Tuesday, July 8, 2008

Retail Memo: Former Raley's CEO Michael Teel and Partner Developing New Prepared Foods, Natural-Specialty Foods Chain in Sacramento, California

A Sacramento, California USA business group called M2 Venture Partners, which is headed by Michael Teel, the former CEO of the Sacramento-based supermarket chain Raley's, has leased and is currently remodeling a former restaurant site (formerly called Adiamo restaurant) in East Sacramento, which it plans to turn into its first small-format prepared foods bistro and natural-organic-specialty foods market of a chain of such stores, called "Goods Eats Grocer." The first "Good Eats Grocer" market is set to open by the end of this year.

That first "Good Eats Grocer" store--which will have a full kitchen and seating inside, as well as offering in-house fresh, prepared foods for takeout, along with selling natural, organic and specialty foods and groceries--will be located at 32nd Street and Folsom Boulevard in East Sacramento.

According to Mr. Teel, the East Sacramento "Good Eats Grocer" market will be just the first store in what will be a chain of such combination prepared foods bistros and natural-organic and specialty foods stores the enterprise plans on opening in the Sacramento area.

Here is how Michael Teel describes the Good Eats Grocer format: " Good Eats Grocer is a natural-organic crossover market that sources the finest quality foods at incredible prices. We have designed our stores to be smaller, and more intimate with an overriding emphasis on the customers’ convenience and ease of access. We offer a great selection of natural and specialty foods from around the world and a huge variety of take-home meals and dinner solutions for the family.

Teel's partner in M2 Venture Partners (the second Michael in M2) is well-connected Sacramento-based technology company entrepreneur, investment banker and former hedge fund founder and manager Michael Ashker.

"Good Eats Grocer" is just one of numerous enterprises M2 Venture Partners is involved in. Those various ventures include a partnership with the Raley's supermarket chain, along with ventures in the high technology, health care and media fields. Mr. Ashker also served as an advisor to fast-growing natural foods chain Sunflower Farmers Markets, arranging $30 million in new financing for the retailer through one of his investment funds last year.

Mr. Teel is fairly well connected in Sacramento himself, especially when it comes to food and grocery retailing. He is the only grandson of Tom Raley, founder of the Raley's supermarket chain, and is thus his generation of the family's only male heir to the family supermarket fortune. Raley's remains family-owned.

Michael Teel worked for the Raley's chain throughout his youth. In 1983 he left to pursue what he calls academic interests. Following that, he started his own advertising agency specializing in the food industry. He returned to Raley's in 1988. He rose to become president of the supermarket chain in 1996, and then became CEO in 1998, when long-time company CEO Charles Collings retired.

Michael Teel left Raley's a few years ago to pursue investment and entrepreneurial efforts like his M2 Venture Partners group, which the small-format "Good Eats Grocer" chain is a product of.

The two Michaels, Teel and Ashker, said they spent over a year formulating their concept for the prepared foods bistro-specialty foods market.

The partners also demonstrated how well-connected they are in Sacramento by beating out Whole Foods Market, Inc. for the lease on the 32nd Street and Folsom Boulevard restaurant building and site in East Sacramento where the first "Good Eats Grocer" market will open.

Whole Foods Market planned to acquire the building and then level it, purchase land surrounding the site, and build a large, multi-level Whole Foods natural foods superstore in the prized location. It would have been Whole Foods' second Sacramento superstore. The supernatural foods grocer currently is looking for a new site for its second store in the city.

However, even though the Whole Foods Market, Inc. offer was a lucrative one, the family that owns the former restaurant and surrounding property, decided to go with the two local entrepreneurs instead.

Besides it's location, one of the key reasons the partners say they wanted the East Sacramento site for the first store of their chain is because the existing restaurant building has a large, well-appointed kitchen in it. M2 Ventures says it plans to make the kitchen area the centerpiece of the bistro and natural-organic-specialty foods market, completely remodeling the building around it to create the market. They will keep much of the existing building shell and interior because they want to preserve as much of the building's local character as possible, they said.

The "Good Eats Grocer" market will feature a gourmet chef running the kitchen. Quality foods will be prepared and served in-store, as well as offered to go. Wines by the glass also will be offered in the bistro, and the market will sell an extensive selection of wines by the bottle, along with its selection of domestic and imported natural, organic, specialty, ethnic and gourmet food and grocery items.

Teel and Ashker also have brought in veteran specialty and gourmet foods retailer Carl La Force as chief operating officer for the "Good Eats Grocer" chain. He recently moved to Sacramento from Portland, Oregon to join the company.

For the last few years, Mr. La Force has operated his own grocery and food service consulting firm. He has over 30 years experience in the specialty and gourmet foods industry. For example, he was instrumental in the development and opening of the Metropolitan Market specialty and gourmet foods chain in Seattle, Washington.

Prior to that, he opened the flagship store of the upscale Larry’s Markets in Washington state. Mr. La Force managed the store for 5 years, getting numerous industry awards for innovative merchandising. According to Michael Teel, Mr. La Force also brings an unequaled passion for fine foods to "Good Eats Grocer." "He has spent the better part of his career developing contacts and networks of the obscure and pure traditional artisan producers of fine foods around the world," Mr. Teel says.

The "Good Eats Grocer" bistro-markets plan to offer a wide selection of artisanal natural, organic and specialty foods, along with more common brands and products in the categories.

Unlike Tesco's Fresh & Easy Neighborhood Market, which plans to start opening the first of an initial 19 of its small-format grocery and fresh foods markets in the Sacramento region in early 2009, the small-format "Good Eats Grocer" stores won't sell basic grocery items, according to M2 Venture Partners. Rather, the focus will be on the natural, organic and specialty items, along with the in-store prepared foods.

However, since a major portion of Tesco Fresh & Easy's offering is prepared foods, which are made in a central kitchen in Southern California at present and then delivered to the stores, the new prepared foods bistro and specialty market chain being started by the two local Sacramento businessmen will be a direct competitor for that portion of Fresh & Easy's offering.

In that way, the "Good Eats Grocer" format is more like Wal-Mart's upcoming Marketside small-format grocery and fresh foods stores, which the mega-retailer plans to start opening in the Phoenix, Arizona Metropolitan region this fall.

The Marketside stores will feature a kitchen in-store, along with seating for about 10 customers at a time. Prepared foods for takeout also will be offered at Marketside.

Marketside parts company with Good Eats there though and joins Tesco's Fresh & Easy in that it too will offer a selection of basic food and grocery items at discount prices like Fresh & Easy stores do.

However, based on information from our sources, it's likely Marketside will offer a greater selection of natural, specialty and gourmet foods than Fresh & Easy stores do, along with its assortment of basic food and grocery items.

M2 Ventures didn't provide a timetable regarding when it will start rolling out other "Good East Grocer" stores after the first one opens later this year. However, the company says their plans are for a fairly substantial prepared foods/specialty foods retail venture in the Sacramento region, far beyond the one bistro-market set to open before the end of this year.

Teel's decades of experience at Raley's, which is a leading prepared and natural-specialty foods grocer, should be put to good use in the new small-format bistro-market venture.

Additionally, since both partners are well connected in Sacramento's business, real estate and political world's, finding good locations for the bistro-markets should be much easier than it normally would be for an out of the area operator and retailer.

Further, since both Teel and Ashker also are extremely well known in Sacramento and the surrounding region, they should be able to garner lots of publicity for the venture prior to the first bistro-market opening, and long after that.

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