Wednesday, March 30, 2011

Two Weeks On: Tesco Launches New @UKTesco Twitter Feed Today

The Insider - Heard on the Street

Tesco, which owns El Segundo, California-based Fresh & Easy Neighborhood Market and is the leading food, grocery and general merchandise retailer in the United Kingdom where it's headquartered, today launched its @UKTesco customer care/customer service Twitter feed, which is something that should be of particular interest to Fresh & Easy Buzz readers who follow my columns.

Here's why: In my March 18, 2011 column - The Twitter Agenda: Tesco CEO Philip Clarke Meets With the Troops About Social Media - I talked in general about new Tesco CEO Philip Clarke's decision to make social media, particularly Twitter, an important part of the global retail chain's communications strategy.

In the column I also offered some specific discussion about a Twitter feed called @TescoStores, incorrectly reporting it was the property of Tesco, something I corrected in a follow-up column on March 22, 2011, which you can read here: In Twitter Veritas: Tesco CEO Philip Clarke Sets 'The Insider' Straight Via A Tweet.

In my March 18 column I also offered a prediction, saying Tesco would start posting tweets on @TescoStores no later than two weeks from March 18, 2011. Although I was incorrect about the still unknown ownership of the @TescoStores feed, I was right in terms of the timeline I offered in my prediction: Today's launching of @UKTesco is one day shy of two weeks from March 18, 2011. Launch date prediction: right on; name of Twitter feed launched, incorrect.

The story begins on March 18 when I wrote about a meeting CEO Philip Clarke, who took over as chief executive early this month from retired CEO Terry Leahy, held with executives and staffers at Tesco's UK corporate headquarters to discuss the increased use of social media and social commerce at the company.

As I noted in the column and in the March 22 follow up, since taking over as CEO Clarke has made the use of Twitter at Tesco and by Tesco executives a centerpiece of his first month as head of the third-largest global retailing company in the world. Fresh & Easy Buzz first reported on the development in a story in February. See - February 24, 2011 Dormant No More: Fresh & Easy Neighborhood Market CEO Tim Mason is Now Tweeting on Twitter.

The social media focus by Clarke, who launched his own Twitter feed in November 2010 and prior to taking over as CEO this month was head of Tesco's corporate information technology and European retail operations, is a good move by the Tesco chief in that, among other pluses, it serves to distinguish him right our of the gate from former CEO Terry Leahy, who although was far from anti-technology wasn't all that keen on using social media at Tesco, although the retailer did begin using it under Leahy's tenure.

Tesco's El Segundo, California-based Fresh & Easy Neighborhood Market has been using social media, including Twitter and Facebook, aggressively since early 2009.

As I wrote about on March 18 and March 22, Tesco has launched a number of specialty Twitter feeds (many in 2010) for its United Kingdom retail and related businesses, which comprises about 70% of total global sales, but had yet to operate a corporate or customer service type central Twitter feed. That's where @TescoStores came in.

But since @TescoStores doesn't belong to Tesco, as you can read about here, the company created @UKTesco to be its overall customer care/service feed for its United Kingdom operations.

And @UKTesco, although it's not @TescoStores, was launched today, one day under two weeks from March 18, 2011.

I'm told, without equivocation, that @UKTesco belongs to the United Kingdom-based retailer, as it says is the case in the very first tweet posted on the feed: "Welcome to the official Twitter account for Tesco customer care UK. If you've got any queries, let us know, we're here to help. via HootSuite."

But it probably wouldn't hurt Tesco to get the Twitter feed "verified" though, using Twitter's simple verification process. You know, just in case there might be a misunderstanding.

- The Insider

[Readers: Read 'The Insider's' past columns, including his news-breaking reporting and analysis on the Sprouts Farmers Market-Henry Farmers Market acquisition-merger, at this link - The Insider.

Friday, March 25, 2011

UFCW Union Local Sets Up Picket Line at Just-Opened Fresh & Easy Neighborhood Market Store in Modesto, California

The United Food and Commercial Workers (UFCW) union's UFCW 8-Golden State local, which represents unionized grocery store workers in parts of Northern California and in the Central Valley, today established an informational picket line at the Fresh & Easy Neighborhood Market store in the Oakmore Plaza shopping center at 1717 Oakdale Road in Modesto, California, pictured below on opening day, Wednesday, March 23. [See - March 23, 2011: Tesco Opens First Fresh & Easy Neighborhood Market Store in California's Northern Central Valley Today - in Modesto; and March 19, 2011: Preview: Fresh & Easy Neighborhood Market is Headed to Save Mart Supermarket's Hometown of Modesto.]

The picket line is and will be in front of the store, near the intersection of Oakdale Road and East Briggsmore Avenue, according to Jacques Loveall, the President of UFCW 8-Golden State.

A Fresh & Easy Buzz correspondent visited the store today and talked with the UFCW union picketers who were out front. They told our correspondent they will be at the store this weekend, when the Tesco owned non-union grocer continues its grand opening at the first Fresh & Easy market in Modesto.

Among the special activities planned at the Oakdale Road Fresh & Easy store this weekend include: food sampling, music, giveaways, and balloon artists and face painting for the kids. El Segundo, California-based Fresh & Easy Neighborhood Market has been offering these activities at the seven fresh food and grocery markets it's opened so far this year in Northern California.

The informational picket line at the Modesto store is a continuation of what UFCW 8-Golden State has been doing at selected Fresh & Easy stores in the Fresno and Bakersfield metro regions in the Central Valley. Members of the local have been staffing the picket lines at many of the 14 stores in the two metro areas (seven stores in each respective region) on a regular basis since the first units were opened in Bakersfield an Fresno. [For example, see - January 14, 2010: UFCW Union Launches Informal Boycott of Fresno CA Fresh & Easy Stores Today; One Day After the Stores Open.]

UFCW 8-Golden State doesn't represent unionized grocery store employees in the San Francisco Bay Area, where the majority of the seven Fresh & Easy stores opened thus far are located.

Union grocery store workers in the Bay Area region are represented by UFCW Local 5, which has had informational picketers at some of the Bay Area stores but not at every store every day. [For example, see - March 9, 2011: Northern California Launch: Tesco's Fresh & Easy Neighborhood Market Opens Store in Pacifica Today. However, Local 5 is gearing up for a major effort targeting Fresh & Easy store workers in the Bay Area, according to our sources.

We first reported in 2010 that this would occur when the first Fresh & Easy markets opened in Northern California in 2011.

We also reported last year that once Fresh & Easy opened its first store in Modesto, which is the grocer's first unit in the Northern Central Valley, UFCW 8-Golden State would establish an informational picket line at the store right away. The Modesto store opened on Wednesday. The union local established its informational picket line today, two days later.

The UFCW union has been trying to organize Fresh & Easy Neighborhood Market store-level workers since the first stores were opened in November 2007.

This year is a big one for the UFCW union and unionized grocers in California: The union's contracts in both Southern and Northern California expire in 2011.

Contract negotiations have already started between the UFCW locals in Southern California and the region's top-four unionized chains - Kroger-owned Ralphs, Safeway's Vons, Albertsons and Stater Bros. -where the current contract now has expired.

Later this year the Northern California union locals will begin contract negotiations with the region's "big three" unionized chains: Safeway Stores, Save Mart Supermarkets and Raley's.

The way the negotiations work is that once contract agreements are reached between the union and the major chains listed above, the state's other smaller, unionized chains and independents adopt essentially the same contract.

Although the current union-retailer contact in Southern California has already expired, the UFCW and the region's "big four" chains agreed earlier this month to continue working under the existing contract until the end of this month, as they continue negotiations. At the end of March, if the union and the four grocery chains don't reach agreement on a new contract - which seems likely will be the case - the two parties could extend the period in which employees would continue to work under the terms of the old contract. Or, the UFCW and its members could decide to strike, which neither party at present wants to see happen, according to both UFCW representatives and sources we've recently talked to at the chains.

The market share-leading grocers in Modesto are union. For example, the two leading food retailers in Modesto, Save Mart Supermarkets, which is headquartered in the city of 205,000, and Raley's, which is based in nearby West Sacramento, are both unionized and UFCW affiliated.

