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Tesco Comes To America As Fresh and Easy


Pundit’s Mailbag – A Look Back At Fresh & Easy: Tesco’s Insistence On UK Suppliers Building Facilities In The USA Increased Overhead And Reduced Flexibility... The End Was Easy To Predict Even At The Beginning explains that we wrote about Tesco’s Journey To America as Fresh & Easy for many years, but we have been speaking to Eric Schwartz even longer. Now, as we published Fresh & Easy: R.I.P, Eric sent over some final thoughts on the matter. But, as Eric reports, the people assigned to the project simply weren’t interested in adapting to American ways; they wanted to change the way we did business in America and the way American consumers eat. It was a tough order, and they failed to do either. 11/16/2015

Fresh & Easy: R.I.P. shares how we’ve published more than 1,000 pages about Tesco’s ill-starred venture to come to America as Fresh & Easy. We didn’t bother to write much about Yucaipa’s efforts to succeed, because, well, they never really made any efforts. It is a sad story. There are lessons here. But now it is done, and in the great mass of American retailing this most studied retailing adventure will be swallowed up and absorbed among all the disappeared retailers of days past. 11/4/2015

At The London Produce Show And Conference: ‘Room at the Top? — What U.K. Retailers Can Learn From U.S. Natural/Gourmet Retailing’ Cornell University’s Rod Hawkes Points Out That ‘Upscale’ Has Changed And That The American Experience Points To The Possibility Of Big Changes Ahead For UK Retailing reports that the fracturing of the UK retail market has mostly been about price. The recent growth of Whole Foods and Costco in the UK market may be the entering wedge by which market fragmentation changes from price to format. Cornell’s Rod Hawkes has carefully followed the healthy/gourmet sector in the US and has a theory about what might happen to UK retailing in the future. He titled his talk: “Room at the Top? What U.K. Retailers Can Learn From U.S. Natural/Gourmet Retailing.” We asked Pundit Investigator and Special Projects Editor Mira Slott to find out more. 5/18/2014

HEADLINER AT THE LONDON PRODUCE SHOW AND CONFERENCE: Former Wal-Mart Exec Bruce Peterson Speaks Out On Consumer Value Perception And The Future Of UK Retailing recalls that when we wrote New Opportunities To Sell Produce In The UK Market Emerging From Tumult — we realized that it was tumult in UK retailing that was redefining the market opportunities in the UK. Obviously there are many experts in the UK on British retailing, and we will have more than our fair share of them at The London Produce Show and Conference but, sometimes, an outsider to the market can both speak more freely and see things from a different perspective. So we asked Bruce Peterson of Wal-Mart fame if he would come to London to share his market analysis. Pundit Investigator and Special Projects Manager Mira Slott gave us this sneak preview. 4/30/2014

A Lesson From Tesco’s Fresh & Easy: Do Your Customers Define Things As You Think They Do? recalls how in all we wrote about Tesco’s journey to America as Fresh & Easy, one continuing issue was that Tesco never quite synced with the American consumers’ understanding and expectations regarding key terms. We thought about these “disconnects” as we recently saw an independent drug store in Manhattan making its pitch. 7/22/2013

From Prophet To Pariah, J.C. Penney’s Ron Johnson Falls Hard; “Brilliant Or Bankrupt” Strategy Reminiscent Of Tesco’s Sir Terry Leahy In Launching Fresh & Easy explains that retailers are often wrong, and ousted J.C. Penney Co. executive Ron Johnson being mistaken is neither surprising nor disqualifying. What is odd is why he and his board of directors allowed a kind of “brilliant or bankrupt” bet with the whole company? If a retailer thinks it should shift to everyday low pricing from a high/low strategy, that is plausible, but typically one would choose a couple test markets. It is not clear why Johnson didn’t proceed this way; it also is not clear why Tesco, in its Fresh & Easy roll-out, didn’t just open five stores, use local wholesalers and distributors and refine the concept until it worked or Tesco knew it couldn’t work. 4/11/2013

The Failure Of Tesco’s Fresh & Easy: Diverse Voices And “Daja Vu All Over Again” our piece, Twenty Lessons Learned From Tesco’s Fresh & Easy Failure, brought many responses. Edna St. Vincent Millay was among the first women to receive the Pulitzer Prize for poetry. She advised that “It is not true that life is one damn thing after another. It's the same damn thing over and over.” Which is pretty much what seems to have happened here. 1/22/2013

Twenty Lessons Learned From Tesco's Fresh & Easy Failure mentions how the year 2012 closed with the announcement that Tesco will probably exit its US business, Fresh & Easy. To our regular readers, the failure of Fresh & Easy will come as no surprise. But it is a surprise in this sense: When we initiated our analysis of Fresh & Easy, we were told, more than in any other situation, that Tesco would get it right. The more we pointed out that they got it wrong, the more we were assured that we were underestimating Tesco. The year 2013 gives us the opportunity to draw business lessons from the debacle in the hope that we may do business better ourselves. 1/7/2013

After Five Years Of Losses, Tesco Calls A Stop To Fresh & Easy Growth Plans saw that Tesco’s announcement from Britain was simple: that they had brought to a halt new Fresh & Easy stores in the U.S. The most important phrase in the Tesco announcement was this: ”… new capital investment will be tightly constrained.” This, which means no store openings and minimal renovations, will make Fresh & Easy’s positioning progressively more difficult. 10/15/2012

Tesco’s Problems With Fresh & Easy Prompt A Question: Why Is It So Hard For Retailers To Cross The Pond? with all the problems that Tesco has had in making Fresh & Easy a success, one wonders why British retailers struggle so desperately in America. Andrea Felsted and Barney Jopson were thinking through this question and wrote a piece in the Financial Times titled, “Bridging The Pond Is A Stern Test For Retailers,” which we excerpt here. It is clear that Tesco values the opportunity to grow in North America and made it an important strategic goal. However, if the losses aren’t restrained, and fast, new CEO Philip Clarke will move to close or sell Fresh & Easy. 9/27/2011

Is Tesco’s Move To Sell Its Japanese Venture A Sign From The New CEO That Fresh & Easy Will Have To ‘Improve Returns’ Or Else? notes that for all we have written about Tesco’s Journey to America in the form of Fresh & Easy, the future of this venture has pivoted around an unknowable: What does Tesco’s new CEO, Philip Clark, think about the notion of sustaining losing businesses in the hope of building long term strategic positions in important markets? Now we have a clue, as Tesco recently announced its intentions to withdraw from Japan and sell its venture there. Sometimes cutting a losing division in one place can free up capital and management time to buttress a loser elsewhere. So one could read this as a positive for Fresh & Easy. 9/7/2011

The Biggest Beneficiary Of A Possible Strike At Ralphs, Vons and Albertsons Might Just Be The Fresh & Easy Chain: With Record Losses And New Management In The UK, This May Be The Last Hope For Tesco In America finds that Southern California supermarket employees have voted to authorize their union leaders to call a strike against Supervalu’s local Albertsons stores, Kroger’s Ralphs banner and Safeway’s Vons stores. In a world with lots of non-union sources of food, it seems suicidal to not find a way to settle. The key beneficiaries of such a strike would be non-union Fresh & Easy and Wal-Mart as well as many ethnic and independent stores. One place where fervent pro-strike prayers are almost certainly being said is at Tesco’s headquarters in the United Kingdom, as in the most recent Tesco financial reports, Tesco has announced that Fresh & Easy lost about $307 million during Tesco’s 2010/2011 fiscal year. 5/2/2011

Tesco Trumpets Increased Sales Numbers But Growth Is Still Underperforming found that when Tesco announced its results for the third quarter, the reporting on Fresh & Easy frequently focused on the one statistic that management elected to highlight: “In the United States, sales were up 38.5% with a particularly successful Thanksgiving holiday period. Like-for-like sales growth remained strong at 9.8% driven primarily by increased customer numbers.” This was the lead for many of the articles that mentioned Fresh & Easy. The implication was that this is a strong performance. It is actually very weak performance. 12/24/2010

Latest Tesco Report Details Bailout Of Owners Of Wild Rocket And 2 Sisters; Tesco Says Fresh & Easy Will Be Profitable But Not Now reports that Tesco has declared its US division shall become profitable in fiscal year 2012/2013. It claimed that the general economy has been the problem, but how does Tesco know things will be OK two years from now? One suspects there will be big write-offs in the Fresh & Easy future. We already mentioned that Tesco acquired its two British transplants, 2 Sisters Food Group and Wild Rocket Foods, here and here. We now learn the shockingly high price paid. Tesco discloses that in addition to asset values that we would consider wildly overvalued, Tesco paid so much that about $130 million in goodwill arose as a result of the acquisition. Yet these companies that practically only sold to Fresh & Easy have nothing that merits such a goodwill evaluation. 10/14/2010

Is Marking Some Produce “Farm To Store In 24” Good For Fresh & Easy? Is It Good For The Produce Industry? finds Fresh & Easy is running a program that promotes its ability to get product into the store in 24 hours. This whole line of promotion is a little curious. It is being trumpeted as if it is a great novelty and innovation, yet in California this is not uncommon. Even more curious is whether the produce arrives from the farm, or the packinghouse, in 24 hours. To us the bigger issue is whether, today, with the local movement so strong, this approach is good for either Fresh & Easy or the produce industry. 7/27/2010

