Phoenix Business Journal – by Jan Buchholz
WinCo Foods, an employee-owned discount supermarket, is setting the stage for its entry into the competitive Phoenix marketplace.
Based in Boise, Idaho, WinCo operates 71 stores and four distribution centers in the Western U.S. It has about 13,000 employees and has been expanding rapidly in recent years. It has gained a reputation as a low-price leader and for deftly managing its stores.
“WinCo has been one of the real success stories in food retailing over the past decade,” said Neil Stern, senior partner of Chicago-based retail consultancy McMillanDolittle. “They are also
employee-owned, so there is a strong sense of pride and commitment to accompany their low prices. It has been a very effective formula.”
Stern said Phoenix is considered to be one of the most competitive grocery markets in the country, along with Houston and Atlanta.
Fry’s, a subsidiary of Kroger Co., is the most prominent large grocer operating here. Safeway, Albertsons, Walmart, Sprouts Farmers Market, Sunflower Market, Trader Joe’s, Costco, Fresh ‘N Easy, Ranch Market and Whole Foods also have carved out niches, some stronger than others.
Bashas’, the locally owned grocer that also operates the high-end AJ’s Fine Foods and discounter Food City, remains in Chapter 11 bankruptcy reorganization, and its future is the subject of speculation.
Target continues to expand its grocery footprint, almost tripling space for food products from 8,000 to 22,000 square feet in stores not designed originally for that purpose, according to Greg Laing, a principal with Phoenix Commercial Advisors who represents Sprouts.
Laing said he expects WinCo to bring something new to the marketplace, which will benefit consumers.
“They are a different operator. They are highly competitive and cost-efficient,” he said.
WinCo representatives would not comment on the company’s Phoenix market plans, but it has hired a local broker to find locations.
“I do represent them for their expansion in Arizona,” said Ed Beeh, executive vice president of SRS Real Estate Partners in Phoenix.
Beeh said WinCo has purchased the former Walmart site near Seventh Avenue and Bell Road in north Phoenix, but he did not provide any additional information about that location.
Documents at the Maricopa County Recorder’s Office show the 139,000-square-foot Bell Road property was purchased at a trustee sale in November for nearly $4.4 million. The buyer was Bell Road Partners LLC.
There is no word on when remodeling will take place or when the store will open.
At Peoria and 51st avenues in Glendale, developer Kornwasser Shopping Center Properties plans to build a WinCo and additional shops.
The project received approval in March from the Glendale Planning Commission, despite neighborhood protests. The Glendale City Council is scheduled to consider the plan in May.
Although WinCo is mum about other locations under consideration, Laing said the grocer has contracts on sites at the southeast corner of Alma School Road and the San Tan Freeway in Chandler, and at the northwest corner of Pecos Road and the San Tan in Gilbert.
“They are looking at other sites in the West Valley and at least two other East Valley locations,” he said.
WinCo likely will go head-to-head with Walmart.
“Walmart has been particularly aggressive and has used Phoenix to test several concepts, including Marketside,” Stern said. “They always make a market more competitive.”
Increased competition may make it harder for Bashas’ to recover.
David Wetta, director of Marcus & Millichap’s retail group in Phoenix, said WinCo’s market entry “will give the weaker players a harder time. Good operators will win in this market, and they will cause everyone to raise their game.”
WinCo expanded into Utah in late 2009 and has stores in Idaho, Oregon, Nevada, California and Washington.
The stores are large, averaging 90,000 to 100,000 square feet. By comparison, Costco warehouses average about 140,000 square feet.