleaning, laundry detergent, paper product and light bulbs.

Promoted in-store, in weekly ad circular and on Web site

Over 3,000 items across most store categories are tagged on the shelf and in displays with special "Living Well Feeling Great" signs that tell shoppers about the "by-$30-or-more-worth-of-participating-products-get-a $10-store-coupon" promotion.

All of the 3,000-plus items in the promotion are also being offered at promotional prices.

Additionally, Safeway devoted nearly a full page in its multi-page weekly advertising circular this week to the promotion, featuring a selection of the items in the ad section at additionally reduced promotional prices for the week -- April 22 - 28. New items will be advertised in its new advertising circular which begins tomorrow.

The supermarket chain also is promoting the coupon program in-store and on its Safeway.com Web site.

The promotion, which started earlier this month, lasts until May 5, 2009. Safeway could extend it, featuring a new set of the 3,000-plus promotional items.

More on leveraging supplier promo monies

The participating brand marketers give Safeway promotional allowance money that covers the majority of the grocer's margin loss on the discount given in the form of a coupon. Safeway eats the margin loss for its own store brand items.

By leveraging its suppliers in this way, Safeway is able to offer shoppers the 30%-plus discount on a $30 purchase of participating items in the form of the $10 store coupon, thereby keeping the amount of margin it contributes in the form of the coupon discount to a minimum.

The brand marketers also pay for the space in Safeway's advertising circular and for any floor space in the stores where there products might be displayed. This added source of revenue also helps Safeway offset its margin reduction or contribution to the deep discount coupons.

The promotion is worth it to the brands because Safeway features the items in a variety of ways which generally leads to a substantial increase in sales for participating brands and their respective suppliers.

Additional supplier-leveraged promotions

The "Living Well Feeling Great" store coupon promotion isn't the only promotional program Safeway is currently using in which the retailer is leveraging supplier promotional monies.

For example, all this week Safeway has partnered with cereal giant Kellogg's in offering a promotion where shoppers who buy any three 4oz or larger boxes (mix & match varieties) of Kellogg's Special K Cereal get a free case (24 bottles), an about $4.99 value) of Safeway's Refreshe store brand bottled water.

The majority if not all of the promotional cost in giving the free case of water to shoppers is paid for by Kellogg's promotional funds.

Additionally, Safeway has teamed up with the Classico Pasta Sauce Brand for a promotion this week. Safeway is advertising all varieties of Classico Pasta Sauce in its stores at 2 for $4. Shoppers who buy two units of the pasta sauce also receive two free boxes of Safeway brand (12-16oz) Pasta. The Safeway brand pasta retails everyday in the stores for about $1.99. The promotion runs until April 30.

Like the Kellogg's Special K and the free case of Safeway Refreshe brand water promotion, all or most of the cost of the free pasta is being funded by the supplier's, in this case Classico, promotional funds.

That's what we mean by leverage. The suppliers fund most of the discounts and Safeway gets, in the case of the "Living Well Feeling Great" promotion, added overall store sales, and in the case of the store brand water and pasta promotions, Safeway gets added sales on the respective freebie store brand items without paying for it out of margin.

Safeway got ahead of the recession on value

The promotions, all of which use supplier promotional funds to increase sales for Safeway, are part of the grocery chain's value-based program, which it started in earnest in early -to mid-2008 when it saw the first serious signs of the current economic recession.

Safeway has intensified its value proposition since then in a number of ways, including: lowering everyday prices on thousands of items in its stores; promoting items in-store and in its weekly advertising circulars at deeper discounts than in the past; creating additional value-based store brand items in its price-point-focused "Safeway" store brand line, its Basic Red line of non-foods household items, and its Lucerne value-based line of dairy products; and each week offering multiple promotions like those described in this story and others that offer deep discounts but most often leverage the margin loss by the supermarket chain by partnering with consumer packaged goods marketers and using their respective promotional monies to fund the majority of the discounts offered.

Safeway Stores, Inc. currently operates about 1753 supermarkets in the U.S. and Canada under a variety of banners.

According to most all industry rankings, Safeway is the fifth-largest food and grocery retailer in the U.S., after Wal-Mart (number one), number two Kroger Co., Costco (number three) and number four Supervalu, Inc.

Safeway is the number one, two or three market share leader in California, Nevada and Arizona., the three states where Tesco's Fresh & Easy Neighborhood Market has its 119 small-format combination grocery and fresh foods markets.

Wal-Mart, Kroger, Costco and Supervalu also operate stores in California, Nevada and Arizona.

Wal-Mart operates its combination grocery and general merchandise Supercenters, which sell a full selection of fresh foods and groceries, it's Wal-Mart discount stores, which offer a limited assortment of groceries but no fresh produce or meats, and its Sam's Club membership warehouse stores, which offer a limited but complete selection of fresh foods and groceries, in California, Nevada and Arizona. Wal-Mart also operates about 30 of its Wal-Mart Neighborhood Market supermarkets in Arizona, along with four of its small-format Marketside combination grocery and fresh foods markets.

