Wednesday, March 12, 2008

Safeway CEO Steve Burd: 'I'm Not Particularly Worried About Tesco's Fresh & Easy Grocery Stores in California'


Safeway Stores, Inc. CEO Steve Burd, speaking at the Bank of America 2008 Consumer conference today in New York, said he is not "particularly worried' about Tesco plc.'s California invasion with its small-format Fresh & Easy Neighborhood Market grocery stores.

California is Safeway's home turf. The grocery chain has its corporate headquarters in the San Francisco Bay Area city of Pleasanton and operates about 750 stores in California and Arizona, under the Safeway, Vons, Pavillions and Pak N' Save banners. California and Arizona are Tesco's two primary market regions for its Fresh & Easy grocery markets.

Burd said that according to Safeway's research, each one of the 10,000 square foot -to- 13,000 square foot Fresh & Easy grocery stores that open within 1.5 miles of a Safeway supermarket has only 10% of the impact of the opening of a standard sized supermarket.

Just in case though, Safeway plans to open the first four or five of its own small format (15,000 -to- 20,000 square feet) convenience-oriented grocery stores this summer in the San Jose region in the Bay Area. [Read our recent March 5 piece about Safeway's new, small-format store development here.]

Tesco, the third-largest retailer in the world, has thus far opened 58 of its small-format, convenience-oriented Fresh & Easy grocery markets in Southern California, Arizona and the Metropolitan Las Vegas, Nevada region. The stores feature a limited-assortment of Fresh & Easy store brand and national brand everyday grocery items, along with specialty, natural and organic groceries. The grocery markets also sell an extensive selection of prepared foods, merchandise fresh produce and meats, wines and craft beers, fresh flowers, and a limited assortment of non-foods items.

The United Kingdom-based grocer also has signed leases for an initial 18 Fresh & Easy stores in the San Francisco Bay Area, along with inking deals for 19 of the grocery stores in the Sacramento region. The Northern California stores are expected to start opening perhaps as early as the end of this year but more likely beginning in early 2009.

At today's Bank of America conference, Safeway's Burd also said the grocery chain, which operates 1743 stores in the U.S. and Canada, will start to focus more on "everyday value pricing" rather than its current focus on "high-low" or promotional pricing.

That's fairly big news for the retailer. Burd said promotional pricing can and does drive people into the stores. However, he reminded conference attendees that in 2005 he said creating lower everyday pricing on a wide variety of items was the chain's goal since launching its "Lifestyle" format and store remodeling program in 2005.

The Lifestyle format has proven successful for Safeway. In fact, last year Burd announced the grocery chain would remodel all of its supermarket banner stores to fit the format. In January, Burd said the chain had about 65% of its stores now converted to the Lifestyle format.

Today, Burd said a series of ongoing cost reduction measures and improved business processes will make it possible for Safeway to this year start its focus on the "better everyday value" pricing program.

3 comments:

Tim Swearingen said...

Mr. Burd should be worried about Fresh & Easy...

They are so committed to responding to their customers needs that a F&E rep repsonded to a post on my blog and offered a great alternative for my need. The fact that they would even bother tells me that they make customer service a foundation of their corporate "culture".

Fresh & Easy Buzz said...

Thanks for you comment Tim. How about a link to your blog so we can read your need and the response from the Tesco Fresh & Easy rep. You can post the blog link here...or feel free to email it to us at freshneasybuzz@yahoo.com.

Thanks

Tim Swearingen said...

Here is the address for my blog (http://timswearingen.typepad.com/), the specific article was posted on 12 March 2008