The 'Fresh & Easy' Writ: California Grocers Association Files Lawsuit Over Self-Service Checkout Booze Ban Law

News/Analysis/Commentary

An interesting new twist has developed regarding California's new law to ban sales of alcoholic beverages at self-service checkouts in retail stores, which is set to take effect January 1 2012.

On December 8 we published this piece - Bad Timing With New Law Effective January 1, 2012: Fontana, California Fresh & Easy Store Cited For Allegedly Selling Alcohol to Minors - in which we pointed out among other things that the language of the new law to ban booze sales at self-service checkouts in California set to take effect in four days is somewhat ambiguous regarding how at least one grocery chain, Fresh & Easy Neighborhood Market, should comply with the new law, although the law's intend is clear, which is that alcoholic beverage sales transactions take place at full-service checkouts.

Fresh & Easy is the only grocer in California that has self-service checkout only in its stores, which is why it's a special case.

In apparent agreement with the ambiguity portion of our December 8 story, On December 23 the California Alcoholic Beverage Control Department (ABC) issued an industry advisory notice in which it attempted to clarify how retailers are to comply with the law when it takes effect January 1, 2012.

Here's (in italics below) what the ABC said in its December 23 advisory notice to California retailers:

On January 1, 2012, Section 23394.7 of the Business and Professions Code goes into effect. This new provision was added to the ABC Act by Assembly Bill 183 (Ma) and regulates the sale of alcoholic beverages through the use of "customer-operated" checkouts at off-sale licensed premises. The section reads as follows:

23394.7. No privileges under an off-sale license shall be exercised by the licensee at any customer-operated checkout stand located on the licensee’s physical premises.

The purposes behind this law include preventing minors from purchasing alcoholic beverages, denying obviously-intoxicated patrons from buying alcoholic beverages, and preventing the theft of alcoholic beverages, by ensuring that alcoholic beverages are sold only in circumstances in which substantial interaction between the purchaser and a sales clerk occurs.

It is clear that a "customer-operated checkout stand" means a checkout stand or station that is designated for operation by the customer. Such checkout stands are commonly referred to as "self serve" or "self service" checkout stands. While retailers do monitor these customer-operated checkout stands and provide assistance to the customer as necessary to conclude any given transaction, including the purchase of alcoholic beverages, such monitoring or oversight does not satisfy the language and intent of the statute. Accordingly, no alcoholic beverages may be sold through any checkout stand that is enabled to allow operation by the customer at the time the customer’s check-out transaction commences or at any point during the check-out process.

The Department recognizes that customers do engage in certain aspects of the point-of-sale procedures even at checkout stands fully staffed and operated by store employees, such as swiping credit or debit cards and authorizing payment, or bagging their own groceries. The Department does not believe such involvement by the customer at a fully staffed checkout stand falls within the scope of customer-operated checkout stand.

The key portion in the ABC advisory notice is paragraph four above. Basically what the ABC is saying, and this is most applicable to Fresh & Easy Neighborhood Market due to its all self-service checkout system, is that all customer transactions that involve alcoholic beverage purchases must be conducted from start to finish by a store employee in a face-to-face manner.

Additionally, and most importantly, the advisory says alcohol sales cannot take place at an existing self-service checkout located on the physical premises (store) of a retailer that holds a California alcoholic beverage license.

What this essentially means in English is that any retailer - read Tesco's Fresh & Easy because all other retailers in California have both full and self-service checkouts in their stores - which has self-service checkouts only has to convert at least one of those self-service checkouts into a full-service checkout if it wants to sell alcoholic beverages in its stores effective January 1, 2012, or else it will not be in compliance with the law.

In other words, the ABC Advisory appears to reinforce our original interpretation of AB 183 vis-a-vis Fresh & Easy, which is that the grocer is going to have to convert at least one self-service checkout in all of its stores in California to full-service in order to satisfy the requirements of AB 183.

Interestingly, note how the ABC advisory mentions satisfying both the language and intend of AB 183. The reason this is interesting is because we addressed both the language, which is ambiguous, and the intent, which is what the ABC is backing up in its advisory, in our December 8 piece. Someone at the ABC must be reading Fresh & Easy Buzz.

Fresh & Easy Neighborhood Market has two types of self-service checkout systems in its stores. Read the full explanation and discussion in our December 8 story linked at top. Pictured above is one of the two versions, the longer checkstand system. These self-service checkouts, which have a conveyor belt, are monitored regularly by store employees, as opposed to the shorter checkstands (version two), which are monitored less frequently. It's these checkouts we suggest Fresh & Easy could modify and use as full-service to comply with the new California law. [Photo Credit: Fresh & Easy Buzz, December 2011.]

The ABC's last minute advisory, just 10 days before AB 183 takes effect, isn't the only new twist to the self-service checkout booze ban law.

Yesterday the California Grocers Association (CGA) filed a petition for a writ of mandate with the California Third District Court of Appeal to stay the December 23 California Alcoholic Beverage Control Industry advisory notice which the grocer's association argues in the lawsuit "attempts to provide guidance in complying with a new state law to regulate alcoholic beverage sales at assisted self-checkout terminals."

Notice the use by the CGA of the term "assisted" self-checkout terminals. Remember, Fresh & Easy is the only grocer in California with all self/assisted checkout in its stores.

In its lawsuit, the CGA claims the ABC's advisory notice is inconsistent with the statute, unenforceable, and in violation of the California Administrative Procedure Act (APA).

CGA notes this: "The new law, Business and Professions Code Section 23394.7, takes effect January 1, 2012. The law provides that 'no privileges under an off-sale license shall be exercised by the licensee at any customer-operated checkout stand located on the licensee's physical premises.'"

This is the key provision we detailed above, which essentially means Fresh & Easy will have to convert at least one self-service checkout to full-service to satisfy the new law, based on the ABC's advisory notice, which communicates how it will enforce the new law.

The advisory can be viewed as an enforcement document from the ABC, meaning that if what is stated in it isn't carried out by retailers in following the new law they could be cited.

Explaining why its filed the writ, CGA president Ron Fong says: "The Advisory attempts to provide grocery retailers guidance on how to comply with the new law, by defining one of the law's key provisions. But the definition is vague and the advisory is an illegal underground regulation. The advisory is as unclear as the law itself. To protect our members, CGA was forced to file this writ."