Save Mart has seven stores in its hometown of Modesto - five Save Mart banner supermarkets, one Food Maxx discount warehouse store and a Maxx Value Foods discount supermarket. Raley's has four union markets in the city.

Both Save Mart and Raley's have union supermarkets located about a half mile from the Fresh & Easy store at 1717 Oakdale Road, where the UFCW local has set up the picket line.

Another Modesto-based chain, 8-store Cost Less Foods, is also union. Cost Less has three stores in Modesto. Safeway, which has just one supermarket in Modesto, is also union.

The seven Save Mart, four Raley's, three Cost Less stores and Safeway store represent about 55 60% of total food and grocery sales in Modesto, according to our research.

The major non-union food and grocery stores in Modesto are: Walmart (a supercenter and a discount format store), Trader Joe's (one unit), Winco Foods (one store), Grocery Outlet (one store) and the Fresh & Easy market at 1717 Oakdale Road. There are also a number of unionized and non-unionized independents in Modesto.

The reactions by shoppers to the UFCW union's pickets at the Fresno and Bakersfield stores have been a mixed bag. Some consumers have stopped shopping at the stores at the urging of the union representatives. But, based on our multi-year research and reporting, the picketing hasn't been a key deciding factor regarding why consumers have chosen or not chosen to shop at the Fresh & Easy stores in the two Central Valley regions. What we've found instead is that in making their decisions to shop at Fresh & Easy in the regions, basic criteria - service, price, selection - are at the top of the list, while the union issue is either far down in the decision-making process or not on shoppers the criteria list at all.

Save Mart Supermarkets is headquartered in Modesto and the chain's majority owner, chairman and CEO, Bob Piccinnini, lives in the city, where the grocer is one of the city's major employers and leading contributor of money and other efforts to the community - along with the fact Save Mart is the second-largest chain in Northern California and one of the "big three" the union has to negotiate with this year - there's a significant amount of pressure on UFCW 8-Golden State to keep pressure on non-union Fresh & Easy, which has three other stores planned in Modesto and next door Ceres.

Just like he said back when the Fresh & Easy stores opened in Fresno and Bakersfield, UFCW 8 Golden State President Loveall says the union local is asking the public not to shop at Fresh & Easy and to shop instead at unionized grocery stores in Modesto, such as those operated by Save Mart, Raley’s, Safeway, Food Maxx, Maxx Value, Cost Less and Rite Aid.

Further, as he said when Tesco-owned Fresh & Easy opened in Bakersfield and Fresno, Laveall has strong words about the chain, saying: "Tesco, which is Fresh & Easy’s parent company in the United Kingdom, is siphoning money out of our community. We are responding to that provocation. California has enough challenges without a foreign company coming in with substandard jobs that threaten good, local companies that bring value and good jobs to our community. It’s bad enough good American jobs are exported overseas at an alarming rate, now this global giant from the UK is coming to our country thinking they can take advantage of American workers on our own turf. We will not allow that to happen."

Tesco's Fresh & Easy has created about 2,800 jobs in its 122 California stores since November 2007, including about 162 positions at the seven stores it's opened in Northern California so far. Fresh & Easy has also created additional new jobs at its corporate headquarters in El Segundo, California and at its distribution center campus in Riverside County.

Tesco currently operates 171 Fresh & Easy stores in California, Nevada and Arizona. Each Fresh & Easy store employs 20-25 workers. All the store-level employees are part-time, accept for the store manager and in some cases the store team leads (like an assistant manager). Starting pay for non management employees at the stores is $10 hour. Tesco's Fresh & Easy pays 80% of the medical insurance premiums for all store-level employees who work 20 hours or more a week. Most workers work 20-32 hours a week, depending on the store location. The retailer also offers a 401k retirement program with a company match.

As we reported yesterday, Colorado and Arizona-based Sunflower Farmers Market, which like Tesco's Fresh & Easy Neighborhood Market is non-union, is opening a store in Modesto in October of this year. [See - March 24, 2011: Sunflower Farmers Market is Headed to Modesto as Part of Northern California Push.]

Sunflower, which operates 33 stores in Colorado, New Mexico, Arizona, Texas and Nevada, plans to open its first store in California in May. That store will be in Roseville, near Sacramento. We expect the UFCW union to add Sunflower Farmers Market to its list of non-union stores it wants to unionize.

But so far the UFCW has had no success unionizing Walmart, Trader Joe's, Whole Foods Market, Target, Sprouts Farmers Market and Tesco's Fresh & Easy, all which are non-union and all which are among the fastest growing food retailers in California.

And, you can bank on this: These fast-growing non-union food retailers and the pressures they're putting on the union supermarkets is a topic at the top of the "big four" chains' discussion list in the contract negotiations currently going on between the UFCW union locals and the grocers in Southern California, as it will be later this year when contract negotiations begin in Northern California between the UFCW and the region's "big three" unionized chains.

Related Stories

>Read our extensive reporting and analysis on the UFCW union-Fresh & Easy Neighborhood Market topic and issue at the following (click on) links - , , , .

Thursday, March 24, 2011

Sunflower Farmers Market is Headed to Modesto as Part of Northern California Push

Boulder, Colorado and Phoenix, Arizona-based Sunflower Farmers Market is headed to Modesto, where Tesco's Fresh & Easy Neighborhood Market opened its first store yesterday. [See - March 23, 2011: Tesco Opens First Fresh & Easy Neighborhood Market Store in California's Northern Central Valley Today - in Modesto.]

In our series last year (from April-to-December 2010) we reported that, in addition to Roseville and San Jose, one of the additional Northern California cities the 33-store farmers market style grocery chain was scouting for a store location in was Modesto, which is located in the Northern Central Valley.

Sunflower Farmers Market is opening its first store in Northern California, in Roseville near Sacramento, in May. The grocer previously planned to open what will be its Northern California flagship store in April. But it recently decided to do so in May instead. [See - September 22, 2010: Sunflower Makes Three: Sunflower Farmers Market's First Northern California Store Will Be in Roseville. Roseville is about 80 miles from Modesto.

Additionally, as we reported in the story linked above, Sunflower is planning a store in San Jose, which will be its first market in Northern California's San Francisco Bay Area.

Sunflower Farmers Market has now confirmed it plans to open a store in Modesto's McHenry Village shopping center (at McHenry and Briggsmore), in October of this year. The store is going into a building being vacated at the end of this month by Philips Lighting & Home, a retailer of home lighting and related products. Philips is moving to a smaller building in the same shopping center.

Sunflower Farmers Market this week posted the Modesto October 2011 opening date on its website. The McHenry Village address isn't listed on the website though. However, a Sunflower Farmers Market source confirmed the McHenry Village site for us this week.

In addition, McHenry Village's marketing staff ran a full-page ad in today's Modesto Bee, the daily newspaper in the city, in which it included a mention that Sunflower was opening as the food and grocery store anchor in the center in October, along with announcing the opening of two other new specialty retailers going into the center.

The 28,000- 30,000 square-foot building that will become a Sunflower Farmers Market in October has historically been home to grocery stores. Until closing in the 1970's a Lucky supermarket (pre American Stores and Albertsons Inc. days) operated in the building in McHenry Village.

In the 1980's a local chain, New Deal Markets, which no longer exists, put a store in what was then the vacant Lucky store building. New Deal, which at the time was owned by Canada's Provigo, operated the store for about two decades before closing it in the early 2000's. The family-owned lighting retailer took over the building a couple years after the New Deal supermarket was closed.

McHenry Village contains a wide variety of retail stores, shops and other businesses, including a CVS Pharmacy, a health foods store, numerous specialty, gift and clothing retailers, restaurants and cafes, a bank, travel agency, beauty salons, a medical office complex and other types of service businesses and commercial offices.

Sunflower Farmers Market will be the anchor tenant in what is Modesto's oldest major commercial shopping center (built in the 1950's), which before the Vintage Fair Mall was built in the city in the 1970's was Modesto's main shopping venue.

