Thursday, June 30, 2011

Tesco's Fresh & Easy Neighborhood Market Developing Loyalty Card Program it's Planning to Launch This Year

Breaking News & Analysis

Tesco's El-Segundo, California-based Fresh & Easy Neighborhood Market is working on a loyalty card program it currently plans to implement in its stores later this year, Fresh & Easy Buzz has learned.

The loyalty program is still being worked on at Fresh & Easy. But it's in its mid-to-final stages of development, according to our sources.

Neither Tesco or its Fresh & Easy Neighborhood Market have publicly mentioned or announced anything about the loyalty program or planned implementation this year. We're the first publication to break the news about the plans.

Those plans currently call for Fresh & Easy's loyalty program to be handled in house, where it's being developed with some outside help, rather than being developed, implemented and administrated by Dunnhumby, the UK firm now fully-owned by Tesco, which developed and administrates Tesco's Clubcard in the UK.

Dunnhumby's U.S. office, which is in Cincinnati, Ohio, can't develop, implement and administrate the loyalty card program for Tesco's Fresh & Easy Neighborhood Market because of its long-term partnership agreement and contract with Kroger Co., who's loyalty card program was developed by Dunnhumby, which is why the firm's U.S. office is in Ohio where Kroger is headquartered

Dunnhumby works closely with Kroger Co. in implementing and administrating its loyalty program, along with creating new marketing programs featuring Kroger's loyalty cards. Kroger Co. is the second-largest  retailer of food and groceries in the U.S. Walmart Stores, Inc. is number one.

The Fresh & Easy loyalty program isn't a direct version of Tesco's popular UK Clubcard. This is the case for a couple reasons, according to our sources.

First, the Dunnhumby partnership and contract poses a problem in terms of using resources from the Tesco program for Fresh & Easy's loyalty card program. But of course Tesco owns Fresh & Easy, so it would be hard to fathom it's not borrowing from Clubcard to a certain degree for Fresh & Easy's loyalty program.

Second, Fresh & Easy has an information technology (IT) system of its own that isn't directly compatible with Tesco's in the UK. Therefore, the software for the loyalty program at Fresh & Easy has to be made to be compatible with its legacy IT system, which has been since day one and continues to be a source of numerous problems for Fresh & Easy Neighborhood Market.

Not being able to use Dunnhumby - although that doesn't mean Tesco CEO Philip Clarke, Tesco group deputy CEO and chief marketing officer Tim Mason, who's also CEO of Fresh & Easy Neighborhood Market, aren't asking questions of or getting informal assistance from certain people at Tesco-owned Dunnhumby - to develop, implement and administrate the loyalty program is a major drawback for Tesco and its Fresh & Easy chain because the firm founded by Anita Dunn and Clyde Humby, who sold out their shares in the company to Tesco and retired, is one of the best around at customer response marketing and loyalty programs.

In fact, one of our sources who's familiar with Fresh & Easy's loyalty program tells us, from the source's perspective, the program lacks expertise from a marketing, information technology and software delivery standpoint. And when it comes to loyalty programs, IT, software performance and marketing are about all that matters. Therefore, in the source's view, Fresh & Easy's loyalty program is far from ready for prime time.

Tesco considered developing and introducing a loyalty program at Fresh & Easy Neighborhood Market last year. But it decided against it for a variety of reasons.

Two key reasons it decided against it last year were because CEO Mason decided sales and sales growth at Fresh & Easy was not at a point where doing so was feasible, and because one of Fresh & Easy's key marketing propositions since 2008 has been its low prices without having to use a loyalty card positioning and slogan.

The latter of the two remains a problem from a marketing positioning and communications for Fresh & Easy in introducing a loyalty program, even though the chain has been down-playing that particular positioning element for the last year or so.

But the issue doesn't even have to come up publicly to be a problem. Rather, the inherent problem is that using the low prices without a loyalty card theme and then introducing a loyalty card has the potential to create confusion in the minds of consumers about Fresh & East, despite whatever marketing and public relations spin the chain puts on the 180-degree change.

Read what we wrote about a loyalty card at Tesco's Fresh & Easy in this 2010 piece - February 2, 2010: Dunnhumby; Trial Balloons By Media; and Fresh & Easy's Loyalty Card Marketing Trap. We also offered this analysis in 2009 - December 8, 2009: Analysis: Why A Loyalty Club Card Program Makes Zero-Sense For Tesco's Fresh & Easy USA.

Depending on the nature and quality of the loyalty program Tesco's Fresh & Easy implements this year, if it doesn't change its mind about doing so which it's done before, it might not pose a problem from a sales standpoint to do so now - particularly to the extent it would have in 2009 or even last year - although based on what we've learned from our sources it doesn't appear the loyalty program is ready for prime time.

But the devil is in the details. For example, we wouldn't suggest the loyalty card be required to get promotional deals on items offered in the grocer's weekly advertising circular or for in-store specials, as commonly is the case with grocer loyalty programs.

Why: Because at Fresh & Easy's limited stage of development, along with its struggles to grow sales, limiting such promotions to loyalty card members only is a prescription for reduced sales, in our analysis, which is something the grocery chain can hardly afford to do. Using the card in this way also has the potential to serve as a barrier to new shoppers trying Fresh& Easy, in our analysis.

Fresh & Easy Neighborhood Market CEO Mason and Tesco CEO Clarke at present intend the loyalty card program to be a replacement for the grocery chain's chronic use of its deep discount (20%-25% off) store coupons - the $5 of $20/$25, $6 of $30 and $10 off $50 versions particularly - which as we've written extensively about are a major contributor to Fresh & Easy's negative-38% margin, which it reported for its 2010/11 fiscal year, ended February 26, 2011.

That margin metric hasn't improved over the last four months. In order for Tesco to break-even with Fresh & Easy by the end of its 2012/13 fiscal year, which is just 20 months away, it must increase the El Segundo, California-based chain's margin significantly - and fast.

Tesco currently has 176 Fresh & Easy stores - which average about 10,000-12,000 square-feet and offer a limited assortment (about 5,000 SKUs) of fresh foods including: produce, meats, perishables, frozen and ready-to-eat and heat fresh-prepared foods, along with beer, wine (liquor in some stores) and packaged food, grocery and general merchandise items - in California (127 units), Arizona (28) and Nevada (21)

Replacing the discount coupons, which are also a major contributor to the 11% comparable-store-sales growth Tesco reported for Fresh & Easy in April for the 2010/11 fiscal year, is far easier thought about and said than actually done though.

Fresh & Easy Neighborhood Market has been using the coupons chronically since 2008. It tried eliminating them in 2009, as we've reported, but after a couple months sales dropped so significantly without the vouchers it started issuing them again at the same regular pace, something Fresh & Easy has continued to do right on up to today. Take them away, in our analysis, and that double-digit comparable-sales-growth drops significantly.

So far this year, for example, the grocer has had one or more of the 20%-25% off coupons in distribution at virtually all times, issuing a new coupon online about every three weeks (with dates good for about three weeks), along with including paper coupons in its direct mailed advertising circulars nearly every week, plus issuing special coupon books regularly, which contain one month's worth (usually four) of coupons.

Fresh & Easy includes the online coupon in its quasi-loyalty "friends of fresh&easy" e-mail-based promotional program. Theoretically at least, the coupons are therefore only supposed to go to consumers who are signed up for the program.

