Sunday, June 15, 2008

Tesco Fresh & Easy Neighborhood Market CEO Tim Mason 'Shows A Little Leg' in Interview With the Financial Times; What About the Ankle?

Fresh & Easy Buzz Editor: Since early this year, Fresh & Easy Buzz has been suggesting Tesco Fresh & Easy Neighborhood Market CEO Tim Mason get out from behind his desk at corporate headquarters in Southern California--both physically and metaphorically--more often and talk more to the press and others about who he is and about his goals for Fresh & Easy in America. Or, as our British friends like to say..."Show a little more leg."

Mason has done so sporadically, but nowhere enough as is needed for the head of a fledgling grocery chain owned by an offshore-based corporation, which is trying to make it's mark in American food and grocery retailing.

Tim Mason is starting to "show a bit more leg" however, as is evidenced by two pieces published in today's Financial Times by staff writer Elizabeth Rigby.

Earlier today, we published this piece in which Mr. Mason told Ms. Rigby that Tesco's Fresh & Easy Neighborhood Market could be moving sooner rather than later beyond its current Western USA base markets of Southern California (soon in Northern California as well), the Phoenix Metropolitan region in Arizona, and the Las Vegas, Nevada Metro market, into the Chicago, Illinois market with its small-format combination basic grocery and fresh foods format Fresh & Easy grocery markets.

As Fresh & Easy Buzz readers are aware, we first published that Tesco has long range plans to move beyond the Western U.S. market into the Chicago region--and likely Florida and New York as well--back in December, 2007. (You can do a search on the blog and find numerous mentions of it.)

In the interview with the Financial Times' Ms. Rigby, Fresh & Easy Neighborhood Market CEO Mason suggests that's one of the reason's Jeff Adams was reassigned from his former position as CEO of Tesco-Lotus in Thailand to his current position as Co-executive vice president for operations at Fresh & Easy USA.

In the piece by Ms. Rigby, the writer joins Mr. Mason at the Eagle Rock Los Angeles neighborhood branch of Fresh & Easy for a more human look at the CEO and the Fresh & Easy chain.

Interestingly, in her piece she mentioned "bloggers," and then goes on to quote nearly every constructive criticism Fresh & Easy Buzz has made to date about Tesco's Fresh & Easy grocery stores. She also mentions "bloggers" and analysts who say the Fresh & Easy model (or format) won't work. Fresh & Easy Buzz readers know this blog (and analysts) has never said that, so we part company there if we are being referred to collectively with possible other bloggers who may or may not have written that before. [Note: We haven't read one serious blogger or analyst who's gone that far, by the way.]

In the piece, Mr. Mason also addresses as legitimate many of the issues Fresh & Easy Buzz was one of the first publications to bring up and offer analysis on, such as the use of the $5 coupons, and the resulting margin hits that is causing, overall store sales, and turnover levels, although he doesn't address them in any depth in the interview, just for the first time essentially acknowledges them as valid.

Additionally, among the product selection "tweaks" mentioned in the article are the additions of more named branded products like Coca Cola soda and charcoal briquets at discount prices; a fix Fresh & Easy Buzz has been suggesting since last December. [$5.99 for a 24-pack of Coke isn't competitively hot, by the way. It's currently the average promotional price at most Western U.S. supermarkets. If you buy four 24-packs though, then use the $5 Fresh & Easy Coupon which is good for purchases of $20 and over, then it's hot. But since $5.99 per 24-pk of Coke is near retailer cost, what's hot also is money losing in that scenario for a retailer.]

In fact, Fresh & Easy Buzz reader and correspondent Vegas Mike was responsible for getting the first Fresh & Easy store in Las Vegas to carry charcoal briquets when he tried to buy a bag in the store some months ago he told us but they didn't sell any at all at the time. He suggested backyard cookouts were a pretty big event in Vegas, and that Fresh & Easy was missing out on lots of sales, not to mention customer convenience, by not selling the item. Soon after, the stores started carrying charcoal briquets, in Las Vegas and elsewhere.

And, of course, Mr. Mason doesn't address in the interview piece--nor does it appear the interviewer asks about it--a fact Fresh & Easy Buzz is well aware of from inside Tesco sources, which is that the margins at Fresh & Easy are very poor ones currently, and have been since November, 2007.