Rather than issue the advisory, Fong says, the ABC should follow standard procedure and promulgate regulations through the California Administrative Procedure Act.

"We strongly disagree with the ABC's attempted interpretation of the new law," Fong says, adding CGA met with ABC officials to discuss the new law. "What was discussed in our meetings was significantly different than the Industry Advisory released last week."

In addition to requesting the advisory be withdrawn, CGA requested the court immediately issue an alternative writ of mandate that stays the effectiveness of the advisory pending a final ruling by the Court.

As of today the appeals court hasn't issued a decision on the grocery association's writ.

In our opinion the advisory issued two days before Christmas by the ABC is clearly meant as an attempt to clarify what as we've said,  including most recently in our December 8 story, is ambiguous language in AB 183.

For example, based on our reading of the language of the law, before the ABC issued the advisory, it's our opinion Fresh & Easy might be able do the following and be in compliance with the legal language (but not the intent) of AB 183.

1. Post signs throughout the checkout area in its stores in California directing customers that if purchasing alcoholic beverages they must use one or more specially designated checkouts.

2. Those specially designated checkouts would be one or more of the type we discuss in our December 8, 2011 story here.

3. Store clerks would then conduct the entire transaction with customers at these designated checkouts; start to finish and face-to-face.

We stress this is merely our analysis and opinion. It isn't an attempt to make a legal determination regarding AB 183 in any way, shape or form.

Additionally, we aren't suggesting Tesco's Fresh & Easy Neighborhood Market plans or had planned to use a version of the system we've outlined above.

The December 23 ABC advisory clearly makes our above scenario moot however (if the CGA doesn't prevail), as it essentially says compliance with the law requires any holder of a California alcoholic beverage license to provide at least one self-service checkout in its store or stores in order to comply with the law effected January 1.

The ABC advisory shouldn't have any effect on any other grocer in California besides Fresh & Easy though, since all the state's other chains and independents either offer full-service checkout only, or in stores with self-service, offer both types of checkout.

These retailers and others only need to instruct customers that if they have alcoholic beverages they must use a full-service checkout lane.

As we've reported previously, Tesco's Fresh & Easy would like to keep its current self service/assisted service checkout system, with as little modification as possible, to comply with AB 183.

With just four days until the self-service checkout booze ban law takes effect, it now appears the grocery chain, which has all but 49 of its 184 stores in California, is placing its hopes to be able to do so on the success of the CGA's lawsuit. The other stores are in Nevada (21 units) and Arizona (28 units.)

From where we sit we find the ongoing saga behind AB 183 surrealistic in the extreme for two reasons.

First, as it pertains to AB 183, it basically will do little if anything to curb underage drinking, which is its primary stated intent, in our analysis.

Most teenagers, for example, obtain alcohol by getting an adult to buy it for them, not by purchasing is at self-service checkouts in retail stores. And while they're are cases of minors gaming self-checkout systems, the percentage is small.

Second, based on four years' of extensive research and reporting on Tesco's Fresh & Easy, which has lost nearly $1 billion since the first stores were opened in November 2007, its our analysis the grocer is missing out on a significant amount of business because numerous shoppers, particularly consumers who are in the 50-plus age segment, do not like the all self/assisted checkout system in the stores, as we've previously detailed in the blog.

As many consumers we've interviewed have told us, 'Why should I scan and bag my own groceries at Fresh & Easy when I can get the same items at numerous other stores for the same price or less and get waited on.'

We've also interviewed numerous consumers who've tried Fresh & Easy but specifically haven't gone back because they don't like scanning their own purchases, nor do they like to ask for help from store workers.

Many shoppers like Fresh & Easy's self-serve checkout. But in the competitive grocery retailing business it makes little sense to exclude the many consumers who dislike it, which is why all of Fresh & Easy Neighborhood Market's competitors offer either full-service checkout or a combination of full and self-service checkout.

For example, Walmart Stores' U.S. division, which is the leading retailer of food and groceries in the U.S. by market share, has studied the utility and feasibility of offering self-service checkout exclusively in some stores but has decided against doing so for reasons of shopper choice and common retailer savvy. All its stores with self-service checkout lanes also offer full-service as not only an option but as a majority offering.

There are only four days until AB 183 becomes law on January 1, 2012. Stay tuned here.

[Readers: Click here to view our extensive past coverage, reporting and analysis of California's new law that bans acoholic beverage sales at self-service checkouts in retail stores effective January 1, 2012.]

Solid Performance Gives Tesco 'Fresh & Easy' Wiggle Room - But CEO Clarke Shouldn't Sleep Soundly Every Night

The Insider - Heard on the Street

United Kingdom-based global retailer Tesco has lost nearly $1 billion since it launched its El Segundo, California-headquartered Fresh & Easy Neighborhood Market grocery chain in November 2007.

That's a whole lot of money to lose on a food retailing venture, even for the world's third-largest retailer. Walmart is the largest by annual revenue. France's Carrefour is number two globally, followed by Tesco.

But despite its big loss with Fresh & Easy from 2008-2011, Tesco has performed superbly over the last four years.

For example, over its fiscal 2008-2011 period Tesco, which holds an about 30% market share in the United Kingdom and has operations in 14 countries, has grown its group revenue by a very healthy 31%.

In contrast, Walmart Stores, Inc. grew its revenue during the same time period by about 11%, which is far from bad for the mega-retailer from Bentonville, Arkansas, considering it has five times' the annual revenue as Tesco does.

Even more impressive, Tesco has grown its profits by 35% over the last four years, despite racking up hundreds of millions of dollars of annual losses from 2008-2011 with Fresh & Easy.

Additionally, despite continuing to have a negative overall profit margin at Fresh & Easy of around -35%, Tesco has averaged a very impressive profit margin of around 4% over the last four years.

That's more than double the profit margin Kroger Co., the leading supermarket chain in the U.S. and the number two retailer of food and groceries in America after Walmart has turned in over the last four years, for example. Kroger's annual revenue, all of which is generated in the U.S., is fairly close to, although less than, Tesco's.

