Raley's Faces New Rivals

SACRAMENTO, Calif. Raley's, already in a state of transition under new management, is about to face a raft of new food-retail competition that is preparing to open in its home market here. Among Raley's recent moves was the decision to convert an existing store in Elk Grove, Calif., a suburb south of the city, to Food Source, its warehouse-store banner. The conversion marks the first time the company

SACRAMENTO, Calif. — Raley's, already in a state of transition under new management, is about to face a raft of new food-retail competition that is preparing to open in its home market here.

Among Raley's recent moves was the decision to convert an existing store in Elk Grove, Calif., a suburb south of the city, to Food Source, its warehouse-store banner.

The conversion marks the first time the company has re-bannered one of its Raley's stores, local observers said, “and it may signify a preemptive strike to get ahead of the curve before Wal-Mart and others begin moving in,” a Northern California observer told SN.

It was not clear last week if Raley's conversion is an isolated instance or part of a broader plan as a host of new competitors prepares to move into the city, including Wal-Mart, Kroger Co., Fresh & Easy and Smart &Final.

“In fact, what Wal-Mart and others do could dictate what Raley's does going forward,” the observer said.

Raley's has been facing competitive pressures for several years from Safeway and upscale independents on one end and from Wal-Mart and other price-oriented operators on the other. In January, the company rehired Michael Teel, grandson of the founder, as president and chief executive officer, whose first move was to cut administrative costs by eliminating five of 10 management positions and 153 corporate office positions — averting a financial crisis, Teel told SN at the time.

Company officials could not be reached last week for comment on the Elk Grove, store, but sources said the store had been underperforming.

“Apparently Raley's is in close touch with the demographics around its stores and realized its conventional format was not a good fit right now for Elk Grove, which is a solidly blue-collar community with a heavy proportion of Hispanics,” the Northern California observer said.

The influx of new competition includes the following:

  • Tesco-owned Fresh & Easy, El Segundo, Calif., which has announced plans to open 19 stores in the area, including one that is expected to be in Elk Grove.

  • Kroger Co., Cincinnati, which operates four of its 11 FoodsCo warehouse stores in the Sacramento market and is reportedly expanding there.

  • Wal-Mart Stores, Bentonville, Ark., which is reportedly looking for at least 10 locations in Sacramento for a new smaller-format store, including one in Elk Grove, trade sources noted.

  • Smart & Final, Los Angeles, which plans to open its first Henry's Farmers Market in Northern California later this month in Elk Grove.

  • Target Corp., Minneapolis, which is expanding its Pfresh food offerings at stores in the Sacramento marketing area.