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Old Posted Oct 3, 2007, 11:42 PM
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Tesco launches next month in California (and AZ, NV)

The British are coming! The British are coming!

Quote:
Tesco Net Rises Ahead of U.S. Launch
U.K. Grocer Girds To Face Wal-Mart; Sales Slow at Home
By CECILIE ROHWEDDER
October 3, 2007; Page B10

British retailer Tesco PLC, set to open stores in the U.S. next month, posted strong fiscal-first-half results, showing deep pockets and earning prowess as it takes on Wal-Mart Stores Inc. on the world's largest retailer's home turf.

The U.S. expansion by Tesco, which controls around one-third of the British food market, is among the most widely watched events in the global retail industry this year. In response to Tesco's plans to open U.S. convenience stores focusing on fresh and healthy food as well as upscale prepared meals, Wal-Mart is studying a new, smaller store format of its own.

Trader Joe's, a specialty food chain owned by closely held Aldi Einkauf GmbH of Germany and concentrated on the East and West Coasts of the U.S., has been promoting upscale and healthy products, too.

On Nov. 8, Tesco plans to open its first five stores in greater Los Angeles, Los Angeles County, Orange County and San Bernardino, Calif. By the end of February, Tesco plans to have 50 stores across California, Arizona and Nevada. It already has a staff of 200 at its U.S. headquarters in El Segundo, Calif., and a large distribution center.

Tesco Chief Executive Terry Leahy said the British retailer already has a "substantial number of sites secured for next year and beyond" for its U.S. store chain, which will be called Fresh & Easy Neighborhood Market. Tesco said it has a "blueprint" to roll out Fresh & Easy beyond the Western U.S. Tesco is spending $510.9 million this financial year on its move into the U.S., and Mr. Leahy said he expects the new U.S. store chain to break even at the end of its second year of operation.

Mr. Leahy said Tesco won't run a major marketing campaign to accompany its U.S. launch and instead will rely on media and word of mouth.He said local interest is strong because the stores are up with banners and signs. By opening in rich and poor neighborhoods and courting shoppers of all income levels, Mr. Leahy said Fresh & Easy will be a novelty in the generally more segmented U.S. retail market.

Tesco, which is based outside London, said net profit rose 19% to £936 million ($1.91 billion) in the 26 weeks ended Aug. 25, from £788 million in the year-earlier period. The increase came mostly from Tesco's growing international business and from real-estate deals. First-half sales rose 9.2% to £24.7 billion.

But in its British home market, Tesco suffered weaker first-half sales growth, which it blamed on the cold and rainy summer weather. Sales at stores open at least a year, and excluding gasoline sales, rose 3.5% in the first half, the slowest growth rate in years.

Mr. Leahy said he was confident about Tesco's business in the United Kingdom for the second half of fiscal 2008, as consumers continue to spend despite a string of interest-rate increases over the past year.

"We've had to go through some real challenges to produce these results, with reviving competition and the British summer [weather], while we are also investing in our future with Tesco Direct and our plans to go into the United States," Mr. Leahy said.

The company started Tesco Direct, an online and catalog business selling nonfood items, about a year ago.

Tesco operates some 2,800 stores, of which 1,500 are in the U.K. and Northern Ireland and the remainder in Eastern Europe, Turkey and Asia. The retailer's stock rose 6.3% yesterday in London Stock Exchange trading to close at 463 pence.



--Lilly Vitorovich contributed to this article.

Write to Cecilie Rohwedder at cecilie.rohwedder@wsj.com1

URL for this article:
http://online.wsj.com/article/SB119131017600546273.html
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  #2  
Old Posted Oct 6, 2007, 4:44 AM
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This is growing into a huge story. Stores from 7-11 to Trader Joes are gearing up to compete with the "threat." This is going to be the biggest news in retail food in quite some time.
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  #3  
Old Posted Oct 6, 2007, 8:40 PM
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They have secured some locations in the bay area that are going to piss the hell out of the local anti-everything elitists,
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Last edited by Policy Wonk; Oct 6, 2007 at 8:50 PM.
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Old Posted Oct 7, 2007, 6:11 PM
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I just recently visit Tesco while in London, they're okay. Personally I think if they are like the ones in London, Trader Joes will have some major competition. IMO they are nothing like Walmart, and don't carry the stock they have. My friend who lives there, and the Londoner's I spoke with on this subject seems to think they will compete as well with Walmart. I don't see it and think it will have little affect on their sales.

