Fresh & Easy closing Sacramento grocery stores

Published: Tuesday, Sep. 10, 2013 - 9:51 am
Last Modified: Wednesday, Sep. 11, 2013 - 6:07 am

It was part of a new wave of grocery stores that set out to reinvent the supermarket business in Sacramento. Now it’s history.

The Fresh & Easy grocery chain said Tuesday it will close all five of its Sacramento-area stores under a deal that will sell most of the troubled chain to Southern California supermarket tycoon Ron Burkle.

The Sacramento stores are among 50 or so Fresh & Easy locations that will close because Burkle – the man who tried to buy the Kings earlier this year – didn’t want them. An investment banker who knows Burkle said the billionaire plans to rebrand the remaining 150 Fresh & Easy locations as Wild Oats, a natural foods chain whose name disappeared in a takeover six years ago.

Owned by British retailing conglomerate Tesco, Fresh & Easy was one of several chains that jumped into the Sacramento region in the past few years with an eye toward gobbling market share from incumbents like Raley’s and Safeway. Fresh & Easy originally planned 17 stores in greater Sacramento.

“Fresh & Easy was looked upon as if it was going to turn the market on its head,” said Robert Reynolds, a supermarket industry consultant in Moraga.

Fresh & Easy – along with other recent challengers to the old order in the Sacramento market, like Sprouts and Fresh Market – offered customers smaller, boutique-like stores stressing fresh foods. A typical Fresh & Easy, for instance, weighed in at just about 16,000 square feet, far smaller than a traditional supermarket. But experts say most consumers still prefer to shop at larger stores, where they can find everything under one roof. It’s no accident that the fastest-growing grocer in greater Sacramento is Wal-Mart.

“The Fresh & Easy stores, with their size, are not competitive with the traditional grocery stores,” Reynolds said.

Experts said Fresh & Easy was hampered by limited selection and failed to capture shoppers’ imaginations. Another problem: Fresh & Easy relied solely on self-serve checkout, which can be a turnoff to many consumers. The stores lost $255 million in the fiscal year that ended last February.

That’s not to say a small store is necessarily a recipe for failure. With the right formula – say, an accent on ethnic foods or organics – a small market format can prosper. Fresh Market, a North Carolina chain that operates a store in Roseville, just reported a 17 percent jump in second-quarter profits. Phoenix-based Sprouts, which has four stores in the region, recently completed an initial public stock offering and reported a doubling of second-quarter profits.

Reynolds said Sacramento has been particularly attractive to the newcomers because of the availability of cheap storefronts after the 2008 real estate crash. “There were a lot of empty boxes,” he said.

With Fresh & Easy closing shop in Sacramento, it remains to be seen what will happen to the five locations. Reynolds said food stores tailored to localized ethnic tastes could do well.

A spokesman for Burkle’s Los Angeles private equity firm, Yucaipa Cos., was unavailable for comment. Fresh & Easy spokesman Brendan Wonnacott said he couldn’t offer an explanation as to why some of the stores were left out of the deal and will close down, including the sites in Sacramento. Also closing is a store in Modesto.

Reynolds said Sacramento’s distance from the company’s lone warehouse, in Riverside, probably made them too expensive to keep operating. The warehouse is being acquired by Burkle.

Fresh & Easy had planned to open a warehouse in Stockton, but it never materialized, Reynolds said.

Lloyd Greif, a Los Angeles investment banker who knows Burkle, said Burkle reviewed each city where Fresh & Easy has stores. “When Ron does a deal ... he’ll cherry-pick locations and what you see here is which markets look attractive and which markets don’t look attractive.”

Tesco announced it will loan Burkle about $125 million to do the deal, but other terms of the purchase weren’t disclosed.

The Sacramento Fresh & Easy stores, including locations in Folsom, Elk Grove and Lincoln, will close in a matter of weeks. The company announced that “most products in these impacted stores will be reduced by 25 percent” starting today.

Full- and part-time employees will be “eligible for a generous separation package,” the company added. The five stores employ a total of 70 workers.

Burkle made his original fortune in the supermarket business, taking over chains like Ralphs and Food4Less and creating a multibillion-dollar empire. He began exiting the industry about 15 years ago but was still major investor in the Wild Oats chain until it was sold to Whole Foods in 2007. He also is a major investor in the A&P chain, which operates on the East Coast,

Greif said Burkle plans to use the Fresh & Easy stores to revive the Wild Oats brand.

Burkle for a while was part of the investor group angling to buy the Sacramento Kings to keep the team from moving to Seattle. He had to drop out because of a conflict of interest, and the team was sold to a group led by technology executive Vivek Ranadive.


Call The Bee's Dale Kasler, (916) 321-1066. Follow him on Twitter @dakasler

Read more articles by Dale Kasler





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