CHICAGO (Adage.com) -- Citrine New World Bistro, which opened this month in the San Francisco suburbs, is more than the latest upscale quick-service entry hungry for some of the $350 billion in restaurants. It's also a hush-hush experiment for Safeway.

Yes, that Safeway, the country's second-largest grocery-store chain.

Citrine isn't like in-store dining facilities at retailers such as Wal-Mart and Nordstrom. Nor is it on par with upscale, white-tablecloth concepts like the Tastings restaurant attached to the flagship Wegmans Food Market in Rochester, N.Y., or the French-inspired Viognier that sits atop Draeger's culinary market in San Mateo, Calif. Citrine is located away from the grocery store, and its only obvious ties to its owner are its use of Safeway brands O Organics and Primo Taglio (and its website's privacy disclaimer).

Cosmopolitan dining
Citrinebistro.com beckons visitors to "Discover a new world of flavor." The fast-casual restaurant's menu traverses the globe, with offerings such as "immigrant seafood stew" and grilled shrimp and sesame noodle salad. It serves wine and beer by the bottle to correspond with each locale.

Safeway won't discuss the project, so it's unclear whether it's intended as a test-kitchen-cum-culinary-showcase to educate customers on the epicurean heights Safeway's products can reach, or whether it's intended to fill a gap left by the likes of Panera and Cosi.

Safeway's venture is the latest of a host of strategies aimed at better positioning the supermarket titan squeezed by Wal-Mart on the value end and quality leaders such as Whole Foods Market on the upmarket side. Sales in the hypercompetitive industry are $500 billion, according to Progressive Grocer's 74th Annual Report of the Grocery Industry.

Safeway, which has 1,755 units under the Dominick's, Vons and Randall's names, among others, is converting its supermarkets into "lifestyle stores" with upscale delis and bakeries, more fresh and gourmet foods, and softer lighting. Same-store sales for Safeway were up 4.8% for the first quarter after a 3.3% gain in 2006. But that's a far cry from Whole Foods' 11% same-store-sales gain in 2006 and its 7% gain in the first quarter of this year.

Feeding frenzy

Wegman's Tastings: Seats 114 and includes communal dining. Offers prix fixe tasting menus, full entrees and sushi. Lunds and Byerly's Minnesota Grille: Features homespun comfort food from patty melts to pot roast -- and breakfast -- in seven stores. Draeger's Viognier: Known as much for its wine cellar as its French-inspired American menu.

"Citrine may be the first chain restaurant developed and operated by a food retailer, but it won't be the last," Dennis Lombardi, exec VP-foodservice strategies for WD Partners, wrote in his blog. WD Partners lists Safeway as a client.

Plans for growth
Citrine indicates on its website that additional stores are pending, signaling that Safeway has a larger ambition than mere merchandising. The supermarket giant has already brought in a management team of experienced restaurant operators for the concept, which is run under its SRG subsidiary. Eric Quick, president-chief discovery officer, joined Safeway from Sodexho's Retail Brand Group, where he ran its six-brand, 400-unit fast-casual restaurant division. Jeff Shamburger, VP-marketing and discovery, has experience with titans such as Burger King, Nestl?, McDonald's and Dunkin' Brands. Both executives declined to comment.

"My guess is if they do this on a breakeven basis, they're probably thrilled," said Jim Hertel, managing partner of consultant Willard Bishop. "It's primarily a marketing and image-creation vehicle to merchandise the best of what they have to offer in store."

Though he admires Citrine's "on trend" idea, Bob Goldin, exec VP of consultant Technomic, sees no threat to the burgeoning fast-casual segment. "To scale these things up takes a long, long time," he said, citing Panera, which took 20 years to build up to 1,000 units. "The fact that they've hired people with restaurant experience is smart, but at the same time, these are grocery people. ... They'd be better off focusing on accelerating their investment in their grocery stores."