The Roseville store opening in May and the Modesto unit opening in October will be Sunflower Farmers Markets' first two locations in California.

The fast-growing farmers market style grocery chain operates 33 stores in Colorado, Arizona, New Mexico, Texas and Utah. Last year, when there were 30 stores, Sunflower president Chris Sherrell said the chain's annual sales were about $550 million.

Thus far 2011 has been a challenging period for Sunflower Farmers Market.

In January an employee of one of its stores in New Mexico was arrested, after an investigation by police, for putting semen into yogurt that was being sampled to shoppers in the store.

And on February 12, the co-founder and CEO of Sunflower Farmers Market, Michael Gilliland, resigned as CEO and chairman of the grocery chain's board shortly after being arrested in a police sting operation in Phoenix, Arizona, in which he has been charged with planning to have sex with an underage prostitute.

In the felony criminal complaint against Gilliland, the female police officer involved in the sting operation says he contacted her from an advertisement the police department placed on a website. The ad offered sexual services from a 17 year-old. After talking with the police officer who he thought was the 17-year old prostitute, the complaint says he arranged to meet the police officer at a Phoenix, Arizona hotel, and to have sex with her in exchange for $100. Gilliland was arrested, along with a number of other men targeted in the sting operation, before entering the hotel.

Gilliland has pleaded not guilty to the charges. His case is working its way through the court system in Arizona.

Gilliland resigned on February 12, 2011, just a couple days after he was arrested. He did so in part at the the urging of Sunflower Farmers Market's board of directors. The grocery chain's president, Chris Sherrell, was named acting CEO on February 12, a position he currently continues to hold.

In addition, Bennett Bertoli, a member of Sunflower's board of directors since the chain was founded in 2002, was elected chairman by the company’s board.

Sunflower's board sent out this news release about Gilliland's resignation and its naming of Sherrell as acting president on February 12, 2011, along with wiping out any traces of Gilliland's tenure as founder/CEO of the chain from its website and social media sites, which before February 12 contained links to numerous newspaper stories and magazine feature pieces about Gilliland.

Gilliland, who also is the co-founder of Wild Oats Markets, which grew to become the second-largest natural/organic foods chain in the U.S. after Whole Foods Market and was acquired by Whole Foods in 2009, was the face of Sunflower Farmers Market from 2002, when the chain was founded until he resigned in February.

For example, he was the go-to-guy for press interviews and other forms of gaining publicity for the grocery chain. He also received numerous awards, which Sunflower touted for publicity purposes, including being honored earlier this year by the Chamber of Commerce in his hometown of Boulder, Colorado, where he divides his time, along with living in Phoenix. (See the stories linked at the end of this piece for details.)

But since his resignation, and with good reason, Sunflower has played down Gilliland's past involvement in the chain, including being referred to by the chairman of the board, Bennett Bertoli, and acting CEO Sherrell, as a non-majority investor in the company, which apparently Gilliland has become after having his ownership diluted by the various multi-million dollar investments that have been made by outside investors over the last few years, which Sunflower Farmers Market has used to fuel its growth.

Sunflower's board and senior management has done a good job of handling Gilliland's arrest and situation, acting fast to gain his resignation, communicating it clearly, and then moving on.

That moving on includes continuing to grow its store count. The newest Sunflower store opened on March 16 in Salt Lake City, Utah.

And with the opening of its first store in California, in Roseville, in May, followed by the acquisition of the Modesto site, the grocer is demonstrating that despite a tough couple months thus far in 2011, it's moving forward under new leadership.

And, based on experience, research and reporting, its our analysis the McHenry Village location in Modesto is going to be a strong one for Sunflower Farmers Market. The McHenry and Briggsmore location is central, meaning the store will draw shoppers from various parts of the city of 205,000. Additionally, the shopping center and surrounding area has a high traffic count already and should grow with the addition of the market.

Further, Modesto doesn't have a major natural and organic foods-focused retailer, such as Whole Foods Market or a similar chain. Sunflower will be the first in the city, although many supermarkets and grocery stores like Safeway, Trader Joe's, Costco, Save Mart, Raley's, Fresh & Easy and others in Modesto offer significant selections of natural and organic products. The city also has a number of independent natural/health food stores, like the one in McHenry Village noted above.

But Sunflower's focus on natural and organic products, including offering an extensive selection of conventional and organic fresh produce, and doing so at discount prices, is a niche currently not being filled in the Modesto market, which is what we said last year when discussing the chain's opportunity were it to locate a store in the city - which it now plans to do not many months after we wrote about it - with the October opening of the Sunflower market in McHenry Village.

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Wednesday, March 23, 2011

Tesco Opens First Fresh & Easy Neighborhood Market Store in California's Northern Central Valley Today - in Modesto

A long line of shoppers waited this morning for the opening of the Fresh & Easy store in Modesto, California, as you can see in the photograph above, and in the next two photos below.

[Related Story: March 19, 2011: Preview: Fresh & Easy Neighborhood Market is Headed to Save Mart Supermarket's Hometown of Modesto]

A big crowd of shoppers braved the wind and rain this morning to attend the grand opening of Tesco's first small-format Fresh & Easy Neighborhood Market store in Modesto, California.

The store's not only Tesco's first Fresh & Easy market in Modesto (population 205,000), it's also the retailer's first store in the Northern Central Valley, which runs from San Joaquin County to Merced County, and is home to about 1.3 million people. (We'll explain why it's significant for Fresh & Easy to be opening its first store in the Northern Central Valley in an upcoming piece.)

The Modesto Fresh & Easy store, which opened this morning at 10 a.m. and is the first of four units Tesco thus far has planned in Modesto and nearby Ceres, is located in a shopping center at 1717 Oakdale Road (at Lancey Drive). The store is about a half mile from a Save Mart supermarket and an equal distance from a Raley's Superstore.

Prior to Tesco's Fresh & Easy acquiring the location in 2008 [See - November 6, 2008: Upcoming New Markets News: Tesco Will Open A Second Fresh & Easy Store in Modesto, California], the store was previously a supermarket operated by Modesto-based Save Mart Supermarkets. Save Mart closed the store a few years ago when it built and opened a larger and more modern supermarket half-a-mile away. Fresh & Easy renovated the building into the about 12,000 square-foot market it opened to a solid crown of shoppers this morning.

The opening of the Fresh & Easy store at Oakdale Road and Lancey Drive in Modesto was kicked off shortly before 10 a.m, when Modesto Mayor Jim Ridenour and the store's manager (both pictured here) cut the ceremonial ribbon, which was good news to the crowd waiting outside in the wet weather because they were allowed to enter the store shortly thereafter.

The store had a steady stream of shoppers following the 10 a.m opening. A Fresh & Easy Buzz correspondent who attended the opening said a second wave of shoppers showed up between 10:30 a.m. and 11 a,m., keeping the store's aisles fairly packed until noon, when a fresh batch of shoppers, many who work at the nearby businesses, showed up to take a look at Modesto's newest grocery store.

United Kingdom-based Tesco, which is the third largest retailer in the world, is the second major global chain to open a grocery store, Fresh & Easy, in Modesto in the last couple years.

In 2008 Walmart Stores, Inc., the world's largest retailer, opened its first Supercenter in Modesto. That supercenter, which has about 80,000-90,000 square-feet of selling space, also happens to be Walmart's first - and to date only we're aware of - hybrid supercenter located in what was an existing vacant big box building.

The supercenter, which is located on McHenry Drive in Modesto, previously contained a warehouse format supermarket and a drug store. Walmart converted the building into a "hybrid supercenter" in an existing building, something the Bentonville, Arkansas-based global-retailer is now doing elsewhere in California and in other regions in the U.S. The average new construction supercenter is about 170,000 square-feet, although Walmart is currently building some as small as 125,000-145,000 square-feet.

Walmart also has a discount format store in Modesto. The store isn't currently on Walmart's list of those in California it plans to expand and add food and grocery sections to, however.

Despite Walmart's opening of the hybrid supercenter in 2008 and now Tesco's entry into Modesto with its first Fresh & Easy store, the city's dominant food and grocery retailers remain locally-based.

