Small Format Food Retailing Memo - Design Innovation: Supermarket Design Firm Wins Award For Design of Independent 'The Market' Specialty Grocery

Design Services Group (DSG), the supermarket design firm owned by supermarket chain Supervalu, Inc. has won the 2009 Outstanding Merit Award from the Association for Retail Environments (A.R.E.) design association for its design work on the independently-owned small-format specialty and natural foods store "The Market" (pictured above), which is located in Plymouth, Massachusetts USA.

DSG won the prestigious Outstanding Merit award at the just-ended 2009 A.R.E. Retail Design Awards event at GlobalShop, held in Las Vegas.

The award recognizes excellence in retail store design, craftsmanship and innovation. This is the second time DSG has been awarded an A.R.E. Retail Design Award: it won a grocery store category award in 2006 for its design of "Highland Park Market" in Windsor, Conn.

The 13,500 square foot "The Market" is the creation of specialty and natural foods retailing veteran Michael Szathmary, who is the store's managing director, and his associates. Szathmary's 40 year retailing career includes having founded and launched the Nature’s Heartland grocery store and Szathmary’s market/cafes in Needham and Brookline, Massachusetts. [Related post - January 20, 2008: Retail Memo: Designing the 'Perfect' Small-Format Grocery Store in a 'Near-Perfect' Place.]

The store's manager is food retailing veteran Mark Guinasso. Guinasso been in the grocery business for over 30 years, with previous management positions at Purity Supreme, Western Beef Supermarkets, Walter’s Meat Market and Nature’s Heartland, where he worked closely with Michael Szathmary.

The fresh produce department (above), named "Farmers Market," at the small-format "The Market" store keeps with the store's overall design theme of showcasing fresh foods in a rustic setting modeled after a 19th century farmers' market.

This is how the owners and management of "The Market" describe the store's format and retailing approach: "We’re The Market. And we want to change the way you shop — for the better, quicker, healthier and happier. With fresh, locally grown foods in season, expert help and our everyday value pricing on the everyday conventional groceries you need . . . every day.Our name says it all: simple, direct, not too fancy — full of good things waiting to be discovered. In fact, we want to make shopping an experience you actually enjoy.

It begins with healthy, high-quality food: like locally grown, seasonal produce. Freshly baked artisan breads. A delectable deli. Certified Angus beef and naturally raised chicken. And fish right off the boat. Fresh is best.

We also offer a constantly changing array of specialty items created in our own kitchen by our own chef and team — in case you’re too busy or tired to cook. Just heat and serve.

Plus, we have experienced people who know their stuff and are ready to help you. Whether it’s catering a party of fifty or just carrying your bags to your car. We’ve made the aisles more convenient, the displays a little tastier. You can pick up a bouquet by Martin’s Flowers just next to our bakery. And we’ve opened a doorway to Long Ridge Wine & Spirits next door. We’ve even selected great music for you to shop by."

You can learn more about the small-format grocery store at its Web site here.

The Deli department (above) at the independently-owned, small-format "The Market" features scores of deli items and ready-to-heat and ready-to-eat fresh, prepared foods.

DSG's Architecture and Engineering department designed the interior of "The Market" the store, working closely with Elkus Manfredi Architects, a Boston firm that designed the exterior shell.

With only 13,500 square feet to work with, DSG store planners had to carefully account for every bit of available space. They settled on an open layout with relatively low shelves to give shoppers a broad view of the entire store from nearly every vantage point, the design firm says. The small-format store has the look of a country store of decades best with a modernistic twist.

The store's design philosophy, according to DSG, is to showcase fresh foods in a rustic setting modeled after a 19th century farmer's market.

"The Market" looks like a modernistic barn by design. An open floor plan directs customers from one department to the next, from the full-service cheese, deli, meat and seafood departments to the bake shop, seasonal and locally grown produce department, the prepared-food section, salad bar, dairy, frozen foods, chef’s cove and floral department, and then to the aisles of groceries.

The 13,500 square foot store features basically all of the departments a large supermarket offers: dry grocery, fresh produce, meat-seafood, deli-prepared foods, bakery, wine, cheese and the like, each designed to fit into the small-format footprint and limited store interior space.

The store has high arched ceilings which make it appear much larger than its 13,500 square feet.

The small-format store is in the Pinehills development in Plymouth, Massachusetts. "The Market" opened in September, 2008.

As Natural~Specialty Foods Memo (NSFM) first declared in the summer of 2007, there's a small-format food and grocery store mini-revolution happening in the U.S. and in many other parts of the world. This includes chains like Aldi (Europe and U.S.), Lidle (Europe), Supervalu, Inc.'s Sav-A-Lot (U.S.), with there small-format, deep-discount grocery stores; Tesco (globally) with its mid-range small format stores like Tesco Express in Europe and Fresh & Easy in the Western U.S., along with Giant Eagle and its small-format Giant Eagle Express format; Safeway (its The Market format), Supervalue (Urban Fresh by Jewel), Wal-Mart (Marketside) and others in the USA (plus Waitrose and Sainsbury's in the UK) on the more upscale end, and numerous independents focusing on small-format stores, the original small-format grocers. Many other chains are playing in the small-format world as well, in the U.S. and internationally.

The current severe global economic recession has slowed down what in 2007 to mid-2008 was a very robust small-format revolution. But the fact is it has slowed down a ll new store development in the U.S. and globally considerably.

But despite the recession, small-format innovation continues.

And in the case of "The Market" in Plymouth, Massachusetts, it continues on an award winning pace.

[You can view "The Market" store's complete design project from DSG at the link below:
Download Project PDF (7790kb).]

[You can view a slide show of the store's interior here. There are links to photographs and information about other food stores designed by DSG at the site.

[Readers: You can follow Natural~Specialty Foods Memo (NSFM) on Twitter.com at www.twitter.com/nsfoodsmemo.]

Small-Format Food Retailing Memo: First 'Urban Fresh by Jewel' Small-Format Food and Grocery Market Opens Today in Chicago's Lincoln Park Neighborhood

Small-Format Food Retailing Special Report

The Jewel-Osco supermarket chain, which is owned by Supervalu, Inc., the second-largest U.S.-based food and grocery retail and wholesale company, opened the first store (the interior of which is pictured above) of its small-format Urban Fresh by Jewel start up chain today at 1910 N. Clybourn Avenue in the Lincoln Park neighborhood in Chicago, Illinios USA.

The small-format market is fairly upscale in design. It features an assortment of basic, specialty, natural and organic grocery products, along with fresh meats and produce (including specialty and organic varieties), ready-to-eat and ready-to-heat prepared meals, side dishes and snacks, and gourmet sandwiches and baked goods, along with wine and beer, with an emphasis on specialty wines and craft beers.

The overall focus of the store, even though it carries everyday grocery brands and items, is towards the upscale and specialty, including an emphasis on natural and organic. But the store also is merchandised for shoppers to pick up everyday items offered at about the same price a larger supermarket offers them for.

Urban Fresh by Jewel joins the company of Tesco's Fresh & Easy, Safeway's "The Market," (its one the market by Vons store in Long Beach, California thus far) Giant Eagle's Giant Eagle Express and Wal-Mart's soon to open Marketside, which all have in common that they are small-format, convenience-oriented grocery markets offering a limited assortment of basic groceries, fresh foods like meats and produce, specialty-natural items and fresh, prepared foods.

According to a Natural~Specialty Foods Memo correspondent who visited the Urban Fresh by Jewel store today on its opening day, it's very similar in design and merchandising style to Safeway's "The Market" format.

