Mid-Week Roundup

Industry news, ideas and information you can use

Whole Foods Gets It Right With New San Francisco Store

Above is a photograph of Whole Food's new store located in the City's Potrero Hill neighborhood. The store is the anchor of a mixed-use development which includes upscale condominiums above and on the sides of the market.

Whole Foods Market, Inc. opened it's newest Northern California store last week in San Francisco's Potrero Hill neighborhood. The store is 42,000 square-feet and is the retail anchor of a mixed use development in the neighborhood. NSFM wrote about the store, which we call a hip, lifestyle neighborhood store, last week. You can read our piece here

John King, the urban design writer and critic for the San Francisco Chronicle, says in an article and review today that Whole Foods got the store just right, creating a retail marketplace that not only fits perfectly with the neighborhood but also is inviting and welcoming for shoppers. "The new Whole Foods Market in San Francisco shows with meticulous precision why upscale grocery stores are coveted by communities that want to see themselves as fully rounded or on the map," says King in his article in today's Chronicle.

King isn't as crazy about the condominium project located above and around the Whole Foods store but nearly waxes poetic about the store's design elements and architecture. "The new Whole Foods is the supermarket equivalent of an iphone or Mini Cooper (car)," he says in his review. "It's designed to send a message that anyone using it is on top of their game."

King loves the store's Market Bistro restaurant (a new feature for Whole Foods) which has a bar made of recycled glass and red bar stools crafted from recyclable leather scraps.

In the review article Whole Foods' regional president for northern California Anthony Gilmore tells King about the new store, "We want to evolve and give our customers a continual since of discovery. I'll sit down with consultants and review every color, every texture, every piece of the design. It's this attention to detail and openness to design that makes King like the store so much. It's also what makes NSFM, who has visited the store, love what Whole Foods as done with the store in terms of incorporating the Potrero neighborhoods industrial past with its more upscale present in creating not only a retail food store but a shopping and lifestyle experience.

Read John King's full review in today's edition of the San Francisco Chronicle here. The photograph at top is from the San Francisco Chronicle. You can view a mini slide-show of the new Potrero Hill district Whole Foods store here.

Shoppers Rate New San Francisco Whole Foods Store

For an interesting look at what shoppers think of the new Whole Foods Market in San Francisco's Potrero Hill neighborhood you can take a look at the yelp.com review site. The sites slogan is "real people real reviews." You can read reviews from real live customers about their experiences at the new store here. So far the store has 4 out of 5 stars with 31 shoppers reviewing. Five stars is the best.

An Urban Design Expert's Thoughts on Whole Foods

Washington, DC-based Historic preservation and urban revitalization consultant Richard Layman has a related story on his blog titled "The seduction of Whole Foods Market." In it he mentions the new Potrero Hill neighborhood Whole Foods and talks about Whole Foods from his perspective as an urban revitalization and historic preservation professional. You can read his thoughts here.

Breaking News: New Whole Foods Store to Open in Oakland

Whole Foods Markets has more retail tricks up its sleeves when next week (on Wednesday, September 26) it opens its newest San Francisco Bay Area store near downtown Oakland, across the Bay Bridge from San Francisco.

The new store is something very new in terms of design for Whole Foods. The store has been designed to resemble a European Food Hall. Whole Foods' northern region president Anthony

Gilmore says he studied food halls in various countries and ended up modeling the new Oakland Whole Foods store after the Galeries Lafayette market in Berlin, Germany. (Read about Europe's Galeries Lafayette chain, owners of the Berlin store Whole Foods is modeling its new Oakland food hall market after here.

Gilmore says the grocer wanted to design a food hall rather than a conventional grocery store to celebrate what he calls Oakland's and the surrounding area's rich, progressive food culture. He says the Oakland store/food hall is an international food market with an international flair.

It's interesting to note that many years ago there was a popular international-style food hall called "Housewives Market" right near the new Whole Foods store in downtown Oakland. By choosing an international food hall design for this new store Whole Foods is paying homage to the downtown's historic roots as well as offering residents a completely new shopping experience. This will be the first Whole Foods for Oakland, which has a population of about 450,000. The new store is located at 230 Bay Place on 27th and Harrison Streets near Oakland's popular Lake Merrit.

The new food hall-style store is designed so the first thing shoppers encounter when they enter the store is the produce department. The store's architect's have then designed the store in such a way that its flow leads the shopper to each in-store attraction in a lively manner. Unlike the traditional supermarket, which generally has its perishables departments around the store perimeter and its dry grocery area in the center or core-of-the-store, the new Oakland Whole

Foods reverses that design. The perishables departments are in the center of the store while dry groceries are located on the perimeter.

The store has an indoor restaurant with an outside dining patio, similar to the Market Bistro Whole Foods debuted last week at its new store in San Francisco's Potrero Hill neighborhood. Specialty, ethnic and natural foods from all over the world also will be merchandised in the store in keeping with its international food hall design and theme.

The store is about 50,000 square-feet and is built in what was once a large Cadillac dealership building which the grocer completely renovated to create its food hall market. The original structure dates back to 1890 when it was built and first used to house a power-generating station. The building was renovated three times before Whole Foods bought it, the last tenant being the car dealership. It had been vacant for some time prior to Whole Foods buying the property.

The property and site are important to Oakland's history and community so Whole Foods' type of community and local retailing should make it not only a popular retail store but a community focal point and gathering place as well.

Retail Briefing

Hypermarkets Booming in China

Hypermarkets, those huge combination supermarket-department stores, are taking hold in China thanks to the lure of low prices, convenient one-stop shopping, accessible locations and the integration of other retail facilities such as restaurants, cinemas and coffee houses that can turn a shopping trip into a full day outing for Chinese consumers, according to a new study conducted by China-based TNS Worldpanel, a market research firm. The research firm says the growing popularity of hypermart shopping is creating a new shopping culture in China. You can read a complete summary of the research report here.

Wal-Mart Canada Going Fresh, Local in New Supercenters

Tomorrow (September 19) Wal-Mart Canada Corp. is opening five new supercenter stores in Alberta. The stores, which will all have grand opening festivities tomorrow, are in Wainwright, Vegreville, Lethbridge, Pincher Creek and West Edmonton.

The stores range in size from 101,000 to 205,000 square-feet and all include a complete selection of fresh foods and groceries as well as other standard supercenter offerings including fashion, electronics, home goods and more. The stores are said to stock over 120,000 products and will be the largest retail stores in Canada, according to Wal-Mart Canada.

Wal-Mart Canada is going upscale and employing local marketing concepts with these new supercenters. For example, the stores will feature a "Your Fresh Market" concept which is exclusive to Wal-Mart's Canadian stores. The Fresh Market will feature ready-to-eat prepared foods, artisan baked breads and deserts, and other prepared foods selections, all of which will be prepared in store.

The five supercenters also have expanded natural, organic, ethnic and specialty foods selections including perishable products as well as groceries. Organic fresh produce will be merchandised in the produce departments right along-side conventionally-grown. The stores are putting an emphasis on "Fresh" and the produce, meat, deli and seafood departments will reflect that fresh emphasis in their size (large), decor (upscale) and selection (broad).

Wal-Mart Canada is putting a local merchandising touch on the stores as well as part of what the retailer says is a major effort to make the supercenters "community" stores. The supercenters will feature Canadian produced beef, veal, chicken and pork. Among the Canadian-produced meats will include Paradise Valley free-range pork and Diamond Willow certified organic beef, which are produced in the local Alberta cities of Wainright and Pincher Creek.

