Saturday, February 28, 2009

Warren Buffett: 'Our Country Has Faced Far Worse Travails': A Paralyzing Fear Has Engulfed the Country. But America's Best Days Lie Ahead.'

Warren Buffett. [Photo Credit: Stan Honda: AFP-Getty Images.]

Businessman, investor, philanthropist and advisor to Presidents, global corporations and governments, Warren Buffett, is a child of, and survivor of, America's "Great Depression."

Buffett, 78, is the founder and chairman of the Omaha, Nebraska-based Berkshire Hathaway Inc. holding company and investment firm.

He acquired Berkshire Hathaway, which at the time was primarily an apparel-making company, producing and marketing men's and women's under-clothing and men's dress and casual apparel mostly under the Fruit of the Loom label, 44-years ago, turning it into the mega-holding company and investment vehicle it is today.

Berkshire Hathaway Inc. owns over 100 corporations, in sectors ranging from food and food distribution (See's Candies and the convenience store distribution company McLane Company are two) to manufacturing (Acme Brick, Johns Mansville and others), apparel-making (Fruit of the Loom, Justin Brands), to furniture-making and retailing (Nebraska Furniture Mart, Jordan's Furniture) and insurance (Geico Auto Insurance), and many others. [Click here for a complete list of Berkshire-owned companies.]

Buffett and Berkshire Hathaway also hold major investments stakes in numerous corporations, including United Kingdom-based Tesco, which owns and operates the 115-store Fresh & Easy Neighborhood Market grocery and fresh foods chain, which has its stores in California, Nevada and Arizona. Buffett also is a major investor in Wal-Mart Stores, Inc., Coca-Cola and numerous other corporations.

Each year as part of Berkshire Hathaway's annual financial report to shareholders, Buffett writes a personal business letter to the company's investors. The Buffett letter has become famous in the financial world because the "Oracle of Omaha" uses his letter to shareholders to not just write about the performance of the Berkshire-owned companies but also to discuss the wider world and environment in which the companies and business in general operate in.

The letter is read closely by analysts as well for Buffett's views on both the current state of the U.S. micro and macro-economy.

Today Warren Buffett issued his annual letter to Berkshire Hathaway shareholders on a day that finds one of the world's biggest corporate success stories, Berkshire Hathaway Inc, reporting its worse year ever in the company's 44-year history, along with a very bad fourth quarter (2008), compared to the same period just a year ago.

Berkshire posted a $117 million quarterly income gain for the fourth quarter 2008, which marked a whopping 96% drop from last year's $2.95 billion in fourth-quarter net income.

For the year, Berkshire Hathaway's net income dropped 59% in 2008, from $12.2 billion, or $8,548 a share, a year earlier, to $4.99 billion, or $3,224 a share, from the previous year. In addition, the holding company's revenue fell 8.8%, from $118.2 billion, in the previous year, to $107.8 billion, for 2008.

Buffett takes much of the responsibility for this performance himself, despite the current global recession and financial crisis. Doing so is characteristically Buffett.

But it's important to note the Berkshire Hathaway didn't loss money in its fourth quarter, like is the case with so many corporations. But without a doubt times are tough in Omaha at Berkshire Hathaway, just like they are elsewhere. [You can read details of the company's fourth quarter financials here and at the link to its just-released financial report here: Annual & Interim Reports (Berkshire Hathaway Inc.)

But the "Oracle of Omaha," the man Forbes magazine ranks as the richest person in the world, says today --despite the devastating performance of his 44-year old (that's when Buffett took it over) Berkshire Hathaway, which over the last 44-years under Buffett's leadership has seen its book value grow from $19 to $70,530, a rate of 20.3 percent compounded annually -- and despite the serious economic recession and financial crisis the U.S. (and the world) finds itself in today -- that: "Our country has faced far worse travails' (than the current recession). A paralyzing fear has engulfed the country. But America's best days lie ahead."

That's the title of Warren Buffett's letter to Berkshire shareholders today, and it's the title of an opinion article he wrote for Newsweek magazine that was just published. Buffett is a member of the board of the Washington Post Company, which owns Newsweek.

Every year Buffett's letter to Berkshire shareholders is a market-moving event because of his legendary status as an investor. Perhaps that's why he chose to issue it on a Saturday this year, when the markets are closed.

But the letter is vintage Buffett, America's strongest cheerleader, but always from a real and grounded position. The 'Oracle of Omaha" may be a Wall Street wizard but he lives his life firmly on main street.

We strongly suggest reading Buffett's opinion piece on Newsweek online. You can do so here.

You can also view and read Warren Buffett's original letter to Berkshire Hathaway shareholders issued today here: Warren Buffett's Letters to Berkshire Shareholders, February 28, 2009. [We suggest reading Buffett's full shareholder letter even if you read the linked Newsweek piece because the Newsweek version is an abbreviated version of the full shareholder letter.]

Warren Buffett, born of the Great Depression, a man who has lived his entire life in Omaha but is a global citizen, says "America's Best Days Are Ahead." These are words we all need to remember, heed, and work together to make true.

Wal-Mart In A Latin Beat: New 'Modern Bodega' U.S. Latino Format; New Bodega Stores Set to Open This Year in Mexico to Add Much Spice to Retail Mix

On September 29, 2008 Fresh & Easy Buzz reported on and wrote about in this piece [Special Report: Wal-Mart, Inc. Studying Second Small-Format Food and Grocery Store Concept; the 'Bodega' or Modern Version of the Corner Grocery Store] Wal-Mart Stores, Inc.'s latest new retail format development project for the U.S. market, a smaller format (about 20,000 -to- 35,000 square foot) "Modern Bodega" format food and grocery market targeted to U.S. Latino consumers.

Additionally, as we mentioned, Wal-Mart is adding a twist to its Hispanic-focused "Bodega-style" format in development for the U.S. market, which is an attempt to appeal as strongly as possible to younger generations of U.S. Latino consumers who have one foot in their home culture of Mexico, Latin or Central America and the other in U.S. mass culture.

We were one of the first publications to report back in September, 2008 on the new Latino retail format being developed by Wal-Mart's development team.

We can tell you today that the development of the "Modern Bodega" store format continues apace at present at Wal-Mart.

We can also report that among the U.S. target markets being seriously studied by Wal-Mart Stores, Inc. for these new format stores once they come online include Arizona, California and Nevada, the three markets where Tesco operates its current 115 small-format Fresh & Easy Neighborhood Market grocery and fresh foods stores, along with Colorado and New Mexico in the Western U.S.

Additionally, Wal-Mart is studying other markets throughout the U.S. with high percentages of Hispanic consumers for the possible opening of the new Latino-focused format stores as well. Two we are aware of are Texas and Florida. Both states have significant Hispanic-American populations, and just happen to be, along with California and New York, ranked as the top four states in the U.S. in terms of total population.

It shouldn't come as a surprise that Wal-Mart is looking west, since the four Western U.S. states we detailed above have among the highest percentages of Hispanic-American residents in the U.S.

Additionally, each of those four states also have a high percentage of younger (18-45) Latino men and woman, who Wal-Mart also hopes to appeal to with as it plans to incorporate elements into the "modern bodega" format stores it believes will have a special appeal to these younger Hispanic consumers.

Below is what then CEO and now chairman of the Wal-Mart board of directors Lee Scott said about the new "Modern Bodega" retail format development from our piece on September, 29, 2008:

"I think there's lots of opportunity for (new smaller) formats (for Wal-Mart) in the U.S. A store that might remind you of a Bodega store is clearly possible." (A Bodega is a small grocery store typically found in Spanish-speaking neighborhoods.)

Lee Scott stepped down as CEO of Wal-Mart at the end of last month, handing over the CEO title and position to the retail chain's former head of global operations Mike Duke. Duke is as high, and perhaps higher, on the U.S.-version of the "Modern Modega" as former CEO Scott, who remains with the company as board chairman and an advisor.

In fact, our analysis is that Duke is even more keen on the new format development since it takes its inspiration in significant part from what Wal-Mart has been doing in Mexico for many years at its Wal-Mart de Mexico division. As the former head of all of the chain's global operations, Mexico, and the Wal-Mart de Mexico division, was part of Mike Duke's senior executive portfolio.

The other part of the "Modern Bodega" format's inspiration comes from Wal-Mart USA's increasing positioning and emphasis on appealing to Hispanic-American consumers across all of its various retail formats, particularly with its combination food and general merchandise mega-Supercenters.

Since about the mid-1990's, when it first started to seriously focus on Hispanic consumers in the U.S., Wal-Mart has progressively become a solid retailer in the Latino consumer segment in terms of its merchandising and marketing, getting a little bit better each year.

Last year the retailer opened its first U.S. Supercenter focused primarily on Hispanic consumers. That store, in Garland, Texas, is called Wal-Mart's "Hispanic Community" store.