Fresh & Easy Must Go ‘Cold Turkey’ To Overcome Crack-cocaine-like Addiction To Discount Coupons explains that for the US vendors, Tesco’s decision to acquire Wild Rocket Foods actually makes selling Fresh & Easy a more viable prospect. Of course, being able to buy from more people is a great thing, but success will still depend on what they choose to buy and how they choose to price and market it. One of America’s most recognized experts on produce retailing has followed the situation closely and sent this note about Fresh & Easy. 7/15/2010

The Oddity of “Performance Related” Pay At Tesco: Tim Mason Got Paid More Even Though Losses Grew At Fresh & Easy states that we don’t know whether The UK’s Serious Fraud Office will elect to investigate Tesco to determine whether its executives and board perpetrated a fraud against its shareholders by failing to disclose promises that could have been made to the owners of British transplants that Tesco may have induced to open in the US. What we do know is that a lot of Tesco shareholders are irate that Fresh & Easy CEO Tim Mason gets paid so much money. 7/15/2010

Tesco Puts Up “Tens of Millions” And Purchases British Transplants Wild Rocket And 2 Sisters Foods — Was A Secret Promise Made To Make The British Suppliers Whole? Did This Constitute Fraud Against Its Own Shareholders? saw the Financial Times ran a small note indicating Tesco would purchase its two US “transplants”: Wild Rocket Foods and 2 Sisters Foods. The most reasonable explanation of why Tesco is spending, as Tim Mason said “tens of millions of dollars” of its shareholders’ money on these acquisitions, is that the investments in the US were made by companies Tesco has close relationships with back in the UK, and there was a promise made, either explicitly or implicitly, that if these private British companies made the investment to help launch Fresh & Easy, Tesco would “take care of them” if things didn’t work out. 6/29/2010

Will A New Tesco CEO Care To Keep Funding Losses At Fresh & Easy? points out the one stunning failure of Sir Terry Leahy’s tenure as CEO must be counted as his inability to establish a profitable operation in North America. Tesco has just announced that Sir Terry had decided he would be leaving Tesco and Tesco announced that he would be replaced by Philip Clarke, who heads up Tesco’s European and Asian operations. The assumption, among many analysts, was that Sir Terry would wait to leave triumphantly when his biggest gamble — Fresh & Easy — had started to pay off. There is always the possibility that he has despaired of that day ever coming. 6/11/2010

Pundit’s Mailbag — Carrefour Hires Tesco Exec While Deloitte Says Tesco Loses 3rd Place Global Retailer Ranking To Metro received a note from Colin Harvey, Merchandise Director in the Food Division of PT Hero Supermarket Tbk in Indonesia. Colin writes to inform us that James McCann, who used to be the Country Head for Tesco Malaysia, has moved to Carrefour in France as head of its French operations in an attempt to boost home performance. He also sends word that according to Deloitte’s annual Retailer Survey, Tesco was knocked from 3rd place to 4th by Germany’s Metro. These rankings are complex, but whatever the relative strengths of Carrefour, Metro and Tesco, Wal-Mart is larger than all of them combined, and then some. 2/9/2010

Tesco’s Fresh & Easy Is No More Popular In Real Estate Than In Produce as we mentioned here, Tesco is now looking to purchase properties in the US, and they may, in fact, ultimately make money on that real estate. We received word that the real estate industry also suffers from the same kind of shabby treatment at the hands of Fresh & Easy as those in the perishables industry. A fellow named Chris Rodriguez is a well known real estate professional and had an e-mail exchange with Tom Scorer, the British transplant who does real estate for Fresh & Easy. He decided to post it on his blog, “Retail Chart Commercial Real Estate Blog.” We thought we would include it here as well. 1/28/2010

Pundit’s Mailbag — Fresh & Easy’s Early Figures Found comments that one of the benefits of having such a diverse, far-ranging and knowledgeable readership is that if we make a mistake, we typically hear about it in minutes. When we received a note from Lisa Reeder at H-E-B/Central Market and incorporated it in a piece we titled, Pundit’s Mailbag — Early Sales Numbers For Tesco’s Fresh & Easy Hard To Find, we gave a lot of information but forgot about one piece of data that specifically addressed Lisa’s question. We soon were reminded of our lapse in this letter from Charles Allen, Principal and lead Food Retail Analyst with Consumer Equity Research in the UK. 1/18/2010

Pundit’s Mailbag — Early Sales Numbers For Tesco’s Fresh & Easy Hard To Find received a letter from Lisa Reeder, Innovation Research Analyst with H-E-B/Central Market, and an astute observer of the industry, who is curious to know where sales figures can be found from Fresh & Easy’s first several months operating in the US. The answer to Lisa’s question is there are no official numbers because Tesco tried to bury them in its UK division. However, Tesco’s most recent report did release a graph and some information from which clear deductions can be made. 1/11/2010

The Power Of Retail Data saw The New York Times had an interesting piece titled “A Data Explosion Remakes Retailing.” The gist of it was that retailers are now collecting all kinds of information about shoppers and shopping patterns and utilizing this information to sell more. One reason the industry was so concerned about Tesco’s opening in America was because its facility with data was legion. The old world of trained experts relying on their well-honed gut is setting; the future is data and its manipulation. Our sense is that though enormous amounts of data are being collected, it is used mostly in a rather “macro” manner. 1/5/2009

Laying Groundwork During The Recession remembers over a year ago we ran, Tesco Uses Poor Economy As Excuse For Fresh & Easy Pullback, and followed up with, What Will Be The Fate of Fresh & Easy. Bill Gerlach, Research and Development Director with Melissa’s, responded to say no business would be open to expansion in a recession, and his point rings true. We are not Tesco, yet as this year closes, we thought it appropriate to share precisely how the Pundit elected to conduct business this recession year. When Bill Gerlach asked us: “Jim, would YOU seriously expand ANY business in this economic climate?” our answer was enthusiastically yes. Today’s Pundit will include several pieces that tell you what we did with this recession. 12/18/2009

Tesco Loses UK Market Share While Fresh & Easy Shows US Sales Growth watched as Tesco revealed its sales numbers this week that and that even after heavy promotion of a new Clubcard, JP Morgan calls disappointing. And all the while losing market share to its rivals. One seemingly bright spot in the report was the little US operation, Fresh & Easy. The key problem is this: Even with this strong sales performance, they expect to lose another quarter of a billion dollars this year. This indicates that the cost of bringing in the customers and getting sales — either through advertising or discounted prices — is too high. 12/9/2009

Tesco’s Fresh & Easy Promoting Its Pricing In A Big Way extends a hat tip to Chris Puentes, President at Interfresh, Inc., for sending us this photo of a truck parked in front of the Fresh & Easy store a block away from his office. It demonstrates the lengths Tesco’s Fresh & Easy is going to communicate its positioning as a low price leader. 11/20/2009

Retailers Eye Target’s Food Expansion Plans reports that the word is out that Target is expanding the amount of food — including some perishables — it will sell in some of its standard discount stores. How significant is this effort — for Target and for the broader industry? Well, we quickly got input from three well known retailers. One of these retail executive saw in the effort an attempt to capitalize on the failure of “small store” concepts such as Tesco’s Fresh & Easy and Wal-Mart’s Marketside. 11/20/2009

Analysts Suggest Ahold Would Be Ripe For A Tesco Acquisition mentions we are often asked what we see as the most likely outcome of Tesco’s foray into America. It is, of course, unpredictable, but it seems most unlikely that the stores will earn a good return on investment without a significant format change. The logical choice is to expand the US division with a massive acquisition and then wash the numbers for the failed Fresh & Easy division through a much larger operation. Now all over London, the papers have been picking up on a suggestion made by ING analysts that Tesco should consider buying Ahold. 11/13/2009

Will Fresh & Easy Improvements Turn The Ship? received a few observations on Tesco's latest moves from industry members, one, a US expert who has been watching along with us since the beginning, sent an update on what they saw as improvements. Although we agree with our correspondent that many changes have been made and some will help, we see the problems as more fundamental. Unless they change these four points we cover here, we doubt it can be a big success. 10/23/2009

Tesco Watches As Fresh & Easy Sales Numbers Show Weakness reports that Tesco announced its earnings for the first half of its 2009/2010 fiscal year and Fresh & Easy continues to disappoint. Exact figures are not available, as Tesco, which published “Like for Like” sales numbers on Fresh & Easy — what we Americans call “Same Store Sales” — last year, stopped doing so when the numbers became inconvenient. Folks like the food retailing team at J.P. Morgan in London are estimating that sales per store, based on an average number of stores open during the period, actually slipped about 4% this half from the previous six months and fell almost 7% from the first half of 08/09. Typically the normal maturation process of retail stores should keep sales growing for several years, so this is a bad sign for Fresh & Easy. 10/16/2007

