C.A. Fortune Newsletter- September 2016

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Newsletter September 2016 Volume 4 - Issue 5

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Distributor News Vol. 4 - Issue 5 Inside This Issue Distributor News 2-3 Industry News 4-5 Consumer Trends 5-9 Retailer News 9-13 Shows & Events 14

KeHE Opens LEED Gold-Certified Distribution Center KeHE Distributors, Naperville, Ill., opened the doors to its new LEED Gold-certified distribution center in Aurora, Colorado. The 270,000-square-foot, state-of-theart facility joins KeHE’s network of 17 distribution centers that provide natural, organic and specialty products to natural food stores, grocery stores and other specialty retailers throughout North America. “Our new site demonstrates our commitment to serving a geographically diverse customer base and employing innovative practices and sustainability measures that enhance our operations,” says Brandon Barnholt, president and CEO. “It’s another exciting step in our journey as a Certified B Corp. and as a trusted supplier to our customers.” The facility employs energy efficient practices such as HVAC skylights and lighting controls, water heaters, LED lighting, recycled packaging material, software devices that monitor electricity usage and 80,000-square-foot freezer and cooler space. Source

Offices Central Region (HQ) 1831-A Howard St. Elk Grove Village, IL 60007 630.539.3100 East Region 2 Van Riper Rd. Montvale, NJ 07645 201.307.9100 South Region 801 Stadium Dr. Ste. 107 Arlington, TX 76011 817.522.3200 West Region 7696 Las Positas Rd, Livermore, CA 94551 925.243.1915

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Nassau Candy Acquires Certain Assets of Distributor Hobbs & Dobbs Hicksville, N.Y.-headquartered Nassau Candy, a supplier of private brand and branded candy and chocolate, said it acquired certain assets of Los Angeles-based Hobbs and Dobbs Inc., a distributor in the specialty candy and novelty markets since 1978. “The acquisition is highly synergistic with many of our candy vendors, plus further expands our channels of distribution and product assortment,” said Randy Goldbaum, Nassau Candy’s vice president of confectionery sales. “The deal unites us with a tremendous brand in Hobbs and Dobbs, its sales presence in the gifting markets, plus expands our product range into a tremendous group of fun and unique non-edibles, which we are excited to bring into the Nassau Candy product family.” Nassau’s products include an assortment of specialty candy, unique shaped tins with major licensed brands, and a collection of novelty, gag gift and other

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Distributor News Nassau Candy Acquires Certain Assets of Distributor Hobbs & Dobbs cont... major specialty chain retailers, hospital gift shops, general stores, and other major gift purveyor specialty items. Hobbs and Dobbs’ customers include specialty candy stores, major specialty chain retailers, hospital gift shops, general stores, and other major gift purveyors. Source

UNFI Reports Adjusted Net Sales Up 8% for FY2016 United Natural Foods Inc. (UNFI) has reported net sales for fiscal 2016 of $8.5 billion, up 3.5 percent from last year’s $8.2 billion. Adjusted net sales for the year were up 8%, excluding the year-over-year impact of the previously disclosed termination of a customer distribution contract and a second-quarter fiscal 2015 reduction in net sales. Net sales for the fourth quarter increased 7.4% to $2.2 billion, from $2.1 billion for the quarter last year. “We are pleased with UNFI’s accomplishments in fiscal 2016, which demonstrate our team’s focus on our strategic initiatives, particularly in light of a challenging operating environment,” said Steven Spinner, president and CEO of Providence, R.I.-based UNFI. “We believe our efforts to further enhance UNFI’s perishable perimeter product offerings, combined with the scale of our leading national distribution network, position us well for growth in sales and profitability over the next several years.” For fiscal 2017, UNFI expects net sales to be in the $9.4 billion-to-$9.6 billion range, or an 11.3% to13.3% increase over this year. GAAP earnings per diluted share are estimated to be $2.53 to $2.63 per share, an increase of 1.2% to 5.2% over fiscal 2016 GAAP earnings per diluted share of $2.50. In other news, the wholesaler’s board of directors approved an increase in board size to nine members and elected Daphne Dufresne to the board, effective October 1st. Dufresne is managing director for RLJ Equity Partners, a Bethesda, Md.-based private equity fund, where she helped build the investment team, raise capital to fund its operations and develop a partnership with The Carlyle Group, a global private equity firm.