Yes its seems to be big news among the locals I've had causal conversations with. From what I've seen visting the store almost everyday during my 6 days in London, it has a slightly higher quality of food than Walmart. I see it on a scale of or the same level as Trader Joes.
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Old Posted Mar 22, 2008, 6:28 AM
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Unlike Trader Joes, they supposedly specialize in lots of ready to eat items, prepared daily off-site. Thats supposed to be their niche in London, stuff you can bring home and microwave, but good enough quality that folks are living off their prepared dishes/meals for several days a week. Their typical store size for the American offshoot (called "Fresh and Easy", if I remember right) will be about 20,000sf. Similar size to Trader Joes, but smaller than Whole Foods and wayyy smaller than WalMarts.
I hope they open one here at Jack London Square (where an exactly 20,000 sf retail space is being built under the new parking garage)
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Old Posted Mar 22, 2008, 7:44 PM
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They are opening 2 of the "Fresh and Easy" stores in my neighborhood. One is going in where a Safeway is moving out, because the Safeway doesn't have room to expand.

IMO these types of smaller grocers will be the wave of the future, because grocery stores don't need to be as big as they're getting... the giant safeway's i see have the same selection, just now you can get frozen chicken at BOTH ends of the store.
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Old Posted Mar 24, 2008, 8:07 PM
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The small format grocery store wars are just beginning. Safeway is testing smaller stores in the Bay Area and Wal-Mart is also testing small format grocery stores.

Aldi's already has many small format grocery stores in Central US, as well as their Trader Joe's stores.

Tesco is going to open a warehouse in Stockton to serve the Northern California/Reno region. Look for more news of openings in the near future.

Tuy
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Old Posted Mar 28, 2008, 7:37 PM
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I actually visited one in Las Vegas. It's pretty bare-bones and unassuming, not to mention small, but that's the point...it's not supposed to be Whole Foods. I was surprised to find one of those recipe/demo stations in the back. Other than that, there was a lot of packaged stuff, including produce. If you're expecting to find some of those unusual British Marks & Spencer-type items (I haven't been to Tesco so I can't compare), like single-serve trifle pudding, don't count on it. It's all about the basics.

The front of the store is ALL self-check-out stations, with one employee ready to step in if needed. This could give them an advantage.

The one thing I question about their business model is that they're opening mainly in out-of-the-way locations "underserved" by other grocery stores, many of which are low-income areas. Given that, does it make sense for them to specialize in ready-to-eat prepared food? That's typically a more expensive way to eat, and tends to be a better fit with yuppie-ish urban areas.
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Old Posted Apr 3, 2008, 12:25 AM
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Fresh & Easy will take a break from expansion

From SFGate.com:

The fast-growing British supermarket chain planning 18 Bay Area stores has halted U.S. openings for the next three months, raising concerns about its prospects.

Fresh & Easy Neighborhood Market, the U.S. division of Tesco PLC, insists that the break was anticipated all along and that every announced location will open. Some, however, believe the move reflects early and serious trouble as the world's third-largest retailer attempts to plant its flag across the pond.

"The more stores they open, the more money they lose," said Jim Prevor, a food industry consultant who writes the Perishable Pundit blog. "I believe there's good reason to believe they will fail ... (unless) the company is willing to rethink the whole concept."

Fresh & Easy spokesman Brendan Wonnacott said that the pause doesn't reflect financial troubles and that planned Bay Area stores will open in 2009. He added that it takes time for stores to build up sales, but that the early results are encouraging.