At 16,000 square feet, Urban Fresh by Jewel also is about the same size as the the market by Vons, which is about 15,000 -to- 18,000 square feet.

Urban Fresh by Jewel also is similar in look and merchandising to Canada's small-format Urban Fresh markets, which are owned an operated by the Canada-based grocery chain Sobeys.

The Canadian Urban Fresh stores have been around for sometime, and it appears Supervalu's Jewell-Osco chain liked the name so much it borrowed it for its small-format start-up chain, which the retailer says it plans to use in a urban-oriented retailing strategy in Illinois and Indiana, where the chain is based and operates about 183 supermarkets.

Food and grocery items at the Urban Fresh by Jewel Chicago store are grouped into pods to make for quick pickings of salads and deli items, for example, according to Miguel Alba, a spokesman for Jewell-Osco. This is the very same merchandising format Safeway rolled out in its the market by Vons store in Long Beach, California, which opened in May of this year.

Safeway plans to open its "The Market" small-format stores on a selective basis throughout the U.S. whenever and wherever it makes sense, CEO Steve Burd told Natural~Specialty Foods Memo early this year.

Safeway Stores, Inc. owns the Dominicks chain based in Illinois, so it's possible we will see a the market by Dominicks doing small-format food retailing battle with Urban Fresh by Jewel, which would be interesting since both chain's formats are so similar in store design and merchandising, including both using the the pod-style displays.

Safeway Stores, Inc. plans to use "the market" as the first part of the name of all of its small-format grocery stores, adding the name of the particular banner it uses in a given market as the ending. Vons is Safeway's banner in Southern California and Southern Nevada, for example. It's Dominicks in Illinios, Safeway in other parts of the U.S., and so on.

Additionally Jewel-Osco's Chicago small-format market has 10 checkout lanes, six of which are self-service. Spokesman Alba says this is designed to appeal to the younger, high-income residents in the Lincoln Park neighborhood, who he said the chain thinks will like the option of having a mix of full-service and self-service checkout lanes. Since four of the ten lanes are still full-service, he says he believes the store is offering both options to shoppers. They can use either full-serve or self-checkout depending on their needs at the time.

Safeway's small-format "The Market" format also uses a mix of full-serve and self-serve checkout lanes.

Tesco's Fresh & Easy Neighborhood Market, the small-format start up chain which now has 82 stores in Southern California, Nevada and Arizona, offers only self-service checkout lanes in its stores, although store clerks will assist customers with checkout and bagging if asked by a shopper to do so.

Trader Joe's on the other hand, the pioneer small-format specialty grocer in the U.S., has stuck to having only full-service checkout lanes in its stores. Clerks bag a shoppers order as well as scan it out in TJ's markets.

Among the upscale, natural, specialty and organic products in the first Urban Fresh by Jewel small-format market are: whole bean gourmet, organic and fair trade coffee beans displayed along with in-store grinders for shoppers to use; specialty, natural and organic food and grocery items across all shelf-stable and perishable categories; gourmet prepared foods items like Lobster and Shrimp Rockefeller and Hazelnut and Currant-Baked Apples (alongside more everyday items like meatloaf and cheescake); and regular and craft beers, along with basic and premium wines (about 400 varieties total, according to Jewel-Osco).

But there's also a limited selection of everyday grocery brands and items, as we mentioned earlier. There's Campbell's canned and packaged soups in the soup section, Kellogs Corn Flakes and Lucky Charms in the cereal aisle, and Wish Bone salad dressing along with numerous gourmet and organic salad dressing brands in the dressings section, for example.

The store does flip-flop a number of things as part of its emphasis on specialty, natural and organic, while at the same time offering basic food and grocery items to the extent any retailer can do so in 16,000 square feet.

For example, instead of national brand candy like Hershey Bars and Snickers at the front checkout stands, which is prime real estate, the store merchandises premium and organic confections like Lindt chocolate bars, New Tree brand Organic candies and Newman's Own organic confection items there, along with Altiods and other specialty and organic mints and related items.

The new Jewel-Osco small-format store sits on the site where there once was another small-format store which was owned and operated by Supervalu, Inc. That store was one of the company's five Sunflower Markets, which was a format it created to experiment with going after the natural foods shopper in a smaller-format store with lower prices than established natural products retailers like Whole Foods Market, Inc.

Supervalu opened five of the stores, which by design were run rather independently by the Sunflower folks hired to do so by the grocery company. In 2007, SuperValu announced its was closing the stores (which it did early this year) and ending what it called its test market of the Sunflower Market natural foods retailing format. [This Sunflower Market isn't to be confused with Sunflower Farmers Market (SFM), which used to happen so much SuperValu-owned Sunflower Market put a link to SFM, which is alive, thriving and growing fast, on its website.

Many people have asked for the last year or so if and what would replace the Sunflower Market natural foods store format, if anything, for Supervalu. They now have their answer. It's likely one or more of the other four closed Sunflower Market natural foods stores will likely end-up as an Urban Fresh by Jewel combination basic grocery, specialty-natural and fresh, prepared foods markets. The five Sunflower Market stores were in Illinios and Indina, in primarily urban locations.

Resources: Learn More:

>The online review site yelp.com already has two reviews about the Chicago Urban Fresh by Jewel store, which just opened today. There likely will be more. You can view the reviews here.

Small-Format Food Retailing Memo: A Professional Chef Turned Grocer Creates A 'Sub-Urban' Small-Format Fresh Foods and Grocery Store in Maryland USA

Small-Format Food Retailing Special Report

The U.S. economy may be going to hell in a handbasket (or perhaps shopping cart), with banking failure after banking failure, fast-rising unemployment, soaring food and gasoline prices and other assorted economic maladies, but even such tough times aren't stopping entrepreneurs from opening small-format food and grocery stores.

A case in point: Andre Cavallaro, the former executive chef at the popular Addies restaurant in Rockville, Maryland USA, recently opened a small-format food store, Sub*Urban Trading Company, in nearby Kensington, Maryland.

The food store, which is designed to look like a modern version of the old general store, takes a "green" positioning stance, offering organic fresh meats and produce, along with natural, organic and specialty food and grocery items, with a major emphasis on "locally-produced" products.

natural and specialty grocery items include oils, condiments, marinades, salad dressings and items in numerous other categories. Natural and specialty perishable items are sold in themarkets as well.

Here's what Katie R. from Kensington, Maryland recently had to say about the store in a review on the yelp.com review website:

"The best word I can think of to describe sub*urban trading co. is 'yum'. Then I guess I would use amazingly fresh, organic, and friendly.

But whether I am biting into a warm rustic blackberry tart made with the ripest blackberries for breakfast or a slice of wild mushroom and goat cheese tart for lunch, all I can think of is yum.

How lucky Kensington is to have this new gourmet carryout owned and run by the friendly and knowledge pair, Andre and Alison Cavallaro.

Not only are there fresh pastry items everyday, but produce, dairy, meat, fish, baking items, and a few choice cookbooks. The fresh meats look so inviting - some marinated with fresh herbs; some small portions cooked to go. Many items are supplied by local farmers so it is worth the drive."

Utilizing his experience as a chef, Cavallaro is making fresh, prepared foods a major part of the market, which opened in August. Each day the store features ready-to-eat in-store fresh, prepared food items -- four different selections for lunch and one offering each evening for dinner. All are chef-quality prepared meals made by Cavallaro.

A Natural~Specialty Foods Memo reader who recently talked with Cavallaro tells us the four main statements the small-format food store makes are -- environmentally-friendly, organic, fresh and local.

All paper products used at the store are recycled, all plastic products used in the foodservice operation are corn-based and biodegradable, and all of the fresh produce and meats sold in the store are organic and, when possible, locally sourced.

