Thursday, May 15, 2008

Fresh But Never Easy: Tesco's Long But Rapid South-North March in the Nation-State of California

If it were a nation, California, which has the ninth-largest economy in the world, according to the World Bank, the U.S. Central Intelligence Agency's World Factbook, the California Department of Finance and other similar sources, would be rivaled in economic power by only the seven nations listed below:

The United States, Japan, Germany, France, the United Kingdom, Italy, China and India. Only these eight nations have economies larger than that of the state of California.

If it were a nation, California, with a current population of 38 million people, would be approximately the 34th-most populated country in the world, right after Poland, which has 38,200 people, only 200,000 more than California, according to data from the United Nations.

With 38 million residents, California has more people living in the state than live in the nations of Venezuela (about 27 million), Iraq (about 28 million and rapidly decreasing), Australia (about 23 million), Romania (about 22 million) the Netherlands (about 17 million), and Portugal (about 11 million), for example.

In fact, of the 221 nation's the United Nations counts as existing in the world, the state of California has more residents living in it than 187 of those nations do.

The agribusiness nation-state

The "nation-state" of California has the largest dollar-producing agricultural industry in the world, centered in the state's Central Valley and San Joaquin Valley, but also located throughout the Golden State from the far south to the far northern border with Oregon.

It's also the most globally diverse region agriculturally despite its urbanization. California farmers raise nearly every type of fruit, nut and vegetable a person can think of. Additionally, the Golden State is the leading global producer of many of those crops, from avocados and artichokes, to almonds and walnuts, along with many others.

The Golden State also has the largest dairy industry in the world in terms of the volume of milk the state's cows produce annually. It's also a top global cheese producer and is rivaled only by France for size and quality in wine grape growing and wine making.

The "nation-state" of California also has a thriving beef cattle, poultry and hog-raising industry, produces timber and cotton as well as foodstuffs, has a considerable fisheries industry, produces honey from bees and eggs from chickens, is a pioneer in organic agriculture, a major leader in the local foods movement, and even has a fairly large oil-producing industry centered in Kern County, which at one time was one of the leading oil-producing regions in America.

High-tech nation

The diversity of the Golden State is astounding. Just a few miles from some of the world's most productive agricultural land is the world's number one high technology region, The Bay Area's Silicon Valley, home to Intel, Sun, Apple, Google, Yahoo and a host of other high tech leaders, along with the research centers like Stanford University and U.C. Berkeley which incubate them, and the venture capitalists who finance them.

Traveling south on Interstate five, from Northern California to Southern California which takes a person through hundreds of miles of Central Valley and San Joaquin Valley farmland as well as right by the oil drilling fields in Kern County near Bakersfield, one eventually arrives in what the locals called the Southland, the vast and diverse region of Southern California.

Hurray for Hollywood

The region is home to the third number one ranking industry, along with agriculture and high tech, which California offers the world--the entertainment industry. What's collectively called Hollywood produces more entertainment products--movies, television programs of all types, videos and related media--than does any other place in the world.

And even though agricultural products and the high tech creations of Silicon Valley represents tens of billions of dollars worth of California exports, entertainment produced by Hollywood is arguably the Golden State's most well known and most globally consumed export.

Home of Presidents

California also has produced two U.S. presidents in modern times; one infamous--Richard Nixon, who was born in California--and one famous--Ronald Reagan, a transplanted Californian originally from Illinois, but a California native son in every sense of the word. Both were Republicans.

Both Nixon and Reagan kept what they called Western White Houses in California, where they spent as much time as they could away from Washington D.C. Nixon's Western White House was in the Southern California city of San Clemente, not far from his boyhood home of Yorba Linda, where the late Republican President's father was a grocer who owned his own small market. (A Fresh & Easy store is opening soon in Yorba Linda, by he way.)

Ronald Reagan's beloved Western White House was his ranch, "Rancho de Cielo" (Ranch in the Sky), in the Santa Barbara Mountains

Ronald Regan returned home to California to live after leaving office, welcomed as the Golden State's favorite son returned home. He died at his home in Southern California.

