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: Tesco Fresh & Easy CEO 'Delirously Happy' About Chain's Performance to Date

The photograph above of Tesco Fresh & Easy Neighborhood Market CEO Tim Mason is from a profile piece, "Tesco's American dream is still in sight," published in yesterday's The Times (United Kingdom). The Times' caption to the photograph is: 'Not usually a man for taking the back seat, Tim Mason has led Tesco's drive into America and insists that he is 'deliriously happy' with the progress so far.'

Tesco Fresh & Easy Neighborhood Market USA CEO Tim Mason (pictured above) told The Times (United Kingdom) newspaper in a follow-up interview (yesterday) to the November 12 interview published in the paper in which the head of Tesco's Southern California-based small-format convenience grocery and fresh foods chain told the publication the grocer is postponing its launch into the Northern California market, that he's "deliriously happy" with Fresh & Easy's progress and performance to date.

This is the first time we can recall hearing the CEO of a U.S. supermarket chain (U.S or foreign-owned), and a struggling one at that, use such effusive language about the performance of the chain he runs in our nearly 30 years participating in and observing the U.S. food and grocery retailing industry.

The Blog Fresh & Easy Buzz, which covers Tesco's Fresh & Easy Neighborhood Market and the retail food and grocery industry, has a report on the interview with Tim Mason and an analysis of Tesco's Fresh & Easy small-format, convenience-oriented grocery and fresh foods chain.

You can read the story and analysis from Fresh & Easy Buzz at the link below:

Sunday, November 16, 2008: Tesco Fresh & Easy CEO Tim Mason Says He's 'Deliriously Happy' With the Chain's Progress Thus Far; We Prefer Andy Grove's 'Only the Paranoid Survive'

Fresh & Easy Buzz also has a story today about Sacramento, California's Oak Park Neighborhood Association, a group of residents who live in the city's Oak Park neighborhood and who appealed the design of the Fresh & Easy grocery market Tesco is proposing for that neighborhood to the Sacramento Design Review Board after the board approved the company's standard store design without comment.

Tesco has basically two designs for its Fresh & Easy stores that it uses in all of the markets, and new proposed markets, it is in. The first is the design it puts into vacant buildings, which the majority of the grocer's stores in Southern California, Nevada and Arizona are to date. The second design is its Fresh & Easy built from the ground up prototype design. These are new store construction projects rather than remodels of vacant buildings. The proposed Oak Park Neighborhood Fresh & Easy in Sacramento is a new, built from the ground up store.

With the exception of a few minor exterior graphic and signage differences, Tesco doesn't customize or localize the Fresh & Easy stores. The stores in Southern California, Nevada and Arizona essentially look the same outside and inside. There are some differences with the exteriors of the stores in remodeled vacant buildings based on what those buildings looked like on the outside before the remodeling. Those are accidental exterior differences though, not intentionally designed ones.

Based on the presentation by members of the Oak Park Neighborhood Association at the store design appeal hearing on October 15, 2008, the city's design review board incorporated a number of changes into the conditions of the store's design; changes Tesco must make when it builds the store in Sacramento's Oak park neighborhood.

According to the story in Fresh & Easy Buzz, despite the mandated changes, and the fact the grocer is postponing it launch into Northern California which includes Sacramento, Tesco and the developer have purchased the vacant lot where the proposed Fresh & Easy market is to be built for $1.1 million dollars. In other words it appears the grocery chain is going forward with the store. When construction will start is a whole different question.

The owner of the parcel was Kevin Johnson, the former NBA basketball all-star and native of Sacramento. Johnson retired from the NBA a few years ago and returned home to Sacramento, launching a career as a real estate investor and developer. He also founded a non-profit community-based development organization called HOPE. HOPE is headquartered in Sacramento's Oak Park neighborhood, the historically low-income neighborhood in the city where Kevin Johnson lived throughout his childhood, and where the Tesco Fresh & Easy Neighborhood Market grocery store is set to be built on land Johnson, who is now the mayor-elect of Sacramento, sold to the company for a cool million.

Read the story from Fresh & Easy Buzz at the link below:

Monday, November 17, 2008: Sacramento City Design Board Agrees With Oak Park Group on Design Changes For Proposed Fresh & Easy Store; Escrow Closed on $1.1 Million Parcel

Small-Format Food Retailing Memo: Schenectady, New York-Based Price Chopper Supermarket Chain Creating New Small-Format, Urban-Concept Grocery Store

The Schenectady, New York USA-based Price Chopper supermarket chain is designing a small-format, urban-concept food and grocery store it will use to serve primarily urban neighborhoods in the eastern U.S. and New England markets it operates in, Natural~Specialty Foods Memo has learned.

Neil Golub, the president and CEO of Price Chopper, which is owned by his family's Golub Corporation and is celebrating its 75th anniversary as a family-owned supermarket chain this year, says the supermarket chain's new urban-concept food and grocery store format will be a brand new small-format rather than just a smaller version of its Price Chopper banner supermarkets, which are located New York, Vermont, Connecticut, Pennsylvania, New Hampshire and Massachusetts. [You can read a history of the Price Chopper chain here, along with other information about its 75 years of food and grocery retailing history.]

Privately-held Price Chopper operates 116 supermarkets in the regions listed above. It's 2008 annual sales are estimated at $3.2 billion by the supermarket industry trade publication Supermarket News, which publishes an annual ranking of the the top 75 food and grocery retailers (all formats) in the U.S. Supermarket News ranks Price Chopper as the 38th-largest food and grocery retailer in the U.S. in terms of the grocery chain's 2008 annual gross sales.

The new small-format, urban-concept market will be about 15,000 square feet in size, according to Golub. The format's size is similar to small-format stores created in just the last couple years by Safeway ("The Market"), Wal-Mart (Marketside), Tesco (Fresh & Easy), Supervalu's Jewel Foods (Urban Fresh by Jewel) and others. Those small-format stores run from 10,000 -to- 16,000 square feet.

The urban store will have most of the departments -- produce, meat, grocery, deli/prepared foods, dairy, ect. -- the chain's larger Price Chopper Supermarkets have, Golub says. However, he adds the departments and product selections will be geared to the urban neighborhood consumer base and the size of the stores, making the ultimate look of the store much different than the grocer's standard-size supermarkets.

