Beyond the Press Release: A Couple Reasons Why Fresh & Easy Neighborhood Market is Expanding its 'Gourmet' Private Brand

Private Brand Showcase
Analysis

Tesco's Fresh & Easy Neighborhood Market announced today it's introducing 12 new fresh-refrigerated ready-to-heat food items under its "fresh&easy Gourmet" brand, which it introduced into its stores in California, Nevada and Arizona in January of this year.

In today's press release, which you can view here, Tesco's Fresh & Easy says it introduced the "gourmet" fresh-prepared foods brand in February 2011.

It's true February is when Tesco's Fresh & Easy Neighborhood Market announced the debut of the brand in a press release.

But "fresh&easy Gourmet" was actually launched in January of this year, as we were the first to report in this story - January 21, 2011: Tesco's Fresh & Easy Neighborhood Market Introducing New 'Gourmet' Private Brand - about three weeks before the fresh food and grocery chain announced the launch of the first batch of items under the brand, which it did on February 8 in this press release.

[Read our story here - February 8, 2011 - Private Brand Showcase Déjà Vu: Fresh & Easy Neighborhood Market Announces its New 'Gourmet' Brand - along with this piece from the day before - February 7, 2011: Getting There First...Plus, Are Tesco's Fresh & Easy and Safeway Traveling Down A Similar Private Brand Aisle? - for details and extensive background and analysis on the "fresh&easy Gourmet brand.]

The 12 new items in the grocer's "fresh&easy Gourmet" line are divided into three categories - fresh-prepared meals, Gourmet (meals) for two and fresh pizzas. All the items are refrigerated and ready-to-heat. (See a list of the 12 new items here.)

Upscale-specialty focus continues

The introduction of the additional SKUs in the "Gourmet" fresh-prepared foods' line just six months after the introduction of the brand is further evidence of an important phenomenon we first pointed out, based on our reporting, observation and analysis, in late 2010 and have continued to offer evidence of since then about Fresh Easy's private brand focus.

That phenomenon is the grocer has since late 2010 focused (not exclusively of course) its own-brand efforts into a more upscale-oriented specialty and higher-end niche in order to attempt to create private brand product differentiation vis-a-vis its competitors, as well as in an attempt to come out with products that can potentially offer higher gross margins, which is something Tesco's Fresh & Easy needs to achieve in a major way. The jury remains out in our analysis as to how this strategy is working thus far.

The quote from John Burry, Fresh & Easy Neighborhood Market's chief commercial officer (head of buying and merchandising in U.S. industry terminology) in the press release issued today also strengthens our analysis, first developed last year, that the Tesco-owned chain of 176-stores has been and continues to move into a more specialty-gourmet-upscale niche in terms of its primary private brand development focus.

The quote: "Customers love our Gourmet products, so we expanded the range with some truly unique and exciting meals only available at Fresh & Easy," said John Burry, Fresh & Easy Chief Commercial Officer. "We are happy to continue to bring more restaurant-quality, fresh food options for our customers to eat at home, as more and more people look for ways to save money."

Our point isn't that Fresh & Easy Neighborhood Market is focusing exclusively on this higher-end and specialty niche. Rather, it's where the grocer has been putting the majority of its private brand focus, starting in late 2010 and continuing to the present.

More unique niche items, higher gross margins

It's all about trying to give consumers a reason to shop at Fresh & Easy - differentiation; unique own-brand products. Think Trader's redux, for example, except in the case of fresh-prepared foods Trader Joe's isn't a key player, as it prefers the frozen foods' category over fresh-prepared when it comes to meals, side-dished and the like.

It's also all about gross margin. In order to break-even with Fresh & Easy by the end of Tesco's 2012/13 fiscal year, which ends February 2013 (about 19 months from now), which Tesco CEO Philip Clarke has publicly said will happen, the grocer must get its gross margins (and overall operating margin) up dramatically. [See - April 19, 2011: Tesco's Fresh & Easy Neighborhood Market Posts Biggest One-Year Loss Yet - $307 Million Loss on Sales of $818 Million.]

Increasing gross margins is one reason Tesco's Fresh & Easy is focusing more on the upscale-specialty niche when it comes to private brand new product development. than it has in the past.

For example, the new "fresh&easy Gourmet" meals for two retail for $9.99 each, which is a higher price-point than the grocer's similar "fresh&easy brand" prepared meals of a similar serving size.

The gross margins just aren't there to date with Fresh & Easy's overall private brand offering, which comprises about 65% of the about 5,000 SKUs offered in its stores.

The higher-end, higher retail price-point items carry a higher gross margin than the mainstream "fresh&easy" brand items do, which explains in part its strategy of focusing on them more so at present.

Expect to see the trend continue when it comes to the grocer's private brand development across all categories.

Related Stories

February 8, 2011: Private Brand Showcase Déjà Vu: Fresh & Easy Neighborhood Market Announces its New 'Gourmet' Brand

February 7, 2011: Getting There First...Plus, Are Tesco's Fresh & Easy and Safeway Traveling Down A Similar Private Brand Aisle?

January 21, 2011: Tesco's Fresh & Easy Neighborhood Market Introducing New 'Gourmet' Private Brand

December 23, 2010: New Items Show Fresh & Easy Neighborhood Market's Niche-Specialty Category Private Brand Development Focus

December 13, 2010: House (Sparking) Cider Rules at Fresh & Easy Neighborhood Market

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