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With Fresh & Easy Stores Empty, Suppliers Left In The Lurch

Jim Prevor’s Perishable Pundit, June 16, 2009

Just the other day, we ran a piece titled, Pundit’s Mailbag — Hope For Tesco Vendor Community ‘Is Gone’, based on a letter sent to us from Steve Spears. Now he sends a short, but graphic, follow-up:

Here is a picture, it is self explanatory.

It is a Fresh & Easy store that sits empty, built directly behind a Rite-Aid Store here in Fresno.

— Steve Spears
P-R Farms, Inc./Bella Frutta
Clovis, California

A hat tip to Steve for sending along the photo.

It is, of course, sad, to see such resources wasted. And for other retailers in centers with these “ghost stores,” it must be most frustrating.

The only chuckle we get from it is that every once in a while a reporter from a consumer publication calls after having spoken to Tesco and getting the “party line”. The reporters always ask the “Pundit” the same question: “Do you agree with Tesco that it is a clever strategy to rent stores, build them out and then let them sit empty?”

We always try to avoid laughing as we patiently explain that it is not a “strategy” at all. Obviously Tesco would prefer to open the stores and make money on each one. Not knowing how to do that, they sit closed while they try to figure out a way.

Tesco is run by big boys, and if they have so much “American Envy” that they want to lose a billion or two to get a little footprint in the US market, more power to them.

We worry about the supplier base. With the operation having opened only about 20% of the stores that suppliers had been advised they should have been ready to serve at this time, the supplier overcapacity could bankrupt companies.

The produce end is a tricky wicket. On the one hand, produce has outperformed the rest of the store — so whereas plenty of vendors in non-produce areas are selling Fresh & Easy only 5% or 10% of what they had been told to prepare to sell Fresh & Easy at this time, most produce is tracking the number of stores. With only 20% of the stores expected to be open actually operating at this time, their volume in produce is also about 20% of what was expected for this time.

On the other hand, Tesco and Wild Rocket Foods moved from a Category Captain model to a Market Buy situation, basically leaving many of these vendors in the lurch. These vendors spent big money to meet the standards that were articulated and now are mostly out of time to get the money back. It has caused big losses in the industry.

The “Pundit” is out in California to give a talk at a luncheon for the Fresh Produce and Floral Council. Interestingly enough, one of the sponsors of the lunch is Wild Rocket Foods. With Tesco not using the capacity it expected, Wild Rocket is looking to sell to other companies.

We wish them success. Their investment — and losses — to date have been substantial. We would suggest they focus on foodservice simply because few in the retail game in Southern California will want to support a company that they will see as part of the Tesco “infrastructure” in America. These retailers will prefer to see Tesco burdened with bailing out its British imports.

It is wonderful, though, to see Wild Rocket supporting the Fresh Produce & Floral Council. We hope they will talk to Tesco about supporting US trade associations such as FPFC, PMA and United Fresh, as most American retailers do. Tesco may not know it, but being open to the kind of interchange and learning these associations provide would be a big help to it in its efforts to revamp its concept in America.

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