A central feature of the market are its fresh, prepared foods to go, sales of which our reader says seem to be picking up since the store opened a little over a month ago. Cavallaro hopes to become a destination venue, where shoppers will stop in after work and pick up dinner to take home from his daily rotating menu, along with visiting regularly for take-home or take back to the office lunches.

The market is designed to be a neighborhood store; a store locals will shop daily if possible in the European tradition. Although we doubt if the owner would mind customers from outside the neighborhood.

In fact, our reader says Cavallaro had a strong following when he was executive chef at the restaurant in Rockville, Maryland, saying she expects numerous take-out prepared foods customers will stop in from there and elsewhere once they learn about the small-format combination natural, specialty and fresh, prepared foods market.

For example, Heather C from Rockville, Maryland, another reviewer on yelp.com offers positive comments about the store's fresh, prepared foods, along with other aspects of the market:

"I absolutely LOVE LOVE LOVE this place!!!!!

I've been in a couple times since they've opened and have been so pleased with the atmosphere, the ambiance, the employees/owners, and obviously the products they sell.

The former chef of Addie's, Andre Cavallaro, and his mother Alison Cavallaro, run this "green" and organic minded market. They focus on all organic, sustainable, and local products. On top of all that, all of their bags, to go containers, cups, "plastic" silverware are made from either corn or recycled products and are all biodegradable!!!

I read Libby's response, and often times I shop at Safeway and organic eggs cost $4.99 and to tell you the truth, don't even know where they come from. So I'm happy to buy my eggs at Sub Urban.

I've been telling everyone I know about this place and highly recommend it to whoever reads this!! Check it out, you won't regret those awesome peach turnovers baked fresh every morning or those kick a** savory tarts!!! (I had the beet and goat cheese one the other day....OMG!)

As we often write about, small-format stores offer much opportunity in terms of geography -- they can be located in urban, suburban or rural area -- and format. Such stores can be more upscale natural-organic-specialty like Sub*Urban Trading Company, no frills, deep disconters like Aldi or Supervalu, Inc.'s Sav-A-Lot, or in-between markets like Tesco's Fresh & Easy Neighborhood Market, Wal-Mart's soon to open Marketside and the hundreds of independently-owned small-format food and grocery stores operated by individuals, family's and partnerships throughout the U.S.

Small-format food stores, because of their smaller size and lower cost to get started, also offer an opportunity to independent and entrepreneurs that otherwise would be unable to open a traditional size supermarket because of the expense of doing so. They also are the perfect fit for natural and specialty foods stores offering a specific focus like fresh, prepared foods.

We're seeing a revolution in the U.S., as we frequently write, in small-format food and grocery stores across all formats -- from hard discount -to- upscale organic, prepared foods and gourmet (or a combination of all those) -- despite the poor economy.

The good news is that if these stores can make it now, they can make it nearly anytime. Additionally, if they do make it now, the stores will be well positioned to thrive once the U.S. economy turns around. This is particularly true for natural and specialty foods'-oriented small-format food and grocery markets.

Small-Format Food Retailing Memo: Not Technically 'Small-Format' But Whole Foods Market, Inc. is Going 'Smaller'

Small-Format Food Retailing Special Report

Amid a sluggish economy and slowing sales growth, Whole Foods Market Inc. is scaling down the size of new stores as the company finds massive grocery stores in most markets can't be justified.

The Austin, Texas, natural and organic grocer now plans to target new stores sized between 35,000 -to- 50,000 square feet, more than 20% smaller than what the company identified a year ago as its "sweet spot" amid successes with some large locations. The company is also renegotiating leases at several stores for smaller spaces than originally signed.

The size reduction by Whole Foods doesn't now make it a charter member of what we've coined as the small-format food retailing revolution going on in the USA. Instead it puts Whole Foods' stores right about in the middle in terms of the current average size of new supermarkets being built in the U.S.

For example, supermarket chains such as Safeway Stores, SuperValu, Inc., Kroger and most others are building new supermarkets that average about 45,000 -to- 60,000 square feet on the one end. Others such as regional players Wegmans (eastern U.S.) and HEB (Texas) have been building mega-supermarkets of about 100,000 square feet, at the other end. Then you have the small-format stores from Tesco (Fresh & Easy), Safeway (The Market) and Wal-Mart's soon to open Marketside, all which average from 10,000 -to- 20,000 square feet.

At its new "sweet spot" of 35,000 -to- 50,000 square foot stores, Whole Foods actually returns to its roots of the 1990's, when that was the size stores the natural grocer was focusing on. In the late 1990's to the present, Whole Foods went mega, opening numerous stores in the 70,000 -to- nearly 80,000 square foot range.

Smaller stores come with a host of lower fixed costs for rents and utilities, and also require fewer employees to run. That can help bolster key profitability metrics like sales-per-square-foot and sales-per-employee and improve the company's return on invested capital.

The smaller format was on display last week when Whole Foods opened its latest location in Richmond, Va. With 45,000 square feet of selling space, the store is smaller than most new ones open in recent years. But the store has mostly the same merchandise as larger stores, which should equate to comparable sales at lower costs.

It was also without any sit-down eateries that have driven up development and operating costs at some other stores. A Whole Foods in Fairfax, Va., for example, has four in-house restaurants including a barbecue joint called the Smokehouse.

The smaller Richmond store, meanwhile, has barbecue dishes available for self- service in addition to a hot food and salad bar, brick-oven pizza and a wine bar and cafe.

The moves for smaller locations come as Whole Foods is exhibiting signs that even the wealthiest consumers are cutting back on their consumption. Same-store sales rose just 2.6% at Whole Foods locations open at least a year, a far cry from the double-digit gains the food retailer enjoyed just a few years back.

Strong sales growth led to seemingly unmitigated growth by the chain, and store sizes followed suit. In 2005, Whole Foods opened its largest location, an 80,000-square-foot store in its Austin backyard that the company calls " enormously successful," and started to steadily increase the size of new locations.

But those larger format stores failed to live up to the performance of its Austin location and those in other dense, urban environments like New York. "

To be sure, Whole Foods, whose 270 stores average roughly 35,500 square feet, has continued to sign leases and open locations similar to its traditional layout and size. But the consumer spending slump has caused the company to rethink its development strategy, and retrench to store sizes from the past.

"With hindsight, reflection and some data points in front of us, we see that the really large stores are very powerful in limited markets and circumstances, and that smaller stores can also produce great returns for us," Chief Executive John Mackey said in an earnings call with food retailing analysts and media last month.

The real estate strategy is one of several moves Whole Foods is using to get back on track after its shares have lost more than half their value this year. The company has recently tried to emphasize value by offering more discounts and incorporating a value message into its marketing.

It is also planning on cutting back on new stores altogether, lowering its fiscal 2009 target to 15 new stores, down from a prior estimate of 25 to 30, as we reported previously.

Whole Foods also recently fired 42 headquarters employees as a cost savings measure.

As we've reported previously in Natural~Specialty Foods Memo, Whole Foods has had plans to open the first of its small-format Whole Foods Express concept stores in a former Wild Oats natural foods store building in Boulder, Colorado.

Initial plans called for that first Whole Foods Express store--which is designed to average 15,000 -to- 20,000 square feet and offer a limited assortment of natural and organic grocery items and feature fresh foods, such as produce and ready-to-eat and ready-to-heat prepared foods--to open this fall. However, as we previously reported, Whole Foods has been unable to agree on a new lease with the building's landlord at the Boulder site, which currently is still being operated as a Wild Oats banner store, so it has yet to start converting the building into the Whole Foods Express prototype store.

