Friday, December 25, 2009

It's 'British Invasion: The Sequel Down Under' For Former Tesco Fresh & Easy Neighborhood Market Director of Grocery Charlotte Maxwell

Fresh & Easy Buzz was the first publication to report in this September 22, 2008 story [Key Personnel Breaking News: Co-Vice President of Retail Operations Brian Pugh No Longer Employed At Tesco Fresh & Easy Neighborhood Market] that former co-vice president of operations Brian Pugh was leaving his position at Tesco's Fresh & Easy and Tesco plc.

Brian Pugh was a key executive for Tesco plc before being tapped to be one of the handful of Tesco executives from the United Kingdom sent to the United States to start up its Fresh & Easy small-format grocery and fresh foods chain in Southern California in 2006. The first Fresh & Easy markets opened in November 2007. There are now 131 Fresh & Easy stores open in Southern California, Arizona and Nevada.

Fresh & Easy Buzz was also the first publication (that we can find) to report in this December 22, 2008 story [Breaking News: Mega-Drug Chain Walgreens Hires Former Tesco Fresh & Easy USA VP of Operations Brian Pugh For New VP of Format Development Position] that the former Tesco Fresh & Easy co-president of operations had landed a new position as vice president of format development at the mega-U.S. drug store chain Walgreens.

Mr. Pugh was promoted by Walgreens to the position of corporate vice president of merchandising (a position he currently holds) just a few months after being hired, as we reported in this March 2, 2009 story: Walgreens Promotes Former Tesco Fresh & Easy Exec Bryan Pough to VP Merchandising Position; Move Fits Drug Chain's Current Strategic Focus.

Prior to March of 2008 Brian Pugh held the position of vice president of operations at Tesco's El Segundo, California-based Fresh & Easy USA.

However, as we reported in this March 12, 2008 story [Breaking News: Tesco plc. Makes Major Personnel Change to Fresh & Easy Neighborhood Market USA Senior Management Team], that changed when Tesco plc decided to transfer Jeff Adams, the former CEO of its Tesco-Lotus unit in Thailand, to Fresh & Easy USA to share senior retail operational duties with Mr. Pugh. [Suggested reading - May 29, 2008: Tesco Makes Official Announcement of Jeff Adams' Title and Position at Fresh & Easy Corporate; Confirms Our Report of March 12.]

Charlotte Maxwell: Part of the British Invasion Down Under

Earlier in this August 17, 2008 story [Special Report: Tesco Fresh & Easy's Director of Grocery Returning to the UK; Grocery Chain Reorganizing its Corporate Buying Department] Fresh & Easy Buzz was the first to report exclusively that Charlotte Maxwell, a nine-year Tesco plc executive and the former director of grocery at Tesco's Fresh & Easy USA for close to three years, was leaving her top position at Fresh & Easy headquarters in Southern California to return to Tesco plc's global headquarters in the United Kingdom.

Ms. Maxwell's departure from the top grocery merchandising job at Tesco's Fresh & Easy came amidst what we called in this August 17, 2008 story [ Special Report: Tesco Fresh & Easy Neighborhood Market Experiencing A Category Manager and Buyer 'Brain Drain'] a category manager and grocery buyer "Brain Drain" at Tesco's Fresh & Easy Neighborhood Market's corporate headquarters in El Segundo, California.

Unlike former Tesco Fresh & Easy co-vice president of retail operations Brian Pugh, who left Tesco plc completely and not just its Fresh & Easy USA unit, former Tesco plc executive and Fresh & Easy USA director of grocery Charlotte Maxwell did return to Tesco and its global corporate headquarters in Cheshunt, Herts, England in the United Kingdom.

Her stay there didn't last long though.

We can now report that Charlotte Maxwell, like Brian Pugh, no longer is employed by Tesco plc.

In April of 2009 Ms. Maxwell joined the Coles supermarket chain in Australia as its new general manager of deli/bakery, which is the senior merchandising and buying position for the deli and bakery categories at the chain.

In 2008 and again in early 2009 Coles, which is Australia's second-largest food retailer after the Woolworths chain, tapped Charlotte Maxwell (in her case in early 2009), along with an entire team of former British supermarket chain executives, category managers and others, as part of a five-year strategic turn-around strategy being implemented by the board of directors of Coles' parent company, Westfarmers. Not too many years ago Coles held the number one market share position in Australia but was overtaken by Woolworths, which is something the board wants to change.

The turnaround effort is being led by Brit Ian MCLeod, who is a former executive with Asda, the number two supermarket chain in the United Kingdom after number one Tesco.

Another British grocery retailing veteran, turnaround specialist Archie Norman who is given much credit for the turnaround of the Walmart Stores, Inc.-owned Asda chain in the United Kingdom, is assisting in Coles' turnaround strategy, working with MCLeod in the position of "chief coach," a consulting capacity.

Former Tesco and Fresh & Easy USA executive Charlotte Maxwell is among a group of numerous Brits now at Coles' corporate headquarters in Australia. This group includes veterans from the United Kingdom's top three supermarket chains: Tesco, Asda and Sanisbury's. Many in the Australian food and grocery industry are calling it the "British invasion of Coles." We sot of like "British Invasion: The Sequel."

And the British food and grocery retailing vets transplanted to Coles in Australia look to be very busy, according to a brief report in Tuesday's (December 23) Herald Sun newspaper headlined: "Supermaket giant Coles accused of crunching suppliers with new campaign."

Here's the report (in italics):

Supermaket giant Coles accused of crunching suppliers with new campaign

SUPERMARKET giant Coles has been accused of launching a new campaign that strips profits from struggling suppliers.

A new management team recruited from UK supermarket chain Tesco has been blamed for the profit grab, which has seen Coles axe some branded lines that compete with its own private labels.

Suppliers say Coles is demanding big increases in payments for shelf space, playing cheap, low-quality imports off against local companies to force their prices down and asking suppliers to take a big hit on payments to subsidise the refurbishment of Coles' stores.

Coles has rejected the "wild" accusations. A spokesman said the chain sought to "strike a balance between paying sustainable prices to suppliers, and ensuring customers get the best possible prices in our stores".

But a food manufacturer who deals with local farmers said the new Coles management had been "ruthless", demanded "premium product for Chinese prices" and played several tricks during negotiations.

It appears the British invaders are stirring things up a bit down under.

Life After (Tesco's) Fresh & Easy

Neither Tesco plc or Tesco's Fresh & Easy Neighborhood Market USA announced the departures of either Charlotte Maxwell or Brian Pugh when each respectively left Fresh & Easy headquarters in Southern California. That's not an unusual phenonmenon though, and certainly not exclusive to Tesco.

But both Mr. Pough and Ms. Maxwell were key in setting up Tesco's U.S. Fresh & Easy chain just three years ago -part of that select team of pioneers or "British Invaders" if you will - And now both are no longer employed by Tesco plc.

We aren't suggesting anything nefarious about the departure's of these former key Tesco employees. It happens.

It is an interesting phenomenon though since both were key Tesco plc executives prior to the establishment of Fresh & Easy USA, which has been a less than stellar venture for Tesco thus far, and now both are not only gone from Fresh & Easy but also from Tesco plc.

But we won't go as far as to suggest there exists anything like a "Fresh & Easy curse" for former key Tesco plc executives who, like those British pioneers of history, came to the former colony of America to stake their claim.

But as many of us know - a start up can be a cruel mistress or master, as has been the case at Tesco's Fresh & Easy USA. But in the case of Mr. Pugh and Ms. Maxwell, it appears they've both landed well - one (Mr. Pugh) with the leading U.S. drug store chain, Walgreens, and the other (Ms. Maxwell) with Australia's second-largest supermarket chain, Coles.

'British Invasion: The Sequel Down Under'

And in the case of Charlotte Maxwell, it's "British Invasion: The Sequel Down Under," in part. Having spent nearly three years as one of a group of Tesco plc senior executives starting up the Fresh & Easy chain in the Western U.S. - a move that's often been dubbed in the media as the "British Invasion" of U.S food and grocery retailing, she's now part of a group of British retail food and grocery retailing veterans who have parachuted (or invaded) into australia to lead the turnaround of that country's second-largest grocery chain.

Monday, December 21, 2009

Wither Walmart's Small-Format 'marketside' Stores and Format?

Walmart Stores, Inc. has eliminated its Web Site for the four 'marketside' (now named 'marketside by Walmart') small-format grocery and fresh foods markets it operates in the Phoenix, Arizona Metropolitan region and replaced it with a single Web Page introducing the company's new line of 'marketside' store brand foods products, which are named after the fresh foods-focused format stores in Arizona.

The Web address for the 'marketside' retail store chain is But that Web Address now contains only this Web Page offering a graphic and headline about the new 'marketside' store brand food products, along with a comment box asking readers to e-mail any comments about the new store brand line to Walmart.