Golub also said its likely the new, small-format urban-concept grocery market will have a different name, other than Price Chopper, or that if Price Chopper is used in the name it will include and additional word or two in order to differentiate the format and store(s) from the Price Chopper banner supermarkets.

Price Chopper has just started designing the urban-concept format based on a location already chosen for the first store. That store will be in Saratoga Springs, New York, in the city's downtown core.

The Golub family's Price Chopper chain operates an old (built in 1957) 24,000 square foot Price Chopper banner supermarket not far from the new downtown Saratoga Springs location where it will build the first of its small-format urban food and grocery stores, once the company has completed the design.

The lease on the 24,000 square foot supermarket, which is located at 19 Railroad Place in the city, runs out in a little less than three years, according to Golub. The new urban market will open shortly before that lease expires. Price Chopper will then close the 19 Railroad Square supermarket.

Saratoga Springs, New York-based Bonacio Construction bought a 2.8 acre piece of property at Church Streets and Railroad Avenue in downtown Saratoga Springs earlier this month. The new, urban-concept small-format market will be located on that parcel, according to Golub Properties, which is the property arm of the Golub Corporation, which owns Price Chopper.

Sonny Bonacio, the owner of the construction company that's worked with Golub Properties and Price chopper before, will built the new urban, small-format grocery market at the location, which will be completely developed with other retail and perhaps housing as well.

Since Price Chopper is working on creating the new urban market format, and the old Price Chopper supermarket at 19 Railroad Avenue still has nearly three years left on the lease, its likely construction on the retailer's first small-format, urban grocery store at the location won't begin until 2010.

The store will be built at the end of the 2.8 acre downtown Saratoga Springs parcel over part of the parking lot that's now located in the space, Sonny Bonacio says.

Price Chopper's Neil Golub says the chain decided to close the 19 Railroad Place Price Chopper, which was built in 1957, last year. However, the company did not want to give up on serving downtown Saratoga Springs, so it decided to create a completely new urban-concept, small-format store it could built in the new, nearby location, plus use in other urban areas in the markets it does business in, according to Golub.

In fact, earlier this year word got out Price Chopper planned to close the old 19 Railroad place 24,000 square foot supermarket when its lease is up in about three years. A group of downtown Saratoga Springs residents who are customers of the store organized and petitioned Price Chopper not to close the supermarket because they said they would have to travel too far outside the neighborhood to buy groceries if it closed.

One of the urban neighborhood's residents, Caroline Stem, who collected 1,250 signatures on a petition to keep the store open, feared Boacio construction would buy the downtown Saratoga Springs property and then bring in a high-end grocery store that lower- and middle-income neighborhood residents wouldn't be able to afford, she says.

However, Bonacio and representatives from Price Chopper met with local neighborhood residents and explained to them in general the type of urban grocery store they plan on creating and building at the downtown location.

Price Chopper's Golub says the new small-format urban market format will be one that offers basic groceries as well as specialty items. He also says the prices in the small-format urban grocery store will be affordable, just as they are in its Price Chopper supermarkets. In other words, based on what Golub says thus far, it looks like the grocery chain's small-format concept will be a neighborhood-focused, 15,000 square foot store that offers everyday food and grocery products along with specialty items rather than an upscale or gourmet market.

"It (the downtown Saratoga Springs small-format grocery market) will be a grocery store that will serve the basic needs of the community," Golub says. "It's not meant to be something that's going to have things that are priced way up here that people won't want," he adds.

That appears to have pleased Caroline Stem and the other neighborhood residents who want a grocery store that serves all of their needs in the downtown core; a neighborhood food and grocery market.

Earlier this month Bonacio Construction, Price Chopper and the mayor of Saratoga Spring, New York invited the downtown neighborhood residents to an announcement of the new, small-format grocery store in downtown Saratoga Springs. All appeared to be pleased with the development, and what the store will and won't be, we're told by people who attended the announcement at city hall.

Of course our interest goes beyond that first, single store, although we are pleased the neighborhood is getting it. Our thoughts go to the fact Price Chopper is yet another U.S. food and grocery retailing company that's creating a small-format prototype store.

In this case Price Chopper's small-format market will focus on urban neighborhoods.

The small-format food and grocery store revolution in the U.S., and elsewhere in the world, continues on, adding New York-based Price Chopper, which in its 75 years of in business as a family-owned chain has been a major innovator, to those chains that have already joined the trend towards creating format-specific, small-format food and grocery stores.

And of course, independent grocers, America's original small-format, neighborhood-focused food and grocery retailers, continue to be strong in smaller store neighborhood retailing, as well as continuing to innovate in the small-format and neighborhood grocery market realm.

Small-Format Food Retailing Memo: Hard Times at Tesco's Fresh & Easy; Will Two Proposed Changes Help? Meanwhile the Grocer Opens its 100th Store

Tesco's small-format Fresh & Easy Neighborhood Market USA grocery and fresh foods chain is postponing its plans to begin opening stores in Northern California in early 2009.

Read a report and analysis from the Fresh & Easy Buzz Blog on the development at the link below:

>Fresh & Easy Buzz, Wednesday, November 12, 2008: Analysis: Hard Times at Fresh & Easy - Northern California Expansion to Be Postponed or Shelved Do to Economy; But its Only a Symptom Not the Cause

Additionally, Fresh & Easy Buzz reports Tesco's Fresh & Easy is considering making two major changes -- flip flopping the grocery shelving in all of its stores and redesigning the packaging of its fresh & easy private label packaged goods products -- as a way to increase both store sales and sales of its store brand products in the various grocery products categories.

Read the story from Fresh & Easy Buzz at the link below:

Fresh & Easy Buzz, Wedneday, November 12, 2008: Breaking News: Tesco's Fresh & Easy Considering Two Major Changes, One Physical the Other Design Oriented, to Increase Sales in its 100 Stores

Lastly, Fresh & Easy Buzz has a piece from yesterday about Tesco opening its 100th small-format, convenience-oriented Fresh & Easy market in the Southern California city of Fullerton. It's been about one year since the first Fresh & Easy store officially opened in Hemet, in Southern California.

In its story yesterday, Fresh & Easy Buzz suggested Tesco might postpone the opening of its planned Northern California stores, along with opening the stores later in the year than it has previously said it would.