The store is actually located in the very first Supercenter opened by Wal-Mart in 1987 (Wal-Mart didn't even use the name Supercenter then. Rather is called the stores, including the store in Garland, Texas converted to the Hispanic store, Hypermarts. The name was eventually changed to Supercenter on all the former Hypermarts.

Wal-Mart gutted and converted that old Supercenter into the Hispanic-focused store, which sells not only food and groceries targeted to the Latino demographic but also general merchandise. The store is serving as a learning laboratory, along with other Wal-Mart stores, for the team designing the new "modern-style" Bodega format.[You can read more about Wal-Mart's first and currently only "Hispanic Community" store here.]

There are many synergies between what Wal-Mart is doing in Mexico, where it today is that country's number one retailer through its Wal-Mart de Mexico division, and what it can do in the U.S. in terms of Latino-focused merchandising and marketing, both at its existing format stores and in new formats like the Garland, Texas "Hispanic Community" mega-store and the "modern bodega" Hispanic format store in development.

After all, in the case of California, Arizona and Texas, for example, the states have a closer geographical proximity to Mexico than they do most other parts (states) of the U.S. And the Latino cultural influence in such states, and throughout the Western U.S., is huge. Least we not forget, most of the Western U.S. was once Mexico.

Additionally, the smaller-format size (20,000 -to- 35,000 square-feet in its current stage of development) of the "modern Bodega" store in development offers a in-fill strategy for Wal-Mart. In practice this means the retailer can pop the stores into market regions with the appropriate demographics in between the locations of its mega-Supercenters and big box Sam's Club membership warehouse stores.

Further, because of the smaller footprint of the stores Wal-Mart can use then in market regions, think highly dense urban areas, for example where there are strong Latino consumer demographics but not enough physical space (real estate) available to build larger stores. This is the stand-alone rather than in-fill aspect or positive utility of such a format.

Last week Wal-Mart de Mexico, Wal-Mart Stores, Inc.'s Mexico division, announced that two-thirds of all its new store openings this year will consist of a relatively new small-format, Bodega-style store that will help them in-fill markets in key regions across Mexico.

Since Wal-Mart already is the largest retailer in Mexico and operates numerous mega-stores in the country, this in-fill strategy makes good sense to us in terms of the current stage of Wal- Mart de Mexico's development in the nation. Frankly, the strategy also is a way for the retailer to defend its dominance in the country.

It's no mere coincidence that Wal-Mart USA is working on its own version of a U.S. "modern bodega" format store at the same time Wal Mart de Mexico is announcing that all bu a fourth of its new stores in Mexico will be of a new "Bodega-style" format store, which likely will be a variation of the various Bodega formats is already operates in the country.

It's also not a mere coincidence that new Wal-Mart CEO Mike Duke is high on the U.S. "modern bodega" format since he was the commander-in-chief of Wal-Mart's global operations that approved the new Bodega-style" stores set to start opening in Mexico soon.

Add this all together, and its our analysis that Wal-Mart's introduction, which will likely come this year, of its first U.S. "modern bodega" Latino format store is going to be the new retail format news of the year. Stay tuned.

Suggested Reading

Aaron Chio is a senior analyst at the Retail Net Group consulting firm. His focus at the firm is on the development of new research, insights and growth strategies in Latin America. He's also a regular reader of Fresh & Easy Buzz.

Aaron Chio has just written and published a strategy report on Wal-Mart de Mexico and its recently announced plans to make the new Bodega format stores its major new store opening strategy in Mexico for 2009.

In the paper he also discusses the same theme we mention, which are the wider implications beyond Mexico, including in the U.S., for the Bodega concept and format, which we most often refer to as small-format food and grocery retailing. There are some qualitative differences between the two terms -- but also numerous similarities.

The paper, which Retail Net Group senior analyst Aaron Chio shares with Fresh & Easy Buzz offers some excellent insights about not only what Wal-Mart de Mexico is doing with the Bodega format, but also what others are doing with the concept, along with that wider market implications for variants of the format, which we mentioned above.

You can read the paper, Retail Net Group Strategy Alert No. 24: Format Innovation: Bodega Stores. by clicking here. It's Fresh & Easy Buzz suggested reading for our readers.

Suggested Reading II: From Fresh & Easy Buzz

>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

>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

>September 15, 2008: Wal-Mart's Chief Merchandising Officer Reiterates CEO's Words that it's 'Keeping Tabs' On Tesco's Fresh & Easy Today at Bank of America Conference

>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

>April 14, 2008: New Multi-Supercenter and Multi-Format Strategies Are Showing Wal-Mart to Be A More Agile Grocery Retailer in the U.S.

>April 25, 2008: Wal-Mart, Inc. Might have Found A Solution or Two to Much of the Opposition to its Mega-Supercenter Stores in the USA

>June 16, 2008: Wal-Mart and Tesco: The Cross-Atlantic Competition Continues to Heat Up; Almost Hot Enough to Make Uber-Cool British Secret Agent James Bond Flinch

>December 1, 2008: Competitor News: Where is 'Wal-Mart America?' A Demographic Look and Analysis

>November 21, 2008: Breaking News: Wal-Mart Stores, Inc. Names New CEO to Replace Lee Scott; USA Chief Castro-Wright Elevated to Vice Chairman Effective Immediatly

>November 19, 2008: Competitor News: Wal-Mart Lowering Prices on Holiday Items and Staples; New Formats Coming; Online Grocery Sales; Hundreds of New Stores FY 2009-2010

>October 2, 2008: Wal-Mart Marketside Countdown: Two Days to Go Until the Mega-Retailer's First Four 'Small-Marts' Open in the Phoenix, Arizona Region

>September 29, 2008: Wal-Mart Offers its Own 'Peek' Inside it's Small-Format Marketside As Part of A One-Week Countdown to the Stores' Oct. 4 Openings in Arizona

>August 11, 2008: Wal-Mart's Small-Format Marketside Strategy is Currently Neither A 1,500 Store, $10 Billion A Year Mega Plan, Nor A Mere Four Store Test

Thursday, February 26, 2009

Tesco's Fresh & Easy Recalling Three Products Containing Peanuts Because of Possible Health Risk

FEBRUARY 26, 2008 -- Tesco's Fresh & Easy Neighborhood Market just announced it is voluntarily recalling all date codes of fresh & easy brand Milk Chocolate Peanut Clusters, Sweet & Salty Granola Bars and Chewy Peanut Butter Chocolate Chip Granola Bars because they have the potential to be contaminated with Salmonella.

The voluntary recall is in response to the investigations of Peanut Corporation of America (PCA) and its Texas facility, which has now been linked to the Salmonella recall.

Tesco's Fresh & Easy says all product can be returned to any Fresh & Easy Neighborhood market store in California, Nevada or Arizona for a full refund.

Click here to read all of the details on the specific products and on the voluntary recall.

Additionally, the link below provides general information about peanut product recalls in the U.S.:

Tesco Fresh & Easy, Research and Course Correction: What 'Was' Said and 'its' Context Matters Little; What 'Is' Matters Much, What's Done Matters More

Fresh & Easy Buzz has written much about the various forms and modalities of research that can be used in the food and grocery retailing sector as a way to both better understand consumers, along with better understanding the food retailing market vis-a-vis what a grocer's competitors (and for a new grocer entering a market its upcoming competitors) are doing -- and why they are doing it.

There is no more important use of research, ranging from market-oriented research and analysis to consumer-focused research, than in using it to help gain a better understanding of what is a central fact of American food and grocery retailing: That it is a regional, sub-regional, sub-sub regional, local and neighborhood enterprise.

For example, if you take a state like California -- the nation's largest and the one where Tesco's Fresh & Easy Neighborhood Market is based and has the majority (in Southern California and Bakersfield in the southern Central Valley thus far) of its current 113 small-format grocery and fresh foods markets -- it's not one market, nor even a series of regional markets. California is best viewed as three or four (or even five) regional markets, then broken down into sub-regional markets, sub-sub regional markets on down to local.

The three major regions of the Golden State -- Southern California, the Central Valley and Northern California (each with sub-regions and sub-sub regions within) -- have many similarities in terms of consumer behavior as it relates to food and grocery retailing. But the qualitative differences are vast in terms of demographics and other key variables.

And within each of these three regions there are significant differences as well. What the popular and powerful former Democratic Speaker of the U.S. House of Representatives, Thomas "Tip" O'Neill was famous for saying about American politics, that "All politics is local," can in the main also be said about American food and grocery retailing, which is something we've written often about in Fresh & Easy Buzz. Tip probably would have made a pretty good grocer with that understanding. It served him well in politics, after all.