If you click the link on any past stories about Walmart's 'marketside' stores in Fresh & Easy Buzz it will take you to the new 'marketside' store brand product line Web Page. The old 'marketside' retail stores' Web Site is gone. And based on our research, Wal-Mart has not moved it to another Web Address. The photograph at the top of this September, 2008 story in Fresh & Easy Buzz is from the no longer existing 'marketside' retail stores' Web Site.

Walmart Stores, Inc. does include 'marketside,' along with its other corporate retail formats, on this page on its corporate Web site. Ironically though, as you can see at the link, the store pictured still has the old 'marketside' (only) sign on it rather than 'marketside by Walmart,' which the stores are now called.

Walmart opened the four 'marketside' combination grocery and fresh foods markets on October 4, 2008 in the suburban Phoenix, Arizona cities of Glibert, Chandler, Mesa and Tempe.

In addition to these four initial test stores, Walmart had planned to open an additional 'marketside' store in Peoria, Arizona, also in the Phoenix Metropolitan region.

Up to five additional 'marketside' test stores were planned for the San Diego region in Southern California. The Peoria, Arizona 'marketside' and at least two of the San Diego region stores - one in San Diego and the other in nearby Oceanside - were originally slated to be open by now based on the retailer's initial strategic plan.

However, earlier this year Walmart announced it was postponing the opening of any additional 'marketside' stores until further announcement.

Shortly after this announcement Wal-Mart confirmed it would introduce the first of its food products under the 'marketside' store brand this year. It has started doing so. The first 'marketside' branded item is an upscale prepared pizza.

This summer Walmart added the 'Walmart' name to the four Arizona 'marketside' stores, changing the original 'marketside' (only) signage on the stores to new signs reading 'marketside by Walmart,' and bearing the Walmart logo. This was a departure from the retailer's original strategy which was to not associate the Walmart name with the 'marketside' stores, instead positioning them as a free-standing entity.

Walmart also set up a corporate office for the 'marketside' stores in Tempe, Arizona. That facility and the four 'marketside' stores remain operating.

Wither 'marketside' the stores?

So, what to think of Walmart's replacing its 'marketside' stores' Web Site with the single page 'marketside' store brand site?

We think the main reason Walmart did this is because since it now has branded the four stores in Arizona 'marketside by Walmart' the old Web site can no longer function as a marketing or communications tool. It's not a standalone 'marketside' grocery and fresh foods store brand anymore.

We have searched for a replacement Web Site for the Arizona 'marketside by Walmart' stores without success. If one exists, it's well hidden. Walmart isn't commenting on the subject at present. There is a Facebook Site for 'marketside by Walmart' stores. However it hasn't had much activity lately.

Fresh & Easy Buzz has reported on and written extensively about Walmart's 'marketside' small-format grocery and fresh foods retail format since early 2008. In our reporting and analysis we've always stressed that for Walmart 'marketside by Walmart' is truly a test. The retailer isn't wedded either to the small-format grocery and fresh foods format -- as Tesco is in the U.S. with Fresh & Easy, for example -- nor is it wedded to the 'marketside' stores specifically. The four stores are a mere trickle in the investment bucket for Walmart.

Walmart though appears somewhat wedded to the 'marketside' brand name in that it is using the name for its new prepared foods store brand, developing and rolling out additional items under the brand.

Perhaps when all is said and done 'store brand marketside' will be the only legacy of the name for Walmart Stores, Inc.?

We don't suspect Walmart will close the four existing marketside stores just yet though. But the fact the chain postponed going forward with opening the additional 'marketside' stores doesn't hold great promise for the future of a chain of 'marketside by Walmart' stores. The San Diego region stores haven't been built/remodeled yet although Walmart holds leasing on the two sites.

The recession really changed the landscape for Walmart vis-a-vis focusing on the marketside stores. It's mega-combination grocery and general merchandise Supercenters have drawn an entire new demographic of shoppers - higher income and professionals - along with its traditional shopper base, as consumers have been searching for food and grocery dollar value in the last two years, and continue to do so. The Supercenters are also drawing more food and grocery customers of all socio-economic levels than ever before.

This fact has caused increased faith at Walmart in its Supercenters, along with the development of a strategic program in which the retailer is committed to holding on to its "new" customers when the recession ends.

Walmart's original strategic vision for 'marketside' was as a fill-in type food and grocery store (in between shopping trips to its Supercenters), which is the main reason it opened the first four test stores in Arizona, where Walmart has numerous Supercenters and holds the number one market share position for food and grocery sales.

The second reason was to test whether or not a focus on selling fresh, prepared foods (ready-to-eat and ready-to-heat) had consumer sales legs. Think Tesco's Fresh & Easy.

The 'marketside' stores were also a defensive move against Tesco's Fresh & Easy, which is another convenient reason the 'marketside by Walmart' stores are located in Arizona, which is one of Tesco's three markets with Fresh & Easy.

Walmart's marketside, just like Tesco's Fresh & Easy, hasn't been turning in a stellar sales performance to date as a format devoted roughly 50% to prepared and fresh foods and 50% to grocery and related products.

Based on our reporting and research at present we don't know the ultimate fate of Walmart's now 'marketside by Walmart' stores and format.

However, we believe there's a high probability that Walmart will dump the stores sometime next year. We don't see Walmart opening the San Diego test stores anytime soon. And it makes little sense for Walmart to operate just four of the 'marketside' stores.

Additionally, with a line of fresh foods and fresh, prepared foods branded 'marketside' available in every Walmart Supercenter and Walmart Neighborhood market format store is a small-format store called 'marketside by Walmart' then needed? Why not just 'marketside' fresh and prepared foods kiosks inside the Supercenters, for example.

For now though the 'marketside by Walmart' stores remain open. Web Site or no Web Site. And of course if a new 'marketside by Walmart' Web site pops up soon that would be a good indicator or sign that 'marketside' the stores also will be around for a while. Stay tuned.

[Readers: Click here and here for a selection of past posts in Fresh & Easy Buzz about Walmart's 'marketside' retail format and stores.]

Monday, December 14, 2009

The Promotional Pundit: Fresh & Easy Buzz's 'Promotional Pundit' and Watchdog Likes Safeway's '12 Days To Save' Promotion

There tends to be a dearth of creative marketing and advertising when it comes to the weekly promotional offerings put forth by U.S. supermarket chains.

For example, most food retailers' weekly advertising circulars consist mainly of a series of national (and regional) brand and store brand items which are offered at discount prices, along with a store-specific coupon or two. This isn't a bad thing - just a limiting one.

Of course, there are exceptions.

I noticed such an exception yesterday in the form of a four-page, full-color supplemental promotional/advertising circular distributed by Pleasanton, California-based Safeway Stores, Inc. via Sunday newspapers and online in all of its U.S. markets. Safeway operates hundreds of supermarkets in California, Nevada and Arizona - the three states where Tesco's 130 Fresh & Easy Neighborhood Market grocery and fresh foods markets are located - under the "Safeway" and "Vons" banners, as well as operating under "Safeway" and other banners in numerous other parts of the country.

The Promotional 'Big Idea'

Safeway's concept in the supplemental advertising flier issued yesterday - and good until Christmas Eve, December 24 - is a simple yet catchy one.

The promotion is called "Safeway's 12 Days To Save." It's a takeoff on the famous "12 Days of Christmas" song and theme."

In the advertising flier [an online version even includes sound; click the fourth button from the left on the Web Player at the link, top of the Web Site] Safeway is offering shoppers a coupon good for a one free item for each of the 12 days - beginning yesterday - leading up to Christmas. The last free coupon - for a free bottle of Safeway brand Club Soda - is to be redeemed by shoppers on Christmas Eve.

Among the "12 days of free items" from Safeway, along with the club soda, are a dozen free eggs, a 5 pound bag of potatoes, free cake mix and eight other items. Shoppers have to spend a minimum of $20 to get the daily free item coupon offering.

The promotion and advertising flier isn't a replacement for Safeway's regular weekly advertising circular. Rather, it's a supplement to it, geared around the Christmas holiday song and theme of the "12 Days of Christmas."

I like Safeway's promotion for a number of reasons.

First, it breaks out of the usual price-promotion-only focused paradigm/box by adding a creative element to it: The "12 Days of Christmas," which is a song every grocery shopper can relate to. It's easy for a consumer to immediately make the mental connection between the 12 days of free item coupons and the "12 days of Christmas" song and theme.

Second, the promotion adds the element of fun to grocery shopping. This cynical pundit smiled when we saw the flier, for example. Good advertising creates smiles.

Third, FREE is an obviously powerful offering. With a coupon for one free item, such as a dozen eggs, in hand, and with only a $20 purchase minimum needed in order to obtain it, I think a non-Safeway shopper just might be tempted to give Safeway a try. In other words, creating new customer trial, which should always be one goal of grocer promotions. And for regular Safeway shoppers the free item is a bonus for being a loyal customer.