Tesco Goes LEED, But Is LEED Sustainable? finds Fresh & Easy has received a LEED Gold certification from the United States Green Building Council for a store in Cathedral City, CA. However, there is increasingly a question about whether the LEED certification process does anything useful at all. A recent article in The New York Times helps to illustrate the problem. LEED gives lots of points for things that don’t contribute to the actual building’s energy efficiency, and the effects of which are never measured. And, many of these buildings get LEED certification based on efficiency standards at which manufacturers say the equipment can perform. But actual achievement of these efficiency levels requires optimum maintenance regimes, which many owners and occupants don’t follow. Wouldn't we be better off looking at “continuous improvement” models? 10/2/2009

Tesco Shifts US Strategy... Starts Buying Real Estate reports that Fresh & Easy has been quiet lately. Now a piece by Jonathan Birchall in the Financial Times has reported that Tesco, though not opening stores in Northern California, is working on its Stockton distribution center, still acquiring store sites and, in fact, is now seeking to buy real estate rather than lease stores. If Tesco intends to hold this real estate it might one day make money on it, but it could buy real estate and lease it to others and make money on it as well. The key issue here is whether the retail concept is profitable, however, to date, the concept has just shown no track record of being able to make money. 9/15/2009

A Keynote Speech And The Future Of Wild Rocket Foods recalls that back in June, the Pundit volunteered his services to help out the Fresh Produce & Floral Council by keynoting one of their luncheon events. One serendipitous event was that one of the Keynote Sponsors happened to be none other than Wild Rocket Foods, one of the British transplants that Tesco brought with it from the United Kingdom when it launched its Fresh & Easy operation in the US. The luncheon marked the beginning of an offensive by Wild Rocket to sell to customers other than Fresh & Easy. Wild Rocket’s challenges to date have been a fantastic business school case study of the opposite: What does a business do when it is all geared for growth and the growth doesn’t come? 8/5/2009

Sainsbury’s Gains Ground On Tesco admits that time and again we are told by players in British food retailing that we should never underestimate Tesco. For almost two decades, Tesco has known little but success. Once long ago it was not Tesco but Sainsbury’s that was the iconic British retailer. Now, however, there is a sense in the UK that Sainsbury’s — which recently announced both very strong sales and, more of a threat to Tesco, the raising of almost three quarters of a billion dollars to expand — is a renewed threat to Tesco in its home base. Are Tesco's margins appropriate in this environment? 7/7/2009

Tesco’s ‘Poor Service’ Record And Out-Of-Stocks our extensive coverage of Tesco’s Journey to America as Fresh & Easy brought this note from Theresa Willerup, Business Development Manager at PakSense, expressing her distaste with Tesco as a former resident of Bristol, England. In the US, there is something odd about the willingness of Tesco to tolerate the out-of-stocks common at Fresh & Easy. Even last week, we visited a Fresh & Easy and saw out-of-stocks that would give any executive at Kroger or Safeway a heart attack. Still, at base, the tolerance of these out-of-stocks is a cultural matter. There is a sense that they can disappoint customers and the customers will become “trained” to come back the next day. That is, as our writer notes, not a very American attitude and helps to explain Tesco’s failure in the US. 7/1/2009

With Fresh & Easy Stores Empty, Suppliers Left In The Lurch extends a hat tip to Steve Spears of P-R Farms, Inc./Bella Frutta for sending this photo of an empty Fresh & Easy store in Fresno. The only chuckle we get from it is when a reporter from a consumer publication calls to ask the “Pundit”: “Do you agree with Tesco that it is a clever strategy to rent stores, build them out and then let them sit empty?” We explain 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. It is, of course, sad, to see such resources wasted. 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. 6/16/2009

Tesco’s ‘Selective’ Market Research admits that some of the more intriguing contributions in our coverage of Tesco’s Fresh & Easy have come from longtime retailer David J. Livingston, who sends us this note in response to our piece Tesco Comes Clean: “Less Loyalty In American Market”. In business, research is often conducted to serve the purposes of those who contract for the research. In fact, it is fair to say that it is typical in business to hire researchers for the purpose of providing evidence that justifies doing what you want to do anyway. Tesco’s inability to solve the problems with Fresh & Easy hinge, as much as anything, on its unwillingness to listen — to the customer, to the trade, to anybody — because of its pre-determined notions of what it is going to do. 6/10/2009

With Wal-Mart’s Marketside Concept In Stasis, Let’s Pause And Examine Ready-Meals Programs despite their differences, Tesco’s Fresh & Easy and Wal-Mart’s Marketside do share four foundational concepts: both are small format, both are located outside of high density corridors, both are designed to appeal to a mass market and both are built around a “ready-meal” offering. With an investment in Fresh & Easy approaching a billion dollars and a great strategic reason to gain a foothold in North America, Tesco may stick it out. Yet the simple fact remains that, although individual market opportunities, of course, vary, the only big foodservice segments that retailers do well at nationally are chicken — both rotisserie and fried — pizza and sub and sandwich programs. If we had to identify a fatal flaw in the Fresh & Easy and Marketside concepts, it would be that they are both built around ready-meals and Americans don’t eat many of these British-type offerings. 6/10/2009

Straight Talk Needed At Tesco our piece Tesco’s US Losses ‘Unnerving’ brought a thoughtful response from one of the “partners” in Tesco’s roll out, John Craig at Drake Real Estate Services, who informs us that Tesco’s results are improving. He also takes issue with our criticism of Sir Terry Leahy’s recent comments on the chain’s progress. It is good news for Tesco if Fresh & Easy is experiencing better results — and not really surprising. Retail concepts generally go through a maturing process. The problem is Fresh & Easy started from a low base, so exceptionally large increases are required to reach the $200,000 a week per store number Tesco promoted at the launch, much less the expected growth from that base. Although news that sales are going up and expenses down is certainly encouraging for Tesco, the base is so low and the losses have been so great, it’s hard to make a big success out of it. As for Leahy’s comments, we say for a CEO, honesty is the best policy. 6/4/2009

Tesco And Others Were Unable To See US Nuances our recent piece, Pundit’s Mailbag — Hope For Tesco Vendor Community ‘Is Gone,’ led Ted Campbell, Executive Director of the Florida Strawberry Association to recollect a story from early in his career of “an opportunity squandered.” He writes us about Tesco and, more broadly, how easy it is to miss opportunities if one is not truly open to them. Why did Tesco send any British executives to the US? Why did it feel the need to have British suppliers set up camp in the US? Tesco was comfortable with its own executives and its own vendors, so it brought them to the US. The cost, though, was not just the expense of paying the British staff or arranging for all new facilities for the British vendors. The cost was being cut off from intelligence about American consumers. 6/2/2009

Pundit’s Mailbag — Hope For Tesco Vendor Community ‘Is Gone’ shares this letter from Steve Spears of P-R Farms, Inc./Bella Frutta, written before the Ballantine collapse, who manages to speak about modern subjects such as Tesco and tree fruit. Steve laments, “It appears that the hope that Tesco’s Fresh & Easy concept might support a vigorous, growing and profitable vendor community is gone.” The shame of the Tesco situation is that it didn’t have to turn out this way; but they were never secure enough to listen. We hoped they would have listened to us a little bit, but, mostly, they needed to listen to their vendor community. 5/29/2009

How Do Kroger, Safeway, Tesco And Bashas’ Stack Up Against Three Of Wal-Mart’s Store Concepts? borrows from the May 2009 issue of PRODUCE BUSINESS, which included the 19th chapter of our Wal-Mart Pricing Report and was focused on seven separate store concepts in the Phoenix, Arizona market. These reports are always intriguing, this Phoenix report, though, offered several insights of great significance for the broader industry. So we thought we would highlight some of these key points for Pundit readers. On our main test, which is what a consumer would pay if he walked through the door without coupons, loyalty cards, etc., Tesco’s Fresh & Easy concept is more expensive than every concept in the market save Safeway. If we consider loyalty card prices, which they do not offer, Tesco is actually the highest price concept of the seven banners we studied. 5/27/2009

Tesco’s US Losses ‘Unnerving’ continues our extensive analysis of Tesco’s journey to America as Tesco just announced its earnings, which included horrific results related to Fresh & Easy. In its report and associated briefings, Tesco tried to have it both ways. Sir Terry Leahy, Tesco’s CEO, pointed out that the recession was an opportunity for Tesco. Yet, when it comes to America, somehow the same recession that is an “opportunity” for expansion elsewhere makes a rapid expansion along the lines Tesco had indicated it originally planned to be somehow “not yet prudent.” You have to really look to the numbers because so much of the verbiage Tesco officials spout is just spin. In truth, the problems of Fresh & Easy remain as they always have been. 4/22/2009

Tesco’s Fresh & Easy Has a Recall; Sanctimonious Claims to Merit Consumer Trust Called Into Question explains how we’ve covered Tesco’s many missteps with Fresh & Easy in America, but we don’t particularly fault Fresh & Easy for getting caught up in this Peanut Corporation of America recall. We fault them for being sanctimonious. As we pointed out in: Lessons From The Peanut Salmonella Outbreak: Audit System Broken, the auditor that Peanut Corporation of America used offered a Gold Standard Certification Program that the company did not have. Which means that for all its talk, Tesco did not even require its ingredient suppliers to have the top third-party audit for whatever auditor it used. This makes us ask if it is not possible that Tesco’s Fresh & Easy has actually been putting its own commercial interests ahead of the health and safety of its consumers. 3/12/2009