Rather than returning to California after resigning from office over the Watergate burglary scandal, President Nixon moved to New Jersey, telling long-time friends at the time that although he wanted to, he was too embarrassed to return to his home state to live.

The contrasts between these two Golden State Presidents is just another example of the vast diversity and contrasts of the "nation-state of California.

California the great exception

It's difficult to find another state in the U.S., or nation in the world for that matter, which is number one globally in three such diverse sectors: agriculture, high technology and entertainment, along with not only being a leading global academic and research center with the University of California system, Stanford, Cal Tech and so many others--but also a major world surfing capital with its rugged coastline and numerous sandy beaches. Think about it.

Arguably the best book written about California is, "California: The Great Exception," by the late California historian, journalist and lawyer Carey McWilliams.

In the book, which was published in 1949, McWilliams, who wrote extensively about nearly every aspect of the Golden State, takes an assessment of California 100 years after its founding. He examines the forces that shaped the state like no other writer really has since. It was McWilliams in fact, who nearly 60 years ago in 1949 predicted California would become a "nation-state," even using the term "nation-state" in 1949 for the still young Golden State.

It's a mistake to think of California as a monolithic state however. Rather, it's completely the opposite. Southern California, the Central Valley and the Bay Area are in so many ways like separate states withing the "nation state" of California.

As the late Pulitzer Prize winning San Francisco Chronicle newspaper columnist Herb Caen once said in one of his many columns, which he wrote for 60 years in San Francisco for the Chronicle and a couple other daily newspapers: "Isn't it nice that people who prefer Los Angeles to San Francisco live there."

The late Los Angeles Times columnist Jack Smith, who's column ran in the Times for 37 years and for many years before that in the LA Daily Mirror before it went out of business, would fire back at Caen in his own column each time the San Francisco scribe offered quotes about the Southland like the one above, which was often.

For example, Caen once quoted the comedian and movie director Woody Allen, who said: "Making a right turn on a red light was Los Angeles' only contribution to culture." Caen ran the Woody Allen quote, along with some commentary of his own in a column, knowing Smith would respond.

The very next day in his LA Times' column, Smith, using his witty pen, replied to his friend Caen: "What about the drive-in bank, the Frisbie, the doggie bag? What about our (Los Angeles') Hansel and Gretel cottages, our Asseryian rubber factory, our Beaux-Arts-Byzantine-Italian-Classic-Nebraska Modern City Hall? What about the drive-in church? Herb, LA is famous for all those and more. San Francisco can't compare."

Word was when Herb Caen read Smith's LA Times' Column (in a newspaper not online) the next morning, which he did regularly every morning in his Chronicle office, he laughed so hard he could be heard throughout the newsroom.

The legend goes Caen then got Smith on the telephone, said he had just read the column, that the items were brilliant, and that by Smith's poking fun at Los Angeles to make a larger point Caen was conceding the north-south rivalry to Smith for that week.

Such is part of the "great exception" that's the nation-state of California.

Tesco in the nation-state of California

It's against the backdrop outlined above United Kingdom-based Tesco, the world's number three retail leader after U.S.-based Wal-Mart and France's Carrefour, is making its long but rapid retail grocery store March from Southern California, through the Central Valley and San Joaquin Valley, into the Sacramento Metropolitan region and the San Francisco Bay Area, with its small-format, convenience-oriented Fresh & Easy Neighborhood market grocery stores.

Its a journey of about 550 miles down Interstate 5 from San Diego to San Francisco. If one sets out in the United Kingdom, where Tesco has its world headquarters and its largest retailing operations, deciding to take a 550 mile road trip, you can bet not only will you not end up still in the UK when your car's odometer hits 500 miles, but that you will have passed through a good many other European countries in route to your destination those 550 miles away.

In other words, along with its massive population of 38 million, its nation-state economy and leading global industries, California also has a vast geography, ranging from some of the tallest peaks in the world near Yosemite, to the below sea-level desert region called Death Valley.