The top grocer in the city of 205,000 is Modesto-based Save Mart Supermarkets, which has seven stores in Modesto - five Save Mart banner supermarkets, one Food Maxx discount warehouse store and a Maxx Value Foods discount supermarket.

Maxx Value Foods, a take off on its bigger cousin Food Maxx, is Save Mart's newest format. The Modesto headquartered grocery chain, which has 241 stores throughout Northern California, northern Nevada and as far south in the Central Valley as Bakersfield and about $5 billion in annual sales, converted a former Save Mart supermarket on Paradise Road in west Modesto into the Maxx Value Foods discount supermarket, which currently is the only one in operation. The format is a test for Save Mart and if it succeeds the retailer could convert some of its older, existing Save Mart stores located in lower income neighborhoods, which Paradise Road in Modesto is, into Maxx Value stores.

West Sacramento-based Raley's is Save Mart's leading competitor in Modesto. It has four stores, all under the Raley's banner. [ See - March 19, 2011: Preview: Fresh & Easy Neighborhood Market is Headed to Save Mart Supermarket's Hometown of Modesto.]

The big turnout at this morning's Fresh & Easy store opening was likely due to a number of factors, including the fact the grocer mailed its weekly ad flyer, which included a coupon good for $10-off purchases of $20 or more and another offering a free reusable canvas shopping bag for purchases of $10 or more, to homes throughout the immediate area, along with to those located in neighborhoods at least as far as two and a half-to three miles from the 1717 Oakdale Road store.

Additionally, Modesto has a very high unemployment rate. the city and Stanislaus County, which it's the county seat of, currently suffers from a joblessness rate of nearly 19%, compared to California's overall 12.4 unemployment rate.

The city and county also have among the highest housing foreclosure rates in the country. Stanislaus County has rated among the top five U.S. counties for residential foreclosures since 2008. The median value of a home in Modesto has dropped by about 40% since 2005.

As a result of these continuing economic struggles, a grocery store grand opening is the perfect venue for the unemployed - a decent outing without a ticket price - and for those looking for a good deal on groceries. A number of shoppers told our correspondent just that this morning.

Lastly, over the last few years grocery store openings have simply become rather popular outings, particularly for the people who live in the neighborhoods where the new stores open. After all, from sociological and anthropological perspectives, grocery stores are far more than merely places to buy food. Their "third places" in which much of the needs of societies and neighborhoods, along with individuals, are met.

Before and after: Pictured above is the inside of the Fresh & Easy store at 1717 Oakdale Road in Modesto on January 31, 2001. Below is the store this morning at the grand opening.

Walnut Creek

In addition to opening the store in Modesto today, Tesco also opened a Fresh & Easy market in Walnut Creek, which is in the eastern part of the San Francico Bay Area. Walnut Creek is next door to Concord, where the grocer opened a store last Wednesday. Walnut Creek is about 65 miles from Modesto.

There are now seven Fresh & Easy markets in Northern California, all opened between March 2 of this year and today. Four additional stores are scheduled to open in Northern California in April.

With the opening of its two newest stores in Modesto and Walnut Creek today, Tesco's Fresh & Easy now operates 171 stores in California, Nevada and Arizona. The majority of the stores, 122 units, are in California. Of the 122 California Fresh 7 Easy stores, 108 units are located in Southern California. In addition to the seven stores in Northern California, there are seven Fresh & Easy markets in the Bakersfield metropolitan region and seven units in the Fresno area.

[Photo credit: Fresh & Easy Buzz, March 23, 2011.]

Related Stories

Readers: See (click on) the following links - , , , , , , - for related stories in Fresh & Easy Buzz.

Tuesday, March 22, 2011

In Twitter Veritas: Tesco CEO Philip Clarke Sets 'The Insider' Straight Via A Tweet

The Insider - Heard on the Street

In my most recent column - March 18, 2011: The Twitter Agenda: Tesco CEO Philip Clarke Meets With the Troops About Social Media - I said the Twitter feed @TescoStores belonged to United Kingdom-based global retailer Tesco, which owns El Segundo, California-based Fresh & Easy Neighborhood Market.

In the column I also asked the question: When will Tesco start tweeting on @TescoStores?

I asked that question because the only two tweets on the feed are from April 2009, when it was set up.

I then offered a prediction that the retailer would start tweeting on the feed no later than to weeks from March 18.

I was wrong on two counts.

First Count: The @TescoStores Twitter feed doesn't belong to United Kingdom-based Tesco, according to CEO Philipe Clarke, who said so in a tweet today.

Second Count: Since I was wrong on the above (the premise), it then follows that my prediction that Tesco will tweet on @TescoStores no later than two weeks from March 18, 2011 is also incorrrect.

Below is today's tweet from Tesco CEO Philip Clarke, addressing @TescoStores:


March 22, 2011:"Sorry been rather quiet last few days - family illness. Been asked why @tescostores not tweeted much: would you believe it isn't ours! via Twitter for BlackBerry®"

Being the competitor I am, I suppose at the least I still have a shot at the prediction part of my March 18 column being correct, if the person who owns @TescoStores contacts CEO Clarke post-haste and offers to turn over the Twitter feed to Tesco, on the condition the retailer start tweeting on it no later than two weeks from March 18, 2011. Come to think of it, if that were to happen, it also would serve as "column-extender" (think editorial Hamburger Helper) for 'The Insider.'

Silver linings

Despite being wrong on the two counts detailed above, it's good to know my column is being read by people close to Clarke, and that those folks, after reading my March 18 piece, asked the Tesco CEO a mere couple days later "why @TescoStores (has) not tweeted much."

Additionally I'm glad Philip Clarke addressed the topic of my March 18 column in his tweet today. Why? I'd rather make a mistake and learn the why rather than be right but never learn the correct answer.

Therefore I thank the CEO of Tesco for that, vis-a-vis his tweet today. And if the only entity that actually did the "asking" to Clarke was my Friday (March 18, 2011) column in Fresh & Easy Buzz, then I hope he got something more out of reading it, as I hope is the case for all who read it, than just my mistake.

Despite getting it wrong about @TescoStores belonging to Tesco plc, and thus having my prediction invalidated by the faulty premise, had I not done so it's possible we (readers and myself) never would have learned what we learned from CEO Clarke's tweet today.

So I'm actually happier than I normally would be to have been wrong in this particular instance because it's serving as a reminder or simple object lesson for me. That reminder: That as long as you're right most of the time, and in my columns I have been, then it's OK to be wrong every so often - particularly if you take a bit of a risk in being so - as long as you admit your mistake, set the record straight (which I'm doing in this column) and learn from the experience, even if its a minor mistake and experience like a column about Twitter feeds and related subjects.

After all, there's always a silver lining in life and in business, if you allow yourself to be open to discover it and learn from it. I want use that worn out phrase "teachable moment," however, even though I suppose I just did.

Meanwhile, to the owner of @TescoStores on Twitter, you can tweet your offer to give the @TescoStores Twitter feed to Tesco CEO Philip Clarke at: @clarkeptesco.

And to the owner of the Twitter feed, I ask just one favor: If CEO Clarke is interested, please make the offer to give him @TescoStores contingent on his agreeing to have Tesco post at least one tweet between now and no later than March 29 on it. After all, my two week prediction clock, which began on March 18, is ticking away. Let's be clear though: It's not like I'm begging.

- The Insider

Related Column: March 18, 2011: The Twitter Agenda: Tesco CEO Philip Clarke Meets With the Troops About Social Media

>Read past columns by Fresh & Easy Buzz's 'The Insider' columnist at the following link -

That's Amore: Fresh & Easy Neighborhood Market Introduces New 'Gourmet' Frozen Pizzas For $3.99 Each

Private Brand Showcase

In Napoli where love is king
When boy meets girl here's what they say...

