Friday, July 15, 2011

Tesco Launches Fresh & Easy Neighborhood Market-Developed 'The Big Kahuna' Brand Wine in United Kingdom, South Korea Stores

"The Big Kahuna" on the shelf at a Fresh & Easy store in California.
Private Brand Showcase

El Segundo, California-based Fresh & Easy Neighborhood Market's "The Big Kahuna" proprietary or private brand wine has been launched in Tesco-owned stores in the United Kingdom and South Korea, along with being offered for sale by the case on the UK-based retailer's website.

Tesco-owned Fresh & Easy introduced "The Big Kahuna" as its in-house value-priced wine brand over three years ago, following a path blazed most successfully in the U.S. by Trader Joe's with its super-popular $1.99 per bottle Charles Shaw brand wine, more commonly referred to as "Two-Buck Chuck," the huge success of which has spawned similar priced value brand copy-cat versions from nearly every major food and grocery retailer in the country.

The Australian-produced "The Big Kahuna" comes in two varieties: Cabernet Shiraz (at top) and Chardonnay.

Fresh & Easy sells the wine in its stores in California (127 units) for $1.99 (750-ml bottle), and for 2.99 per bottle in its Nevada (21 units) and Arizona (28 units) grocery markets.

The wine is being offered at a higher price-point in the UK than at Fresh & Easy Neighborhood Market in the U.S.

For example, Tesco is offering Fresh & Easy Neighborhood Market-developed "The Big Kahuna" wine brand for a considerably higher price on its website in the UK. The current price per case is £22.80 (£3.80 per bottle), which is about $37.18 per case, or $6.19 per bottle, based on today's British pound to U.S. dollar conversion rate. The per-bottle retail in the stores it's currently in is a bit higher.

Tesco has a long history of offering Australian wines in its stores in the UK and in Asia, particularly South Korea. In fact, the British retailer is the largest customer of wine produced in Australia, largely based on the numerous Tesco proprietary or private brand wines produced for the retailer in the country.

It's a logical and smart move for Tesco to offer Fresh & Easy's "The Big Kahuna" brand wine in its UK and South Korea stores as well as online via Doing so expands the number of points-of-distribution - and thus increases total sales - for the brand, which in turn should allow Fresh & Easy Neighborhood Market to obtain a lower cost of goods for "The Big Kahuna" from its Australian producer.

A lower cost of goods means a better gross margin on the wine for Fresh & Easy, which is important because at $1.99 and $2.99 per bottle retails, along with the shipping costs from Australia, there isn't much gross margin in "The Big Kuhuna," or any other wine with similar overseas origin and the same points.

But even a few pennies cost savings per bottle can add up to nice little profit boost on the wine for Fresh & Easy Neighborhood Market because the value-priced "The Big Kahuna" is a high volume brand for the grocer.

Additionally, since the Australian producer of "The Big Kahuna" also produces additional proprietary wine brands for Tesco, it makes good top and bottom line sense to us to maximize the brand opportunities across all its chains globally for UK-based Tesco whenever it makes sense.

"The Big Kahuna" is the second private brand developed at El Segundo, California-based Fresh & Easy that Tesco is distributing in its stores in the UK, where it's the leading retailer of food and groceries.

The first brand, which we broke the news about in these two stories - June 26, 2011: Tesco Bringing Fresh & Easy Neighborhood Market's 'goodness for kids' Brand to the UK - With a 'Tesco' Twist; and June 27, 2011: Tesco Introduces First Items in Fresh & Easy Neighborhood Market-Developed 'Tesco goodness for kids' Brand in United Kingdom Stores - is "Tesco Goodness for kids", which is based on the "fresh&easy goodness for kids" brand developed in Southern California.

The Australian-produced wine brand with the Hawaiian name, "The Big Kahuna," is the first Fresh & Easy Neighborhood Market-developed private brand product to be sold in Tesco's stores in Asia we're aware of, in this case the country being South Korea.

Interestingly, we suggested in this March 8, 2011 piece - March 8, 2011: Tesco's Fresh & Easy ♥'s California With 27 New Varieties of Proprietary Brand Wines From the Golden State - that Tesco should take a few or all of Fresh & Easy's then new proprietary brands of California wines to the United Kingdom and South Korea.

Perhaps a few of those brands of wine produced in California will be the next ? Stay tuned.

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Additionally, you can read past stories in our Private Brand Showcase feature here.


Anonymous said...

Kahuna has been on sale in the UK for some time in stores, not long after F&E opened. Usually at a £5-£6 price point (budget wines usually start at about £3.50, e. g. Tesco own brand Montepulciano D'abruzzo at £3.59).

Kahuna is currently on a 3 for £12 promotion.

A lot of the difference in price will be the significant alcohol tax charged in the UK, and then sales tax on top (£1.81 alcohol tax, then an additional 20% sales tax on the total).

Fresh & Easy Buzz said...

Thanks for the comment and info anonymous.

We learned about Kuhuna being for sale in UK stores earlier this year. Wanted to wait until on sale also in South Korea stores to report it. And believe we're first to report both.

Surprised to hear you say has been since not long after F&E first opened, as didn't see it in any UK stores at that time.

Also, key point of our piece is that Kauna was developed by F&E. Doubt if many are aware of that, including UK publications.

Regarding the UK price; familiar taxes are higher there. But isn't the store listed price before taxes?

The U.S. $1.99-$2.99 bottle prices at F&E are before taxes.

Do you think Tesco will bring any of the F&E California wines we mention in the piece to UK stores or to wine site?


Anonymous said...

From memory, Kahuna showed up in the UK stores about 9 months after the first F&E opened in 2007, certainly within 12 months, certainly in the largest format "Extra" stores (5000-7000m2 sized stores).

As is common in countries which have a Value Added Tax kind of sales tax, the retail price on the shelf is *inclusive* of all taxes (unless the focus is business to business, on the presumption that the buyer can reclaim VAT and is therefore more interested in ex VAT price). Inc. VAT price on the shelf edge makes sense when you have a uniform country-wide tax rate at a large percentage, but it drives retailers nuts when the VAT rate is changed because all the shelf edge labels need to be changed.

Prices quoted in my previous comment are single bottle prices from home delivery website, which is now available for search without registration; home delivery prices directly match store prices (delivery charge is extra) although some items are home delivery only (Greater London area) and occasionally there are "home delivery only" promotions. There is a 5% case discount (for 6), and the dedicated wine website does charge different prices and has it's own promotions.

Anonymous said...

Here's a photo of Kuhuna in a Tesco store in South Korea You're right, it was just recently introduced there.