Lastly, and perhaps most important, Safeway's "12 Days To Save" promotion and advertising flier creates interest in the Safeway brand. Safeway's supplemental advertising flier caught my attention, for example, and I look at way too many grocery chain promotional and advertising pieces. That means is broke from the usual clutter.

Such interest in "brand Safeway" does more than promote -- it adds to the chain's overall marketing and brand building efforts -- and as such I think it warrants being called a marketing piece as well as just a promotional one.

I give two thumbs up to Safeway's "12 Days To Save" promotion.

And just for fun, the song: "The 12 Days of Christmas"

On the first day of Christmas, my true love sent to me A partridge in a pear tree.

On the second day of Christmas, my true love sent to me Two turtle doves, And a partridge in a pear tree.

On the third day of Christmas, my true love sent to me Three French hens, Two turtle doves, And a partridge in a pear tree.

On the fourth day of Christmas, my true love sent to me Four calling birds, Three French hens, Two turtle doves, And a partridge in a pear tree.

On the fifth day of Christmas, my true love sent to me Five golden rings, Four calling birds, Three French hens, Two turtle doves, And a partridge in a pear tree.

On the sixth day of Christmas, my true love sent to me Six geese a-laying, Five golden rings, Four calling birds, Three French hens, Two turtle doves, And a partridge in a pear tree.

On the seventh day of Christmas, my true love sent to me Seven swans a-swimming, Six geese a-laying, Five golden rings, Four calling birds, Three French hens, Two turtle doves, And a partridge in a pear tree.

On the eighth day of Christmas, my true love sent to me Eight maids a-milking, Seven swans a-swimming, Six geese a-laying, Five golden rings, Four calling birds, Three French hens, Two turtle doves, And a partridge in a pear tree.

On the ninth day of Christmas, my true love sent to me Nine ladies dancing, Eight maids a-milking, Seven swans a-swimming, Six geese a-laying, Five golden rings, Four calling birds, Three French hens, Two turtle doves, And a partridge in a pear tree.

On the tenth day of Christmas, my true love sent to me Ten lords a-leaping, Nine ladies dancing, Eight maids a-milking, Seven swans a-swimming, Six geese a-laying, Five golden rings, Four calling birds, Three French hens, Two turtle doves, And a partridge in a pear tree.

On the eleventh day of Christmas, my true love sent to me Eleven pipers piping, Ten lords a-leaping, Nine ladies dancing, Eight maids a-milking, Seven swans a-swimming, Six geese a-laying, Five golden rings, Four calling birds, Three French hens, Two turtle doves, And a partridge in a pear tree.

On the twelfth day of Christmas, my true love sent to me Twelve drummers drumming, Eleven pipers piping, Ten lords a-leaping, Nine ladies dancing, Eight maids a-milking, Seven swans a-swimming, Six geese a-laying, Five golden rings, Four calling birds, Three French hens, Two turtle doves, And a partridge in a pear tree!

Click here to listen to the song: "The Twelve (12) Days of Christmas."

Tuesday, December 8, 2009

Analysis: Why A Loyalty Club Card Program Makes Zero-Sense For Tesco's Fresh & Easy USA

Yesterday (December 7) the Financial Times reported here that Tesco is planning to bring its successful loyalty card program from the United Kingdom (UK) to its Fresh & Easy Neighborhood Market chain in the Western U.S., siting as its source "A recent advertisement for a new marketing position at Fresh & Easy’s US headquarters in the Los Angeles area [which] lists '2010 planning for loyalty programme' amid the job responsibilities."

The position in question however has to do with Fresh & Easy's existing "Friends of Fresh & Easy" e-mail-based marketing program rather than the grocer having any immediate plans to import the successful loyalty club card scheme from the UK to Tesco's fledgling Fresh & Easy chain.

Fresh & Easy Buzz was surprised to read the Financial Times' report yesterday for two major reasons: First, according to our (good) sources, Tesco's Fresh & Easy has no such near-term plans to begin a loyalty card program like the very successful 'Tesco Clubcard' in the UK and, second, the intellectual and operational "brains" behind Tesco's UK loyalty card program, the firm Dunnhumby, is unable to administer such a program for Tesco Fresh & Easy USA because the firm is prohibited from doing so due to a contract it has in the U.S. with the Kroger Co. supermarket chain, even though Dunnhumby is majority-owned by Tesco.

This Financial Times' report apparently struck the editors and reporters at the supermarket industry trade publication Supermarket News as a surprise like it did us here at Fresh & Easy Buzz.

Today, Supermarket News' reporter Julie Gallagher reported in this story that, according to Fresh & Easy Neighborhood Market spokesman Roberto Munoz, Tesco has no current plans to start-up a loyalty card program at its Western USA-based chain of 130 Fresh & Easy small-format grocery and fresh foods markets located in California, Nevada and Arizona.

In the report, spokesman Munoz told Ms. Gallagher the job advertisement in question is for Fresh & Easy's e-mail-based "Friends of Fresh & Easy" marketing program, which it started earlier this year, and which Fresh & Easy Buzz suggested in concept the grocer create 11 months before that.

What Fresh & Easy Buzz does know is that the topic of importing the loyalty club card program from Tesco UK to the Fresh & Easy USA outpost has been a topic of discussion for a considerable amount of time between Tesco corporate brass in the UK and Tesco Fresh & Easy senior management at its Southern California headquarters.

For example, we were told as far back as 2007 and again in 2008 by a former Tesco Fresh & Easy headquarters employee who was in a position to know that discussions on importing the loyalty card program (or not) were held more than once by the grocery and fresh foods chain's senior management, as well as being discussed with members of Fresh & Easy's buying and merchandising team at the El Segundo, California headquarters.

The decision then, and now, has been to not institute a loyalty card program for Fresh & Easy. The two key reasons for not doing so being (1) the Dunnhumby-Kroger Co. dilemma and (2) the simple fact that it's been believed by the chain's senior management that it's far too soon in Fresh & Easy's development to consider a club card program because of not wanting to create any type of program that might perceptually or actually serve to restrict business, particularly the encouragement of much needed new shoppers to the stores. A grocer has to create loyalty before it rewards it after all.


Our analysis here at Fresh & Easy Buzz is that it makes no sense at this point in time for Tesco's Fresh & Easy Neighborhood Market to get into the loyalty club card business for three key reasons:

1. Loyalty card programs tend to work best for large chains with significant market share such as Tesco in the UK and Safeway Stores, Inc. in the U.S. Fresh & Easy has little or no share of the market in its three key market regions: Southern California, Metropolitan Las Vegas, Nevada and Metro Phoenix, Arizona. A grocery chain needs a significant and strong customer base in order to make a loyalty card program work. Fresh & Easy has neither at this point in time. Therefore, adopting a loyalty card program makes little sense.

2. Fresh & Easy Neighborhood Market already has too many self-imposed retail operations' policies that serve to restrict potential shoppers. These include: not accepting manufacturers' cents-off coupons, paper personal checks and WIC Vouchers in any of its 130 stores. Having a 100% self-service checkout system also is a restriction to customers who prefer full-serve checkout or at least being offered the option of having it.

There's no reason at this point in its development for Fresh & Easy to self-impose an additional potential barrier to customer entry policy such as a club card, which would mean that only holders of such a card would get certain promotional offerings and price reductions.

3. Fresh & Easy has far more concerns at this point in time in terms of its operations, marketing and merchandising than the implementation of a loyalty card program. These concerns include: the need to draw more shoppers to its stores, increasing gross margins considerably and still having numerous underperforming stores, among others. Instituting a loyalty card program would in our analysis do nothing to help solve these serious problems. In fact we think instituting a loyalty card program would just distract the grocer from focusing on these and other big issues. It's our analysis that the biggest issue remains the viability of the Fresh & Easy format itself. The jury is still out on that question -- as is the answer.


Therefore, to those at Tesco and its Fresh & Easy chain, we suggest that not implementing any sort of a loyalty club card program at this point in time is the wise decision for the three key reasons we mention above, along with a few others.

The time is not right for such a program, and we don't see any benefits of doing so for Tesco's Fresh & Easy. There are many higher and more important priorities to be addressed, changes to be made, and programs to create and implement in order to achieve success for the chain.

Monday, May 25, 2009

Memorial Day 2009 - A Day of Remembrance: In Honor of Those Who Made the Ultimate Sacrifice in Service to Their Country

The Tomb of the Unknowns [soldiers] (pictured above) at Arlington National Cemetery in Arlington, Virginia, located across the Potomac River from the nation's capital, is a memorial to all of the American service members who fought and died in foreign wars but who've never been identifield.

The Tomb of the Unknowns, which was established in 1921, contains the remains of one unidentified soldier from World War I, World War II, the Korean War and the Vietnam War.

The Tomb of the Unknowns, which is considered hallowed ground, is guarded 24 hours a day, seven days a week, 365 days a year, by a dedicated military honor guard.