In fact, Natural~Specialty Foods Memo has now learned the Whole Foods Express concept is under review, as nearly everything at Whole Foods is, because of the supernatural grocer's significant drop in profits in the last quarter, which has resulted in the new strategies discussed in this piece, along with others.

Building and operating smaller stores isn't anything new for Whole Foods. In fact one of the chain's best-performing stores from a sales per-square-foot perspective is it 14,000 square foot store at 414 Miller Avenue in Mill Valley, in Marin County in the San Francisco Bay Area. That store averages between $500,000 -to-$600,000 a week in gross sales, according to sources in a position to know.

The Mill Valley store is where Whole Foods' co-president Walter Robb got his start. He opened the store in the early 1990's as the store manager, using his success with the Mill Valley store to move on to President of the Northern California Division and then eventually into his current position.

Additionally, the majority of the stores Wild Oats stores Whole Foods acquired in the merger last year are no bigger than 35,000 square feet, many being much smaller than that.

Whole Foods currently has plans to build some new stores even smaller than its new "sweet spot" size of between 35,000 -to- 50,000 square feet. These include two stores in San Francisco, one in the city's Noe Valley neighborhood and the other in the famous Haight-Ashbury district. Both of these stores are in the 17,000 -to- 20,000 square foot range. Another new store in development in Capitola, which is in Northern California's coastal region, also is smaller than 30,000 square feet.

We generally define a small-format food store as from 10,000 -to- 20,000 square feet in size, as do most others. The two San Francisco Whole Foods stores in development listed above fit that small-format definition. The Capitola store comes very close.

These however aren't specifically designed small-format stores like the Whole Foods Express prototype is. Therefore, it's our analysis that Whole Foods should move forward with its Express format.

If it can't open the first store in Boulder because of the lease problems that's fine. There still are numerous places where it makes even better sense to open one of the stores, particularly in an urban location where such a store makes much more sense for Whole Foods than it does to do so in Boulder, where the decision to do so was based largely on the fact that after acquiring Boulder-based Wild Oats, Whole Foods found itself overstored in the city of Boulder.

However, it pledged not to close any of the stores in the city that was home to Wild Oats. Therefore the natural grocer decided to turn one of the former Wild Oats stores into the Whole Foods Express as a way to differentiate the Whole Foods brand in the now overstored city.

We suggest opening a Whole Foods Express store in San Francisco or New York as a first test. It makes good sense to do from numerous perspectives, including geography, density, cost, maximization of sales per-square-feet, and more.

Feel free to agree, disagree and offer your perspective by clicking the comment link below.

Small-Format Food Retailing Memo: Does Wal-Mart Plan to Build A $10 Billion A Year 'Small-Mart' Empire?

The Financial Times is reporting today that Wal-Mart, Inc. had an advertisement it later pulled on its Marketside.com website that described the small-format Marketside combination fresh, specialty, natural foods and basic grocery stores to eventually be a chain of over 1,000 stores doing about $10 billion in annual sales.

Below is today's report from the Financial Times:

Wal-Mart sees Marketside as $10bn chain

From the: Financial Times
By Jonathan Birchall in New York
August 7, 2008

Wal-Mart, the world’s largest retailer, says the new small Marketside grocery stores it is to launch this autumn could expand to a chain of more than 1,000 stores, delivering $10bn-plus in annual sales.

The retailer plans to open 10 of the 15,000 sq ft Marketside stores initially, including four in the Phoenix area, where they will be competing directly with Tesco’s recently launched US Fresh & Easy store concept. Wal-Mart’s executives have described the Marketside stores as a pilot project, although it is the first new store format to be launched by the company in a decade. But a job advertisement for the retailer indicates the scale of its ambitions for Marketside, saying the format “is expected to start with 10 stores and evolve to between 1,000-1,500 stores with over $10bn annual sales."

At less than a 10th of the size of the average Wal-Mart superstore, Wal-Mart said the new stores would be aimed at “the needs of a time-starved, higher-income consumer that is interested in convenience and premium fresh, natural and organic offerings.”

The approach contrasts with Wal-Mart’s experience with the Wal-Mart Neighborhood Market stores it launched 10 years ago, which are about the size of a traditional US supermarket.

In response to an inquiry from the Financial Times, Wal-Mart stressed the Arizona stores were a pilot project. The retailer subsequently removed from its website the job advert that included the more ambitious targets.

Wal-Mart’s superstores are built around high volume and low cost, and the group has faced challenges in adapting to the supermarket-sized Neighborhood Market stores it launched in 1998, opening more than 140 outlets. The Marketside stores will require a fast turnover of stock, which could be a difficult fit with Wal-Mart’s distribution system.

Tesco has opened more than 60 Fresh & Easy stores in California, Arizona and Nevada since November and plans to have several hundred operating during the next two years.

Wal-Mart, the largest US grocer with more than 20 per cent of the market, is developing the Marketside format as growth slows at its 2,500-plus superstores.

The Marketside format is also expected to spearhead a broader drive by the retailer to improve its overall grocery offering.

Safeway and SuperValu, two of the largest US supermarket chains, are also experimenting with small, local formats.

Natural~Specialty Foods Memo Analysis

As our readers know, we've been covering Wal-Mart's Marketside format development closely as part of our extensive coverage of what we termed the small-format food and grocery retailing revolution in the U.S.

The Marketside stores, which will feature in-store, fresh prepared foods (and in-store seating for about 9-10 customers along with take out), specialty and natural foods and groceries, fresh meats and produce, along with a limited selection of basic grocery items, will average about 15,000 -to- 20,000 square feet--which is a fraction of the size of its Supercenters, which are about 180,000 square feet on average, and less than half the size of its 45,000 square foot Wal-Mart Neighborhood Market supermarkets.

The format's focus will be on consumers who desire quality foods at reasonable prices. The first four Marketside stores are scheduled to open in the phoenix, Arizona Metropolitan region this fall.

We started covering the Marketside format development last year, and have broken numerous stories about its progress. During this more than one year coverage of the story, we've developed some very good sources.

We talked to a couple of our Wal-Mart sources today about the Financial Times report. One of those sources, who has been very good thus far, told us the mention of an eventual 1,000 store, $10 billion a year Marketside chain was on the job advertisement online board. However, the source says not to take it too seriously, not to think it means plans call for such a chain in the near future.

Rather, the source says its an internal long range goal number, and it didn't belong on the job board website, which is why it was taken down after the Financial Times reporter contacted the company about it.

This doesn't mean Wal-Mart doesn't plan to be aggressive with its Marketside format--just not 1,000 stores, $10 billion a year aggressive in the short to medium term.

As we've reported, Wal-Mart is looking for additional Marketside sights in Arizona, in addition to the four set to open this fall. The retailer also is looking throughout California and Nevada (Tesco Fresh & Easy country along with Arizona), as well as in other U.S. states.

Thus far we've reported for example that Wal-Mart is considering signing a lease for site in Reno, Nevada, along with in various particular California locations for the stores.

The current poor U.S. economy also has factored into Wal-Mart's planning for its Marketside small-format fresh food and grocery stores, according to our source. That source says because the stores will be more upscale in design and positioning--along with putting an emphasis on fresh, prepared foods--the retailer is exercising caution as it is well aware of the current consumer trend in the U.S. to trade down to discount food stores like its Wal-Mart Supercenters.

This fact isn't putting the brakes on Marketside. Rather, its providing a moderating theme to how fast the retailers grows the stores.

