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Safeway Gets a Makeover

With its "lifestyle initiative," Pleasanton chain hopes to compete on premium products, but the local competition is intense.



Like a phoenix, in early December the Safeway in Alameda's South Shore Center shut its doors and was promptly reborn, bigger and prettier, just across the way.

Similar transformations are happening to many Safeways. The Pleasanton-based supermarket chain, which operates 1,776 stores nationwide, has renovated or replaced 213 of them over the past two years to make them more appealing to contemporary shoppers. Safeway's "lifestyle" initiative, among other changes, entails expanding store bakeries and prepared-foods sections, replacing linoleum with faux wood, and warming up the color palette on the walls. By year's end, Safeway expects another 260 or so of its stores -- 43 percent of the total -- to have made the transition to "lifestyle stores."

Safeway is delving more deeply into organics, too. The Lifestyle stores boast broader selections of organic produce, and January brought the roll-out of Safeway's new O line of more than 150 USDA-certified organic products, whose rather double-edged marketing language includes statements such as "Taste food the way it should be" and "Treat yourself to the unique experience of real food."

Some industry analysts argue that Safeway is mobilizing upward to respond to other grocery chains poaching from its customer base -- Wal-Mart and Costco on one end of the spectrum and Whole Foods and Andronico's on the other. Company spokewoman Jennifer Webber argues that Safeway aims to remain right where it always has been. "We're a traditional grocery store, not a specialty store," she says. "We're trying to be in the middle, which is where 70 percent of the market is."

In essence, the chain's strategy is to keep its regular customers who might be interested in premium products from defecting to the competition for all of their shopping.

Though the conversion is costing billions, the company says it helped drive a chainwide 7.2 percent sales increase in its last fiscal quarter over the same period the previous year. The lifestyle initiative also would seem to be putting pressure on competitors: Just two months after the larger Safeway debuted in Alameda, Albertsons announced that it would close its nearby South Shore Center store at the end of February.

To gauge how well this more chichi, organic-intensive Safeway fits into the East Bay gourmet lifestyle, the Express put together what we dubbed the Yuppie Food Basket, a shopping bag of highfalutin' produce and well-loved upscale foods, including the likes of Acme sourdough baguettes, organic Meyer lemons, and the bizarrely popular snack Pirate's Booty. Then we comparison-shopped at Alameda's new lifestyle Safeway and three foodie-fave East Bay grocery stores: Berkeley Bowl, Whole Foods in Walnut Creek, and Andronico's in Danville.

It was far easier to compare prices on premium brands at the latter three stores since the Alameda Safeway did not carry products such as Cafe Fanny granola or even free-range or organic chicken. With the disclaimer that prices can fluctuate day to day, and that our sample was hardly exhaustive, we did find some things worth noting:

• If you're shopping on a budget, it's Berkeley Bowl all the way. No real surprise there. As for quality and range of produce, the Bowl also wins hands down, with the widest selections of both conventional and organic fruits and vegetables.

• Locals who deride Whole Foods as "Whole Paycheck" might as well call Andronico's "Whole Trust Fund." The upscale local chain charged significantly more than its rivals for many Yuppie Food Basket staples: Overall, Andronico's charged 34 percent more than Berkeley Bowl and 13 percent more than Whole Foods. Safeway was excluded from the overall comparison because it didn't always offer comparable products.

• The biggest surprise, however, is that when you eliminate the noncomparable products from the Yuppie Food Basket, Safeway prices are right up there with Whole Foods, its decidedly fancier competitor.

When presented with our data, Safeway's Webber had this to say: "When people shop, they shop for what's on sale, what's on special. They're not looking for certain brand items. When you shop the sales you can absolutely find good value."

No doubt. Yet people with an eye for premium products aren't necessarily shopping on price but on prestige and quality. Safeway's base, that mainstream 70 percent, is far more likely to view six bucks a pound for mixed greens as an unnecessary extravagance. Rather than offer the same economies of scale on De Cecco pasta and Cypress Hill goat cheese that it does on Jiffy peanut butter, Safeway appears to be using the profits it can make on high-end foodstuffs to upgrade its own lifestyle.

Safeway's new organics line treads on existing upscale brand.

To the left, we have a bottle of O cabernet vinegar produced by O Olive Oil, a ten-year-old gourmet brand based in San Rafael. To the right, a bottle of O brand balsamic vinegar, part of Safeway's new line of organic products. To confuse things further, the two bottles can be found just one shelf apart at the Safeway in Oakland's Rockridge neighborhood, where shoppers are also free to ponder between O and O brands of olive oil.

The smaller company simply can't be happy that Goliath just renamed himself David. Then again, with Goliath distributing David's products, Dave's execs are playing it safe, for now at least. "Our concern is that no confusion be caused in the marketplace," says O Olive Oil VP Mario Aranda. "We're a very small company working with small organic farmers for many years." At the moment, he adds, O is "looking into what this means for us." -- Jonathan Kauffman

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