We've also written often about ethnographic research, and have used an applied Anthropological research modality (participant and non-participant research) in some cases in our coverage and analysis of Tesco's Fresh & Easy and the food and grocery retailing business in general

On Saturday, February 21 we wrote this piece about some comments attributed to Tesco Fresh & Easy Neighborhood Market CEO Tim Mason in a brief story published in the February 22 edition of the Sunday Times of London. Since those comments and direct quotes from Mr. Mason in the story track arguments we've been making for nearly a year about the research the grocery chain did prior to launching its U.S. food and grocery chain -- research in fact that the retailer has publicly said formed the basis for the Fresh & Easy format -- we thought the CEO's remarks in the Times' report were right on, albeit a bit late in coming. We even called the comments attributed in the story to Mr. Mason"healthy" ones.

We also thought they were a good basis for creating a bridge in which the chain and its CEO could now go forward with the changes it needs to make in the Fresh & Easy format, merchandising, marketing and operations if it hopes to succeed in the ways Tesco has planned on doing with the grocery and fresh foods chain in the Western USA.

You can read our February 21 piece here: A Healthy 'Mea Culpa': Tesco Fresh & Easy CEO Tim Mason Says 'We Got it Wrong;' Comments Tend to Agree With Fresh & Easy Buzz Analysis and Arguments.

It appears though that Mr. Mason's comments attributed to him in the Sunday London Times' story were "taken out of context," according to the Tesco Fresh & Easy Neighborhood Market spokesperson, although we've yet to hear from CEO Mason in print in this regard.

We wrote about this development on February 24 here: The 'Mea Culpa' 'Mea Culpa' By Proxy With A Dash of Spin: Tesco's Fresh & Easy Now Says CEO Mason's 'We Got it Wrong' Comments 'Out Of Context.'

What's interesting is that it really doesn't matter if Tesco Fresh & Easy Neighborhood Market CEO Tim Mason said what was attributed to him or not in the Times' story, or if it was "taken out of context" and thus required clarification from the corporate spokesperson (although it is interesting that clarification was in another publication rather than in the Sunday Times) The fact is, Tesco's Fresh & Easy is struggling. And all of that struggle isn't just because of the current economic recession. The chain was struggling pre-recession.

In fact, based on what Tesco has said Fresh & Easy is, and promoted it to the press as -- a neighborhood grocery and fresh foods market for "everybody" (all consumers) that offers everyday prices 15-20% below competitors' everyday prices -- one would think the stores would be thriving in a recession, for that format as described by Tesco would appear to a reasonable observer to be just the retail prescription for cash-strapped shoppers in an economic recession. But this isn't the case at present.

Our analysis is that a major part of Tesco Fresh & Easy's problems goes back to this research -- research the grocery chain touted as being extensive, comprehensive and nearly ground-breaking in its public relations push prior to opening its first stores in November, 2007. Tesco failed, or did so poorly, to do the most basic of all research we argue -- the type of market-based research that would have allowed the retailer to gain an understanding of American U.S. food and grocery retailing in general and Western USA food retailing, particularly with a focus on California, Nevada and Arizona and each states sub-regional, sub-sub regional and local markets.

Had it done this type of research -- and hired an American research team with strong knowledge of the respective local markets to conduct it independently for the company -- it would have learned that no such food retailing gap existed in the market in terms of any lack of grocery chains and independents selling the types of products Tesco offers at the Fresh & Easy stores.

For example, there is nothing revolutionary -- despite the many articles to that effect that were published in the mainstream press before the first Fresh & Easy stores were opened -- about the prepared foods sold at Tesco Fresh & Easy. In fact, California grocers are among the innovators in fresh, prepared foods merchandising, and many have been doing in a major way what Tesco just started doing with prepared foods for a good 15 years, getting better at it each year.

It's not that Tesco should not have opened the Fresh & Easy stores, and as we often say -- "Don't rule Tesco out ever. But it is that, in our analysis, the research was flawed, and we also think some ethnocentrism played a role in how it was conducted.

And as a result, that flawed research -- too much emphasis on focus groups and elaborate in-home ethnographic research and not enough market-based study in an informed and unbiased way -- resulted in Tesco doing so many wrong things with Fresh & Easy that it positioned the stores in a way from the very start that dramatically decreased its odds of success.

Tesco's Fresh & Easy has also been super-slow on the draw in course-correcting. It appears CEO Mason is realizing some changes are "now" needed -- such as focusing on value and stronger and more frequent promotions, two things we've been emphasising and suggesting in our analysis for about eight months -- but those changes needed to come in about the third quarter of 2008, when it was clear the current direction -- which we've still not figured out is -- was not working. It's not too late though. We think Fresh & Easy has strong potential if fixed.

But now Fresh & Easy's corporate spokesperson has said CEO Mason does not believe any of the initial research was flawed -- that it was just fine. That Mr. Mason's comments in that regard were taken out of context. That he meant nothing of the sort. Instead, the company's position is that any problems at Fresh & Easy are due to the current recession, according to spokesperson Brendan Wonnocott in the Supermarket News report and in a couple other published reports yesterday.

We think that's too bad. Why? Because the research is flawed, or the conclusions drawn from it are, take your pick, and it is our analysis that unless that is realized by CEO Mason and the other senior executives at Tesco's Fresh & Easy, it isn't likely they will be able to make the changes needed to move the grocery chain forward to success.

For a thoughtful and interesting analysis of that research, we suggest you read a piece posted yesterday by Applied Anthropologist Grant McCraken in his Blog: "This Blog Sits at the Intersection of Anthropology and Economics." The piece, "Ethnography is not an in-home interview," directly addresses the Tesco Fresh & Easy research within the framework of ethnographic research, which is the writer's specialty. Click here to read his post.

We will offer additional original analysis and thoughts on the research and related issues in an upcoming post in Fresh & Easy Buzz.

Supplemental reading from the Fresh & Easy Buzz archives:

February 21, 2008:

March 24, 2008: The Analysis of Tesco's Fresh & Easy From Piper-Jaffray's Mike Dennis in This Interview Published Today Sounds A Lot Like Ours For the Last Few Months

April 1, 2008: Supermarket News' Fresh & Easy Cover Story: Industry Analysts and Others Agree With Our Multi-Month Argument That Fresh & Easy Stores Need Local Focus

April 3, 2008: Our 'Fresh & Easy Stores' Lack A Sense of Place' Theory is Growing; Read What We and Others Are Saying Tesco Needs to Do With Fresh & Easy

April 9, 2008: USA Today Discusses Themes We Sound Off On Here at Fresh & Easy Buzz Near-Daily: Neighborhood, Community and 'Sense of Place' in American Retailing

April 28, 2008: Having Trouble in the Neighborhood (Market)? Who You Going to Call? Gene Hoffman Would Be a Good Start

May 16, 2008: Tesco is Incorporating New Interior Design Elements and Enhancements Inside its 61 Fresh & Easy Neighborhood Market Grocery Stores

May 7, 2008: May 7, 2008: Feature & Analysis: Tesco is Launching A Major 'Local Foods' Program in the United Kingdom; Why Not Do the Same At Fresh & Easy USA?

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

Tuesday, February 24, 2009

The 'Mea Culpa' 'Mea Culpa' By Proxy With A Dash of Spin: Tesco's Fresh & Easy Now Says CEO Mason's 'We Got it Wrong' Comments 'Out Of Context'

The photograph above of Tesco Fresh & Easy Neighborhood Market CEO Tim Mason is from an exclusive interview piece the CEO did with the London Times, which was published on November 12, 2008, the same UK-based newspaper Tesco's Fresh & Easy says attributed or quoted comments made by the CEO "out of context" in the report its Sunday addition ran two days ago. You can read two pieces (November 12 and 16) we wrote about the interview here: 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 and here: Tesco Fresh & Easy CEO Tim Mason Says He's 'Deliriously Happy' With the Chain's Progress Thus Far; We Prefer Andy Grove's 'Only the Paranoid Survive.' There's a link to the November 12 story in the Times at both of our links above. [Photo credit: Times of London.]

Analysis & Commentary

In this piece [A Healthy 'Mea Culpa': Tesco Fresh & Easy CEO Tim Mason Says 'We Got it Wrong;' Comments Tend to Agree With Fresh & Easy Buzz Analysis and Arguments] on Saturday, February 21, we wrote about a report in the Sunday Times of London in which Tesco Fresh & Easy Neighborhood Market CEO Tim Mason is attributed and quoted as saying the retailer got it wrong when it came to the research that formed the basis for what the Fresh & Easy format is and how the stores are merchandised and operated.

Since it has been our argument and offering (along with including positive suggestions) for over a year that Tesco did indeed "get it wrong" with its self-touted "extensive" and "in-depth" research -- which was too heavy on consumer focus groups and ethnographic research (researchers spent time in consumers' homes observing their food-related behaviors) and almost completely lacking in gaining an understanding of the food and grocery retailing business and market in California, Nevada and Arizona, in our analysis -- when we read the Sunday Times' story with the quotes and words attributed to Mr. Mason it made perfect sense to us that he would say what was attributed to him.

