Tuesday, July 12, 2011

Tesco in America: A Few Things Tesco Deputy CEO-Fresh & Easy Neighborhood Market CEO Tim Mason Might (and Probably Should) Say in His Speech at Town Hall Los Angeles Today

Tim Mason (above), the deputy CEO of Tesco plc and CEO of its El Segundo, California-based Fresh & Easy Neighborhood Market fresh food and grocery chain, will take center stage this afternoon in front of the movers and shakers in Southern California's business, government and non-profit worlds when he speaks at a luncheon event at Town Hall Los Angeles, which is one of the premier business and civic leadership forums in the United States.

Tim Mason, who joined United Kingdom-based Tesco in 1982 after working for three years for Walls Meat, a sausage company owned by Unilever, and rose to be become Tesco's head of corporate marketing in 1995 before coming to the U.S. in 2006 to start up Fresh & Easy Neighborhood Market as its first and to date only CEO, added the Tesco deputy CEO title along with that of chief marketing officer to his Fresh & Easy CEO title in March of this year after Tesco CEO Terry Leahy retired and was replaced by former head of European-Asian operations and corporate information technology chief Philip Clarke.

Mason, who remains based in Southern California, was in the running to replace Leahy as CEO of Tesco but instead was given the deputy CEO slot, which is a new position that was essentially created for him when Clarke was named CEO.

His chief marketing officer title is a return of sorts to Mason's pre-Fresh  Easy days, in that it's essentially the same position he held prior to 2006, although it's less hands on due to his responsibility heading up Tesco's Fresh & Easy chain in the states.

Mason's speech at the sold-out Town Hall Los Angeles event this afternoon, which is being held at the Millennium Biltmore Hotel at 506 South Grand Avenue in Los Angeles from 11:30 a.m. to 1: 30 p.m (he speaks from 12: 30-1:30 p.m)  is titled: "A 21rst Century Approach to Food Retailing."

Presumably Mason will point to now nearly four-year-old, 176-store Fresh & Easy Neighborhood Market, which has lost about $900 million since the first stores were opened in November 2007, including about $300 million in its fiscal year ended February 26, 2001, as an example of that topic in his speech this afternoon.

CEO Clarke and Mason say Fresh & Easy will break even by the end of Tesco's 2012/12 fiscal year, which is just 20 months away. The 2012/13 fiscal year ends February 2013.

In addition to his nearly 30-years with Tesco, Mason also has a very personal connection to the company and its history: He's married to the daughter of the famed former Tesco CEO and chairman Baron Ian MacLaurin of Knebworth, who retired from Tesco in 1997 (two years after Mason became its corporate marketing chief) and went on to a distinguished second career as chairman of Vodaphone and as an investor, philanthropist, politician  and all around power broker in UK business and political circles.

MacLaurin, who was born in 1937, was Tesco's very first executive trainee, joining the then minor British retailer in 1959. He rose through the ranks at Tesco, holding a number of senior executive positions before joining the board in 1970 and becoming managing director (CEO) shortly after that. In 1985 he was named chairman of Tesco's board.

When he took over as head of Tesco, Sainsbury's, which is now about tied with Walmart-owned ASDA as the UK's second-leading food and grocery retailer, was far and away Britain's top gun.

But when MacLaurin, who appointed Terry Leahy as CEO before he left, retired in 1997 after 38-years with the company, 27 of those years on the board, Tesco had cleaned Sainsbury's clock and was far and away the top retailer of food and groceries in the UK.

Terry Leahy built on what MacLaurin created at Tesco. Today Tesco, which is the third-largest food and grocery retailer in the world after number one Walmart Stores, Inc. and Carrfour of France, has nearly as much market share in the UK as ASDA and Sainsbury's do combined.

Tesco's share of the UK food and grocery market is about 31%. ASDA and Sainsbury's have an about 35% combined share, followed by Morrisons, which has about 12% of the market.

