Retail Whispers

The Retail Whispers column is a new weekly feature of Natural-Specialty Foods Memo (NSFM). In it we bring you food retailing news you aren't likely to be able to find elsewhere. We also bring you personalities, retail business analysis, opinion and comments--all in a lively, insider format. Feel free to email us with comments, ideas and tips at nsfoodsmemo@yahoo.com.

The Retail Insider: Heard On The Street:
Inside retail news you aren't likely to get elsewhere

San Francisco...Late last week Natural~Specialty Foods Memo (NSFM) reported that Whole Foods Market, Inc. is in negotiations to acquire the Bell Market supermarket in San Francisco's upscale Noe Valley neighborhood. The Noe Valley Voice, a neighborhood newspaper, first reported the development last week. NSFM confirmed it with our San Francisco commercial real estate and neighborhood sources. Retail Whispers has now learned a number of other grocers also are interested in the store. Among these retailers are national specialty foods retailer Trader Joe's and local Bay Area upscale grocer Mollie Stones Markets.

Our sources tell us that Whole Foods seems to have the upper-hand on the negotiations at this point as the supernatural grocer currently is in due-diligence negotiations with the Bell Market building owner's real estate representatives. Bell Market is owned by Kroger Co. Kroger sold off or closed its Bell Market and Cala Foods stores in the Bay Area last year. The Noe Valley Bell Market was supposed to be sold at the time to an independent, Delano IGA, which bought eight other Bell Market stores in the City and in Marin County. A deal couldn't be reached for this one store however so Kroger continued operating it.

More Whole Foods...Retail Whispers' sources also tell us Whole Foods is scouting around the famous (or infamous in some circles) Haight-Ashbury district in San Francisco for a new store building site. The Haight-Ashbury neighborhood would be an excellent location for a Whole Foods store. The area has gone through considerable gentrification over the last decade. It has a large population of college educated young professionals as well as a large group of somewhat older and more established college educated residents. A large University of California campus is nearby. During the day at least 50,000 students, professors, researchers and health care professionals work on or right near this campus which is a five minute drive from the neighborhood. Many University-affiliated people live in the neighborhood as well. The area also is a big "foodie" neighborhood with dozens of upscale and ethnic restaurants, cafes and bistros. Retail Whispers will keep our readers posted on this development.

Southern California...UK retailer Tesco confirmed on Friday when and where it will open some its first batch of Southern California Fresh & Easy Neighborhood Markets stores. Four of the convenience-style markets will be located near residential areas in the cities of Oak Park, Newbury Park, SimiValley and Moorpark. All four stores are in Ventura County. Two of the locations will be new stores built from the ground up and the other two will be located in existing buildings which are being remodeled. More stores are planned later for Ventura Country. On Friday CEO Tim Mason said at present Tesco has about 100 Fresh & Easy markets in its construction planning pipeline. Mason also said Tesco is modeling Fresh & Easy after Starbucks from the standpoint that customers won't have to drive too far to find one ( a Fresh & Easy store). In other words Tesco is talking lots of stores over time. Maybe more than we and others have reported.

More Fresh & Easy...Tesco also plans to add three more stores in Orange County. This now brings the number of Fresh & Easy stores planned for the OC region to nine. According to our sources it's likely the first Fresh & Easy store to open will be in the OC. We know the first will be in California, and think it will be in Orange County, but aren't ready to wager on it (at least not too much money) yet. We hear Tesco is working hard to have the first store open by November of this year, which is the date they have been touting in the press for almost a year now. New Fresh & Easy to anchor new center...A new Fresh & Easy outlet will anchor a brand new shopping center in Azusa, California. The center is called "Citrus Crossing" and is already 90% leased. The Fresh & Easy Neighborhood Market will be the retail anchor to the 180,000 square-foot mixed-use development according to Trachman Indevco, LLC, the center's developer.

Bristol Farms feeling left out...Retail Whispers' Southern California grocery industry sources tell us Supervalu-owned upscale retailer Bristol Farms doesn't seem to be getting the attention and focus that was expected under Supervalu ownership. Bristol Farms' people have had plans for major store expansions but it seems either those plans have been put on hold or that simply because Supervalu is still assimilating its huge acquisition of Albertson's Inc. that the time clock of the local folks isn't quite the same as that of those back at Supervalu HQ in Minnesota. Retail Whispers thinks the upscale specialty and natural foods-oriented Bristol Farms banner offers lots of opportunity for Supervalu as a national, upscale format. As such we think the chain is likely to increase its focus on the banner as they begin to focus more on the future rather than on the assimilation process. In other words once they get some breathing room.