Upon reading the words attributed to CEO Mason, we said two things: "Good for him, he is now standing tall," and "It's about time" the grocer admitted what it knows to be the case regarding the research and the conclusions it drew from it, mainly that a major food retailing opportunity gap (the Fresh & Easy format) existed in the three markets that was just waiting to be filled.

No such major opportunity gap existed, in our analysis and in that of others who know the markets well. That doesn't mean Tesco shouldn't have launched Fresh & Easy. Just that the premise based on the research was faulty, in our analysis and opinion.

It is always better in business, politics and other related endeavors to define your problems rather than let others do it for you. This is what we felt CEO Mason achieved in the comments attributed to him in the Sunday Times' report. Experienced marketing and PR hands call this "hanging a lantern" on your problems. Once you define them for yourself it puts you more in the driver's seat. It also makes it easier to move forward on your own terms. It also feels good to do.

This morning however we were treated to an e-mail containing a story from the online version of the supermarket industry trade publication Supermarket News. That story, titled, "Fresh & Easy On Course, Company Says," contains what appears to our eyes, and experience, to be what we are referring to as the "'Mea Culpa,' 'Mea Culpa' by proxy." (See the title of our February 21 piece. Some might say it's even "spin."

The angle of the Supermarket News report is that Tesco Fresh & Easy CEO Tim Mason's comments in the Sunday Times' piece were "taken out of context," according to what the story reports Fresh & Easy Neighborhood Market's spokesman, Brendon Wonnacott, told the reporter.

We reprint the brief report from this morning's Supermarket News (in italics) below. Here is a link to the story as well.

Fresh & Easy On Course, Company Says
Feb 24, 2009

EL SEGUNDO, Calif. — Comments to the Sunday Times of London by the head of Fresh & Easy Neighborhood Stores here — to the effect that Tesco has been operating under mistaken assumptions in the U.S. — were taken out of context, a chain spokesman told SN yesterday.

“We’ve been very clear from the beginning that Fresh & Easy is continually evolving,” Brendan Wonnacott explained. “Making changes is something we’ve done from the start and will continue to do. That shouldn’t be surprising — that’s just being a good retailer.”

The newspaper had quoted Tim Mason, chief executive officer of Fresh & Easy, as saying, “We may have assumed certain elements of the Fresh & Easy brand would do the work for us, and we would not have to go down and dirty on price. That may have been a mistake.”

According to Wonnacott, “The economic environment has changed immensely over the past several months, [during which] we have heard consistently from our customers that they are more conscious of price, and like any good retailer, we are responding. We rearranged our flier a few months ago to highlight a few key products at great prices. We have simply turned up the volume on price communication so people know we offer high-quality products at great prices.”

Since the onset of the recession, for example, Fresh & Easy has launched a 98-cent produce pack that has helped increase produce sales by more than 11%, Wonnacott said; and it has continued to introduce more national-brand products in its stores and added larger sizes of detergents — all in response to customer requests for help stretching their budgets, he explained.

“We continue to evaluate different categories where we may complement the existing Fresh & Easy product range and help customers make their dollars go even further.”

All of what Mr. Wonnacott says -- the introduction of the value-based 98-cent produce packs (a value proposition we like because we've been suggesting for many months that value-based is where the grocer needs to move to and focus more on), adding more national brands (something we first suggested in early 2008) and the like are true -- and he says it well.

And since we weren't present when CEO Mason and the writer of the Sunday Times' piece talked, we have no idea if the words attributed to Tim Mason in the story were taken out of context. We should add that Tesco and Tesco Fresh & Easy often goes to the UK-based Times' when it has news to report on an exclusive basis. [See the photo caption with links at the top of this piece.]

In fact, in our February 21 piece we even used the word "healthy" to describe the words attributed in the Sunday Times' story to Mr. Mason, and to his showing in our opinion strong leadership ability in saying them, regarding Tesco Fresh & Easy's operating the Southern California-based 113-store small-format, convenience-oriented grocery and fresh foods Fresh & Easy chain under bad assumptions cleaned from the company's research.

After all, it is no secret to many that Mr. Mason and other Tesco Fresh & Easy executives, along with some of the top Tesco plc brass back home in the United Kingdom, have voiced concern and discussed at length the pre-Fresh & Easy launch research that formed the basis for the format and wondered how and why it was of less than top-flight quality.

And in standing tall and saying so in the Sunday Times' piece, Tim Mason showed the things of a leader -- the confidence to admit a mistake, a determination to correct it and move on once admitted, and a touch of humility backed up by a nice sash of resolve. (Note how much positive street credibility President Barack Obama has recently got for saying he got it wrong on a couple of key things so far in his Presidency.)

But now the spin. By having the Tesco Fresh & Easy Neighborhood Market corporate spokesperson "clarify" CEO Mason's comments to the Sunday Times' for its report -- adding nuonce and conflict to the reported statements and saying they were taken out of context -- it's our analysis and opinion that the company has now just added an unnecessary element to the reported statements. (We aren't putting down the corporate spokesperson for doing his job.

There was nothing wrong or negative about what Mr. Mason was reported to have said. In fact, it was refreshing and could have formed a great premise to go forward with the changes the CEO knows need to be made, and plans to make.

If the comments were taken out of context, the simple thing would have been to contact the Sunday Times' writer and express that viewpoint. We are rather sure he would have done a follow-up story, particularly since the UK-based newspaper writes about Tesco regularly.

Additionally, Tesco and Tesco's Fresh & Easy has chosen to go to the British papers rather than U.S-based papers whenever CEO Mason has specific (non press release) news he wants to put out publicly, so its not like there isn't precedent in terms of media relations with Tesco, Tesco's Fresh & Easy and the British mainstream press. CEO Mason is British after all, and was an executive at Tesco in the UK before coming to America to head-up Fresh & Easy. [See the photo caption and links at the top of this piece.]

Instead someone decided to do a little spinning to the Supermarket News' reporter, and he reported it like any good reporter should. But it's our analysis that this "clarification" from Fresh & Easy not only was unneeded, but now takes what was a story at the end of its news cycle and created a new news cycle for it.

Instead the company should have used CEO Mason's bold and leadership-oriented comments attributed to him in the Sunday Times' story as the basis of the changes it plans to make with Fresh & Easy. Such a headline would read: "Confident CEO admits mistakes, vows to build on those mistakes with changes designed to greatly improve Fresh & Easy."

But instead the impression left is: "What did CEO Mason really say?" "And why does a corporate spokesperson need to interpret and clarify what the company leader said?" In other words, they've gone and muddied the whole thing up in our analysis.

We don't think you would see this happening with Safeway Stores, Inc. CEO Steve Burd, or just retired Wal-Mart Stores, Inc. CEO Lee Scott, who remains chairman of Wal-Mart's board of directors, for example, to offer just two examples of industry CEO's. The reason is because doing so would diminish the perception of their leadership ability to all stakeholders -- investors, employees, suppliers, industry peers and others.

It's key for stakeholders to clearly understand that when the person at the top is speaking out, he is doing so for himself and the company. And that if he or she feels something they said to a reporter was taken out of context, then they say so and describe what and how in their own words rather than via proxy.

As a result, Mr. Mason now needs to step back in and talk to the reporter who wrote the piece in the Sunday Times so that he clarify in what ways he believes his comments were taken out of context in the piece.

If not, the Tesco plc and Tesco Fresh & Easy stakeholders are left confusion -- with what to us were healthy, leadership-oriented made comments by the Tesco Fresh & Easy CEO in the Sunday Times' story, but which now today have been amended by the company spokesperson in the Supermarket News report, including suggesting the Sunday Times' writer took Mr. Mason's comments out of context, leaving confusion as to what was said, as well as to who is running the shop over in El Segundo.

Monday, February 23, 2009

Consumer Behavior & Retailing In the Recession: Gauging the Mindset of the 'New Frugal American Shopper' In An 'All Retailers Are Discounters' Time

Beginning in about mid-2008 (to the present) Fresh & Easy Buzz first started to write regularly about how consumers were beginning to trade down in terms of where they are shopping for food and groceries (types of stores), how much they're spending, what they're buying and how they're buying it, due to the then beginnings of -- and now full-blown -- the current economic recession. This consumer trading down behavior has decreased dramatically from then to now. It's our analysis it will continue all year and well into 2010 at the very least.

Among the recession-induced changes in consumer food and grocery shopping behavior we've sited include: a shopper flight to discount food-grocery stores like Wal-Mart, Aldi, Sav-A-Lot and similar price-impact-focused stores; consumers buying fewer prepared foods items and more staples and basics for cooking at home; an overall decrease in the amount of money shoppers are spending on food and groceries, particularly on premium, specialty, organic and impulse items; shopping weekly sales more frequently and cherry-picking retailers advertised items; purchasing more store brands if such items are cheaper than national brands; the dramatic increase in consumer use of manufacturers' "cents off" coupons and retailer store coupons; and a number of other indicators all pointing to the fact there now exists in large numbers what we call "the new frugal American food and grocery shopper."