Wal-Mart Canada is expanding this upscale, fresh, natural, organic and specialty format to its other supercenters in Canada after the five new stores open. The retailer opened its first Canadian supercenter about one year ago. There currently are 17 supercenters in the country and the company plans to have 28 of the units open and operating in Canada by early 2008. In addition to the current 17 supercenters Wal-Mart Canada has 270 standard discount stores and six Sam's Club Warehouse stores. The supercenter, Fresh Market format is the retailer's major emphasis at present in Canada.

Wal-Mart Canada is much more popular in Canadian communities than it's U.S. counterpart division. More than 100 communities in Canada have lobbied or petitioned the company to have supercenters located in their towns. Wal-Mart Canada also scores high in annual ratings of the "best companies to work for in Canada" surveys. There also has been little if any opposition from communities in Canada when Wal-Mart announces its desire to build a supercenter, unlike the case in the U.S. where communities in many parts of the country are conducting efforts to prevent the chain from building supercenters in their towns and counties.

Tesco Says its 'Locked and Loaded' For Fresh & Easy Launch

Tesco CEO Sir Terry Leahy told a reporter for the Dow Jones News Service that the grocer is "locked and loaded" and ready for its November, 2007 launch of its Fresh & Easy Neighborhood Market upscale convenience-type stores. (NSFM reported here that the first store might open as early as next month in Las Vegas.)

Leahy told the Dow Jones reporter on the sidelines at a media conference late last week the retailer's three main priorities in the U.S. with the Fresh and Easy stores will be community,

environment and nutrition. You can read the full report from Dow Jones here.

Kroger Co. Second Quarter Profits Soar

Kroger Co., the largest U.S. supermarket chain, saw its second quarter profits soar by 28% from the same period in 2006. The mega-chain raked in profits of $267.3 million for the period ending August 18, which was 58.3 million more than its Q-2 profits of $209 million in 2006. You can read more here from Forbes.com. Last year Kroger launched as one of its major initiatives a dramatic increase in merchandising and selling higher margin natural and organic products in most of its many store banners. This initiative gained steam late last year and has picked up even more momentum this year. Kroger's CEO is a major force behind the initiative saying he wants Kroger to be the retailer who brings organics to the masses at reasonable prices. It looks like the chain is doing something right based on these second quarter profit numbers.

From Clerk to VP: Woman Grocer makes Good At Kroger

Although it's changing somewhat, the retail supermarket industry has long been "a man's world" when it comes to high-level management and executive positions at food retailing companies. However, it's also historically been an egalitarian industry from the standpoint of formal education, giving entry-level workers a chance to move-up based on their job performance. One hasn't traditionally needed an MBA, or even a BA in many cases, to climb the ranks and become an executive.

In the case of Pam Matthew's, vice president of merchandising and marketing for Kroger's Central Division in Indiana, she's proven that gender shouldn't matter when it comes to climbing the corporate ladder. In fact she was recruited to her current position at Kroger by a man, who picked her over all the other potential candidates--who were all male. (See it's changing.) Matthew's, who doesn't have a college degree, also took advantage of the industry's promote-from-within ethic, combining determination with hard work to get to her current position. you can read a feature profile about Pam Matthews in today's Indianapolis Star here.

Industry News and Information Briefing

Aussie Food in Big Demand Globally

Australia's clean, green image of its fine foods and wine is attracting buyers from the new middle classes in emerging economies worldwide in such countries as China, Indonesia, India and other emerging regions, according to an Australian government report detailed in an article in today's The Age, an Australian publication. "In terms of food (and wine) our markets have traditionally been in high income countries like Japan, the United States, the United Kingdom, New Zealand and Hong Kong," says Tim Harcourt, the chief economist for Austrade, the country's economic and trade organization. You can read more about the growing market for Australian foods and wines here.

New California Food Legislation Could Be Trend Setting

The California legislature has passed two new legislative bills in the area of food health and safety which could portend changes in other states as well. The first new law requires manufacturers to clearly label any food intended for human consumption that contains products from a cloned animal or its progeny. The second bill requires fast food chains with 15 or more outlets to provide nutrition information for their products served in the restaurants, including clearly posted information on trans-fat content, sodium, carbohydrates and more. The Governor still needs to sign both bills before they become law. You can read about the two bills in more detail here.

Consumer Behavior: Business By the Numbers

The Economist magazine (09-13-07 issue) has a fascinating article about how businesses are increasingly turning to the use of mathematical algorithms (they have nothing to do with how Al Gore moves) to track and analyze consumer and shopper behavior. At its core an algorithm is a step-by-step method for doing a job. For example, a recipe is an algorithm for preparing a meal. Also, those decision-tree posters that hang on doctors office walls which help them to work out what is wrong with a patient from his symptoms are called medical algorithms, step-by-step methodologies for pin-pointing a cause in this case.

In the business world companies are increasingly turning to the mathematical science of algorithms to learn more about their customers and consumers in general better. A case in point is the Tesco Supermarket chain. Tesco, with the help of a marketing consulting firm named Dunnhumby, has dumped all of the data from the chains loyalty card users into a huge database and is using algorithms to analyse these shoppers, learn more about them and develop ways to meet their every grocery shopping need. You can read the Economist article here. This information has great utility for all business sectors in the natural and specialty foods industries.

Confection Industry Giant Mars Says No to Vegetable Oil

NSFM has reported on the move by some major confection industry makers and industry trade groups to get the U.S. Governemnt to allow chocolate-makers to add up to 5% vegetable oil to their products rather than using 100% cocoa butter, which currently is the case, and still be able to call the confections product chocolate or pure chocolate. Yesterday confection industry giant Mars announced it's against this move by the other candy-makers and said it opposes any such legislation. "Today Mars U.S. chocolate products are pure, authentic chocolate and they are going to stay that way," said Todd Lachman, president of Mars Snackfoods USA. You can read more here.

The fastest growing segment in the confection industry is in high, quality premium chocolates and all-natural and organic varieties. Mars and others are going after that market via acquiring smaller, gourmet confection companies as well as creating new premium products. NSFM thinks Mars was smart to get out front and let consumers know the company is against any plans to "adulterate" chocolate quality. A nice way to differentiate themselves from the other large confections companies and to strike a blow in the effort to brand the company as premium. Mars CEO Lachman made this announcement yesterday at the "All Candy Expo" confections show in Chicago. We think that was a savvy move--making the announcement at the show with all the major confection industry players in attendance as well as the media.

New Categories: Yoplait's Fizzy, Carbonated Yogurt in a Tube

Yogurt maker Yoplait (owned by General Mills) has introduced a new carbonated, fizzy yogurt product that comes in a tube rather than a traditional plastic container. The product is named Fizzix. The company created the product for and is targeting it to the "Tween" demographic. This group consumes less yogurt than other demographics and is growing rapidly. Overall yogurt category sales are growing rapidly as well. Yogurt category sales more than doubled between 1998 and 2006. Health and convenience are the two primary factors attributed to this rapid growth in sales. You can read more about the new carbonated yogurt category and new Yoplait product here.

U.S. Department of Defense Grocers Go Organic

Sales of organic foods in the U.S. have grown by about 25% over the last seven years. And it hasn't just been the private sector food retailing industry that's taken notice and increased its organics product selections year after year. The grocers at the Defense Commissary Agency (DeCA), the U.S. Defense Department organization responsible for running the numerous supermarkets in the U.S. for members of the military, says it has more than tripled the number of organic products on its stores' shelves over the last few years.