Read the piece from Fresh & Easy Buzz at the link below:

>Fresh & Easy Buzz, Tuesday, November 11, 2008: Southern California Market Report: Tesco Hits A Numerical Milestone Tomorrow Morning As Store Number 100 Opens its Doors in Fullerton, California

Speaking of it being nearly one year since the first Fresh & Easy Neighborhood Market store opened, that first Fresh & Easy store in Hemet, California was actually scheduled to open on November 8, 2007 its official opening day. However, as Natural~Specialty Foods Memo was one of the first publications to report, Tesco actually opened the store a week earlier in a stealth, soft opening to test the first of its small-format markets out prior to its official grand opening. on November 8, 2007.

You can read our piece about that stealth opening at the link below:

>Natural~Specialty Foods Memo, November 2, 2007: Breaking News: First Fresh & Easy Market Opens A Week Early: The Fresh & Easy Neighborhood Market in Hemet, California is open for business a week before it's official grand opening date of November 8.

Small-Format Food Retailing Memo: Wal-Mart Studying Second Small-Format Grocery Store Concept; Inside Marketside One Week Before the First Stores Open

The Blog Fresh & Easy Buzz, which covers and writes about Tesco's Fresh & Easy Neighborhood Market, small-format food and grocery retailing, and related topics and issues, has two stories today about Wal-Mart, Inc. and small-format food retailing.

The first piece reports on and details comments Wal-Mart, Inc. CEO Lee Scott made earlier this month at the 15th Annual Goldman Sachs Global Retailing Conference in New York City about a second (besides its small-format Marketside) small-format grocery store concept the retailer is studying.

You can read that story at the link here: "Special Report: Wal-Mart, Inc. Studying Second Small-Format Food and Grocery Store Concept; the 'Bodega' or Modern Version of the Corner Grocery Store."

The second piece from Fresh & Easy Buzz provides new information about Wal-Mart's Marketside grocery and fresh foods stores -- the first four of which will open on October 4 in Chandler, Gilbert, Mesa and Tempe, Arizona, in the Phoenix, Arizona Metropolitan market region -- offering a look inside Marketside prior to the stores opening in a week.

You can read that story here: "Wal-Mart Offers its Own 'Peek' Inside it's Small-Format Marketside As Part of A One-Week Countdown to the Stores' Oct. 4 Openings in Arizona."

The four Marketside stores (which we coined as "Small-Marts" in August, 2007) which are about 15,000 -to- 20,000 square feet will open in just one week.

The combination grocery, fresh and specialty foods stores -- which will feature basic groceries, natural, organic and specialty products, fresh baked goods, fresh produce and meats, craft beers, wines and spirits, and in-store prepared foods -- will herald a new era for Wal-Mart, one in which the world's largest retailer joins the prepared and natural/specialty foods categories in a major way.

The Marketside development also places Wal-Mart square in the center of the small-format food and grocery retailing revolution we've been talking about in Natural~Specialty Foods Memo since we first published the Blog in August, 2007, over a year ago.

The small-format food and grocery retailing revolution -- and small-format competition -- has just started. Stay tuned.

Small-Format Food Retailing Memo: Wal-Mart to Open Small-Format, 'Small-Mart' Marketside Stores in Arizona on October 4

From the Natural~Specialty Foods Memo Editor's Desk: Wal-Mart will open its four small-format grceory and fresh foods Marketside stores in Chandler, Gilbert Mesa and Tempe, Arizona in the Phoenix Metropolitan market on October 4, according to its marketside.com website and a report in the blog Fresh & Easy Buzz.

As our readers know, we've covered Wal-Mart's Marketside format ('Small-Mart's being a term we coined for the stores) development extensively, beginning in September of 2007.

The Arizona stores are the first for Marketside units for Wal-Mart. Wal-Mart thus far plans to open two Marketside stores in Southern California, one in San Diego and another in the nearby city of Oceanside, according to our sources. Wal-Mart has not publicly announced the two California locations.

Additionally, we've reported Wal-Mart has plans to open more Marketside stores in Arizona -- besides the first four opening in 11 days -- as well as doing the same in Southern California, along with opening some of the small-format grocery and fresh foods markets in Northern California, particularly in the San Francisco Bay Area. Also, Wal-Mart has looked at opening a Marketside store in the Reno area, in Northern Nevada.


Below is the report from Fresh & Easy Buzz. Natural~Specialty Foods Memo is working on an analysis piece regarding the Marketside stores opening on October 4. We hope to have it published soon.

From Fresh & Easy Buzz: Wednesday, September 24, 2008

Breaking News: Wal-Mart to Open its Four Marketside Food and Grocery Markets in the Phoeniz, AZ Metropolitan Region on October 4

As we've been reporting on Fresh & Easy Buzz for months, Wal-Mart, Inc. has planned an early Fall, 2008 opening of its small-format, combination grocery and in-store fresh, prepared foods Marketside stores in the Phoenix, Arizona Metropolitan region.

Wal-Mart has now announced and confirmed on its http://www.marketside.com/ website the specific date the four Marketside grocery markets will open in the Phoenix Metropolitan region cities of Gilbert, Mesa, Chandler and Tempe.

All four Marketside stores are set to Open on Saturday, October 4, just 11 days from today, according to the announcement on the Marketside website. [Click here to see the announcement (look in the right corner) on the website. Click here for maps showing the location of each store in the four Arizona cities.

Click here to read the rest of the story from Fresh & Easy Buzz.

[Editor's Note -- the photos: The photograph at the top is of the Wal-Mart Marketside store in Mesa, Arizona. The picture was taken in late August, 2008. The second photograph shows what the inside of a Marketside store looks like (at least a small portion of it). Additionally, the aprons the three clerks in the picture are wearing are the Marketside store employee uniforms. The photo is from the Marketside.com website.]

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.

Retail Memo: Soaring Gas Prices Leading to Increased Grocery Category sales At U.S. Convenience and Drug Stores; Good For Small-Format Grocers Too

Guest Retail Memo From the Washington Post

From Soda and Chips To Grocery Staples
Shoppers Turn to 7-Eleven, CVS to Beat High Gas Prices

By Ylan Q. Mui
Washington Post Staff Writer
Saturday, August 9, 2008

Walk into Zulfiqar Ali's 7-Eleven in Arlington and you'll find the standard stack of newspapers, rack of magazines and ATM in the front of the store. And, lately, two red grocery baskets.