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Industry News Record Breaking Natural Products Expo East Hosts Over 28,000 Attendees The 31st Annual Natural Products Expo East, held September 21st-24th, hosted more than 1,450 brands including 450 first-time exhibitors. This year, the exhibit space was expanded to both the third and fourth levels of the convention center to accommodate increasing demand. This was the largest show on record and grew by 10%, gathering over 28,000 community members to the Baltimore Convention Center in Baltimore. Natural Products Expo East is produced by New Hope Network and is co-located with Biofach America, NPA East, and the Harvest Festival. Natural Products Expo East is timed in early fall to offer an opportunity for brands to showcase products ahead of the new year, making it an essential event for spotting trends in food, beverage, supplement and personal care products. “Attending this show helps keep me professionally current, on top of market trends and in the conversation. I meet dedicated and innovative people who share their passion and expertise, and I come home rejuvenated and infused with hope. You realize you are part of a large movement of interested, educated, articulate and often brilliant people and the experience is thrilling,” said Leslie Li, Director of Food Services, Organic Food Program, Rudolf Steiner School. Source

FDA Begins Process to Redefine ‘Healthy’ Claim on Food Labels The U.S. Food and Drug Administration has announced it will redefine how and when “healthy” can be claimed on food labels in order to align the term with new nutrition and dietary guidelines. In a six-page industry guidance document, the FDA said rules for the Nutrition Facts label, updated in May, as well as suggestions outlined in the 2015-2020 Dietary Guidelines for Americans, prompted the agency to take another look at certain product claims. Redefining ‘healthy,’ the FDA notes, is also part of an overall plan to provide consumers with information that will allow them to make quick, easy food choices that correspond with public health recommendations. The agency also hopes to encourage the food industry to develop and introduce “healthier” products. “We have started to consider the criteria or terms for an updated definition of “healthy” but don’t have all the answers,” says Douglas Balentine, director of the Office of Nutrition and Food Labeling at the FDA’s Center for Food Safety and Applied Nutrition, in a blog post. “As a first step, we are asking for public input on a range of questions about what “healthy” should mean from a nutrition perspective and how consumers understand and use “healthy” food label claims.” continues next page...

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Industry News FDA Begins Process to Redefine ‘Healthy’ Claim on Food Labels cont... The FDA will solicit public comments until January 26th. It also plans to host public forums to gain additional input. In the meantime, the agency has released guidelines under which manufacturers can continue to use “healthy” as a nutrient content claim without further FDA enforcement. First, foods that are not low in total fat should have a fat profile of predominantly mono- and polyunsaturated fats. The amounts of mono- and polyunsaturated fats should be declared on labels and constitute the majority of the fat content. Furthermore, food claimed to be “healthy” must contain at least 10% of the daily recommended value of potassium and vitamin D, two nutrients the FDA believes consumers aren’t getting enough of, especially in comparison to the long-emphasized vitamin A and vitamin C. The FDA’s announcement comes on the heels of a public comment period on the use of “natural” on food labels. While the FDA has not established a formal definition for “natural,” it considers “natural” to mean that nothing artificial or synthetic has been included in or added to food that would not be expected to have those substances. The FDA received three citizen petitions asking the agency to define the term and another petition seeking to prohibit its use. More than 5,700 public comments were submitted between November 12th and May 10th. Source

Consumer Trends

Consumer Spending on Halloween to Top $8 Billion Average Shopping Trip will Cost $82.93 vs. $74.24 in 2015

American consumers are looking to splurge on their favorite candy and costumes this Halloween, as total spending is expected to reach $8.4 billion, according to the National Retail Federation’s (NRF) annual survey conducted by Prosper Insights & Analytics. This Halloween, consumer spending is expected to reach an all-time high in the survey’s history, the retail association revealed. On average, U.S. consumers are expected to spend an average of $82.93 vs. $74.34 in 2015, with more than 171 million Americans planning to partake in Halloween festivities this year. “After a long summer, families are excited to welcome the fall season by celebrating Halloween,” NRF President and CEO Matthew Shay said. “Retailers are preparing for the day by offering a wide variety of options in costumes, decorations and candy, while being aggressive with their promotions to capture the most out of continues next page...