Kakaako, Hawaii...A new Whole Foods store being constructed in Kakaako has been held up do to the discovery of three new sets of native Hawaiian human remains. This isn't the first time construction has stopped do to this finding. Thus far 59 sets of native Hawaiian human remains have been found on the six-acre site which includes construction of a 67,000 square-foot Whole Foods market, a 17-story residential tower, parking garage and numerous other retail shops. The native Hawaiian people are called iwi. One real estate broker commented about the continued start and stops by the local gevernment saying, "How many sets of remains do they need to find before they realize the site is a burial ground." You can read more here.

Have a tip or heard a rumor about a food retailer looking for a new store location or other inside information? If so feel free to email it to us at nsfoodsmemo@yahoo.com. We keep our sources confidential.

Retail Newsmakers:
Retailers making news, doing interesting things

New York City...John Catsimatidis, chairman of NYC-based Gristedes Supermarkets, Inc, is said to be seriously thinking about running for mayor of NYC when the current term of Mayor Michael Bloomberg runs out in a couple years. Catsimatidis is chairman of the 39-store supermarket chain as well as the sole owner and CEO of the Red Apple Group of which Gristedes is a part. Red Apple Group has ownership interests in real estate, oil refining, gasoline distribution and aviation. The company had $3.7 billion in annual revenue last year. Catsimatidis also is very involved in NYC civic and governmental circles. He's sat on many city boards and commissions and is involved with many non-profit, civic and charitable organizations in the Big Apple. He's considered a major player in NYC political and civic circles.

Gristedes, the supermarket chain, isn't doing so well though. Ten years ago the chain had 79 stores compared to just 39 today. Most were closed either because the upscale competition from Trader Joe's, Whole Foods, Fairway Markets and others was too much, or because the NYC rents were to high to warrant staying open based on the stores' sales activity. Catsimatidis doesn't seem too concerned though. he recently told the New York Times he would stay in the supermarket business even if his stores only break even as his other business interests are making him plenty of money, especially the oil and gas interests.

New York City political pundits tell us Catsimatidis sounds serious about running and has been doing all the things a potential candidate does to prepare. Retail Whispers wonders if one of those things includes lobbying the supermarket and grocery industries for campaign contributions. After all we can't recall one major U.S. city that's had a grocer as its mayor in recent times. (If you know of one let us know.) It wouldn't hurt the industry to have one of "its own" as mayor of the largest city in America, would it? Of course Catsimatidis has to run first---and then win.

Modesto, California...Bob Piccinini, majority-owner and CEO of Save Mart Supermarkets, has always loved Italian food and wine. It is after all the food and drink of his Italian heritage. Recently Piccinini took that love to a new level and created a line of Imported Italian wines under the "Piccinini Vineyards" brand name. The red and white varietal wines are produced in Italy and shipped to the U.S. for sale exclusively at the chain's 250-plus stores. The wines are selling for under $10.00 bottle and are often featured on promotion for $6.99 bottle. Salute!

Austin, Texas...Whole Foods Market, Inc.'s CEO John Mackey recently took a beating in the business press for posting negative comments about Wild Oats and its CEO during the run-up to the acquisition by Whole Foods. Mackey created a screen name and posted the comments frequently on a financial industry website/chatroom. It's perhaps because of this situation that Mackey has been uncharacteristically quiet during the merger process the last couple weeks. Rather, Whole Foods Co-president Walter Robb has been the primary face to the press, public and Wall Street.

Retail Whispers wonders if this might mean Robb is Mackey's heir-apparent for the CEO seat? Not that Mackey is leaving anytime soon of course. There might be one difficulty with this scenario though. Robb lives in the San Francisco Bay Area despite his senior corporate position. He works primarily out of the Whole Foods northern region office in Emeryville. Robb has lived in the Bay Area for about 20 years--and loves it, hence his decision (and Mackey's ok) to not live full-time in Austin. Would this geographical blip keep Robb from taking the CEO spot if offered? We doubt it. Rather we think he would find a way to divide his time between Austin and the Bay Area--as well as points in between. Of course that would mean buying a house perhaps in Austin. Retail Whispers thinks with those merger stock option grants coming in he could some how swing it.

Sacramento, California...Long-time Sacramento grocer Darrel Corte has been a leading specialty food and wine expert and retailer for over four decades. Corte, dubbed the "Silver Palate" for his food and wine tasting expertise, is a true international fine food and wine retail pioneer. In the 1960's Corte and his brothers began turning their flagship Sacramento store into a fine foods and wine retail mecca. The brothers continued this transformation into the 1970's, 1980's and 1990's, getting progressively more upscale. They continue their own unique brand of specialty food and beverage retailing today.

Corte was one of the first grocers to seize on the idea of creating his own gourmet food brands or labels. Decades ago he began taking Seville oranges grown from the family's own trees and turning them into Corte Brothers Gourmet Seville Orange Marmalade. The limited edition product--how much was made depended on the orange crop--sells out rapidly each year. Corte went on to brand numerous other imported and domestic specialty foods with his "own" private label.