Kroger Co. operates the Ralphs supermarket chain in Southern California and the Smith's and Fry's chains in Nevada and Arizona respectively.

Costco operates its membership club stores in all three states. The stores sell fresh foods and groceries, along with general merchandise items of all kinds.

Supervalu, Inc. operates the Albertsons chain in Southern California and the upscale Bristol Farms supermarkets in the region (and one in San Francisco). It doesn't operate the Albertsons' stores in Arizona. Those stores are owned by the private equity firm Cerebus.

Look for more, similar types of promotions at Safeway-owned supermarkets in which the retailer offers similar store coupon and free product deals by leveraging supplier promotional monies, in addition to including its own store brands in the promotions. Doing so is not only a way to compete in the recession and gain sales, it's also a way to offer deep promotional discounts without such discounts coming completely or primarily out of the retailer's margins.

For example, when Tesco's Fresh & Easy distributes one of its $5-off purchases of $20 or more or $6-off purchases of $30 or more store coupons, the discount comes out of the retailer's margin because they are straight store coupon deals and not special promotions like Safeway's, which are funded entirely or primarily by supplier promotional monies.

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Competitor News & Market Analysis: The Arizona Market Food Retailing 'Canary' Sings Again; Kroger Co.-owned Fry's Supermarkets Lays Off 90 Employees

Arizona Market Region Report: Food & Grocery Retailing in the Recession

Back in June, 2008, Fresh & Easy Buzz suggested in this piece [Arizona Region Market Report: First Signs of A Weakening Might Be Starting to Show in the 'White-Hot,' 'Super-Competitive' Arizona Market] that we were seeing the first signs of possible food and grocery retailer layoffs and potential store closings in Arizona with the announcement by Arizona-based Bashas' that it was firing numerous employees at its corporate headquarters.

Last month, the recession and related white hot competition in Arizona struck Bashas' again in the form of more layoffs and the closing of five if its Arizona stores, as we reported on in this February 6, 2009 piece: Arizona Market Region Analysis: Bashas' Worker Layoffs, Closing of Stores Could be the 'Canary in the Coal Mine' in Ultra-Competitive Arizona Market.

Well that food retailing canary made itself heard again just two weeks ago in Arizona. The Kroger Co.-owned 120-store Fry's supermarket chain in the state fired about 90 workers, according to Joe Ellen Lynn, Fry's corporate spokesperson. The layoffs were first reported by the Arizona Republic newspaper on March 13. We varified it with Fry's and other sources.

Fry's employees about 18,000 workers in Arizona, according to the chain.

The Fry's employees appear to have been all from the chain's corporate headquarters because United Food & Commercial Workers union Local 99, which represents Fry's store-level workers in Arizona, says none of its members who work for the supermarket chain have been laid off to date.

Headquarters staff and some other exempt employee positions such as regional field reps and the like are non-union positions.

Retailers, particularly supermarket chains, and especially unionized chains, almost always terminate headquarters and non-direct store-level employees as a first cost-cutting step when such reductions are needed or desired by senior management.

Based on our research, this appears to be what Fry's has done.

Arizona is struggling in the current recession. Unemployment is fast-growing. Residential real estate activity has come to virtually a complete halt. And commercial real estate activity, which was booming just a little over a year ago, is down dramatically.

Arizona also is one of the most competitive food and grocery retailing markets in the U.S., as we've frequently mentioned in Fresh & Easy Buzz.

Mix these two conditions together, the recession and white hot competitive food retailing climate in the state, and something has got to give, an argument we started making about one year ago.

We've seen this give first with Bashas' and now with Fry's.

Additionally, Tesco's Fresh & Easy Neighborhood Market has slowed the opening of a number of new stores in Arizona.

Safeway Stores, Inc. basically isn't planning any new stores in the state beyond those it might already have in the pipeline.

Fry's and Albertsons also are pretty steady-state in terms of new store plans at present in Arizona.

Wal-Mart though remains pretty much on schedule in terms of continuing to open new stores in the state, particularly its combined food and general merchandise mega-Supercenters.

That strategy is paying off for Wal-Mart in the food and grocery sector. The retailer has now grown its way to becoming the number one food-grocery sales market share leader overall in Arizona, but just by a couple hairs, which demonstrates the state's super-competitive market.

Wal-Mart is currently number one with a 24% market share, according to recently published research. Kroger's Fry's is right behind Wal-Mart, with an about 21.5% share. Safeway is third with about 18.5%. And Bashas' is neck-to-neck with Safeway, with Albertsons right in the game. It's the market share version of a win-by-the-neck horse race, in other words.