"To ensure our patrons have available the products they want we keep an eye on trends," says DeCA CEO and director Patrick Nixon. "Because of this you will see organic selections on our store shelves. Organic alternatives are side-by-side with similar non-organic items (integration) throughout the commissary," Nixon says.

The Department of Defense-operated stores sell grocery products for about 30% less than the average for-profit supermarket, according to Nixon. This 30% price reduction applies to organic products as well making them relatively affordable for military customers.

The Defense Commissary Agency operates stores worldwide selling groceries to active-duty military members and retired veterans and their families. The agency doesn't make a profit on its products allowing it to price everything it sells in its stores at cost plus a 5% surcharge which goes to pay for building new commissaries and remodeling existing ones.

New Survey: Americans Prefer Domestic, Local Foods

A new survey conducted by the Leopold Center for Sustainable Agriculture at Iowa State University found that 85% of Americans have confidence in the safety of their local and regional food systems. However only 12% of those survyed expressed confidence in food produced and imported into the U.S. from anywhere else in the world. "American's remain extremely wary of foreign foods," says Richard Pirog, the deputy director of the Leopold Center and the co-author of a paper about the study's results and implications. "That was something that was very apparent (in the results).

These numbers are very stark." You can read a complete summary of the survey here. The survey's numbers are indeed very stark and if true--and varified by similar surverys--point to a particluarly troublesome situation for specialty and natural foods importers and for foreign food and beverage companies doing business in the U.S.

Unified Western Grocers to Acquire Seattle Wholesaler

Los Angeles, California-based Unified Western Grocers is acquiring Seattle, Washington-based wholesaler Associated Grocers. Associated Grocers shareholders approved the sale to Unified Western Grocers at a special meeting on September 14, 2007. Unified Western Grocers is the largest wholesale grocer in the Western United States and is member-owned. Associated Grocers has been selling groceries to independent retailers in the Pacific Northwest for almost 75 years.

Unified and Associated have been competitors in the Pacific Northwest market for a number of years. The acquisition makes sense for both companies since Unified is the larger of the two. Also the independent retail market in the region has consolidated considerably over the last 10 years and Unified is better able do its size and resources to provide not only the best wholesale cost of goods to independents but also provide the myriad of services they need to compete against the region's retail chains which include Safeway Stores, Kroger-owned Fred Meyer and numerous others.

Unified also has a large specialty and natural foods division called Market Centre Foods. The specialty & natural division serves Unified retail members and also chain operators including Raley's Superstores and Save Mart in California and Nevada as well as other chains throughout the Western U.S. You can read more details about the acquisition here.

Mid-Week Roundup Ender

Health and wellness is a growing movement among people of all ages. It's far more than even a trend. Rather, we see it as a movement that's here to stay--and will only get bigger as people continue to live longer and want to live healthier lives. The health and wellness movement offers huge opportunities for manufacturing, marketing and retailing companies as many have already discovered and others are beginning to. The wellness movement offers great opportunities for retailers and as an extension to their supplier companies. The current monthly issue of Grocery Headquarters magazine (Sept., 2007) has a cover story on health and wellness and the marketing opportunities it presents. You can read the story here.

Retail Memo: Whole Foods Getting Small (er) With Two New Stores in Northern California to Be Located in Vacant Supermarket Buildings

Santa Cruz's historic and famous Beach-Boardwalk turns the city of about 60,000 into a community many times that size from late spring to the end of summer when tourists from California and thorughout the U.S. flock to the seaside resort community to play, shop and eat.

Mega-supernatural foods retailer Whole Foods Market, Inc. is departing from its practice in recent years of building primarily big and super-big new stores in the 55,000 -to- 80,000 square foot range throughout the U.S.--and especially in California--in the coastal Northern California cities of Santa Cruz and Capitola, where it's currently developing smaller-footprint 32,000 square foot (Santa Cruz) and 23,800 square foot stores (Capitola).

The two stores also will be located in currently vacant, former supermarket buildings, something Whole Foods has done in the past but not often, as it prefers building stores from the ground up.

In fact, the Santa Cruz store site, which is going to be in an empty former Albertsons supermarket building at 911 Soquel Avenue in the Eastside shopping center, was only going to be 24,000 square feet, about the same size as the one in nearby Capitola.. This week however Whole Foods was able to acquire two buildings next to the empty supermarket, allowing it to expand what will be the city's future Whole Foods store by 8,000 square feet for a total of 32,000 square feet.

Locating the two new stores in the vacant buildings makes good sense because vacant land is near impossible to find in the two coastal cities, and when it's available the cost is out of this world. Additionally, the two buildings--one a former Albertsons store as mentioned in Santa Cruz and the Capitola site a former Ralph's supermarket--have been vacant for sometime, therefore Whole Foods likely acquired them for a reasonable cost. Reasonable for the region that is.

The Santa Cruz and Capitola units will be full Whole Foods Market stores rather than versions of its new Whole Foods Express format, according to a Whole Foods executive in Northern California who asked we not name them.

The first Whole Foods Express store is set to open in a former Wild Oats store in Boulder, Colorado soon. The Whole Foods Express format is about 15,000 -to- 20,000 square feet, will feature a wide-variety of fresh, prepared foods, and a limited assortment of natural, organic and specialty foods and products.

At under 24,000 square feet, the Capitola Whole Foods store will be even smaller than the Santa Cruz store. That planned Whole Foods' store is located on 41rst Avenue in the coastal city, which is just a few miles from Santa Cruz.

Smaller stores aren't a new thing for Whole Foods, just a departure from its practice over the last 5 -to- 10 years of primarily building stores from the ground up in the 55,000 up to 80,000 square foot range.

Locating stores in empty retail buildings also is the exception rather than the norm for Whole Foods Market, Inc. The retailer generally likes to built brand new stores, but has renovated empty buildings before, especially in places like Northern California where vacant land can be hard to find and premium-priced.

For example, last year Whole Foods opened its European Market Hall-style store in downtown Oakland in Northern California's San Francisco Bay Area. That store is in a former automobile dealership which the grocer completely demolished and renovated into the store which is designed similar to a European food hall.

Whole Foods also has a number of smaller stores in Northern California, the majority of which were built and opened prior to the last few years however. Those stores include it's first and currently only store in the University city of Berkeley (a second, bigger store is planned for Berkeley as well), it's Los Gatos store near Santa Cruz, and its sales per-square-foot-busting store in the Marin County city of Mill Valley, along with a few others.

The Mill Valley Whole Foods store, which is where the grocer's co-president Walter Robb started with the supernatural foods retailer as a store manager in the early 1990's when he helped design it and opened it, has only 15,000 square feet of selling space but averages in the neighborhood of $600,000 a week in gross sales.

Crews from Northern California's John Sutti & Associates, a retail design and building firm which has built and renovated most of Whole Foods' stores in Northern California over the years, are currently demolishing the Santa Cruz store site in the former Albertsons' building and preparing it for renovation, according to our Whole Foods' source in Northern California.

The Santa Cruz and Capitola stores will be the first Whole Foods markets in both cities. The grocer has a fairly new store in Monterey, but that city is about a 45-minute drive from Santa Cruz and Capitola. It also has another store in Los Gatos, which is about 30 minutes away depending on traffic.

Both cities have prime natural foods retail consumer demographics--higher than average post high school educational levels, higher than average income, a large "foodie" and health/organic foods'-eating population, a large counter culture population--and Santa Cruz has a number of independent natural foods stores that all do very well.