On top of the impressive metrics detailed above, Tesco has averaged a very healthy return on equity of about 15% over the last decade, which has satisfied all but the most aggressive of its major investors.

It's this impressive performance that, in my analysis and opinion, is why Wall Street and The City (the UK's Wall Street) have been so patient with Tesco and its continuing struggles with and substantial financial losses at Fresh & Easy Neighborhood Market.

It's also why these big institutional investors, like Warren Buffett in the U.S. who owns about 4% of Tesco, will make some noise if Tesco doesn't break-even with Fresh & Easy Neighborhood Market by the end of its 2012/13 fiscal year, which begins February 2012 and ends in February 2013, as CEO Philip Clarke has said will happen, but will give the retailer more time to achieve the goal as long as Clarke and company continue to reduce the loss percentage, as was the case in Tesco's 2011/12 fiscal-half year, when it reported a loss of 23% less ($112 million) for Fresh & Easy than it did for the same period the year before.

Tesco reports the financial results for its 2011/12 fiscal year, which ends in February 2012, in April 2012.

If come April 2012 Tesco posts a 2012/13 fiscal-year reduction in losses at Fresh & Easy similar to what it reported in October 2011 for the half-year, it will get near-unanimous praise from the financial community for its efforts, thus giving Clarke plenty of wiggle room over the next year, in my analysis.

Tesco won't break-even with Fresh & Easy by the end of its 2012/2013 fiscal year though, in my analysis and opinion. But I'm not ready to put any specific numbers to my prediction this far out.

By the way, a loss of say $50-$100 million isn't break-even, as it's been publicly defined by CEO Philip Clarke. It's breaking even. Therefore, I do hope the goal posts aren't changed at Tesco, with a spokesperson next year perhaps suggesting something like, "Well, we didn't mean 'literally' breaking even by the end of fiscal 2012/13."

Conversely, if Tesco posts a loss of say $10-$15 million for Fresh & Easy at the end of fiscal 2012/2013, I will consider that break-even. Perhaps the holiday season has me in the giving mood?

The upcoming year, 2012, is a crucial one for Tesco with Fresh & Easy.

California (south, central and north), metro Las Vegas, Nevada and metro Phoenix, Arizona, where Tesco's 184 Fresh & Easy grocery markets are located, are among the most competitive food retailing market regions in the U.S. The competition in all three states will only get more intense in 2012.

For example, Walmart plans to open its first Walmart Neighborhood Market stores in California next year.

Mega-dollar store chain Dollar General will open its first Dollar General Market small-format grocery stores in California, starting in the north, in 2012. Dollar General opened five of the grocery markets in metro Las Vegas this year, with more units planned for the region.

The coming year will also find Boise, Idaho-based discount grocer WinCo Foods opening its first one or two stores in metro Phoenix. Fast-growing WinCo, which operates mega-stores averaging about 90,000 square-feet, is a competitive force wherever it goes. Metro Phoenix will be no exception, in my analysis.

Tesco has said it plans to open about 50 new Fresh & Easy stores in 2012. Nearly all of those stores will be in California, according to Fresh & Easy Buzz's research and reporting.

Tesco's ace in the whole in terms of its stellar performance over the last few years is its mega-market share at home in the UK, where it has over 2,700 stores and generates about 70% of its annual revenue.

Tesco controls about 30% of the UK market, which is nearly as much as its two leading competitors - Walmart-owned Asda and Sainsbury's - combined.

Asda has an about 17% share. Sainsbury's is very close behind with about 16.3%. Morrisons, the fourth-largest food and grocery retailer in the UK, has an about 12.4% market share. These "Big Four" chains, as they're called in the UK, account for nearly 75% of all food and grocery sales in the nation, according to the data from market research firm Kantar.

I don't see Tesco losing much market share at home in the UK over the next couple years despite the heavy competition there from Asda, Sainsbury's and Morrisons, along with Waitrose at the more up-market end and the hard discounters Aldi and Lidl on the other end. Tesco is a mid-range food retailer in the UK, as are Asda and Morrisons.

Therefore, I also expect Tesco to perform at or near the same levels it has over the last four years, despite continuing losses at Fresh & Easy in America.

As long as this is the case, Tesco CEO Philip Clarke will continue to get his wiggle room for Fresh & Easy from investors until early 2013, when the retailer reports its fiscal 2012/13 results, which if Clarke is right will include breaking even with what then will be a five-year-old and some change Fresh & Easy Neighborhood Market chain in America.

What I describe though is only the midfield game for Clarke and Tesco when it comes to Fresh & Easy. In other words, getting to break-even by fiscal 012/13 end and doing so without experiencing the wrath of investors is merely job one.

The bigger picture, which is if Fresh & Easy Neighborhood Market is actually a viable food and grocery retailing model and business for Tesco in the U.S., is what Clarke must also be thinking very seriously about. I don't know about him - but it would keep me up at least one night out of each week.

I'm not going to address that mega-question today. But it is a central question I will be addressing in this space throughout 2012.

I will say this today though, although I've seen some considerably promising improvements at Fresh & Easy since Philip Clarke took over as CEO of Tesco in March of this year, the jury is still out on the central question I posed above, which is if Fresh & Easy Neighborhood Market is a viable - defined as something that can make money and be grown beyond its current three state geographical area - business for Tesco in America.

Stay tuned for that discussion in 2012. See you next year.

- The Insider

Related Stories

December 8, 2011: Tesco Reports 11.9% Q3 Comp Store Sales Gain for Fresh & Easy ... But On Heavy Discounting

November 10, 2011: Chief Marketing Officer Uwins Out in Top-Level Reshuffling at Tesco's Fresh & Easy Neighborhood Market

October 10, 2011: Gov. Signs AB 183: End of Self-Service Checkout Only in California For Fresh & Easy Neighborhood Market if Stores to Still Sell Alcohol

July 1, 2011: Tesco Shareholders Meet: Board Says Yes to Pay Plan, No to Investigation of Fresh & Easy Neighborhood Market; Pig Farmers Say it's Impossible to Bring Home the Bacon

May 11, 2011: CEO Philip Clarke Launches A New 'Vision and Strategy' For Tesco

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

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

January 27, 2011: Incoming Tesco CEO Philip Clarke Names Expanded Corporate Executive Committee

October 8, 2010: 'The Insider' - Incoming Tesco CEO Philip Clarke Needs to 'Imagine' When it Comes to Fresh & Easy Neighborhood Market USA

October 5, 2010: Philip Clarke's Early Welcome to America: Tesco Logs $151 Million Half-Year Loss For Fresh & Easy Neighborhood Market

October 4, 2010: Tuesday's Tesco Interim Report Offers A Road Map of Sorts For the Future of Fresh & Easy Neighborhood Market

September 13, 2010: 'The Insider' - Reading Philip Clarke's Tea Leaves: Might A Mixed Corporate/Franchise Model Be in Fresh & Easy Neighborhood Market's Future?