This is due to a variety of factors: the ubiquitous use of the $5 coupons (which can be used by shoppers for orders as small as $20); the daily up to 50%-off fresh product markdowns; the less than targeted sales volumes in the stores, which means Fresh & Easy's product procurement costs for its fresh & easy store brand items are higher than most of its chain competitors like Safeway Stores, Inc and SuperValu, Inc. are; the special display-ready cases it requires vendors to special-make for the chain (more added cost of goods); the retailer's cumbersome vendor requirements (more added cost of goods); and a number of other factors unique to the grocer which taken in sum are currently resulting in less than adequate margins for Fresh & Easy Neighborhood Market. [We will bee addressing the margin issue in an upcoming analysis piece.]

Mr. Mason was smart to choose the Financial Times to do his "coming out" interview though, as the United Kingdom-based financial publication has been very favorable to Tesco and its Fresh & Easy launch in the U.S., including being the only publication to run a story on a dubious piece of research conducted by a British investment bank named Executive Research Ltd., which said the results of its research proclaim Fresh & Easy is "America's New Cult Retailer," despite the fact the first stores opened only eight months ago, and half of the current 61 stores have been open for less than half that time. [Note: Ms. Rigby did not write that piece.]

Ms. Rigby also adds a needed human touch in her description of Mr. Mason, talking about his "lucky" green-striped shirt which he's worn to all of the Fresh & Easy grocery store grand openings he's attended.

Mr. Mason has waited too long to "show a little leg" as the leader of Tesco's Fresh & Easy Neighborhood Market USA in our analysis. However, better late than never perhaps; if its a trend rather than a one-time event with just one publication which has generally been favorable to the cause in its coverage to date. We say this not because it matters to Fresh & Easy Buzz if Tim Mason is more public as CEO. But rather because in our analysis it matters to the success of Fresh & Easy.

There is no substitute for having the CEO of a fledgling retail grocery store start up do the talking as often as possible. The press and consumers want to hear from the top on key issues, rather than a "spokesperson."

We also happen to know Mason has a strong and at times humorous personality. But since he seldom speaks out most people aren't aware that's the case. In fact, now that the Fresh & Easy CEO is "showing a bit more leg," we have a question: "What about the tattoo of the Fresh & Easy logo clock on the ankle?" Could be a great story if true.

Fresh & Easy Buzz has been told by two sources in positions to know that Mr. Mason has a tattoo of the Fresh & Easy clock, which is part of the retail chain's logo as you can see in the graphic above, branded on one of his ankles in the form of a tattoo, in order to express his brand marketer's dedication to the brand and the mission. We're told the grocery chain chef even showed the tattoo to Fresh & Easy Neighborhood Market headquarters employees at a staff meeting. Mr. Mason was head of marketing for Tesco PLC in the UK before coming to America to head up Fresh & Easy.

We haven't reported the tattoo officially because we haven't had demonstrative evidence, such as a photograph or confirmation from Mr. Mason. However, since we are asking about the tattoo of the Fresh & Easy clock in the form of a question, which allows for different standards for us than those we've imposed for reporting news on the blog, this piece is an appropriate place to mention it.

If true, we think having a tattoo of the Fresh & Easy clock on an ankle would make an even better "color piece" than one including the green-striped "lucky" shirt reproduced below from the Financial Times. After all, it's an ultimate brand marketer's "permanent" dedication to the cause.

Read the piece in today's Financial Times, "U.S. Tesco chief dons lucky shirt to fend off criticism," below:

By Elizabeth Rigby, in Los Angeles
Published: June 15 2008

It is an archetypal sunny Monday morning in Los Angeles and Tim Mason is standing outside the Eagle Rock Fresh & Easy store in his “lucky” green-striped shirt, which he fishes out of the wardrobe every time he cuts the ribbon on a new neighbourhood shop.

Today there is not a store opening; there has not been one of those for the past three months after Mr Mason, chief executive of Tesco US, pressed the pause button on the 200-store roll-out to “smooth out any wrinkles”.

But it is clearly a big enough moment for the special shirt to come out – it is also the first time that Mr Mason has spoken publicly about Tesco’s US ambitions since he officially opened this very same store seven months ago.

In spite of his attempts at keeping a low profile on the Fresh & Easy project, it has drawn critics far and wide – from bloggers to some industry analysts – who say the model will not work.

