Olivers Market University of San Fransico

Olivers Market University of San Fransico

ISneptember 2005, Olivers Markets was nearing completion of an estimated $500,000 remodel of its original Cotati, Califomia, store when its top management team, consisting of Steve Maass (owner) and Tom Scott (general manager), quickly had to decide whether or not to bid on an expan- sion opportunity. Oliver's Markets consisted of two supermarkets in Sonoma County, one in Cotati and the other in nearby Santa Rosa, which together gen- erated about $40 million in sales per year. Sonoma County was situated at the northem fringe ofthe San Francisco Bay Area, about an hour's driving time from the Golden Gate Bridge. Oliver's hadjust been informed by its grocery wholesaler that Kroger's, a national chain, was selling 20 supermarkets in the San Francisco Bay Area. Within a week of receiving the list ofKroger's locations for sale, Steve and Tom narrowed the choice to two stores-Ralph's Super- market in Santa Rosa and Bell's Market in Novato. Novato was in Marin County, about 30 minutes south of Santa Rosa. Oliver 's had one week to tender a bid on one or both of the Kroger stores, either of which could.cost an estimated $2 million to retrofit. in ad- dition to the ongoing lease and operating costs.

In deciding whether or not to purchase and ret- rofit the new site(s), Steve and Tom were primarily guided by logistics, that is, proximity to existing stores, and by expected leasehold costs. Of greater concern, perhaps, was how to continue to differ- entiate Oliver's Markets from other supermarket chains. Prominent among these rivals, Trader Joes, Costco, and Whole Foods had recently entered Oli- ver's Markets' sales territory with brand-new stores; Wal-Mart and Target had also announced plans to develop regional supercenters, that is, large-format discount supermarkets, in Califomia. See Exhibit I for an explanation of supermarket terms.

OLlVER'S HISTORY

In 1988, Steve Oliver Maass purchased the then

bankrupt Cotati Farmer's Market. He recalled:

We came in here and it was just the worst store I'd ever seen. I looked at it and I said I know I can do a better job than this store has been doing. There's just no way I'd do this bad