California Centers Magazine serves retailers, developers, shopping center owners, investment sales brokers and tenant representation firms throughout the state of California.
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34 California Centers Magazine | August 2016 C C high-quality groceries at everyday low prices for the first time," said Gor- don Nesbit, Aldi's Moreno Valley divi- sion vice president, during his store's grand opening. "We may be new to California, but we've been successful in the U.S. for 40 years and we're ex- cited to continue to grow and bring our unmatched combination of qual- ity and value to Southern California. Great-quality groceries and everyday low prices make for an unmatched combination that shoppers love, and that couldn't be more true than it is right here in California." The chain is hoping its unique busi- ness model sets it apart from others within the crowded California grocer industry. Most Aldi locations only contain a handful of aisles, compared to the standard 30 aisles in many American grocery stores. The market is also almost entirely composed of its own premium exclusive brands, which Aldi touts as "free of certified synthetic colors, partially hydrogenat- ed oils (PHOs) and added MSG." Hammond notes the chain is known for a few other things as well, not the least of which is its simplistic ap- proach to groceries. While others hope to lure shoppers with bells, whistles and large, heavily marketed displays, Aldi is happy to let the quality of its products and competitively low pric- es speak for themselves. This easygo- ing approach extends to the compa- ny's real estate choices as well. "Aldi will take a space virtually 'as- is,'" he notes. "But it will expect a very competitive rent." FILLING A GAP Like MacLellan, Hammond also doesn't believe new and expanding players like Aldi are at risk of failing due to oversaturation, a phrase he says appears from time to time as the grocers shuffle about. "I feel as if we have just as many grocery stores today as we had 10 years ago," he explains. "The new concepts have taken over the best for- mer Ralphs, Vons and Fresh & Easy locations. The older, obsolete spaces have been converted into alternative uses, such as gyms or soft goods. The new concepts all fill a niche, while it's Ralphs and Vons that are constantly working to stay competitive." Emeryville-based Grocery Outlet, which offers up to 60 percent off on name-brand items, is one chain gob- bling up some of these abandoned locations. The "extreme-value" grocer plans to open 14 Southern California outposts, a move that kicked off this past December when a bankruptcy court judge approved the acquisition of six former Fresh & Easy stores for $205,000. The stores are located in Long Beach, Rosemead, Sunnyvale, Whittier, Orange and Downey. Grocery Outlet's claim to fame is its independently run platform in which each individual owner determines the feel, tone and deals displayed at their given store. ORGANICALLY GROWN Another mistake many of the now-extinct grocers made, according to experts, was assuming organic was a niche category within the California marketplace. In a land rife with farm- er's markets and a long harvesting history, this is hardly the case. Instead, Californians expect their grocers to have an exhaustive selection of or- ganic products. It's hardly an upsell — and it's definitely not a niche unto itself. "Organic is the new norm," says Scott Kaplan, executive vice president of JLL in Ontario. "Organic will not be considered special in the future. It will be base expectation and every grocer that would like to be relevant needs to embrace it." As with other retail sectors, the trends rampant within the grocer landscape are primarily inspired by Millennials, who are ruled by technol- ogy, convenience, affordability, and an appreciation for meaningful, artisanal products. "Thanks to technology, customers now are more educated than ever and expect more for their money," Kaplan continues. "The cell phone and In- ternet are used to help the consumer make buying decisions. Today's con- sumers want it all. They want cheap prices, organic, speed to market to get in and out of a location, loyalty programs and more. They are very demanding and their wallets are the ultimate voting power." Consumers, especially notoriously picky Californians, may want it all, but one only needs to look as far as the current mov- ers and shakers to determine the two resounding priori- ties. "It is 100 percent a case of healthy fare versus af- fordability," says Dan Hoogesteger, managing director of the West Coast headquarters for Sands Investment Group in Santa Monica. "California residents tend to strive for that healthy, outdoor-fo- cused lifestyle, which drives interest in both healthy options and afford- ability." Though organic may be too broad of a category to independently cap- ture these grocer dollars, MacLellan believes the companies that will rise to the top will find a way to incorpo- rate both health and wallet wellness into the niches they penetrate going forward. "Organic food is pretty widely sold now across the board in the grocery store sector," he reiterates. "However, there are other niches that are being established, including a wider selec- Gelson's Sherman Oaks location. Dan Hoogesteger Managing Director Sands Investment Group