When the moon hits your eye like a big pizza pie
That's amore
When the world seems to shine like you've had too much wine
That's amore

- That's Amore: By Dean Martin
[Click here to listen to "That's Amore" while you read the story]

Tesco's Fresh & Easy Neighborhood Market is introducing a new line of frozen artisan Italian pizzas under its 'fresh&easy Gourmet' brand, which the grocer debuted in January of this year. [See - January 21, 201: Tesco's Fresh & Easy Neighborhood Market Introducing New 'Gourmet' Private Brand; and February 8, 2011: Private Brand Showcase Déjà Vu: Fresh & Easy Neighborhood Market Announces its New 'Gourmet' Brand.]

There are three SKUs in the new frozen Italian pizza line - Margherita, Four Cheese and Pesto & Arugula.

According to John Burry, the chief commercial officer (head of buying and merchandising in U.S. industry terminology) for United Kingdom-based Tesco's Fresh & Easy Neighborhood Market, the fresh&easy brand Gourmet pizzas, which were created by the grocer's in-house chefs, "are handcrafted in Visso, an Italian village just outside Rome known for its extremely pure water from Monti Sibillini National Park . The dough and sauce are made on-site by the pizza maker who gives the pizzas a traditional, rustic Italian crust by double-proofing the dough and baking the pizzas in a stone oven," Burry says.

Margherita is the classic Italian pizza variety, made with just crust, tomato sauce or marinara, mozzarella cheese and fresh basil. It's often called the 'Italian Flag" because when prepared, most famously in Italy's Neapolitan region, its colors mimic that of the national flag. The fresh&easy Gourmet frozen pizzas uses just those ingredients, keeping to the traditional Italian recipe.

The fresh&easy Gourmet Four Cheese Pizza also follows a traditional Italian recipe, using mozzarella, edamer, emmanthal and gran moravia cheese, along with Italian balsamic vinegar from Modena.

The Pesto & Arugula Pizza is modeled after a popular variety in Italy's Liguria Region, which is famous for its pesto. The variety contains basil, crushed garlic, grated hard cheese, pine nuts and olive oil. All of the ingredients are from Italy.

The three varieties are also very popular in the United States, where over the last few years many consumers have been trading-up to higher quality premium pizzas, making a choice of quality (smaller pizzas) over quantity, huge and inexpensive belly-filler pizza pies that use inferior ingredients, including in some cases artificial cheese.

All three varieties of the fresh&easy Gourmet brand frozen Italian pizzas, which based on their size are designed to serve two or three people (depending on appetites of course), sell for an introductory price of $3.99 each. (More on that below.)

The Italian pizzas contain no artificial colors or flavors, high-fructose corn syrup or added trans fats.

The introduction of the fresh&easy Gourmet premium frozen Italian pizzas is the latest example of what we first identified - correctly so far - in late 2010 as a major new private brand development trend at Tesco's Fresh & Easy, which is a focus on creating and launching more upscale, premium, specialty, gourmet and natural/organic types of products than it has in the past. [See - December 23, 2010: New Items Show Fresh & Easy Neighborhood Market's Niche-Specialty Category Private Brand Development Focus; and December 13, 2010: House (Sparking) Cider Rules at Fresh & Easy Neighborhood Market, for examples of our thesis.]

We've tied this flight-to-quality and niche-oriented product private brand developmental trend at Fresh & Easy Neighborhood Market in part to the Tesco-owned fresh food and grocery chain's need to increase its margin from what's currently a negative-38% to in the plus category. Theoretically at least, premium and gourmet types of private brand products generally allow a retailer to take a higher margin because consumers are willing to pay more for the quality items. Therefore, following that notion, if a retailer offers - and sells - enough higher-end specialty food items, at higher gross margins than it can get on everyday grocery items, it's overall profit margin should eventually rise.

Additionally, specialty and premium-oriented foods under a retailer's private brands - think Trader Joe's - can help a retailer create a niche among shoppers, along with over time developing loyalty from consumers because they like the retailer's brands - Think Trader Joe's again - and products under those brands, and therefore will become regular customers of the retailer's stores.

It's our analysis that all three of these things are the main drivers of Fresh & Easy's current focus on developing more niche-oriented specialty, premium, gourmet, healthy and natural types of private brand items.

Prices at $3.99, the fresh&easy Gourmet artisan Italian Pizzas should sell well, since the everyday price point is considerably lower than similar offerings of similar sized pizza's by brands like Wolgang Puck and California Pizza Kitchen. Retailer's like Trader Joe's, Safeway and others already offer similar artisan pizza's in their stores.

Pricing: Food for thought

The $3.99 price point is excellent. However, considering the ingredients for the frozen artisan pizzas come from Italy, where the pies are also made by hand, and adding in the cost of shipping the pizza's from Italy to California in a frozen state (have you seen the soaring cost of fuel and ocean and air shipping recently?), we doubt Fresh & Easy's gross margins are where they should be on the items. And if you add in promotional pricing and discounting from customers using the Fresh & Easy coupons, the margin becomes even slimmer.

We've seen similar pizzas everyday priced for $4.99 - $6.99. We would go $4.99 each everyday on the items - then discount the pizza's every so often for $3.99 on ad.

In fact, it's our analysis that the $3.99 price-point is actually too low - and thus takes away from the premium quality positioning of the artisan pizzas. There's a psychology to price when it comes to specialty and premium food products. Priced too low consumers perceive the items as not gourmet. Too high, they just won't buy them, at least not in significant volume.

But at the current price of $3.99 each, although we haven't tasted the fresh&easy Italian pizzas yet, we're willing to say it sounds like it could be ... "An offer you can't refuse." And ... "That's Amore."

Related Stories

Readers: See and read the numerous past stories in our Private Brand Showcase feature at this link - .

Monday, March 21, 2011

Fresh & Easy Neighborhood Market Flooding its Northern California Store Neighborhoods With Margin-Busting Store Coupons

Tesco's Fresh & Easy in Northern California - 2011

Fresh & Easy Neighborhood Market is flooding the local neighborhoods where its opening its first stores in Northern California with its deep-discount store coupons, specifically the $5-off purchases of $20 or more vouchers, which if used by shoppers to buy the minimum purchase amount offer a healthy 25% savings, resulting in getting $20 worth of groceries for $15.

Tesco's Fresh & Easy is distributing the $5-off purchases of $20 or more store coupons at the Northern California stores in books of four (as pictured at top), with each of the four coupons good for one week. For example, the coupon book currently being distributed at the five Northern California stores the grocer has opened thus far this year contains four $5-off-$20 vouchers good for the following dates: March 14-20; March 21-27; March 28-April 3; and April 4-April 10.

Employees of Fresh & Easy Neighborhood Market are asking customers shopping in the Northern California stores to sign up for its "Friends of Fresh & Easy" e-mail promotional bulletin in order to receive the coupon books. However, the grocer is also distributing the coupon books to shoppers who don't sign up for "Friends of Fresh & Easy," which the retailer uses in a data-base marketing fashion to communicate with and send promotional item announcements to members once or twice a month. The "Friends of Fresh & Easy" bulletins also include an online discount store coupon.

Along with the coupon books, which contain one month's worth (4) of discount vouchers, Tesco's Fresh & Easy is including at least one store coupon - either a $5-off-$20, $6-off-$30 or $10-off-$50 version - in the weekly advertising circular it direct mails to households located around the Northern California stores, something it also does in all of its market regions in California, Nevada and Arizona.

So far this year Fresh & Easy Neighborhood Market has opened five stores in Northern California, in the cities of San Jose, Danville, Pacifica, Concord and Vacaville. On Wednesday the fresh food and grocery chain opens two new stores in the region. Those stores are in Walnut Creek and Modesto. (Click here to read our extensive coverage about Tesco's Fresh & Easy in Northern California - 2011.]

The coupons and profit/loss

We've reported on and written extensively about Fresh & Easy Neighborhood Market's use of the deep-discount store coupons, which offer shoppers 25% and 20%-off total store purchases if used to buy the minimum required purchase amount, since 2008. The discount coupons, which can be used on everything sold in the stores, are Fresh & Easy's primary promotional vehicle, along with its weekly advertising circular. Tesco's Fresh & Easy stores don't except manufacturer's cents-off coupons, like nearly all of its competitors do.