But that's not the case because every time Fresh & Easy distributes a new coupon via "friends of fresh&easy," numerous Coupon Maven and Mommy Bloggers post the vouchers on their sites, where the discount coupons are available for download by anyone. Google "Fresh & Easy Coupon" and you will see what we're talking about. People also post the coupons on Twitter, Facebook and other social media sites. All that's required to obtain them is knowledge of how to use Internet, or knowing someone who does.

The store coupons serve a "pull" function for Fresh & Easy Neighborhood Market though, in which in addition to encouraging people to return to the stores and shop (by getting more coupons), they also are designed (at least in theory) to draw or "pull" new customer into the stores, which is something that's essential for Fresh & Easy a this stage in the game.

The coupons are designed to do this in an immediate - nothing to join; just clip a coupon and come on in and shop - and regular way; and to do it fast. In contrast loyalty programs take a long time to develop and aren't the best vehicle for "pulling" shoppers into grocery stores until hundreds of thousands of consumers join the retailer's loyalty program.

This is a factor Tesco and Fresh & Easy better think deeply about as they go forward with the loyalty program. They have to eliminate or only use the deep discount coupons promotionally, say once per quarter instead of all the time, in order to improve margins.

But we doubt if a loyalty card program will address or solve the coupon issue directly for Fresh & Easy. And its hard to believe the program we've learned about from our sources is something Tesco wants to unleash on the Fresh & Easy stores soon.

Wednesday, June 29, 2011

Union-Affiliated CtW Investment Group Calls For 'Objective and 'Independent' Review Of Tesco's Fresh & Easy Neighborhood Market

Tesco's 2011 Annual General Meeting (AGM)

The CtW Investment Group (part of the Change to Win coalition), which invests and manages money for a number of union pension funds in the U.S. including the United Food & Commercial Workers (UFCW) union, is calling for incoming Tesco plc board chairman Richard Broadbent to order and lead an "objective and independent" review of the United Kingdom-based global retailer’s U.S. Fresh & Easy Neighborhood Market chain.

The union-affiliated investment group's request came in the form of a letter it sent today to Broadbent, in advance of Tesco's Annual General Meeting (AGM), which is being held in Nottingham, UK on Friday.

Broadbent, who is currently deputy chairman at Britain's Barclays Bank, is set to join Tesco's board as a non-executive director July 2. He will become chairman on November 3, 2011, when current board chair David Reid retires. [See - May 11, 2011: Richard Broadbent to Join Tesco's Board July 2; Become New Chairman November 3.]

Since Broadbent isn't set to become chairman for four months, it appears CtW Investment Group is timing its letter to the not yet member of Tesco's board and its future chairman to Friday's annual meeting, where he is up for a vote by shareholders to approve his nomination to the global retailer's board of directors, which consists of an about 50%-50% split between Tesco senior executives, including CEO Philip Clarke and deputy CEO and Fresh & Easy Neighborhood Market CEO, Tim Mason, and outside or non-executive directors. As a board member and then as chairman, Broadbent will be a non-executive director, meaning he doesn't work for Tesco.

The group says in the letter an independent review of Fresh & Easy is needed in order to determine what additional steps Tesco needs to take to make good on the commitment made by CEO Philip Clarke after taking over in March of this year that the fledgling U.S. grocery chain, which lost about $307 million on sales of about $818 million in its most recent fiscal year (ended February 26, 2011), will break even by the end of its 2012/13 fiscal year, which is 20 months from now.

There are currently 176 Fresh & Easy Neighborhood Market stores open and operating in California (127 units), Arizona (28) and Nevada (21).

Tesco has opened 22 new Fresh & Easy stores so far this year - 12 in Northern California, its newest market region, and 10 in Southern California, where it has 101 of its 176 stores. There are currently 12 Fresh & Easy grocery markets in Northern California and 14 units each respectively in the Bakersfield and Fresno metropolitan regions in California's Central Valley.

Clark said recently (confirming our earlier report of 40-50 new stores this year) Tesco plans to open 50 new Fresh & Easy stores in 2011. As part of its break-even plan for Fresh & Easy, Tesco says it will have 300 stores open and operating by February 2013, at which point it says it will break even with the U.S. operation.

CtW Investment Group also has a problem with Tesco's proposed new senior executive/board director remuneration or pay plan, which will be voted on by shareholders at the annual meeting on Friday, specifically the part that no longer ties Fresh & Easy Neighborhood Market CEO Tim Mason's pay to performance at the grocery chain.

This argument is really a moot point though, for two reasons.

First, CtW Investment Group last year objected to Mason's pay and bonus structure under Tesco's then pay-for-performance scheme, which is still in effect.

For example, Mason made over $6 million in 2009, despite huge losses [See: Strong Group Revenue & Profit For Tesco... But $253 Million Loss at Fresh & Easy] at Fresh & Easy. Tesco said his pay, bonus and stock compensation was in reward for "meeting certain corporate benchmarks and milestones" with Fresh & Easy.

In other words, performance is in the eye of the corporate beholder. And is often the case, it doesn't have to be based on profit and loss, particularly when it comes to start-up-type ventures like Fresh & Easy (four years in November 2011), although in our analysis and opinion Mason's pay last year was too high ($2.5 million might have been reasonable) considering the continued high losses at Fresh & Easy. But we didn't expect him to give any of it back.

More significant though in terms of rendering the argument CtW Investments is making moot in our analysis is the fact as of March 2011 Mason became Tesco's group deputy CEO and chief marketing officer, as well as CEO of Fresh & Easy.

Therefore, unlike from 2006-2010 when his sole responsibility at Tesco was for Fresh & Easy, he is now not only the CEO of the U.S. chain but also deputy CEO to Philip Clarke, as well as the global retailer's chief marketing officer. As such, in our analysis, the argument his pay should be tied to Fresh & Easy's performance, which it really never was in practice if one defines performance as making a profit or at least coming close to break-even, has been rendered moot by his elevation to deputy CEO of Tesco.

Mason has been a member of Tesco's board since February 16, 1995.

Before moving to the U.S. in January 2006 to start up Fresh & Easy as CEO he was Tesco's chief marketing officer, based in the UK, a position he again holds as of March, as part of his job title trifecta at Tesco.

Mason remains based at Fresh & Easy's headquarters in El Segundo, California but has been spending a considerable amount of time since March at Tesco's headquarters in the UK, as well as traveling to its other global outposts. For example, he's spent the last few days in Eastern Europe with his boss, CEO Philip Clarke, and other Tesco senior executives, who are putting on a road show for financial analysts.

CtW investment Group and the UFCW union were front and center, joined by numerous others, at last year's Tesco AGM over the issue of compensation for the global retailer's senior executives who also serve on its board. The pay issue was the major hot button at the 2010 investors' meeting, where a whopping 47% of company shareholders voted against Tesco's Remuneration Report.

[We chronicled the going's on at last year's AGM in this story - July 5, 2010: Verbal Fireworks at Tesco's 2010 Sharholders' Meeting in London - which we suggest you read. Also See - June 23, 2010: Tesco Fresh & Easy Neighborhood Market CEO Tim Mason Gets Big Stock Award Featuring a Singular Twist.]

Earlier this month Tesco moved to avoid any such similar behavior from shareholders when they meet in the United Kingdom on Friday, when it released a revamped pay plan for its senior executive/board directors. The new "all for one and one for all" scheme attempts to reward all the senior executives/directors based on Tesco's overall performance, at least in theory.

