CARSON, Calif. -- K.V. Mart Co. here, a 30-store chain that caters primarily to low- and medium-income shoppers, plans to open an upscale group of stores in southern California beginning next year, according to Darioush Khaledi, chairman and chief executive officer.
The stores will be called Napa Valley Farms -- a reference to the rich agricultural area in northern California and also the location of a winery Khaledi owns there, he told SN.
Khaledi said he hopes to open his first Napa Valley store in Palos Verdes next summer, with the second one in Westwood Village tentatively scheduled to open at the end of 2000 or the spring of 2001, followed by eight to 10 additional stores in such the scale southern California communities as Beverly Hills and Newport Beach.
K.V.'s decision to get into upscale marketing comes at a time when two potential rivals are expanding:
Gelson's Markets, Encino, Calif., an 11-unit chain owned by Arden Group, Los Angeles, plans to open stores in Orange County and Beverly Hills in the next two years and hopes to acquire a location in Santa Barbara.
Bristol Farms, an eight-store upscale chain based in Los Angeles, recently raised $25 million to help finance projected growth of four to six new stores per year.
Khaledi said he decided to open an upscale group of stores "because southern California is lacking in the number of good upscale operators compared with other West Coast cities. This part of the U.S. has more money than any other city but fewer upscale stores per capita."
Asked if he had numbers to back up that statement, Khaeldi told SN, "We're independent entrepreneurs, and our decision is based more on a feeling than on specific numbers."
He said his plans for a 30,000-square-foot store in Palos Verdes, a high-income community south of Los Angeles, have met with some local opposition.
"High-income areas are usually anti-growth and not very business-friendly," Khaledi told SN, adding, however, that he is confident he will be able to start construction soon.
Khaledi said he already has his eye on a second potential site in Westwood Village, just outside the campus of UCLA in West Los Angeles. Because of the high cost of real estate there, the Westwood store will probably be 22,000 square feet, he pointed out.
He said he hopes to begin construction on the Westwood site next summer.
Working with its supplier, Certified Grocers of California, K.V. acquired in late spring 12 stores divested by Boise, Idaho-based Albertson's. Including these recent additions, K.V.'s 30 stores consist of 18 conventional Top Valu Markets and 12 Valu Plus warehouse stores.
K.V.'s annual sales are approximately $240 million, and with the addition of the 12 stores that will all be reopened by the end of September, the company is estimating annual sales of $450 million.
The company has four more stores under construction, Khaledi noted.
His goal at Napa Valley Farms is to offer quality products that are comparable to other upscale operators but at more affordable prices, he told SN.
"Similar stores in the Los Angeles, San Francisco and Seattle areas all have good selection but astronomical prices," Khaledi told SN.
He said he believes the buying power of his 30 stores will help him buy more effectively for the upscale operation.
"With our established resources in produce, we certainly have access to the sources of supply, and with more purchasing power advantage than some other companies, we should be able to provide the same quality of perishables to consumers at lower prices," he said.
"With our business doing $1 million a week in produce, it will be easier for us to buy an additional $40,000 worth of higher-grade merchandise for the Napa Valley stores from the same sources at better prices than someone who's buying a smaller quantity."
Khaledi said he expects the Napa Valley stores to carry 20,000-24,000 stockkeeping units overall, compared with 14,000-15,000 at his Top Valu and Valu Plus stores, "with maybe 20-30% more SKU's in grocery," he added.