We first started suggesting slightly over a year ago that the Arizona market, particulary the Phoenix Metropolitan region market where Tesco's Fresh & Easy Neighborhood market has its grocery and fresh foods stores, was getting close to beign overstored. In mid-2008 we began suggesting Arizona was overstored, particulary adding the economic recession into the equation.

It's our analysis that the Bashas' and Fry's layoffs are the result of this retail saturation in the state. The economic recession, which is hitting Arizona like a hammer, is an added factor.

It's likely that if economic times were better, the Bashas' and Fry's layoffs could have been avoided -- maybe. But economic prosperity is never a constant. Therefore, overstoring must always be analyzed based on the economy being an independent rather than dependent variable. Independent variables are those subject to change. Dependent variables are constants.
It's our further analysis that more cutbacks will come among grocers in Arizona. We likely not only will see additional layoffs. but we suspect to see more store closings as well.

For example, Tesco's Fresh & Easy is bleeding cash. The question is how long the grocer is willing to do so. Right now we don't think openingadditional stores in Arizona will do much of anything to solve that situation. Same store sales growth is what's needed.

But since Tesco is moving to a much more price and promotional-focused and value proposition-oriented positioning of its Fresh & Easy stores, it's also at the same time becoming a stronger competitor to the major players like Wal-Mart, Fry's, Safeway, Bashas and Albertsons, as shoppers search all over for good deals. [Read our March 2, 2009 piece here: Fresh & Easy Buzz Redux: Much of the Value Proposition-Based Analysis and Suggestions We've Been Offering Now Being Adopted By Tesco's Fresh & Easy.] That value proposition-based positioning, if done fully and comprehensively, also might be what helps Tesco's Fresh & Easy to bleed far less cash over time.

In Fry's case, its parent company Kroger Co., just reported a solid 8% income gain in its latest quarter just ended two weeks ago.

But Fry's is facing serious competition, as all the others are in Arizona, despite its parent company doing well. This should be another indication about what we mean when we call the Arizona market a white hot one.

As such, we expect to see more shoes drop in the food and grocery retailing sector in Arizona between now and this summer. The recession isn't improving, and even the most optimistic forecast calls for only seeing some demonstrable improvement in the overall U.S. economy by the end of this year. (And remember, Arizona is one of the hardest hit states.)

At the same time, the competition is heating up even more so in the Arizona market region, particularly from an everyday price and price-promotional perspective. When this type of competition in a near or already overstored market happens like it is, something has to give among one or more of the players.

Linkage - Select Related Posts:

>April 1, 2009: Competitor News: Bashas' Chain Launching 10,000-Plus Item Storewide Price Slashing Program This Week in its Arizona Supermarkets

>February 3, 2009: Competitor News: 'Grocer-Gone-Wild:' Arizona's Fry's and its 'Bring it On' 'Take All Competitors' (Including Tesco's Fresh & Easy) Store Coupon Move

February 12, 2009: Consumer Use of Manufacturers' 'Cents Off' Coupons Continues to Grow: The Latest American Rage: Home Coupon-Clipping and Coupon-Trading Parties

>March 19, 2009: Ground Control to Shopper: Point-of-Purchase-Based Mobile Couponing the Next Hot Ticket; Kroger Co. Leading the Food Retailing Pack

>December 16, 2008: Food & Grocery Retailing in the Recession: Bashas' Broadening the Shopper-Base in its Hispanic Format Food City Stores; Shoppers Search for Value

>March 11, 2009: Fresh & Easy Buzz Redux: Tesco's Fresh & Easy Changes its Promotional Advertising Flyer to 'Weekly;' Something We've Been Suggesting For About A Year

>February 6, 2009: Arizona Market Region Analysis: Bashas' Worker Layoffs, Closing of Stores Could be the 'Canary in the Coal Mine' in Ultra-Competitive Arizona Market

>December 12, 2008: Fresh & Easy Looking For Gold in Gilbert: Second Store in the Arizona City Set to Open Jan. 7; A Third Fresh & Easy Market to Open In Fall, 2009

>December 12, 2008: Marketing & Promotions Report: Manufacturers' Coupons Becoming the 'New Black;' Use Among Consumers Soaring; Marketers Distributing More Than Before

>October 2, 2008: Arizona Market Report: Fresh & Easy Opens Two New Stores; Marketside Opens in Three Days; Analysis of One Of the Most Competitive Markets in the U.S.

>June 8, 2008: Arizona Region Market Report: First Signs of A Weakening Might Be Starting to Show in the 'White-Hot,' 'Super-Competitive' Arizona Market

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

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

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

>April 14, 2008: New Multi-Supercenter and Multi-Format Strategies Are Showing Wal-Mart to Be A More Agile Grocery Retailer in the U.S.