Ironically, this is what CtW Investment Group and the UFCW union, who's pension funds it manages and invests objects too because it lumps Mason in with all the other Tesco senior executives on the board rather than basing his pay on Fresh & Easy's performance. But as we detailed above, since Mason is deputy CEO and chef marketing officer of Tesco along with being CEO of Fresh & Easy Neighborhood Market, including him in the mix seems kosher to us.

Plus: Who says Mason will remain CEO of Fresh & Easy for long, now that he has major Tesco group responsibilities?

For example, Former CEO of Tesco's operations in Taiwan, Jeff Adams, who was transferred to Fresh & Easy Neighborhood Market in 2008 and is its head of retail operations, a lesser position than he held previously in Taiwan, has been waiting patiently in the wings in El Segundo for nearly three years. He would be one of Tesco deputy CEO Mason's logical internal replacements as CEO of Fresh & Easy - based on the way Tesco does internal succession - should Mason return to the UK.

[For some background on Jeff Adams at Fresh & Easy USA read - March 12, 2008: Breaking News: Tesco plc. Makes Major Personnel Change to Fresh & Easy Neighborhood Market USA Senior Management Team; and September 22, 2008: Key Personnel Breaking News: Co-Vice President of Retail Operations Brian Pugh No Longer Employed At Tesco Fresh & Easy Neighborhood Market.]

The irony involving CtW Investment Group's position on the new executive/director pay sheme is because it appears from all indications we have the majority of Tesco's other investors - CtW holds some stock in Tesco through the pension funds it manages for the UFCW and other labor unions so qualifies as an investor in the company - particularly the big and all-important institutional investors who control the voting, are in favor of the new pay plan, which is expected to pass by a much higher percentage of votes than the Remuneration Plan did last year.

A representative of CtW is set to be at Friday's Tesco AGM, according to the firm. The UFCW union also told us it will have someone there, as it did last year.

We don't expect the same level of fireworks this year as there was in 2010 at the meeting [Verbal Fireworks at Tesco's 2010 Sharholders' Meeting in London.] But there should be a robust, albeit brief, discussion of the new pay plan.

We also don't expect any action to be taken by Tesco's board now or in the future regarding the request in the investment group's letter to Richard Broadbent for an "objective and independent" review of Fresh & Easy Neighborhood Market - at least not one the results of which Tesco would make public.

Tesco has a solid agenda for its annual meeting Friday, which only runs for two hours, from 11 am-1 pm. You can view the agenda here.

Fresh & Easy Buzz will have a correspondent at Friday's . We'll be offering news reports and analysis of the annual shareholders' meeting in the blog. Stay tuned.

Related Stories

May 11, 2011: Richard Broadbent to Join Tesco's Board July 2; Become New Chairman November 3

April 19, 2011: Tesco's Fresh & Easy Neighborhood Market Posts Biggest One-Year Loss Yet - $307 Million Loss on Sales of $818 Million

March 1, 2011: Fresh & Easy Neighborhood Market CEO Tim Mason Pockets Nearly $1 Million From Sale of Tesco Shares

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

[Also: Click on the following links - , , , , , , , ,  - to read stories about past Tesco annual general (shareholder) meetings and related topics.]

Sprouts Farmers Market Plans to Close Henry's Farmers Market's Corporate Office in Irvine, California July 9

The Insider - Heard on the Street

It's nearly all over in Irvine accept for the sweeping, mopping and locking up.

Sprouts Farmers Market plans to close the Henry's Farmers Market corporate office in Irvine, California July 9, as it completes its consolidation of Henry's headquarters operations into its corporate offices in Phoenix, Arizona, according to my sources.

And since July 9 happens to be a Saturday, there will be time to do some sweeping and mopping up before turning the key in the lock of the Irvine office doors for the very last time.

Sprouts Farmers Market hasn't announced when it plans to close the Henry's Farmers Market's corporate office - just that it will do so at some point. Additionally, a closing date hasn't been reported by any other publication to date, at least based on a search of the three major Internet search engines I did before writing my column.

All the Henry's headquarters employees remaining employed by Sprouts Farmers Market have either moved into their respective jobs at Henry's stores in Southern California or out in the field, or to the grocer's corporate headquarters offices (just a handful of workers) in Phoenix, as the consolidation process that began immediately after Sprouts' and its new majority-owner, private equity firm Apollo Global Management, got the green light from U.S. government regulators on April 18, 2011 that the deal to merge Henry's into Sprouts Farmers Market was approved and final, is nearly completed.

The Henry's corporate headquarters employees not remaining with Sprouts Farmers Market, which include most of the category managers/buyers and other support staff like finance, marketing, administration and human resources, have been laid off, the last remaining batch having completed their tenure in Irvine last week, according to my sources.

The Henry's Farmers Market Stores in Southern California will continue to fly the Henry's banner for most of this year. However, by mid-2012 or earlier all of those units should be re-branded to the Sprouts Farmers Market banner, my sources tell me.

Sprouts has already changed the name of the single Henry's store in Northern California to Sprouts Farmers Market. That store is in Elk Grove, near Sacramento. Sprouts has a store in nearby Roseville. The combining of the two farmers market-style grocery chains, which share a family history, gives Sprouts Farmers Market a little better brand recognition in the Sacramento area, where it will open a third store in Citrus Heights in early 2012 and is looking for numerous other locations.

Phoenix-based Sprouts is starting the re-branding process with Henry's nine Sun Harvest banner stores in Texas. Sean Boney, CEO of Sprouts Farmers Market said in April the Sun Harvest stores should all be flying the Sprouts banner before the end of this year.

The closing of the Henry's Farmers Market headquarters in Irvine will be the end of long era of the chain's being based in Southern California, where it was founded by members of the Boney family, who also are he founders of Sprouts Farmers Market, despite being bought and sold twice over the last couple decades.

For example, Henry's remained headquartered in Southern California through two corporate ownership changes - Wild Oats Markets Inc., which bought the chain from the Boney family - and Commerce, California-based Smart & Final, Inc.

Smart & Final, which is also owned by Apollo Global Management, bought Henry's Farmers Market from Whole Foods Market, Inc. in 2007. Whole Foods Market obtained Henry's in its 2007 acquisition of Wild Oats Markets. The hybrid conventional-natural foods farmers market style chain didn't fit Whole Foods' plans so it sold it to Smart & Final.

Apollo Global Management bought Henry's Farmers Market from Whole Foods Market in 2007 because it wanted a growth vehicle to combine with its Smart & Final chain.

Smart & Final, which operates mostly small-format non-membership warehouse stores, along with some Smart & Final Extra smaller-format style grocery stores, has historically relied on food-service customers - mom and pop grocers, restaurants and the like - for a significant percentage of sales.

However, Apollo's strategy since owning the chain has been to become more of a consumer-focused food and grocery retailer, which led to the start-up of the Extra format stores, the acquisition of Henry's in 2007, and last year's ill-fated launch of five SmartCo Foods stores in metropolitan Denver, Colorado which were closed a few months later. [See - December 11, 2010: Smart & Final's Not So Marvelous SmartCo Foods' Misadventure in Denver and here for details and analysis.]

(Smart & Final's future post Henry's becoming part of Sprouts Farmers Market is the topic of a follow-up column coming soon. Stay tuned.)

Meanwhile Sprouts Farmers Market opened its newest store today. The store is in Dublin, California, which is in the Easy Bay Area, no more than a stone's throw from Safeway Stores' corporate headquarters in Pleasanton.

The Dublin market is Sprouts' third store in Northern California. It also has stores in Sunnyvale (South Bay Area), Roseville and Elk Grove (the former Henry's unit).