After all, there is no need to open Marketside stores in the way for example that Tesco is opening new Fresh & Easy Neighborhood Market stores--about at a pace of one new store every three or four days on average--since Wal-Mart's strategy with Marketside is part of a multi format strategy while Tesco is engaged in a single format--Fresh & Easy--U.S. food and grocery retailing strategy.

Having said that, we are currently working on reporting about a couple possible Marketside store sites in California. We hope to write about just where those locations are soon. Like we said, Wal-Mart is taking a moderate, but still plenty aggressive, approach with its new, small-format Marketside retail development and format.

Small-Format Food Retailing Memo: Independents Help Fuel Small-Format Food Retailing Revolution in the U.S. By Reinventing the 'Corner Grocery Store'

A 1920's corner grocery store in the United States.

The Return of the corner grocery store

As regular Natural~Specialty Foods Memo readers are aware, a year ago we started writing extensively about what we've deemed to be a revolution in small-format grocery store retailing internationally and in the United States.

[Click here to read a sampling of some of our stories on the topic. Also do a search in the box at the top of the blog. Search terms: small-format food retailing, small-format food retailing special report, small-format grocery stores, international small-format food retailing revolution, small-format food retailing memo, independent grocer memo.]

In the U.S., this small-format food retailing revolution continues to grow. In fact, in just the last year hundreds of new small-format food and grocery stores have opened throughout the U.S., despite the poor state of the economy.

That's evidence--along with a few other criteria like the fact giant retailers like Wal-Mart, Tesco, Aldi, Safeway and SuperValu all are committed to small-format store development-- to us it's a trend, rather than a mere fad.

SuperValu, Inc. is even extending its involvement in small-format food and grocery retailing beyond its discount Sav-a-Lot chain, into its Jewel supermarkets division. This fall it will open the first store of what are likely to be many "Urban Fresh by Jewel" stores, which are 15,000 square foot specialty food and grocery stores with an emphasis on fresh and specialty products. The first "Urban Fresh by Jewel" small-format market will be in Chicago.

We've identified the food retailing chain leaders in this revolution as no frills discount grocer Aldi USA (with around 900 stores), the U.S. division of Germany-based Aldi International; Supervalu, Inc.'s no frills, discount Sav-A-Lot chain (about 1,600 stores); specialty grocery chain Trader Joe's (300 stores) Tesco's Fresh & Easy Neighborhood Market (currently 67 stores and growing fast) Safeway Stores, Inc., with its new small-format "The Market" stores; Wal-Mart with its soon to open first four Marketside stores; and numerous others.

Independent grocers, America's original small-format grocers, also are putting a renewed focus on opening small-format grocery stores, especially in urban neighborhoods and in the down towns of suburban and small cities. We call this phenomenon the "new corner grocery store." The phrase is more metaphorical to describe the phenomenon rather than literal to mean a small grocery store right on the corner, although that applies as well.

And it's not just experienced and independents currently operating supermarkets and grocery stores that are opening these new small-format "new corner grocery stores." For the first time in decades, we are seeing numerous entrepreneurs, some with food retailing backgrounds, others with restaurant backgrounds (and some with both), along with entrepreneurs from other walks of professional life, starting to open small-format grocery stores throughout the U.S.

Just like the big chains--where the small-format grocery stores range from no frills, deep discount markets like Adli's and Sav-A-Lot's and combination basic grocery and fresh foods stores like Tesco's Fresh & Easy, Safeway's "The Market" and Wal-Mart's Marketside, which will open this fall in the Phoenix, Arizona region, to natural and specialty format stores like Trader Joe's and others--these independents also are opening up a variety of formats of small-format grocery stores. These markets range from upscale fresh, specialty and natural foods stores, to modern versions more basic grocery stores modeled after the corner grocery store of the past. Hence the title we are giving them: the "new corner grocery store."

Although in our analysis the small-format food retailing revolution is still in its infancy in the U.S. (and in many parts of the world as well), it is beginning to have positive effects on numerous cities and towns throughout the U.S., as well as on consumers.

Not only are the stores serving shoppers in locations often previously underserved, but the small-format grocery store revolution is starting to have a positive effect on urban, suburban and small town down towns because many of the grocery stores being opened in such areas are going into buildings which were either previously empty or rundown. In other words, grocers are improving these buildings and thus the neighborhoods in these communities, providing a higher and better use for the existing buildings and therefore the community as a whole.

This morning we read a story in the Rutland (Vermont) Herald newspaper about three independents and how they are making a go with three small-format grocer stores in three different towns in Vermont.

Those grocers--Bellomo's Market in Rutland, West Street Market in Proctor, Vermont, and California Fruit Market--are three excellent examples of independents who are helping to create this small-format food retailing revolution in the U.S. by reinventing what we call the "new corner grocery store."

Read the story, "Owners around town revitalize small-scale retail," written by Bruce Edwards here.

It's not easy competing with the big chains for independents regardless if they operate huge supermarkets or small-format food stores. However, the fact is small-format independent food and grocery stores are in a growth mode rather than in decline in the U.S.

The ingredients for success for independents, as well as chains, are the same in the main regardless of store size. Those ingredients include creating a niche and them communicating it in all a retailer does, providing excellent customer service, operating clean stores regardless of the format, and a handful of other essentials.

Small-format grocery stores do offer a couple interesting particulars for retailers however.

First, because of the smaller size, the overhead--monthly rent, energy costs, labor--are less. For independents this means fewer barriers to entry, as it costs millions to open a new supermarket of say 40,000 square feet or more.

Second, it is easier to focus on a particular niche or niches in a small-format food and grocery store. By sheer virtue of its smaller-size, a retailer is focusing on a narrower niche--neighborhood residents, gourmets, natural and organic foodies, for example--which all things being equal should allow for easier focus in merchandising, marketing and operations.

Lastly, small-format stores allow for a strategy that doesn't have to force a retailer to directly compete against the big chains. For example, a corner grocery store can focus on being a fill-in, secondary and even tertiary, store for neighborhood residents. Additionally, by creating a natural-organic and specialty niche, the small-format store can brand itself as the place to shop for affordable "quality" foods for example.

Again, creating a niche, executing and communicating it aren't any easier with a small-format grocery store. But by virtue of the smaller physical size it can allow a retailer to do so more economically and in a tighter fashion.

It's our analysis that chains like those mentioned earlier are opening small-format stores in large part because they figured this fact out. Of course, it is something many independents have know all along in the U.S.--which accounts for the fabulous success of the independent food and grocery retailing segment overall in America.

We're observing the beginnings of the emergence of the "new corner grocery store" in the U.S. This time around though it's being conducted as much by big chains as it is by independents.

Therefore, independents in this current food retailing revolution will have to be even more competitive than they have been in past campaigns and battles. Of course, that is something independents as a segment have shown they can do time and again in the United States.

Retail Memo: Upscale 'Food Emporium' Expanding 'Food to Go' Into More Stores; Plans Standalone, Small-Format Version of the Prepared Foods Concept

The once great but lately struggling Atlantic & Pacific Tea Company (A&P) seems to have found a success story in its 29 store Food Emporium upscale gourmet and prepared foods supermarket format, which it's in the process of taking even more upscale and gourmet.

Most specifically, a key ingredient of the format's success is coming in the in-store fresh, prepared foods category, with a concept and store section called "Food to Go," which the food retailer launched in its busy Food Emporium location in the Trump Palace building in Manhattan's Upper East Side.

A&P operates 16 of its 29 upscale Food Emporium stores in Manhattan; nine of the gourmet-oriented supermarkets are located in New York State, and four are in nearby Connecticut.