June 12, 2010: 'The Insider' - Will Phil Clarke Shake Things up at Fresh & Easy Neighborhood Market USA When He Becomes Tesco CEO in 2011?

June 8, 2010: Tesco CEO Terry Leahy Retiring; Philip Clarke New CEO; Tim Mason Named Deputy CEO But Will Remain Fresh & Easy Neighborhood Market Chief in U.S.

[Readers: Click here to read past columns by 'The Insider.'

Merry Christmas From Fresh & Easy Buzz

Tesco Celebrates the Holidays With Mince Pie Ice Cream in the UK and Pumpkin Spice at Fresh & Easy in America

Private Brand Showcase

A slice of pie, often with a scoop or more of ice cream on the side à la Mode style, is a post-Christmas dinner dessert tradition throughout much of the world, particularly in Europe and America.

For example, no proper British family would be caught dead without having a mince pie on the cupboard for dessert on Christmas Day.

By the same token, most American families include pumpkin pie as part of their holiday dessert offerings, often along with apple pie, and in some cases even mince.

As any kitchen anthropologist knows, when it comes to pie à la Mode, there are two types of eaters: the ones who like just a bit of ice cream to go along with a healthy slice of pie; and those ice cream lovers who prefer just a smidgen of pie to go along with their ice cream.

Those in the latter camp can rejoice this holiday season - at least if you live in the United Kingdom, California, Nevada or Arizona.

Why: Because Tesco in the United Kingdom and its sibling in America, Fresh & Easy Neighborhood Market, which has 184 stores in California, Nevada and Arizona, are celebrating the holiday mince and pumpkin pie traditions in each respective country with special seasonal ice cream flavors.

Just in time for Christmas, Tesco has come out with mince pie ice cream under its Tesco Finest premium private brand, which it's offering in most of its 2,700-plus stores in the United Kingdom.

The ice cream is the second seasonal Tesco Finest brand product it's come out with a mince pie theme and taste. The other one is noted and pictured in this December 4, 2011 story: 'Merry Crispmas' ... From Tesco.

The Tesco Finest Mince Pie Ice Cream includes mincemeat made with French brandy and ruby port wine and bits of buttery pastry (the crust). There's also citrus and loads of spices, including cloves and cinnamon.

The limited edition ice cream, which is designed to stand alone rather than merely share a plate with mince pie, although mince pie lovers might find themselves "double-dipping" in a like-for-like à la Mode fashion.

Fresh & Easy, which is owned by Tesco, is offering its own frozen version of pumpkin pie, with its limited edition fresh&easy brand Pumpkin Spice Ice Cream, pictured above.

The ice cream, which retails for $3.99 (1.25 quarts) is spiced with nutmeg, ginger and cloves, similar to how a traditional pumpkin pie is.

Like the Tesco Finest Mince Pie Ice Cream, Fresh & Easy's Pumpkin pie version is also designed to stand alone, although we see numerous à la Mode opportunities. A scoop or two sharing the same plate as a white or vanilla cake might make for a nice taste contrast, for example. Sort of turning the pie (or cake) à la Mode tradition on its head, so to speak.

Mince pie used to be a much more popular Christmas holiday dessert item than it is today in the United States. It remains so for Americans of a certain age but ask most Americans under about age 60 if they would like mince pie for dessert come Sunday and, with some exceptions (British expats for one), the answer will be no thanks.

Pumpkin pie remains a holiday favorite in America though, its popularity usually knowing no age boundaries. For example, here at Fresh & Easy Buzz we know numerous kids as young as 6-years-old and on up who love the spicy custard pies, and not just for the holidays.

But ice cream could be another matter. For example, we've searched pretty comprehensively and haven't found a mince pie ice cream in the United States, perhaps for the reason described above regarding the overall popularity of mince pie in America.

But perhaps those mince pie adverse younger folks might like the pie's flavors offered in ice cream form?

As such, perhaps Fresh & Easy's product developers should consider giving a fresh&easy brand mince pie ice cream a go next holiday season. The recipe is in the family, after all.

And even if younger consumers don't take to it, there's definitely a age 60-plus (which happens to be the fastest growing population cohort in the United States) or so group of people out there in California, Nevada and Arizona that would likely give it a try.

[Photo Credit #1: fresh&easy Pumpkin Spice Ice Cream = Fresh & Easy Buzz.]
[Photo Credit #2: Tesco Finest Mince Pie Ice Cream = @Cinabar, via Twitter.]

Recent Private Brand Showcase Stories

December 5, 2011: The Tesco Christmas Dinner Pizza - A Festive Feast Without the Fork

December 4, 2011: 'Merry Crispmas' ... From Tesco 

December 1, 2011: Master Chocolate-Maker Tells the Story Behind Fresh & Easy Neighborhood Market's Holiday Confections

November 14, 2011: Safeway Puts its Brand on Ice in San Francisco For the Holidays

November 13, 2011: Trader Joe's Introduces 'Wasabi Arugula' ... Minus the Wasabi

November 9, 2011: Glatt to Meet You Paisan - Kosher 'Meats' Italian at Mollie Stone's Markets

Readers: Click here to read all past stories in our Private Brand Showcase feature.

Hermosa Beach, California Fresh & Easy Express Taking Shape For January 11, 2012 Opening

What a difference a week or so makes: New signs on the future Fresh & Easy Express, pictured above. Above photo taken 12/19/11. Photo below from our December 13, 2011 story. Photo credits: Fresh & Easy Buzz.