It's also one of seven new stores Sprouts Farmers Market plans to open between April and December of this year. In addition to the Dublin store, five of the seven stores are in Southern California, in the following cities: Redondo Beach, Westlake Village, Costa Mesa, Lakewood and Granada Hills. The remaining store is in Carrollton, Texas.

Back in Northern California, which is Sprouts' newest market region and a major focus for the retailer because it plans to open numerous stores in the region over the next few years, the farmers market-style grocery chain is set to begin renovation and expansion in July of a former Co-op grocery store in Walnut Creek(East Bay Area), which it plans to open in early 2012, along with the store in Citrus Height mentioned earlier.

The Walnut Creek store was planned by Henry's prior to the deal. It fit Sprouts' Northern California plan well, so it decided earlier this year to move forward on the location.

- The Insider

Fresh & Easy Buzz's 'The Insider' on the Apollo/Sprouts/Henry's Deal + Related Stories

April 18, 2011: Sprouts Farmers Market Confirms Our April 14 Scoop: Sprouts' Acquisition-Merger of Henry's Farmers Market Final Today

April 14, 2011: Sprouts Farmers Market's Acquisition-Merger of Henry's Farmers Market to Be Final On Monday, April 18

~February 16, 2011: The Sprouts-Henry's Deal: New Website Reunites the Two Grocery Chains As 'One Farmers Market'

~February 16, 2011: Breaking: Smart & Final Enters Into Agreement to Sell Henry's to Sprouts Farmers Market

~January 5, 2011: 'The Insider' - Will 2011 See Sprouts Farmers Market Acquiring Henry's Farmers Market? 'The Insider' Says it Could Be in The Cards

~January 7, 2011: 'The Insider' - Sprouts Farmers Market-Henry's Farmers Market Deal Negotiations Continue; End-Game Could Be Near

~January 8, 2011: Smart & Final-Henry's Tell Employees About Deal Discussions With Sprouts Farmers Market; Confirming 'The Insider's' Reports

~January 10, 2011: Sprouts Farmers Market to Open Second Northern California Store in Roseville No Later Than Mid-April

~January 11, 2011: 'The Insider' - A 'New York State of Mind': 'The Insider' On Walmart, Apollo Global Management, Tesco's Fresh & Easy and the NRF in New York City

~January 24, 2011: 'The Insider' - End-Game Could Be Near in the Sprouts Farmers Market-Henry's Farmers Market Deal Talks

~January 30, 2011: 'The Insider' - The Sprouts & Henry's Deal Talks: Smart & Final is Looking Like A Retailer That Wants to Make A Deal

Also see:

~December 11, 2010: Smart & Final's Not So Marvelous SmartCo Foods' Misadventure in Denver

~November 17, 2010: Smart & Final Pulls the Plug On All Five SmartCo Foods Stores in Metro Denver After Being Open Less Than Five Months

Plus, read more about , , and by clicking on the green links. Use the "older post" and "newer post links at the bottom of each linked page for additional pages/stories.

Save Mart Supermarkets Signs On For Five More Years' of NASCAR Sponsorship

Sunday's Toyota/Save Mart 350 at Infineon Raceway.

Northern California Market Region

Modesto, California-based Save Mart Supermarkets has signed a multi-year agreement to continue as co-title sponsor of the annual NASCAR Sprint Cup Series event at Infineon Raceway in Northern California's Sonoma Valley.

The announcement was made Sunday (June 26) by Save Mart majority-owner, chairman and CEO Bob Piccinini and Steve Page, president and general manager of Infineon Raceway, during the Toyota/Save Mart 350 NASCAR race, which was won by

The 240-store supermarket chain, which is number two in market share in Northern California after number one Safeway Stores, In., and Infineon Raceway have a long partnership together: Save Mart has been either title sponsor or co-title sponsor of the NASCAR Sprint Cup event at Infineon Raceway since 1992.

Additionally, Save Mart has been either the title or co-title partner of the NASCAR annual Cup event - this year's Toyota/Save Mart 350 held Sunday -  in Sonoma for two decades, celebrating its 20th anniversary as a sponsor of NASCAR in Sonoma this year.

According to Save Mart CEO Bob Piccinini, Save Mart was the title sponsor of the NASCAR Cup event from 1992-1997. It has combined with partners as co-title sponsor of the event since 1998. The last five years, the event has been known as the Toyota/Save Mart 350.

Piccinini says the new agreement with the Sonoma County raceway announced Sunday is for five years, extending through 2016.

"We are excited to continue our partnership with Infineon Raceway as co-title sponsor of the Cup Series event and look forward to finding new ways to celebrate with racing fans across every community we serve," Piccinini, who's a rabid auto racing and sports fan - he's also a minority owner of the Golden State Warriors professional basketball team and the Arizona Diamondbacks and San Diego Padres pro- baseball teams - says. "Our sponsorship continues to build strong brand recognition and provide great value to our loyal supplier partners and shoppers. It's been a great ride so far and we are ready for more."

One of the ways Piccinini and Save Mart found to celebrate Sunday's Toyota/Save Mart 350 NASCAR Cup Series event, along with promoting the chain at he same time, was by featuring the grocer's 12-foot high "hot rod" shopping cart, which we wrote about in the story below on the blog. [See - June 28, 2011: Gentlemen ... Start Your Grocery Cart: Save Mart Supermarkets Goes 'Big' With 12-Foot High Motorized Shopping Cart.]

Save Mart's Lucky supermarket chain, which has 76 stores in the San Francisco Bay Area and elsewhere in Northern California, is the official grocery chain of the Golden State Warrior's for promotional purposes.

Earlier this year Piccinini, who invested in the team (an about 20% ownership stake, according to our sources) last fall as part of a new ownership group that bought out the team's previous owners for $450 million, was named a member of the Warrior's four-person executive board, which is headed by majority owners Joe Lacob and Peter Guber. Read the October 27, 2010 column by our 'The Insider' about the new owners and Piccinini's involvement here: Save Mart CEO Bob Piccinini Poised to Make it to the 'Bigs' as Member of Golden State Warriors' Ownership Group.

But back at the races, Steve Page, who runs Infineon Raceway in Sonoma Valley said in announcing th new five year deal with Save Mart Supermarkets he inked with Piccinini: "Our relationship with Save Mart continues to evolve in new and positive ways." They are an engaged, active and promotionally-oriented partner and the synergy between our respective organizations has only grown stronger over these 20-years. We couldn't be more delighted to announce this new agreement and extension."

Infineon Raceway is a wholly-owned subsidiary of Speedway Motorsports, Inc., which is a major marketer and promoter of motor-sports entertainment in the United States.

The new five year deal in which Save Mart will continue to sponsor the annual NASCAR Sprint Cup Series event at Infineon Raceway, also means the grocery chain's 12-foot high motorized shopping cart, which is powered by a 454 cubic inch Chevy engine, will be getting a lot more use. And that's an added reason Save Mart should look into the world record-holding potential its giant shopping cart holds, as described in our story yesterday.