In our research we see this trading down at retail across the board. Some evidence:

There are more BMW's, Mercedes and luxury SUV's in Wal-Mart, Dollar Tree, Dollar General and Costco parking lots than we've ever seen before, for example.

Goodwill stores are so packed and doing so much business that many are aggressively searching for used product, and for the first time ever paying for it in some cases.

And when it comes to eating out, MacDonalds' sales are soaring (and dollar menu items selling off the charts), while even mid-range restaurant chains like Applebees are struggling. MacDonalds said last week it is shooting to open 1,000 new stores globally this year.

The small-format, hard-discount chain Aldi USA, which is based in Illinois and has nearly 1,000 stores in the southern U.S., Midwest, Mid-Atlantic and eastern regions of the U.S. is booming, while higher-end grocers like Whole Foods Market is struggling, for example.

Aldi USA is doing so well in the bad economy that is entered the Florida market late last year, building a distribution center there and the first of what it plans to be many stores.

This year Aldi USA is entering two brand new markets, New York State and Texas. Florida, New York and Texas, along with California, happen to be the top food and grocery sales markets in the U.S. in terms of total dollar sales. Aldi USA plans to open at least 100 new stores in the U.S. this year.

Aldi USA also is getting ready to launch a major television advertising campaign in all of its U.S. markets because it believes it can pull even more shoppers into its stores with what will be retail brand-oriented ads that will tout Aldi's low-price and value model and message, depicting it as the "perfect" grocery store for today's tough times. Read: money savings and value everyday.

Just like upscale, specialty and premium-oriented grocers like Whole Foods Market, Bristol Farms (Southern California) and Dean & Delucca loved the "go-go" mid-to-late 1990's, it appears small-format, hard-discounter Aldi USA, which is the American division of Germany-based Aldi International, is lovin' not so "go-go" 2009.

It's our argument that "all grocers are now discounters" in this seriously down economy. That even includes upscale retailers like Whole Foods, which has been lowering prices in its stores, promoting-discounting on price heavily, and even periodically offering store coupons good for 10%-25%-off purchases of $25, $50 and $100. Until last year Whole Foods was about as far from a "discount-oriented" grocery chain as one could find in the U.S. At present, price and value are the two key merchandising and promotional strategies at Whole Foods.

By "all grocers being discounters" we of course mean each in its own ways. Aldi is different from Whole Foods, and Wal-Mart is different than both in its discounting behavior. But we do mean that regardless of format or positioning, all grocers are today discounting. Some just aren't doing it well. Others might not even know it is what they are doing.

While our focus is on food and grocery retailing in Fresh & Easy Buzz, the same "all retailers are now discounters" theory holds true across nearly every type of retail format at present in the U.S., from clothing and books to consumer electronics and home stores.

High-end fashion retailer Saks has been regularly holding 50%-70%-off sales in its upscale stores, for example. Department store chain Macy's appears to be offering nearly everything it sells in its department stores on sale these days if you visit one of the stores. And even the super-popular "Apple" stores (Apple computer) have started discounting Apple lap top computers, iphones and ipods recently.

Time magazine has now discovered the dual consumer-retailer behavior change we've been describing and writing about in Fresh & Easy Buzz. That duality is the combination of the "new frugal American consumers" and the "all retailers are discounters" proposition, a result in the main of the trading down behavior by so many consumers.

Time sought out Paco Underhill, the well-known consumer researcher, retail analyst and author of the excellent book, "Why We Buy: The Science of Shopping," to, in Time's words,"gauge the current mindset of the American consumer." Trying to do just that is fast-becoming the number one activity of America's retailers right now.

Time magazine staff writer Sean Gregory talked to Paco Underhill, the founder and CEO of the consulting firm Envirosell, about the "mindset" of today's cash-strapped, economic confidence-lacking, job-insecure American consumer for a piece published in the magazine yesterday. We suggest reading the story as your supplemental reading for the day. It's well worth the few minutes it takes to read it.

Click here to read "How Consumers Shop Differently Today" from the February 22, 2009 addition of Time.

Sunday, February 22, 2009

Bloggers-At-Large: The UK's 'Village Postmaster' Offers His Thoughts On Tesco Fresh & Easy CEO Tim Mason's 'Mea Culpa'

The "Village Postmaster" is an independent retailer, town postmaster and Blogger -- the "Village Counter Talk" Blog -- in the lovely and bucolic village of West Chiltington, West Sussex, United Kingdom.

He's also a longtime observer of and posts often about United Kingdom-based global retailer Tesco, which owns and operates El Segundo, California (Southern)-based Fresh & Easy Neighborhood Market, which currently has 113 small-format (10,000-13,000 square foot) grocery and fresh foods markets in Southern California, Metropolitan Las Vegas, Nevada and Metro Phoenix, Arizona, in the Western United States.

Tesco plc is the leading food and grocery retailer in the UK. It controls about a 31% market share in the nation. Tesco is the third-largest retailer in the world, after number one U.S.-based Wal-Mart Stores, Inc. and number two Carrefour, which is headquartered in France.

As a longtime independent retailer, as well as having his store in West Chiltington, West Sussex UK serve as the town's post office, "The Village Postmaster" offers his experiences and insights in his "Village Counter Talk" Blog from the perspective of an independent entrepreneur. The Blog is followed closely by many in the United Kingdom and beyond.

For example, here's what columnist Vickie Woods of the London Daily Telegraph newspaper says about "The Village Postmaster" and his "Village Counter Talk" Blog: "The 'Village Postmaster' is a curmudgeon, and 'Village Counter Talk' is one long enjoyable moan about the somewhat embattled job of keeping a business going in the face of desperate odds."

The United Kingdom's "Village Postmaster" read our piece in Fresh & Easy Buzz published yesterday in which we reprinted a brief report from today's Sunday London Times about Tesco Fresh & Easy Neighborhood Market CEO, and Tesco PLC senior corporate officer, Tim Mason being quoted as saying the grocer "got it wrong" from the start about various aspects of its Fresh & Easy chain, and then we detailed in the post how Mr. Mason's comments, as attributed in the Times' report, sound like they came right out of the pages of Fresh & Easy Buzz, in terms of our analysis, arguments and suggestions over the last year-plus. [You can read our piece from yesterday here: A Healthy 'Mea Culpa': Tesco Fresh & Easy CEO Tim Mason Says 'We Got it Wrong;' Comments Tend to Agree With Fresh & Easy Buzz Analysis and Arguments.]

We weren't surprised to see today that longtime Tesco-watcher, independent retailer and Blogger "The Village Postmaster" has already offered his own view of the issue today in his Blog in a post titled: "Tesco Own's Up At Last." He does follow Tesco and its USA Fresh & Easy venture rather closely, after all.

You can read what "The Village Postmaster" has to say in his post today in the "Village Counter Talk" Blog here.

Saturday, February 21, 2009

A Healthy 'Mea Culpa': Tesco Fresh & Easy CEO Tim Mason Says 'We Got it Wrong;' Comments Tend to Agree With Fresh & Easy Buzz Analysis and Arguments

Pictured above is the Fresh & Easy Neighborhood Market store on famous Hollywood Boulevard, in Hollywood, California. The Fresh & Easy market is nearby the Kodak Theatre, where the annual star-filled Academy Awards show, also called the Oscars, will take place tomorrow night. The envelope please: It's now about 15 months since the fist batch of Fresh & Easy stores opened. Will Tesco Fresh & Easy Neighborhood Market CEO Tim Mason be able to make the small-format, convenience-oriented grocery and fresh foods chain a "star?"

In a brief story to be published in tomorrow's Sunday London Times, Tesco Fresh & Easy Neighborhood Market CEO Tim Mason and the Southern California-based grocery and fresh foods chain's chief marketing director, Simon Uwins, tell the Sunday Times' William Kay that the retailer's "extensive" market research in the Western U.S. market regions of California, Nevada and Arizona, research Tesco has been touting as top-flight and comprehensive for over two years, was wrong and mistaken.

"We may have assumed that certain elements of the Fresh & Easy brand would do the work for us and we would not have to go down and dirty on price. That may have been a mistake," Tim Mason, CEO of Tesco's Fresh & Easy Neighborhood Market USA, is quoted as saying in the report.

It not just about getting "down and dirty" on price though, although that's a reality in the current deep economic recession. It's all about creating a comprehensive Fresh & Easy format rather than the current muddled format, placing value at the center of that comprehensive format and then communicating it in a clear and regular way to consumers, as we've been suggesting the grocer needs to do since we started Fresh & Easy Buzz.

We reprint the full Sunday Times' report below (in italics):

Tesco admits: We got it wrong in US
February 22, 2009
The Sunday Times
By William Kay, Los Angeles

THE head of Tesco’s US operation, Fresh & Easy, has said its early market research was mistaken and it may make big changes to the stores.

