A British supermarket chain plans to open at least 18 stores throughout the Bay Area next year, many in neighborhoods that other grocery stores have long avoided.
Fresh & Easy Neighborhood Market, the aggressively expanding U.S. division of Tesco PLC, the world's third-largest retailer, plans to build smaller than typical outlets offering prepared meals, fresh produce and perishables in Antioch, Concord, San Jose, San Francisco, Hayward, Oakland, Oakley and elsewhere.
"The West Coast is a place that likes new things and likes new ideas," said Tim Mason, chief executive officer of Fresh & Easy, in explaining the regional push. "It's a market where we think there's a desire for fresh foods, healthy foods."
The San Francisco stores will be at Third Street and Carroll Avenue and Silver Avenue and Goettingen Street, in the Bayview and Portola neighborhoods.
Shopping options in the Bayview largely are limited to the Foods Co. bulk grocery store and the small Super Save market, along with corner stores and fast-food restaurants. An October survey by the Southeast Food Access Working Group, part of Mayor Gavin Newsom's Shape Up San Francisco program, found that 94 percent of neighborhood residents would support new food options and that half frequently bought groceries at Safeway stores outside the area.
Studies routinely have linked limited access to fresh produce and inexpensive groceries to poor health in low-income and minority neighborhoods, including higher rates of diabetes, obesity and heart disease. Only 52 percent of residents of "disadvantaged communities" in the Bay Area are within walking distance of a supermarket, according to a 2002 study by the Transportation and Land Use Coalition, a partnership of regional advocacy groups.
Many stores have avoided such areas for two main reasons, said Bob Reynolds, president of Moraga retail consulting firm Reynolds Economics. There's a perception of higher operating costs related to security and theft, and lower-income customers tend to spend less per trip than white-collar suburban shoppers, he said.
"It's easier to go to a Burger King than it is to get a decent piece of fruit in many neighborhoods," said San Francisco Supervisor Sophie Maxwell, who represents Bayview and Portola. "Fresh & Easy can help that."
Ken Hecht, executive director of California Food Policy Advocates, initially said he was pleased to hear that Fresh & Easy is expanding in the Bay Area, because the company repeatedly has said it will locate in neighborhoods underserved by grocery stores. But after reviewing the list of locations, which includes stores in upscale cities like Danville and Walnut Creek, he said the company isn't doing enough.
"This just isn't going to do what needs to be done if low-income people are to avoid obesity - and that's our biggest threat to public health right now," he said.
Fresh & Easy is building roughly 10,000-square-foot stores that are about a fifth of the size of a typical supermarket and stocking a narrower selection of often less-expensive goods with a higher proportion of private-label and prepared products. The closest comparison is Trader Joe's, which packs its 12,000- to 15,000-square-foot outlets with items bearings it own brand.
Tesco opened its first U.S. store a little more than two months ago and was scheduled to open its 36th and 37th today. Most Fresh & Easy markets are in Southern California, with a handful in Arizona and Las Vegas. Tesco is investing $2 billion over five years in the division and has 140 planned locations.
The other Bay Area sites announced Wednesday are Danville, Fairfield, Mountain View, Napa, Sunnyvale, Vallejo and Walnut Creek. The company plans to eventually open additional regional stores and is discussing several addresses in Oakland, Mason said.
The aggressive expansion could take sales away from businesses like Safeway, Wal-Mart and Whole Foods Market, some retail experts say. Burt Flickinger III, managing director of New York retail consulting firm Strategic Resource Group Inc., said Fresh & Easy stores provide a shopping experience that is "fresher, faster and cheaper."
"They should be the fastest-growing grocer on the West Coast and challenge everyone from Safeway and Save Mart to Whole Foods and Wal-Mart," he said.
Others took a more skeptical view.
Jim Prevor, editor in chief of retail trade publisher Phoenix Media Network Inc. and author of the Perishable Pundit blog, said the company's early performance doesn't bode well. Vendors and industry consultants report that the first Fresh & Easy stores have run into operational difficulties, like regularly running out of stock, and that both foot traffic and weekly sales are below monthly targets, he said.
"It's possible, of course, that over time they may be able to either persuade Americans that the concept is great, or they may change the concept," he said. "But to date, it's certainly been a struggle."
Safeway spokesman Brian Dowling said the Pleasanton supermarket chain has been expanding market share and expects that trend to continue, regardless of Fresh & Easy.
"We've had a variety of competitors try to take our business in the past, and the fact is, we have a strategy in place to grow our business against a range of competition and we think we'll continue to be successful," Dowling said.
Tesco itself hasn't disclosed financial results for its U.S. division so far, but Mason said the company is very pleased with the early results.
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