Related Stories

June 28, 2011: Gentlemen ... Start Your Grocery Cart: Save Mart Supermarkets Goes 'Big' With 12-Foot High Motorized Shopping Cart

June 19, 2011: Safeway Has A Picnic in San Francisco Featuring the 'World's Longest Picnic Table' to Showcase its 'Open Nature' Natural Foods' Brand

March 23, 2011: Tesco Opens First Fresh & Easy Neighborhood Market Store in California's Northern Central Valley Today - in Modesto

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

October 27, 2010: Save Mart CEO Bob Piccinini Poised to Make it to the 'Bigs' as Member of Golden State Warriors' Ownership Group

July 15, 2010: Just Like Mr. Rogers Did, Save Mart Supermarkets' Doesn't Just Talk the Talk, it Walks the Walk in the Neighborhood

Tuesday, June 28, 2011

Gentlemen ... Start Your Grocery Cart: Save Mart Supermarkets Goes 'Big' With 12-Foot High Motorized Shopping Cart

Touring the track on Sunday at the Toyota/Save Mart 350.

Northern California Market Region

Northern California's two leading supermarket chains - Pleasanton, California-based Safeway Stores, Inc. and Save Mart Supermarkets, which is headquartered in Modesto - have been thinking and doing "big" this month.

But the big thinking and doing has nothing to do about the fact the grocery chains are the number one - Safeway - and number two - Save Mart - market share leaders in Northern California.

Safeway Store's big thinking and doing was on display in San Francisco on Sunday, June 17, when the grocery chain broke the Guinness World's Record for creating the longest picnic table. We wrote about the "big" (or long) event in this June 19 story: Safeway Has A Picnic in San Francisco Featuring the 'World's Longest Picnic Table' to Showcase its 'Open Nature' Natural Foods' Brand

Kyle Bush and the giant Shopping cart in the winner's circle after Sunday's race.

12-foot high 'hot rod' shopping cart

Not to be outdone by its competition when it comes to "big" thinking and doing, earlier this year Modesto-based Save Mart hired a local company, BRE Rods & Classics, located in nearby Salida, California, to create the 12-foot high, "hot rod" shopping cart (pictured at top).

The cart, which some insiders are calling "Piccinini's Pride," in honor of Save Mart majority-owner, chairman, CEO and rabid auto racing fan Bob Piccinini, who commissioned the mean machine, was featured on Sunday at the NASCAR Toyota/Save Mart 350 auto race at Infineon Raceway in Northern California's Sonoma County.

Sunday's race, sponsored annually by Toyota and Save Mart Supermarkets, was won by Kurt Bush, who held off a late-charging Jeff Gordon to claim the first-place honor.

Save Mart's mega-motorized shopping cart, which is powered by a 454 Chevy engine sponsored by Watson Racing, which allows it to hit speeds of up to 100 miles an hour, according to Jim Brown of BRE Rods & Classics, got its inaugural debut in Modesto's annual "Graffiti Fest" parade on Friday evening, June 11. (You can see the Save Mart motorized shopping cart on a test run in the brief video below.)

The three day "Graffiti Fest" event, which is sponsored by the Modesto Kiwanis Club each year, pays homage to the movie "American Graffiti," which was made by Modesto native George Lucas of Star Wars fame, and chronicles the born-and-raised in Modesto movie producer-director's childhood, growing up in what the locals like to call the "Cruising Capital of the World."

Or at least Modesto was America's cruising capital. However, a number of years ago the Modesto City Council outlawed cruising on McHenry Avenue and J Street, the main drag where most of the action took place in Lucas' era (late 1950's-to-early 1960's) and in his movie, which is set in the early 1960's. As the famous line in American Graffiti says: "Where were you in '62?

Local boosters created the annual "Graffiti Fest" event, along with a series of other events throughout the summer, called "Graffiti Summer," as a way to celebrate the tradition, along with using it as a vehicle to increase tourism and encourage people to spent money with local businesses during the summer months.

Save Mart's big, hot rod shopping cart got a bit over-heated during its trial run in the June 11 "Graffiti Fest" parade, according to a longtime Modesto-area food broker and Fresh & Easy Buzz reader who was there, and had to be sidelined. A Save Mart executive confirmed that observation for us recently.

However, the crew at BRE Rods and Classics fixed the problem and "Piccinini's Pride" was in top shape at Sunday's Toyota/Save Mart 350 race in Sonoma County.

Sunday's big race isn't the last stop for the shopping cart. Save Mart's pit crew is taking the racing engine-powered vehicle to the California State Fair in Sacramento next.

After that the cart, which also made an appearance at one of Save Mart's Lucky banner supermarkets in Napa, California on June 23, will be featured at the annual "Hot August Nights" event in Reno, Nevada. Save Mart, like Safeway Stores, Inc., operates supermarkets in northern Nevada, as well as in Northern California.

The Save Mart "hot rod" shopping cart at the Crystal Springs Gold Course in Burlingame, California. The club's pro says course rules prohibit the shopping cart's use as a golf cart, even though it can hold a whole lot of golf bags. But he did let a photographer use the fairway to take a few "shots."

An American tradition

Creating "out-sized" things and events - giant displays in-store, parade floats, and even record-holding tables and giant shopping carts - is part of a long and historic tradition of thinking and doing "big" by U.S. grocers, as a way to not only promote their stores, but also to have plain fun.

It's good to see that Save Mart and Safeway Stores' are keeping that tradition alive - and are doing so in a "big" way.

Potential Guiness World Record?

Modesto, California-based Save Mart Supermarkets, which was founded over five decads ago by Bob Piccinini's father Mike and partner Nick Tocco, operates 240 stores in Northern and Central California and Northern Nevada under the Save Mart, S-Mart Foods, Lucky, Maxx Value (supermarkets) and FoodMaxx (discount warehouse format) banners, should contact the Guinness World Record people post-haste because a Guiness World Record might just be looking the grocer right in its eyes, so to speak.

Save Mart can't get the record for biggest/largest/tallest shopping cart. That record is already held - and at 34.4 feet high, from ground to handle, the world record-holding cart, which was made by the Al Safeer Group and Century Shopping Mall, and sponsored by Dubai UAE Duty Free, won the honors in February 2004 at the Dubai UAE Shopping Festival

But ... the record-holding shopping cart from Dubai has no motor.

Enter Save Mart's 12-foot high "muscle car-style" shopping cart, powered by the 454 Chevy engine.

Based on our research on the Guinness website, we think there just might be an opportunity for Save Mart to claim the title and honor of having the world's biggest, largest or highest (or all three) motorized shopping cart.

It's certainly worth checking out. After all, does Save Mart Supermarkets' (and its chief Bob Piccinini) really want to let Safeway Stores' have all the glory with its World's Longest Picnic Table, when it comes to Northern California-based grocery chains setting world records?

The grocery business is all about competition, right? So ... Bring it on.

Related Stories

June 19, 2011: Safeway Has A Picnic in San Francisco Featuring the 'World's Longest Picnic Table' to Showcase its 'Open Nature' Natural Foods' Brand

March 23, 2011: Tesco Opens First Fresh & Easy Neighborhood Market Store in California's Northern Central Valley Today - in Modesto

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

October 27, 2010: Save Mart CEO Bob Piccinini Poised to Make it to the 'Bigs' as Member of Golden State Warriors' Ownership Group

July 15, 2010: Just Like Mr. Rogers Did, Save Mart Supermarkets' Doesn't Just Talk the Talk, it Walks the Walk in the Neighborhood

Monday, June 27, 2011

Voting Starts in Fresh & Easy Neighborhood Market's 2011 'Design-A-Bag' Contest

One of the 10 finalists in Fresh & Easy's reusable bag design contest is the design (above) by Janeil Lim, of Los Angeles, California. 

Lim says this about the inspiration behind the bag's design: "I wanted to represent the diversity and colors that abound in modern day America. I wanted to also highlight through my own creative style the fun and excitement that me and my partner feel whenever we come to fresh&easy and the joy it has brought to our neighborhood. I wanted to create something striking and engaging that makes everyone smile."