They argue that the stores have too few branded goods for US shoppers, the look is too utilitarian, and the wrapped fruit and vegetables are “unappealing”, while the self-service check-outs are unpopular. The three-month suspension in store openings, meanwhile, was seen a sign that the wheels were coming off Fresh & Easy before it had even got going.

“I was surprised everyone went mental,” says Mr Mason, reflecting on the reaction to the pause in openings.

“It just seemed at the time the most sensible use of resource. This is a tiny business and there is limited resource. So you have a choice, you can use that [resource to run the business] and open stores as well or you can use that resource to work out how to open stores better, but you can’t do both.”

The tweaks to the model are evident as soon as you walk towards the store. It is all about low prices. At the entrance, there are palettes stacked with bags of charcoal for $4.99 (£2.56) and 24 packs of Coca-Cola for $5.99.

The first thing customers see as they enter the doors is a four-feet high mountain of San Pellegrino water for 99 cents a bottle and a new “extra low prices” unit stacked with discount offers on fresh meat and prepared meals.

“When we first started we didn’t have any high-low promotions at all,” explains Mr Mason.

“What we discovered, because we were the new kid on the block, was that people didn’t get the price image,” he says, grabbing a packet of sirloin steak that has been reduced from $5.99 to $2.99 a pound.

He has “turned the volume up on price” by introducing 30 promotional lines in stores. The price cuts on these products run in fortnightly blocks, with promotional leaflets dropped through neighbourhood letterboxes in an effort to attract locals.

“It has dramatically improved the price image,” says Mr Mason, who says that his stores are still 10-25 per cent cheaper than rivals such as Trader Joe’s, owned by the family trust of one of the German billionaire brothers behind Aldi, and the Safeway-owned Vons stores. He is sure increased footfall will follow. “We probably won’t do it forever. We track [our price image] every week by exit surveys, and this has improved it by about 20 points.”

Perhaps as a sign that sales were not quite what it wanted – Mr Mason will not comment on turnover levels – Tesco has also being more aggressive in marketing and couponing.
“[We were looking at] how you make [stores] launch better, how you get them going better,” says Mr Mason. That meant extending its couponing to all households within two miles of each store.

“It was just question of trying to find the point at which it triggers and we know, from the UK, if you are trying to build and shape discounts, it is what you need to do,” says Mr Mason as he stops in the wine aisle.

The operating model needed attention. Wastage was too high, although again he will not talk numbers.

“The second stream of work is how you align the amount of stock you need with the sales you are going to get. The problem is because you err on the side of the customer you have a lot of stock.

“You need to work on the [product] range, you need a good ordering system. Trying to have the range and variety at the sort of level of turnover that American stores do is difficult. British stores take three or four times the amount of turnover that American ones take.”

There have been another 23 new ready meals put into the stores, from classic meatloaf to shepherd’s pie. Mr Mason says that Fresh & Easy has about 120 different ready meals now, with another 60 to be made in the coming months.

“We needed to hit a period of improving the operating model and letting everything bed in a bit, so when we come back to opening four or six stores a week we are a more robust business,” he says. “There are plenty of people who don’t have any great desire to see us successful, you know. They will say stuff that is not [true], but you have to put up with it and get on with it.”

On July 2 that is exactly what Mr Mason will be doing, as he puts on his lucky green shirt and cuts the ribbon on shop number 62 in Manhattan Beach, next door to the head office.

“You need a store with real customers in it that you can drop into,” says Mr Mason. Is he worried about being next door to a Trader Joe’s? “It is the closest we have ever been to one,” he says, smiling, “but we will do just fine”.
You can read a complete transcript of the Financial Times' interview with Tim Mason here.

1 comment:

traderprofit said...

Vegas Fresh & Easy stores continue to open and it appears to me to be a strategy with no merit, for an idea with no currency.

Fresh & Easy fills no void in the Vegas market. Indeed, there is no paucity of retail stores carrying a much wider selection 24/7.

I can't think of any reason to go back to a Fresh & Easy. I've been twice and it was a waste of time. Why would a saavy retailer open a store directly across the street from a Walmart neigborhood market, which carries a greater selection at lower prices?

My time is important and I won't be spending at Fresh & Easy. It's time to pull the plug on this disaster.