McWilliams used the phrase "California: The Great Exception" often in his writing and in speeches and talks he gave throughout California. Those exceptions included the state's geographical diversity--its rugged coastlines, vast deserts and high mountain peeks--it's people--the movie moguls who created Hollywood, the state's agricultural pioneers, and California's wily inventors like the billionaire Howard Hughes in McWilliams' time, and the Apple computer and Google guys in modern times.

There's never been a food retailer from across either the Atlantic or Pacific oceans that's decided to plant its flag in California and build a statewide chain of grocery stores. That fact, among other things, is what makes Tesco and its Fresh & Easy Neighborhood Market small-format grocery store retailing venture in the Western U.S.--and particularly in California--worthy of writing about.

It's a bold venture, worthy of all the other pioneers--the farmers, gold miners, Presidential candidates, movie moguls, wily inventors, high tech industry pioneers and assorted others--who have staked claims in the Golden State.

Since late October of last year, when Tesco opened its first Fresh & Easy grocery store in the Southern California desert region city of Hemet, the retailer has concentrated all of its store opening efforts in the Southern part of the state.

However, that's changing. As we've been reporting on, writing about and chronicling here on Fresh & Easy Buzz, Tesco has been locking up leases in California's Central Valley and northern portion of the state as fast as a California gold minor would lock his daily take in a strongbox.

From Southern California, Tesco's Fresh & Easy will be marching on to the Bakersfield region in the southern Central Valley with its small-format grocery stores.

From Bakersfield, its on to the Fresno Metropolitan region, about 110 miles away.

Then its up the road a bit, likely opening a few stores in the Merced County area eventually.

From there, it's about 30 miles up the road to Modesto, where Tesco has inked a lease for one store so far. Then it's down Highway 99 to Stockton--with possible stores along the way in Manteca and Tracy--where Tesco will locate its Fresh & Easy Neighborhood Market Northern California regional distribution center. We expect stores in Stockton as well.

The next leg of the road trip runs from Stockton to Sacramento, where Tesco has signed leases for 19 stores in the region, along with a lease for a store in Galt between Stockton and Sacramento, and likely one to come in Lodi as well.

Along with Sacramento is the road trip into the San Francisco Bay Area, completing the first leg of Tesco Fresh & Easy's retail grocery store march from Southern California north, with 48 store location leases locked up so far: 19 in the Sacramento region, 18 in the Bay Area, 5 in Bakersfield, 5 in Fresno, and 1 in Modesto--with many more to come in all these regions.

Gutsy, world-class retailer

Tesco is one of the best food, grocery and general merchandise retailers in the world. Corporately, its merchandising, operations and product branding efforts are world-class. Failure generally hasn't been an option globally for Tesco as well.

It's small-format Fresh & Easy grocery store venture is a bold one, especially in a highly-competitive market such as California. But its exactly that fact--that California is so competitive--which could play into Tesco's success in the Golden State. The retailer knows--like all the pioneers before it--that California offers rich rewards.

Counting Tesco out of the food retailing game in California and elsewhere in the U.S. would be a major mistake. One thing the retailer knows how to do corporately is to make course corrections if it has to. Not always soon enough, but it generally does so.

If properly merchandised, operated and marketed, Fresh & Easy could become a very popular and successful grocery chain in California and elsewhere in the Western U.S.

With gasoline at $4 gallon (and going up more), for example, a neighborhood grocery store chain, with stores located about two miles from each other could become a very tempting alternative to driving to the big box store five miles or more away, especially since Fresh & Easy's prices are affordable ones.

Tesco's California march--the first by an international retailer of note in Golden State food retailing history--is filled with potential potholes. However, nobody can argue Tesco isn't a gutsy retailer. After all, how many retailers in the U.S., let alone from overseas, would launch such a long march to become a major food and grocery retailer in the nation-state of California?

Tesco is making the long geographical march from Southern California to Northern California in record time. It's one of the fastest long marches we've observed. Fresh & Easy Buzz has been reporting on, chronicling, writing about, and analyzing the food retailing march.

Below are numerous pieces of various types we've published about Tesco's Fresh & Easy Neighborhood Market and its march north in California. Just click-on each city or region listed below to read some of our pieces about them.

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