We think Janeil Lim achieved all she set out to, based on the inspiration she describes above. And if the design doesn't win first place in the contest, Fresh & Easy Neighborhood Market would be smart to create a reusable shopping bag using it, which it can sell in its stores.

Why? Because the multi-culture theme of the design, along with the excellent use of color, depicts the ethnic melting pot that is Southern California, where Tesco's Fresh & Easy is headquartered and where 101 of its 176 stores are located. That's a communications and marketing message the grocer would be wise to associate with its stores, via Janeil Lim's multi-ethnic-themed and colorful reusable bag design.

'Green' Food & Grocery Retailing

El Segundo, California-based Fresh & Easy Neighborhood Market's Design-A-Bag reusable shopping bag design contest has ended, and the grocer is asking members of its "friends of fresh & easy" e-mail marketing- loyalty program to vote for their favorite bag, out of 10 finalists it's chosen from the 800 designs submitted in the contest, which began April 5. [See our April 4, 2011 story: Fresh & Easy Neighborhood Market to Launch Reusable Bag Design Contest Tomorrow.]

Non-members of "friends of fresh & easy" can vote for their favorite bag designs by signing up for the program, something the grocer hopes people will do so it can add new members to its data base.

This is the second year United Kingdom-based Tesco's Fresh & Easy Neighborhood Market has conducted the reusable shopping bag design contest, which it kicks off in April, to tie into Earth Month and Earth Day.

Interestingly, 500-fewer (800) bag designers entered this year's contest, compared to last year, when, according to Fresh & Easy, there were 1,300 submissions.This is despite the fact this year the grocery chain opened the contest to teenagers 13-17. Last year, contestants had to be 18-years-old and above to enter.

Being a legal resident of the U.S. is also required in order to enter.

One theme that resonates among nearly all of this year's 10 designer-finalists is ... using color as an inspiration.

As you can below and see here, many of the finalists' reusable bag designs make ample use of color as part of their respective design elements. Also see Janeil Lim's bag design pictured at top for a good example of using color as part of her multi-cultural-themed bag.

There are some excellent bag designs among the 10 finalists, which should make the choice by the "friends of fresh & easy" members a tough one.

Voting for the contest ends July 10. Tesco's Fresh & Easy Neighborhood Market says it will announce the winner and finalists July 26.

The first place winner - last year it was Josephine Close of Southern California - receives $5,000 in multiple Fresh  Easy gift cards, which the grocer says represents one-year's worth of groceries. The nine semi- finalists each receive a $100 gift card.

The winner's design will also be turned into a reusable shopping bag by Fresh & Easy Neighborhood Market, which it will offer for sale in its stores in California, Nevada and Arizona, beginning later this year, a spokesperson for the grocery chain says.

Josephine Close's winning bag from last year is currently on sale at the 176 Fresh & Easy stores for 79-cents. [See our January 19, 2011 story - January 19, 2011: Customer-Designed Reusable Shopping Bag Now On Sale At Fresh & Easy Neighborhood Market Stores. The bag is pictured in the story as well.

Which bag design from these 10 finalists is your favorite? Predictions on which designer will win are welcomed in the comments section.

Related Stories

April 4, 2011: Fresh & Easy Neighborhood Market to Launch Reusable Bag Design Contest Tomorrow

January 19, 2011: Customer-Designed Reusable Shopping Bag Now On Sale At Fresh & Easy Neighborhood Market Stores

July 27, 2010: The Winner of Fresh & Easy Neighborhood Market's Reusable Bag Design Contest Is...

June 17, 2010: Fresh & Easy Neighborhood Market Picks Eight Finalists in its Reusable Bag Design Contest; Website Voting Through June 30

April 19, 2010: Tesco's Fresh & Easy Joins Kroger Co. in Holding Earth Month-Earth Day Reusable Bag Design Contest

Also: Click here for a complete selection of stories fom Fresh & Easy Buzz on the reusable shopping bag topic and issue

Tesco Introduces First Items in Fresh & Easy Neighborhood Market-Developed 'Tesco goodness for kids' Brand in United Kingdom Stores

Private Brand Showcase

Yesterday we broke the news United Kingdom-based Tesco is importing the "goodness for kids" private brand from its El Segundo, California-based Fresh & Easy Neighborhood Market chain to its stores in the UK - with a "Tesco" twist: The brand is called "Tesco goodness for kids," rather that "fresh&easy goodness for kids."

Read our detailed piece here - June 26, 2011: Tesco Bringing Fresh & Easy Neighborhood Market's 'goodness for kids' Brand to the UK - With a 'Tesco' Twist

Today in our reporting we discovered Tesco has launched the first line of products - value-added bagged fresh produce items - in its UK stores and on its grocery home delivery site under its new, Fresh & Easy-originated "Tesco goodness for kids" private brand.

The first products under the brand are six SKUs "Tesco goodness for kids" bagged, value-added fresh produce items, including: apple snack pack, pineapple fingers, melon and grape snack Pack, and apple and grape snack pack, along with the other SKUs shown here. There are also "organic fun-sized bananas" under the new Tesco private brand for kids.

Additionally, Bryan Roberts, director of retail insights for Kantar Retail EMEA in the UK, did a store check today for Fresh & Easy Buzz and his firm and spotted some of the bagged "Tesco goodness for kids" value-added produce items, which have replaced similar "Disney" brand items, in a Tesco store in London.

Robert's, who lives across the pond in the UK, photographed one of the SKUs he saw in the Tesco store - the "Tesco goodness for kids fun-size organic bananas" (pictured above),  for Fresh & Easy Buzz and his employer.

Tesco UK will soon be introducing the range of fresh-prepared kids' meals under its "Tesco goodness for kids" brand, according to our sources at the retailer. Tesco is selling out its remaining stock of "Disney" brand meals first.

Additionally, look for Tesco to introduce other items in other categories, such as shelf-stable fruit drinks and various packaged food items, under the "goodness for kids" brand, which was created by the new product development and category management teams at Fresh & Easy Neighborhood Market in Southern California.

Tesco's Fresh & Easy Neighborhood Market, which operates 176 stores in California (127 units), Arizona (28) and Nevada (21), introduced its "fresh&easy goodness for kids" brand in late summer 2009. In an August 29, 2010 story (the last story link below), we broke the news about Fresh & Easy's redesign of the "goodness" packaging and its launching of numerous ne items under the kid-friendly brand.

Related Stories

June 26, 2011: Tesco Bringing Fresh & Easy Neighborhood Market's 'goodness for kids' Brand to the UK - With a 'Tesco' Twist

September 4, 2010: Fresh & Easy Neighborhood Market Unveils New fresh&easy 'goodness' Brand Items and Packaging

August 29, 2010: Fresh & Easy Neighborhood Market Expanding its fresh&easy 'goodness' Co-Branded Line; Launching Numerous New Items

Click this link - to read all the past stories in our 'Private Brand Showcase' feature.

Sunday, June 26, 2011

Tesco Bringing Fresh & Easy Neighborhood Market's 'goodness for kids' Brand to the UK - With a 'Tesco' Twist

Private Brand Showase

Something we've suggested in Fresh & Easy Buzz that United Kingdom (UK)-based Tesco should do regarding its corporate private brand development strategy in relation to its Fresh & Easy Neighborhood Market chain in the U.S. is to create synergies between its UK proprietary product brands and Fresh & Easy store brands, a number of which, like "eatwell" and "goodness for kids" in the consumables category either don't have ("eatwell") or don't need to include ("fresh&easy goodness for kids") the "fresh&easy" brand name anywhere on them.