"Sales and repeat customer visits are all increasing every week," he said. "We've been thrilled with the reception we've received in the neighborhoods we're in so far."

The company hasn't released financial data.

After talking to suppliers, Piper Jaffray senior research analyst Mike Dennis wrote in a March 13 report that Fresh & Easy is running 70 percent below projected U.S. sales, $30 million compared with $100 million in the second quarter. That equates to about $60,000 in weekly sales per store compared with the $200,000 average he says the company projected.

He noted that Tesco has tapped an American executive from its Thailand grocery business, Jeff Adams, to determine how the company can turn a profit on its $700 million investment to date. The company has said it plans to invest $2 billion over five years in its U.S. division.

"If Fresh & Easy fails it will add to the list of U.K. retail brands unable to break into the U.S.," Dennis wrote. The company generated buzz locally after announcing plans to set up in neighborhoods that other grocery stores have avoided. That includes a store in San Francisco's Third Street corridor, promising to complete a more than 10-year effort by city officials to expand the food selection in the district.

Fresh & Easy agreed to buy the 15,000-square-foot retail space of a condominium project at 5800 Third St., being built by Goldman Sachs Urban Investment Group and Noteware Development.

Amy Cohen, director of neighborhood development for the Mayor's Office of Economic and Workforce Development, said that project is on schedule and the company is looking at more sites in San Francisco.

"Fresh & Easy is actively working with the city," she said. "We see no slowdown."

A report released Tuesday by Mayor Gavin Newsom's office found that Bayview-Hunters Point residents spend $14.5 million annually on groceries in other neighborhoods or cities, because of lack of options in the neighborhood.

Additional Fresh & Easy stores are planned for Antioch, Concord, San Jose, Hayward, Oakland, Oakley and elsewhere in the Bay Area.

The company has opened nearly 60 stores since late last year, mostly in Southern California. It is generally building about 10,000-square-foot spaces, slightly smaller than a typical Trader Joe's. The company stocks its shelves with a narrower selection of goods than traditional supermarkets, with a higher proportion of private-label and prepared products.

Food industry consultant Prevor, who puts Fresh & Easy's weekly sales figure at around $50,000 per store, said the markets aren't drawing adequate foot traffic because they don't carry enough items for all-in-one shopping trips and U.S. consumers aren't yet familiar with the Fresh & Easy brand.

He added that he spoke to Fresh & Easy vendors who have been working for more than a year to meet the company's projected volumes. Last week was the first they had heard of any planned break in store openings.

Fresh & Easy Chief Marketing Officer Simon Uwins wrote on his company blog last week that the "pause for breath" had been planned after the company had opened 50 stores.

"We've given ourselves a little bit of time to kick the tires, smooth out any wrinkles, and make some improvements that customers have asked for," he said.

Fresh & Easy said in December that it expected to have 200 stores open by the end of this year. That figure now stands at 150, Wonnacott said.


Planned Fresh & Easy locations
Antioch: Somersville & Buchanan roads

Lone Tree & Golf Course

Concord: Clayton & Ygnacio Valley roads

Danville: Diablo Road & Interstate 680

Fairfield: Beck Avenue & West Texas Street

Hayward: Mission Boulevard & Rousseau Street

A Street & Hesperian Boulevard

Mountain View: Middlefield Road & Rengstorff Avenue

Napa: Jefferson Street & Imola Avenue

Oakland: 73rd & Bancroft avenues

Oakley: Laurel Road & Ohara Avenue

San Francisco: Third Street & Carroll Avenue

Silver Avenue & Goettingen Street

San Jose: Bird & Minnesota avenues

Almaden Road & Curtner Avenue

Sunnyvale: Tasman Drive & Fair Oaks Avenue

Vallejo: Oakwood Avenue & Springs Road

Walnut Creek: Ygnacio Valley Road & San Carlos Drive

E-mail James Temple at jtemple@sfchronicle.com.
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