For example, Santa Cruz-based multi-store New Leaf Community Markets currently has two stores in Santa Cruz and is in the process of building a brand new 17,800 square foot natural foods store on the city's westside. New Leaf has to a large degree "owned" natural foods' and products' retailing in the city of Santa Cruz for the three decades or so it's had it's stores in the city of about 60,000.

Whole Foods' opening a store in Santa Cruz is going to put serious competitive pressure on New Leaf, even though it's building its own new store and has two others in it's hometown city.

Additionally, New Leaf was supposed to be acquired by Canada's Planet Organic, Inc. However, a couple weeks ago Planet Organic backed out of the deal because it said it decided not to float a planned $15 million stock offering, part of which was to be used to buy New Leaf, because of poor market conditions. [You can read our May 5 piece on the Planet Organic aborted buyout of New Leaf Community Markets here.]

New Leaf had earlier indicated to Natural~Specialty Foods Memo and others it needed the cash from the acquisition/merger (New Leaf's owners were still going to run the operation post-acquisition) to finish building the new Santa Cruz store on the city's westside and to complete another new store its' currently building in nearby Half Moon Bay.

New Leaf's owners have said they are still well enough financed to complete and open the new stores, and to operate fully. However, since the grocer did say when it jointly-announced the deal with Planet Organic executives at a press conference in Santa Cruz the cash from the acquisition was needed for the new store expansion and other purposes, there is some skepticism as to whether or not New Leaf will be able to move forward completely without finding either new financing on its own or another suitor, which they likely should be able to do in our analysis.

Santa Cruz is the county seat of Santa Cruz county, which has about 300,000 residents. Capitola, an artsy and tourist-oriented city of about 15,000 located just a short drive from Santa Cruz, also is in Santa Cruz County.

The economies of both cities are heavily dependent on tourism. Santa Cruz and Capitola draw tens of thousands of visitors each week in the summer months, some for weekends, others for longer stays.

Santa Cruz is home to its historic and famous Beach-Boardwalk, a beachside playland featuring various rides, attractions, entertainment venues, food stalls and restaurants, and other attractions for kids and kids at heart. The Santa Cruz Beach-Boardwalk is one of California's top tourist destinations, drawing not only Californians but visitors from throughout the U.S.

The cities are only a short drive from the Bay Area's Silicon Valley region, and many people in San Jose and the surrounding cities have weekend homes in the Santa Cruz area, as do people from California's Central Valley where summer temperatures often top 100 degrees. For these folks, Santa Cruz is a place to get away to for cooler weather and relaxation on the weekends.

The fact Capitola is a major tourist destination and weekend home retreat should allow Whole Foods to have more than enough customers for it's new store even though the city's population is only about 15,000.

Santa Cruz also has a campus of the University of California, which is a major employer in the city and of people who live in Capitola and other nearby cities. County government also is a major employer in Santa Cruz since it's the county seat. Health care is a fast-growing industry in the town as well, especially since there are many small communities nearby without their own hospitals and major medical offices.

Lastly, food and wine industry and related businesses and industries plays a big part in the Santa Cruz and Capitola economies. Whole Foods fits in well in this regard. Both cities are home to many restaurants, ranging from cutting-edge California cuisine and organic foods-only operations, to ethnic eateries who's menus span the globe.

The area also is home to numerous organic farming and food production companies, as it's nearby America's prime growing region for fresh market vegetables, the Monterey and Salinas Valley region. The region's farmers are leaders in the U.S. organic foods industry as well.

There also are numerous specialty, natural/organic and artisan food producers in the region, which isn't surprising considering the organic farming industry and the "foodie" and wine culture which permeates the area, not to mention the prime soil inland from the coast.

The University of California at Santa Cruz also has a well-respected program in sustainable agriculture, which not only serves as an educational and research hub for the industries but also has resulted in many people staying in the area after graduating from the program because of it's coastal beauty and the numerous opportunities in sustainable farming and food production.

With the store in Santa and the one in Capitola both opening early next year, Whole Foods is going to make a major impact in the two cities and surrounding area.

With it's commitment to local foods selling, the two branches of the United State's number one natural foods' store retailer will open new market opportunities for many of the area's smaller organic and sustainable farmers and food producers.

The stores also will offer the respective communities' large base of natural and organic food shoppers more product variety compared to what's currently available to them in the area's natural foods stores and supermarkets.

Whole Foods is making a major push in Northern California, and the stores in Santa Cruz and Capitola are part of that new store growth initiative.

Whole Foods currently has 24 stores in Northern California. All but two--Sacramento and Fresno--of those stores are located in the Bay Area or the Coastal region near the Bay Area.

The supernatural food retailer currently has 20 new stores in various stages of development in California. Out of those 20 new stores in development, 13 are in Northern California. All of those 13 are set to be opened by the end of 2009.

Further, Whole Foods announced earlier this year it would double the number of stores in Northern California, from its current 24 to about 50 in the next four years. The region is not only one of the grocer's top revenue producing regions, it's one of it's top growth target markets as well.

Mid-Week Roundup

Research Roundup: Specialty and Premium Foods

Three New Studies Show a Consumer Flight to Premium Taste and Quality

Consumers are flocking to product lines like Safeway's private label O' Organics line, which combines premium quality and organic ingredients, to create a premium taste product with healthy attributes.

Three just-released studies show consumers are looking for quality when it comes to their food choices and are increasingly opting for premium specialty foods.

The first study, by market research firm Mintel, concludes that consumer demand for quality and taste, as well as an increased interest in international food traditions, are the key drivers for the specialty foods market in the U.S. Almost 73% of U.S. consumers currently report purchasing specialty foods. That's up from 64% just one year ago, according to the Mintel survey released this month. Mintel surveyed 1,092 consumers in July, 2007 for the survey. The results were just released this week.

For the survey, Mintel defines specialty foods as those products that are of premium quality such as "high-end" chocolates, coffee, oils and other premium goods. These foods are generally considered unique (hence specialty) and may be produced by small or local manufacturers, imported, or have exotic ethnic flavors. Other specialty products included in Mintel's definition are coffee and tea, specialty beverages, cheese and olive oils, among other premium products. The products in the categories that fit into Mintel's definition are referred to by the study as "premium," "fancy" and "gourmet." They also are often more expensive than there regular or basic counterparts (premium condiments, coffee, teas, chocolates and the like which are higher priced than basic grocery items in the respective categories).

According to the study, taste is the primary reason consumers buy specialty foods and beverages. Awhopping 88% of survey respondants reported taste as their number one motivation for buying the premium products. Two thirds of the respondents also sighted "personal indulagance" as a key reason for buying specialty food items. They said they buy the premium goods for the pleasure of giving themselves a treat.

Specialty Foods Consumer Characteristics and Demographics

In terms of specialty foods consumer demographics, the new study found the typical specialty foods shopper tends to be younger and more affluent than the average consumer. Further, they also are more likely to buy products that are natural, organic, kosher and halal, in part sighting a perception that these types of foods offer higher quality attributes. Again we see her what we call the Natural~Specialty foods convergence--the coming together of the specialty and natural and organic foods categories do to the similar consumer demands for cleaner and healthier foods combined with a desire for premium taste.

The specialty foods category also is heavily influenced by international travelers. These consumers visit many places in the world and develop new food traditions based on the foods the sample while visiting various contries in the world. When they return home to the U.S. they look for--and demand--these new foods and ingredients in their local food stores. This also introduces retailers to new ethnic foods which results in introducing customers to them once the retailer merchandises the new international products.