In October 2010 United Kingdom-based Tesco reported a mid-fiscal year loss for Fresh & Easy 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.]

Tesco has said it expects to report a full-fiscal-year loss of $250-$259 million for its El Segundo, California based chain, which is the same amount (loss) it reported for Fresh & Easy for the previous 2009/10 fiscal year, despite the fact sales at Fresh & Easy Neighborhood Market grew by 47% in the first half of fiscal-year 2010/11, compared to the same period in the previous year, largely as the result of new store openings. Tesco's 2010/11 fiscal year ended in February. It will report its interim 2010/11 fiscal year financials in April 2011.

Our analysis: Thus far, based on the sales-to-profit/loss ration described above, Tesco's strategy in which it says as sales grow at Fresh & Easy losses will decrease has failed to occur.

Tesco also reported a 10% increase in same-store-sales for the half-year, and in December 2010 reported nearly the same figure for Fresh & Easy for its third quarter. For the 13-week period ended November 27, 2010, overall sales at Fresh & Easy Neighborhood Market grew by 38.5% (35% at constant rates), over the same period in the previous year, and same-store-sales, an even more important indicator for retailers, grew 9.8%.

Same-store-sales is a key metric for food and grocery retailers because it measures sales growth for stores opened at least one year, thereby factoring out sales due primarily to rapid new store expansion.

Tesco operated 155 Fresh & Easy markets in California, Nevada and Arizona at the end of its fiscal 2010/11 third quarter. Currently there are 169 Fresh & Easy stores.

These sales growth figures, particularly the same-store-sales increases over the previous like periods, should impact the amount of loss Fresh & Easy Neighborhood Market has for the 2010/11 fiscal year.

But Tesco, based on its estimate that the loss this year will be about the same as the previous year, despite the significant overall and same-store-sales growth, is essentially saying - without outright saying it - that it's strategy of achieving rapid sales growth primarily by opening numerous new stores isn't reducing losses at Fresh & Easy, in our analysis.

If the sales growth strategy was working, for example, we should have seen some reduction in the loss amount in fiscal year 2009/10 compared to 2008/09, which wasn't the case, along with seeing the same phenomenon when Tesco reported the mid-year 2010/11 loss of $151 million for Fresh & Easy, which actually was a higher mid-year loss than for the previous mid-year period, despite the significant sales growth in period-over-period sales. (See the October 10, 2010 story linked above for additional details.)

The coupons and margins

In its mid-year report in October 2010, Tesco also said its trading profit margin for Fresh & Easy Neighborhood Market was a negative-38%. To put this number in perspective, even the worst-performing and less-profitable grocery chains in the U.S. have a margin at least in the plus-high teens -to- plus-low twenties. Whole Foods Market, for example, has a plus-36% gross margin.

It's this particular metric - margin - where the regular and even chronic use of the deep-discount store coupons comes into play for Tesco's Fresh & Easy and it's goal to break-even by the end of its 2012/13 fiscal year, which is two years from now.

For example, unlike manufacturer's cents-off coupons, which retailers like Kroger, Walmart, Safeway, Target and others are reimbursed by manufacturers for accepting, the discounts from the Fresh & Easy coupons come directly out of the grocer's profit margin, meaning each time a shopper uses one of the coupons and the 15%, 20% or so is discounted from her purchases, that percentage comes out of Tesco's hide from a profit margin standpoint.

The regular use of the coupons - Fresh & Easy has had the deep-discount vouchers in regular circulation since 2008 on a near weekly basis - is, in our analysis, a significant contributor, along with a number of other factors, to Fresh & Easy's negative-38% margin, as we've discussed previously in Fresh & Easy Buzz.

The coupons and Northern California

Tesco had a solid opportunity when it launched into Northern California - a brand new market region for its Fresh & Easy chain - this month to hold back from distributing the store coupons and see if the stores could make it on their own without the chronic use of the deep-discount vouchers.

However, as evidenced by the coupon books and distribution of the coupons in the weekly advertising circulars, Fresh & Easy obviously had decided not to do so. Im fact it's doing the opposite - it's flooding the neighborhoods where the stores are with the coupon books containg four weeks' worth of the deep-discount vouchers.

That's good news for grocery shoppers, as the coupons go a long ways towards bringing down a grocery bill, particular if a customer buys close to the minimum amount required to use the coupon, such as $20 for the $5 vouchers. Fresh & Easy's average market basket size is about $20-$25, according to our research and reporting, which among other things suggests that on average shoppers using the coupons aren't buying much over the minimum purchase amount required to redeem the store vouchers.

Additionally, in the past Fresh & Easy has tried to get away from using the $5-off purchases of $20 or more coupons and instead focus on the $6-off-$30 and $10-off-$50 versions. However, it's found that, particularly in the case of the $10-off-$50 coupons, which it does use at times as online coupons, the use of the version by shoppers is much lower than the $5-off and $6 off versions.

The shoppers we've talked to in Northern California are pleased as punch to get the coupons and coupon books from Fresh & Easy, as is the case with shoppers in California, Nevada and Arizona, many of whom told the grocer when it tried to stop offering the discount vouchers for a few months in 2009 (margin reasons perhaps?) that without the coupons they were either not shopping at the stores at all or doing so much less frequently. Tesco's Fresh & Easy listened and resumed its regular distribution of the coupons, which its done every since, having at least one version of the discount vouchers out in circulation nearly every week since then.

At present, we don't see Fresh & Easy Neighborhood Market coming in with a margin higher than the negative-38% Tesco reported for the California-based chain in October 2010, when it reports its fiscal year financials later this year. If the margin is improved, we except it to be so by no more than a couple percentage points. If Tesco doesn't report Fresh & Easy's margin number for fiscal 2010/11, we expect it's because it's worse than the first-half negative-38%.

The coupons and breaking even

Meanwhile, the coupon books and coupons in the weekly advertising circulars, along with the online vouchers the grocer distributes every two or three weeks, are helping sales at the just-opened Fresh & Easy stores in Northern California, which on Wednesday will number seven units, with five more stores to come between now and the end of April - and more units after that.

Perhaps Tesco has a secret plan to wean shoppers off Fresh & Easy' shopper-delectable deep-discount coupons? Or perhaps it has a companion plan that will bring Fresh & Easy's margin up from that negative-38% number to something in at least the plus-teens by say mid-2012, which is something that if achieved would warrant not only a tip of the hat but also a pat on the back at the same time?

But right now, in our observation and analysis, we don't see anything Tesco's Fresh & Easy Neighborhood Market is doing from operations and mechandising standpoints - combined with the price pressures from its competitors in the highly-competitive markets in California, metropolitan Las Vegas, Nevada and metro Phoenix, Arizona where it has its 169 stores - that indicates there will be a significant upward movement in that negative-38% margin metric in 2011.

Related Stories

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

December 7, 2010: Tesco Reports Solid Third Quarter Same-Store-Sales Growth For Fresh & Easy Neighborhood Market

January 29, 2011: Fry's Food Stores Brings Back 'Competitor Coupon Match' Promotion; Accepting Fresh & Easy Neighborhood Market Coupons in Arizona

November 19, 2010: Kroger-Owned Fry's Store Coupon Jujitsu Ensnares Tesco-Owned Fresh & Easy Neighborhood Market in Arizona

January 18, 2011: Fresh & Easy Neighborhood Market Launches 'Extra-Low Every Day Low Price' Merchandising Program

November 19, 2010: Kroger-Owned Fry's Store Coupon Jujitsu Ensnares Tesco-Owned Fresh & Easy Neighborhood Market in Arizona

February 3, 2009: Competitor News: 'Grocer-Gone-Wild:' Arizona's Fry's and its 'Bring it On' 'Take All Competitors' (Including Tesco's Fresh & Easy) Store Coupon Move

May 20, 2009: Breaking Buzz: Tesco's Fresh & Easy Issues Another New Discount Store Coupon ($10-off $50 Though); We Told You the Coupons Would 'Be Back'

Also, see (click on) the following links - , , , , , and - for additional related stories.