Tesco Comes Clean: “Less Loyalty In American Market” extends a lot of hat tips because Pundit readers from around the world sent us copies of this article, simultaneously stunning and predictable, from The Sunday Times of London. Now, after two-and-a-half years, in which Tesco tried to dismiss our critique, the admission finally comes: “Tesco Admits: We Got It Wrong in US.” Acknowledging a problem is often the first step in solving it, so we commend Tim Mason and Tesco for coming clean. As we have since the beginning, we wish them well. The supply sector could use a vibrant and growing customer. Unfortunately, the article gives every indication that Tesco is misdiagnosing the problem. 2/27/2009

Perishable Thoughts — Tesco’s Missed Mark: American Consumer Complexity admits there is something comical about this image of British executives poking around people’s refrigerators trying to “study Americans” and missing the storage freezers in basements and garages. The truth is they missed so much more. The real problem is not that the Tesco executives were incomplete in their research. It is that the research should start the day one is born. In that sense, the problem is that the British schoolchildren don’t read much Walt Whitman, known as America’s “poet of democracy” for his ability to write in a manner reflective of the country. It is not solely that America is large, nor that it is diverse, though it is both. 2/27/2009

Fresh & Easy In A Town Near You received requests, almost simultaneously, from both a big retailer and a large supplier for a list of Fresh & Easy locations. The information is publicly available through press releases, a map on the Fresh & Easy website and observational methods. It wasn’t, however, available in a nice list form, so we put it together. The spreadsheet includes several tabs: a master of all locations, then one each for Arizona, Nevada, northern California, central California and southern California. We also added a tab called “disputed,” for stores that might have been announced at some point but seem to have disappeared. We thought many in the industry might appreciate having access to such a list, so we make it available with our compliments. 2/11/2009

Headstrong Tesco Claims Success With 98-Cent Fresh & Easy Line in continuing our in-depth analysis of Fresh & Easy, we recently ran, Fresh & Easy’s 98-cent Sale Causes More Consumer Confusion. In it, we ran the assessment of a noted retail produce expert who says: “This 98 cent plan may be a solution to the wrong problem.” Now Fresh & Easy is claiming it has had fantastic success. As is typical with announcements from Tesco, the release sheds more smoke than light on the situation. Sales are up 11% but we aren’t told what that really means. Obviously it would be easy to be clear, but Tesco prefers to grab a PR headline and leave shareholders in the dark. Observations from our Pundit Intelligence Network are very interesting and indicate some real improvements. It is, however, not likely any of this will change the fundamental problem of the concept. 2/6/2009

Is Tesco Defrauding Consumers? Promising Only Nature’s Choice Certified Product But Delivering Cheaper Alternatives? points out that retailers and large buyers dictate a set of standards to their vendors. The supply base is told to invest time and money to conform to these standards with the implicit promise of business from the buyer. Now, however, with value the watchword for retailers worldwide, this deal is disintegrating. We received a letter from a major producer responding to our piece regarding retail pressure on producers in the UK who says: “In the end, a cheap deal will triumph over food safety.” We are not an expert in British law but to us, publicly declaring that “all of our fresh produce growers from around the world must achieve” the Tesco Nature’s Choice certification, which is “independently audited,” and then selling produce that has not been independently audited to meet that standard is perpetrating a fraud against the consumer. 1/22/2009

Fresh & Easy’s 98-cent Sale Causes More Consumer Confusion asks what kind of store is Tesco’s Fresh & Easy? With all we have written on the subject, one of the obvious problems of the concept is that we can’t really answer. At the present moment, Fresh & Easy seems to be aiming for the ambiance of a dollar store. The chain issued an announcement: “New Year’s Resolution 101: Stretch Your Budget and Stay Lean in 2009.” We know value is the hot thing today and, certainly, consumers like a deal. However, one day the store is promoting its green credentials; the next day it’s the place you get stuff for under a buck. This 98 cent plan may be a solution to the wrong problem. 1/13/2009

Do UK Retailers Use ‘Bully Tactics’ To Squeeze Suppliers? uncovered how this past fall British newspapers were filled with headlines saying that UK retailers were using the financial crisis and consumer desire for value pricing as cover for efforts that would crush production agriculture. Sean Poulter at The Daily Mail said: “Tesco has been accused of putting ‘extreme’ pressure on growers and suppliers in an attempt to compete with budget retailers like Aldi, Lidl and Netto.” To learn more about the British producer community and its concerns regarding retailers, we asked Pundit Investigator and Special Projects Editor Mira Slott to find out more from Lee Woodger, Head of Food Chain Unit for the National Farmers Union and Rory Taylor, Media Relations Manager for the Competition Commission. 1/7/2009

Small Format Stores And The Ever-Changing Retail Environment our analysis of small-format stores has left open one question: Do American consumers want to shop in small format stores? The basic argument against small stores is that they are inherently not convenient. We have argued that Fresh & Easy needlessly compounded this problem by devoting its precious shelf space to private label items. A smaller format almost inevitably means fewer choices. As a result, although we can see these “general interest” small format stores succeeding in urban areas, we have trouble seeing Americans abandoning their large stores in suburbia to shop in these venues, unless, of course, the supermarkets voluntarily give up their assortment advantage. 12/9/2008

Tesco Continues To Be Challenged notes that Tesco stock did well after its announcement of the slowest same-store sales numbers in its core UK market in 16 years. The announcement also confirmed Fresh & Easy won’t meet the 200-store level it had projected for February 2009. Beyond claims that can’t be defined such as that the performance of Fresh & Easy is “pleasing,” the report said little. Problems in its core market may call for a pullback to focus on turning things around. Poor UK results may also indicate that diversification outside the UK can be valuable. One thing is for sure: Nothing in the announcement gives any credence to the idea that a recession in America is causing a slowdown in expansion in the United States. 12/3/2008

What Will Be The Fate Of Fresh & Easy? shares some interesting feedback on our recent piece Tesco Uses Poor Economy As Excuse For Fresh & Easy Pullback from a trade marketing expert and an experienced retailer that help show that it is obvious that the concept is not performing and that headquarters back in the UK has lost faith in the concept. The question is what will happen now, and here we offer six options. However, according to JP Morgan, It sounds as if Tesco may have bigger things to worry about than fixing up a small chain of tiny stores. 11/24/2008

Tesco Uses Poor Economy As Excuse For Fresh & Easy Pullback admits that there is no doubt that the economic situation has changed, but it does that. There are economic cycles, upturns and downturns, etc. It is inconceivable that Tesco entered the US market expecting that there would never be a recession. The issue is not that Tesco cannot raise the money to expand the division. It is not even that the world is offering such compelling opportunities elsewhere that Tesco prefers to invest elsewhere. It is that the stores right now are not performing sufficiently well to justify the investment required to support them. 11/18/2008

Will Tesco Pay Wild Rocket’s Bills? reports that our piece, Is Fresh & Easy Departing From Private Label?, brought an outpouring of anger at Tesco, the main complaint: That Tesco, which the produce vendors would like to work with, requires produce vendors to sell to Wild Rocket. One shipper sent this simple note: “Did you see the Blue Book rating of Wild Rocket Foods? (86) F … Not Good.” To call a Blue Book rating of (86) F not good is a very kind way of putting it. Now this is Wild Rocket, not Tesco, but Tesco compels produce companies to deal with Wild Rocket and Tesco is, for practical purposes, its only customer. If Wild Rocket LLC goes broke, will Tesco protect vendors? 11/7/2008

Can Whole Foods Survive Prolonged Economic Downturn? explains that Whole Foods has seen its stock price decline 78% over the past year, it has already eliminated its dividend and scaled back capital expenditures; now the word on the Street is that sales trends have gotten worse and that the company is expected to reduce its guidance. Perhaps Whole Foods selling itself to another retailer could carry it through the recession. Tesco has had interest before but found it pricey. The new lower share price would give it an instant footprint across North America and allow it to roll its money-losing Fresh & Easy division into a new consolidated North American Tesco division. 11/4/2008

Is Fresh & Easy Departing From Private Label? writes that by electing to go 100% private label, Fresh & Easy denied consumers the brands they were familiar with, and by repacking everything and demanding unusual specifications, it was both undermining its sustainability credentials and driving up costs for no purpose. Then all the sudden we got word that Doug Davis, Managing Board Director and VP of Supply Chain Management at Wild Rocket, Fresh & Easy’s British transplanted produce supplier, was shaking up the place and actively soliciting quotes in normal shipper cartons and labels. If private label produce was a mistake, was there really a need to import Wild Rocket at all? 11/4/2008

