Quick Take

In her weekly look at local business, Jessica M. Pasko reports on three more Rite Aid locations shutting down and a $38 million funding round for Scotts Valley's Heron Power Electronics Company, plus numbers, names and dates to know.

Each week, we’re taking a closer look at the movers and shakers, the growth of industries and what’s really driving the Santa Cruz County economy. I’ll be spotlighting some of the biggest areas for opportunity, updates on local development and all things underpinning the regional business scene each Wednesday.

Got ideas? Send them my way to news@lookoutlocal.com with “Business News” in the subject line.

Local Rite Aid stores to shutter as corporate chain goes bankrupt

Two local Rite Aid pharmacies are set to close June 25 as part of the parent company’s ongoing bankruptcy case.

On the chopping block this month are the stores at 1988 Freedom Blvd. in Freedom and 80 Rancho Del Mar in Aptos. A third store, on Highway 9 in Felton, will also be closing, but no timeline has been announced. The closures come after Pennsylvania-based Rite Aid filed for bankruptcy a second time. At its peak, the company operated more than 1,200 stores in 15 states. Read more here.

Heron Energy raises $38 million to transform electric grid technology

A Scotts Valley-based company started by a former Tesla executive has set its sights on upgrading legacy energy infrastructure. Heron Power Electronics Company officials announced late last week that the company had raised a $38 million Series A funding round to build a new kind of electric transformer that the company claims is more compact and responsive than older analog models. (Series A is the name given to a company’s first significant round of venture capital funding.) 

Transformers are a key part of the electric grid, and Heron is focused on what are called medium-voltage transformers, which are found in large substations and throughout residential neighborhoods. Older medium-voltage transformers are huge and aren’t always able to adapt quickly to changes like energy demand fluctuations, weather conditions and other external factors, according to the company. That’s in part due to more connected devices and new data centers drawing from the power system. Today’s energy grids need transformers that can readily adapt in order to meet demand surges and that are rugged enough to stand up to extreme temperatures and weather changes.

The company is targeting an internal pilot of its transformers next year, and hopes to do installations with energy and data center partners as soon as early 2027.

Heron Power was founded by Drew Baglino, who joined Tesla in 2006 and eventually served as the company’s senior vice president of powertrain and energy engineering. (Tesla’s powertrain system is the engine of its electric vehicles, including the battery, electric motors and charging system.) He resigned from that position in April 2024 and started Heron Power a few months later.

ICYMI: Santa Cruz’s soda tax to be decided by court following lawsuit

a person drinking from a bottle of Coca-Cola
Credit: Kevin Painchaud / Lookout Santa Cruz

A tax on sugar-sweetened beverages in the city of Santa Cruz faces legal challenges and now it will be up to a judge to determine whether the tax violates state law. 

Voters approved the tax in November, but it didn’t go into effect until May 1. The levy charges 2 cents per fluid ounce on the distribution cost of putting most sugar-sweetened beverages on store shelves and in restaurants.

Advocates say the tax will help reduce sugar consumption, but some business owners have argued that it puts them at significant financial disadvantage. As Christopher Neely reported, the American Beverage Association, a legislative lobby group representing the likes of the Coca-Cola Company and PepsiCo, along with related industry players, filed the suit in Sacramento last week. The plaintiffs argue that the city doesn’t have the right to establish new taxes on grocery store items under a state law passed in 2018. Read Christopher’s full story here.