Corte also is a wine industry pioneer--both as a retailer and much sought after taster. He was the major populizer of Amador, County California Zinfindel and the first retailer to sell it. Today it's considered one of the top Zins in the world. Corte Brothers market merchandises an extensive inventory of wines, especially those produced by international and domestic artisan and boutique wine makers. Corte spends a good deal of his time traveling the world participating in wine, tea, olive oil and other tasting events as an expert judge. He also brings back unique specialty foods and wines from his trips for the store. For many of these producers Corte is the first American retailer to buy and retail their products.

Corte continues to go strong as a grocer and food and wine lover and expert. You can find him on the floor at Corte Brothers as well as conducting tastings right in the store. When he isn't traveling the world of course. Noted foodie and Gourmet Magazine editor Ruth Reichl, who credits Corte with introducing her to the world of food and wine, calls Corte the best food and wine retailer (and more) she's ever met. Corte and his brothers demonstrate there is always room for a good independent with a strong niche. Also: doing what you love pays off.

Know of a retailer making news or doing something interesting (maybe its you)? If so drop us a note and tell us about him or her at nsfoodsmemo@yahoo.com.

Mergers & Acquisitions:
Food retailing buyouts, acquisitions and mergers

All has been quiet on the food retailing M&A front since the Whole Foods Markets, Inc. acquisition of Wild Oats was approved a couple weeks ago. However, just this week Mega-retailer Wal-Mart Stores, Inc. mentioned its open to and interested in acquisitions in the U.S. and abroad to grow its business. Wal-Mart has been stymied in its supercenter new store building goals by numerous U.S. cities and counties which have enacted big box retail store size laws pertaining to combination food and general merchandise retailing. These laws are primarily aimed at Wal-Mart and its supercenter stores. On Wednesday, September 18 Wal-Mart will be participating in the Bank of America Securities Annual Investors Conference in San Francisco. Wal-Mart's presentation will be webcast. You can listen to the 30 minute presentation at 8AM on September 18 here.

Wal-Mart is expected to talk about its acquisition plans and also will likely be asked to talk about plans for developing two new small footprint retail formats, or Small-Marts. The two formats are an upscale, convenience-type food store and a small footprint health & wellness store which would sell healthy products and have a health and wellness clinic in the store.

In terms of the dearth of current M&A activity Retail Whispers doesn't find it too surprising. First, the sub-prime mortgage crisis in the U.S. has dried up much of the funding for investment banks, hedge funds and private equity funds. In other words these leaders in M&A activity are in a holding pattern by and large at present. This isn't exclusive to the retail food industry, its across the board. Second, in terms of food retailing companies themselves, most of the publicly held retailers are either still digesting acquisitions (Supervalu) or are currently knee-deep in store remodeling programs and new store building efforts (Kroger, Safeway, Publix and others). This isn't to say we won't see a major acquisition or a merger or two before the year is out but rather that activity isn't going to be robust between now and the end of the year in our view.

Retail Whispers' Weekly Feature
Discussions of retailers doing what they do best

Each week Retail Whispers selects an article which focuses on one or more aspects of the food retailing business. This week we bring you this piece from the Boulder (Colorado) Business Report. The article talks about how in Boulder, the former hometown of supernatural grocer Wild Oats and now Whole Food Market, Inc's second hometown after Austin, many small grocers are still thriving despite all the competition. In addition to numerous Whole Foods stores now (about five), Boulder, a city of about 100,000, also has three Safeway stores, two King Soopers and numerous independents. All of the independent food retailers in the article have a few things in common. First, they've found a niche and work it hard. Second, they never skimp on customer service. Lastly, they make their stores an extension of their personalities. Customers aren't just shoppers but part of the team. You can read the full article here.


Weekly Retail Question:
Food for thought

Retail Whispers wonders why so few U.S.-based food retailers do business overseas. Few if any of the top-ten supermarket chains have stores overseas. Wal-Mart, the world's largest retailer, is the exception of course. But Target, Kmart and other mass-merchandisers haven't become international retailers of note at all. Safeway Stores' CEO Steve Burd said last week the chain would expand its business to Australia and a couple other countries but provided no specifics. Perhaps he means retail business but Burd made the comment at a conference during a discussion where he was talking about Safeway getting more into non-retail businesses like its Blackhawk gift card company so he might actually mean something more on that order in terms of overseas business activity.

Whole Foods Market, Inc. has built stores in London and Canada and we think they will built more in other European countries. We think France is the likely next step. In the main though American food retailing companies remain primarily domestic bound. Retail Whispers has a number of explanations as to why this is the case but we want to hear what you have to say. Send us your thoughts and comments about our retail question to nsfoodsmemo@yahoo.com. If we publish your comments we will not include your name unless you ask us to in your email.