The ethnic diversity in the U.S. also is a key means of introducing new foods to consumers, according to the new Mintel study. Hispanics, Asians, Eastern Europeans and others all desire foods from their homeland when they migrate to the U.S. They not only introduce retailers to these foods by requesting them but have also spawned a huge ethnic retailing industry. These immigrants also introduce other U.S. consumers to their food traditions which creates an even bigger market for ethnic specialty foods.

Other Survey Findings

>Of the 1,092 consumers surveyed by Mintel in July, 2007, 61% reported buying Hispanic food products and 55% said they buy Asian products.

>Consumers said 46% of the specialty foods they buy are sourced locally and 29% of the foods are sourced internationally. Mintel doesn't provide a definition of what is "local," whether it means within a 100 mile radious of the shoppers home, produced in the same state they live in, or if "made in the USA" is considered local. As such we question the 46% figure somewhat. Saying specialty foods are produced locally also requires the consumers surveyed to have rather good knowledge of the origins of the specialty foods they buy. We aren't sure that is the case as the majority of products don't have origin information on them--and if they do we aren't fully convinced shoppers retain that information.

>Consumers said only 11% of the specialty foods they purchase are from artisanal producers. This doesn't suprise us in that artisinal-produced specialty foods is still a small niche market and various considerably by region in the U.S. For example in California and parts of the East Coast and New England, there are numerous artisanal food producers. However in other parts of the U.S. there a very few. Also, retailers--especially conventional supermarkets--aren't yet selling many artisanal foods. Generally it's stores like Whole Foods, Trader Joe's, upscale supermarkets, farmers markets and specialty stores that stock artisanal foods in any quantity. As such access to these specialty foods is a key driver we believe in the 11% figure.

Based on the survey results Mintel says the current hot button trends in the specialty foods market for manufacturers and retailers are: premium taste, organic, natural, single-sourced, handmade and artisanal. These attributes show no sign of losing popularity, Mintel says in its new survey report.

Hartman Group Study: Consumers Redefining Premium Quality

Another new study bby the Hartman Group concurs with the Mintel survey that premium taste and quality are currently driving the specialty foods market. The Hartman report also says it would be a mistake for food marketers to assume premium quality is only something more upscale and affluent consumers are seeking, or that it is about mere personal indulgence. Rather, the report says it's consumers themselves, not the specialty foods industry, that is redefining premium quality and driving the flight to such premium taste in the U.S.

In the report, "Premium Food Experiences: Understanding the Consumer Redefinition of Quality," the Hartman Group says premium quality from the consumers vantage point means five key things:

>Consumers are seeking distinct flavors

>Consumers are seeking more fresh and less processed foods

>Consumers have a keen interest in purchasing more locally produced foods

>Consumers are seeking artisanal and hand-crafted specialty foods

>Consumers have a willingness to pay more for premium taste and quality as long as it is reasonable

You can read a complete summary of the survey, including narratives from consumers interviewed, here The article is written by Blain Becker of the Hartman Group, who conducted the study along with others at the firm. much of what the Hartman research found mirrors the Mintel study. However, there also are some differences, and things not covered in the Mintel report. We recommend reading the article linked above by Hartman's Becker.

New Report: Flight to Premium Quality in Frozen Food Category

It's not just packaged and fresh specialty foods that are experiencing a flight to premium quality, according to a new study of U.S. consumers by the market research firm Research and Markets. A just-released research report from the firm, covering the frozen processed foods category--which includes ready-to eat dinners/meals, red meat and poultry products, fish/seafood, vegetables, frozen potato products, desserts, bakery products, pizza's and soup and noodles.

The report says there is a move in the U.S. towards high quality premium foods. It sights what it calls the "Starbucks factor," and says the success and expansion of the coffee king's coffee shops demonstrates the trading up in the coffee category of U.S. consumers, who just a few years ago were fine with drinking low-quality coffee. The same is happening across all food categories, including frozen foods, the report says.

Other key inflencers in this trend towards consumers trading up to premium quality include the success and expansion of Whole Foods Market, Inc., Food shows (and their popularity) on the Food Network, PBS, Bravo and other networks, and the overall celebrity chef phenomenon, which has created "a nation of foodies; consumers who seek out the best," according to the new study.

The just released report also says healthier, more convenient and indulgent frozen specialty foods will see significant growth now and in the years to come. Additionally, the report says artisanal-produced specialty frozen foods are a key growing market for manufacturers and retailers.

Another sign of the flight to premium taste and quality in the U.S. is the fact that those retailers who have introduced premium, natural and organic private label or store-branded product lines are doing the best in terms of private label sales among all retailers, according to the report. Research and Markets sights the huge success of Safeway Stores O Organics specialty foods line as an example of creating a product line which hits on both the flight to quality and natural trends among U.S. consumers today. The report also points to the huge success of specialty retailer Trader Joe's private label premium, natural and organic store brands as an example of the premium and healthy trend in the U.S.

With these examples above, we again are seeing the convergence between natural and specialty foods products (and the industries). Retailers like Safeway and Trader Joe's are combining premium taste attributes with natural and organic ones to create private label product lines that appeal to the growing number of U.S. consumers who want these combined attributes in the products they buy. You can read more about the specialty frozen foods market study here.

We also aren't surprised the flight to premium quality foods extends from fresh and dry packaged goods products to frozen as well. In fact, if it didn't we likely would not be looking at an overall trend--which we believe it is--but rather only a category-specific one. We are seeing the combination of a flight to premium quality and desire for such foods that also are healthier and more natural.

Unlike in the recent past, U.S. consumers no longer want to trade off taste for health. They want their organic cereal and cookies to have the taste of gourmet cereal and cookies. They also want premium specialty foods that offer unique taste experiences. Much of this has been influenced by fusion restaurants, where ethnic cuisines like Asian and Cuban are combined, and where traditional Hispanic foods are given added taste with a "California Cuisine" flair, for example. Sushi bars have introduced U.S consumers to premium, fresh fish, and once exotic tastes like wasabi. Farmers' markets across the country have shown consumers what "real" fruit and vegetables can taste like and they want that same premium taste available to them in their local supermarket.

The flight to premium taste and quality demonstrated in these three surveys offers a myriad of opportunity to specialty and natural foods manufacturers, marketers and retailers. Combining such attributes as premium taste with natural or organic is a hot button for many consumers. Artisanal produced foods and locally grown also offer great sales opportunities. Natural and specialty foods consumers are converging more and more in the U.S. Understanding that will be key for food marketers looking to succeed in today's and tomorrow's competitive market.

Natural~Specialty Foods Memo's Product Marketing Roundup

A Woman's Place is At the Top: Specialty Food manufacturer and market Glory Foods has named its first female president. Her name is Jacqueline Neal. Glory foods is well-known in the specialty foods industry for its home-cooked, Southern-style canned vegetables and side dishes, frozen entrees, side dishes and bagged vegetables. Ms. Neal has extensive experience in the food industry, including stints with Heinz, Quaker Oats, Nabisco, Kraft Foods and others. She not only should add much to Glory Foods with her extensive experience at major packaged goods companies, but having a woman's touch in the top spot at the specialty foods company should also provide additional insight since woman still make up the majority of food shoppers.

A New Definition of a "Hot" Presidential Candidate: San Francisco, California-based Dave's Gourmet has launched a new line of hot sauces with labels featuring caricatures of the 2008 candidates for United States president. There's Rudy, Hillary, Barack and others, all looking out at you from the hot sauce label. Dave, owner of the specialty foods company, is even getting in on the act himself. He has a caricature of his own face on one of the labels, describing himself as a "write in" candidate for President in 2008.