Retail Ethnography - Welcome to the (Eclectic) Neighborhood

A week ago today we wrote and published this story - December 13, 2011: Welcome to the (Eclectic) Neighborhood: Hermosa Beach, California Fresh & Easy Express Set to Open Jan. 11, 2012 - about the Fresh & Easy Express store Tesco's Fresh & Easy Neighborhood Market is preparing to open in early January 2012.

In the story we reported that El Segundo, California-based Fresh & Easy Neighborhood Market plans to open what is calls internally the "F3 store" on January 11, 2012.

The Fresh & Easy Express stores have about 3,000 square-feet of selling space in what is about 4,000 square-feet of interior space, hence the "F3 store" moniker. The standard stores are called F10's because they have 10,000 square-feet of selling space.

The grocery chain hasn't announced the opening date of the Hermosa Beach Fresh & Easy Express store, or the dates of any other stores it plans to open in January 2012.

Since our story came out last Tuesday, Tesco's Fresh & Easy has made considerable progress on the 'Express' store, which is located on Pacific Coast Highway (PCH) and 8th Street in Hermosa Beach.

For example, as you can see in the photograph at top taken Monday, December 19, the exterior of the building, which previously housed a furniture store called Mortise & Tenon, now sports two new signs - the vertical sign directing shoppers to the store's parking lot on 8th Street and the Fresh & Easy signage on the building's facade.

If you take a look at the second photo at top, which is from our December 13 story, you'll see that the two signs weren't on the future Fresh & Easy Express store.

The vertical Fresh & Easy Express sign (see top photo) directing shoppers to the parking lot on 8th Street replaced the old Mortsie & Tenon furniture store sign (see second photo at top).

The Hermosa Beach unit is one of four Fresh & Easy Express stores the grocer plans so far to open in early 2012, all in Southern California.

The other three units are: Los Angeles (Figueroa Street and Jefferson Boulevard); Burbank (Victory Boulevard and Buena Vista); and Laguna Niguel (Crown Valley Parkway and Golden.)

The first Fresh & Easy Express store opened November 2, 2011 in Los Angeles See the November 1 and 2, 2011 stories linked at the end of this piece for details and photographs.

On November 15, 2011 Fresh & Easy Market announced via a press release that it plans to open 20-plus new stores in early 2012.

The Tesco-owned fresh food and grocery chain didn't and hasn't announce the specific locations of the stores, mentioning just the cities the grocery markets will be located in.

However, through our reporting and research we've identified the addresses of the 20-plus stores, which we published in this story on November 15: Fresh & Easy Neighborhood Market to Open 20-Plus New Stores in Early 2012 - We Have What's Not in the Press Release.

Tesco's Fresh & Easy will close out 2011 with 184 stores in California (135 stores), Arizona (28 units) and Nevada (21 units.)

Of the 135 grocery markets located in California, 105 units are in Southern California. There are 14 stores, seven units each in metro Bakersfield and metro Fresno, in the mid-to-southern Central Valley, and 16 stores in Northern California.

Tesco has opened 29 new Fresh & Easy stores in calendar year 2011. No new store openings are planned the the remainder of the year.

The Hermosa Beach Fresh & Easy Express store is slated to open in three weeks. Stay tuned.

Related Stories

December 13, 2011: Welcome to the (Eclectic) Neighborhood: Hermosa Beach, California Fresh & Easy Express Set to Open Jan. 11, 2012

November 23, 2011: Tesco and its Fresh & Easy Chain Hoping 'Seven' is the Lucky Number For 'Fresh & Easy Express'

November 2, 2011: Open in Los Angeles: A Look at the First 'Fresh & Easy Express' Store

November 1, 2011: Analysis: Tesco Opens First 'Fresh & Easy Express' Store Tomorrow in Los Angeles ... So What ... ?

July 30, 2011: First 4,000 Sq. Ft. Fresh & Easy Neighborhood Market 'Express' Store Set to Open in Los Angeles' San Pedro Community This Year

January 23, 2011: Tesco's Fresh & Easy Neighborhood Market Looking For Locations For New, Smaller-Format 4,000-to-5,000 Square-Foot Stores

Welcome to the (Eclectic) Neighborhood: Hermosa Beach, California Fresh & Easy Express Set to Open Jan. 11, 2012

Retail Ethnography

Welcome to the neighborhood.

Tesco's Fresh & Easy Neighborhood Market plans to open its micro-small-format (3,000 square-feet) Fresh & Easy Express fresh food and grocery store (pictured at top) at Pacific Coast Highway (PCH) and 8th Street on an eclectic commercial block in Hermosa Beach, California on January 11 2012, according to the banner (below) the grocer recently put on the exterior of the vacant building being renovated to house the store.

And an eclectic block it is - particularly the three retail stores that will be neighbors of the Fresh & Easy Express market when it opens in less than a month.

Sharing the block fronting the PCH and across 8th Street are three stores: Sassy's, The Tender Box and Learned Lumber.

The last business, Learned Lumber, is self-explanatory - it's a lumber yard.

But the other two, Sassy's and The Tender Box, are nearly impossible to discern from just the names of the stores.

Venture a guess what type or format of stores they are, without looking a the photos?, of course

Fortunately you don't have to guess, that's what we're here for - to go out in the field and report, and then inform.

Sassy's (at left, above), which is located next to The Tender Box (at right, above) and is a mere baguette's throw from the future Fresh & Easy Express store, is a adult lingerie and costume shop, featuring everything for a night at home (lingerie), a special night out (adult costumes) or a mix of both in the same evening.

If you're thinking The Tender Box might be, say, a tobacco shop, think again. And when trying to guess, think about its proximity next door to Sassy's.

Give up?

Well, and remember we're merely the messenger, The Tender Box specializes in adult entertainment and toys, and we aren't referring to consumer electronics, although some of the inventory for sale in The Tender Box does require batteries to use.

Unique business names seems to be the norm for the block.

For example, the vacant 4,000 or so square-foot building (pictured below) Fresh & Easy Neighborhood Market is putting the 'Express' market in previously housed a furniture store named Mortise & Tenon. For those not familiar with the term mortise & tenon, it is a type of joint used in wood working, such as in furniture-making. The store will have about 3,000 square-feet of selling space.