>November 19, 2008: Competitor News: Wal-Mart Lowering Prices on Holiday Items and Staples; New Formats Coming; Online Grocery Sales; Hundreds of New Stores FY 2009-2010

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

Competitor News: Bashas' Chain Launching 10,000-Plus Item Storewide Price Slashing Program This Week in its Arizona Supermarkets

Arizona Market Region Report: Food & Grocery Retailing in the Recession

Bashas', Arizona's home state supermarket chain, is fighting back against the economic recession and stiff competition from numerous food and grocery retailers in the state by launching a major price-slashing initiative in its 100-plus Bashas' flagship banner supermarkets. Arizona-based Bashas operates about 156 supermarkets in the state (out of about 161 total) under the Bashas', Food City (Latino format) A.J.'s Fine Foods (upscale format), Eddie's Country Store and Bashas' Dine (prepared foods focus) banners. Bashas also operates the small Sportsman's Fine Wine & Spirits chain in Arizona.

Mike Proulx, Bashas' president and CEO, said starting this week the supermarket chain is slashing the everyday prices on more than 10,000 nationally branded and private label food and grocery items across all store categories and departments.

The current economic recession and the added competition from chains like Wal-Mart, Safeway, Kroger Co-owned Fry's, Albertsons, Costco, Tesco's Fresh & Easy Neighborhood Market and others in Arizona is what's behind the aggressive price-slashing value move by hometown chain Bashas'.

"In the 77 years that Bashas' has been in business, we've weathered countless economic downturns," Bashas' CEO Mike Proulx said in announcing the storewide price reductions. "Not only was our company formed during the height of the Great Depression, but we've survived the ups and downs of the supermarket industry, increased competition and national economic fluctuations. As Arizona's hometown grocer, we knew we needed to do something more for families looking to stretch their dollars during these tough economic times."

Bashas' is serious about trying to protect its turf in the white hot competitive Arizona market region, a state that has been hit among the hardest by the housing foreclosure crisis, credit crisis, unemployment and overall recessionary blues.

In addition to its massive category-wide price reduction move this week, Bashas' is going back to some of that old time food retailing religion in the form of offering shoppers a good old supermarket sweepstakes promotion.

The promotion is a win-free-groceries-for-a-year sweepstakes, for which one lucky winner will walk away with $5,200 in Bashas' gift cards, or the equivalent of $100 a week in free groceries for an entire year, according to Johnny Basha, the vice chairman of the company and a member of the Basha family, owners of the supermarket chain.

Additionally, fifty-three second-prize winners will each receive a Bashas' gift card worth $50. One winner will be chosen from each participating Bashas' store in metropolitan Phoenix and Tucson.

Contests and sweepstakes like this are making a comeback in the supermarket industry in these tough economic times, designed as ways to get shoppers into the stores. For example, Safeway Stores, Inc., which is a major player in Arizona food retailing, currently is running a customer sweepstakes-drawing around its "Ranchers Reserve" store brand beef line. The first prize winner receives a brand new pickup truck and Airstream travel trailer. There are numerous second prize winners as well.

Bashas' started offering the sweepstakes in its stores this week. Shoppers can enter until April 30. The grocer says the prize drawing will take place in May.

As we reported and detailed in this February 6 piece [Arizona Market Region Analysis: Bashas' Worker Layoffs, Closing of Stores Could be the 'Canary in the Coal Mine' in Ultra-Competitive Arizona Market] the Arizona-based chain laid off 203 employees as a way to cut expenses amidst the double whammy of economic recession and heavy competition in Arizona. those firings came on top of previous layoffs earlier.

The hometown Arizona-based supermarket chain also is closing five of its stores in the state.

Having made the layoffs and decided on the closing of the five less than desired performing stores, and thus focusing on the expense control side of the ledger, Bashas' now appears to be putting its focus on the demand or sales side, kicking off the major price-slashing program as a way to keep and gain shoppers in Arizona.

The primary, although not exclusive, focus of the price reductions on the 10,000-plus items is on essentials or basic everyday food and grocery products that shoppers by most frequently. That obviously makes sense as that's where the hottest competition among competing grocers currently is, not only in Arizona, but throughout the United States.

As we discussed in past stories in Fresh & Easy Buzz, Bashas has always been a tough competitor. Years ago when Safeway became a major player in Arizona many analysts were writing Bashas' off. They survived. When Kroger Co. came to town in a big way... ditto. And the biggest threat, Wal-Mart, hasn't rendered Bashas' a failure, although the brawny big box retailer from Bentonville, Arkansas is the most serious threat to Bashas and all of the other supermarket chains doing business in Arizona to date.

Bashas' is showing with the major price reduction program that it gets value -- that merely being the hometown grocery chain isn't enough in the current recession.