As Aldi Opens In Orlando, The Age Of Deep Discounters Is Upon Us explains how deep discounters such as Aldi have been talking up its compensation policy as it looks to attract employees. Tesco’s Fresh & Easy, whose journey to America we have been chronicling here, also promotes that it pays $10 an hour. Fresh & Easy has not promoted what it will pay managers, but we understand Aldi managers are far better paid. We wonder if both Tesco and Wal-Mart — with its Marketside stores — didn’t make a mistake in not focusing their small-store concepts on a very clear value proposition such as Aldi. Perhaps they didn’t think they could do it any better? 10/23/2008

Why Do Ready-Meal Programs Fail? our piece — Questions For Fresh & Easy And Marketside: Are Americans Really Ready For “Ready Meals”? — brought a contribution from one of America’s most respected authorities on retailing fresh foods who writes that ready-to-eat meals are not a novel concept, and it is unclear why successive attempts at making it work persist. So why did Tesco build its concept around this offering… and why has Wal-Mart chosen to also walk down this path? Everyone at retail wants to believe there’s a future for ready-made meals, yet changing consumer habits is very difficult. 10/15/2008

Question For Fresh & Easy And Marketside: Are Americans Really Ready For “Ready Meals”? points out that although these formats have much to differentiate themselves from one another, they share one important element: an emphasis on “ready meals”, specifically, food that is prepared by a vendor or in a commissary and then packaged for the consumer to reheat. Yet we wonder if both Tesco and Wal-Mart aren’t misinterpreting the consumer research as to the extent of the market for these foods in the United States. To some extent these “ready meals” strike us as an “in between” product squeezed on both ends by more compelling propositions. 10/14/2008

More Thoughts About Wal-Mart’s Marketside finds that visiting the Marketside concept crystallized why Fresh & Easy has struggled so. The Fresh & Easy concept is simply so foreign, so insistent on doing things its own way that it is asking a great deal of a consumer. Basic Marketside policies — accepting checks, accepting manufacturer’s coupons, etc. — are interesting to contrast with Fresh & Easy simply because Marketside policies are so normal for America. However, the big challenge with this format is to get consumers to shop it as something other than a convenience store. 10/7/2008

A Triumph in Phoenix — Wal-Mart’s Marketside Hits The Trifecta One Open Question: Do Suburban Consumers Want Small Grocery Stores? although Tesco’s launch of its Fresh & Easy concept has attracted great interest, it has always been something of a novelty for the American trade. Now the Bentonville behemoth strikes back, opening a concept that is directly competitive with Tesco’s new venture, in a regional market Tesco has tried to seize. It is Wal-Mart saying to Tesco: “Not on my turf.” The new Marketside format is a triumph and, in almost all cases in which Marketside might compete directly with Fresh & Easy for American consumers, those consumers will strongly prefer Wal-Mart’s Marketside over Tesco’s Fresh & Easy. Here are three reasons why. 10/4/2008

Tesco Puts Positive Spin On Fresh & Easy Numbers reveals Tesco lost around $137 million so far in its US adventure. Tesco portrays these as start-up costs. The degree to which the losses were “planned” is in dispute, the fact that Tesco has an infrastructure that can handle more business is clearly true, but it is difficult to know the degree to which “high overhead and other costs in relation to the scale of the business, whilst also trading from immature stores” is the cause of the losses. Willard Bishop, ourselves and others, who were estimating about $5 per square foot, per store, per week were exactly correct and Tesco’s dismissive attitude was just a smokescreen. 10/1/2008

Despite Fresh & Easy Sales Growth, Challenges Lie Ahead announces that next week Tesco is due to release the first “hard numbers” on the Fresh & Easy rollout in the US. Fresh & Easy has found it is smart to heavily discount the product and build traffic, but, will the customers attracted by these great deals become loyal to a concept or loyal to great deals? Tesco has said it would have 200 stores open by the end of 2008 and later guided down to 150 stores. At this pace, Fresh & Easy may not even have a hundred stores open by yearend. Paying less than its unionized competitors also makes it a juicy target for the United Food and Commercial Workers union. Wal-Mart has managed to avoid unionization, but Fresh & Easy may not be as successful. 9/26/2008

Wal-Mart’s Marketside Format Opens In Fresh & Easy’s Back Yard reports that next week Wal-Mart will open the doors on its first four Marketside stores in the Phoenix area. What we know about the concept is that it will emphasize brands more heavily than Fresh & Easy does and there will not be all this needless repacking of fresh produce and at least for the initial test stores, the service deli is out. The great strength of Fresh & Easy since its opening has not been its concept, but was Sir Terry Leahy coming out and saying that Fresh & Easy was not a test, it was a rollout. The question is how dedicated is Wal-Mart to the concept? 9/26/2008

Wal-Mart Prepares Launch Of Its ‘Marketside’ Concept points out that Sir Terry Leahy at Tesco is showing a willingness to bleed to establish this beachhead in America and this small store format. There is zero indication that Wal-Mart will build these small format stores as a strategic initiative to fill the market niche to prevent others from doing so. If Wal-Mart is concerned about Tesco in a strategic sense, developing little stores to compete mano-a-mano is a weak response. 8/19/2008

Whole Foods Faces Tough Economic Times Whole Foods has tried hard to get away from its “Whole Paycheck” image, but has found it difficult. Its core appeal is to consumers who believe that cheap food isn’t really cheap. The more Whole Foods attempts to promote economic value — the more its core customers will think it has sold out. One possible answer: Tesco, who has coveted Whole Foods for a long time, but its previously pricey stock had made an acquisition prohibitive. Besides they have complementary problems. As Whole Foods drains cash in the UK, Tesco hemorrhages money from its Fresh & Easy division in the US. Yet together both the UK and the American division would be profitable. Perhaps the Fresh & Easy stores could be rebranded: Whole Foods Petite. 8/7/2008

Industry Pro Gives Thoughts/Insights On Safeway's Small Format Stores points out that of great interest to the competitors of Tesco’s Fresh & Easy concept is whether other small format stores will become a competitive tool. Safeway’s opening of its new “the Market by Vons” has attracted great attention, and our coverage brought a letter from a prominent industry consultant who sees advantages for Safeway. 6/3/2008

Fresh & Easy Loses Price/Assortment War To Wal-Mart In Los Angeles investigated the price competitiveness and assortment numbers of Tesco’s Fresh & Easy concept through Pundit sister publication PRODUCE BUSINESS. The comeuppance: Fresh & Easy isn’t even in Wal-Mart’s league when it comes to price on fresh produce and Fresh & Easy actually did worse than the raw data implies. 5/30/2008

Safeway’s Small Footprint Store Distinguished By High Service, Upscale Look And Offerings looked at Safeway’s recently opened “small footprint” store called “The Market by Vons”, more branded than private label, with warmer tones and is an upscale high-service store. The facts indicate it is not designed to be a “Tesco killer.” Tesco’s whole concept is broad appeal, high volume. Very likely, in areas that can support certain demographics, the Safeway concept will work. But it can’t “answer” the Tesco challenge. 5/23/2008

While Research Company Tries To Keep Details Under Wraps, Pundit Subjects Report To In-Depth Analysis revealed new consumer research on Fresh & Easy conducted by a company called “Execution Research,” has piqued a lot of interest. Using terminology such as “the new cult retailer” and giving out superlatives liberally —the news report was filled with shocking revelations. Mira Slott, Pundit Investigator and Special Projects Editor, spoke to two people in Execution’s London headquarters to learn more. 5/19/2008

Despite Rhetoric, Execution Data Confirms Pundit Sales Estimates reported that we are not exactly sure what it means to be the “new cult retailer,” but it apparently doesn’t mean that current sales are very good. Two hard facts presented in the Execution Research report implicate actual store sales that are right around the Pundit’s own numbers and a big disappointment for stores that Tesco expected to be doing $200,000 a week. 5/19/2008

Upbeat Tone Belies Data Establishing That Fresh & Easy Appeals Only To A Small Niche discussed how although the report is relentlessly upbeat in tone, we find the data much less encouraging as to the prospects for Fresh & Easy. The Execution researchers don’t realize it but, if their data is correct, they have identified why the concept may fail. 5/19/2008

Decision To Survey Only Fresh & Easy Customers Leads To Circular Reasoning pointed out that surveying only Fresh & Easy shoppers wildly distorts evaluations. The failure of Execution Research to follow established research procedures leaves one wondering if they just don’t know better, or if they are more interested in publishing hyped-up conclusions than supporting them with rigorous analysis. 5/19/2008

A Missed Opportunity — Even Investors Deserve Transparency wrote that it does seem rather odd that an investment bank in London would have discovered a fantastic success that has eluded virtually all US retail experts who have studied the matter. And if, however, the researcher is not going to disclose its survey and other details of its methodology, one is going to focus on the motivations of the sponsors. 5/19/2008

Execution Researchers Acknowledge Limitations: “We’re Not US Food Retail Analysts…” reinforced that the Execution Research report acknowledges a lack of expertise in US food retail analysis and relies on consumer perception of competitive response while making no mention at all of well known competitive responses to Tesco’s Fresh & Easy rollout in the US. Further errors of not clarifying issues such as banner ownership leaves a lot of loose ends for the report’s clients to figure out themselves. 5/19/2008