All four of the stores - Fresh & Easy Express, the lumber yard, Sassy's and The Tender Box are on the west side of the PCH. Learned Lumber and Fresh & Easy Express are next to one another on 8th Street, while Sassy's and The Tender Box are next to one another across 8th Street.

And yes, no need to ask - Learned Lumber does sell plenty of "hardwood," and the now gone furniture store - which the Fresh & Easy Express is replacing - also offered various items made out of that particular variety of lumber back in its day on the block.

The eclectic nature of the businesses on the block shared with the soon-to-open Fresh & Easy Express store actually are a pretty good depiction of the Hermosa Beach neighborhood itself, which is, well ... eclectic.

The demographic is mostly young. But there are also a number of older, long-term residents in the area, including a few folks who still call themselves hippies.

It's also fairly bohemian or hipster if you're looking for a lifestyle generalization.

There are also numerous singles and young couples in the neighborhood, which is highly dense and filled with apartment complexes and condominiums.

Our four-plus years of research and reporting on Tesco's Fresh & Easy shows younger people, those about 35 and under, as well as singles, tend to be the demographic that thus far has taken to the Fresh & Easy format the most, from a demographic and lifestyle perspective.

Therefore, the demographic and lifestyle composition of the neighborhood could bode well for the Fresh & Easy Express, which is essentially a smaller - about 3,000 square-feet, as compared to 10,000 square-feet - and edited - about 2,500-2,700 SKUs, as compared to about 5,500 SKUs - version of the 10,000 square-foot standard-version Fresh & Easy stores.

The area isn't an inexpensive place to live however.

Housing costs and rents in Hermosa Beach are a bit less than is the case in nearby Manhattan Beach (where Fresh & Easy has a store), for example.

But Hermosa Beach is only affordable from the perspective of what people living in coastal Southern California consider "affordable" to be. As an example, If you're reading this and renting a two bedroom apartment in metro Phoenix, Arizona (or some place similar), multiply what you're paying by a factor of around three.

What the neighborhood doesn't have much of is foot-traffic. Rather, the traffic in and around the block where the future Fresh & Easy Express store will open at Pacific Coast Highway and 8th Street, on January 8, 2012, is mostly automotive.

The 'Express' market will front the PCH, as you can see in the photo above. But there's also an entrance on 8th Street, where there's a small parking lot, pictured below.

There's no on-street parking to speak of either on 8th Street (a few spaces on one side of the street is all) or on the PCH. Therefore, the small parking lot next to the Fresh & Easy Express store on 8th Street is about it on what is a very auto-traffic heavy block.

These same tight space conditions might also make food and grocery deliveries to the 'Express' store a bit of a challenge. The earlier in the morning the better would probably be a good move.

The Hermosa Beach neighborhood isn't a food desert.

There's a Ralphs' Fresh Fare supermarket, for example, along with a big CVS Pharmacy drug store, which has a large selection of groceries, perishables and frozen foods (and liquor, beer and wine) but no fresh foods like meat or produce, and a 7-Eleven convenience store, all a couple to a few minutes drive from the Fresh & Easy Express location at Pacific Coast Highway and 8th Street.

Additionally, there's a Whole Foods Market store about 10 minutes away by car from Pacific Coast Highway and 8th Street, along with a couple other grocery stores a 10-15 minute drive away.

The Hermosa Beach Fresh & Easy Express set to open January 11 is one of four 'Express' format stores Tesco's Fresh & Easy Neighborhood Market plans to open in early 2012, as we reported and detailed in this story on November 15, 2011: Fresh & Easy Neighborhood Market to Open 20-Plus New Stores in Early 2012 - We Have What's Not in the Press Release.

The other three Fresh & Easy Express stores with planned early 2012 openings are in Los Angeles, Burbank and Laguna Niguel. The addresses of those stores are in the story linked above.

Tesco's Fresh & Easy Neighborhood Market opened its first 'Express' store at La Cienega Boulevard and 18th Street in Los Angeles November 2, 2011.It's the only Fresh & Easy Express unit currently open.

In addition to the La Cienega store, we've identified the addresses of six more future Fresh & Easy Express stores - the three noted earlier set for early 2012 openings, plus two more, which we listed in this November 23, 2011 story: Tesco and its Fresh & Easy Chain Hoping 'Seven' is the Lucky Number For 'Fresh & Easy Express.'

There are also photographs of the Burbank Fresh & Easy Express, construction in progress, in the November 23 piece.

Back at Pacific Coast Highway and 8th Street, where the Fresh & Easy Express store will soon open in the former furniture store building, we don't see a whole lot of retail synergy coming to the grocery market from its immediate neighbors - Sassy's, The Tender Box and Learned Lumber - although one can imagine that after spending time shopping in any or all three of the stores one might have worked up a bit of a thirst or hunger.

Conversely, we doubt if the Fresh & Easy Express will bring much new business to Sassy's, The Tendor Box and Learned Lumber, since all three stores tend to be what retail experts call destination stores.

The lumber yard, for example, tends to deal primarily with contractors and local handymen rather than off the street trade, although its probable that after loading a truck with lumbar a contractor might venture over the the Fresh & Easy Express for a bite to eat and a beverage.

And we could be completely wrong about synergies in the case of Sassy's and the Tender Box. Both stores cater to women as well as men, for example - and it is a fact women shop for groceries at a much higher percentage than men do. So perhaps the close proximity of the three stores will lead to a bit of synergy for the two stores plus the Fresh & Easy Express.

But, in a less tongue-in-cheek analysis, based on the demographics of the neighborhood, the potential for the Fresh & Easy Express store doing well in the area is fairly high. For example, the large selection of ready-to-eat and ready-to-heat fresh-prepared foods available in the "Express' format stores should be particularly popular with the young and single residents in the Hermosa Beach neighborhood.

Conversely, the major drawback for the Fresh & Easy Express store at Pacific Coast Highway and 8th Street in Hermosa Beach is the lack of adequate parking. The nearby Ralphs, CVS drug store, 7-Eleven and Whole Foods Market store all have large parking lots, for example. And since the neighborhood is high on auto transit and low on foot-traffic, having adequate parking is a very important variable.