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Consumer Trends Consumer Spending on Halloween to Top $8B Average shopping trip will cost $82.93 vs. $74.24 in 2015 cont... this shopping event.” According to the survey, consumers plan to spend $3.1 billion on costumes (purchased by 67% of Halloween shoppers), $2.5 billion on candy (94.3%), $2.4 billion on decorations (70%) and $390 million on greeting cards (35.4%). When it comes to preparation, 71% of consumers plan to hand out candy, decorate their home or yard (49%), dress in costume (47%), carve a pumpkin (46%), throw or attend a party (34%), take their children trick-or-treating (30%), visit a haunted house (21%) or dress their pet(s) in costume (16%). Consumers will use online resources (35%) and make in-store visits (29%) to search for the perfect costume inspiration. Social media will also play an influencer in consumers’ quest, particularly Pinterest and Facebook (both tied at 17%). Some other places for inspiration include friends and family (19%), pop culture (16%) and print media (14%). “Consumers are eager to celebrate Halloween, especially given that eight in ten Americans will shop by mid-October. That is the highest we have seen in the survey history,” Prosper Insights Principal Analyst Pam Goodfellow stated. “Americans will enjoy taking advantage of early-bird promotions both online and instore as they kick off the fall season.” When it comes to where consumers will shop for the season, 47% of shoppers will visit discount stores to buy their Halloween-related items this year and 36% will visit a specialty Halloween or costume store, up from 33% last year. In addition, 26% of customers will visit grocery stores and supermarkets, 23% will visit department stores and 22% will shop online. The Halloween shopping plans survey was conducted September 6th through September 13th. More than 6,000 consumers were surveyed. Headquartered in Washington, D.C., NRF is a retail trade association representing discount and department stores, home goods and specialty stores, merchants, grocers, wholesalers, chain restaurants and Internet retailers from the United States and more than 45 countries.

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Consumer Trends Which Natural Food Trends are Poised to Succeed in the Mainstream “The ideas, innovations and values born out of the natural products industry are resonating with mainstream consumers,” said Eric J. Pierce, director of business insights at New Hope Network. “Increasingly we’re finding shelf space for our products in conventional retailers,” Mr. Pierce said during a presentation at Natural Products Expo East, held September 21st-24th in Baltimore. “We’re finding more conventional shoppers, more mainstream shoppers finding relevance in our products.” The challenge for manufacturers, retailers and investors is predicting which product concepts will expand to gain mainstream acceptance. To identify these opportunities, New Hope Network tested more than 680 product concepts with 1,000 consumers representative of the U.S. population — not just the Whole Foods shopper, Mr. Pierce said. Two primary metrics were analyzed: purchase intent (“how likely am I to buy this product?”) and market prediction (“how likely are others to buy this product?”). Based on the metrics, eight trends emerged as having the greatest potential to succeed in the mainstream. Among them are grass-fed meat and dairy, compostable packaging, probiotics and prebiotics, and mission-based brands. Of the latter trend, Mr. Pierce said, “These are the brands that work to stand out in the marketplace by standing for something, standing for a purpose.” Another trend gaining favor among mainstream consumers is brain health, a concept coming on the heels of an increased interest in heart and gut health. “As we experience an aging population and more stress in our lives, many are finding themselves looking for more energy or mental agility or acuity,” he said. “So the idea of cognitive health and support is something that is growing in terms of attention. There is an array of different products that fit into this topic of brain health.” Examples include Steaz Organic Energy sparkling beverages with green tea extract, associated with reduced inflammation and increased mental alertness, and Hemp2o water infused with hemp seed extract, which is linked to improved cognitive function. Hidden vegetables is another product concept shown to resonate with conventional shoppers. Examples at Expo East included Veggie Fries, a line of frozen french fries blended with broccoli, carrots and chickpeas; MadeGood granola bites with a hidden serving of vegetables; and Good Health Veggie Pretzels, made with spinach, broccoli, carrots, tomatoes, beets and shiitake mushrooms. “I think what’s powerful here is to recognize that fueling this is a growing consumer desire to consume more plants in their diets and to eat more healthy and plant-based foods,” Mr. Pierce said. The rise of paleo-positioned products also has the potential for mainstream success, but, Mr. Pierce said, “I’m not suggesting that CrossFit gym memberships are about to skyrocket.” Rather, mainstream consumers are identifying with the values of the paleo lifestyle, which emphasizes whole, minimally processed foods, no refined sweeteners and an avoidance of grains. continues next page...