“We may have assumed that certain elements of the Fresh & Easy brand would do the work for us and we would not have to go down and dirty on price. That may have been a mistake,” said Tim Mason, head of Tesco’s US business.

Ahead of Fresh & Easy’s launch in November 2007, Mason trumpeted the in-depth research that was done to identify a gap in the West Coast grocery market.

Marketing director Simon Uwins said: “We went into people’s houses, talked to them about food and food shopping. We went into their kitchens and poked round pantries.”

Unfortunately, Mason now admits, they did not poke around their garages, where they would have found huge freezer chests bulging with stockpiled meat bought on special offer.

“There’s less loyalty in the American market,” said Mason. “A Brit has to hear it a few times before you accept that people make up their mind where to go each week when they check out the special offers round the kitchen table.

“In a key moment at a focus group, one man told them that he had stopped shopping at Fresh & Easy because they no longer sent him a flier promoting the latest special offers.

“We came out of that meeting and said we had better make sure we hit everyone in the area with fliers.”

Recession has slowed expansion. There are 113 Fresh & Easy outlets and plans to have 200 branches have been put back at least six months. [Here is a link to the story as well.]

Analysis: Tesco Fresh & Easy CEO Tim Mason takes a page right out of Fresh & Easy Buzz

Mr. Mason's comments and quotes should sound rather familiar to regular readers of Fresh & Easy Buzz.

For over a year we've been writing and offering analysis in numerous pieces that Tesco's "extensive" pre-Fresh & Easy launch research was questionable, since the grocer failed to discover so many basic aspects and practices of how food and grocery retailing in America works.

These research failures include such simple basics as how Americans prefer fresh, bulk produce over pre-packaged, to (a major Fresh & Easy Buzz theme) the regional, sub-regional, sub-sub regional and local nature of grocery retailing in the U.S. -- that there are regional markets like the Western U.S., then sub-regional markets within those which have extensive differences, like California, Nevada and Arizona, then additional sub-sub regional markets within those, such as Southern, Central and Northern California, and then even local markets within those sub-sub regional ones, right on down to the neighborhood level. There are niches within the niches. Just ask Safeway Stores, Inc. what it discovered when it finally started taking its neighborhood merchandising-marketing program seriously in the late 1990's.

We've suggested that despite the research being bad, something Mr. Mason has only admitted now, such things happen, but that Tesco's Fresh & Easy should have admitted it long ago and then course corrected. It has started doing a bit of that course correcting of late, including taking our advice in terms of beginning to build a better value proposition. But it is nearly a year too late in doing so, as we've written previously.

Another major theme in all of our writing and analysis has been that's what lacking with Fresh & Easy's merchandising, marketing and operations is the creation of a value proposition and then the communication of that proposition in a clear, concise and repetitive manner. It appears our argument has now found receptive ears.

By value proposition we of course mean discount pricing, both everyday and promotional -- after all from day one Tesco claimed Fresh & Easy was and is about 15% cheaper everyday than its food retailing competitors stores are, which hasn't tuned out to be true based on our research -- but not just discount pricing. Value is much more than that. Value is appealing to consumers on multi-levels, and it must include their pocket books. It's Convincing them your offering provides the best value for the best price.

As we frequently suggest, for Tesco's Fresh & Easy,that value proposition needs to be the hub of its wheel, with all of its other offerings -- prepared foods, natural and specialty foods, specialty wines, ect. -- then being the spokes of that hub and wheel.

Based on our extensive research, which has included talking to numerous past Tesco Fresh & Easy employees, it's, as we've previously reported and discuss in the Blog, our analysis that what Tesco has done to date with Fresh & Easy is essentially assume it could force-feed its model of British food and grocery retailing into the Western U.S. and convince consumers that they would prefer it to what they are used to and like -- food retailing Western USA style, which means appealing to the consumer and focusing locally like a laser beam on the communities and neighborhoods served.

The U.S. is a decentralized (there really is no national chain, Wal-Mart comes the closest to being one), super-competitive, multi-format food retailing market. And unlike the United Kingdom, regional supermarket chains and independents are a key and significant force in U.S. grocery retailing.

In California alone there are numerous multi-billion dollar, privately-held chains that are top market share players in their sub-market regions. These include Stater Bros. (about $4 billion in annual sales) in Southern California's Inland Empire region, Bashas (about 3.4 billion in annual sales) in Arizona, and Raley's (about $3.6 billion in annual sales) and Save Mart (about $6.5 billion annual sales) in regional markets in Northern California.

There are a few others over the billion dollar annual sales mark as well, along with many multi-store independents approaching a billion dollars in annual sales, and even more in the hundreds of millions and high tens of millions in annual sales.

Then there's the really big guys -- Wal-Mart, Costco, Target, Safeway, Kroger Co., Supervalue, (and many more), along with the big niche players -- Trader Joe's (about $5 billion), Whole Foods Market (about $6 billion) (and numerous medium and smaller niche players too) -- and the ethnic grocers (particularly Latino consumer-focused food retailers) in California, Nevada and Arizona).

Did we forget to mention the legions of high-volume single store independent grocers in the U.S.? And California is one of the strongest single-store independent markets in the nation, as one example.

And let's not forget the mega-drug chains like Walgreens, CVS-Long's and Rite-Aid, all of which increasingly are offering and discount promoting more and more food and grocery items. For example, this weeks 12-page advertising circular from Walgreens, the largest U.S. drug store chain (maybe should change the name to Walgreen's drug & grocery) looks more like a supermarket ad circular -- about 60% of the items are groceries, including dairy and deli items -- than a traditional drug chain (or Walgreens') advertising piece.

We aren't sure if this "British food-grocery retailing model "force-feeding" approach by Tesco has been because of pure hubris, which is something former and present company employees have suggested to use is the reason. But whatever the reason, in our analysis its been in many ways "Ted Mack time" (an important American pop culture reference to know) by Fresh & Easy's leaders thus far for Tesco, which is one of the best overall global retailer's in the business.

[If you do a search in the "search box" at the top of Fresh & Easy Buzz -- use words like "value proposition," "localism," "research" -- as well as looking through the Blog archives (even better) -- you will find that Mr. Mason's revelation in the Sunday Times' piece mirrors our analysis, arguments and suggestions rather closely in terms of where Tesco's Fresh & Easy has gone thus far -- and where it needs to go.]

It is said that admitting mistakes is the first step towards correcting them. We hope that's the case for Tesco's Fresh & Easy, especially because the grocer has some of the finest and most dedicated store-level employees in the business.

It's also important to note that unlike Tim Mason, many CEO's will never admit, particularly in print, that they "got it wrong." Instead, they would rather go down with the ship still saying they were right; that the environment was just wrong. For example, look how long it has taken General Motors' CEO Rick Waggoner to admit GM "got it wrong." And the timing was pretty close to the company's asking for billions of dollars in loans from the U.S. government, at that. Therefore we give Mr. Mason credit for having the confidence and wisdom to say what he said.

But the fact that Mr. Mason is admitting the grocer "got it wrong" should also shed some light on just how serious (as in not so positive) Tesco's struggles with Fresh & Easy are. Keep in mind Tesco will soon report its financials, including those at Fresh & Easy Neighborhood Market USA.

We have seen some positive signs in recent weeks in terms of changes in Fresh & Easy's merchandising and marketing. Of particular note appears to be the movement, albeit in baby steps, by the grocery chain more towards the value proposition-based model we've long been suggesting it needs to do. On the item side of this equation these developments include the introduction of what Fresh & Easy calls its 98-cent value produce packs. It also includes the addition of more nationally branded grocery products into the stores.

Fresh & Easy also has been sharpening its promotional pricing -- offering better deals -- and improving its in-store merchandising, particularly in the grocery category.

For example, when we visited a number of stores between the 2008 Thanksgiving and Christmas holidays we noticed pre-pack shippers being tastefully used in the stores. Prior to that Fresh & Easy had a "clean floor" policy, in which it didn't allow shippers on the store floor. The shippers we viewed then were all featured national brands, which is a good idea for the grocer because it helps augment the primarily store brand (about 60%) model and focus in the stores. The shippers, many of which contained items with a higher ring but were price-discounted well, also help increase market basket size for the stores.

We also saw an end-cap display we liked. It featured a number of well merchandised fresh & easy store brand grocery items. On the display were stacks of paper Post-It Notes, along with a sign that basically said: "Take a Post-It Note, write-down your favorite fresh & easy brand items and stick it on the display." The display (shelving) was covered with Post-It Notes, with customers' favorite fresh & easy branded items hand written on the slips of paper.

This is the type of creative merchandising the grocery chain needs to nurture and do more of. It's creative and interactive, inviting shoppers to participate in the grocer's business. We suggest Mr. Mason find out who came up with this idea and put them in charge of "creative merchandising" for the entire chain.