But Fresh & Easy Express is a eclectic little store - its small but stocked with plenty of ready-to-eat and heat foods; has an in-store bakery; offers an assortment of groceries, perishables, frozen foods and non-foods items; sells beer and wine; and serves fresh coffee by the cup - and the commercial strip where it's located on Pacific Coast Highway and 8th Street offers an eclectic mix of retail, to say the least. So perhaps the little grocery store will fit right in, sharing the block with Sassy's, The Tender Box and Learned Lumber, in a Hermosa Beach bohemian kind of way.

[Editor's Note: Photo Credit - Fresh & Easy Buzz. The photographs were taken by a Fresh & Easy Buzz correspondent on 12/07/11. Click on the photos to enlarge.]

Related Stories

November 23, 2011: Tesco and its Fresh & Easy Chain Hoping 'Seven' is the Lucky Number For 'Fresh & Easy Express'

November 2, 2011: Open in Los Angeles: A Look at the First 'Fresh & Easy Express' Store

November 1, 2011: Analysis: Tesco Opens First 'Fresh & Easy Express' Store Tomorrow in Los Angeles ... So What ... ?

July 30, 2011: First 4,000 Sq. Ft. Fresh & Easy Neighborhood Market 'Express' Store Set to Open in Los Angeles' San Pedro Community This Year

January 23, 2011: Tesco's Fresh & Easy Neighborhood Market Looking For Locations For New, Smaller-Format 4,000-to-5,000 Square-Foot Stores

Tesco Reports 11.9% Q3 Comp Store Sales Gain for Fresh & Easy ... But On Heavy Discounting

News & Analysis

United Kingdom-based Tesco said today comparable-store-sales (called like-for-like in the UK) for its El Segundo, California-based Fresh & Easy Neighborhood Market chain increased by 11.9% for its 2011/12 fiscal year third quarter, which ended November 26, 2011.

The 11.9% comparable-store-sales gain is slightly less than the 12.4% Tesco reported for Fresh & Easy for its fiscal second quarter, which ended August 27.

Comparable or same-store-sales is a key indicator for retailers because the metric only includes stores open a year or more.

In contrast, overall sales growth as a metric includes new stores opened during a given quarter. Tesco reported a 29.2% overall growth rate for the third quarter for Fresh & Easy Neighborhood Market.

When looking at Fresh & Easy Neighborhood Market, comparable store sales are what's key because the numerous new Fresh & Easy stores Tesco opens tends to make the overall sales number meaningless when it comes to gaining any real understanding of the 184-store U.S. grocery chain's sales performance.

The 11.9% comparable sales growth number is a good one for Tesco's Fresh & Easy. It also continues a solid comparable sales growth trend for the grocery chain, which has turned in double-digit comparable sales increases over the last few quarters.

However, a considerable percentage of that double-digit comparable sales growth is due to heavy discounting by the chain during the third quarter, which included distributing numerous 20% off discount store coupons, along with the discounts offered customers with the new Fresh & Easy "Friends" reward card which was launched in early October, in our analysis.

Fresh & Easy's loyalty/rewards card gives customers points for certain purchases which they can redeem for cash discounts. For example, 500 points equals five dollars off any given total purchase. Fresh & Easy gave (and is still offering as an intro) shoppers 500 free points or $5 on their cards just for signing up.

Philip Clarke, Tesco's CEO, said today U.S. like-for-like revenue rose almost 30% in the "week around Thanksgiving," which "demonstrates the business is really gaining traction with customers."

What Clark didn't mention though - and what you aren't likely to read elsewhere because we track such things closely at Fresh & Easy Buzz - is that from November 2 through the week leading up to Thanksgiving, Fresh & Easy Neighborhood Market distributed five of its 20% off - $10 off purchases of $50 or more, 6 off $30, $5 off $25 - store coupons via its "friends of fresh & easy" e-mail-based flyer. The coupons are also easily available online by simply typing "fresh & easy coupons" into Google or one of the other search engines.

Fresh & Easy distributed the 20% off store coupons online on the following dates leading up to Thanksgiving on November 24: November 2, 9, 16, 18 and 22.

Fresh & Easy Neighborhood Market also distributed the coupons in its weekly advertising circulars, which are direct mailed to consumers homes.

Employees at a number of Fresh & Easy stores we visited in the three weeks before Thanksgiving were also handing out store coupons to shoppers. Additionally, a number of our correspondents reported in the same thing.

Such discounting, which has helped Tesco achieve double-digit same-store sales with Fresh & Easy for a number of quarters now, does little to help the U.S. chain's trading margin, which Tesco must increase significantly if, as CEO Philip Clarke says will happen, it's going to break-even with Fresh & Easy Neighborhood Market by the end of its 2012/13 fiscal year, which ends in February 2013.

As noted earlier, the 11.9% comparable-store-sales metric for Fresh & Easy is a good one.

The big question though is - at what cost (as in margin)?

Tesco doesn't report metrics like margin - or even sales and profit/loss - for Fresh & Easy for its third quarter.

Therefore, we can't know what that cost might be. For example, did Tesco improve its poor trading margin (negative 35% at fiscal half year) with Fresh & Easy during the fiscal third quarter? Conversely, Did the heavy discounting make that poor trading margin even worse? Did it stay the same?

We won't know any meaningful about whether or not the retailer improving its trading margin and is decreasing its loss with Fresh & Easy until Tesco reports its fiscal 2011/12 full year financials in April 2012. The fiscal year is over at the end of February 2012.

On October 5 of this year Tesco reported a fiscal 2011/12 half-year loss of $112 million for Fresh & Easy, on sales of $470 million. The loss is 21-23% (depending on how recorded) lower than the one iy reported for Fresh & Easy for the same period in the previous fiscal year.

Meanwhile, Tesco today reported its fourth-straight quarter of sales declines at home in the UK, which accounts for nearly 70% of the global retailer's revenue. Tesco has operations in 14 countries.

Sales at Tesco's UK stores open at least a year dropped 0.9 percent, excluding fuel and value-added tax, in the fiscal third quarter ended Nov. 26, the retailer reported today.

But despite the decline in sales at home, Tesco reported an overall increase in corporate revenue of 7.2%, including fuel (7.3% at constant exchange rates). and 5.4%, excluding fuel (5.5% at constant exchange rates) for its fiscal third quarter.