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Consumer Trends Which Natural Food Trends are Poised to Succeed in the Mainstream cont... “These things are resonating with consumers, even if they aren’t a strict adherent to a paleo diet or even truly understand what the paleo diet is,” Mr. Pierce said, citing as examples Cappello’s grain-free pasta made with almond flour, Hu Chocolate bars featuring almond butter and puffed quinoa, and Three Jerks Jerky, made with simple ingredients and no MSG or nitrates. Local sourcing represents another trend gaining traction beyond the natural segment, with such brands as Community Seafood and Three Twins Ice Cream touting locally sourced ingredients. “When you talk to consumers about the local movement you might find a much broader array of issues that are important to consumers — supporting local communities, knowing where your food comes from, having that more intimate connection to your food,” Mr. Pierce said. “It’s this idea of telling the story where your food comes from and having sourcing be local to your manufacturing, despite the fact that you may have outgrown your initial local distribution footprint. Companies can scale and in many ways remain local.” Source

Millennials Pushing Organic to New Heights More than half of organic shoppers are millennials with children, according to a new survey from the Organic Trade Association. Parents ages 18 to 34 years old represent the largest group of organic consumers in the United States. Among American mothers and fathers, 52% of those buying organic are millennials, which compares with 35% of Generation X parents and 14% of Baby Boomer parents. Laura Batcha, chief executive officer and executive director of the Washington based Organic Trade Association (O.T.A.), discussed the survey findings at Natural Products Expo East, held Sept. 21st-24th in Baltimore. “The market is diversifying,” Ms. Batcha said. “The younger folks are adopting to it quickly, but for many of these millennials, I like to think of them as second generation. Many of them were raised on organic products. It’s not a new idea they’re embracing; it’s just something that’s incorporated into their way of thinking.” “More than 75 million strong, in the United States, millennial consumers are more likely to view the organic label as trustworthy, credible, reliable and relevant,” Ms. Batcha said. “That is a reflection of many of these folks being second-generation organic and having a well-rounded, sophisticated understanding about what it means,” she said, adding that millennials are more likely to recognize the broader benefits of organic production on the environment, farmer livelihoods and animal welfare. continues next page...

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Consumer Trends Millennials Pushing Organic to New Heights cont... Since 2009, the O.T.A. has partnered with KIWI Magazine to conduct surveys and analyze the organic buying patterns of U.S. households. In a survey of more than 1,800 households throughout the country with at least one child under 18, 82% of families said they buy organic sometimes, and the number of families who never buy organic has steadily decreased to 18% from 30% seven years ago. Additionally, nearly half of all households surveyed are buying more organic foods today than a year ago. Organic food sales in the United States last year hit a new high, reaching $39.7 billion, up 11% from the year-ago level and outpacing the overall food industry’s growth rate of 3%, according to the O.T.A. Nearly 5% of all food sold in the United States in 2015 was organic. Ms. Batcha described a “virtuous cycle” driving the growth in organic foods. “One thing we do know is shoppers of organic have some habits that make them very attractive to retailers,” she said. “That means retailers are stocking products, which means products are more available to more people in more locations, which increases accessibility. “But the reasons why those shoppers are coveted amongst retailers is because they typically shop more often, more trips in a week, higher basket sizes, than non-organic buyers.” Source

Retailer News Giant Introduces Free Fruit Program for Kids All 169 Giant-Landover stores will now offer a free piece of fruit for children under 10 during each shopping trip, the retailer announced. The program kicks off with free bananas before moving to mandarin oranges later in the fall. Stores will use in-store signs and produce displays to promote the program. The retailer said produce suppliers were supporting the program. “Giant is always pleased to provide opportunities for healthy eating, whether it’s at home or in the store,” Lisa Coleman, lead nutritionist for Giant-Landover, said in a press release. “This program is one more way Giant helps children consume enough fruits and vegetables, further emphasizing our commitment to helping customers of all ages eat well and make healthy choices for themselves and their families.” An Ahold USA spokesperson told SN all Stop & Shop, Giant-Carlisle and Martin’s stores would also offer the Free Fruit for Kids program. Source

