June 13, 2013
Will Wild Oats Rise Again?
If the reports are true, the Wild Oats banner will soon be back and flying over stores that currently carry the Fresh & Easy name.
Here is how the story, broken by Bloomberg News, goes:
- Ron Burkle, the founder of the private equity firm Yucaipa, is in discussions with Tesco to acquire its unprofitable Fresh & Easy chain with 199 small stores in Arizona, California and Nevada.
- Jim Keyes, former CEO of 7-Eleven and Blockbuster, owns the Wild Oats name and will become CEO of the new grocery chain once the deal for Fresh & Easy is done.
Wild Oats, which had 107 stores at the time it was acquired by Whole Foods in 2007, has been planning a comeback as a CPG vendor. According to the company’s website, it plans to sell a wide range of shelf stable items as part of a relaunch of the Wild Oats brand this year.
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Discussion Questions
What do you think of Ron Burkle buying Fresh & Easy and then converting the business to Wild Oats? Is Wild Oats’ brand equity and Jim Keyes’ retailing acumen a good investment for Yucaipa Cos. to make?
Poll
This could make sense in several locations, but a lot of them will have to go dark. Many of locations simply are not compatible unless they can get free rent deals. Overcoming the damage done by Tesco will also be a challenge. However, like any failed grocery chain, there are a few locations where the broken clock is correct twice a day, and they should do well.
The answers to both questions would seem to be … Burkle has proven that he knows how to make money. I suspect he will do that again with this move.
I personally loved the Wild Oats stores and am hopeful that the new version will offer something unique to keep these locations operating in these neighborhoods. I am pleased to hear of this potential result rather than shuttering yet another set of retail locations.
The combination of money and retail expertise seem right for this opportunity. The real question is the demographic makeup of the locations. I assume the due diligence has been done and so I think this can be a good investment.
Hopefully the negative atmosphere from Fresh and Easy can be eradicated.
Fresh & Easy had three fundamental issues—its products, pricing and locations. Wild Oats may be able to address the first two, but not the third.
Ron Burkle is an investor and so one assumes there is profit potential in the deal.
As to the banner … what brand equity? Seems like a stretch, but since it’s probably a “buy and flip” play, it probably won’t make much difference.
Fresh & Easy was a case study on what to do wrong when entering a new market and to get the timing exactly wrong. Yucaipa could give more than one case study on timing acquisitions, but has also had some bad experiences, particularly in the cold storage industry, with its investment in Americold. This one could go either way—the retail experience bodes very well for the effort, but the drive for a quick payback could ruin it.
Based on the scant information available, I conclude that the new Wild Oats will be like a new-age Aldi—all private label, but with an organic, upscale spin. Oh… isn’t that Trader Joe’s?
One concern would be that the 200 locations may not match up well with the type of shoppers who are interested in that sort of merchandising. Fresh & Easy took strip center locations not always in prime neighborhoods.
Yucaipa is savvy about retail real estate, though. Chances are the deal is attractively priced. The stores are pretty young, so they may not need immediate renovation.
Evidently, it believes the Wild Oats brand retains equity worth leveraging too. All in all, that’s a nice batch of raw material to start with.
Whether or not the investment is a good idea depends upon how the transition is rolled out. There will be some equity issues with discarding or using either name, so creating a retail environment that works for their consumers will probably be more important.
The questions are, does the current real estate fit with the future plans? Do the current stores have similar consumers? What consumers does the new store want? What will be the best shopping experience and products for the consumers they plan to attract? There are too many unanswered questions to pass judgment on the investment.
I think this is a worthwhile endeavor. I recall shopping at Wild Oats and it was my perception that their products and prepared prepared foods were held to a high standard. What will be interesting will be how they differentiate themselves from Whole Foods.
Burkle and Keyes are in it to make a profit. Given that, the guess is they will be successful after closing losing locations and opening new in areas better suited. Here’s another guess: they will flip it after getting it profitable again.
Failed retail stores and brands tend to be what they are—failed retail stores. Overcoming that is rare.
The brand of “Wild Oats” is known to retailheads like us, but likely has little or no meaning to the consumer. I don’t see the brand name itself lending anything to the success as it would be the same as a new or unknown brand.
Their greatest challenge will be reaching the consumer, gaining awareness, and gaining consumer tries. The traditional methods simply don’t work anymore and it is the greatest challenge to new retail entering the market.
