Wednesday, November 14, 2007

Tesco Fresh & Easy Update: Oakland, CA

Oakland may be the central front in Tesco's Fresh & Easy Neighborhood Markets' Northern California invasion in 2008

As we reported yesterday,Tesco is making plans to launch its Fresh & Easy convenience-style grocery markets in Northern California in a big way next year. The UK-based grocer has already secured its first location, a former Albertsons supermarket building on Bird Avenue in the Bay Area city of San Jose. Tesco will renovate the empty building to fit its 10,000 square foot Fresh & Easy Neighborhood Market format. The building is about 40,000 square feet.

We've now learned Tesco might make the Easy Bay Area city of Oakland the central front in its Bay Area food retailing invasion. Oakland city officials and commercial real estate sources tell us Tesco is seriously looking at five potential store sites in the city to locate its Fresh & Easy grocery markets.

The five Oakland sites are:
  • 20th and Telegraph Ave
  • 17th and San Pablo Ave.
  • West Grand and Market St
  • 606 Clara St
  • Oakland Coliseum Transit Village
The first three sites are in or near Oakland's inner city, an area underserved by retail food stores, especially those offering fresh foods, produce and meats. The fourth location is not far from the downtown core, and the fifth site is a couple miles outside the downtown, and is adjacent to the Oakland Coliseum, where the NFL's Oakland Raiders play their home football games. The Coliseum Transit Village location also is where BART (the Bay Area's light rail system) has a stop. It's also a central hub for local bus lines and taxi cab services.

For decades Oakland, like many other large U.S. cities with substantial low-income populations, has been unable to draw supermarkets or other retail food stores to the city, especially its downtown, inner city neighborhood. This situation has changing for the positive in Oakland this year however--in a big way.

Last month, Whole Foods opened its first store in Oakland. The store, located in downtown, is a European Food Hall-style market, a design first for Whole Foods. The market is in a former Cadillac dealership which the grocer renovated from top to bottom. The food hall-style store is large and offers all of Whole Foods' traditional upscale features: tons of natural and organic groceries, non foods, fresh produce, meat and seafood, an in-store restaurant, and a cafe. The market also offers many specialty and artisan foods produced by local bay area purveyors.

Further, specialty foods grocer Trader Joe's opened two stores in Oakland on the same day about three weeks ago. Both stores are only about a 15 minute drive from downtown and serve neighborhoods that are a mix of upscale young professionals and manufacturing and service workers. These two stores are the first for Trader Joe's in Oakland as well.

Additionally, Bay Area-based Safeway stores recently remodeled one if its stores, located not far from downtown Oakland, turning it into one of its upscale Lifestyle stores, featuring lots of fresh produce and prepared foods, along with natural and specialty groceries, in addition to basic grocery offerings.

On top of all this retail food store activity, the city of Oakland and a local developer broke ground two weeks ago on a huge project called the Harvest Market Center. Located at the popular Jack London Square, just a few blocks from downtown Oakland, the center will be a large public market similar to the famous Pikes Public Market in Seattle, Washington and the popular Ferry Plaza Public Market in nearby San Francisco. The Oakland public market will feature scores of boutique, artisan, natural and organic foods vendors--ranging from fresh green grocers, butchers, gourmet retailers and bakers, to local natural and organic food purveyors and more.

The possible addition of five Fresh & Easy Neighborhood Markets (at least three in the inner city core) would be a huge boon to Oakland and its residents. Since the stores offer basic groceries along with fresh produce, meats and fresh prepared foods, the markets could serve as primary shopping destinations for many of the city's residents. Further, based on the retail prices we observed at the Fresh & Easy stores which opened last week in Southern California, Oakland shoppers would be able to obtain basic groceries at prices at or below the prices at traditional supermarkets.

This spate of food retailing activity in Oakland--which might kick into even higher gear early next year if Tesco goes forward with its five locations--is due primarily to a policy began about 7-8 years ago by Oakland's then mayor, former Governor of California and now state Attorney General, Jerry Brown. Brown served two terms as Oakland's mayor. He left office at the beginning of this year.

As mayor, Brown instigated an aggressive downtown redevelopment plan which has resulted in the building of thousands of condominiums, townhouses and apartments in downtown Oakland, turning the once "dead after five PM" city core into a thriving residential area. The redevelopment also has brought new hotels, office buildings, restaurants, night clubs, art galleries and retail to the downtown.

The last piece of the puzzle has been food retailers--and if Tesco does locate the five Fresh & Easy stores in Oakland that puzzle will be nearly completed, along with the pieces already filled in by Whole Foods, Trader Joe's and Safeway. There's also talk in Oakland that WinCo, the large Boise, Idaho-based discount grocer, might build a huge new store in Oakland.

