GROCERY OUTLET GETS 'LUCKY'

ELLIOT ZWIEBACH

BERKELEY, Calif. - Grocery Outlet here got Lucky last week - literally.

The chain of 125 bargain warehouse stores won the right to use the Lucky name after a federal judge in San Francisco refused to grant a temporary restraining order requested by Albertsons asking Grocery Outlet to cease and desist from using that name on a store it opened a few days earlier.

Albertsons originally acquired the Lucky name when it bought American Stores Co. in 1998. However, it converted stores with the Lucky banner to the Albertsons name in 1999, and because it had not used the name for at least three years, Judge Jeffrey S. White ruled Albertsons had abandoned the Lucky trademark, making it available for others to use.

That ruling will stand at least until April 28, when Albertsons will have the opportunity to present evidence to support its arguments at a preliminary injunction hearing. The chain "will vigorously defend our right to use our famous Lucky brand," an Albertsons spokeswoman told SN.

Meanwhile, Grocery Outlet will continue to use the Lucky name on a new neighborhood-oriented format it is testing at a store in Rocklin, Calif., about 15 miles north of Sacramento.

When it came to selecting a name for that store, "we realized the format was very similar to the original Lucky format," Bob Tiernan, president and chief operating officer, told SN. "And when we investigated if the name was available, it appeared to us Albertsons had abandoned it."

To speed the process along, Grocery Outlet filed suit against Albertsons last month in U.S. District Court in Oakland, Calif., to obtain a declaratory judgment allowing it to use the name. That suit is still pending, Tiernan said.

Grocery Outlet opened the Lucky store April 1, with a logo featuring the same red script as the original but with the addition of a rainbow over the K - identical to the rainbow on the Grocery Outlet logo.

The Rocklin store had been licensed to an independent operator, as are most Grocery Outlet locations, Tiernan said, but when the company decided to test the new format there, it converted it from independent ownership to its fifth corporate store, he said.

"Sales at that store were stagnant, and we felt it was an ideal location to test the new format because of the slightly upscale nature of the neighborhood and the demographics there," Tiernan said.

Grocery Outlet hopes to test the Lucky format at the Rocklin location for six to eight months, then replicate it at five or six other stores that it wants to convert, he said. "We think this approach would work at any of our stores, but all the stores we're looking at are 15,000 square feet and under," he said.

Operating the Lucky stores as neighborhood markets "means shoppers won't have to drive long distances to get to a box store to find the kind of prices we offer, which are 20% below any discount format, including Wal-Mart and Winco, and 40% below conventional operators," he said.

The reformatted store is very basic, Tiernan said, with everyday low pricing, no lavish product displays and the inclusion of neon lights, like a lot of the Lucky stores had in the 1950s. However, signs in the window and throughout the store inform customers the store has no connection with the old Lucky chain, he said.

At 12,500 square feet, the store is smaller than most of the 20,000-square-foot units Grocery Outlet operates, with less general merchandise but expanded offerings in other categories.

For example, the Lucky store will offer 60-70 SKUs of produce, compared with a norm of 40, Tiernan said. The store will also offer fresh meat, which Grocery Outlet has been testing in place of frozen meat at 20 other locations, plus expanded selections of cheese, frozen food, beer and wine.

"Part of the testing process will involve determining what other products will sell well so we can broaden our assortment," Tiernan said. "That will allow us to redefine any category based on what customers want."

Price points at the Lucky store are identical to the Grocery Outlet stores, he said, though the buying is a little different - rather than relying solely on opportunistic buys, like manufacturer overruns, buying for the Lucky store, particularly in beer and wine, "will be a little more aggressive, where we'll bring in more brands and offer a wider variety," Tiernan said.