Tesco considers options for failed Fresh & Easy push - The Packer

Tesco considers options for failed Fresh & Easy push

12/05/2012 01:37:00 PM
Tom Karst

(UPDATED COVERAGE, Dec. 6) Never having won the enthusiasm of U.S. shoppers, Tesco might say “ta-ta” to the U.S.

The United Kingdom-based retailer said Dec. 5 a strategic review of its Fresh & Easy business in the U.S. might lead to pulling out of the U.S.

Fresh & Easy, Tesco’s small-format supermarket concept rolled out in Southern California, Arizona and Nevada in 2007, has since expanded into northern California with about 200 stores.

Philip Clarke, Tesco chief executive officer, said in a statement that returns haven’t been acceptable for Tesco to sustain its investment, which news media accounts so far put at close to $1.6 billion.

“It is now clear that Fresh & Easy will not deliver acceptable shareholder returns on an appropriate timeframe in its current form,” he said.

Clarke said other companies have expressed interest in buying all or part of the Fresh & Easy chain, or in partnering with the U.S. company.

“Innovation is the bleeding edge,” said Don Goodwin, president of Golden Sun Marketing, Minnetrista, Minn. “They tried to be innovative and they bled profusely.”

More retail consolidation may be ahead with the divestiture of Fresh & Easy and pending sales from large retailers like Supervalu, he said.

Fresh & Easy had rigorous labeling and traceability compliance standards for suppliers when it entered the U.S. market, which created tension and pushback because the company had few stores, and needed less produce to stock shelves.

“If they entered today, it might go a little easier because of the compliance standards we are working toward with the traceability initiative,” Goodwin said.

Fresh & Easy’s sterile store environment and initial commitment to packaged produce hurt them greatly, Goodwin said, because the West Coast sells less packaged produce than any region of the country. He said the chain also could have gained from bringing in experienced U.K. and American supermarket executives to lead the chain.

Bruce Peterson, president of Peterson Insights, Bentonville, Ark., said the chain stocks similar items in its stores, even though the neighborhoods they are in are very different.

“The moniker on the building was Fresh & Easy, but it wasn’t always particularly fresh and it wasn’t always particularly easy,” he said.

Despite a tremendous investment in research by Tesco to find out what the U.S. shopper wanted, Fresh & Easy stores never hit the mark, said Bill Bishop, chairman of Willard Bishop LLC, Barrington, Ill.


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Rae    
cali  |  December, 10, 2012 at 10:58 AM

This is a really a great place to shop and the food is very fresh! Self check outs are not dufficult if you know what you doing if you dont want to check yourself out they are there to help you!! the ready meals are all made fresh in riveraside cali with the USDA on site also the the salads and sandwichs and the fruit is all cut by hand! I am very sad tesco wants to pull the pulg on fresh and easy!!! I will miss you frash and easy!!! RaeRae

Daniel Torres    
Gonzales CA>  |  December, 10, 2012 at 02:20 PM

maybe then can ask Bubba or Bufford at Walmart on how to be successful

Anon    
CA  |  December, 10, 2012 at 03:13 PM

they should have started by NOT trying to compete with hispanic stores... anyone with any kind of experience in the business knows the F&E format would lose in some of the first markets they went into. i've seen some stores plop down in areas that work, and others in areas where they can't even win over the guy who buys a sandwich in the gas station! i think they also made some early mistakes in how they treated the grower/shipper community... a lot of the wrong attitudes in the wrong places.

Mark    
Los Angeles  |  December, 11, 2012 at 03:59 PM

It's a shame to see Fresh & Easy go. They offered some innovative and flavor rich ready-to-eat meals at a fair price. They offered locals tremendous coupon discounts amounting to 15% on a $25 bill. I actually liked the number of private label offering they had - similar to Trader Joe vs brands. If you live in Los Angeles, the mainstream grocers (Vons & Ralphs) are so outragously priced on ordinary items, it's easy to understand why people want alternatives. The comment with competing with Latino supermarkets is true - they initially entered those markets. But if you live in those areas it is nice to have a CHOICE of something besides Super A and a bodega. Walmart would win by buying these assets.

Don    
Secaucus, NJ  |  December, 11, 2012 at 04:56 PM

My wife and I loved F&E stores that we found in Arizona and California, and hoped that a similar concept could make its way east. We live in a community with no supermarket and could benefit from a small market. Nevertheless, I agree with every negative brought out in the article. The locations seemed so poorly chosen and it would seem that they were driven by low cost real estate. Yes, they reminded one somewhat of Trader Joes. F&Es private branding seemed good to me. They are absolutely the only market that seemed to have conquered the self check-out concept. I found it easy and dependable. Generally I avoid self checkout. Tesco has done so well in matching to store to the community in England. I think they made a near miss in America. Someone else will pick up this wedge market and get it right. It amazes me what Kohls has done in its field. This concept needs someone as smart in merchandising as Kohls.

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