We aren't surprised Tesco might locate five Fresh & Easy stores in Oakland, including at least three in the inner city. Unlike Whole Foods, which bases it's store decisions largely on a neighborhood's percentage of college degree-holding residents, or Trader Joe's, which generally uses similar demographic variables when choosing store locations, Tesco has said its strategy with the Fresh & Easy format is to intentionally target areas underserved by retail food stores along with more upscale neighborhoods.

For example, its first store in Los Angeles, which opened last week, is located in that city's Glassel Park neighborhood, a primarily low-income area but one that's rapidly moving more upscale. Oakland is the same. Although the city has many lower-income residents, its growth is coming from younger, high-income professionals, who've been moving to Oakland in droves from San Francisco and other Bay Area cities to live in the new downtown housing and take advantage of the city's booming nightlife activity.

While Oakland may become the central front in British grocer Tesco's 2008 Bay Area invasion, we've also learned from our sources that the retailer is talking to city officials and real estate people in cities throughout the Bay Area, as part of its plan to be a major food retailing force in Northern California.

Cities where our sources tell us Tesco representatives have expressed a direct interest in locating Fresh & Easy stores include, in addition to Oakland: Pleasanton (home of Safeway Stores corporate headquarters), Walnut Creek, Concord, Fremont, Pittsburgh, San Leandro, Dublin, Danville, Livermore and Antioch. These cities are all in the East Bay Area.

Many of these East Bay Area locations are either already locked-up by Tesco or the grocer is in various stages of the negotiating process. City officials and real estate sources have provided us with specific locations in many cases. However, we've decided to wait to publish those locations until we have a bit more confirmation.

Tesco also is looking aggressively in the city of San Francisco for store locations. Additionally, our sources tell us the retailer is looking up and down the San Francisco peninsula, from San Francisco, throughout San Mateo county to San Jose. As we mentioned above, Tesco already has secured a store location in San Jose, its first according to the manager of the property. The retailer is looking for additional locations in the city of San Jose, including a number of sites in the downtown core, like it is doing in Oakland. Other Bay Area cities on the radar screen include San Mateo, Redwood City, Menlo Park, Palo Alto and others.

There are at least 25-30 empty former Albertsons supermarket buildings in the Bay Area, and Tesco is looking at all these locations for possible Fresh & Easy stores. These stores were closed by Albertsons LLC, the entity that bought the Northern California Albertsons division as part of the buyout of Albertsons, Inc. by Supervalu and Cerebus Capital Management. Not too long after that, Albertsons LLC sold the entire Northern California operation to Modesto, California-based Save Mart Stores, Inc. Save Mart has been converting the former Bay Area Albertsons stores to the Lucky Stores banner and the remaining stores outside the Bay Area to its Save Mart banner.

We're hearing from our sources that Tesco is looking at opening as many as 100 stores in Northern and Central California in the next two years, with the majority of those stores being located in the San Francisco Bay Area. The Sacramento metropolitan region also is high on Tesco's agenda for the Fresh & Easy stores.

Update: Five Fresh & Easy stores opened today in Las Vegas

Tesco opened five Fresh & Easy Neighborhood Markets today in Las Vegas, Nevada. The locations of the five stores are: Tropicana & Durango, Tropicana & Jones, Lake Mead & Del Webb, Bermuda & Silverado Ranch, and Warm Springs and Easter. (The store at left is one of the five that opened today.)

Today's Las Vegas' store openings come on the heels of the opening of the first six Fresh & Easy stores last week (November 8) in the Southern California cities of Los Angeles, Anaheim, West Covina, Arcadia, Upland and Hemet. A sixth store opens Friday (November 16) in the Southern California city of Chula Vista. On November 28, two more Fresh & Easy markets open in Southern California in Laguna Hills and Lakewood. The first Arizona Fresh & Easy stores are set to open on December 5 in Mesa and Chandler.

To date, Tesco has officially announced 122 Fresh & Easy locations for Southern California, Nevada and Arizona. A company spokesperson says the retailer plans to have 50 stores opened by the end of February, 2008. Tesco's goal is to have 200 Fresh & Easy markets opened by the end of 2008.

Like in Southern California, Fresh & Easy staffers opened the Las Vegas stores this morning at 10:00AM with a number of special grand opening events and promotions. However, unlike in Southern California last week when the first six stores opened, there wasn't quit as much media frenzy and fanfare this morning in Las Vegas, according to observers at the stores.

Crowds were brisk but it was much more low-key than in Southern California we're told. This also is evidenced by the huge volume of media coverage the grand openings received last week, compared to what is very little thus far about the Las Vegas; store openings.

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