To spice things up a bit Dave's is holding its own "Presidential" competition via its website here. Here's how it works: Each bottle of Presidential hot sauce that's purchased counts as a vote for that candidate. If you buy one Hillary Clinton caricature bottle and three Barack Obama bottles that means you gave Barack three votes and Hillary one. Dave says he encourages "ballot stuffing" as well. The more you buy the more you vote.

Currently the company's website has Hillary Clinton in the lead with 13% of the hot sauce vote, followed by Obama with 11%, none of the above with 10%, And Rudy Giuliani with 9%. The top four is pretty close, although Hillary seems to have a fairly solid lead. There is a five-way tie for fifth place however between Fred Thompson, Mitt Romney, Al Gore (is he running?), John McCain and hot sauce Dave himself. John Edwards isn't doing so hot--he brings in the rear at 7%, second to last to Newt Gingrich (6%), who even though he hasn't announced he is running has his own hot sauce and the honor of placing last in the voting. Dave's is giving the profits from the sales of the Presidential candidate hot sauces to charities involved in cancer research. Now, that's hot.

Tea for Two: U.S. immigrant Ahmed Rahim used to manage two tea houses in Prague in the Czech Republic. Shortly after he came to the U.S. he and his sister Reem started a tiny specialty tea company called Numi Tea in his Oakland, California apartment. Today, just eight years later, Numi Tea is one of the fastest growing specialty, natural and organic tea companies in the world. It sells its teas not only in the U.S. but throughout the world, including in China, a country where consumers know their teas. Rahim is going back to his tea house roots a bit. Numi is moving into a new facility in Oakland and the brother and sister team decided to include a public tea house in the facility. You can read about the Rahim's, Numi and the new tea house and facility here. It may sound cliche but it has to be said: There's is a true American success story.

Beer and Clamato: For ages many Hispanic (and other) consumers have combined beer with tomato or Clamato juice to make a beer cocktail. Until now they had to buy the beer and tomato or Calamato juice separately and mix their own cocktail. Not any more. Anheuser-Bush is currently testing a beverage called Chelada, which is a combination of Budweiser beer and Clamato Juice, which is a tomato juice and clam juice product that's been on the market for decades. The folks at Bud know this combination is big with many Latinos and are betting the ready-to-drink combination will be a big hit with what is currently the fastest growing ethnic group in the U.S. Bud also plans to sell the beverage in Latin and Central America and perhaps elsewhere. Read more here.

Tanka Bars and Bites: Seldom in the vast world of niche marketing do we see a food product targeted to native Americans in the U.S. Asian Americans, Afro-Americans, Latino's, Woman and others---yes--but creating a product and targeting it to Native Americans is new and rather interesting marketing strategy in the food industry. And that's just what motivated Karlen Hunter, among other reasons, to create the Tanka Bar, which is a modern version of a traditional food called Wasna, a mix of meat and berries that plains Indians used to pack into Buffalo horns to sustain them on long journeys. Hunter, CEO of Native American Food Company, and a member of the Lakota Indian tribe, hopes the Tanka Bar and its sister product Tanka Bites, a bite-sized version of the Tanka Bar, will be a healthy alternative for young people who are more likely to grab a snack of potato chips or candy.

"We want to show them (young native Americans) that this is our original fast food," Hunter recently told the New York Times. Her message--and product--are timely in that Native Americans are among the highest sufferers of obesity and diabetes in the U.S. Her marketing message is creative and culturally relative as well. "In Indian country we don't say, 'this is good for you'...that will turn them away. We say, 'in traditional times our people could run great distances eating this food. So taste it. It tastes good.' "

The Tanka Bar and Tanka Bites are made primarily from Buffalo meat and cranberries. The Buffalo meat is softer than beef jerky and the cranberries give the bar a slightly fruity taste. The initial run of 1.5 million bars and bites has sold out. Hunter says her dream is to make the product "the first national break-out product made on an Indian reservation." The bars and bites are produced on a Lakota reservation where Hunter lives and works. To make the products the first reservation-produced national break-out product, Hunter also wants to get non-Native Americans to buy the products. Among her marketing tools are Myspace and Facebook sites which introduce the bars and bites, discuss their origins and heritage, and talk about their nutritional benefits. Read all about the bars and bites and their heritage and other facts here.

Natural~Specialty Foods Memo's Retail Roundup

Retail Innovation: Illycaffee's Push-Button Cafe

Triest, Italy-based premium coffee producer, marketer and retailer Ilycaffee has found an innovative, inexpensive and quick way to build and open a cafe with essentially the push of a button. Ilycaffee has taken the "Push Button House," designed by Adam Kalkin, and turned it into a rapid-construction cafe for hard to build locations or places where the retailer wants to set up and operate a cafe temporarily. In fact that's what the premium coffe company going to do with there first "Push-Button Cafe" when they set it up in New York City's bustling Columbus Circle between November 28 and December 29 of this year.

Manhattan, and Columbus Circle, are teaming with holiday shoppers and others during this period of time. A great opportunity for a retailer like Illycaffee to sell thousands of gallons of specialty coffee drinks and lots of deserts in a prime location without the investment of actually building or leasing a permanent "brick and mortor" store in the area. That's if they could even find a location in the high-rent, retail mecca of Columbus Circle where the temporary cafe will be located.

Illycaffee's Push-Button Cafe opens at the push of a button in 90 seconds and go anywhere.

The "Push-Button House" is an innovation designed by Kalkin to be used in areas where there has been a natural disaster, such a Huricane Katrina, or the current wildfires in Southern California. It's also designed for lower-income people (or anyone who wants to live in one frankly) who can't afford a traditional house but wants to own rather than rent. It's essentially a "house in a box." It comes prefabricated in a container. And with the push of a button it transforms into a living space in about 90 seconds. It has a kitchen, small dining room, bedroom, bathroom, living room and even a small library. You can read more about the "Push-Button House" and view pictures of it here.

As you can see in the pictures above and below, the "Push-Button Illycaffe" has pretty much everything a "brick and mortar" cafe would have. It's also rather attractive. We find this concept not only innovative but effective as well. Food retailers can use it to extend their brands to places they currently aren't: fairs, sporting events and a myriad of other venues. Manufacturers could use it to sell their products direct to the public, as could small start-up and artisanal food and beverage companies on limited budgets.

The uses are as varied as the retail imagination is. It's also great for test marketing and special events or seasonality retailing like Illycaffee is doing. In many ways its a serious lemonaide stand concept for grown-up and start-up retailers. Once word gets out on what Illycaffee is doing we expect others to adapt the "Push-Button House" for their own retail uses like Illycaffee has.

Retail Briefs

Whole Foods' New Market Hall Store: In mid September we wrote about the new Whole Foods Market "Market Hall" style store which was set to open in Oakland, California on September 26. The store, a first-of-its-kind design for Whole Foods, opened on the 26th to much acclaim from shoppers, suppliers and Oakland city officials. We recently read an excellent profile and review of the Oakland "Market Hall" store, which we have visited, written by Julie, a blogger for the sfist, a San Francisco Bay Area-based blog. You can read her piece on the new Oakland Whole foods Market Hall here. She has great pictures of the European-style food hall format store as well.

Columnist Dissed For Liking Whole Foods: Liberal San Francisco Chronicle columnist Mark Morford likes the new Whole Foods Market Hall store in Oakland. In fact, he likes Whole Foods in general and recently said so in his Chronicale column. (You can read the column, "Is it OK to love Whole Foods?" here.) In response to his positive column on the supernatural grocer Morford receives an email box full of angry and nasty responses from readers who have a distain for Whole Foods. These anti-Whole foods folks essentially acused Morford of "selling out" his "Liberal" credentials by giving the grocer an overall favorable nod despite having some intellegent critiques of how they do business.