Additionally, where "fresh&easy" is used on the brand packaging-label in conjunction with the primary brand name, such as on the "goodness for kids" line, it can easily be replaced with, for example,"Tesco."

Fresh & Easy Neighborhood Market also has a number of proprietary brands of California wine that in our analysis Tesco would be wise to offer for sale in its stores in United Kingdom, which in fact is something we suggested and offered details about in this March 8, 2011 story - Tesco's Fresh & Easy ♥'s California With 27 New Varieties of Proprietary Brand Wines From the Golden State - in relation to the private brand synergies we think Tesco is missing out on between its U.S. Fresh & Easy chain and its flagship operations in the United Kingdom, which accounts for nearly 70% of the global retailer's annual sales.

The Fresh & Easy-developed proprietary brand California wines can be shipped directly from California to the UK, since that's how the numerous brands and varieties of California wine already sold in Tesco's stores in that country get there anyway.

Tesco could also offer the Fresh & Easy proprietary brand California wines in its other divisions in Europe and also selectively in Asia, where it has numerous stores.

Wine consumption in China, for example, is growing by double-digits. Additionally, California wines are popular in Japan. And wine-consumption is also fast-growing in South Korea, were consumers regularly buy and enjoy food and beverage products imported from the U.S., just like the Japanese people do. Tesco has stores in all three nations.

Offering the California wines (at present sold only in the 176 Fresh & Easy stores) in its UK stores would greatly increase the volume for the proprietary brand wines, which in turn would allow Tesco to obtain a lower cost of goods from the California wineries that produce the products for Fresh & Easy. That, in-turn, would allow Fresh & Easy Neighborhood Market to make a higher gross margin on the wines than it does currently. And Fresh & Easy needs all the margin help it can find.

It's important to note that within the brand synergy strategy we describe, care must be taken to create products under the brands that fit the respective nation's food palate. For example, a "goodness for kids" brand cottage pie (fresh-prepared foods category) might be a good product variety for Tesco's UK stores, but we wouldn't suggest it for Fresh & Easy Neighborhood Market in America.

The key proposition behind our analysis and suggestion is simple: Brands are brands. If  Fresh & Easy has one or more brands that have utility in Tesco's UK operations - and like-wise at Fresh & Easy - the retailer should take advantage of this and import and cross-pollinate between the two countries, making sure to follow the provision noted above, along with doing the same thing when it comes to product brand packaging and product labels.

'Tesco goodness for kids' brand - via Fresh & Easy

Apparently Tesco has taken our advice - or come to a similar realization and conclusion on its own - because the retailer is currently preparing to roll out a new brand, "Tesco Goodness for kids," in its UK stores which, accept for substituting the "fresh&easy" name with "Tesco" on the product labels, is identical to Fresh & Easy's "goodness for kids" brand, which we've reported on and written extensively about in the blog. (See those stories here.)

Tesco is replacing its "Disney" brand of food products for kids, which it licenses from the California company of theme park, movie and all around brand fame, with the "Tesco goodness for kids" brand, created by the product development and category management teams at El Segundo, California-headquartered Fresh & Easy, which happens to be a short drive from Disneyland, in Anaheim, California.

We learned about the new brand for Tesco UK a few weeks ago, and expect the retailer to launch the first items in the range in its stores in the next week or two, based on information from our sources.

Additionally, Bryan Roberts, an astute observer of the UK food retailing scene and director of retail insights there for Kantar Retail EMEA, late last week spotted a sticker on one of the Disney brand food items in a Tesco store that mentioned the new "Tesco goodness for kids" brand will soon be replacing the "Disney" branded food products for kids. Roberts took a photograph of the brand sticker (pictured at top), which he shared with Fresh & Easy Buzz, as part of a discussion we had about the brand and its origins at Fresh & Easy.

Venture brands

CEO, Philip Clarke, recently announced a new product brand strategy for Tesco, which it's calling venture brands.

Tesco's venture brands program is very similar to what Safeway Stores, Inc. does is the U.S., which is the development and creation of numerous brands - O Organics, Eating Right, Open Nature, Snack Artist and a number of others - that don't use the chain's name on the product's packages or labels at all.

Instead of being private or store brands, they just happen to be product "brands" that have been developed by a retailer and sold in its stores. And in the case of O Organics and Eating Right, Safeway Stores, Inc. markets the brands to other retailers in the U.S. and globally, which is something Tesco is looking into doing with some of its venture brands once they're introduced into its stores and have a bit of a track-record behind them.

Among the first batch of the numerous planned venture brands Tesco is currently developing include "ChokaBlok" ice-cream, La-thams dog food and NutriCat cat food, according to Sidonie Kingsmill, brands development director for Tesco.

"Our venture brands are very different to own-label; they will never be 'me-too' products," she says. "We look at where the customer opportunities are, where brands are not succeeding and what we can do in addition to brands. We’re in a unique position as the biggest retailer (in the UK), with access to the best suppliers worldwide."

'ChokaBlok' ice cream

One of those first venture brands, "ChokaBlok" premium ice cream (pictured above), was recently launched and is available in Tesco's stores in the UK. The brand, which initially features five flavors of ice cream (listed and pictured here), doesn't carry the Tesco name anywhere on it, in keeping with Tesco's venture brands strategy. The key branding proposition behind the product's name, which was created by UK branding agency Mayday, is that the ice cream is 'chok' full of the best quality ingredients Tesco could find.

The "Tesco goodness for kids" brand isn't part of the venture brands portfolio, since it's taken from Fresh & Easy Neighborhood Market's existing brand portfolio and includes the Tesco name as part of the brand name.

Ice cream is a popular category (and product) in California, Nevada and Arizona, where Tesco has its 176 Fresh & Easy stores.

Fresh & Easy Neighborhood Market also has a private or proprietary brand focus - about 60-65% of the about 5,000 SKUs in the small-format stores are proprietary brands.

In our analysis an opinion, based on the two examples offered above and a few others others, Tesco should  launch the new "Chokablok" brand of ice cream in the 176 U.S. Fresh & Easy stores.

Doing so not only would create the second-leg of the Fresh & Easy-Tesco UK product brand synergy program - Fresh & Easy Neighborood Market-developed "goodness for kids" being the initial leg - it also would give Fresh & Easy an interesting brand exclusive - "ChokaBlok" ice cream -  to its stores in California (127 units), Nevada (21) and Arizona (28).

Fresh & Easy Neighborhood Market's current private brand ice cream supplier in the U.S. should be able to produce the product to Tesco's recipe, making any minor changes needed for the American palate. And its packaging suppliers can create the identical packages using existing art work from Tesco.

If  brand "ChokaBlok" were to do well in the Fresh & Easy stores, the grocer's category management team could create its own line extensions under the brand for the U.S. stores, which Tesco's UK team also will be doing. Each operation -U.S. and UK - could then pick and choose from the other's creations, in terms of which new items to bring into its respective chains' stores.

This is a good example of the power of brand synergy. Having two teams in two different countries working on developing new items under the same brand offers the potential for twice the creativity, which might translate to twice the success. There are also important cost-savings that can be realized, particularly in the long-term.

In fact, we'll even offer a suggestion to Tesco for a "ChokaBlok" brand line extension, in the ice cream novelty category.