The inscription on the marble tomb simply reads: "Here Rests In Honored Glory An American Soldier Known But to God."

President Barack Obama lays a wreath at the Tomb of the Unknowns at Arlington National Cemetery this morning. [Photo Credit: Charles Dharapak/AP. May 25, 2009.]

Friday, May 22, 2009

Friday Frolic: Liberty Market Top 'Food Star;' Phoenix Ranch Market Chain and Asian Grocer Among Newspaper's '50 Stars of Arizona Food World' List

Arizona Region Market Report

Gilbert, Arizona's independent Liberty Market supermarket (pictured at top) has been picked as the Number 1 "food star" in the Arizona Republic newspaper's just-published 2009 list of what it calls the "50 Stars of Arizona's Food World."

Liberty Market is just one of three Arizona food retailers to make the list. The other two are the Latino-focused Phoenix Ranch Markets chain and Lee Lee Oriental Supermart, an Asian specialty format supermarket in Peoria, Arizona.

The daily newspaper published its "Top 50" list in yesterday's (May 21) edition.

Here's what the Arizona Republic says about Liberty Market, it's top "food star."

Liberty Market
"Since 1935, Liberty Market has been a Gilbert fixture. For decades, it was the only grocery store in town. Then it became the grocery store no one went to, and now the market-restaurant is the Gilbert headquarters of chic, cozy eats: gourmet olives and cheeses for sale, wood-fired pizza to order, pressed sandwiches, fizzy Italian sodas and red velvet cake. Think La Grande Orange, suburban style. It's the creation of Joe Johnston, the brains behind Coffee Plantation and another Gilbert landmark, Joe's Real BBQ. 230 N. Gilbert Road, Gilbert. 480-892-1900." [Web site:]

Fresh & Easy Buzz last wrote about Gilbert, Arizona's Liberty Market in this October 17, 2008 piece: [Phoenix, Arizona Metro Market Report: Gilbert, Arizona Independent Liberty Market Fears Not the Tesco and Wal-Mart Invasion of its City.]

Tesco's Fresh & Easy Neighborhood Market, which now has five of its small-format, convenience-oriented combination grocery and fresh foods Fresh & Easy markets in the Phoenix Metropolitan region city of Gilbert where Liberty Market is located, and about 30 stores in Arizona, didn't make the Arizona Republic's food star list. The newest Fresh & Easy unit in Glibert (number five), at Higley & Queen Creek in the city, opened on March 26.

Wal-Mart also has one of its four small-format combination grocery and fresh foods Marketside food markets in Gilbert, Arizona. [October 3, 2008: Wal-Mart Opens First Four Small-Format Marketside Fresh Food and Grocery Stores Tomorrow Morning in Gilbert, Chandler, Mesa and Tempe, Arizona.] Marketside isn't an Arizona "Top 50" food star either, according to the newspaper.

In addition to the retail food markets, the newspaper's "Top 50" list includes restaurants-chefs, a public market, pubs, food companies, wineries, individual foodies and other purveyors of all varieties of foodstuffs.

[You can view the Arizona Republic's complete "50 Stars of Arizona's Food World" list here.]

Here's what the Arizona Republic says about Phoenix Ranch Market, its number 18 selection, which is owned by Southern California-based Pro's Ranch Markets:

Phoenix Ranch Market
"This high-energy California-based grocer packs its markets with tortillas made fresh daily, thirst-busting aguas frescas, vats of crema, a seafood bar with as many as 10 varieties of shrimp and an 80-foot case stocked with traditional Mexican meats. The produce department offers the best local selection of fresh and dried chiles. Too busy to cook? Stop by the expansive takeout restaurant for carnitas, Guerrero-style tacos, red-chile beef or seafood tostada. 1602 E. Roosevelt St., Phoenix, 602-254-6676; 5833 S. Central Ave., Phoenix, 602-276-3800; 5802 W. Thomas Road, Phoenix, 623-247-0362; 6730 W. Camelback Road, Glendale, 623-247-4200." [Web site:]

The Phoenix Ranch Market stores are located in and around Phoenix, Arizona.

Fresh & Easy Buzz recently wrote about the newest Phoenix Ranch Market Latino-focused supermarket, which is in Mesa, Arizona. You can read our story here: [April 26, 2009: Sunday Feature: Pro's Ranch Markets' Set to Open Sixth 'Phoenix Ranch' Latino-Focused Phoenix Metro Region Supermarket in Mesa, Arizona On Wednesday.] The Mesa Phoenix Ranch Market store is now open.

The Arizona Republic also gave a "Top 50" nod to the Lee Lee Oriental Supermart in Peoria, Arizona (number 25).

Here's what the newspaper writes about the Asian specialty supermarket:

Lee Lee Oriental Supermart
"No, you're not in Asia - you're in Peoria. But it's easy to lose your bearings wandering the aisles of amazing Lee Lee Oriental Supermart. Just about every Asian country is represented, from Indonesia to Singapore, the Philippines to Thailand. The range of products is breathtaking. The high-quality produce section can stop you in your tracks, both for the staggering variety of greens, fruit and vegetables and for the astonishingly low prices. Check out the live fish and handsome seafood counter. The meat case displays animal parts you'd never see at your neighborhood American supermarket. And the shelves are packed with noodles, oils, vinegars, sauces, pastes and beverages. Lee Lee is like the Grand Canyon: You have to spend some time here to truly appreciate it. So make sure you stop and smell the Chinese long beans. 7575 W. Cactus Road, Peoria, 623-773-3345; 2025 N. Dobson Road, Chandler, 480-899-2887."

The downtown Phoenix Public Market, a collection of numerous retail fresh foods, specialty grocery and prepared foods purveyers all under the same roof, is also one of the "Top 50" on the list. [Web site:]

Arizona's food banks also get a mention as one of the state's "food stars," and rightly so. The Arizona food banks, like those in many other states, have seen some of their busiest times in history over the last year as the recession and unemployment has hit Arizona hard.

The "Top 50" list is an interesting mix of businesses and individuals, all having a single focus, which is to bring food to Arizona residents in a variety of ways and formats, focusing on doing it the best way they can.

And it's interesting, but not a surprise, to note that the three food retailers named to the "Top 50" list are all independents. After all, when it comes to features and offerings like product selection, specialty focus and fresh, prepared foods, independents have historically lead the way among American grocers.

That's good -- and likely rather tasty -- food for thought as we enter the Memorial Day holiday weekend.

Wednesday, May 20, 2009

Breaking Buzz: Tesco's Fresh & Easy Issues Another New Discount Store Coupon ($10-off $50 Though); We Told You the Coupons Would 'Be Back'

Tesco's Fresh & Easy Neighborhood Market has issued another one of its discount store-coupons.

However, the just-issued (yesterday) store coupon is a $10-off total purchases of $50 or more discount voucher, unlike the typical $5-off purchases of $20 or more and $6-off purchases of $30 or more discount store coupons the grocery chain normally distributes to shoppers.

Additionally, instead of having a multi-week (nearly one month) shelf-life like the $6-off purchases of $30 or more direct-mailed paper coupon that Fresh & Easy distributed on April 28, the new $10-off ($50) store coupon is good only for about one week. The $6-off coupon mentioned above expires on May 25. [See- May 1, 2009: Fresh & Easy Brings Back $6-Off Deep-Discount Store Coupon; Latest Version Good For Nearly One Month; New Promo Strategy Didn't Last Long.]

Fresh & Easy posted the new $10-off total store purchases of $50 or more discount coupon on its Web site yesterday. The store coupon, posted on the grocer's Web site here, expires on May 24.

Perhaps Tesco's Fresh & Easy's senior management read Fresh & Easy Buzz's two recent stories about the grocery chain's once again aggressive distribution of its discount store coupons, along with our past pieces in which we suggested that two key elements of using discount store coupons as promotional vehicles are:

>To increase shopper market basket size -- achieved by making the minimum purchase amount required to redeem the coupon more than $20 or $30 -- and;

>Duration -- that instead of having a nearly one month shelf-life like the April 28 -to- May 24 $6-off Fresh & Easy store coupon does, making the expiration date about three days -to- one week, so that an incentive is created for the shopper to use the coupon within a shorter period of time, which is what grocery retail promotions are designed to do in the main.

The new $10-off purchases of $50 or more store coupon meets both of our criteria: It pegs the minimum customer purchase required to redeem the store coupon at $50 rather than a mere $20 or $30, and the coupon's shelf life is for about one week, rather than for two, three or even nearly four weeks, time periods most typically used by Tesco's Fresh & Easy.