But it's our overall analysis at this point in time that Tesco's Fresh & Easy has yet to create this comprehensive value proposition and merchandising and marketing program. We suggest it follow up on its recent value-based offerings and the type of creative and successful (the items on that particular store's Post-It Note display were selling at a brisk pace) merchandising exemplified by the display we described, and build these various elements (the parts) into a value-based overall (the whole) merchandising and marketing program which then must be positioned and communicated well.

Value needs to be the hub of the Tesco Fresh & Easy wheel (format and overall offering) and then all of the other offerings (prepared foods, natural-organic-specialty groceries, wines, ect.) need to be the spokes. The other offerings are important. But they need to fit in with the overall value proposition and support it rather than detract from it in what we've termed as a "model or format muddle" that exists with Fresh & Easy at present.

We will return later for some further analysis on the topic and issue. But that's all for now.

California State Appeals Court Cuts Tesco's Fresh & Easy A Big Break; Overrules Judge's Ruling on Distribution Center Environmental Review

The 800,000-plus Tesco Fresh & Easy Neighborhood Market distribution center pictured above includes 500,000 square feet of roof top solar energy panels, as you can see in the photograph. Tesco says the massive solar panel array and system provides about 70% of the building's total energy needs. One doubts this "green" aspect of the distribution center would need an "environmental review," since the impressive roof top array and solar energy system is among the largest of any commercial building in the U.S

A California State Appeals Court in Riverside County, California last Thursday overturned a Riverside County Superior Court judge's previous ruling that the 820,000 -to- 850,000 square foot Tesco Fresh & Easy Neighborhood Market distribution center in the Southern California county would have to undergo a new series of environmental impact studies and reviews. That ruling was made by Riverside County Superior Court Judge Thomas Cahraman in 2008.

The Riverside-based appeals court ruling was first reported yesterday (Friday, February 20, 2009) by Lou Hirsh in the Press-Enterprise, a daily newspaper that covers Southern California's Inland Empire region, where Riverside County is located. [You can read the report here.] The Inland Empire region comprises Riverside County and San Bernardino County.

The Tesco Fresh & Easy distribution center is located on land that once was a U.S. Air Force base and is now the Meridian Business Park, located off of Interstate 215 in Riverside County.

Fresh & Easy Buzz verified the ruling with the appeals court yesterday. We also reviewed a summary of the appeals court's ruling.

The original ruling against Tesco was made by a judge in response to a lawsuit filed by a non-profit citizen, health and environmental organization in Southern California called Health First. The United Food & Commercial Workers (UFCW) union, which is attempting to organize Tesco Fresh & Easy store-level employees, was supportive of the Health First lawsuit.

When the Fresh & Easy Neighborhood Market distribution center was built in 2007 it didn't go through an environmental review process separate from the one that the entire Meridian Business Park development went through. Tesco was given approval to take this route by the local March Joint Powers Authority, a government agency that is responsible for all development on the former U.S. Air Force land. The authority approved Tesco's plans for the distribution center.

However, Health First argued that projects the size of the Tesco Fresh & Easy distribution facility need to go through separate, individual environmental impact reviews. Lawyers for Tesco and the March Powers Authority disagreed. As a result, Health First filed a lawsuit; the lawsuit the Superior Court judge agreed with.

Tesco and the March Powers Authority then appealed that judge's ruling to the Riverside-based state appeals court, which ruled in favor of the two parties on Thursday, overturning the judge's decision and ruling against Health First's lawsuit on the appeal. [We reported on the appeal on April 16, 2008 here: Tesco and Riverside County March Joint Powers Authority File Appeal Over Fresh & Easy Distribution Center Environmental Review Court Order.]

The appeals court decision isn't final yet though. Health First's legal counsel has the right to offer oral arguments against the appeal to the court.

If Health First decides to go this route then Tesco's and the March Powers Authority lawyers also will make rebuttal oral arguments. If that happens then the court will either uphold its ruling after completion of all the oral arguments or reconsider it.

As it stands right now, the appeals court's decision is set to become final in March if Health First decides not to further pursue the case further by offering the oral arguments.

The appeals court's decision is an extremely positive one for Tesco because had the court agreed with the previous judge's decision, the company would have had to temporarily close the Riverside County Fresh & Easy Neighborhood Market distribution center and pay to have a complete environmental impact report conducted on the facility, which could take as long as a year to do. Further, it's possible that such a review would end up requiring Tesco to make numerous expensive changes to the facility or even close it all together.

The facility is Tesco's only one. All of the about 112 Tesco Fresh & Easy stores in Southern California, Nevada and Arizona receive fresh foods and grocery products from the Riverside County distribution center.

Had Tesco been forced to shut it down, even temporarily, it would have had to find an alternative way to distribute products to its stores. Such an alternative would be very expensive and disruptive for the grocery chain, particularly because the distribution center also includes a kitchen facility where the grocer prepares and packages all of the fresh, prepared foods items sold in the stores. It would be near impossible to find an alternative to the kitchen based on the centralized way in which Tesco's Fresh & Easy operates its prepared foods program.

Tesco also pre-packages most of its fresh produce and meats at the distribution center. The pre-packaged fresh foods are then shipped that way to the stores. This centralization process also would have made it difficult and expensive for the grocery chain to find an alternative had it been forced to close the facility.

Based on the appeals court ruling on Thursday, it's likely that even if Health First goes forward with the oral argument phase, that the court will uphold its Thursday ruling. As of yesterday, Health First had not indicated to the Riverside-based appeals court if it plans to go forward with the oral arguments.

Friday, February 20, 2009

90-Year Old California Man Who Lost Over $700,000 in Retirement Savings to Scam-Artist Bernie Maddoff Goes Back to Work -- At A Grocery Store

90-year old Ian Thiermann, who lost $738,000 in the $50 billion financial swindle conducted by Wall Street financier Bernie Maddoff, at work in his new job at the Ben Lomond Market supermarket in Ben Lomond, California. [Photo: KPIX TV, Channel 5.].

Sign of the times: It's a good thing grocers are still hiring

Ian Thiermann, a 90-year old retired businessman from Ben Lomond, California, a small town near the city of Santa Cruz on Northern California's coast, says he lost his entire life savings, $738,000, to the Wall Street financier and Ponzi Scheme crook Bernard Maddoff. The $738,000 was what Mr. Thiermann had saved and invested throughout his working life for his retirement.

As a result of losing it all, Ian Theirmann decided the only think he could do was to return to work at age 90, he told San Francisco-based KPIX, Channel 5 television for a recent report the station did about the Ben Lomond resident.

However, with the current job availability situation so poor, along with the fact he is 90-years of age, Ian Thiermann wasn't completely confident he could find a job in the small, coastal Northern California city where he lives.

But a local independent grocer, Ben Lomond Market, heard about Mr. Thiermann's plight and offered him a 30 hour a week job at $10 an hour as the store customer greeter, a position they created especially for the energetic and sociable 90-year old.

"This is not a woe is me kind of man. This is a community coming together and helping each other out in times of need," Barbara Loffer of Ben Lomond Market told KPIX.

In explaining his plight and decision to return to the work force as the official customer greeter at Ben Lomond Market, Ian Thiermann told KPIX reporter Kiet Do: "You meet a situation like this, what are you gonna do, fold up? Instead of crying, yelling or being mad about it, face it and move on."

That simple sentence and overall attitude from Mr. Thiermann, a man who at age 90 lost every cent he had saved throughout his working life and as a result did what he had to, which is to go back at work, is something we should all keep in mind as we struggle in the current bad economy.

Times are tough without a doubt -- but like Ian Thiermann, who was born in 1919 and has lived through wars and the Great Depression -- and survived -- says: "You meet a situation like this, what are you gonna do, fold up? Instead of crying, yelling or being mad about it, face it and move on."

That's a motto, and attitude, we all should follow. It's also the attitude that will get the country out of the current economic recession and malaise.

[You can read the report from KPIX Channel 5 here.]

[You can view video of Ian Thiermann at the Ben Lomond Market at the link below:]

Fresh & Easy Buzz offers a major tip of the hat to the owners of the Ben Lomond Market for coming up with the job for Mr. Thiermann after hearing of his situation.

The grocer's doing so demonstrates what we often say about America's independent grocers -- that they survive and thrive in the U.S. food and grocery retailing sector in large part because they focus on being an integral part of the communities where they operate their stores. They focus on the local -- local customers, products and issues. Ben Lomond Market, in hiring Ian Thiermann demonstrates that independent grocer spirit in spades.

The grocer also demonstrates that the community focus we describe extends far beyond only selling groceries.

We wish Mr. Thiermann all the best in his new job. And we think he will be a great asset to the market, its owners, and its customers.