As you can see by those numbers, the UK's top four chains hold nearly 80% of the nation's food and grocery market share, leaving the country's numerous other chains to fight it out over the remaining 20-plus %. In fact, if you include the cooperative group (about 6% market share), the food and grocery market share held by the UK's "big five" chains jumps to over 80%.

A few things Mason might say this afternoon

We expect Mason's talk this afternoon at Town Hall Los Angeles to largely mirror Fresh & Easy Neighborhood Market's marketing positioning and message, which is that the chain of small-format (about 10,000 square-foot) fresh food and grocery stores is a "food retailer for the 21rst Century," because its focus is on providing "wholesome food at affordable prices" in a fairly no-frills setting, as the retailer says in its positioning statement.

Since Town Hall Los Angeles also has a civic focus in which business leaders often discuss the role of business in society and in the communities their respective company serves, we anticipate Mason will also devote a significant percentage of his less than one hour speech, which includes questions and answers at the end as part of the hour format, to discussing those aspects of Fresh & Easy's operations and how it relates to the community.

Mason will likely touch on the following topics as part of his speech tomorrow:

>Healthy foods offerings, using as example's the fact most of Fresh & Easy's private brand food products are made without the use of preservatives, artificial flavors or coloring;

>Local foods merchandising, using Fresh & Easy's "Farm to Store in 24 Hours" produce program as an example;

>The grocer's role in the community, siting as examples the fact Fresh & Easy gives a local non-profit organization a $1,000 donation each time it opens a new store, which to date has amounted to $176,000 in donations to various non-profit groups in California, southern Nevada and metropolitan Phoenix Arizona, where Tesco has its 176 Fresh & Easy stores, along with the various other charitable activities it engages in;

>Environmental sustainability; which is not only one of Mason's responsibilities as CEO of Fresh & Easy but also in his position as group deputy CEO of Tesco and;

>The future of Fresh & Easy Neighborhood Market, particularly as it pertains to Los Angeles and Southern California where the chain s headquartered, although this tpic area will be limited we suspect.

For example, a we reported in this December 10, 2010 story - Fresh & Easy Neighborhood Market CEO Tim Mason Says 70 New Stores Possible in Los Angeles Area - Mason told a gathering of business, political and community leaders at a meeting of the Valley Industry & Commerce Association of the San Fernando Valley on December 9, 2010: "We've (Fresh & Easy) identified 70 opportunities [new store locations] in Los Angeles. If we can open those 70 opportunities, that will be 1,400 jobs, as well as 300 construction workers per-site. We’re eager to invest and we want to get on."

Something Mason should address

Based on our information, Fresh & Easy Neighborhood Market hasn't acquired anything close to those 70 future locations in the Los Angeles area since Mason's speech to the group. And, according to our sources, current plans at Tesco don't call for opening anywhere close to 70 new Fresh & Easy stores in the Los Angeles area between now and the end of 2012.

Therefore, it would be informative if Mason offered an update to his December 9 speech tomorrow. Was the 70 stores in Los Angeles speech in December 2010, for example just more of Fresh & Easy's grand thinking and public relations - Terry Leahy and Mason originally said there would be 1,000 Fresh & Easy stores by the end of 2012-to-mid 2013 after all; instead current plans call for about 300 stores by February 2013 - or is it grounded in reality?

Tesco in (and a little bit of) America: A Story Mason could tell

We don't think Mason will offer a history of Tesco in his speech this afternoon. However if he does, an interesting aspect of that history has to do with the influence American supermarkets had on founder Jack Cohen when he visited the U.S. in 1935 and saw what at the time was a brand new innovation - the self-service grocery store - and by that we don't mean self-service checkout.

John Edward Cohen, called Jack for short, founded Tesco in the UK in 1924. That first store was a market stall  in London's East End.