But it's also clear that the Arizona-based supermarket chain is struggling, based on the layoffs, store closings and felt need to reduce the everyday prices on so many items. Although such price reductions are hardly exclusive to Bashas' in the current econopmic climate -- many supermarket chains are making similar moves, although at 10,000-plus items Bashas' is about the most extensive we've heard of thus far.

Arizona is shaping up as competition central in U.S. food and grocery retailing in the recession. Tesco's Fresh & Easy certainly has its job cut out for it competing with these long time major players like Bashas', Safeway, Kroger, Wal-Mart and the others in the state.

Linkage - Select Related Posts:

>December 16, 2008: Food & Grocery Retailing in the Recession: Bashas' Broadening the Shopper-Base in its Hispanic Format Food City Stores; Shoppers Search for Value

>February 6, 2009: Arizona Market Region Analysis: Bashas' Worker Layoffs, Closing of Stores Could be the 'Canary in the Coal Mine' in Ultra-Competitive Arizona Market

>February 3, 2009: Competitor News: 'Grocer-Gone-Wild:' Arizona's Fry's and its 'Bring it On' 'Take All Competitors' (Including Tesco's Fresh & Easy) Store Coupon Move

>December 12, 2008: Fresh & Easy Looking For Gold in Gilbert: Second Store in the Arizona City Set to Open Jan. 7; A Third Fresh & Easy Market to Open In Fall, 2009

>December 12, 2008: Marketing & Promotions Report: Manufacturers' Coupons Becoming the 'New Black;' Use Among Consumers Soaring; Marketers Distributing More Than Before

>October 2, 2008: Arizona Market Report: Fresh & Easy Opens Two New Stores; Marketside Opens in Three Days; Analysis of One Of the Most Competitive Markets in the U.S.

>June 8, 2008: Arizona Region Market Report: First Signs of A Weakening Might Be Starting to Show in the 'White-Hot,' 'Super-Competitive' Arizona Market

>April 9, 2008: Arizona's Shopper and Employee-Beloved Bashas' Named One of 'The Best' Places to Work in the State For Second Year in a Row

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

Consumer Behavior & Retailing In the Recession: Gauging the Mindset of the 'New Frugal American Shopper' In An 'All Retailers Are Discounters' Time

Beginning in about mid-2008 (to the present) Fresh & Easy Buzz first started to write regularly about how consumers were beginning to trade down in terms of where they are shopping for food and groceries (types of stores), how much they're spending, what they're buying and how they're buying it, due to the then beginnings of -- and now full-blown -- the current economic recession. This consumer trading down behavior has decreased dramatically from then to now. It's our analysis it will continue all year and well into 2010 at the very least.

Among the recession-induced changes in consumer food and grocery shopping behavior we've sited include: a shopper flight to discount food-grocery stores like Wal-Mart, Aldi, Sav-A-Lot and similar price-impact-focused stores; consumers buying fewer prepared foods items and more staples and basics for cooking at home; an overall decrease in the amount of money shoppers are spending on food and groceries, particularly on premium, specialty, organic and impulse items; shopping weekly sales more frequently and cherry-picking retailers advertised items; purchasing more store brands if such items are cheaper than national brands; the dramatic increase in consumer use of manufacturers' "cents off" coupons and retailer store coupons; and a number of other indicators all pointing to the fact there now exists in large numbers what we call "the new frugal American food and grocery shopper."

In our research we see this trading down at retail across the board. Some evidence:

There are more BMW's, Mercedes and luxury SUV's in Wal-Mart, Dollar Tree, Dollar General and Costco parking lots than we've ever seen before, for example.

Goodwill stores are so packed and doing so much business that many are aggressively searching for used product, and for the first time ever paying for it in some cases.

And when it comes to eating out, MacDonalds' sales are soaring (and dollar menu items selling off the charts), while even mid-range restaurant chains like Applebees are struggling. MacDonalds said last week it is shooting to open 1,000 new stores globally this year.

The small-format, hard-discount chain Aldi USA, which is based in Illinois and has nearly 1,000 stores in the southern U.S., Midwest, Mid-Atlantic and eastern regions of the U.S. is booming, while higher-end grocers like Whole Foods Market is struggling, for example.

Aldi USA is doing so well in the bad economy that is entered the Florida market late last year, building a distribution center there and the first of what it plans to be many stores.

This year Aldi USA is entering two brand new markets, New York State and Texas. Florida, New York and Texas, along with California, happen to be the top food and grocery sales markets in the U.S. in terms of total dollar sales. Aldi USA plans to open at least 100 new stores in the U.S. this year.

Aldi USA also is getting ready to launch a major television advertising campaign in all of its U.S. markets because it believes it can pull even more shoppers into its stores with what will be retail brand-oriented ads that will tout Aldi's low-price and value model and message, depicting it as the "perfect" grocery store for today's tough times. Read: money savings and value everyday.