The "Food to Go" in-store fresh, prepared foods section has been doing so well in the Trump Palace store that A&P plans to roll the concept and department out to as many of its other 15 Food Emporium stores in Manhattan as is feasible, according to Hans Heer, who's the general manager for Food Emporium as well as a senior vice president for A&P.

Heer says the rollout of the "Food to Go" departments will be slow, and that they might not go into all of Food Emporium's New York City gourmet supermarkets because of space limitations. The fresh, prepared foods departments are decent-sized. Therefore, most of the stores will need some expansion in order to accommodate the departments.

Space is at a premium in Manhattan. Therefore, it's not clear if there will be additional space to expand in all 15 of the stores so the in-store fresh, prepared foods sections can be added. However, Food Emporium plans to put the gourmet prepared foods sections in as many of those Manhattan stores as it can.

According to Heer, Food Emporium has thus far earmarked two Manhattan locations (yet to be named) where the retailer plans on adding the "Food to Go" departments later this year. More should be on the way early next year.

Additionally, A&P is looking at a second strategy for the Food Emporium "Food to Go" concept. That strategy is to open standalone small-format "Foods to Go"-style prepared and specialty foods stores in the city. The stores would feature fresh, prepared foods made in-store, along with selling a limited assortment of other specialty and gourmet grocery items, cheeses and various other upscale products. Prepared foods are the centerpiece of the concept though.

When we say small-format, we really mean small. After all, 15,000 square feet is considered a good-size supermarket in dense Manhattan (Whole Foods Market's huge food emporium in the city aside). It's likely the stand-alone "Food to Go"-style stores would be in the 1,500 -to- 3,000 square foot range.

We call the standalone fresh, prepared foods stores "Food to Go"-type stores because Heer says the retailer won't use the "Food to Go" brand on those stores like it does in its Food Emporium stores. ("Food to Go" inside Food Emporium is sort of a store-within-a-store department.) Instead, the new, small-format fresh, prepared and specialty foods markets will operate under a separate name and have a separate and distinctive logo, according to Heer.

Food Emporium is targeting the opening of two or three of the stand-alone "Food to Go"-type stores in Manhattan for this year, according to Heer. Additionally, the goal is to open up to five of the stores in 2009 in Manhattan.

The "Food to Go" shop inside the Trump Palace Food Emporium store offers a myriad of gourmet, ethnic, specialty, natural and organic prepared foods items. The ready-to-eat and ready-to-heat prepared foods' selection ranges from New York Deli-style sandwiches and gourmet soups, to sushi, ethnic cuisine entrees and side dishes, healthy gourmet foods, and complete gourmet dinners to go, along with much more.

A&P recently decided to take its current 29-store Food Emporium "gourmet 2.0," from what was already a fairly upscale format. This added upscaling and further gourmet emphasis includes new design packages in and outside the stores, a more upscale and eclectic specialty, gourmet, ethnic and natural foods product offering (including its own gourmet private label), the "Food to Go" store-within-a-store fresh, prepared foods sections, and other higher-end touches and merchandising options.

Additionally, the Food emporium stores feature old fashion butchers shops which carry prime cuts of beef and the highest quality poultry and pork available. The Food Emporium stores also offer shoppers a gourmet prepared foods catering service.

The upscale markets also sell specialty and high-end wines, craft beers, artisanal cheeses, fancy deli meats, gorgeous floral arrangements, it's own line of specialty and gourmet grocery products and other specialty offerings.

According to Heer, the Trump Palace Food Emporium, which contains the first of the "Food to Go" fresh, prepared foods sections, is the first of its 29 stores to get the retailers "gourmet package" makeover, which it's in the progress of giving all the other stores, starting with the remaining 15 Manhattan units.

The Trump Palace Food Emporium also is the 29-store gourmet banner's highest sales-performing store as well currently, according to Heer.

The Trump Palace Food Emporium, which opened in 2004, is 25,000 square feet on two levels. There's an escalator to get to the second floor as well as an elevator.

Food Emporium also recently gave its website an upscaling . The site looks very gourmet and lists all the upscale features the stores offer in a very attractive presentation.

Food Emporium also offers online gourmet grocery shopping on the website. Shoppers can order online and either pick up their purchases at a store location they designate or have the order delivered to their home or office. Food Emporium offers free delivery for orders of $50 or more, which doesn't take much when one is buying gourmet groceries and prepared foods.

The new A&P/Food Emporium stand-alone small-format fresh, prepared and specialty foods stores will be interesting to observe when the two units open sometime this year. After all, as we write about often on Natural~Specialty Foods Memo, there's a small-format food and grocery retailing revolution going on internationally and in the United States.

This small-format food and grocery store revolution is happening across all formats in the U.S. for example--Save-A-Lot and Aldi as no frills, discount grocers, Trader Joe's as small-format specialty and natural foods grocer, Tesco's Fresh & Easy as hybrid basic grocery and fresh foods retailer, Safeway's new "The Market" format as hybrid upscale basic grocery, fresh and specialty foods grocer--and many more.

A&P's Food Emporium small-format fresh, prepared foods spin-off will fit in at the upper-end of this small-format food retailing revolution: gourmet prepared foods as the store's centerpiece with a limited assortment of specialty, gourmet and natural food and grocery products along side.

New TNS Retail Forward Study Looks at What We've Called the Small-Format Grocery Store Retail Revolution in America and Quantifies Our Analysis

As regular Natural~Specialty Foods Memo (NSFM) readers know, in August, 2007 we first suggested there was emerging the beginnings of a small-format grocery store retailing revolution occurring in the United States, in which major grocery chains were more-and-more getting into the game by creating and launching stores ranging in size from about 10,000 -to- 25,000 square feet, which is what we in the main define as small-format.

[Do a key-word search in the search box at the top of the blog using phrases such as small-format grocery retailing revolution, small-format grocery stores, small-format food retailing, Small Marts, small-format revolution, small-format stores, small-format food stores and small-format price-impact stores, (one phrase at a time of course) to get a sampling of those pieces. We also suggest reading through the NSFM archives for more pieces.]

We've sited the success in the U.S. of German Retailer Aldi, with its over 850 small-format, price-impact Aldi USA grocery stores, SuperValu, Inc.'s success with it's growing Sav-A-Lot small- format discount grocery chain, the Trader Joe's phenomenon, with the rapid-growth and high demand all over the U.S. for its specialty grocery stores, which now number well over 300, and the entrance into the Western USA by Tesco, with its small-format, convenience-oriented Fresh & Easy Neighborhood Market grocery stores, as examples of this growing small-format grocery store revolution.

And that's not all. From August, 2007 to the present we've also sighted as evidence of a small format grocery store revolution in America, the fact that mega-retailer Wal-Mart has developed its very own small-format grocery store, it's 15,000 -to- 20,000 square foot Marketside banner, the first stores of which are set to open in the Phoenix, Arizona Metropolitan region this summer.

Additionally, we've reported on and written about Safeway Stores, Inc.'s planned intrance into the small-format grocery store segment. Safeway plans on opening four or five 15,000 -to- 25,000 square foot combined grocery and fresh and specialty foods-oriented grocery stores this summer in the San Jose region in the San Francisco Bay Area.

Other players in this small format revolution we've written about include Pennslyvania-based Wawa Food Markets, which operates hundreds of hybrid small-format grocery markets-convenience stores in the Eastern USA, supermarket chain Hy-Vee, which recently opened its first small-format grocery store in Lincoln, Nebraska, supernatural grocery retailer Whole Foods Market, which has created Whole Foods Express, it new small-format store of about 20,000 square feet, the first of which is set to open soon in a remodeled former Wild Oats Market building in Boulder, Colorado.