Morford didn't take the nasty detractors sitting down though. He does what a writer should do. He took fingers to keyboard and wrote another column (10-12-2007) about those who dissed him for liking Whole Foods. In that column (read it here) Morford said most of the letters he recieved were in agreement with his point of view on Whole Foods or were a i reasonable and polite disagreement with his opinion. There was a segment of letters however which Morford takes off on.

These letter writers he says are absolutist, extreme and voracias Liberals. Morford asks: "Does the Extremism of some progressives spell danger to delicious evolution?" His answer: "Well, yes." But read his 10-12 column for yourself as it's witty, satirical and biting. He makes a number of larger political and social points using his writing about Whole Foods--and the "Whole-Paycheck-label-crowd's" letter-writing responses to his column--as not only the chief topic at hand but as a metaphor for the larger issues of public discourse and debate. The column is pretty humorous as well.

FTC Re-opens Whole Foods' Merger Wound: Federal agencies just don't like losing court battles. That was the case when the U.S. Federal Trade Commission (FTC) lost its first try to stop the Whole Foods' acquisition of Wild Oats Markets, Inc. A judge ruled in favor of the acquisition/merger but the FTC then went back to court and tried again. The same judge once again ruled in favor of the acquisition, which then went through in September.

Now the FTC is back again, this time appealing the ruling with a new court motion designed to overturn the merger on anti-trust grounds despite the fact that Whole Foods is well on its way to integrating Wild Oats into its operations. In fact, it's this integration the FTC aims to stop with its appeal. This is an unusual move by the FTC, attempting to stop a merger not only after it has gone through, but at a point where the acquiring company is well on its way to integrating the company it has purchased into its culture and operations. You can read more details about the FTC's appeal here and here. For a satirical take on the FTC's new court filing to stop the Whole Foods' acquisition of Wild Oats take a look at this dialogue from the Wonkette Blog. The topic: "The FTC hates Hippies."

H.E.B's New Natural-Specialty Cypress Market: H.E.B's newest retail format, its 112,000 square-foot upscale Cypress Market, made its debut yesterday when the first store opened in the Cypress neighborhood in Houston, Texas. The huge store features the largest meat market (full-service and self service) in the area. It features aged prime, all-natural and organic meats. The store also has a giant fresh fish and seafood department. The department will get fresh fish deliveries seven days per week in order to ensure optimum freshness, according to H.E.B. A large selection of both wild, farmed and locally-fished seafood and fresh fish are offered in the upscale department.

The store's produce department is expansive and upscale. It features over 900 varieties of fresh fruits and vegetables, including more than 100 varieties of certified organic produce. Cypress Market also features a huge wine department which includes a temperature controlled wine cellar and tasting room. The wine department features at least 2,000 different varieties of wines from throughout the world, according to an H.E.B. executive. The store's bakery is equally as expansive and upscale. It features a wood-burning hearth oven. Artisan, craft and organic breads are baked in the bakery multiple times daily. The store also has an international cheese shop that includes a cheese aging cave. The cheese shop offerers over 400 varieties of cheeses from throughout the world.

The store also features a Central Market "Cafe on the Run," which has numerous upscale meals for takeout or catering. There also is a full-service eat-in restaurant nearby in-store. Other ser vice highlights include a tortilleria where homeade tortillas are made, an eat-in sushi bar which also offers sushi to go, a cafe/coffee bar with an in-store coffee bean roaster.

The store also has the "Cooking Connection," an in-store department staffed full time by a professional chef and assistants. The department oeprates numerous "H.E.B. Showtime Cooking Stations" located throughout the store. Store culinary professionals will interact with shoppers every day of the week, consucting over 30 in-store demos or tastings each week, according to an H.E.B spokesperson.

Specialty, gourmet, ethnic, natural and organic grocery products and non-foods play a major role in the store. The shelves are full of premium specialty, international, natural and organic groceries. There also is a large store-within-a-store natural and organic health & beauty care and nonfoods area. A "Healthy Living Department" features row upon row of natural and organic bulk foods.

H.E.B. is one of the pioneer retailers of natural and specialty foods with its Central Market format. This format inspires the specialty and natural product offerings in the Cypress Market, which takes the Central Market concept to its next level in terms of upscale, premium, natural and organic retailing. The store also offers a huge selection of basic groceries and an expanded basic non-foods offering in its 112,000 square-feet. Everything from small appliances and kitchenware (basic and upscale) to various types of furniture and other offerings. H.E.B says on of the goals is for the Cypress Market to not be just an upscale specialty market but also a complete destination retail shopping center for consumers. It is.

Mid-Week Roundup Ender

Unmentionable Cuisine: We happen to be big believers in the concept of cultural relativism when it comes to food choices. That one regions food choices, like eating beef from cattle, can be considered unmentionable in another culture. We also are major advocates of fresh, all natural foods, procured locally whenever possible.

However, we aren't sure if the cuisine being offered by Britian's Famous Wild Boar Hotel restaurant might not just be taking the concepts of natural, fresh and locally procured just a little to far. The restaurant, located in Crook, near Windermere, in Cumbria UK, is preparing and serving up pancakes made from grey squirrels to diners, according to a story in the London Daily Mail (10-16-2007). And the price is right--as an introduction to the squirrel pancakes, which head chef Marc Sanders describes as "Peking duck-style squirrels wraps, the restaurant is currently offering them to diners for free as an introduction to the new dish on its menu.

Head Chef Marc Sanders diplays his creation: Grey Squirrel Peking Duck-style wraps or panckaes.

The grey squirrels also are locally procured. They're caught on the hotel's 72 acre wooded grounds. Hotel general manager Andy Lemm says the grey squirrels are everywhere on the grounds. "Our diners seemed to enjoy the squirrel pancakes," Lemm told the Daily Mail, "and I thought they tasted rather nice, a bit like rabbit," he added.

Grey squirrels are killing off red squirrels in the UK. As such the reds have become an endangered species while the government has encouraged hunters and others to eliminate the greys. Britian's Lord Inglewood, a conservationist, warned Brits that the red squirrel would soon become extinct if grey squirrels are allowed to go on increasing. Red squirrels are native and the greys aren't.

Lord Inglewood also suggested one way to deal with the problem would be to foster a market for grey squirrel meat. He told Brits that Americans eat grey squirrel and even have a number of recipes for the meat, including what he discribed as the most popular dish in the U.S., Brunswick Stew, which the Lord says "is casseroled squirrel."

He wants famous British chefs like Jamie Oliver to promote grey squirrel-based dishes for school dinners. (Really, the Lord told the Daily Mail that, we couldn't make it up.)

Meanwhile, chef Marc Sanders decided to take the Lord up on his suggestions by creating the squirrel pancakes and putting them on the hotel's menu. The hotel's general manager also had a hand in the dish since he was looking for a way to help rid the grounds of the grey squirrel infestation.

Fresh, all natural, locally procured--the grey squirrels do hit all the hot buttons with today's foodies. And we must say the squirrel Peking-style pancakes do look attractive in the picture. Perhaps what was once unmentionable cuisine will become tomorrow's new trendy food dish. We're not sure though, those grey squirrels are rather cute. And a wise man once told us never to eat meat from an animal that's much cuter than you are.

We would give the squirrel pancakes a go as the Brits say. Would you? Let us know if you would in the comments link below.