Just like upscale, specialty and premium-oriented grocers like Whole Foods Market, Bristol Farms (Southern California) and Dean & Delucca loved the "go-go" mid-to-late 1990's, it appears small-format, hard-discounter Aldi USA, which is the American division of Germany-based Aldi International, is lovin' not so "go-go" 2009.

It's our argument that "all grocers are now discounters" in this seriously down economy. That even includes upscale retailers like Whole Foods, which has been lowering prices in its stores, promoting-discounting on price heavily, and even periodically offering store coupons good for 10%-25%-off purchases of $25, $50 and $100. Until last year Whole Foods was about as far from a "discount-oriented" grocery chain as one could find in the U.S. At present, price and value are the two key merchandising and promotional strategies at Whole Foods.

By "all grocers being discounters" we of course mean each in its own ways. Aldi is different from Whole Foods, and Wal-Mart is different than both in its discounting behavior. But we do mean that regardless of format or positioning, all grocers are today discounting. Some just aren't doing it well. Others might not even know it is what they are doing.

While our focus is on food and grocery retailing in Fresh & Easy Buzz, the same "all retailers are now discounters" theory holds true across nearly every type of retail format at present in the U.S., from clothing and books to consumer electronics and home stores.

High-end fashion retailer Saks has been regularly holding 50%-70%-off sales in its upscale stores, for example. Department store chain Macy's appears to be offering nearly everything it sells in its department stores on sale these days if you visit one of the stores. And even the super-popular "Apple" stores (Apple computer) have started discounting Apple lap top computers, iphones and ipods recently.

Time magazine has now discovered the dual consumer-retailer behavior change we've been describing and writing about in Fresh & Easy Buzz. That duality is the combination of the "new frugal American consumers" and the "all retailers are discounters" proposition, a result in the main of the trading down behavior by so many consumers.

Time sought out Paco Underhill, the well-known consumer researcher, retail analyst and author of the excellent book, "Why We Buy: The Science of Shopping," to, in Time's words,"gauge the current mindset of the American consumer." Trying to do just that is fast-becoming the number one activity of America's retailers right now.

Time magazine staff writer Sean Gregory talked to Paco Underhill, the founder and CEO of the consulting firm Envirosell, about the "mindset" of today's cash-strapped, economic confidence-lacking, job-insecure American consumer for a piece published in the magazine yesterday. We suggest reading the story as your supplemental reading for the day. It's well worth the few minutes it takes to read it.

Click here to read "How Consumers Shop Differently Today" from the February 22, 2009 addition of Time.

Recession Economics: Fresh & Easy Buzz Flashback - President-Elect Obama Talking Near $1 Trillion Stimulus Today

Recession Street USA - Strong Medicine For A Big Problem

Yesterday in this post about the economic recession [also see here], we wrote that U.S. President-elect Barack Obama and others will soon stop talking about implementing a "mere" $500-$600 million economic stimulus package when he takes office on January 20, 2009, and start talking about an economic stimulus package of about $1 trillion.

But we didn't think soon would actually mean just 24 hours after we wrote and published the post. But then that's "recession time" for you -- in such severe economic downturns everything seems to move faster, with the exception of the upward trend of the economy.

Today President-elect Obama, anxious to jolt the economy back to life, said he is considering a federal stimulus package that could reach a whopping $1 trillion, dwarfing last spring's tax rebates and rivaling drastic government actions in the 1930's to fight the great depression.

The latest figure "Team Obama" is considering appears to be about $850 million. However, since it was about $600 million just a day or two ago (remember we are on "recession time"), it could easily go from $850 million to $1 trillion between now and January 20, when President-elect Obama is sworn-in as the 44th President of the United States, particularly if the December unemployment figures, which come out in early January, 2009, are as bad as most think they will be.

We suggest you read the just breaking story from the Associated Press at the link below:

Obama looking at $850 billion jolt to the economy

Food & Grocery Retailing in the Recession: Bashas Broadening the Shopper-Base in its Hispanic Format Food City Stores; Shoppers Search for Value

Competitor News: Arizona Region Market Report - and Beyond

Arizona-based, family-owned supermarket chain Bashas uses a multi-format food and grocery retailing strategy in the state.

The hometown supermarket chain, which operates about 160 stores in Arizona, has its namesake banner Bashas supermarkets, which consist of both superstores and conventional supermarkets. This banner is the bullwork of the grocery chain's business in the state.

But Bashas strategy also includes covering niche markets with its additional food retailing formats. These include the retailer's AJ's Fine Foods banner, which are supermarkets that focus on merchandising specialty, gourmet, natural, organic, premium and fresh, prepared foods in an upscale retail setting.