Sunday, March 20, 2011

Just-Retired Tesco CEO Terry Leahy's First 'Angel' Investment is Online Educational Start Up Stuck On Homework

Terry Leahy (above) waves bye to employees at Tesco's corporate headquarters in Cheshunt, Hertfordshire, United Kingdom, as he leaves the office early and for the last time on March 3, 2011, after serving as CEO for 14-years. His parting words: "See you in the shops."

We said in our recent coverage about the retirement of Tesco CEO Terry Leahy, who stepped down less than three weeks ago after 14-years as the chief of the United Kingdom-based global retailer, the energetic 55-year-old wouldn't let the British sod get under his shoes for very long, and that he would be launching a new career as a private investor, including as an angel investor. Angel investors provide early funding to start up companies.

Well...Leahy, who's been doing his homework on potential companies to invest in since he announced in June 2010 he would retire from Tesco in March 2011, has already made his first angel-oriented investment. That investment is in a United Kingdom-based start-up online learning company, which describes itself as: "A revolutionary video based website designed to provide help for GCSE pupils when they get stuck on their homework." Think of it as and online tutor of sorts.

For those not familiar with its education system, students in England and other parts of the United Kingdom study General Certificate of Secondary Education (GCSE) over two years, from the age of 15, and take GCSE exams at the end of this period. These are the final years of their compulsory high school education. At this point, students can either leave school and get a job, or go on to further studies.

In contrast, in the United States students begin high school in the ninth grade (average age of 14-years-old) and are required to spend four years attending in order to graduate with a high school diploma, although in most states after age 16 a student can take a G.E.D. (General Equivalency) test, and if they pass it are awarded a G.E.D. high school diploma.

Start-up launches tomorrow, according to its founders, United Kingdom media veterans Helen Royle and Teresa Watts who, among other positions and places, have worked as executives at Britain's ITV and at the BBC.

According to Royle and Watts, the online tutor will operate on a paid subscription model. It's designed to assist GCSE students in England, Wales and Northern Ireland (to start) with their GCSE school curriculum in multiple subject areas, beginning with mathematics.

Neither Royle, Watts nor Terry Leahy have yet announced how much the former Tesco CEO has invested in or how much of an ownership stake his investment represents. That information might have to wait to be known if and when the online learning company goes public.

Having Sir Terry, who serves as an unpaid counselor to British Prime Minister David Cameron and is one the most well-known businessmen in the United Kingdom, backing the start-up is a major plus for the two entrepreneurs. After all, the energetic Leahy is very well connected.

The investment in the educational online start up company also fits with Terry Leahy's focus on education during his tenure as Tesco's CEO. Tesco runs extensive education programs, including in the basics, for its employees, along with offering funding for employees who qualify and want to extend their education at the university level.

As the head of one of the top five companies in the United Kingdom, Leahy also spoke out frequently about the country's national education system, particularly arguing for higher standards in its schools. The majority of employees retailers hire

We recently were told by a good source that in addition to making investments in companies at home in the United Kingdom and in Asia, Leahy, who was replaced as CEO by another Tesco veteran, Philpe Clarke, has been looking at potential investment schemes, including start up companies in the environmental, health, retail, education and other sectors, in the United States, home to Tesco's Fresh & Easy Neighborhood Market, which was Leahy's idea and was launched essentially as a start up in Southern California in 2006. The first Fresh & Easy stores opened in November 2007. There are currently 169 Fresh & Easy markets in California, Nevada and Arizona.

We just happen to know of a couple food and grocery retailing-oriented start ups in the U.S. that might possibly interest Sir Terry, although we have a hunch he's had his fill of those at least for a while. But just in case - our e-mail address is on the blog.

Related Stories

February 25, 2011: A Parting Gift: Retiring Tesco CEO Terry Leahy Exercises Options and Sells Nearly Three Million Shares of Company Stock

February 28, 2011: Changing of the Guard: Clarke Takes Over the Reins as Tesco CEO Wednesday

February 28, 2011: Big Day For Tesco CEO Terry Leahy: Retirement and A Birthday But No Break-Even For Fresh & Easy USA On His Watch

February 23, 2011: Incoming Tesco CEO Philip Clarke Visits America - And Fresh & Easy Neighborhood Market

Saturday, March 19, 2011

Preview: Fresh & Easy Neighborhood Market is Headed to Save Mart Supermarket's Hometown of Modesto

Tesco's Fresh & Easy in Northern California - 2011

Tesco's Fresh & Easy Neighborhood Market is preparing to open its first store, pictured above and below, in the Northern California city of Modesto on Wednesday, March 23.

The store, one of four units Tesco's Fresh & Easy currently has planned for Modesto and next door Ceres, is in a shopping center at 1717 Oakdale Road (at Lancey Drive) in Modesto, which has a population of about 205,000 residents and is located in the Northern Central Valley. [The photographs were taken by a Fresh & Easy Buzz correspondent on January 30, 2011. The store is completed and ready to open Wednesday.]

[See the following linked stories for details about the four Modesto and Ceres locations Tesco's Fresh & Easy has plans for stores at currently - May 10, 2008: New Markets: Tesco's Fresh & Easy to Move Into Modesto, California Market; Open its First Store in the City Early Next Year; November 6, 2008: Upcoming New Markets News: Tesco Will Open A Second Fresh & Easy Store in Modesto, California; March 31, 2009: Despite Having Postponed its Northern California Launch Indefinitely; Tesco's Fresh & Easy Planning Third Store in Modesto, California; and November 3, 2010: Tesco's Fresh & Easy Neighborhood Market Plans New Store in Northern Central Valley, California City of Ceres.]

Modesto is a little over an hour's drive from the San Francisco Bay Area city of Concord, where Tesco opened a Fresh & Easy store yesterday. [See - March 16, 2011: Fresh & Easy Neighborhood Market Opens Stores in Concord and Vacaville Today; Makes Five Markets in Northern California.]

Fresh & Easy Neighborhood Market acquired the Oakdale Road and Lancey Drive location in 2008, as we reported in this story - November 6, 2008: Upcoming New Markets News: Tesco Will Open A Second Fresh & Easy Store in Modesto, California.

The building was most-recently home to a Save Mart supermarket, which was the anchor retailer in the shopping center. However, the Modesto-based chain, which is the second-largest grocer in Northern California after Safeway Stores, Inc., closed it some years ago after building and opening a bigger and more modern supermarket a little over half-a-mile away at 2601 Oakdale Road (at Floyd).

Save Mart, which operates 241 stores in Northern California, northern Nevada and as far south as Bakersfield in the Central Valley and has about $5 billion in annual sales, is headquartered in Modesto, where it's one of the city's top private sector employers.

Save Mart Supermarkets is privately-held. It's majority-owner is Bob Piccinini and his family. Picinini is a Modesto native and resident. His father Mike and a partner, Nick Tocco, founded the chain in the 1950's, opening the first store in Modesto. In the 1980's, shortly after he became president of Save Mart, Picinini, who is chairman and CEO of the chain, bought out the Tocco family in order to have a controlling interest in Save Mart.

Save Mart had about 40 stores, all in and near Modesto, when Bob Piccinini took over the chain in the 1980's. Today the retailer's 240-plus stores are located throughout Northern California and northern Nevada, and in the Central Valley from Stockton and Modesto south to Bakersfield.

Four years ago Piccinini's Save Mart bought the Albertsons Northern California division from then-owner private equity firm Cerberus. The stores, which are located primarily in the San Francisco Bay Area but also in the Sacramento region and elsewhere in Northern California, were re-branded Lucky about a year later.

The Lucky name has a long history in Northern California, where supermarkets under the banner operated for decades. However, Albertsons Inc., which was acquired by Supervalu, Inc., Cerberus and CVS Pharmacy a number of years ago, acquired American Stores in the 1980's and a few years later changed all of the Lucky banner stores in Northern California to Albertsons. When Save Mart bought the division from Cerberus, rights to the Lucky name and brand were part of the deal. Save Mart decided to change all the Albertsons banner stores back to Lucky, rather than using Save Mart, because research found the Lucky brand still had significant equity among consumers in Northern California.