These players are just the tip of the small-format grocery store retailing revolution in the USA of which we've reported on, written about and analyzed here in Natural~Speciatly Foods Memo.

Lastly, we've also written about the fact that the original small-format food retailer, the local independent grocer, continues to thrive in Americaby building and operating small-format grocery stores. That independent is in fact the model in many ways for the small-format revolution being created by this larger, chain operators.

International small-format grocery store revolution

Further, we've also said there's an international small-format grocery store revolution occurring. Many of the players are the same--with a few more added--internationally.

Tesco, with its rapidly-growing Tesco Express hybrid grocery store/convenience store chain and German grocery chains Aldi and Lidl are leading the international small-format grocery retailing revolution.

France's Carrfour, the second largest retailer in the world, is becoming a major player in the international small-format grocery store revolution as well, especially in Asia.

And of course, many other smaller players, as is the case in the U.S., are part of the growing small-format grocery store revolution throughout parts of the globe.

New TNS Retail Forward small-format grocery store study

It's seems we were somewhat on track beginning nearly ten months ago when we proclaimed a small-format grocery store revolution was occurring in the U.S., as well as in many other parts of the world.

A new study just released by the well-respected market research firm TNS Forward's Columbus, Ohio office says consumers are ready and willing to shop at small-format grocery stores that feature convenience in shopping and fresh, prepared foods.

The study also includes a caution which we use frequently in our pieces here at NSFM, which is that the jury is still out as to whether small-format grocery stores in general will meet consumer expectations, satisfy their needs as a primary or even secondary shopping venue, and provide a return on investment for the stores' owners.

The study also hits on three key points we make often about small-format grocery stores:

>Research: The study says food retailers considering a small-format grocery store strategy must monitor and analyze shopper needs, attitudes and expectations well in advance of launching a small-format store or chain.

>Localism: The report says paying attention and focusing on local (region and neighborhood) culture (and cultural differences) and demographics is key in launching any small-format grocery store venture.

>Partnering: The research study says retailer's launching a small-format grocery store venture need to seek input from grocery, fresh foods and consumer packaged goods suppliers and partners, as they have national knowledge as well as local experience, among other reasons for doing so.

The above three aspects of small-format grocery store retailing, which we summarize as research, localism and partnering, are themes we've been including in out numerous pieces on the small-format grocery store retailing revolution occurring in the U.S. and in other parts of the world for months.

U.S. Consumer attitudes about small-format grocery stores

The TNS Retail Forward study says 64% of U.S. shoppers surveyed said they would either definitely or probably shop at a small-format grocery store. [Based on our own research and some others we think that number is a bit higher.]

The study also notes consumers surveyed indicated the combination of the small-format (convenience), combined with fresh, prepared foods offerings is a compelling offer for "the time-pressed shopper."

Jennifer Halterman, a senior consultant at TNS Retail Forward and the primary author of the study says, "The small-store trend is part of an ongoing evolution in the retail food sector, and we expect more players to throw their hats into the ring."

We agree completely with the latter part of her quote--that more retailers are throwing, and getting ready to throw, their small-format grocery store retailing hats in the ring. I

In fact, we invite Ms. Halterman--and our readers--to stay tuned over the next couple of weeks as we will be reporting and writing about some new entrants into the small-format grocery store retailing revolution who nobody else has reported on yet. In fact, look for one or more of those fresh pieces later today, along with lots of upcoming analysis in the weeks ahead.

Retail Memo: Wal-Mart's New Small-Format 'Marketside' Grocery Store Logo Unveiled

Mega-retailer Wal-Mart has published the logo (pictured above) for its new, small-format grocery stores called Marketside, as part of a government trademark filing the retailer made this week.

The new stores, which should open this summer in the Phoenix, Arizona metropolitan region to start, will be about 15,000 square feet.

Thus far, Wal-Mart has applied for liquor licenses for three Marketside "Small-Marts" in the Pheonix region, according to filings there. We know the size of the stores--15,000 square feet--because its listed in the liquor license applications. We also expect the retailer to file at least one more liquor license application soon for a fourth store in the region. As we reported earlier, our sources tell us Wal-Mart's initial plans are for at least four of the small-format markets in the Phoenix suburban area.

The Marketside stores at 15,000 square feet are nearly a third the size of the retailer's current smallest-format grocery store, the 45,000 -to- 48,000 square foot Wal-Mart Neighborhood Market. Le Petite Wal-Mart the Marketside format is indeed.We were one of the first publications to break the story about Wal-Mart's development of the Marketside format back in 2007, when a group of the chain's executives were camped-out in the San Francisco Bay Area researching the small-store format. We've continued to write about the development extensively.

Here is a summary of what we know about the Marketside format thus far:

>The Marketside stores will feature a limited assortment of basic grocery items and a selection of more upscale specialty and natural foods dry grocery items. The stores also will feature fresh meats and produce. The small-format grocery markets will have a selection of fresh, prepared foods' items similar to what Tesco's Fresh & Easy Neighborhood Market format stores in California, Arizona and Nevada have. However, we don't know how extensive the Marketside "Small-Marts'" prepared-foods item mix will be. Fresh & Easy's selection is extensive, and ranges from basic items like macaroni and cheese and meatloaf, to more upscale items like beef steak tips in burgundy sauce and gourmet ethnic prepared foods selections. Fresh will be a major positioning statement and merchandising element of Wal-Mart's Marketside stores.

>Wal-Mart has trade marked two "brand" names, "City Thyme" and "Field & Vine." We suspect these will be two private label brand names the retailer will use for grocery and fresh foods' products in the "Small Marts."

>Two commercial real estate sources tell us Wal-Mart executives have looked in Southern California and Northern California for store locations for the small-format Marketside stores, in addition to Arizona where the first three or four stores will open. [Most of Tesco's Fresh & Easy grocery stores in Arizona are located very close to where Wal-Mart will locate its first stores in the Phoenix metro region. Southern California is the largest target market region for Fresh & Easy stores. Tesco will open at least 18--and probably as many as 40--Fresh & Easy markets in the San Francisco Bay Area beginning in late 2008 or early 2009.]

>Wal-Mart has been working on a major project for some time to develop one or more brands/lines of fresh, prepared foods. We've talked to suppliers in the product development and prepared foods businesses who've told us they've had conversations with Wal-Mart executives regarding the program. We expect the Marketside stores will play a big part in the merchandising of these prepared foods items when they are completed. We aren't sure if Wal-Mart will have certain brands like the ones mentioned above exclusively in the small-format grocery stores. In fact, it's likely the retailer will merchandise the new, prepared foods brands in all of its retail food store banners--Wal-Mart Supercenter, Neighborhood Market and Marketside--as a way to create and extend brand equity.

>Sources have told us Wal-Mart is looking at an urban strategy, as well as a suburban one (the three Arizona stores to date are suburban) for the Marketside "Small-Marts." The retailer is particularly interested in being able to locate the 15,000 -to- 20,000 square foot grocery markets in places they've been unable to put Supercenters because of local government and community group opposition. These regions include the San Francisco Bay Area, other parts of Northern California, and in portions of Southern California. Look for a Marketside store or two in the heart of San Francisco sometime in the not to distant future.

Wal-Mart's Marketside stores are obviously directly targeted at Tesco's Fresh & Easy Neighborhood Market, although the world's largest retailer from Bentonville, Arkansas says they are merely an extensive of the chain's on-going new format development program.