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Retailer News IGA Partners with Digital Foodie and Freshop for e-Commerce Program IGA has launched IGA Groceries Online—or IGA GO as it will be branded to shoppers—an e-commerce solution that meets shoppers’ need for a convenient online ordering platform from their trusted local Hometown Proud IGA store. IGA has named two preferred partners to bring IGA GO to its more than 1,100 IGA licensed retailers across the U.S. The partners, Digital Foodie and Freshop, will begin providing their optional online grocery services to IGA retailers immediately. “IGA retailers are in a unique position to offer an online grocery solution when you consider online shoppers migrate towards a trusted brick and mortar store, prefer online shopping as a service rather than a premium offering, and expect a full grocery experience with access to fresh departments like IGA’s meat, produce, bakery and deli,” says IGA CEO Mark Batenic. “Now our shoppers will have two ways to experience IGA’s personalized level of Hometown Proud customer service: within the walls of the IGA stores they know and trust, and online whenever and wherever is most convenient for them. With the industry’s top two providers behind us, we look forward to the immediate benefit our retailers and shoppers will see from this new IGA offering.” Award-winning grocery platform creator Digital Foodie is providing an IGA program option that includes retailer-branded web service, linked to IGA branded native mobile applications for placing orders and shopping planning, as well as in-store picking and fulfillment tools for optimized store pick-up and home delivery. IGA and Digital Foodie also established a marketing partnership for digital experiences that draws upon Digital Foodie’s marketing and consumer adoption best practices, leveraging its successes in more advanced European grocery markets. Digital Foodie will work closely with IGA and its retailers to develop marketing offers and training programs for converged groceries proven to achieve a high level of consumer adoption with profitable results for grocers. “The retail grocery industry is undergoing a digital transformation that requires grocers to provide converged services including on-demand and in-store solutions to extend and enhance their current bricks and mortar business and to fend off digital inroads by competitors such as Walmart, Amazon and other large grocery chains,“ says Kalle Koutajoki, CEO of Digital Foodie. “We have nearly a decade of experience in deploying online grocery in the most competitive on-demand grocery markets in the world, while simultaneously ‘cracking the code’ to achieving retailer profitability. I am very excited about this partnership, and with our platform and secret sauce to profitability, IGA retailers can jumpstart their on-demand business instantly while keeping the control of the store brand.” Freshop’s program option will provide full digital personalized engagement and online shopping for IGA’s independent retailers. The company’s full-service offering powers mobile, web and app-clickable circulars, full product catalogs, recipes to shopping lists, list building and the personalized offers critical to IGA’s independent grocers. Freshop, known throughout the industry for its efficient processing, also offers integration with loyalty platforms, PCI compliant payments, ADA compliant websites, and walkpaths for order fulfillment and outstanding support, all for one simple charge per store. continues next page...

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Retailer News IGA Partners with Digital Foodie and Freshop for e-Commerce Program cont... “Online Grocery is not just for big metro areas—grocers are successfully using Freshop in more than 25 states in communities of all types and sizes,” says Freshop’s CEO Brian Moyer. “IGA’s partnership with Freshop allows IGA stores to not only compete in online grocery but to go beyond what the ‘big guys’ are offering. Freshop’s powerful, easy to use platform enhances each local IGA, highlighting products and personalized services tailored to the community.” Source

Meijer Unveils Heritage Center

History Museum will be Open for Public Tours Midwestern superstore retailer Meijer is opening a Heritage Center to showcase its history, from founder Hendrik Meijer’s first arrival in the United States through the company’s most recent innovations and expansions. “Our grandfather and dad took a risk when they started this company in the midst of the Great Depression,” Co-Chairman Doug Meijer said. “But bringing innovations to their customers helped give their grocery store a future. At Meijer, we have a deep reverence for our history and culture, and are pleased to share this with the community that truly led to the company’s success.” To Inform and Inspire The interactive Meijer Heritage Center is designed to inform and inspire team members and visitors through 12 exhibition areas, including a theater, a selection of personal letters to the Meijer family from team members, suppliers and customers, 30 team member video interviews, and an array of artifacts that tell the Meijer story from its earliest beginnings to the present. The 5,000-square-foot museum is located on the Meijer Corporate Campus in Grand Rapids, Mich., in the Fred Meijer building. The museum was unveiled to team members this month at a ribbon-cutting event (pictured above). An open house for the public and media was scheduled for September 10th. “We’re excited to be able to showcase the founding culture and history of Meijer from which our team has grown to be a leader in delivering the best value and innovation to our customers,” said Mark Meijer, a member of the company’s board of directors. After open house, the center will open to the public for docent and self-guided tours by appointment only. Source