Ali added them a few months ago after he noticed shoppers making multiple trips between the grocery shelves and the checkout counter, carrying cans of Goya black beans, Aunt Jemima pancake syrup and fresh fruit. On a recent evening, two elderly women who live nearby spent $150 on groceries. Ali has even expanded his stock of sugar, salt and cooking oil due to popular demand.

"It was not like that before," said Ali, who has worked at the store for six years and owned it for the past two. "Before, people just buy a couple of things and pay and leave."

Once primarily the province of Big Gulps and beef jerky, convenience and drug stores are siphoning away sales from traditional supermarkets as the weak economy and high gas prices force consumers to save more by driving less. They are stopping by not only for the quickie quart of milk, but also for pantry items normally bought at the supermarket -- and even for dinner. Some are using the stores to stretch their paychecks, buying what they need when they need it instead of stocking up.

At 7-Eleven stores in the Washington region, grocery sales were up 2 to 3 percent last month compared with last year, said Tom Gerrity, director for processed foods. Frozen food sales grew 7 percent, and ready-to-eat meals jumped 9 percent. Other regions across the country are seeing similar growth, with weekly spikes following paycheck cycles.

"Some of the products that would typically be purchased at a supermarket or club store in bulk quantities, we're seeing more customers buy those products throughout the month at a 7-Eleven," he said.

According to local trade publication Food World, 7-Eleven is among the top 10 grocery destinations in the Washington area, ranking ninth with annual sales of $469 million and 3.3 percent market share -- ahead of chains such as Harris Teeter (10th) and Whole Foods (11th). CVS ranked fourth with $941 million in sales, excluding prescriptions, and 6.5 percent of the market. Giant dominates the region with $3.3 billion in sales and 23.2 percent market share. Safeway follows with $2.6 billion in sales and 18.3 percent of the market.

Part of the strong rankings are due to the sheer number of convenience and drug stores in the region: 7-Eleven has 416 and CVS has 190. Whole Foods and Harris Teeter together have just 32 stores. But as gas prices continue to nibble away at consumers' wallets, many are finding that they can get what they need closer to home.

"It's a big number because convenience stores are everywhere," said Jeff Metzger, publisher of Food World. "They're trying to use the edge that they inherently have."

Convenience and drug stores have been ratcheting up the competition with traditional grocers over the past three years with expanded food offerings, Metzger said. CVS does not break out sales numbers for grocery, but general merchandise accounts for 15 percent of revenue, according to the company's latest annual report. CVS spokesman Mike DeAngelis said the retailer does not position itself as a grocery destination but does tailor merchandise to neighborhoods.

"Where we see a need in a particular community, we make efforts to expand our selection of staple food items (bread, milk) as well as our convenience food assortments," he wrote in an e-mail.

At Ali's store, grocery sales are up 6 percent, while chips grew 16 percent and take-home cookies and crackers skyrocketed 39 percent. Budget beers rose 15 percent. Yesterday morning, one customer bought toilet paper, napkins, Ritz crackers and Sunkist soda. Two boys walked in for a gallon of milk.

Mustafa Abdellatif, 68, stopped by for the newspaper and a Perrier mineral water. He lives nearby and shops at 7-Eleven when he doesn't feel like driving to the supermarket.

Lately, he has tried to cut back on his time behind the wheel because of gas prices. When he does drive, he said, he finds himself glancing at the fuel gauge more often. The 10-minute walk to the 7-Eleven qualifies as his exercise for the day.

"When I have a small list of groceries," he said, "then that's when I come here."

Food is an important profit-driver at convenience stores, particularly service items such as fountain drinks and on-the-go meals. Consulting firm Technomics estimates that profit margins on such items can easily hit 40 percent and may exceed 60 percent.

"A trip to the gas station may be unavoidable, but now consumers are more likely to also pick up a quick meal or a snack at a [convenience store] and avoid another stop," he said.

Pennsylvania-based Wawa, which has 30 locations in the area, recently began offering a six-item dinner menu at its convenience stores for $3.99 each or three for $9.99. Lisa Wollan, head of consumer insights and brand strategy, said the program has been a success and helped showcase the brand as a one-stop shopping destination.

"We were trying to give our customers maximum value," she said.

Still, a recent report by consumer behavior research firm TNS Retail Forward showed that the primary reason shoppers visited convenience stores was to fill up their gas tanks. Grocery shopping ranked last. Among store merchandise, cigarettes and other tobacco products make up the bulk of sales, followed by bottled beverages and alcoholic drinks.

"It's important to add destination appeal so that shoppers think of them not only as convenience," said Jennifer Halterman, Retail Forward senior consultant. "Adding that second layer can help them in the future."

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.

Small-Format Food Retailing Special Report: Waitrose to Create its Second Brand New Small-Format Chain This Year With Convenience-Oriented Format

Upscale British supermarket chain Waitrose says it plans to enter the lucrative and highly competitive small-format, convenience-oriented grocery store segment in the United Kingdom (UK) opening its first small-format grocery shop early next year.

With the launch of its new grocery-convenience store format, Waitrose will take on three of the UK's leading retailers: Tesco (Tesco Express format), Sainsbury's (Sainsbury's Local format) and Marks & Spencer (Simply Food format), all of which operate small-format grocery shops in the nation.

Tesco is the leading food and grocery retailer in the UK. Sainsbury's is number three, after Wal-Mart-owned Asda. Marks & Spencer (M&S) and Waitrose are the UK's two leading upscale food and grocery chains, with M&S holding a higher share currently than Waitrose.

Waitrose, which is owned by the John Lewis Partnership, which also operates department stores in the UK as well as opening its first upscale food halls last year, wants a piece of the small-format, convenience-oriented grocery retailing segment, what is a ~27.4 billion-p (British Pounds) market in the UK and fast-growing.

According to Waitrose, its convenience grocery shops will average about 3,000 -to- 4,000 square feet in size.

Although Waitrose didn't go into any detail in terms of describing the stores, based on Waitrose's upscale brand, and conversations Natural~Specialty Foods Memo has had with two UK industry observers, we think the Waitrose small-format, convenience-oriented food stores will be more similar to, as well as primarily target competitively, Marks & Spencers' Simply Food shops, which are smaller upscale food stores of a more upmarket nature and format than those of Tesco and Sainsbury's.