The product suggestion: "ChokaBlok Ice Cream Sliders," which would be mini ice cream sandwiches - two cookie-type wafers with various flavors of ice cream "sandwiched" in the middle. In our analysis and opinion such an item would fit well in both the U.S. and UK. And the name - "ChokaBlok Ice Cream Sliders" - plays well off of the super-popular mini hamburgers of the same name (sliders)

A good and logical place to start in developing the ice cream sliders would be to take two or three of the existing flavors of "ChokaBlok" (cost-efficient) and use them as the filling for the "Chokablok Ice Cream Sliders." That's another example of synergy; in this case in product development - taking an existing product, the current available flavors of ChokaBlok" ice cream, and use it to create a new product - the sliders/ ice cream sandwiches.

And that's another way of describing brand synergy, which if done right and well, is something that could help Tesco as it tries to break-even with its Fresh & Easy chain in America between know and February 2013, which is something CEO Philip Clarke, who took over the corner office at Tesco's global headquarters in the UK has pledged he will do.

The 'goodness' in brand development synergies

Meanwhile the launch of the "Tesco goodness for kids" brand in Tesco's stores is an important brand development milestone for Tesco Group overall and for Fresh & Easy in particular, as it is the first example of significant product development synergy between Tesco's U.S. outpost and the mother ship in the UK.

It also should be a confidence builder for the team at Fresh & Easy that developed the "goodness for kids" brand because the parent companies decision to launch a version of the brand in the UK, where Tesco is the leading food and grocery chain, suggests an appreciation for the teams work across the pond in El Segundo.

You should also expect to see some of the venture brands Tesco is developing - and maybe even "ChokaBlok" Ice Cream - on the shelves of the Fresh & Easy stores in the Western U.S. in the future, just as you might see some of those California wines developed by Fresh & Easy, along with one or more of its other proprietary food product brands, in addition to "goodness for kids," coming soon to a Tesco-owned store in the UK, and perhaps elsewhere in Europe and even in Asia, in the not too distant future.

Friday, June 24, 2011

Tesco's Homeplus Chain in South Korea Scores Home Run With Smart Phone-Enabled Virtual Grocery Stores in Subway Stations

Food & Grocery Retailing 2.0

As part of its search for different ways and formats to reach food and grocery shoppers in South Korea, where its Homeplus is the second-largest retail chain after number one E-mart, United Kingdom-based Tesco recently created virtual stores in subway stations (pictured at top) in the city of Seoul as a way to try to make grocery shopping more convenient for the busy and time-pressed urban residents in what has become one of the most work-focused country's in the world.

The Homeplus discount chain is jointly-owned by Tesco and Samsung, with Tesco holding 94% of the stock in the venture.

The 115-store chain consists of big discount hypermarkets - which are similar to a Walmart supercenter in merchandise selection and similar to a mini mall in that the big marts also feature numerous independently operated (they lease from Tesco) smaller stores like travel agencies fast-food shops, bookstores and others inside them- along with smaller Express format stores. Homeplus also has an e-commerce store or mall.

Tesco's strategy with Homeplus in its quest to overtake E-mart, which is owned by Shinsegae Group, as South Korea's leading retailer is to find different ways, in addition to building actual stores, to use the online world to grow its sales.

It's Homeplus online store or mall is now the number one e-commerce site for groceries, general merchandise and consumer goods in the nation, which offers it a solid base in those strategic efforts. The virtual stores located in the subway stations are an extension of that online paradigm and strategy.

The Homeplus product-less stores in the subway stations consist of virtual grocery shelves and fresh and perishable food cases, which are designed to look just like the inside of a brick-and-mortar store, as you can see in the photograph at top.

Shoppers walk up to the virtual store, choose the items they want to buy, and then scan the product QR code using their smart phone.

Once the product QR code is scanned, the item goes into a shopper's online grocery cart.

When a shopper completes his or her purchases, they then request a time for the groceries to be delivered to their home later in the day.

The concept is essentially three-fold for Tesco's Homeplus.

First, research conducted for Tesco by the Seoul, South Korea office of marketing firm Cheil Worldwide showed that a significant percentage of urban-living and hard-working South Koreans are finding the task of weekly grocery shopping to be a burden because they're so busy at work,with family and in other activities.

Additionally, many South Korean consumers expressed a preference for being able to use waiting time, such as waiting for their subway car in the station, in productive ways.

Therefore putting these two consumer insights together resulted in the concept of attempting to allow people to shop at Homeplus wherever they may be, so to speak.

The rapid adoption and use of smart phones in South Korea also made possible the concept of converting this waiting time to shopping time, since all the technology needed to access and order groceries from the virtual subway station-based stores is contained in the hands of most urban consumers who use the subway system.

From November 2010 through January of this year, Cheil Worldwide (which produced the three minute video above featuring a look at the subway stores) launched a marketing and advertising campaign for the Homeplus virtual subway station stores. During the three month period, 10,287 consumers visited the Homeplus online store using smart phones, according to the firm. Additionally, the number of new registered members rose by 76%, and on-line sales increased 130%.

Before taking over as the head of United Kingdom-headquartered Tesco in March of this year, CEO Philip Clarke was in charge of the global retailer's operations in South Korea in his position as head of Tesco's European and Asian operations, its second largest unit after the United Kingdom.

Yesterday, Cheil Worldwide's office in Seoul, South Korea, which created the virtual subway stores for Tesco's Homeplus, won three awards for its marketing, adverting and communications campaign for the concept and brand at the 56th annual Cannes International Festival of Creativity (in France), which is affiliated with the famous film festival of the same name - Cannes.

The firm won a Grand Prix (the festival's highest award) in Media, and two Gold Lions in the direct advertising and Outdoor advertising categories, for the virtual subway stores. (See here.)

Tesco's Homeplus says it's looking for other similar venues in South Korea where it might put the virtual stores. Among the key criteria for such locations are public places and spaces that attract a high volume of people on a regular basis, along with having the "captured audience" characteristics of the subway stations, meaning places where people congregate and even better have to wait for something or someone.

The Homeplus virtual subway station-based stores from Tesco is one of the more innovative food and grocery retailing concepts we've seen over the last couple years.

It's also, in our analysis, a perfect example of where smart phone technology is taking us when it comes to retailing. In the not too distant future, don't be surprised if instead of using the conventional checkout stand in the supermarket or other format retail store (it's already starting in limited tests), shoppers instead will use their smart phones to ring up their own purchases, along with using the devices to pay for the purchases, in what is going to be the next wave of global retailing evolution.

The virtual stores, in subways or other public space are, in our analysis, a niche business with limited widespread utility for Tesco or any other retailer at present and in the near-to-medium term. But that's fine because that's as it's intended to be - one of a number of new ways and formats designed to reach shoppers where they are.

It's really all about convenience - bringing the store to the consumer - although it's important to note South Koreans' can already access the Homeplus online store with their smart phones wherever they are.

But the subway station-based virtual store does have the added benefit of the visual - the big screens depicting the virtual grocery shelves in the photograph at top.

It also has what we call the "captured audience element," meaning the subway stations, where the chief human activity is waiting, offer a good venue for suggestive selling (or shopping), which is really the key marketing feature behind the offering. A place featuring a captured audience throughout the day and night, with time on its hands while it waits, equals a good potential venue to get people to interact with the virtual grocery store and do some shopping.

We're going to be seeing numerous new and innovative experiments like the virtual stores from Tesco, Walmart and other retailers over the next few years, all made possible because of the smart phone and the new technology being added to it on what seems like a daily basis.

Stay tuned.