You can read our two recent stories on the topic at the links below:

>May 1, 2009: Fresh & Easy Brings Back $6-Off Deep-Discount Store Coupon; Latest Version Good For Nearly One Month; New Promo Strategy Didn't Last Long

>May 7, 2009: 'They're Back' in Full-Force: Tesco's Fresh & Easy Adds New $6-Off Online Coupon to Just-Recently Direct-Mailed $6-Off Coupon; Tough to 'Terminate'

As you can clearly read in the stories, we even suggested a $10-off purchases of $50 or more value store coupon as one of the recommended options. Both the $10-off ($50) and the $6-off ($30) coupons provide a 20% discount to shoppers if they purchase the minimum amounts -- $50 and $30. But the $10-off ($50) discount store coupon provides Fresh & Easy with an added $20 in total purchases if a shopper desires to use the coupon.

In our stories, particularly the May 7, 2009 piece, we also said that the discount store coupons would be back in force for Fresh & Easy. And they are. Back-to-back in fact.

The new coupon comes on the heels of one of the two $6-off purchases of $30 or more Fresh & Easy store coupons reported on in our May 1 and May 7 stories that's still out there and alive. That coupon doesn't expire until May 25, actually one day after the new $10-off ($50) store coupon expires.

In addition to posting the $10-off store coupon on its Web site yesterday, as well as alerting members of its "Friends of Fresh & Easy" e-mail data base to the offering, the grocery chain promoted the new $10-off store coupon this afternoon on its feed with this "tweet:"

Hello Savings! hello coupons! from Netvibes, directing its Twitter followers to the online coupon on its Web site.

From early February until April 28, Tesco's Fresh & Easy attempted to dramatically reduce the volume of the discount store coupons it distributes, both via its paper fliers direct-mailed to consumers homes and on its Web site, as we discussed in our May 1 and May 7 stories linked above.

During this time period, we are aware of only about three store coupons having been issued by Fresh & Easy. They all were either $5-off ($20) or $6-off ($30) coupons. (See our May 1 and May 7 stories for more details.)

That may still sound like a significant number of the discount coupons for the grocer to issue in a three month period. But compared to the past -- from the time the first batch of Fresh & Easy stores opened in November 2007 until early February 2009, the grocery chain almost always had these discount store coupons circulating, mostly mailing them to residential households every couple weeks (often including two or three in one flier), posting the coupons online, and even handing them out to shoppers in multiples in the stores until the end of 2008. Store coupon mania would be a fair term for the practice.

Tesco Fresh & Easy's senior management members and its company spokespeople even said in early 2009, via the company Web site Blog and on its feed, that the grocer was cutting back and perhaps even eliminating the discount store coupons completely.

As we said in our two early May stories -- the store coupons are back. The plans to dramatically reduce or eliminate distributing the coupons obviously hasn't work.

The 20% store coupon's 20% discount comes out of Tesco Fresh & Easy Neighborhood Market's profit margins. This is unlike the case with manufacturers' "cents off" item coupons, which virtually every grocery store excepts but not Fresh & Easy, the discounts of which are paid for by the maker and marketer of the given product.

With manufacturer-issued "cents off" item coupons, grocers send the coupons to a clearing house on a regular basis and are paid back the face value of the coupon (50-cents or $1) plus a three cent or so per coupon handling charge, by the company that issued the coupon.

Expect to see more of the discount store coupons throughout the summer because Tesco's Fresh & Easy needs the sales they bring to its stores, which is why the discount store coupons are back in force.

[Follow Fresh & Easy Buzz around on at]

Monday, May 18, 2009

Strategy Session: Tesco's Fresh & Easy Needs to Move From its One Store Brand Fits All Strategy to A 'Three Brand' Store Brand Strategy

Tesco's Fresh & Easy Neighborhood Market uses its fresh&easy private label brand on every store brand item in its stores regardless of retail price point or ingredient profile, including premium, specialty, natural and organic products, as the photogrpah above offers an example of. We suggest the grocery chain create two new store brands: One for premium-specialty products and another for natural-organic items, thus giving the retailer what we call a three brand store brand strategy.

Analysis & Opinion: Tesco's Fresh & Easy Neighborhood Market and its Store Brand(s)

Tesco's Fresh & Easy Neighborhood Market currently uses a one brand name fits all strategy for its store brand merchandising and marketing strategy, with just one very minor exception.

That exception is that in February the grocery chain began merchandising a limited selection of fresh meat and poultry items under the "Buxted" store brand, which it's using as a value or price-focused store brand for the fresh meats category. (We haven't conducted any empirical research on the "Buxted" brand for the price-focused fresh items. But to us the brand name sounds far more "upscale" or "premium" to our ears than it sounds "value" or "low price." [See - March 9, 2009: An English Village, A British Fresh Chicken Brand and Tesco Fresh & Easy's New 'Buxted' Discount Fresh Meat Brand: What Do All Three Have in Common?]

All of the store branded items in the Fresh & Easy stores -- and store brands comprise about 60% of all the SKUs in the markets -- are branded with the fresh&easy name. This includes all store product categories -- dry grocery, perishables, packaged fresh produce (which is nearly all the produce in the stores), fresh, prepared foods, non-foods and fresh meats -- accept for the "Buxted" items.

Single store brand strategy a mistake

We think using the fresh&easy brand name only for its store brand items is a mistake for Tesco's Fresh & Easy.

The main reason this is our analysis is we argue that using a one store brand name fits all strategy allows for zero brand differentiation between discount or value-priced, natural and organic, and premium and specialty items in the stores. There's no brand differentiation among the store branded items based on their retail price, quality or ingredient contents. They are all fresh&easy.

It's our analysis that this unitary and undifferentiated store branding item strategy creates confusion in the minds of shoppers, as well as fails to offer Fresh & Easy the ability to differentiate -- and thus sell more -- it various products based on creating consumer perceptions built on the brand name, which is what packaged goods branding and marketing is all about after all.

The Safeway example

As an example, Safeway Stores, Inc. uses various brand names for its private label products depending on various criteria. The grocery chain uses the "Safeway" store brand name on its value-priced grocery and non-foods items.

It uses the "Lucerne" brand name on its value-priced dairy and perishable items.

And Safeway uses the brand name "Basic Red" for a line of store brand "branded generic" (meaning the most-price-focused line) items, such as paper goods and other non-foods products.

Safeway also has a separate brand name, "Safeway Select," for its perishable and dry grocery premium and specialty items.

Additionally, for Organic products Safeway uses the "O 'Organics" brand name, and it even has a separate brand name, "Eating Right," for its extensive line of healthy and natural items.

The Pleasanton, California-based supermarket chain also uses "Safeway Artisinal" for a select number of upscale specialty products in its fresh bakery and deli departments.

And it uses the brand name "Ranchers Reserve" to designate its Angus variety of store brand beef, for example.

While at this point in time we don't suggest Tesco's Fresh & Easy adopt as extensive of a store brand strategy as Safeway Stores' does -- after all Safeway has about 1,755 stores in the U.S. and Canada, with annual sales of over $40 billion, while Fresh & Easy has 120 stores with annual sales of about $300 million in the U.S. (although its parent Tesco has annual global sales of about $80 billion) -- our analysis leads us to suggest and argue that Fresh & Easy Neighborhood Market does need to expand its one store brand -- fresh&easy -- fits all products store brand strategy to, at a minimum, a three store brand strategy for now.

The three-brand store brand strategy

Here's what we suggest:

First, for now we would retain the fresh&easy store brand name.

We would use it as the chain's value-priced store brand across all categories -- from dry grocery and prepared foods, to fresh meats, perishables and fresh produce. In other words, instead of being "everything" like it is now, brand fresh&easy would be the chain's price-focused store brand.

We would get rid of the "Buxted" store brand. It's only a few months old and nobody likely would even notice if it was eliminated.

The brand name just is wrong for a price-focused fresh meats line in our analysis. It sounds stuffy, even upscale, rather than saying "value" or "low-price."

A new premium-specialty products' store brand

Now that we've established fresh&easy as the price or value-focused store brand, we would then create a new store brand for all of the premium and specialty items currently branded with the fresh&easy name. We would use the brand name across all store categories on items that fit the premium or specialty classification.

This premium and specialty category brand name should not have fresh&easy as a part of it. Rather, just as if it was a manufacturer-marketed packaged goods brand, it should merely have a name. For example, Target uses Archer Farms and Choxie for its premium and specialty store brand items. Kroger Co. uses "Private Selection" as its premium and specialty foods store brand.

Creating a new brand name for the fresh&easy premium and specialty food and grocery items does a couple key things for the grocery chain in the store brands arena.

First, it allows a merchandising separation between the price-focused (the fresh&easy store brand) items and the premium and specialty items. This is key in consumer packaged goods marketing.

Second, it allows Tesco's Fresh & Easy much more merchandising opportunities (which it would have to take advantage of to make work) than it now has.

For example, by branding its premium and specialty items with a new brand name, confusion no longer exists between say a lower priced (and quality) fresh&easy brand chocolate bar and a fresh&easy brand higher-quality premium chocolate bar in terms of the two same brand chocolate bars having significantly different retail price points and ingredient profiles. Consumers are used to premium items having different brand names than price-focused items.