By contrast, Tesco's Tesco Express and Sainsbury's Sainsbury's Local convenience -style grocery stores are more middle-market in terms of design and merchandising.

Waitrose's new convenience grocery stores will be located primarily in urban and suburban cities in the UK.

The UK's Co-operative Group chain also operates numerous small-format, convenience-oriented grocery stores throughout the nation. The Co-op stores put an emphasis on natural and organic foods, as well as sustainability, but sell selections of basic groceries as well. The non-profit Co-op, already a significant retail force in the country, is preparing to become an even bigger player in UK food and grocery retailing with its pending acquisition of the Somerfield supermarket chain, which could come later this week. Somerfield has 900 stores.

Waitrose's new 3,000 -to- 4,000 square foot convenience grocery chain comes right on the heels of its recent creation of it's small-format "Market Town" chain, which is designed specifically for smaller towns and villages in the UK. We reported on the "Market Town" development in this piece on June 10. Thus far Waitrose has opened two small-format "Market Town" village grocery stores, with many more to come. The "Market Town" stores average about 13,000 square feet in size.

It's not surprising Waitrose wants to enter the convenience grocery store sector. According to UK retail market research firm IGD, overall sales in the small-format convenience grocery retailing sector grew by about 5.1% in 2007, which is about 30% more than in the larger supermarket sector.

Entering the convenience-oriented, small-format food and grocery retailing segment also gives Waitrose more options. Along with its Waitrose supermarkets, which average 20,000 -to- 35,000 square feet, its new "Market Town" small-format village grocery stores, and now its 3,000 -to- 4,000 square foot convenience grocery stores, Waitrose will likely be better able to compete against its competitors, who all have multi-retail format strategies.

The development also is a part of Waitrose CEO Mark Price's aggressive plans to make Waitrose a bigger player in UK food and grocery retailing. Price wants not only more formats and many more stores across all formats, he also wants to reach a larger segment of British consumers, rather than the generally upper income shoppers and food lovers who comprise its customer base.

To this end, Waitrose has been lowering everyday prices as a way to be more competitive with less wealthy UK consumers. They two new small-format chains also are part of Price's design to reach more consumers--both urban, suburban and rural residents--in the UK.

Waitrose also is the primary owner of Ocado, which is the UK's leading internet-based, home grocery delivery company. Waitrose and Tesco are currently going head-to-head in an Internet-based grocery store/home delivery price war, battling for the home delivery shoppers dollars.

A Waitrose spokesperson told Natural~Specialty Foods Memo that the food retailer could have its first of the convenience grocery store opened in the UK in just six months, and that it would be no later than nine months before the first store opens.

Small-Format Food Retailing Special Report: No Frills, Small-Format Discount Grocer Aldi USA Preparing For Florida USA Store Launch

Aldi USA, the Batavia, Illinios-based U.S. division of International food and grocery retailer Aldi International, based in Germany, has grown to become the 25th-largest grocery retailer in the U.S., with 900 stores and about $5.8 billion in annual sales (2008 estimate), according to the supermarket industry trade publication Supermarket News and Thompson's Grocery Register.

Aldi USA has achieved this goal despite the fact (or perhaps because of it) its stores, which average about 15,000 square feet, are nearly one-third smaller on average than the typical new supermarket opened in the U.S today.

The operator of small-format, no frills discount grocery stores in the Midwest, Mid-Atlantic and eastern USA regions is currently on a rapid new store growth program, with plans to open about 100 new stores per year in the U.S. over the next four -to- five years.

Aldi also is entering new regions in the U.S. as a part of this rapid expansion plan. One of those new market regions is the heavily populated and lucrative state of Florida, which is the fourth-largest state in the U.S.

The discount grocer is currently gearing up to open a number of its small-format grocery stores, along with a distribution facility, in Florida.

As part of its major initiative to enter the Florida market for the first time, Aldi USA has launched a new job recruitment website, aldifloridajobs.com, where it is advertising for retail, management and distribution center jobs for its Florida launch.

One the website, Aldi lists an initial 24 stores, located in eastern, western and central Florida, which will begin opening in September, along with a warehouse facility that will open in Haines City, Florida soon. Many more Florida Aldi stores are set to be built after the first batch of 24 open.

The 24 new stores in Florida listed on the website are in the following cities:

Orlando (four stores),Tampa (two), Pinellas Park (two), and one each in Brandon, Clearwater, Daytona, Lady Lake, Lakeland, Largo, Merritt Island, Ocala, Palm Bay, Plant City, Rockledge, Sanford, St. Petersburg, St. Cloud, Titusville and Winter Park.

According to the website, Aldi will be holding job fairs at each of the Florida stores starting this week.

Aldi trys to run each of its approximately 15,000 square foot stores with no more than 15 employees, although the amount per-store varies depending on the region and store neighborhood.

The state of Florida is the third-largest retail food and grocery market in the United States, with annual sales of over $30 billion. That's a very lucrative new market for a discount grocery chain like Aldi.

Florida-based Publix is the state's leading supermarket chain, with about 40% of the food and grocery sales market share, which is a dominant share any way you look at it.

However, mega-retailer Wal-Mart has been gaining on Publix, as it continues to open new Supercenters in the state. Wal-Mart's food and grocery sales market share is currently estimated at about 21% in Florida. The Winn-Dixie chain comes in at number three with an approximately 16% share.

Super-competitive discounter Aldi will likely take share away from all three of these retail chains. However, since Publix is more of an upscale retailer than Wal-Mart and Winn-Dixie, along with being the hometown grocer, it could be less hurt by Aldi, although the jury is obviously still out on that, especially in the currently depressed U.S. national economy.

We expect Aldi's entrance into Florida with its no frills, small-format discount grocery stores to create downward price pressure in the market as well. In other words, since Aldi is a price leader in every market it enters, expect Wal-Mart especially--but also Winn-Dixie, Publix and the state's other grocery chains and independents--to lower their respective everyday retail prices, offer stronger price promotions, and create new value programs.

This phenomenon won't likely happen at first. But once Aldi begins to open a critical mass of stores--for example it's opening four all nearly at the same time in Orlando--you'll see the price competition in the respective Florida markets heat up as the state's established grocers find they are losing business to Aldi stores. There's been what we call "an Aldi (price) effect" in every market the small-format discount grocer has entered in the U.S.

