Tesco Comes To America As Fresh and Easy 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
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
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’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.
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 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 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 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’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.
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 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.
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
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
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.
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
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
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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 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.
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 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.
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 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 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.
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.
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.
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.
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 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.
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’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.
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.
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
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.
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.
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.
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
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
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’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
Fresh & 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
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. 2/5/2008
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 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
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
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
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
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
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
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
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
As 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
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. 3/25/2008
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
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
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
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
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 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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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 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
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
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
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
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
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
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
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
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’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
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
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
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
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’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
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 ‘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
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
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
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
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 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
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
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
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
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
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
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
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
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
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 — 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
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
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
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
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
| ![Jim Prevor's Perishable Pundit [header]](images/pp_headtop_842x45.jpg){kind=small}
![Jim Prevor's Perishable Pundit [header]](images/pptopnav_01.jpg)