The name Tesco was first used by Cohen on tea he sold in the market stall. The entrepreneur derived the name Tesco from the initials of his tea supplier, T E Stockwell, and combined the initials with the first two letters of his last name - Cohen.

In 1935 Jack Cohen incorporated his growing food and grocery retailing business as Tesco Stores Limited.

Grocery stores were all full-service at the time. Shoppers would tell store clerks the products they wanted, many of which were in bulk form, and store employees would "fill the order," picking the packaged grocery products from sheolves high and low and scooping the bulk items like sugar and flour from bins.

When Jack Cohen visited the U.S. in 1935, a number of grocery stores across the pond were trying the then radical concept of self-service, in which shoppers "filled their own orders," choosing what they wanted from shelves, bulk bins and refrigerated cases right out on the store floor rather than located behind a counter.

Cohen was hooked.

In 1945 he converted the first Tesco store, a small shop in St. Albans UK, into his frst all self-service market. Self-service took a while to catch on with the customers and the competition but Cohen pressed on, eventually converting all his Tesco stores to the concept, his competitors following his lead. Every new Tesco store Cohen opened was self-service as well.

Jack Cohen also brought back a popular U.S. merchandising technique of the time, the "stack it (product) high and sell it cheap" display, merchandising and pricing practice that was all the rage in the American food and grocery retailing business at the time -  and still is for many discount supermarket operators.

The Tesco founder, who retired in 1973 and was replaced by Ian MacLaurin, even earned the nickname Jack "The Slasher" Cohen for the low-price-focused merchandising practice he first saw in the U.S. and which Tesco built its business and massive growth on until the mid-1970's, when under MacLaurin's leadership the retailer took a more higher-end or up-market approach to selling groceries.

Tesco has maintained the more up-market-oriented approach to the present, although beginning in 2009 it  returned somewhat (and continues to today) to its more price-focused days, mixed with the more higher-end approach, forced to do so because of the economic recession and increased competition from Walmart's ASDA, Sainsbury's, Morrisons, hard-discount chains Aldi and Lidl, and even upscale operator Waitrose, which beginning in about 2009 under CEO Mark Price started to sharpen its pricing profile and has broadened its customer base beyond higher income consumers, who historically comprised the majority of Waitrose customers.

Had Jack Cohen not visited America in 1935, Tesco would still have eventually gone from a full-service grocery store to a self-service supermarket, although most likely much later than it did.

But had the founder not made the trip in 1935, Jack "The Slasher" Cohen may never have learned about the "stack it high and sell it cheap" merchandising approach, which fueled Tesco's initial growth and put it on the path of becoming what it is today, the leading retailer of food and groceries in the UK and the third-largest seller of groceries in the world.

Therefore, although Tesco has only been physically in America with Fresh & Easy Neighborhood Market since 2006, American-style food and grocery retailing circa-1935 and beyond has been "in Tesco" since Jack Cohn's first visited the U.S. in 135 and discovered self-service and stack it high, sellit cheap merchandising.

Not only would the Jack Cohen-USA visit story make a good antidote for Tim Mason to tell when he speaks to Southern California's movers and shakers at Town Hall Los Angeles this afternoon, it's also an instructive history lesson for he and CEO Philip Clarke to recall, study and learn from as Jack Cohen's market stall shop in London's East End, turned mega-global food and grocery retailer Tesco attempts to succeed with its U.S. Fresh & Easy venture in the 21rst Century, job one being to turn a fiscal year 2010/11 loss of $300 million into break-even 20 months from now.

Related Stories

~We written extensively about Tesco group deputy CEO-Fresh & Easy Neighborhood Market CEO Tim Mason. Click on this link -  - to read those stories.

~We've also written numerous stories about Tesco CEO Philip Clarke since he took over the corner office in March of this year.You can read those stories by clicking on his name: .

~You can also read about former Tesco CEO Terry Leahy, who retired in March after 14-years as CEO of Tesco by clicking here:

No comments: