Wednesday, February 23, 2011

Incoming Tesco CEO Philip Clarke Visits America - And Fresh & Easy Neighborhood Market

The Insider - Heard on the Street
The Changing of the Guard at Tesco

In October 2010, a few months after being named CEO-designate of Tesco on June 8, Philip Clarke (pictured at top), who officially takes over the corner office from Sir Terry Leahy at the global retailer's headquarters in Cheshunt, Hertfordshire, United Kingdom next week, said he planned to visit the U.S. and take a top-to-bottom look at Tesco's fledgling Fresh & Easy Neighborhood Market chain, which after opening two new stores in Southern California today now has 164 fresh food and grocery stores in California, Nevada and Arizona.

In a column on June 12, 2010, a few months before incoming Tesco CEO Clarke publicly mentioned his plans to visit Fresh & Easy's headquarters in El Segundo, California and a sampling of the stores in California, Nevada and Arizona, I suggested he do just that, asking in the column: Will Phil Clarke Shake Things up at Fresh & Easy Neighborhood Market USA When He Becomes Tesco CEO in 2011?

In another column, on October 2010 - Incoming Tesco CEO Philip Clarke Needs to 'Imagine' When it Comes to Fresh & Easy Neighborhood Market USA - I suggested not only how important such a visit, both for Philip Clarke's good as incoming CEO and that of Tesco and its Fresh & Easy chain's future (and for Tesco investors), but also offered a suggestion to Clarke about how he might approach the retailer's U.S. operations, as you will see if you read the column at the link above.

Following Clarke's signing off late last year on Fresh & Easy Neighborhood Market CEO Tim Mason's strategy designed to get Tesco's U.S. fresh food and grocery chain to break-even, there was much speculation in the press and among analysts, particularly in the UK, as to whether or not Clarke would make a trip to visit Fresh & Easy Neighborhood Market's operations and stores prior to becoming CEO in March. Clarke sparked some of this speculation himself when a couple UK publications he gave interviews to reported him saying he didn't need to visit Fresh & Easy in order to sign off on the strategy noted above.

But I, and Fresh & Easy Buzz, have said all along that Philip Clarke would be making such a trip to America before he takes over as Tesco's CEO.

And in my column today, while I can't report on the state of Mr. Clarke's "imagination" vis-a-vis Fresh & Easy USA (although I can report on a couple of his perceptions and emotions following the trip, which I will do at the end) - I can report that the Tesco CEO-designate has made a trip to the United States, including spending time at Fresh & Easy Neighborhood Market's corporate headquarters in El Segundo, along with visiting some Fresh & Easy stores in California, Nevada and Arizona, as well as a few stores operated by competitors.

Incoming Tesco CEO Clarke's just-completed trip to the U.S., which included an investor relations roadshow and visits with key Tesco investors in the U.S., began on February 6, when he landed in New York. He left the U.S. on February 15, arriving back home in the United Kingdom on February 16.

After spending a couple days in New York, Clarke and company hit Boston (on February 8); Omaha, Nebraska - home of major Tesco investor Warren Buffett - Denver, Colorado; and Sante Fe, New Mexico (all on February 9), where he and his team had a meeting with investors that afternoon. (Yes, there was some informal future Fresh & Easy market region scouting going on - but it wasn't the primary or even secondary reason for the visits to those cities, according to my sources.)

From New Mexico, Clarke and his team flew to San Francisco, arriving in the City-by-the-Bay on February 10. Tesco has two Fresh & Easy stores set to open soon in San Francisco, along with a third location waiting in the wings. And as Fresh & Easy Buzz has reported, the retailer is searching for additional locations in the city. [See - February 1, 2011: Tesco's Fresh & Easy Neighborhood Market Still Plans April-May 2011 Openings For First Two San Francisco Stores; and January 26, 2011: Fresh & Easy Neighborhood Market is On A Mission - In San Francisco's Mission District.]

After San Francisco, Clarke flew to Southern California, using it as his base from February 10 -to- 15 to visit Fresh & Easy stores in the region and in Nevada and Arizona, along with spending time at Fresh & Easy's corporate headquarters in El Segundo, where he met with Tesco director and Fresh & Easy Neighborhood Market CEO Tim Mason, who will get the added title of Tesco deputy CEO on March 1, and various executives and headquarters employees.

Philip Clarke also visited Fresh & Easy's distribution center and fresh foods production kitchen in Riverside Country, California on Valentine's Day (February 14), where among other activities he taste-tested a number of fresh-prepared meals and side-dishes sold in the Fresh & Easy markets. Word is the Chicken Fontina and Broccoli and Cranberry salad were his favorites.

Visits to some Fresh & Easy stores, and those of a few of its competitors in Southern California, metro Las Vegas, Nevada and metro Phoenix, Arizona, were high on Clarke's itinerary sheet during his visit, as I noted earlier.

Below are the highlights of some of incoming Tesco CEO Clarke's store visits during his time in the Western USA:

>Metro Phoenix, Arizona: On February 11, Clarke visited at least three Fresh & Easy markets in metro Phoenix, along with a Kroger Co.-owned Fry's supermarket and a store operated by locally-based grocery chain Bashas'.

>Metro Las Vegas, Nevada: The following day, February 12, Clarke visited a number of Fresh & Easy stores in metropolitan Las Vegas, Nevada, including the unit at Durango and El Capitan, where he admired the display of $10 per-dozen roses, which Fresh & Easy Neighborhood Market was advertising in its Valentine's day ad circular and promoting in-store for the holiday week. While in Las Vegas, Clarke also visited a few competitor's stores, according to sources.

>Southern California: Back in Southern California, the incoming Tesco CEO toured a number of Fresh & Easy Neighborhood Market stores in the region, where as of today Tesco operates 101 of its 162 small-format fresh food and grocery stores.

Among the Fresh & Easy stores Clarke visited in Southern California were the Manhattan Beach unit, which is the closest Fresh & Easy store to corporate headquarters in El Segundo - and the one Fresh & Easy CEO Tim Mason likes to take guests to visit. The store, which is one of the better-performing Fresh & Easy markets, also recently acquired a new produce department, along with a new floor. Word is Clarke likes the Manhattan Beach store, which is located just a head-of-lettuce-throw-away from a Trader Joe's market. [Take a look at the store, and the nearby Trader Joe's, here.]

Additionally, the soon-to-be-CEO visited a Fresh & Easy store in Burbank, which has an in-store coffee shop/bakery, something the grocer is testing. Interestingly, its also something Fresh & Easy Buzz first suggested nearly three years ago, and has mentioned since, that Fresh & Easy Neighborhood Market should include in some of its stores. The Burbank store (at Olive and Verdugo) opened on April 7, 2010. It was the 150th Fresh & Easy market opened by the chain. Since the Burbank store opened in April 2010, the grocer has opened 12 additional stores, nine of which have been opened so far this year.

Clarke also toured a Whole Foods Market store in Southern California while in the region; a visit he's reported to have proclaimed to be "quite fun," according to an excellent source.

Word is, not only was this the first time incoming Tesco CEO Philip Clarke has visited any of the Fresh & Easy stores, its also the first time the United Kingdom native, born and raised in Liverpool, England just like outgoing Tesco CEO Terry Leahy was, has visited grocery stores at all in the Western United States. Clarke has been with Tesco since 1974.

That Clarke hasn't visited the Fresh & Easy stores prior to his recently-concluded trip isn't all that unusual though. In his current positions as chief of Tesco's European and Asia retail operations and head of corporate IT, the soon-to-be-CEO wasn't directly involved in the planning, launching and operations of Fresh & Easy in the U.S. Instead, the U.S. chain, which was the idea of outgoing CEO Leahy, has been the focus of Tesco director and Fresh & Easy Neighborhood Market CEO Tim Mason, who as his CEO title reflects, has had charge of the launch and operations, reporting directly to Leahy.

Mason will be officially adding the title Tesco deputy CEO to his resume, along with retaining the Fresh & Easy CEO title, on March 11. However, he will report to incoming CEO Philip Clarke, who will have full responsibility for running Tesco's growing global retailing empire.

Tim Mason will add a couple new corporate duties to his management shopping cart though, taking responsibility for Tesco's branding and its climate change initiatives. Prior to coming to the U.S. to start up Fresh & Easy Neighborhood Market in 2006, Mason was Tesco's corporate marketing chief, as well as a member of the company's board, a position he retains.

The sixty-four-thousand-dollar question - actually the $1.5 billion question, since that's about what Tesco has invested in Fresh & Easy so far - about Philip Clarke's 10-day visit to the U.S. and his five days at Fresh & Easy Neighborhood Market's headquarters and in the stores is: What did he learn? And the logical follow on to the question is: Did what Philip Clarke learn make him feel more positive or less positive about Fresh & Easy's chances of breaking even by the end of Tesco's 2012/13 fiscal year? The 2012/13 fiscal year-end is a little over two years from now. Clark is one the record as saying Fresh & Easy will break-even by then.

It's really a rhetorical question though, as Philip Clarke is the only person who knows the actual answer to those two questions. And his answer, if asked such a set of questions, is rather predictable to me, as it should be - positive and affirmative.

But before he left Los Angeles to fly back to London on February 15, soon-to-be Tesco CEO Philip Clarke attended a "City Meeting" at Fresh & Easy Neighborhood Market's headquarters in El Segundo, California, not far from that Manhattan Beach store he visited and liked.

City Meetings, in Fresh & Easy-speak, are regular events in which the grocer brings in store management and others emplyees from various regions for an event/meeting in which all sorts of things are discussed, such as region and store performance, new company initiatives, new product introductions and the like. The meetings are colorful events. Fresh & Easy employees often dress up in outfits, tied to a particular theme, food is served, and various group activities and exercises are conducted. The meetings are designed to be informative - but also to be motivational and team building exercises.

As I mentioned in the beginning of my column, I can't personally speak to Philip Clarke's "imagination" vis-a-vis his trip to America and outlook about Fresh & Easy post-visit - nor can I speak to the two questions posed above except in the ways I have. All I can do is report what the soon-to-be Tesco CEO said before he departed for London from Los Angeles on February 15, 2011 after that City Meeting, which is: "Leaving LA for London after attending the city meeting at El Segundo - great trip, good insights and lots of ideas. Invigorating."

Tesco's current fiscal year ends on February 28, 2011. The retailer has said it expects to report a loss for its Fresh & Easy USA chain for the full fiscal year in the $250 -to- $259 million range, about the same loss as it reported in the prior fiscal year, despite adding considerable sales over the past fiscal year. In October Tesco reported a half-year loss for Fresh & Easy Neighborhood Market of $151 million. [See - October 5, 2010: Philip Clarke's Early Welcome to America: Tesco Logs $151 Million Half-Year Loss For Fresh & Easy Neighborhood Market.]

But now the hard work begins for Clarke, who's most-challenging inheritance from outgoing CEO Terry Leahy is Fresh & Easy USA. Clarke must take the good insights, wealth of ideas and invigoration he picked up during his visit to America and Tesco's U.S. outpost and use his imagination and other skills to turn them into a plan, along with Tim Mason and his team at Fresh & Easy, that results in break-even for the fledgling Fresh & Easy chain by the end of Tesco's 2012/13 fiscal year, which is something Clarke no doubt assured the Tesco investors he spent time with on the first leg of his U.S. trip is going to happen - and happen on time. And that's a "fresh" task for Clarke and team that isn't going to be "easy" to achieve.

Stay tuned.

- The Insider

Related Stories

January 27, 2011: Incoming Tesco CEO Philip Clarke Names Expanded Corporate Executive Committee

October 8, 2010: 'The Insider' - Incoming Tesco CEO Philip Clarke Needs to 'Imagine' When it Comes to Fresh & Easy Neighborhood Market USA

October 5, 2010: Philip Clarke's Early Welcome to America: Tesco Logs $151 Million Half-Year Loss For Fresh & Easy Neighborhood Market

October 4, 2010: Tuesday's Tesco Interim Report Offers A Road Map of Sorts For the Future of Fresh & Easy Neighborhood Market

September 13, 2010: 'The Insider' - Reading Philip Clarke's Tea Leaves: Might A Mixed Corporate/Franchise Model Be in Fresh & Easy Neighborhood Market's Future?

June 12, 2010: 'The Insider' - Will Phil Clarke Shake Things up at Fresh & Easy Neighborhood Market USA When He Becomes Tesco CEO in 2011?

June 8, 2010: Tesco CEO Terry Leahy Retiring; Philip Clarke New CEO; Tim Mason Named Deputy CEO But Will Remain Fresh & Easy Neighborhood Market Chief in U.S.

Read (click on the green link) past columns from 'The Insider' columnist at this link - .

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