AJ's Fine Foods, which pioneered specialty and gourmet food and grocery retailing in the state, was a popular multi-store independent for many years in the Metro Phoenix market. Bashas acquired it a number of years ago and has selectively added new stores.

In addition to its flagship Bashas banner and its AJ's Fine Foods upscale supermarkets, Bashas also operates a small chain of upscale wine and spirits stores, Sportsman's Wines. The current four-store mini-chain (two stores in Scottdale, one in Phoenix and one in Glendale) was acquired by Bashas not too long ago from the family that founded and operated the popular Phoenix Metropolitan region upscale wine and spirits mini-chain for a number of years.

In acquiring Sportsman's, Bashas saw a number of synergies between it and its AJ's Fine Foods upscale target consumer, which was part of the grocer's motivation for buying it. Bashas also acquired Sportsman's it has said as a way to improve the supermarket chain's overall expertise in wine and spirits merchandising, as well as to open new stores and build the business in and of itself. This upscale segment isn't doing all that well for Bashas at present, as is the case with pretty much all upscale food retailers in this recession.

Bashas also is testing a natural foods store in Arizona, Ike's Farmers Market. That store is located in Oro Valley, Arizona.

But it's not just conventional superstore/supermarket, upscale specialty and natural foods formats Bashas includes in its multi-format strategy in Arizona. The grocery chain also operates Food City, which is a format and banner targeting the state's extensive Hispanic or Latino population, which comprises about 40% off all Arizona residents.

Basha's currently operates 61 Food City supermarkets, with store number 62 set to open soon in El Mirage, Arizona. The stores are full supermarkets with a focus on the fresh foods, groceries and non-foods Hispanic consumers buy and use most often. Food City stores also carry a strong selection of basic food and grocery items just like those found in all supermarkets. After all, Latino consumers have particular food preferences, but they also purchase many of the same brands and products Americans from all ethnic backgrounds buy.

Among the special features the Food City stores offer are huge fresh produce and meat departments. Many of the stores also have full-service pharmacies in-store. In addition, the stores offer a full check-cashing service because many Hispanic consumers, as well as others, don't use banks but rather prefer or have to cash their payroll checks at a supermarket or discount store like Wal-Mart, essentially using the stores as their financial instituion.

It's estimated that in both California, Nevada and Arizona, for example, as many as 25% of people don't use banks but rather use supermarkets and discount stores for their "banking" services such as payroll check cashing. Tesco's Fresh & Easy stores don't cash payroll checks or take paper, personal checks. Just cash, debit and credit cards. All 104 Fresh & Easy markets are in California, Nevada and Arizona.

As a result of not cashing payroll checks, Tesco is missing out on this huge, potential customer base in its Fresh & Easy stores. Wal-Mart, Kroger, Safeway, Bashas --the leading food and grocery retailers in these three states -- not only all cash payroll checks, they encourage it as policy because of all of the business it brings to their stores.

When it comes to basic food and grocery items, It is just this aspect of its Food City stores -- that they sell lots of basic food and grocery products at discount prices -- that Bashas is using in a new merchandising and marketing program designed to position the stores to a wider customer base -- everybody -- that's looking to save money in this severe economic recession, which has hit Arizona particularly hard.

In fact, in just the last month Bashas has added more basic or mainstream food and grocery items to its Food City banner stores, products that appeal to a wider audience, and focused on further discounting these "American-style" food and grocery items.

The new approach and program designed to increase business in the Food City supermarkets appears to be baring some recessionary shopper fruit, according to a recent piece in the Arizona Republic, written by staff writer Cathryn Creno, who covers the Arizona food and grocery retailing industry for the paper. Additionally, Fresh & Easy Buzz recently was in a couple Food City stores and observed an ethnically diverse consumer base shopping the supermarkets.

You can read the Arizona Republic story here.

Bashas isn't eliminating its Hispanic shopper niche in the Food City banner stores. Rather it's attempting to broaden the shopper base during the current bad economic times, which is creating in what our research has found are some profound changes in consumer food and grocery shopping patterns of behavior, particualrly in the Western U.S., where numerous different retail formats selling food and groceries exist.

For example, we're finding consumers shopping alternative formats much more than ever before in recent history in this recession.

Many shoppers are seeking out food and grocery bargains at dollar and 99-cent stores and salvage grocers and others, for example. Salvage grocers (also sometimes called "scratch & dent" grocers) are those that primarily sell slightly damaged or blemished food and grocery products, as well as manufacturers' close-outs.

Berkeley, California-based Grocery Outlet, which operates a chain of franchised salvage-type supermarkets (including stores in California, Nevada and Arizona), has reported this year its sales are up by at least 10-15%, and its owner-operators report seeing new faces in their stores daily.