Based on our research and observation we believe that such confusion exists among many consumers that shop at Fresh & Easy markets in regards to the unitary fresh&easy brand name regardless of the price or quality of an item. We think the shopper confusion exists across all fresh&easy branded item product categories and ingredient profiles. The chocolate bar example is merely a convenient and we think illustrative example.

Having separate brand names for store brand price-focused and premium-specialty items allows for better merchandising, pricing, merchandising and marketing strategies for a food retailer. In addition to lending to better product differentiation among shoppers, doing so also gives the retailer far more merchandising, retail pricing, marketing and promotional ammunition.

A new natural-organic products store brand

Next we would create a new, separate brand name for all of Tesco Fresh & Easy Neighborhood Market's natural and organic food and grocery items, including natural and organic fresh foods, which are currently branded under the fresh&easy name, like all of the grocery chain's store brand products are.

Like with the premium and specialty items, this allows for greater product differentiation in the minds of consumers. It also, like with the other examples, allows for far superior retailer merchandising, pricing, marketing an promotional strategies.

Right now, the only difference between a fresh&easy store brand conventionally-grown food item and an organic item is the price, along with the name "organic" (or "natural) being stamped on the fresh&easy item package. From a packaged goods merchandising and marketing perspective this creates confusion in the minds of shoppers.

For example, this is why Safeway created its hugely successful "O Organics" store brand, which it uses for its organic food and grocery items across all store categories -- from dry grocery and perishables to fresh produce. It's all about packaged goods brand marketing, regardless if its a retailer doing the brand marketing or a classic packaged goods company like P&G or Kraft.

In terms of creating a new store brand for its natural and organic items, Fresh & Easy actually might not even need to create the brand name. Instead it could purchase a brand name that has years of brand equity behind it in the natural and organic products segments.

How about the 'Wild Oats' brand: It's for sale?

Whole Foods Market, Inc. put up the "Wild Oats'" brand name and related intellectual property for sale in March, as a result of a settlement it reached with the U.S. Federal Trade Commission (FTC) regarding the anti-trust case filed by the agency over the natural grocery chain's 2007 acquisition of rival Wild Oats Markets Inc., which was based in Boulder, Colorado. [See- March 17, 2009: Store Location Strategy: Whole Foods Market-FTC Settlement Agreement Puts 32 stores on the Market; What Should Tesco's Fresh & Easy Do About it?]

The majority of the Wild Oats' stores (over 100 total) were based in the Western U.S., where Tesco's Fresh & Easy has its 120 combination grocery and fresh foods markets.

In our analysis, even though Wild Oats no longer exists as a food retailer -- it's stores are part of Whole Foods Market, Inc. now and all branded under the Whole Foods banner -- the Wild Oats' brand name still has equity, particularly in the Western States. Wild Oats was pretty strong in Arizona, Nevada and Southern California, which are the three market regions Fresh & Easy operates in.

The Kroger Co. also sold the Wild Oats' store brand natural and organic products in most of its U.S. supermarkets nationally for a number of years, under a special contract with then Wild Oats Markets Inc. Kroger only stopped doing so when it came out with its own store brand of natural and organic food and grocery products just a few years ago. In fact, Kroger "went to school" on the Wild Oats' branded items it sold in its stores, using the sales data and other related information to help it create its natural and organic store brand.

The Wild Oats brand name is still for sale. And we think it could probably be purchased for a fairly reasonable amount of money by a retailer such as Tesco's Fresh & Easy.

Under the settlement agreement, Whole Foods Market, Inc. and the FTC have establish a special trustee who is handling the sale of the "Wild Oats" brand, along with various stores being offered for sale. The trustee arrangement was designed so that Whole Foods Market can't hold out for a certain price for the brand, perhaps as a way to keep it off the market. [ Store Location Strategy: Whole Foods Market-FTC Settlement Agreement Puts 32 stores on the Market; What Should Tesco's Fresh & Easy Do About it?]


What we're suggesting at this point in time is that Tesco's Fresh & Easy move from its one brand name fits all store brand strategy -- everything branded fresh&easy -- to a three store brand name strategy -- the fresh&easy brand for price-focus (which would still be the majority of items in the stores), a new store brand name for premium-specialty food and grocery items, and a third new brand name for organic and natural products, including potentially buying the "Wild Oats brand from Whole Foods, or creating a new brand name outright.

We also suggest eliminating the "Buxted" store brand name for the reasons given earlier. We suggest this strongly as part of the three store brand name strategy.

The fresh&easy brand name would return to those price-focused chicken breasts and steaks that have been carrying the "Buxted" brand name since February of this year.

And since Fresh & Easy Neighborhood Market would be creating a new store brand name for all of its premium and specialty items (across all store categories), instead of using a name like "Buxted" for a handful of value-based fresh meats, it would then do the reverse: it would brand the more premium cuts of meat under the new premium-specialty store brand, which is how such a retailer store branding approach really should go anyway. You create a special brand name for your more upscale items rather than a new brand name for just a few price-focused ones.

Another alternative would be to create a new brand name for the premium fresh meats rather than use the new category-wide premium-specialty store brand name. Both options create differentiation.

But you want to "differentiate" the premium meat items, not the price-focused ones because, according to Tesco's Fresh & Easy, all of its fresh meat items -- like all of the fresh&easy branded items in the stores -- have everyday low prices. If that's true, then why a price-focused discount fresh meats brand -- "Buxted." Brand fresh&easy is "value" after all, isn't it? See the potential confusion? That's why you "new brand" the premium, not the majority fresh&easy brand meat and chicken items.

The same principle applies throughout the store categories.


Our store brand strategic scenario for Tesco's Fresh & Easy is, as we said earlier, for this point in time. It takes into consideration the current (and near and mid-term future) number of Fresh & Easy stores and the chain's current limited sales volume. (You can't really do a Safeway program yet, if ever.)

But creating this three store brand strategy is very important for the grocery chain, particularly because Fresh & Easy relies so much on its store brand -- the 60% -to- 40% store brand to national brand SKU ratio.

As an example of another grocery chain that relies heavily on store brands, look to Trader Joe's, which like Fresh & Easy is a small-format retailer. The grocer has numerous, not one, store brands: multiple store brands for natural, for organic, for Italian products, for certain perishables, ect.

The small-format Aldi USA grocery chain also uses a multiple store brand strategy. It even has separate store brands for gourmet products, Asian foods and Italian food items, along with a store brand for price-focused items, and a couple others.

Tesco's Fresh & Easy publicly says the grocery and fresh foods chain's less than stellar sales to date are do almost completely to the current economic recession. The recession is also the reason it gives for dramatically slowing its new store openings and postponing indefinitely its Northern California market region launch.

We disagree.

In fairness we will attribute say 40% (and we feel that's liberal) of the performance problems at Fresh & Easy to the economic recession, which the grocer's senior management should remember will eventually be over.

That leaves the majority 60% due to internal factors however.

That 60% is simple in our analysis and opinion: It has to do with poor overall merchandising, marketing and operations strategy and implementation at Tesco's Fresh & Easy, the responsible parties being those at the very top of the corporate chart.

For example, the grocery chain still has very serious out-of-stock problems in many of its stores due to problems with its continuous replenishment ordering system and its supply chain logistics process. (more on that in detail in an upcoming piece in Fresh & Easy Buzz.)

On the operations end, Tesco's Fresh & Easy says the recession is the cause of its less than stellar sales performance but refuses to take manufacturers' "cents off" coupons or accept WIC (Woman's, Infants and Children's program) vouchers in any of its stores, even though manufacturer-issued coupon use is at a modern era all time high among consumers, and the U.S. Federal Government recently added nearly $3 billion dollars to the WIC program for poor mothers as part of the economic stimulus package. [Suggested reading - March 7, 2009: Analysis & Commentary: The Seven Retail Operations Changes Tesco's Fresh & Easy Neighborhood Market Needs to Make to Help it Get On the Success Track.]

And from a strategic merchandising and marketing perspective, Tesco's Fresh & Easy has thus far failed to come up with a solid, comprehensive overall merchandising and marketing positioning strategy for the Fresh & Easy format and stores, and then communicate such a strategy to consumers in its markets in a simple, clear way.

The grocery chain needs to address, define and then clearly communicate these types of marketing themes: What is Fresh & Easy -- the format? What makes Fresh & Easy Different - differentiation? Why should I shop at a Fresh & Easy store? What are the benefits of doing so?

These are all internal issues or problems, not economic recession-caused.

In addition, in our analysis the one brand fits all store brand strategy is one of these internal problems. It's far to simplistic, particularly for a retailer like Tesco, which is the third-largest food and grocery retailer in the world.

Many brand marketers and brand researchers, such as Tom Pirovano of AC Nielsen, believe that grocery chains should completely disguise their store brands, not using the name of the chain in the brand name at all.