Tesco Uses Smoke And Mirrors To Hide Search For Fresh & Easy CEO revealed that the Fresh Produce Journal in the UK was told, “Tim Mason and his team are not coming back from the US.” Is Tesco backtracking? Perhaps they couldn’t find an acceptable candidate? It may be that the whole search is a ruse; however, none of these explanations would really explain the denials. The fact remains that food industry executives have been interviewed to be CEO of Fresh & Easy. 5/15/2008

Will Wal-Mart’s Energy Efficient/Hispanic Store Make A Real Contribution? touches on mighty Tesco, who has to some extent been laid low by its refusal to focus its stores. It refuses to choose between, for example, organic-lovers willing to pay for what they want and budget stressed bargain-hunters willing to trade down to feed the family. Wal-Mart’s small format stores will be mostly branded and it rides that branded equity into households across America. Fresh & Easy is not just a 10,000 square foot store, but a 10,000 square foot store that is somehow supposed to serve everyone. 5/14/2008

Tale of Two Tescos visited Palm Springs recently for an industry meeting and had the opportunity to visit two Fresh & Easy stores in that area. Some stores are selling from $100k-120k a week, but we are finding many stores stuck in that $50k-60k-a-week range. The prime difference seems to be real estate — as the saying goes, there are three things important in retail: location, location and location. 5/13/2008

Kroger’s CEO Says Combo Stores Are Best Response To Tesco Threat describes the presentation given by David Dillon, Chairman & CEO of The Kroger Co., along with Kroger’s Senior Vice President & CFO Michael Schlotman, at the Tenth Annual Retail Conference sponsored by Lehman Brothers. Always an interesting presentation and, particularly, the Pundit found intriguing Mr. Dillon’s response to a question about Tesco’s new Fresh & Easy Neighborhood Market format. 5/4/2007

Why So Much Content On Tesco/Fresh & Easy? explained that our discussion of Tesco in America is not about a small chain on the west coast; it is about the future of retailing, branding, food safety, wholesaling, sustainability and more. Our coverage intends to show Pundit readers how to avoid the dangers and capitalize on the opportunities that Tesco's rollout in America represents. 5/2/2008

Is Fresh & Easy Suited Best For Seniors? wondered if Tesco has found a market segment that would find the Fresh & Easy concept particularly appealing and offers a few ideas that could make it more so. This discovery was prompted by a letter to the Pundit that clearly points to some passion developing for Fresh & Easy. 4/30/2008

Tesco Searches For American CEO Of Fresh & Easy discovered Tesco is actively recruiting for a new American CEO for its Fresh & Easy division. It is expected that several key executives will be returning to Britain. One food industry executive put it: “They want to pull the ‘good old boys’ out of the U.S. for fear the concept will collapse and these co-workers, friends and relatives will get hung with the failure.” 4/22/2008

Reading Tesco Between The Lines received help on our analysis of Tesco’s earnings release and report from David J. Livingston and DJL research, who agrees with the Pundit that we have to continue to stick to our own tracking methods until Tesco actually starts releasing audited financial statements on its US division. 4/18/2008

Tesco’s Earnings Report Comments Indicate Better Sales; $200 Million In Losses Expected Tesco has announced its earnings — without breaking out separate numbers for its new U.S. concept, Fresh & Easy. Much of the release’s commentary is not helpful, but the sparse information within it contains clues to their situation. We have studied Tesco/Fresh & Easy extensively and in dealing with this company we have learned that in many cases what they don’t say is more important than what they do. 4/16/2008

Tale Of Tesco’s Disrespectful Dinner Guest confessed that Momma Pundit taught us that when invited to an event, barring allergy or religious conviction, one eats and drinks what one is served and says thank you. This tale of a transplanted Tesco buyer’s arrogance and simple disrespect doesn’t bode well for their success in this business. 4/11/2008

Pundit’s Mailbag — Too Critical On Tesco? responded to a charge by Retail Management Consultants President and CEO George Whalin that the Pundit has been too critical of the emergence of Tesco’s Fresh & Easy concept in America without “looking at the entire picture.” 4/11/2008

Fresh & Easy Vendors Uneasy In the minds of vendors, responsible for setting up intricate production schedules, planting crops, hiring employees, and doing other things to meet Tesco’s anticipated volume requirements, they are left believing one of two explanations after Tesco’s announced pause in expansion: Tesco is either lying to them or doesn’t care about them. 4/4/2008

Tesco ‘Pauses’ With Fresh & Easy Expansion Plans announced Tesco’s “planned” break in their store expansion plans, even though vendors say they were only informed last week. The idea of a “pause” is a good one, and the Pundit offers 7 ways that Tesco can use this time to re-tool a failing strategy. 4/1/2008

Memo to Sir Terry Leahy: King George III Lost the War; America Is Independent Now received word that Tesco is likely to hide results of its new US venture within the results of its massive UK retail operation, and has done so in previous reports. An analyst in European food retail at Citi in London authored a report recently providing a quick summary of current thinking on Fresh & Easy: an excessive desire to “manage” the release of those results. 4/1/2008

Pundit’s Mailbag — Observations On Fresh & Easy’s Competition And Britishness shared a letter from a produce industry innovator about her first visit to a Fresh & Easy store. She makes two interesting observations, one, that competitors near these new Fresh & Easy locations are working hard to combat them, and two, that Fresh & Easy may be unwittingly helping, by offering products Americans are uninterested in. 3/25/2008As Another Analyst Confirms Low Sales, Fresh & Easy Brings In More Help reports continue to indicate that the rest of the world is concluding that there is a real problem with Fresh & Easy. Goldman Sachs downgraded the supermarket giant’s shares and low customer counts in the U.S. persist. Now, an American from Thailand is being sent in, either to help the chain with an American perspective, or to survey the wreckage. 3/20/2008

Fresh & Easy Now Accepts AMEX announced the arrival of what should have been an existing payment method at Fresh & Easy. As with so much of what Fresh & Easy does, not accepting the card early on was an attempt to force consumers into doing things the Fresh & Easy way. 3/20/2008

Safeway's Steve Burd's Comments Buttress Pundit's Fresh & Easy Analysis showed “evidence” of Tesco’s volume, deduced from a statement by Safeway CEO Steve Burd, that each one of Tesco’s Fresh & Easy Neighborhood Market stores that open within 1.5 miles of a Safeway has only 10 percent of the impact of the opening of another conventional supermarket. 3/14/2008

Fresh & Easy Makes Corrections shared a letter from an experienced retailer providing additional evidence that Fresh & Easy is now changing and in significant ways. Yet, every change creates its own problems. 3/4/2008

In London, Pessimism Spreads Over Fresh & Easy reported that this week in London, an analyst with Piper Jaffray came out with a report on the financial performance of Fresh & Easy stores in America that grabbed much attention. The report by Piper’s Mike Dennis is quite intriguing, but not for reasons the press highlighted. 2/29/2008

As Tesco Takes On Sacramento, Executives Eye Lucrative Incentives identified that one of the more interesting facets of watching the Fresh & Easy rollout is considering how compensation agreements can affect behavior. We begrudge Tesco leadership nothing, yet it is also possible that the compensation agreements could distort people’s perceptions and lead to unwise decisions. 2/29/2008

More On Fresh & Easy’s Discounting Policy reprinted another Fresh & Easy visit account from a foodservice industry member, and wondered for all the talk of modification of Tesco’s plans as it learns from experience, to some extent Fresh & Easy is a train speeding on a track, and changing course is not an easy option. 2/27/2008

Tesco Conference Call With Pundit Q&A Available For Your Listening Pleasure Gave a quick impression of a conference call hosted by Citi European Food Retail Team that the pundit was a part of with instructions on how to listen to an audio recording of the conversation. 2/22/2008

Just Say No: The New Dynamic Of Producer/Buyer Relations examined how buyers, beyond big retailers, have so pressed their advantage that producers, beyond the banana giants, are increasingly just saying “What is the point?” The uncertainty of future options with Wal-Mart, for example, is one reason why Tesco’s Journey to America was so welcomed by America’s suppliers when it was first announced. Yet Tesco may well disappoint U.S. producers. 2/22/2008

Tesco Conference Call With Pundit Q&A Available For Your Listening Pleasure Gave a quick impression of a conference call hosted by Citi European Food Retail Team that the pundit was a part of with instructions on how to listen to an audio recording of the conversation. 2/22/2008

Just Say No: The New Dynamic Of Producer/Buyer Relations examined how buyers, beyond big retailers, have so pressed their advantage that producers, beyond the banana giants, are increasingly just saying “What is the point?” The uncertainty of future options with Wal-Mart, for example, is one reason why Tesco’s Journey to America was so welcomed by America’s suppliers when it was first announced. Yet Tesco may well disappoint U.S. producers. 2/22/2008

Deep-Discounter Aldi Gives Tesco A Run For The Money recognized that among Tesco’s problems in America is a confusion of focus, and with competitors rededicating themselves to discount pricing; it may be time to abandon “green, organic and sustainable”. 2/20/2008

Tesco And Feedback From The Industry gave theories on suspect emails communicated to us in regard to our Tesco coverage, and encouraged Pundit readers to continue to contribute to our assessment of important industry institutions and events. 2/20/2008