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Retailer News Whole Foods Adds Three Vice Presidents

Whole Foods Market has appointed three new global VPs to its Austin, Texas, headquarters team: Sonya Gafsi Oblisk, global VP of marketing; Martin Tracey, global VP of team member services; and Brooke Buchanan, global VP of communications. As global VP of marketing, Oblisk will lead Whole Foods’ marketing, advertising and brand development efforts, including digital, brand marketing and customer relationship strategies. Oblisk brings more than 15 years of experience in retail, consumer products and affinity marketing, including an eight-year tenure at Walmart, where she most recently served as VP of marketing for the retailer’s Sam’s Club division. In his role as global VP of team member services, Tracey will have strategic responsibility for the end-to-end team member experience, including recruitment, compensation and benefits, talent analytics, learning and development, and payroll operations for more than 87,000 team members. Most recently, he served as chief talent officer and VP of people development at coffeehouse chain Starbucks, where he was responsible for leadership development, talent analytics and organizational development. Buchanan, as global VP of communications, will lead Whole Foods’ public relations, internal communications and government affairs efforts. She previously served as VP of communications for healthcare technology company Theranos, as VP of public relations for housewares and food retailer Williams-Sonoma, and in multiple senior positions at Walmart. Prior to her corporate experience, she spent more than eight years in political and government communications. Whole Foods Market operates more than 455 stores in the United States, Canada and the U.K., and employs more than 87,000. Source

Whole Foods Ups Lorenzen to Pacific Northwest President Whole Foods Market has named Angela Lorenzen regional president of its Pacific Northwest region. In her new role, Lorenzen will oversee 22 stores in Washington, Oregon and British Columbia. Two of those stores – in Eugene, Ore., and Victoria, B.C. – will open in September and November, respectively. “I’m thrilled to lead our team in the Pacific Northwest region,” Lorenzen said. “This community cares deeply about natural and organic food and the story behind what’s continues next page...

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Retailer News Whole Foods Ups Lorenzen to Pacific Northwest President cont... on their plate. I’m focused on empowering our team members to meet the needs of this unique community and providing shoppers with the great experience they expect from Whole Foods.” Prior to her promotion, Lorenzen served in various leadership roles in Whole Foods’ Northern California region, including VP and executive coordinator of operations. She has worked in five of the company’s California stores, including the Noe Valley store, the opening of which she led. Source

Save Mart Unveils New Look At Tracy Store After a months-long makeover, Save Mart on Sept. 7 debuted a fresh look at its South Tracy Boulevard store in Tracy, California. The unit now includes features geared toward convenience and service, according to the company. The Tracy location is only the second store under the Save Mart brand that has the modern elements envisioned for the rest of the chain. The company’s Porterville store was the first to be revamped, and its Oakdale location is tentatively slated to host a grand reopening on December 1st, Save Mart’s Nannette Miranda tells The Shelby Report Features of the revamped store include: • Burrito/taco/nacho bar • Valley Fresco with fruit/vegetable-infused water, fresh squeezed orange juice and fresh cut produce • Specialty sandwiches • Expanded seafood counter • Expanded selection of natural, organic, gluten-free and bulk foods • Largest assortment of cold craft beers in county (500-plus in cold case) • New wine and liquor tasting section • Value aisles with deals • Updated pharmacy with private consulting room (the drive-thru remains) • Café seating with Wi-Fi To celebrate the store’s grand reopening, Save Mart donated $500 to both Tracy High School’s cheer team and Merrill F. West High School. In addition, schools and organizations enrolled in the grocer’s charitable giving program, Shares powered by eScrip, can enjoy a donation of up to 6 percent of qualified purchases during the month of September, instead of the usual 3 percent. The Save Mart Cos. is based in California’s Central Valley and operates 205 traditional and price-impact stores under the Save Mart, Lucky, FoodMaxx, S-Mart Foods and MaxxValue Foods banners. Source

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Shows & Events

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