Small-Format Food Retailing Special Report: SuperValue's No Frills, Discount Sav-A-Lot Chain Looking For Big Growth in Two Eastern U.S. States

SuperValu, Inc.'s no frills, small-format discount Sav-A-Lot grocery chain plans to expand its store count significantly in Connecticut and Rhode Island in the eastern United States, Natural~Specialty Foods Memo (NSFM) has learned.

Commercial retail real estate expert Anne O' Neal tells NSFM that SuperValue's Sav-A-Lot is looking for multiple new store sites in both states.

The small-format Sav-A-Lot stores, which average about 13,500 -to- 18,000 square feet, are no frills, limited assortment deep discount stores. The SuperValu, Inc. Sav-A-Lot division currently operates about 1,180 of the small-format discount grocery stores nationwide in the U.S.

Some of the Sav-A-Lot discount grocery stores are operated corporately by SuperValu, Inc., while others are franchised to independent operator groups. SuperValu supplies those independent operator groups from its wholesale division, as well as providing marketing and retail merchandising support through its various corporate divisions. Most recently SuperValu, Inc. has been making a major push in the U.S. to open new, corporately-owned and operated no frills Sav-A-Lot discount grocery stores.

Three new Sav-A-Lot stores will open in the two states this year, with more on the way. According to Ms. O'Neal, Sav-A-Lot is looking for new store location sites in value shopping centers in Connecticut and Rhode Island. The grocery chain is represented in the region by Oxford Real Estate.

Sav-A-Lot likes to locate its small-format, no frills discount grocery stores next to other format discount stores in the shopping centers it selects.

Additionally, the discount food retailer looks for locations that have a population of about 35,000 within a three mile area, with an average household income of about $45,000.

SuperValu, Inc.'s major competitor in small-format discount retailing currently is Aldi USA, the U.S. division of Germany-based international discount grocer Aldi International.

Like Sav-A-Lot, small-format Aldi, which operates no frills, discount stores of about 15,000 square feet, is growing fast. Aldi plans to open 100 new stores in the U.S. this year--far more than Sav-A-Lot will open--including moving into the lucrative and highly populated state of Florida this year.

Aldi currently operates about 900 of its small-format discount grocery stores in the U.S.--in the Midwest, Mid Atlantic and eastern USA regions. In addition to Florida, Aldi USA is moving heavily into other southern U.S. states, with future plans to enter other new regions in the country with its stores.

While SuperValu's Sav-A-Lot currently has a store count lead of nearly 300 stores on Aldi USA, that is changing. In addition to opening 100 new stores this year, Aldi USA plans to open nearly 100 new stores a year for the next four to five years in the U.S.

The current poor U.S. economy, with both soaring gasoline prices and fast-rising food prices, is driving more consumers to small-format, no frills discount grocery stores like Sav-A-Lot and Aldi. As a result, these retailers are capitalizing on this trend, growing their respective store counts significantly in the U.S., along with entering new regional markets.

Of course, the small-format grocers also face heavy competition from discounters like Wal-Mart, with its Supercenters and Sam's Club stores, Costco Wholesale, warehouse grocery chains, and numerous other price-impact food and grocery retailers.

However, the no frills smaller-format stores, which require far less monthly rent, have far lower energy costs than the big box discount stores, and require fewer-employees to operate, could be at a competitive advantage because this reduced overhead allows the grocers to sell product for less without hurting margins as much as it does many of the bigger-format discount grocers for the above reasons, along with a few others.

Low fixed operating costs and labor are in part what's allowing these small-format discounters to thrive and grow currently in the U.S.

As we've said, there's a small-format food retailing revolution going on globally, particular in the developed west where the big supermarket and big big box discount store formats have dominated food and grocery retailing for decades. Sav-A-Lot and Aldi are just two of the many retailers that are creating and growing the U.S. version of this revolution in food retailing. Does (store) size matter? It appears it does. But in this case, small can be as powerful as big.

Small-Format Food Retailing Memo: Post-Pause Frenzy: Tesco to Open at Least 30 New Fresh & Easy Stores Over Next 90 Days Beginning On July 2

Pictured above is the Fresh & Easy grocery market set to open on July 2 in a shopping center in Manhattan Beach, California. The photograph of the Fresh & Easy store was taken from in front of a Trader Joe's, which is nearly next door to the Fresh & Easy in the shopping center. The two stores even share the same parking lot. (Photo: copyright, 2008 Natural~Specialty Foods Memo.)

Tesco plans to open between 30 -to- 37 new Fresh & Easy Neighborhood Market grocery stores over a 90-day period beginning on July 2 when it opens its first new store, in Manhattan Beach, California, since taking a three month new store opening pause which began in Early April, based on information the retailer published in this press release yesterday.

Tesco currently has 61 of its small-format (10,000 -to- 13,000 square foot) combination basic grocery and fresh foods grocery markets open in Southern California, the Phoenix, Arizona Metropolitan region, and in the Las Vegas, Nevada Metropolitan market area.

In the press release, Tesco announced it will hire an additional 750 new employees over the next 90-days for the new Fresh & Easy Neighborhood Market stores it plans to open during this time period. Most of those new employees will be at store-level.

Additionally, in the press release, Tesco says it employs an average of 25 workers per-store

[Note: In most its previous press releases, Tesco's Fresh & Easy Neighborhood Market has said it employs and average of 20 workers per-store. We assume the average is 20 -to- 25, and the retailer has decided to use 25 rather than 20 now. If not, it would then appear Fresh & Easy Neighborhood Market has either revised the average, or has recently increased the number of employees it has on a per-store basis. You will see below why we mention this. It's not to knit-pick.]

Based on this data in the press release--hiring 750 employees over the next 90 days; the majority of which we know to be store-level hires from our sources--it's a good estimation that Tesco will be opening about 30 -to- 37 new Fresh & Easy stores beginning on July 2 and for the 90-day period following that.

Here's the math: 25 employees per-store on average; hiring 750 new employees over the next 90 days; equals 30 new stores during that three month period. At 20 employees average per-store, it works out to about 37 new stores. Therefore, we estimate Tesco will open between 30 -to- 37 new Fresh & Easy grocery stores over the next 90-days beginning on July 2.