For example, in a May 13 post in Nielsen's "The Shopper Wonk" Blog, Pirovano offers retailers 11 tips to grow their store brands. His tip number two is this: "Disguise your premium store brands. Many consumers still associate private label with cheap knockoffs. There – I said it. But what if they don’t know it’s a store brand? Look to position premium store brands as exclusive products like Choxie at Target and Canopy at Walmart." [You can read his full post here.]

We agree in large part with Pirovano's analysis regarding store branding. But there are also very successful exceptions, particularly when using a chain name on one brand as part of a multi-store brand strategy such as what Safeway and Target are doing. Like Safeway, Target uses its name -- "Target" -- for its price-focused store brand of packaged goods, then uses the other brands like Archer Farms and Choxie.

In the case of Tesco's Fresh & Easy, it's our analysis that the fresh&easy store brand will work fine for the near -to- medium, and perhaps even long term, as the grocery chain's price-focused (which means majority item) store brand. In fact, as the price-focused store brand we think it offers some benefits to the grocery chain, particularly right now and over the next couple years, in the area of creating name awareness overall for the Fresh & Easy retail brand, which it needs as a relatively new entrant to the markets it's in.

But this is our position only as part of the three store brand strategy we describe in this piece.

Once the two new store brands -- the premium-specialty and natural-organic -- have been created and slotted, we then suggest Tesco's Fresh & Easy go from there to create additional store brands -- but in a very careful and methodical way over time -- that would add value, achieve stronger product differentiation and give more meaning to the store's merchandise mix and marketing strategy.

We haven't been extremely impressed with Fresh & Easy's from the top store brand strategy thus far. So we would strongly suggest bringing in consultants with actual experience in the Western U.S. markets, and in store branding, before doing any brand creation, such as the recent creation of "Buxted," which actually isn't a brand creation but the use of a brand from Tesco Fresh & Easy's fresh foods supplier, United Kingdom-based 2 Sisters Food Group, which is Fresh & Easy's in-house supplier.

This observation is also one of the reasons we think buying a brand like "Wild Oats" could be a very good idea for Tesco's Fresh & Easy, then rebranding all of its current (and new) natural and organic products under the "Wild Oats" brand. We would do this across all store categories -- from dry grocery to fresh, preapred foods. Any item that's "natural" or "organic" would get the "Wild Oats" brand.

We believe that moving to this initial three store brand strategy will better position Tesco's Fresh & Easy in the store brands arena in many ways, as we've detailed throughout this piece.

Doing so also offers a much richer ability to price, merchandise, market and promote store brands.

And most important, we think the strategy will over time provide much more shopper brand differentiation vis-a-vis the current single fresh&easy store brand, and that with all things being equal, the net result will be increased sales and more return customers to the Fresh & Easy markets, including many more consumers than currently is the case that will shop the stores in part because of its store brands selection.

[Follow Fresh & Easy Buzz around on at]

Saturday, May 16, 2009

Competitor News: Wal-Mart Clears First Major Hurdle For Proposed Mega-Distribution Center in Merced, CA; Chain's Regional Strategy Moving Forward

Regional Market Report: California's Central Valley & Northern California

In this April 18, 2009 story [Competitor News: Wal-Mart Close to Clearing First Major Hurdle For its 1.1 Million Square-Foot Regional Distribution Center in Merced, California] Fresh & Easy Buzz reported that Wal-Mart Stores, Inc. was close to clearing its first major hurdle towards its plans to build a mega-1.1 million square-foot regional distribution center in Merced, California, in the Golden State's Northern Central Valley region.

That initial hurdle has now been cleared by Wal-Mart: On April 27 a 90-day public comment period in which area residents could comment by letter pro or con to the City of Merced Planning Department about the proposed project's potential environmental and other impacts on the community and surrounding region ended.

As of the end of business on April 27 the City of Merced received 301 letters from area businesses, organizations and individuals regarding the planned 1.1 million square-foot Wal-Mart distribution center project, according to the city's planning department.

Next phase for Wal-Mart

The next phase of the now-ended public comment period has started.

That phase requires Wal-Mart's contract planning firm for the project, EDAW, to respond in writing to each of the 301 letters received by the CIty of Merced.

The 301 letters are a mix of comments in favor of and opposed to the proposed 1.1 million square-foot Merced Wal-Mart distribution center, according to the planning department. When we published our earlier story on April 18 there were about 50 letters submitted at that time, with the number of letters in favor of the project far exceeding the quantity of letters in opposition, according to the city's planning department.

Once the EDAW planning firm responds to all of the letters, the City of Merced Planning Commission will hold public hearings on the proposed project.

Those hearings could come soon, or much later, depending on how fast the planning firm responds to the letters, a process Wal-Mart is required to follow by law.

The hearings will include public input, allowing members of the public for and against the huge distribution center project to voice their opinions.

Wal-Mart Stores, Inc. has said it wants to break ground on the 1.1 million square foot distribution facility starting in early 2010.

The project, which Wal-Mart proposed in 2005, is to be built on 230 acres at Childs and Gerard avenues in southeast Merced, according to plans filed with the City of Merced Planning Department.

Wal-Mart Stores, Inc. says it estimates the distribution center will take about 18 months to complete.

If the planned mega-distribution center is ultimately approved by the planning commission, it then goes before the Merced City Council for discussion and debate -- and an eventual vote. In California, planning commissions, which are comprised of members appointed by the city council, only give advisory approval to projects. Elected officials must ultimately approve such projects.

Merced residents and others for and against the distribution center project also get a chance to voice their respective opinions at a public Merced City Council meeting before the elected officials vote on the project's approval or denial, according to the city.

Organized support and opposition groups

As we wrote about in our April 18, 2009 story, there are organized groups in favor of and against the proposed 1.1 million square-foot Wal-Mart distribution center project in Merced.

Leading the opposition to the proposed distribution center is a local organization called "Merced SWAT" (Stop Wal-Mart Action Team). You can read about the group's opposition to the project at its Web site here.

Another local group, the "Merced Alliance for Responsible Growth," also opposses the planned Wal-Mart distribution facility. There's overlap between this group and "Merced SWAT."

Two national anti-Wal-Mart groups have also joined the local organization, "Merced SWAT," in opposition to the proposed Merced Wal-Mart distribution center.

One of the two organizations is the well-know Wal-Mart watchdog group "Wal-Mart Watch." You can read what the group is saying about the proposed project at its Web site here.

The second national anti-Wal-Mart organization allied with the local Merced group is called "WARN" (Wal-Mart Alliance for Reform Now). The group says it's collaborating with "Merced SWAT" to oppose the 1.1 million square foot Wal-Mart distribution center project in Merced. Read what WARN has to say at its Web site here.

The proposed distribution facility project also has strong support in Merced however.

For example, a majority of the City Council has indicated it's in favor of the distribution center, which Wal-Mart says will bring 1,200 full-time jobs to Merced. The retailer says the facility will operate 24 hours a day, seven days a week.

Additionally, most of the city's and Merced County's business leaders are in favor of the project.

And informal polls of residents have shown widespread support for bringing the disctribution center and the estimated 1,200 new jobs to the city.

Lastly, a pro-distribution center organization called the "Merced County Jobs Coalitio"n is heading up support and lobbying efforts among proponents of the proposed 1.1 million square-foot Wal-Mart Merced distribution center.

Tough economic climate, high unemployment

Merced County, of which Merced is the county seat, currently has a whopping 20% unemployment rate, one of he highest in California. By comparison, California's overall joblessness rate is about 11.4%, and the current U.S. unemployment rate is just under 9%.

Additionally, Merced County, which up until about mid-2007 was one of the fastest-growing counties in California, has since early 2008 been one of the top-five counties in the U.S. in terms of having the highest per-capita housing foreclosure rates in the United States month after month. And its often been number one or two during this period, including just last month when it was the leading U.S. county in housing foreclosures, according to a number of firm's that track monthly foreclosures by county.

Local development watchers in Merced have told us in the recent past that they believe the planned Wal-Mart distribution center project will ultimately be approved by the City Council because new jobs are so desperately needed in the city and county.

However, it's important to note that since the April 27 public comment period on the project ended, the opposition groups have been gearing up considerably, including in the case of "Merced SWAT" recently hiring a Sacramento, California-based land-use lawyer to assist it in fighting the project, along with getting more aggressive with its public relations efforts.

Of course such opposition isn't anything new for Wal-Mart, particularly in California where it has had other distribution center proposals, along with numerous proposed mega-Supecenter stores, killed by opposition groups , cities and counties.

As a result, Wal-Mart is working closely with the City of Merced and with its allies in the city regarding its efforts to gain approval for the proposed 1.1 million square-foot facility. Supporters are touting the 1,200 new jobs and Wal-Mart is promising to spend additional monies in the city, buying supplies for the distribution center from local businesses and donating to a wide variety of groups and local organizations, as it does throughout the U.S.