Many shoppers also are seeking out ethnic supermarkets looking for bargains. These include Hispanic consumer-oriented stores like Food City and Asian foods-focused discount supermarkets as well.

The 99-Ranch Asian supermarket chain for example says its seeing more and more non-Asian shoppers in its big supermarkets located in California and elsewhere in the U.S. than it's ever seen before. The stores offer both basic food and grocery items and Asian foods at discount prices. The stores fresh meat and produce departments, which offer lots of value-priced items, have become particularly popular with non-Asian shoppers over the last few months, the company says, and we have observed having visited a number of the stores recently and seen shoppers of various different ethnic backgrounds in the markets.

As we wrote about yesterday in this piece [ Food & Grocery Retailing in the Recession: Wal-Mart CEO Describes Changes in Consumer Behavior-More Cheap Basics, More Cooking at Home; More Leftovers], Wal-Mart CEO Lee Scott said on the NBC news program "Meet the Press" on Sunday that the mega-chain is seeing shoppers buy more cheaper, basic food and grocery items in its U.S. stores, including purchasing more frozen foods when they are on sale in place of fresh, prepared foods, for example. Wal-Mart's research he said shows consumers are buying these items on sale and storing them rather than purchasing more expensive fresh foods on a weekly basis.

Scott's observations are echoed by numerous supermarket chain executives we've talked with in the last month. They say there's a clear trend people are cooking and eating more at home. That they are buying more food ingredients instead of highly processed and fresh, prepared foods.

These industry executives also tell us price (and discounting) is King right now. They are seeing more "cherry picking" of weekly advertising circular specials and in many cases reduced market basket sizes which they attribute to shoppers buying from two or more supermarkets depending on a given week's ads.

Our research shows there's a "search for value" among U.S. shoppers right now. Additionally, with the drop in the per-gallon price of gasoline below $2.00, shoppers are more willing to drive around to different stores for deals than they were just a little over a month ago when gas was over $4 gallon.

This "flight to value" means food and grocery retailers, regardless of the format stores they operate, must tighten their belts and emphasise the value proposition, with a particular focus on selling basic food and grocery items for the best prices possible in their stores. Retailers also must focus their weekly promotions on more basic items and get creative in promotions.

Shoppers are still looking for indulgent and premium products but are buying them more as irregular treats rather than on a regular basis like they were doing as recently as the first quarter of this year.

Right now it's all about the basics. For example"

>Leftovers have taken on new status in households, something else Wal-Mart Stores, Inc. CEO Lee Scott said shoppers are telling Wal-Mart.

>Manufacturers' cents-off coupons are becoming gold. Weekly supermarket advertising circulars are getting read rather than tossed in the garbage can. Unlike all of its major competitors in the Southern California, Nevada and Arizona markets, Tesco Fresh & Easy Neighborhood Market stores don't accept manufacturers' cents off coupons. [Read more here: Marketing & Promotions Report: Manufacturers' Coupons Becoming the 'New Black;' Use Among Consumers Soaring; Marketers Distributing More Than Before.]

>Consumers who never set foot in a 99-cent store are doing so; and buying food and grocery items in these stores.

>Non-profit retail food cooperative markets, where in return for paying an annual fee and/or volunteering hours to work in the stores, owner-customers receive 20% or more off the price of groceries, are booming.

>Wal-Mart is seeing a substantial cohort of higher-income consumers shopping in its Supercenters and Sam's Club stores. Additionally, the retailer's sales and income for the last two quarters demonstrate it's thriving in the down economy, according to CEO Scott and Wal-Mart USA president Eduardo Castro-Wright.

Price and value is top of mind among food and grocery shoppers. The challenge for retailers right now is to position their respective stores in the minds of these consumers as the place to shop in order to get that value.

And as we've been writing about, our analysis is doing so is job one for Tesco's Fresh & Easy Neighborhood Market right now -- to create a real value proposition for its 104 stores in Southern California, Nevada and Arizona, and do it fast -- and then hammer home that value proposition regularly in-store and through marketing programs in a regular, repetitive, consistent, concise and clear way.

Tesco's Fresh & Easy model seems designed to achieve this but the execution by Fresh & Easy USA corporate just hasn't been and isn't there. We wonder why since United Kingdom-based Tesco plc. is a proven global retailer?

Is it because the U.S. is the toughest market the retailer has faced to date? Is it because Tesco flubbed with Fresh & Easy? Or is it a senior management problem at Fresh & Easy Neighborhood Market in Southern California. Or, perhaps, a combination of all three?

We've argued that's it's all three, along with a couple other details. But most of all, Tesco's Fresh & Easy Neighborhood Market has failed to date to capitalize on what we believe could be its greatest strength, particularly in the recession, which is the creation of a solid value proposition, followed by a tight merchandising and marketing program designed to implement it. There's no time to do so like the present, after all.