We've been reporting Tesco would resume its rapid new store opening pace with Fresh & Easy at roughly the same frenetic clip it's been opening the stores at since November, 2007, which has been the opening of a new Fresh & Easy grocery store about every two and one-half -to- three days.

Numerous publications have written during the current three month new store opening pause it was likely Tesco would open fewer stores once the break ended. However, we've stated all along that would not be the case.

Rather, we've said, as the data from yesterday's press release and our analysis indicates, Tesco would start its rapid-fire new store opening machine back up once the three month pause ended and resume opening new Fresh & Easy stores once again on the average of about one new store every two and one-half -to- three days, which opening 30 -to- 37 new stores over the next 90 days in fact equates to. In other words, the new store pipeline is full and ready to be opened.

With a current store count of 61 Fresh & Easy stores, opening about 30 -to- 37 new stores over the next three months will give Tesco 91 or slightly more Fresh & Easy stores by early fall, 2008, with about three more months to go in the year still remaining to open more.

Initially, Tesco said it planned to have 200 Fresh & Easy stores open and operating in the Western USA by the end of 2008. Earlier this year the company revised that number downward, saying it would have more like 150 stores opened by the end of 2008.

In large part, Tesco revised that number down from 200 to 150 stores because initially it planned to start opening the about 50 Fresh & Easy stores that will open in the new markets of Bakersfield, Fresno, the Sacramento Metropolitan region and the San Francisco Bay Area, this year. However, the retailer has said those stores won't start opening until early 2009.

Even if Tesco has 100 Fresh & Easy stores open by say October 1, that would still leave 50 new stores to be opened between October 1 and December 31, in order to achieve the 150 stores open by the end of 2008 estimate.

In our analysis that's not likely to happen for a couple reasons.

First, it would mean opening a new store nearly every day, which we don't think Fresh & Easy plans to do; one every three days is hectic enough.

Second, October -to- December is the holiday shopping season--Thanksgiving and Christmas--which is the busiest time of the year in food and grocery retailing, making it difficult if not near- impossible to open that many, or close to that many, stores during the season.

We do believe it possible Tesco could open an additional 30 new stores during those remaining months of 2008 however, which would give the retailer in the neighborhood of 130 stores opened by the end of the year, which is close enough to 150 for even the most ambitious food retailer or pickiest analyst.

As we've written before, we can't recall another grocery retailer in modern food retailing history that's embarked on as rapid of a new store opening blitz as Tesco has with its Fresh & Easy Neighborhood Market USA venture, especially in a concentrated market region like the Western U.S. In fact, in only three Western USA states--California, Arizona and Nevada thus far--for that matter, limiting the geographic region even more.

Of course, doing so is key to Tesco's Fresh & Easy retail marketing and positioning strategy for the small-format Fresh & Easy grocery stores. It's what we call a "critical mass" store opening and location strategy: opening up as many stores within two miles or so of each other in selected markets as fast as possible with the goal of becoming in a sense the de facto neighborhood grocer in those cities and neighborhoods.

The question is: Has the three month new store opening pause given Tesco's Fresh & Easy Neighborhood Market enough time to improve and optimize its marketing, merchandising and operations in its stores so as to better compete for primary shoppers along with creating the means to generate needed new consumer trial?

Our analysis is no it hasn't. However, Tesco is viewing Fresh & Easy as a work in progress. Therefore "getting it right" right now isn't as important as getting more stores open "right now" is for the retailer. Remember, "critical mass" is crucial to Fresh & Easy's overall strategy.

Of course so are sales, margins and profits, as they must be to any food retailing chain. But the logic within Tesco in the main is those will come later.

Also what will have to come later in our analysis is a re-evaluation of many of the Fresh & Easy Neighborhood Market store locations in all three current market regions--Southern California, Las Vegas and Phoenix, Arizona Metro market.

Most of these Fresh & Easy stores are located in retail store buildings formerly owned and operated by supermarket chains like Albertsons and Ralph's, and in former Rite Aid drug stores, as well as in various former big box retail stores of various retail types.

These various stores were closed by their respective retail operators for various reasons; among them being sales underperformance in the locations.

Fresh & Easy, being a different format than say the Albertsons and Ralphs stores could eventually perform well in these locations. Additionally, in those former non food retailing locations, a food retailer might succeed where a non-food retailer failed. However, we know many cases in which Fresh & Easy stores in these locations aren't currently performing very well, particularly in the Las Vegas market, but in the other two markets as well.

That's not Tesco's primary concern at present however. Rather, "critical mass" is the focus, which is why starting once again on July 2, with the opening of the new Fresh & Easy grocery store in Manhattan Beach in Southern, California, followed by one new Fresh & Easy grocery market opening about every three days for the 90-days following that, Tesco will once again be on a Fresh & Easy Neighborhood Market new store opening tear.

Small-Format Food Retailing Special Report: Brookfield, Wisconsin USA Town Planners Ask: 'What's it All About...Aldi?' Local Columnist Answers Loudly

Should Aldi acquaintance be for naught?
June 10, 2008
By Laurel Walker

Special to Natural~Specialty Foods Memo

From: Milwaukee Journal Sentinal, JS Online

I bought a 12-ounce bag of unsalted almonds at the Waukesha Aldi on Les Paul Parkway and Arcadian Ave. for a mere $3.48 - 29 cents an ounce - Monday.

Had I been inclined to spend $3.99 a gallon of gas driving to a high-end Sendik's or Fresh Market in Brookfield, I'd probably have paid more. At Pick 'n Save, just a stone's throw from the Aldi, the almond price per ounce was nearly double for a pound bag and more than triple for a half-cup-size serving.

I wasn't in the market for one, but I noticed Aldi was offering a big special on cantaloupe - 69 cents apiece. At Pick 'n Save, the deal was two-for-$5.

Maybe Brookfield-area residents don't like almonds or cantaloupe. Or savings on their grocery bills.

Or, to listen to some Brookfield Town Plan Commissioners in turning up their noses to the discount grocer's request to locate in the vacant former Gander Mountain store at Blue Mound and Janacek Roads, it's really the bargain hunters that Brookfield-area residents don't want in the neighborhood.

The Plan Commission recommended denial of Aldi, 3-1. This, even though some plan commissioners had toured Aldi stores elsewhere and, they said, found well-dressed customers, clean stores and enthusiastic shoppers.