There are three major retail grocery industry distribution facilities in Merced, so the proposed Wal-Mart facility would hardly be one of a kind if built, although it would be much larger than the existing three centers are.

Grocery wholesaler McClane Companies, which is owned by billionare Warren Buffett's Berkshire Hathaway conglomerate, has a large distribution center in Merced from which it distributes grocery products to convenience stores throughout California and other western states.

Pleasanton, California-based Safeway Stores, Inc. operates a private label manufacturing and distribution facility in the city.

And Modesto, California-based Save Mart supermarkets operates a fresh produce distribution center in Merced.

Strategic importance

The proposed 1.1 million square-foot distribution center is crucial to Wal-Mart's strategic plans to grow its store count and market share in Central and Northern California, particular in the food and grocery categories, in which it is only a minor player at present in the regions.

For example, read our story here - February 11, 2009: Tesco's Fresh & Easy Isn't the Only Food & Grocery Retailer With its Eyes on Bakersfield: Wal-Mart's Bakersfield Push and Central Valley, CA Strategy; and our piece here - September 15, 2008: Wal-Mart Expanding its Discount Store-to-Supercenter Conversion Program As Part of its Strategy to Grab Even More Food and Grocery Sales Market Share.

The Merced facility would distribute everything contained in a giant Wal-Mart Supercenter, including perishable and non-perishable food and grocery products.

Right now, the political odds-makers in Merced tell Fresh & Easy Buzz that their money is on the ultimate approval by the Merced City Council of the project in the city of about 80,000 residents. Merced County has a population of about 250,000.

First Lady in Merced today

And today is a big day for Merced.

First Lady Michelle Obama is set to make her first and only university commencement address this afternoon to about 500 graduates of the University of California at Merced, the University of California's newest campus, which opened in the city in 2005. The class graduating today is the first full graduating class since the school was opened four years ago.

Ironically, the graduating class lured the First Lady to speak at today's commencement by launching a student-initiated letter writing and video lobbying campaign directed at Mrs. Obama, which included sending her a special Valentine's Day invitation in February, which was an invitation she apparently couldn't resist.

Perhaps the proponents and opponents of the proposed Merced Wal-Mart distribution center project could learn something from the University of California at Merced class of 2009 when it comes to launching successful letter writing and lobbying campaigns? After all, out of the huge stack of 2009 commencement speech requests she received, the First Lady chose just one, UC Merced, where she will speak this afternoon.

The city and the campus are conducting a two-day weekend festival in conjunction with the First Lady's commencement speech. As many as 15,000 -to- 20,000 people are expected to attend the graduation ceremonies on campus. The four year-old campus currently enrolls about 3,000 students.

Those same Merced political odds-makers tell us that today and tomorrow the proposed Wal-Mart distribution center issue is taking second place as a topic of discussion among residents as the city gears up for and celebrates the First Lady's visit. But come Monday, local residents tell us the proposed distribution facility issue will be back front and center as the main topic of discussion around town and in the city's coffee shops and pubs.

The proposed Merced mega-Wal-Mart regional distribution center is a major topic of discussion among the region's grocers as well, as they know the facility means more Wal-Mart Supercenters and likely other Wal-Mart format food and grocery stores in the region. That's a competitive prospect most grocers aren't looking forward to.

Tesco's Fresh & Easy in the Central Valley

Tesco's Fresh & Easy Neighbohrood Market hopes to have a major impact on food and grocery retailing in California's Central Valley in the not too distant future.

Thus far, Tesco has three of its small-format, convenience-oriented Fresh & Easy combination grocery and fresh foods markets open in Bakersfield, which is in the southern Central Valley. The grocery chain plans to open at least six additional stores (four more in Bakersfield, one in Delano and one in Wasco) in Bakersfield and the surrounding region.

Fresh & Easy Buzz however is aware that at least two of the four additional Bakersfield Fresh & Easy stores have now been completed but are sitting empty and have yet to be opened by the grocery chain. Those two locations are at Brimhall & Jewetta and Hageman & Coffee in Bakersfield. The store in Delano also is completed but has yet to open. [February 11, 2009: Tesco to Open Third Bakersfield, California Fresh & Easy Store On February 25.]

Additionally, Tesco has at least 10 (seven in Fresno and three in nearby Clovis) Fresh & Easy markets slated for the Fresno Metropolitan region in the mid-Central Valley.

Tesco's Fresh & Easy hasn't opened any of the 10 Fresno-area Fresh & Easy stores despite the fact that some of the stores are completed and ready to open.

For example, the downtown Fresno Fresh & Easy market at Tulare and R Street, which we wrote about in this July 23, 2008 piece: [Fresno, California Fresh & Easy Grocery Store to Be First in Chain to Include Local, Community and Neighborhood Design Elements and Features] is completed but not yet opened.

Fresh & Easy has included the 10 Fresno stores as part of its indefinite postponement of its Northern California region launch, even though Fresno isn't technically in Northern California. Rather it's considered Central California. [See - November 12, 2008: Analysis: Hard Times at Fresh & Easy - Northern California Expansion to Be Postponed or Shelved Do to Economy; But its Only a Symptom Not the Cause. May 15, 2008: Fresh But Never Easy: Tesco's Long But Rapid South-North March in the Nation-State of California. May 6, 2009: Tesco Fresh & Easy Northern California Market Region Update ]

And in the Northern Central Valley, Tesco's Fresh & Easy thus far has three sites planned in Modesto, as we've previously reported. [See - March 31, 2009: Despite Having Postponed its Northern California Launch Indefinitely; Tesco's Fresh & Easy Planning Third Store in Modesto, California.]

But despite all these Central Valley sites, many of which contain completed Fresh & Easy markets, the grocer has to date only opened three stores in the vast region, all three in Bakersfield.

Merced is located between Fresno and Modesto. The city is about 45 miles from Fresno (to the south) and about 35 miles from Modesto (to the north).

Of course, it's hard to become a player in a market like the Central Valley if a grocer has stores completed but doesn't open them, as the Bakersfield and Fresno examples above indicate is the case for Tesco's Fresh & Easy.

Not opening a completed grocery store is seldom if ever done by U.S. food retailers. Having numerous empty store buildings that aren't producing sales or cash flow isn't considered to be prudent management in the food and grocery retailing industry, particularly for major chains.

For example, one would be hard-pressed to find a completed Wal-Mart store of any kind that doesn't have a definite opening date planned for it.

The same would be the case at Kroger, Costco, Safeway and virtually every other chain -- large or small -- we are aware of. It's just not an excepted practice. And most grocers rush to open a completed store rather than allow it to remain empty a day longer than they have to.

Linkage - Additional Related Stories:

>February 11, 2008: Tesco's Fresh & Easy Isn't the Only Food & Grocery Retailer With its Eyes on Bakersfield: Wal-Mart's Bakersfield Push and Central Valley, CA Strategy

>September 15, 2008: Wal-Mart Expanding its Discount Store-to-Supercenter Conversion Program As Part of its Strategy to Grab Even More Food and Grocery Sales Market Share

>December 29, 2008: Competitor News: Winco Foods to Expand in California and Nevada in 2009; Put Aggressive Focus on Central Valley, Northern California and Northern Nevada

>December 3, 2009: Tesco Opens its First Two California Fresh & Easy Stores Outside of Southern California in the Central Valley City of Bakersfield Today.]

>April 13, 2009: Despite Postponing its Northern California Launch Again Earlier This Year Tesco's Fresh & Easy Planning Third San Francisco Store; First Stockton Unit

>March 31, 2009: Despite Having Postponed its Northern California Launch Indefinitely; Tesco's Fresh & Easy Planning Third Store in Modesto, California

>November 12, 2008: Analysis: Hard Times at Fresh & Easy - Northern California Expansion to Be Postponed or Shelved Do to Economy; But its Only a Symptom Not the Cause

>July 23, 2008: Fresno, California Fresh & Easy Grocery Store to Be First in Chain to Include Local, Community and Neighborhood Design Elements and Features

>May 14, 2008: Fresh & Easy Buzz Exclusive: Tesco's Fresh & Easy Neighborhood Market Plans to Open Five Stores In the Fresno, California Metropolitan Region

>May 15, 2008: Fresh But Never Easy: Tesco's Long But Rapid South-North March in the Nation-State of California

>November 20, 2008: Analysis & Commentary: Fresh & Easy Neighborhood Market and Tesco's Lowered Expectations

>September 29, 2008: Special Report: Wal-Mart, Inc. Studying Second Small-Format Food and Grocery Store Concept; the 'Bodega' or Modern Version of the Corner Grocery Store

>August 8, 2008: Analysis & Commentary: Wal-Mart's Marketside As Part Of it's Multi-Format Category-Killer Strategy Spells Trouble For Tesco's Fresh & Easy

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