British Intelligence On Tesco: Three Areas Of Concern discussed a letter from an industry member in the U.K. on his assessment of the likelihood for success of Tesco’s Fresh & Easy concept in America, with analysis of key points from the Pundit. 2/15/2008

Tesco Tries ‘Automatic Markdown System’ furthered our discussion of rampant discounting at Tesco stores with more reports of discounting and marking down perishable items at set times every day. We can’t think of anyone else doing that — and for a whole load of good reasons. 2/12/2008

Tesco’s Insular Attitude May Be Cause Of Its Problems surmised that in not becoming a member of our trade associations, we suspect Tesco doesn’t even know it is doing anything unacceptable to anyone. Yet, the fact remains, they are strangers in a strange land, and they are badly miscalculating the cultural imperatives. 2/8/2008

Tesco Criticism Of $5 Coupons And Hybrid Car Parking shared a letter from an executive of a grower/shipper with experience in branded marketing who visited a couple of Fresh & Easy stores and found that hemorrhaging money and alienating customers while planning to open more stores constitutes a train wreck waiting to happen. 2/5/2008Fresh & Easy Reaches Out To Shoppers As Competitors Work To Block Its Growth reported that mixed reviews continue from vendors, industry analysts and store employees while Tesco waits for its concept to take off. The competition, however, is not sitting back, with new locations, sales, and small store concepts of their own. 2/1/2008

Pundit’s Mailbag — Tesco And The Clash gives a lighthearted explanation of our reference to the classic song “London Calling” by The Clash, as it relates to Tesco’s expansion into the U.S. food retailing market. 1/31/2008

London Calling … Questions About Tesco Tesco refuses to have executives on the record, decides against releasing sales figures for its fledgling US business until next year, and is defensive when cornered by British news media. Credibility in the media is one thing, but how long until it begins to lose credibility with investors? 1/30/2008

Supervalu Closes Sunflower Market — Are There Lessons For Tesco? shows similarities between Supervalu’s failed Sunflower Market stores and Tesco’s burgeoning Fresh & Easy concept. 1/30/2008

Pundit Analysis Buttressed: Tesco’s Fresh and Easy Sales Only 25 Percent Of Plan, Says Willard Bishop Report highlighted a Willard Bishop Consulting analysis of current store performance, which despite some bright spots, shows results that are much less than projected. 1/29/2008

Tesco Intelligence Report: Slow Start its holiday sales in the U.K. for the most part, was negative as Tesco had projected growth of around 4% in same-store sales in its core U.K. market for the holiday season but only achieved a 3.1% increase — although the company had exceeded expectations on its non-U.K. business as well as on sales of non-food items in the U.K. 1/23/2008

Was Tesco’s Real Estate Decision A Result OF Hubris Or Humility? Caught in a series of sub-standard locations, Tesco may find that hubris, as it must, brings its price as its American supermarket competitors decide to fight back. 12/20/2007.

Will Tesco Keep Its Promises? Disclosed two reactions from readers to our expanding coverage of Tesco’s promise to locate stores in the “food deserts” of Los Angeles. The Pundit feels this is just the first of many promises Tesco won’t deliver on. 12/19/2007.

Tesco Observations From A Retail Pro shared comments from a correspondent visitor to the newest Fresh & Easy stores in California and expanded our earlier critique Trip To Tesco’s Fresh & Easy Store Reveals The Good, The Bad and The Ugly 12/18/2007.

Trip To Tesco’s Fresh & Easy Store Reveals The Good, The Bad and The Ugly Retells a visit to a Fresh & Easy Store by the Pundit where an examination reveals more cons than pros. 12/14/2007

Decline Of Nobel Culture: From Theodore Roosevelt To Al Gore...To Tesco & Non-existent Drowning Polar Bears examined how the politicization of the Nobel committee and the general decline in standards has led to some interesting award winners when compared historically. With reference to Tesco, Polar Bears And Social Responsibility. 12/11/2007.

Tesco’s Secret Expansion Plan? asked how after only 3 weeks since opening, Tesco is talking about a second distribution center to service Northern California, are secretive plans for a major takeover and supercenter concept on the horizon? 12/4/2007.

Will Tesco Regret Operating Its Own Commissary? points out how Tesco should’ve learned from Wal-Mart on the trouble with commissaries. They recently suffered a legal setback when a California court ruled against them in a lawsuit brought by a front group for the unions that its main warehouse did not comply with environmental planning law. 12/4/2007.

Tesco, Polar Bears And Social Irresponsibility pondered why Tesco, a giant corporation with extensive resources, wouldn’t more carefully vet any pop-culture environmentalism claims before it starts posting them in every back room and putting them on postcards sent out by the CEO. 11/30/2007. Tesco Takes Heat For Not Supporting Underserved showed how the Los Angeles Times has blasted Tesco for not “walking the walk” when it comes to locating stores in underserved areas. Analysis reveals less than 10% of planned locations will appear in high-poverty neighborhoods, …long excuses from Tesco. 11/21/2007.

Pundit’s Mailbag — Tesco Gets Reviews From Industry Members retold several industry members offerings of support of Tesco’s Fresh & Easy concept. As a refrigerated, prepackaged niche somewhere above Wal-Mart and below Whole Foods, the shrinking middle class may offer a customer base, but the genie is out of the bottle, and the concept is not Tesco’s alone. 11/13/2007.

Tesco Finally Opens Doors… British Press And Protesters Unimpressed described how Tesco’s opening in America drew harsh words from British journalists, and the Pundit agrees. Tesco has worked hard on reputational marketing, and those who live by the sword can easily die by the sword. Also asks the real question: How big is this market? 11/9/2007.

With Its Stance On Trans Fats, Tesco May Be Hip But Not Healthy proposed that while eliminating trans fats in private label products is good, what replaces them may be worse. With an excerpt from the “Health Journal” column of The Wall Street Journal on the potential impact of those alternatives on the consumer waistline. 11/7/2007.

Tesco Teases With Video Of New Store showcased a short video clip released by Tesco to generate consumer buzz before the launch of its Fresh & Easy Neighborhood Market concept. With critique on the clip’s shortcomings. 11/7/2007.

Confirmation Of Tesco In SFO reports that leases have been signed, and rumors of Tesco’s arrival in the Bay area have come true, a direct assault on Safeway’s homeland. 11/7/2007.

Will Meijer Be In Tesco’s Sights If It Succeeds With Fresh & Easy Format? discussed the after effects of a successful emergence for Tesco in America, including a prediction that Tesco will make an offer to acquire Meijer. 11/2/2007.

Tesco May Face Opposition Not Only From Unions But Also Animal Rights Activists reveals that direct appeals have been made to the Tesco Board of Directors from animal rights groups in response to Tesco’s treatment of animals at its Chinese stores. While normal in Asia, certain practices would make a western stomach turn. These may just be the pitfalls of operating a global company. 10/26/2007.

Tesco Under Attack From Waitrose in U.K. As U.S. Rollout Imminent Real Estate Key In Both Markets explains how allegations of “land banking” by Tesco are drawing the ire of competitors in the U.K. who are calling for government intervention. A closer look reveals Tesco’s use of real estate as part of a retailing strategy obscures its actual profitability. 10/25/2007.

Tesco, Disney and Dunnhumby pointed out that a deal between Disney and Tesco, based on tested recommendations by Dunnhumby, a consumer data consultancy majority owned by Tesco, says that a lot of consumers like the mouse. 10/24/2007.

Tesco Intelligence From Pessimistic Vendors And Anxious Competitors reports on conversations the Pundit had at PMA that indicated that optimism on the success of Tesco seems to be waning, citing issues with unrealistic product sizes, restrictive contracts, margin evaporation and arrogance. 10/19/2007.

Report Card On ‘Green-ness’ Of UK Stores reported on the findings of self-proclaimed consumer advocacy group, the National Consumer Council on the “green-ness” of UK retailers, with Tesco “showing potential.” 10/18/2007.

Tesco Marks November Eighth As Launch Date For Six Stores profiles Tesco’s announcement of Fresh & Easy Neighborhood Market first store openings in Southern California. With commentary on the “social responsibility” of these new stores touting healthy, private label products, high worker wages and benefits and “green” methodology. 10/10/2007.

Tesco’s Biggest Challenge: Prepared Foods presented why Tesco’s success with its Fresh & Easy Neighborhood Market concept may well depend on the concept’s ability to get Americans to dramatically increase the frequency of food shopping. 10/10/2007.

Is Publix’s Ownership In Crispers A Future Strategy Against Tesco? suggested that even though Publix has a strategy for fighting Whole Foods with its GreenWise concept, it may also have a strategy for dealing with the prepared food offer should Tesco’s Fresh & Easy Neighborhood Market come east. 10/9/2007.

Tesco Expands Plans For More Openings In California reported on Tesco’s announcement of plans to open 48, 10,000 square foot, Fresh & Easy Neighborhood Markets throughout California’s “Inland Empire.” With cities and intersections of the planned location in Riverside and San Bernardino. 9/26/2007.