Tesco has to date opened 43 (in only three months) of the small-format (10,000 -to- 13,000 square feet), convenience-oriented Fresh & Easy grocery stores in Arizona, Southern California and Nevada. Fresh & Easy stores sell a limited assortment of everyday grocery items, specialty and natural/organic groceries, fresh produce and meats, some nonfoods, and an extensive selection of fresh, prepared foods. About 65% of the items in the store are sold under the Fresh & Easy store brand. Everyday low-price, especially on the basic grocery items, is a major part of Fresh & Easy's positioning, along with "fresh."

The Marketside banner will be the first new banner in the U.S. for Wal-Mart in about 20 years, according to some esxtensive research we did on Wal-Mart retail format development a couple months ago.

The Marketside logo, which was published on the U.S. Patent and Trademark Office Website as part of the filing, features marketside in lower-case green lettering, next to an attractive pile of fresh food items stacked one atop the other. The logo screems "Upscale," yet minimal; "Green," not just because the lettering is the color green, but subtextually in the environmental sense of the word as well; and "Fresh," depicted by the stacked fresh food items. The logo also has a minimalism to it as we mentioned above, perhaps suggesting the small size of the grocery stores and the "simple" convenience of shopping in them?

Resources:

>Read a couple of our most recent pieces on the Wal-Mart "Marketside" format here.

>To locate numerous other pieces we've written on what we call the "small-format food retailing revolution in America" just type in (one phrase at a time) keywords like small-format grocery stores, Small-Marts, Fresh & Easy Neighborhood Market and small-format revolution in the search box at the top of the blog.

Retail Memo: A Peak Inside a New Trader Joe's Store

On Friday, February 1, a new 13,000 square foot Trader Joe's market will open in the Kercheval Avenue business district in Grosse Pointe City, Michigan, a wealthy city of about 7,000 people in Wayne County, Michigan.

Grosse Point City, often referred to by locals merely as "the city," is a suburb of Detroit, and is about 8 miles from the motor city. It's one of six similar-sized cities--Grosse Pointe Farms, Grosse Pointe Park, Gross Pointe Shores , Grosse Pointe Woods and Lake St. Clair--that are located literally right next to each other in Wayne County. The region is often collectively called "The Pointes."

These six wealthy Detroit suburbs together should make for a healthy market for Trader Joe's and its eclectic selection of specialty and natural foods and products.

Trader Joe's stores are small-format, but are packed with everything from fresh produce and meat departments, wine and craft beers areas, to extensive selections of perishables, frozen foods and fresh, prepared foods, along with shelves of specialty, ethnic, gourmet, natural and organic gorcery products. About 75-80% of the grocery items in the stores are branded under Trader Joe's various private labels. The new Grosse Pointe City TJ's even has an in-store food sampling kiosk where shoppers can taste all kinds of foods and beverages.

Amy Salvagno, a writer for G& G Newspapers, a Michigan chain of publications that serves readers in many cities in the area, got a peek inside the yet to open store, and has a piece in today's paper about what she saw.

We like the piece--it's interesting, descriptive, consise and fairly brief--so decided to share it with our readers. You can read Ms. Salvagno's article here.

Trader Joe's, which is headquartered in Southern California and owned by the German retailer Aldi, currently has about 300 stores in the U.S. All Trader Joe's banner stores are in the USA.

The specialty grocer is expanding rapidly, building and opening new stores throughout the country, from California to New York, and nearly everywhere in between. The grocer is so popular in fact that numerous cities and neighborhood groups, such as those in Albany, New York and Nashville, Tennessee to site just two examples, have launched sophisticated lobbying campaigns to try and convince TJ's to open stores in their towns.

Trader Joe's is the leader in what we've termed the small-format food retailing revolution in America. It's quirky stores, full of specialty, natural and organic products, do so well in part because they make shopping fun. Store associates wear funky tropical island-print shirts, and all the in-store signs are hand-produced works of art, done with colored chalk on black or green chalkboards, rather than ink on paper signs like most grocery stores. All Trader Joe's stores have at least one--and often more than one--employee who's only job is to hand-create in-store product signs.

Trader Joe's private-label branded products also are a big hit with customers. They love the product names, quality, varieties and prices. And of course, TJ's famous "Two-Buck-Chuck" line of $1.99 bottle wines, which have won many awards over wines that cost ten-times the price, are another big hit with shoppers.

The specialty grocer also extends its fun-filled merchandising philosophy to its new store grand openings. The new Grosse Pointe TJ's grand opening, like all new store openings, will begin with a Hawaiian lei cutting (rather than a traditional ribbon) ceremony at 8:45 in the morning. As store officials cut the lei, a live band will play tropical music for those in attendance. Employees will, of course, be dressed as if they just returned from a tropical island vacation.

The grand opening fun also features clowns and face-painting for the kids, lots of free food and drink, and tons of free ballons and stickers, for both real children and children at heart.

Food & Community Memo [Interactive]: Davis, California Debates Small-Format and Locally-Owned Grocery Stores vs. Chains and Big-Box Stores

A regular reader of Natural~Specialty Foods Memo informed us via an email of a lively debate currently going on in the city of Davis, California, via a blog called The Peoples Vanguard of Davis, about small-format, local neighborhood grocery stores vs. chain supermarkets and big-box stores for the city.

Davis, home to the Davis campus of the University of California, is a city of about 65,000 people. It's located about 11 miles west of Sacramento.

Davis is well-known for both its educational achievements and social and environmental consciousness. For example, it's ranked as the number two city in the U.S. in terms of the number of its residents who have graduate degrees.

Environmentally, Davis is home to one of America's first comprehensive solar energy housing developments called Village Homes. The innovative solar-energy powered subdivision was built in the 1970's, at a time in the U.S. when most city's and private developers hadn't even though about community-based renewable or alternative energy solutions.

The bicycle is one of the primary means of transportation in Davis. The city has the highest per-capita bicycle ownership of any city in the U.S., and its residents use the two-wheeled, pedal-powered vehicles regularly, and for far more than exercise. The city's official logo, pictured at the top of this piece, even features a bicycle graphic.

Davis also has a iconic public transportation system, thanks in large part to a partnership between the University of California campus, which houses about 30,000 students, and the city. Modern, energy-efficient buses, and older, English-style double-decked buses bought from Britain, traverse the entire city nearly 24 hours-a-day providing low-cost public transportation and eliminating the need for the use of private cars for many residents.

The University of California at Davis is one of the top research universities in the U.S. in the areas of agriculture and food distribution. It's a leader in both the areas of large-scale agribusiness research (including biotechnology) and sustainable, or green, agriculture.

The campus also is the number one research university in America in the areas of enology and viticulture (wine growing and making). Additionally, it's become one of the foremost research centers in the U.S. in the fields of alternative and renewable energy, electric and hybrid car development, and other cutting-edge green technologies.

The city has experienced lots of growth and change over the last 20 years, including a more than doubling of its size. That growth has brought lots of new housing, and many new residents who prefer to live in a University town but commute to their jobs in nearby Sacramento, a city of 500,000 people.

The small-format neighborhood grocery store debate taking place on the local blog is lively, interesting, intelligent and timely.

As our readers know from our numerous pieces, there's a small-format food retailing revolution happening in the U.S. The Davis debate is similar to many of those happening in cities across America. The issues include: locally-owned independent grocery stores vs. big-box stores and Supercenters, small-format, more convenient stores vs larger ones, and the affects these formats have on the environment and local, community economies, just to name a few.

Join The Discussion:

We invite you to read the article that got the debate started on The People's Vanguard of Davis Blog, along with the numerous comments and opinions on the blog regarding the issue.

After you've read the blog article and the reader comments, we also invite you to weigh in , using our comments link below, with your thoughts about small-format vs. big box stores, local food retailers vs. chains, and any other thoughts and opinions you have. We look forward to reading what you have to say.