Tesco Fresh & Easy Update: Oakland, CA

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


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

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

The five Oakland sites are:

• 20th and Telegraph Ave
• 17th and San Pablo Ave.
• West Grand and Market St
• 606 Clara St
• Oakland Coliseum Transit Village

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Thursday Talking Points Memo

Category Marketing Dominance: How Whole Foods Market, Inc. Became King of the Supernatural Retail Grocery Category and Why it Will Continue to Reign For Some Time

The ultimate purpose of any marketing strategy is not to just build a brand but to dominate a category. For example, Google dominates the search category, Campbell's the canned soup category, Starbucks the premium coffee category and Whole Foods Market Inc. the supernatural retail grocery category. Among the many things these category kings have in common is they also have built strong brands. To paraphrase an old saying: "Dominate your category and the brand equity will follow."

Our discussion today is about Whole Foods Market, Inc. and how it's positioned itself as the supernatural retail grocery category king. In fact, it's become more than the dominant category leader--it's now the category's only real member.

How did this happen? Whole Foods has employed seven key marketing strategies in the mere two decades it's been in existence to take it from an entrepreneurial one-store start-up to the sole player of any significance in the supernatural grocery category.

These seven key strategies are: The creation of a corporate retail purpose/mission and the building of a culture to advance and sustain it, development of innovative, lifestyle-oriented retail merchandising methods, shrewd buying practices, competitor acquisitions, alliance building, 24/7 communication and community relations practices, and rapid new store growth. These aren't the exclusive strategies the grocer has used to get where it is today but they are the primary and key marketing strategies which have made Whole Foods the category owner it is today.

Let's examine each of these marketing strategies briefly. First, from its early entrepreneurial beginnings under CEO John Mackey, Whole Foods saw the importance of creating and building a unique culture based on a purpose and a mission other than merely being a natural foods retailer. These precepts have been refined throughout the years and infuse everything the grocer and its associates do in the stores.

Second, Whole Foods is a perfect example of "continuous improvement" when it comes to its merchandising philosophies and practices. Observing the grocer over the years shows a progression from an orthodox, food co-op type of retail merchandising philosophy to today's mix of upscale, natural foods/lifestyle-oriented merchandising in its stores. Retail as theatre is a good description of retail merchandising in today's Whole Foods stores. Food is clearly at the center but it's much more, including social aspects, fun, creativity and the creation of good feelings for store shoppers.

The third marketing strategy, shrewd buying practices, is less sexy but no less important than the other five. Whole Foods has developed, from it corporate buying headquarters to its stores, a policy and practice of getting the absolute best cost of goods it can from its distributors, suppliers and vendors. Store-level associates are rewarded economically for doing this--and even more importantly they take great personal pride in cutting a better deal (some vendors say too much pride) than the guy or gal at the Whole Foods store down the street. These buying practices from the top down to store-level have helped the supernatural grocer obtain the highest gross margins among food retailers anywhere in the world.

Whole Foods' strategy of acquiring competitors in the natural foods retailing sector is no less brilliant. From the grocer's early acquisitions of Mrs. Gooch's in Southern California and Bread & Circus in the Eastern U.S., to its recent acquisition of rival Wild Oats (and many other acquisitions in between), Whole Foods has used acquisitions as a two-pronged marketing strategy not only to grow more rapidly and enter markets with a critical mass of stores but also as a way of eliminating competitors (and potential competitors) in the supernatural retail grocery category.

The fifth key marketing strategy, alliance building, has and continues to serve Whole Foods well. The grocer builds alliances with a vast network of stakeholders ranging from farmers and chefs to non-profit, environmental, consumer and non-governmental organizations in the U.S. and globally. Whole Foods' sixth strategy, 24/7 communications and community relations, ties into alliance building. The grocer conducts a very comprehensive marketing communications program both from its headquarters and at store-level, telling its story to the media and other constituents. Most impressive, Whole Foods makes sure its core purpose, mission and culture is weaved into these stories which constantly reinforces its clear leadership and dominance in its category.

Lastly, coupled with its aggressive acquisition strategy, Whole Foods pursues a super-aggressive new store building program. What's most important about this besides the sheer growth it is providing is that the grocer continues to "up the anti" with its new stores. Rather than build similar size and format stores like most food retailers do Whole Foods stores keep (generally) getting bigger and more lifestyle-oriented. They also continue to incorporate new concepts (like a day-spa in the recently opened Campbell, California store) and formats (like the European food hall store just opened in Oakland, California). Furthermore, since the grocer has a decentralized culture its able to localize its stores in ways other large food retailers have yet to duplicate.

These seven marketing strategies form the core of the process Whole Foods has used to not only dominate its category, but now that its acquisition of Wild Oats has been finalized and is proceeding along well, position itself as the only real member of the supernatural retail grocery category.

This post Wild Oats acquisition category dominance can be evidenced by what has happened with Whole Foods' publicly traded stock in the little more than a month since the U.S. Federal Court gave the green light for the acquisition. As soon as the acquisition was approved Whole Foods stock went from a near all-time low in July, 2007 to a 33% jump in a week or so. Today the stock is up 48% over that July low.

MSN's popular "Top Stocks" columnist and investment expert Robert Walberg believes Whole Foods' stock will rise even more in the coming months--much more in fact. Walberg says "what makes Whole Foods such an exciting long-term investment is that it has changed how we perceive the supermarket experience, much like Starbucks changed coffee retailing 20 years ago. The produce, meat, specialty food and wine/cheese areas provide a feast for the senses. Meanwhile the focus on natural and organic products throughout the store gives consumers a place to shop where they can find an abundance of healthy and nutritious food choices for their families," he says. "Toss in a knowledgeable staff that prides itself on being friendly and helpful and you have a winning mix of product and service."

We couldn't agree more with Walberg in terms of Whole Foods' current positioning. Further, the supernatural grocer's category dominance which it has achieved using the marketing strategies we've discussed is what we believe will enable the grocer's stock share value to grow even more in the near term. Even more importantly though it's this category dominance which will allow the supernatural grocer to grow aggressively as a formidable food retailer for some time without any major competition in its category.

Whole Foods' major competition will come as the lines between natural foods super retailing and supermarkets and mass merchandisers continue to blur. As more retailers like Safeway, with its Lifestyle format and H.E.B with its City Market format for example, continue to "up their respective anti's" in terms of increased upscale natural foods-oriented and lifestyle merchandising, Whole Foods will find itself under increasing competition--not in its category but from a new, blurred category.

An analogy or similar example to this is where long-time carbonated beverage category king Coca Cola currently is. It remains the most recognized brand in the world according to most research, however since the carbonated beverage category has blurred so much (waters, new-age beverages) ,Coke is having to reinvent itself as its category melts away. That's why Coca Cola calls itself a "hydration" company today. Soda pop remains its flagship product but is being overtaken by bottled waters, juices and new-age brands within the company.

Whole Foods won't find itself in this situation for a long time however--and perhaps its next challenge won't even be from a Safeway, H.E.B or the other numerous supermarket chains that seem to be moving more and more into a Whole-Foods type niche with many of their retail banners. In fact, the history of category dominance tends to be led by entrepreneurial rather than established companies. Google, Starbucks, Microsoft and Whole Foods all began as fairly recent entrepreneurial companies and today own their respective categories. As such, it's quite probable that Whole Foods' is as likely to face a category challenge down the road from something and someone new in addition to a more established retailer. Of course with Whole Foods' track record as a dynamic, innovative company, if and when that time comes the grocer just may have already intentionally morphed itself into something different than it is today.