Ch-ch-changes: Openings, closings and other developments

  • Downtown Pops! Program seeking applications for two storefronts: The City of Santa Cruz is accepting applications for tenants for 701 Front St. and 1407 Pacific Ave. as part of its ongoing Downtown Pops! program. Through this program, the city enters into a long-term lease with the owner of a vacant storefront and then offers a six-month sublease of the space to a new local business at an attractive rate. Palace Art & Office Supply previously occupied the Pacific Avenue space, while 701 Front St. was most recently home to a vintage store and before that Botanic & Luxe (now on Cooper Street). Applications and more details are available here.
  • Joby Aviation closes $250 million investment from Toyota: Santa Cruz-based electric air taxi company Joby Aviation announced it has received $250 million from Toyota Motor Company. The payment is part of a previously announced deal from the carmaker to invest $500 million in Joby to support its efforts to launch commercial air taxi service. Company officials have targeted 2026 for launching commercial service in its first markets, which are expected to be Los Angeles and New York City. Joby still has to meet several milestones before that can happen, including finishing its certification processes with the Federal Aviation Administration.
  • Capstan Medical picked as trade pub’s 15 best medical developments: Santa Cruz-based Capstan Medical was named to a new list of the 15 most innovative medical technologies from FierceBiotech, a trade publication for the medical technology industry. Capstan Medical is pioneering a new, minimally invasive approach to heart valve surgery that uses surgical robotics. The company, based on the Westside of Santa Cruz, announced earlier this year that it had completed its first trials in human patients. 
  • Downtown Santa Cruz farmers market opens in new spot: The Santa Cruz farmers market is expected to debut its new, temporary location along Cedar Avenue, near the downtown Santa Cruz library, on Wednesday from 1 to 5 p.m. The market’s move comes as the city’s planned library and housing project prepares to break ground. The location will be the market’s home until a new, permanent home can be established, which isn’t likely to happen for a few more years.
  • Three Santa Cruz businesses in the running for USA Today’s 10Best competition: Nominations for this year’s USA Today’s annual 10Best awards program, which highlights businesses around the country, include three sweet local companies. Marini’s has been nominated in the best candy shop category, while Pacific Cookie Company is in the running for best cookie store and Marianne’s Ice Cream vies for best ice cream shop in the country. Readers can vote daily until Monday for their favorite nominee in each category.

Got hires, promotions, or departures to report? Send them to news@lookoutlocal.com with the subject line “Career changes.”

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Looking at the numbers

  • $40,000,000: That’s how much an 18-hole golf course in Watsonville will set you back, according to a new real estate listing. The Spring Hills Golf Course property includes a 124-year-old ranch-style clubhouse and a waterfall. Once a private residence, the expansive property was converted into a golf course in the 1960s.
  • 69.2%: That’s the occupancy rate for Santa Cruz County hotels in April, marking an increase from 62.2% the previous month. The average daily room rate was also up month over month, from $159 to $177, and short-term rental occupancy rates also saw an increase. With Easter falling in April this year, local hospitality officials say they expected to see a bump over March. As the region’s busiest tourism season kicks off, local hospitality officials have said they’re preparing for what could be a slightly subdued season due to economic uncertainties and immigration concerns that could affect some travelers.

Save the date 

  • Wednesday, June 4: Santa Cruz Works will hold a summer mixer on the roof of the Anton Pacific apartments at 800 Pacific Ave., Santa Cruz, from 6 to 8 p.m. The evening will include networking with the top CruzHacks and Santa Cruz Launchpad teams, who will share their new innovations. Tickets are $23.18 and are available here.
  • Wednesday, June 4: Santa Cruz city officials will hold a virtual meeting to present a new housing project proposal for Front Street and gather public feedback. The meeting will be held on Zoom from 6 to 7:30 p.m. The proposal for 201 Front St. is for an eight-story, 245-unit apartment building, where Ace Hardware and its parking lot currently reside. 
  • Friday, June 6: Internet service provider Cruzio will mark its 35th anniversary with a party from 5 to 8 p.m. at its headquarters at 877 Cedar St., Santa Cruz. The free event includes live music, food and drinks, local vendor booths and community breakout sessions with local leaders.
  • Wednesday, June 11: The Santa Cruz Area Chamber of Commerce will hold a ribbon-cutting ceremony for Bandit Systems’ new office at 1320 Mission St., Santa Cruz. The event takes place from 5 to 7 p.m. Bandit Systems provides advanced video surveillance and security systems. Details and tickets here.
  • Saturday, July 26: The Pajaro Valley Chamber of Commerce and Agriculture will hold its annual awards dinner and auction. The event takes place from 4 to 9 p.m. at the Santa Cruz County Fairgrounds. Details and tickets here.

Add your business or networking events to Lookout’s free public calendar, BOLO. Click here to add your event.

Business news worth reading

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Jessica M. Pasko has been writing professionally for almost two decades. She cut her teeth in journalism as a reporter for the Associated Press in her native Albany, New York, where she covered everything...