Tesco’s Price-Hike Strategy revisited Tesco’s pricing strategy, only this time, instead of slashing prices to beat rivals, Tesco is raising them, representing an about face in the vicious price war, aimed at convincing consumers that higher prices correlate to higher quality. The real reasons behind the price hikes may not be so altruistic. 9/6/2007.

UK Retail Environment Helps Suppliers Break Commodity Mold Incorporated letter excerpts from Tim O’Connor, President & CEO of the United States Potato Board, who offers his expertise on buyer-led food safety initiatives and supplier/retailer relationships, with particular attention to our recent piece: Asda and Tesco Buyers Accused of Arm Twisting 8/23/2007.

Asda and Tesco Buyers Accused Of Arm-Twisting presented allegations of supplier abuse by Tesco and Asda and resulting investigations into forced discounts and threats of merchandise removal by the Competition Commission prompted by supplier complaints. 8/22/2007.

ASDA/Wal-Mart And Tesco Price Wars Portend Future Of Having To Take Sides foretells of trouble ahead for U.S. suppliers after an ultimatum from ASDA’s business unit director: “We will only back those who back us.” 7/24/2007.

Publix Tests Curbside Service…Hello, Tesco? looks at Tesco’s proposition to open, very quickly, hundreds of stores all built in a format that has no track record of consumer acceptance. Is this is a”brilliant or bankrupt” strategy? U.S. Supermarket chain Publix is testing what may be amore American definition of convenient. 7/12/2007.

Kroger And Tesco Approach Store Acquisitions Differently contrasts differences in the acquisition strategies of Tesco versus Kroger by illustrating the recent sale by A&P of all of its 66 Farmer Jack stores in Michigan, with Kroger buying 20 of the best locations, against Tesco’s announcement of plans to open in marginal neighborhoods. 6/22/2007.

Tesco Launches Price War In The U.K. details Tesco’s launch of a 270 million pound price blitz. As its future in North America is about to be decided, what would motivate Tesco to launch such a battle in the U.K., its home base from which its profits flow to fund the American effort? 6/21/2007.

Pundit’s Mailbag — Tesco’s Behavior discussed a thoughtful letter from Matt Roy, Produce Director with Lincoln Poultry, in which he offers industry insight in response to our overall coverage of Tesco. Includes simple ways in which Tesco can ingratiate itself with U.S. vendors. 6/19/2007.

Working With Wal-Mart May Not Be As Bad As You Think — Tesco Could Be Tougher! examined how U.S. vendors may be excited about Tesco’s arrival in America, enabling them to diversify their business away from Wal-Mart, but the grass may not be greener once a Tescopoly takes hold. 6/15/2007.

Could Tesco Pounce On Wild Oats If FTC Blocks Whole Foods’ Purchase? asked if the Wild Oats operation is too small and scattered for Tesco to bother with, or are locations in 24 states and one Canadian province, and an attractive operating model worth pursuing. 6/14/2007.

Snapshots Of Tesco’s Vegas And California Stores illustrated the initial 15 Fresh & Easy Neighborhood Market locations in Las Vegas with street intersections and prototypical construction diagrams. 5/30/2007.

Clash Of Corporate Cultures Seen In Contrast Between Wal-Mart/ASDA Essentials And Tesco/Fresh & Easy examined problems with the Wal-Mart/ASDA Essentials concept including pricing, merchandising and store branding, and if Tesco may avoid these issues. Cultural differences in committing to a launch are revealed. 5/29/2007.

Small Store Concepts Not Solely A Tesco Idea Check Out Wellcome’s Express Fresh Model looked at how retailers worldwide are claiming to see a niche in the area of small store concepts, including Wellcome supermarkets. With article excerpt from the Taipei Times detailing Wellcome Taiwan’s testing of the new store format. 5/25/2007.

A Look At Tesco’s Stores provided exterior elevations as to the appearance of new Tesco stores. It also included maps and addresses of the twenty new Phoenix area stores plus an announcement of Tesco’s new “green” truck fleet. 5/24/2007.

Is Tesco Sending A Message To U.S. Competitors? analyzed an interview given by Andrew Higginson, Tesco’s Finance and Strategy Director regarding Tesco’s new American venture. 5/16/2007.

Tesco, Whole Foods And Wal-Mart Concepts Tested On Both Sides Of The Pond looked broadly at the ideas these retailers are exporting, and how they will play out in their new surroundings, in the end, success or failure may come down to the details. 5/15/2007

Tesco’s Chief Executive Comments On US Venture with all the industry getting ready for Tesco to Come to America, it is worth paying attention to what Sir Terry Leahy, Chief Executive for Tesco, has to say. He did a video commentary after Tesco announced its preliminary results last month, and Sir Terry made a few comments specifically about its U.S. venture. 5/10/2007

Ten Reason’s Why U.S. Chains Should Be Concerned About Tesco And Target reviewed a major retail report by the analysts at JP Morgan, entitled Supermarket Industry Review and Outlook: Is There Room for Two More Giants? We identified ten key points that are often overlooked in industry discussions. 5/3/07

Is Tesco’s ‘Green’ Position A Sustainable Advantage? excerpts an interesting piece from The New York Post entitled “‘Green’ Grocer Tesco’s Building Its Eco-Friendly Brand In U.S.” The article makes two points that are important to be aware of as Tesco comes to America. The first is a contrast in the way Tesco and Wal-Mart are approaching green initiatives. The second point is that Tesco is likely to be able to legitimately brag that it is “greener” than Wal-Mart, Safeway and other competitors — but that much of this is simply a consequence of its building everything new as opposed to being stuck with legacy structures. 5/2/2007

Tesco’s Small Store Format Not Unnoticed At Wal-Mart asked why Wal-Mart would consider small store formats when Supercenters are still viable, plus, they’ll need thousands to make an impact. Still, they’ve given a new executive the task of developing it, a former Tesco chief executive. 5/2/2007

Tesco Values Award Goes To Grant J. Hunt Co./Orchard View Farms announces an American venture has been awarded one of Tesco’s most prestigious awards. Grant M. Hunt, currently president of the Grant J. Hunt Company, is a former Chairman of the Produce Marketing Association. His father, Jim Hunt, was also Chairman of PMA. That this relatively small company should be a source of such industry leadership tells you something is really special there. Obviously Tesco thinks so as well. 4/26/2007.

Tesco’s US/Japan Small-Store Strategy Contrasts With Wal-Mart’s Big-Store Plan analyzed whether Tesco’s decision to open smaller stores was driven by its experience in the United Kingdom. 4/24/07.

A Closer Look at Tesco’s Finances questioned whether Tesco’s profitability is due to superb operations or a sub-par return on real estate assets. 4/19/2007.

Tesco’s Union Obstacle pointed out that union opposition could complicate Tesco’s U.S. expansion plans and that this was an issue Wal-Mart and Tesco had in common. 3/9/2007.

Tesco In America: Real Estate closed out our review of aspects of the Credit Suisse report with a look at its assessment of the types of real estate that Tesco is pursuing in the U.S. We explored the possibility that such real estate was a double-edged sword, available and thus suitable for a rapid Tesco roll-out but also available to competitors if the concept’s success merits duplication. 3/2/2007.

Tesco In America: Real Estate closed out our review of aspects of the Credit Suisse report with a look at its assessment of the types of real estate that Tesco is pursuing in the U.S. We explored the possibility that such real estate was a double-edged sword, available and thus suitable for a rapid Tesco roll-out but also available to competitors if the concept’s success merits duplication. 3/2/2007.

Tesco vs. Target dealt with the possibility that Tesco’s new entry might cause Target to consider new formats and, possibly, slow down expansion on its supercenter format. 3/1/2007.

Tesco vs. Costco explored the implications of Tesco’s new American concept on Costco and pointed out how push-back from Costco and others might impact Tesco’s plans. 2/28/2007.

Tesco In America: Foodservice vs. Prepared Foods pointed out both the importance of its prepared foods offering to Tesco’s success and differences in the market between the U.S. and the U.K., which might mean that restaurants will offer stronger competition to Tesco in the U.S. than they do in the U.K. 2/27/2007.

Tesco’s Success Course Far From Easy inaugurated our coverage of an excellent research report produced by the analysts at Credit Suisse. What did they entitle their report: It May Be Fresh, But It Won’t Be Easy. 2/23/2007.

The End of Supermarkets pointed out that if Tesco’s concept -- heavy to perishables and prepared foods — became the preferred way for consumers to buy these items, it would nullify the supermarket’s preferred strategy for dealing with supercenters and warehouse clubs. 8/16/2006.

Tesco, Part II included input from a letter-writer deeply involved with Tesco in the U.K., testifying to Tesco’s high food safety standards, intensive consumer focus. However, we also pointed out that Tesco’s plan for a rapid roll out was a “brilliant or bankrupt” strategy. 8/16/2006

As the king of the United Kingdom’s food retailers prepares to open stores in America, we’ve paid close attention to its operation:

Tesco Challenges kicked off our coverage of Tesco’s proposed American venture and pointed out that there are major obstacles to be overcome. 8/15/2006


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