Wednesday, February 18, 2009

Oscar Night Marketing: Fresh & Easy Scores A Gold With Just Out Academy Awards Night Tie-In News Release

Tesco's Fresh & Easy Neighborhood Market, which just happens to have one of its small-format, convenience-oriented, combination grocery and fresh foods stores located on Hollywood Blvd, in Hollywood, California, just down the street from the Kodak Theatre where the Academy Awards ceremony will be held and telecast from this Sunday night, just issued this press release:

Title: The Glitz and Glam of Hollywood on a Budget:
Fresh & Easy Shares Creative Party Ideas for the Movies' Biggest Night

Click here to read the full release.

We've been critical of many of the grocery chain's marketing communications-oriented press releases in the past, on the grounds of at times not containing any news, of being mundane, and of poor timing, along with a few other problems.

But we think Fresh & Easy did well with this one. It's creative: Carrie Wick, the west coast publicity director for Fingerprint Communications offers some "out of the box" and fun ideas and tie-ins between Fresh & Easy food and grocery products and the Oscar telecast.

She also offers some creative and inexpensive decor ideas -- value -- for people at home watching the awards show. Ms. Wick also focuses the Oscar night food menu on value, something that's a must for most consumers right now.

Additionally, the ideas and suggestions in the release are done with a sense of fun, which is just what people want to have watching the awards show together at home.

Lastly, the overall key theme of value (good timing) doesn't get in the way of also suggesting fun. In fact, Ms. Wick's suggestions do a pretty good job of creating the impression that inexpensive entertaining can be fun.

The timing of the release by Fresh & Easy also is good, in our analysis and opinion. Coming out today allows a couple to three days to generate media attention on the release. But if it came out Monday that might have been too early to hit the Oscar Night editorial news cycle. Of course, as with a movie, the real reviews for the press release will be if it gets some decent play, particularly in the consumer-oriented media in Southern California. We think it just might.

We may have a bit more to say later...

Individuals, Society, Business, Grocery Retailing & More: 'Tweetminister,' 'Tweet Congress' and the Rise of 'Tweetocracy'

Since Tesco's Fresh & Easy Neighborhood Market is a British creation (Tesco is based in the United Kingdom and has brought many of the ways of British food and grocery retailing with it across the pond in its operation of Fresh & Easy), and since -- as we've written about in a number of posts (see the links at the end of this piece) -- Fresh & Easy has a site on the social networking site (here), combined with the fact that Fresh & Easy Buzz has its own site on Twitter, we're going to make an editorial assumption and judgement that our readers might have some interest in two things -- the United Kingdom and the Twitter social networking site.

Now having made this assumption -- or as some might be want to suggest having merely attempted to find a Tesco Fresh & Easy and Twitter angle because we just want to share something we've recently became aware of with our readers -- we would like to introduce you to an interesting new Web site we recently discovered via a post in the Springwise newsletter.

The new Web site, 'Tweetminister," describes itself as "the place where real life and politics 'tweet.'" The Web site is a clearing house for members of British Parliament who "tweet," Twitter-talk for making real time posts about what they are doing, where they are, what they are reading, ect. on the micro-blogging, social networking site.

A potential problem: Twitter limits "tweets" to only 140 characters, which has us thinking it must be extremely difficult for the politicos to compose a "tweet." After all, if you've ever watched Britain's MP's in action in Parliament, you know brevity isn't something they regularly practice, as is the case with members of the U.S. Senate. But something tells us many of the PM's staffers are doing the "tweeting" for them.

We won't go on about the "Tweetminister" site. Rather, take a look at it here. It communicates all of the "twittering" MP's "tweets" in real time, which is an interesting feature.

Not to be outdone, Britain's Prime Minister's (Gordon Brown) office has its own site on Twitter, "10 Downing Street," here. Come to think of it -- "Tweet" actually sounds a bit British, but Twitter is based in San Francisco, California USA. [Note to the Obama White House: Why in the world isn't there a "White House" Twitter site yet. After all, social networking sites (including Twitter), which you folks used so well, played a huge part in the successful "Obama For President" campaign? Is Gordon Brown more social networking savvy than Barack Obama?]

The American side of the pond: 'Tweet Congress'

Now, speaking of those U.S. Senators we mentioned above -- did you really think we would leave the American angle out of this equation, that special U.S.-British relationship and all? --there's also a fairly new Web site called "Tweet Congress," where you can track what those members of the U.S. House of Representatives and U.S. Senate who "tweet" are "tweeting" about, and do so in real time, just like at "Tweetminister."

For example, as we write this, Republic Congressman from Southern California Dana Rohrabacher "tweets:" Just got out of Afghanistan; met old friends who worked with me in past battles against Soviet invaders and Taliban lunatics." Who would have know the Congressman was out of town, were it not for Twitter.

And Congressman John Boehner from Ohio, who also happens to be the Republican Majority Leader in the House, has recently posted about the Employee Free Choice Act legislation and its "Card Check" provision, legislation that likely will be debated in the House of Representatives later this year "tweets:" Support for 'card check' dips as public awareness grows@ .

Yes, Republican House Leader Boehner opposes the Employee Free Choice Act and "Card Check." [Read a recent piece we wrote about the Employee Free Choice Act, "Card Check" and organized labor and the food and grocery retailing industry at this link: Labor & Food Retailing: Kroger Co. Chains Sign New Contract With the UFCW Union in Vegas; What Happened to the UFCW Tesco Fresh & Easy Campaign? ]

You can explore "Tweet Congress" and all it has to offer here.

If nothing else comes of it, creating the "tweets" for the members of the U.S. Congress will be much more enjoyable for the scores of college-university student interns who work in the Capital Hill, Washington, D.C. offices, usually without pay, of every member of the House and Senate each year, compared to the normal, mundane tasks of opening mail and answering phones usually given them. And of course, we bet those members of Congress who have created some of their own "tweets" rather than delegating completely to staffers and interns are, like most Twitter users, hooked on "tweeting."

E. Pluribus Twitterdom: Grocers, politicians, citizens and all

At the end of this post (below "Reader Resource") we include links to a few of the recent pieces we've written and posted about the micro-blogging, social networking site In those posts we've discussed, among other things, how Twitter is a template in which different users -- individuals, businesses (including grocers), governments, non-profit groups and others -- can adapt the site to their specific needs and uses.

If you spend some time going through Twitter, you will discover this fact in no time flat. People from all walks of life use the site. Businesses ranging from convenience store chain 7-Eleven (and Tesco's Fresh & Easy), to mom and pop dry cleaners, are using Twitter. Newspapers, magazines, blogs (like Fresh & Easy Buzz) are one of the fastest-growing user segments of the micro-blogging social networking site. Add to that non-profit groups, community and neighborhood organizations and more. And individuals are the biggest users of Twitter.

This is the template aspect of Twitter -- all kinds of users, using the site in different ways. It seems like each week we discover people using Twitter in new and different ways. It's a template in which an ever-evolving combination of existing and new users are creating unique ways to adapt the site to what they desire. And among the fastest-growing user segments of Twitter is business, which is using the site as both an informational-communications space as well as for marketing purposes.

As the two sites, "Tweetminister" and "Tweet Congress," demonstrate, Twitter also is a force for greater citizen participation in government. Who would have thought just a couple years ago that British PM's and U.S. Members of Congress would be letting their constituents know in real time what they are up to, and what their thoughts are? And in times like the present, with the global recession and financial-credit crisis, citizens need to know more than ever what their representatives are up to. Increasingly you can ask them via a "tweet," as long as you use Of course, some might say it's all TMI -- too much information.

We call this new phenomenon -- the direct communication between legislators and citizens via Twitter -- "Tweetocracy." And thus we suggest the U.S. and the UK are on the road to becoming "Tweetocracies." We also use "Tweetocracy" in the larger sense, as suggested in the post title, for how Twitter is democratizing numerous aspects of life, including business, politics and more. Remember you read those two terms here first. (And, if you have seen the terms used used in print before, do let us know. We couldn't find any such usage of "Tweetocracy" in our search to see if the term has been coined yet.)

Reader Resource:

A selection of recent, related posts from Fresh & Easy Buzz:

>January 25, 2009: Twitter Me This Batman: Are You Using Twitter? If Not, You Probably Should Be

>January 19, 2009: Sweet Tweets: Popular Web Site Picks Up Fresh & Easy Buzz's Buzz On Tesco's Fresh & Easy and; Adds A Little Buzz of its Own

>January 18, 2009: The UK Telegraph Reports on Tesco Fresh & Easy's Use of Twitter.Com; Since Fresh & Easy Buzz Was First to Report it, We Offer Some Added Value

>January 26, 2008: When Social Media Goes Bad - Maybe? Tesco and Waitrose Store Workers in the UK Use Facebook Sites to 'Diss' Store Customers

>February 4, 2008: Social Media and Sense of Place: Phoenix, Arizona Fresh & Easy Market Site on; 'Kissmecait' Does Some Retail Anthropology & Geography