Save Mart is the dominant grocer in Modesto, both in terms of number of stores and market share. It operates five Save Mart banner supermarkets, a Maxx Value Foods hard-discount format supermarket (on Paradise Road in the western part of the city), which so far the only store in what is a smaller-sized version of its Food Maxx discount warehouse format, and one Food Maxx discount warehouse store in Modesto.

Another privately-held and fairly local (90 minute drive from Modesto) chain, West Sacramento-based Raley's, is Save Mart's leading competitor in Modesto.

The other leading major chain food retailers in Modesto are: Walmart (one supercenter and a discount format store), Safeway, Winco Foods, Trader Joe's, Costco, Grocery Outlet and 99 Cents Only, all with one store each respectively in the city.

Modesto also has numerous multi and single-store independents that operate stores of various different formats, from upscale (O'Brien's Markets; two stores) and mid-range (Sam's Food City), to hard-discount (Cost Less Food Co.; three units).

Additionally, a new independent and locally-owned grocer, Green's Market, which specializes in in-store prepared ready-to-eat and ready-to-heat fresh-prepared foods, opened a small-format store this month in downtown Modesto. The store also offers a selection of fresh produce, perishables and groceries, putting a emphasis on locally-produced, natural/organic and specialty-oriented products.

Raley's, which operates stores under the Raley's (superstores), Bel-Air, Nob Hill (supermarkets) and Food Source (discount warehouse format) banners, has four Raley's superstores in Modesto.

And like Save Mart, one of Raley's four Modesto stores is located about half-a-mile from the soon-to-be-opened Fresh & Easy store at Oakdale Road and Lancey Drive.

The photo above of the inside of the Fresh & Easy store at 1717 Oakdale Road in Modesto, which is set to open March 23, was taken by a Fresh & Easy Buzz correspondent on January 30, 2010, shortly after work began on the store's interior.

The Save Mart supermarket that's a little over half-a-mile from the Fresh & Easy location at 1717 Oakdale Road is about 40,000 square-feet. The nearby Raley's superstore is about 50,000 square-feet. In contrast, the Fresh & Easy market at Oakdale Road and Lancey Drive is, like all of the grocer's fresh food and grocery markets, 10,000-12,000 square-feet.

The Fresh & Easy store opening at 1717 Oakdale Road on Wednesday isn't the first location the grocer acquired in Modesto. Rather, as we were the first publication to report nearly three years ago in this story - May 10, 2008: New Markets: Tesco's Fresh & Easy to Move Into Modesto, California Market; Open its First Store in the City Early Next Year - that honor goes to the Sylvan Square shopping center in Modesto, where Tesco signed a deal to put a Fresh & Easy market in half the building, which is about 30,000 square-feet, that formerly housed independent grocer Michotti's Marketplace, which closed in early 2008.

Fresh & Easy originally planned to make the Sylvan Square center store its first unit in Modesto. However, that was back in the days when Tesco planned to launch into Northern California in early 2009 rather than early 2011. [See - May 10, 2008: New Markets: Tesco's Fresh & Easy to Move Into Modesto, California Market; Open its First Store in the City Early Next Year. Those plans have changed, however. Fresh & Easy decided last year to make the Oakdale and Lancey store its first in the city.

It will be interesting to observe how the two family-owned and locally-based chains, particularly Save Mart, which is Modesto born, bred and based, behave from a competitive standpoint when the Fresh & Easy store at 1717 Oakdale Road, which essentially will be in the middle of the Raley's and Save Mart stores, both being only about half-a-mile away, opens on Wednesday.

Save Mart Supermarket's is known to get very aggressive with new (and existing) competitors coming into its home-base Modesto territory. Among the defensive moves the local chain could make, for example, is to except Fresh & Easy's discount store coupons at its Oakdale Road Save Mart store, like Kroger-owned Fry's is doing in Arizona, as we detailed in this recent story - January 29, 2011: Fry's Food Stores Brings Back 'Competitor Coupon Match' Promotion; Accepting Fresh & Easy Neighborhood Market Coupons in Arizona.

As an example of Save Mart's competitive streak, in December 2010, when it converted a Save Mart store on Paradise Road in west Modesto into its first (and currently only) Maxx Value Foods discount supermarket, the grocer launched a price and promotional war campaign against a nearby store owned by Modesto-based multi-store discount grocer Cost Less Food Co., targeting the Cost Less store on Carpenter Road in Modesto, which is the retailer's closest unit to the Maxx Value store on Paradise Road. Modesto-based Cost Less Food Co. has eight stores. Seven units are in the Central Valley and one store is in Jackson, which is in Amador County in the foothills.

Save Mart's price war campaign started with a full-page advertisement in the local daily newspaper, the Modesto Bee. In the advertisement Save Mart published a price-comparison survery that stated its prices on a chosen market basket of groceries is cheaper than the same one at the Cost Less store, showing receipts for comparable items purchased at both stores in the ad.

A few weeks later Cost Less fired back, running not a one page but instead a double truck ad in the paper, offering a survey with twice the number of items Save Mart used in its market basket sample and showing that its Cost Less store on Carpenter Road is the cheaper of the two stores, based on purchases of like items at both stores.

These types of surveys depend on the items a retailer selects to include in the market basket. And since its a self-selection process it can be easily manipulated. Consumers should beware of such surveys and retailers should be cautious in using them.

In December Save Mart Supermarkets also started running (and continues to do so) a weekly full-page ad for its Paradise Road Maxx Value Foods store in the paper's Wednesday food section, which is something Cost Less has been doing for a number of years. The ad, just like Cost Less Foods' full-page advertisement, features about 10-12 "loss leader" food and grocery items offered at or below cost.

Two other possible defensive moves Save Mart Supermarkets could make vis-a-vis the nearby Fresh & Easy market at 1717 Oakdale Road would be to offer to match or beat all advertised and everyday prices at the Fresh & Easy, which is something Save Mart already does at its Food Maxx discount warehouse stores, where its policy is to meet or beat the prices of all its competitors.

Additionally, since Save Mart is headquartered right in Modesto (about a 10-minute drive from its own and the Fresh & Easy store on Oakdale Road) it can easily offer store-specific deals at the Oakdale Road store only, targeted to Fresh & Easy, like it's doing with the Paradise Road Maxx Value Foods store against Cost Less.

Or...Save Mart could nothing more than it's already doing, which in some ways would be bad news for Fresh & Easy since it would signal that Save Mart doesn't find the new entry owned by the world's third-largest food retailer, Tesco, a serious threat to its store half-a-mile away and its hometown dominance in Modesto.

Save Mart operates supermarkets and Food Maxx units in the Fresno and Bakersfield areas where Fresh & Easy Neighborhood Market has 14 stores, so the chain is familiar with the Fresh & Easy format and operations.

Raley's, in addition to being a superstore operator, is a pioneer and leader in ready-to-eat and ready-to-heat fresh-prepared foods merchandising, a category that comprises a significant portion of Fresh & Easy's offering.

Raley's introduced a new line of pre-packaged refrigerated ready meals and sides in October of last year, which it's added to its already extensive selection of packaged and bulk deli-style merchandised ready-to-eat and ready-to-heat fresh-prepared foods. [See - October 30, 2010: Raley's Launches New 'Raley's TO GO' Pre-Packaged, Refrigerated Fresh-Prepared Foods Line.] The new pre-packaged line was launched in part because of Tesco's moving into Northern California this year.

All of Fresh & Easy's fresh ready meals and sides are pre-packaged. We expect Raley's to defend its prepared foods turf at the nearby store once the Fresh & Easy market at Oakdale and Lancey opens. We also expect Raley's, like Save Mart, to defend its turf across all categories at the Modesto store.

It should be an interesting competitive triangle; the Fresh & Easy market at 1717 Oakdale Road, the Oakdale Road Save Mart store and the nearby Raley's superstore, all located about half-a-mile from each other. And it begins on Wednesday, March 23, when the first Fresh & Easy store in Modesto opens at 1717 Oakdale Road. Stay tuned.

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