Beyond that, they will have to have a compelling and relevant offer right from the start to gain any level of return visits in order to gain any footing towards incremental growth. They will only have one chance to make a good first impression and how they execute towards that will be essential.
Huh? I can’t imagine how Whole Foods would even allow this to happen. Of course that may be the key to understanding this; i.e. they wouldn’t allow anything to happen which would have a chance of being a successful competitor, therefore this can’t have a chance. At least that’s one interpretation. As others have noted, Mr. Burkle and his granola possee will have to overcome F&E’s (presumably) mediocre locations, and any ghosts-of-SKUs-past that may still be haunting them. I wish them well.
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This could make sense in several locations, but a lot of them will have to go dark. Many of locations simply are not compatible unless they can get free rent deals. Overcoming the damage done by Tesco will also be a challenge. However, like any failed grocery chain, there are a few locations where the broken clock is correct twice a day, and they should do well.
The answers to both questions would seem to be … Burkle has proven that he knows how to make money. I suspect he will do that again with this move.
I personally loved the Wild Oats stores and am hopeful that the new version will offer something unique to keep these locations operating in these neighborhoods. I am pleased to hear of this potential result rather than shuttering yet another set of retail locations.
The combination of money and retail expertise seem right for this opportunity. The real question is the demographic makeup of the locations. I assume the due diligence has been done and so I think this can be a good investment.
Hopefully the negative atmosphere from Fresh and Easy can be eradicated.
Fresh & Easy had three fundamental issues—its products, pricing and locations. Wild Oats may be able to address the first two, but not the third.
Ron Burkle is an investor and so one assumes there is profit potential in the deal.
As to the banner … what brand equity? Seems like a stretch, but since it’s probably a “buy and flip” play, it probably won’t make much difference.
Fresh & Easy was a case study on what to do wrong when entering a new market and to get the timing exactly wrong. Yucaipa could give more than one case study on timing acquisitions, but has also had some bad experiences, particularly in the cold storage industry, with its investment in Americold. This one could go either way—the retail experience bodes very well for the effort, but the drive for a quick payback could ruin it.
Based on the scant information available, I conclude that the new Wild Oats will be like a new-age Aldi—all private label, but with an organic, upscale spin. Oh… isn’t that Trader Joe’s?
One concern would be that the 200 locations may not match up well with the type of shoppers who are interested in that sort of merchandising. Fresh & Easy took strip center locations not always in prime neighborhoods.
Yucaipa is savvy about retail real estate, though. Chances are the deal is attractively priced. The stores are pretty young, so they may not need immediate renovation.
Evidently, it believes the Wild Oats brand retains equity worth leveraging too. All in all, that’s a nice batch of raw material to start with.
Whether or not the investment is a good idea depends upon how the transition is rolled out. There will be some equity issues with discarding or using either name, so creating a retail environment that works for their consumers will probably be more important.
The questions are, does the current real estate fit with the future plans? Do the current stores have similar consumers? What consumers does the new store want? What will be the best shopping experience and products for the consumers they plan to attract? There are too many unanswered questions to pass judgment on the investment.
I think this is a worthwhile endeavor. I recall shopping at Wild Oats and it was my perception that their products and prepared prepared foods were held to a high standard. What will be interesting will be how they differentiate themselves from Whole Foods.
Burkle and Keyes are in it to make a profit. Given that, the guess is they will be successful after closing losing locations and opening new in areas better suited. Here’s another guess: they will flip it after getting it profitable again.
Failed retail stores and brands tend to be what they are—failed retail stores. Overcoming that is rare.
The brand of “Wild Oats” is known to retailheads like us, but likely has little or no meaning to the consumer. I don’t see the brand name itself lending anything to the success as it would be the same as a new or unknown brand.
Their greatest challenge will be reaching the consumer, gaining awareness, and gaining consumer tries. The traditional methods simply don’t work anymore and it is the greatest challenge to new retail entering the market.
Beyond that, they will have to have a compelling and relevant offer right from the start to gain any level of return visits in order to gain any footing towards incremental growth. They will only have one chance to make a good first impression and how they execute towards that will be essential.
Huh? I can’t imagine how Whole Foods would even allow this to happen. Of course that may be the key to understanding this; i.e. they wouldn’t allow anything to happen which would have a chance of being a successful competitor, therefore this can’t have a chance. At least that’s one interpretation. As others have noted, Mr. Burkle and his granola possee will have to overcome F&E’s (presumably) mediocre locations, and any ghosts-of-SKUs-past that may still be haunting them. I wish them well.