Monday, April 7, 2008

San Jose Mercury News Reports on Tesco's Past Spoiled Food Problem in the UK; Relates it to Fresh & Easy: F&E Better Get in Front of This Story Fast

It's far from "fresh" news that Tesco had a problem in the past with the health authorities in the United Kingdom (UK) because some of its stores there were selling out-of-code and spoiled food products. We've mentioned it recently in Fresh & Easy Buzz in relation to some organizing the United Food & Commercial Workers (retail clerks) union has been doing in Southern California.

A couple weeks ago the UFCW union mass-mailed fliers to residents in a number of Southern California neighborhoods where Tesco has its Fresh & Easy grocery stores. The fliers quoted union retail meat specialists who work at various union shop supermarkets in Southern California as saying they are very concerned about Fresh & Easy's fresh foods handling policies.

Along with these "first-person" quotes, the UFCW fliers had information from UK publications about the stores in the UK that sold the out-of-date or spoiled fresh foods. Tesco settled the matter and says it has solved that problem in those UK stores where it occurred.

There have been no reported incidents by consumers or county health departments in the western U.S. states and counties--California (Southern), the Phoenix Metro region in Arizona and Metro Las Vegas, Nevada--where Tesco has its 61 Fresh & Easy grocery markets that we are aware of.

The News is really that a major U.S. paper is running the story.

Despite the fact there have been no reports to our knowledge about the selling of any spoiled or out-of-code fresh (or any other) food products at the Fresh & Easy stores, the fact that the San Jose Mercury News--which has the second-largest circulation after the San Francisco Chronicle in Northern California's Bay Area, along with having a somewhat national (and even international) readership because of the world-wide web--ran the story is news in itself (or should be) vis-a-vis Tesco and its Fresh & Easy retail operation.

Tesco should have a press release, with a statement from CEO Tim Mason, on the news wires by midnight tonight. That gives them three hours (their west coast time) as we write this.

The Mercury News story has a statement from Fresh & Easy's spokesman, which is good for the retailer. However, it isn't enough. A smart and savvy grocery retailer--especially being a start-up in the USA even though its the world's third-largest international retailer--needs to respond to such a story fast--and with authority.

That authority can only come from the CEO. If this story were written about Safeway Stores, Inc. for example, they also would have their vice president for food safety, something every major grocery chain should have, respond in a statement as well as the company's CEO. They did this rather effectively years ago when there was a spate of food safety scares in the U.S. supermarket industry.

Fresh & Easy is rolling the dice with its fresh foods markdowns

Tesco also should be very careful with a practice it started (and continues today) in its Fresh & Easy grocery stores some time back. That practice, which we've written about before, is the marking-down of fresh foods' items like prepared foods, meats and produce by up to 50% shortly before the items are set to go out-of-code. The Fresh & Easy stores are doing this daily, some more than others obviously. It's a lack of sales problem, as well as a fresh foods logistical one, as we've previously written.

There is a reason major U.S. supermarket chains don't do markdowns like Fresh & Easy is doing on a scale any larger than with a few fresh meat items, and that's on a store-by-store basis. Further, since the vast majority (about 99.7%) of U.S. supermarkets sell produce in bulk, rather than packaged with code dates on it like Fresh & Easy does, it isn't even a issue in terms of markdowns for the industry.

You never see a major U.S. supermarket chain of any significance do such markdowns for quick sales of perishable products like prepared foods entrees, ready-to-consume foods, dairy products and the like. As we said, the behavior is limited primarily to fresh meat items; and done well-before the code dates on the packages expire. Many major U.S. chains don't even allow store-level meat managers to markdown fresh meat items. Rather, they have a chainwide policy against any markdowns.

Why don't major U.S. supermarkets do this perishable and fresh foods markdown behavior rather than "eat" the loss? It's simple: they don't even want to come close to taking a risk of having a food safety problem or issue.

The amount of money saved by marking a fresh foods product down and selling it for 50% off, even for a chain like Safeway which has 1,700 stores in the U.S. (compared to Fresh & Easy's 61), pales compared to the potential sales losses (not to mention the potential long-term reputation and retail brand damage) that comes from a food safety issue, such as a consumer getting sick from one of the 50% off fresh foods items they purchased at a store marking such items down for quick sale. [Read the March 23 piece we wrote here about Fresh & Easy's fresh foods markdown program. Just scroll down a bit on the linked page to read it.]

Revolutionary operations and merchandising programs implemented by supermarket chains of any kind which are doing business for the first time in the U.S. should in our opinion be focused on the sales-increase side of the ledger--great formats, exciting promotions, award-winning consumer marketing campaigns, for example--rather than in finding ways to squeeze out a little less dollar loss by doing things long-established grocery chains don't do in the U.S., like marking down fresh foods' products on a regular basis as a matter of policy.

As you can see from our brief explanation, there's a good reason why these U.S. chains don't do it.

Fresh & Easy Neighborhood market hasn't had one reported incident of a consumer's complaining about or getting sick from purchasing out-of-date or spoiled foods in its stores to our knowledge, as we've said. Further, no government entity has suggested the chain has done this to our knowledge.

In fact, the story in the Mercury News merely says some people are worried about stores Fresh & Easy will open in San Jose at the end of this year or early next year because of the spoiled foods' issue Tesco had in the UK. There is absolutely no assertion that Fresh & Easy sells spoiled fresh foods that we can discern from the story.

However, perception is reality. And consumers reading the paper's story will draw their own conclusions as people do. (We aren't suggesting the Mercury News shouldn't have ran the piece, by the way. That's there editorial call completely.)

Were we running Tesco, we would be having our PR department, with input from F&E CEO Mason and others, at their computers right now, crafting a statement with assurances from the CEO that Fresh & Easy's food safety standards are impeccable, if that is the case. That statement would be in the email boxes of every newspaper in America, and on the PR news release wires, by 7am tomorrow morning. Perception is reality.

Stories involving any aspect of food safety--even when nothing material exists as is the case with the Fresh & Easy stores--need to be got in front of, especially when they appear in a major metropolitan daily newspaper in a state where a retailer not only has based its corporate headquarters but has the greatest number of its grocery stores as well. That is the case on both counts for Tesco's Fresh & Easy in California.


The Village Postmaster said...

Thanks for showing the flag for West Sussex recently, Tesco seem to have forgotten some cardinal rules of retailing with their American adventure.

Most importantly don't let other people run with the PR, because for want of the 'official' line others will fill the void.

I have just posted an independent UK slant on the Mecury-News story with a link to you.

Keep up the good work, I am really enjoying your coverage.

Anonymous said...

Those flyers are one of the dirtiest of dirty union tricks I've ever heard of.