Town Chairman Keith Henderson brazenly warned Aldi officials at the meeting that when they come before the Town Board next Tuesday, supervisors' concern would be about clientele drawn to the store. He made that leap by comparing grocery shoppers trying to stretch their food dollars to the recent spate of police calls at the nearby Chuck E. Cheese, where miscreants can guzzle beer while trying to forget that their kids are going wild.

Ridiculous.

The kind of savings I saw Monday are what brings retirees like Lee Eickstaedt of Waukesha or Jerry and Angie Butalla of Big Bend or couples like Jesse and Shannon Medina of Waukesha, with three small kids to feed, back repeatedly. Nice clients, all of them, it seemed to me.

"I shop here because of value," said Eickstaedt, an Aldi customer for 12 years. "You don't just save pennies. You save dollars."

The Butallas like the quality of products, often off-brands, that are available in small quantities, unlike Sam's Club.

"They always try to please," Angie Butalla said. Besides, you don't end up with shopping carts smashing into your car, she said. Among other cost-saving measures, Aldi saves on labor by refunding a 25-cent cart deposit when you return your cart to the entry.

The Medinas combine Aldi shopping with other stores. With five mouths to feed, they look for food savings anywhere.

"It doesn't make sense for any community to turn down a store that would save residents money," Jesse Medina said.

Aldi already operates in Oconomowoc, Muskego, Waukesha and 14 locations in Milwaukee County.

Zoning Administrator Gary Lake said officials can't legitimately use "clientele" as a basis for rejecting the store, which fits existing zoning. Architectural objections, though, might qualify, he said.

Chris Hewitt, an Aldi vice president in the Oak Creek Division, said store officials will offer pedestrian improvements, like landscaping, as suggested, to satisfy the Town Board.

I'll bet even Aldi clientele appreciate bushes and benches.

Small-Format Food Retailing Special Report: Is Reno, Nevada Next After Arizona For Wal-Mart's Small-Format Marketside?

Natural~Specialty Foods Memo has learned Wal-Mart is likely to locate one of its small-format Marketside combination basic grocery and fresh, prepared foods markets in a new retail development in Reno, Nevada set to be built at Plumb Lane and Virginia Street, where a commercial developer has recently demolished the old Park Lane Mall to make way for the new mixed-use development. Our source is a knowledable Reno-area Wal-Mart employee who asked we not use his or her name for obvious reasons.

Wal-Mart is set to open four of its brand new Marketside small-format 15,000 square foot grocery and fresh foods stores this summer in the Phoenix Metropolitan region in Arizona. All four of these store locations are within just a few miles of Tesco's Fresh & Easy Neighborhood Market grocery stores, which are of a similar size (10,000 -to- 13,000 square feet on average) and are a similar combination basic grocery and fresh foods format, although the Fresh & Easy stores' prepared foods are made at a central kitchen in Southern California and shipped to the stores DSD-style, while Wal-Mart plans to prepare fresh foods in-store with its Marketside format stores.

The Reno, Nevada Marketside store would be the first location outside of Arizona (which aren't even opened yet) if it's build in the new development.

The new mixed-use development in Reno, where the Wal-Mart employee says the Marketside store will go, is to include retail shops, residential housing and public venues in a new-urbanism-style village design. The area around the old mall and new development in Reno, which has a population of about 200,000, is undergoing much change and gentrification. New urban residential housing including lofts and condominiums are going up nearby and a new public market, perhaps similar to the famous Pike's Place Public Market in Seattle, Washington, is being planned for nearby.

Locating a Marketside small-format grocery and fresh foods store in such a development would make sense, since as we reported here a part of Wal-Mart's strategy with the food stores is an urban one. Over time there is going to be lots of foot traffic in this Reno neighborhood, including thousands of new residents.

Wal-Mart currently has eight stores in the Reno Metropolitan region, which has a population of about 410,000, according to 2007 U.S. Census Bureau statistics.

Seven of the stores are Supercenters and one store is a Wal-Mart discount store, which sells a limited assortment of dry and perishable food and grocery items (no fresh produce or meats though) and lots of non-foods like cleaning products and other household items, in addition to general merchandise, hard goods and soft goods

Three of the seven Supercenters (as well as the Wal-Mart discount format store) are in Reno; two Supercenters are in Carson City, one is in next door Sparks, and one is in Fernley.

As the blog Fresh & Easy Buzz reported here on May 22, Tesco plans to open its first small-format, convenience-oriented basic grocery and fresh foods Fresh & Easy grocery store in northern Nevada in the Silver State shopping center center at Prater Way and McCarren Blvd. in Sparks, which is next door to Reno.

Tesco also is in the process of negotiating for other Fresh & Easy grocery store sites in Reno and the Metropolitan region. For example, according to Karen Melby of the City Works Department, Tesco Fresh & Easy representatives are interested in a site at Sparks Blvd. and Los Altos, in an area called Spanish Springs, in Sparks.

Sources also tell us other potential Tesco Fresh & Easy store locations include South Reno, other parts of Reno, Carson City and Fernley. Additionally, they've mentioned Incline Village in Lake Tahoe as a location Tesco Fresh & Easy representatives are looking at.

Wal-Mart is looking in Southern and Northern California for sites for its small-format grocery and fresh foods Marketside stores.

The Sacramento Metropolitan region and the Reno Metro region are considered generally as part of the same food and grocery market region in terms of market share numbers and advertising buys. Therefore, locating one or more Marketside stores fits in well with the strategy to open stores in Northern California (and Southern), as well as in Arizona, for Wal-Mart.

After all, this is part of the same logic and strategy Tesco is using by opening 19 stores in the Sacramento market, which will start opening early next year, then looking for locations in the Reno Metro region market.

Wal-Mart also has eight Supercenters in northern Nevada, which is a pretty high concentration based on the region's population of about 420,000 residents.

By eventually opening say three -to- four small-format Marketside stores in the Reno Metropolitan area, Wal-Mart could focus on that "fill-in" shopper strategy Wal-Mart USA chief Eduardo Castro-Wright discussed in this piece we published earlier today, while preventing any cannabalization of the Supercenters because unlike Tesco's strategy of being grocery stores for all consumers (supermarkets in the pure definition of the term), Wal-Mart's focus with Marketside is more narrow generally speaking because of its three-format food and grocery retailing strategy.