[You can view Tesco's fiscal 2011/12 third quarter reporting here.]

The fiscal fourth quarter, which ends in February, is a crucial period for Tesco with its Fresh & Easy chain, which is something we'll be offering analysis on in upcoming stories.

Related Stories

November 27, 2011: More Reshuffling: Number Two Marketing Exec Follows CMO Uwins Out the Door at Tesco's Fresh & Easy Neighborhood Market

November 18, 2011: Fresh & Easy Neighborhood Market Combining Big Seasonal Foods Assortment With Promos and Discounts to Lure Holiday Shoppers

November 10, 2011; Chief Marketing Officer Uwins Out in Top-Level Reshuffling at Tesco's Fresh & Easy Neighborhood Market

October 10, 2011: Gov. Signs AB 183: End of Self-Service Checkout Only in California For Fresh & Easy Neighborhood Market if Stores to Still Sell Alcohol

Bad Timing With New Law Effective January 1, 2012: Fontana, California Fresh & Easy Store Cited For Allegedly Selling Alcohol to Minors

News & Analysis

The Fresh & Easy Neighborhood Market store at 16049 Baseline Boulevard in Fontana, California is one of 20 retail stores in Southern California's San Bernardino County that were issued citations by the California Alcohol Beverage Control Board (ABC) this past week for allegedly selling alcoholic beverages to minors.

The citation issued to the Fresh & Easy store in Fontana was the result of a regional sweep conducted by the state's alcoholic beverage sales regulatory agency and the San Bernardino County Probation Department, according to a spokesperson for the ABC.

The 19 other retail stores are in the cities of Ontario, Upland, Redlands, Montclair, San Bernardino and Rancho Cucamonga, according to the ABC and the San Bernardino County authorities.


Self or assisted service checkout at Fresh & Easy.

The citation comes at a particularly bad time for Tesco's Southern California-based Fresh & Easy grocery chain because AB 183, which bans the sale of alcoholic beverages at self-service checkouts in retail stores, goes into effect January 1, 2012.

We nicknamed the self-service checkout booze ban bill the "Tesco Fresh & Easy Law" because Fresh & Easy Neighborhood Market is the only grocery chain in California that offers self-service checkout only in its stores.

All the other chains and independent grocers in the Golden State either offer full-service checkout only or offer a mix of full and self-service.

El Segundo, California-based Fresh & Easy Neighborhood Market has been struggling to figure out a way to comply with the law without having to add some sort of full-service checkout component to what it calls its "assisted checkout" system in its 135 stores in California, according to our sources who are familiar with the discussions.

There are 184 Fresh & Easy stores in the Golden State. The remaining 49 stores are in metropolitan Las Vegas, Nevada (21 units) and metro Phoenix, Arizona (29 units).

Fresh & Easy calls its self-service checkout system "assisted checkout" because if asked, store workers will assist customers with the checkout process. The employees also regularly assist customers when problems occur with the self-checkout process.

Additionally, the self-service checkouts at Fresh & Easy don't allow customers to fully self-scan alcoholic beverage items.

Instead, the product UPC code numbers are programmed into the computer, so when a customer scans an item the system flags it, stopping the self-checkout process. A store worker must then come to the checkout and check the customer's identification card, which the grocer does for those a clerk believes to be 40-years-old or younger. If all is well, the clerk then punches a special code in the register, which then allows the customer to complete his or her self-checkout.

The intent of AB 183 however is that the new law will require a store worker to handle any and all checkout transactions involving alcohol from start to finish, in a face-to-face manner with the customer.

Fresh & Easy has two types or versions of self or assisted service checkout lanes in its stores.

The first type, which has shorter checkstands, isn't monitored regularly by store workers.

The second version though, which features longer checkout stands with conveyor belts, is monitored regularly by one or more store clerks, who linger in the area to assist customers.

It's this second system that Tesco's Fresh & Easy has considered tweaking a bit so that it might meet the requirements of the self-service alcohol beverage self-checkout ban law when it goes into effect less than a month from now, according to our sources.

For example, at the larger conveyor belt-equipped checkouts where store employees are always present and monitor the checkout process, Fresh & Easy could have the employees conduct any and all customer transactions that involve the purchase of alcoholic beverages.

It's possible, although not fully-clear, that if the grocer had a store worker conduct the entire transaction from start to finish, it might meet the legal language of AB 183, although it wouldn't likely meet the intent of the legislation's author, Assemblywomen Fiona Ma (Democrat-San Francisco), and the various supporters of the law.

Her intent behind the legislation, if not spelled out explicitly in the bill's language, is that retail stores would need to offer both full and self-service checkout under the new law.

However, the definition of full-service checkout isn't without some ambiguity in AB 183, based on our close reading of the legislation. Therefore it is possible, in our analysis, that a version of Fresh & Easy's monitored self/assisted checkout could qualify under the law, if not based on the intent of the legislation, perhaps on the actual language of the bill.

The other alternative for Fresh & Easy would be to offer at least one full-service checkout in each of its stores in California, which is something we suggested in early 2008 it do for reasons having nothing to do with any legislation in California, which wasn't yet introduced at the time, designed to ban alcohol sales at self-service checkouts in retail stores.

We stress we're not saying Fresh & Easy Neighborhood Market has decided to go with the option we are reporting on. Rather, based on our reporting, it's one scenario the grocery chain is considering because if possible it wants to retain its self/assisted checkout system, even if doing so requires some modifications, rather than add fell-service checkouts to the California stores, according to our sources.

Meanwhile, although a retailer being issued a citation for allegedly selling alcohol to minors isn't a capital offense, it is a serious one, albeit not completely uncommon.

However, receiving such a citation from authorities coming so close to the self-service checkout alcohol sales ban law going into effect is particularly bad timing for Tesco's Fresh & Easy.

The California ABC is aware the grocer offers self-service checkout only in its stores, and it plans to monitor Fresh & Easy closely once the law goes into effect.

In addition, numerous California law enforcement agencies were supporters of AB 183, and as a result plan to step-up monitoring of the checkouts once the law goes into effect in January 2012.

The law has fines attached to it for retailers that are caught allowing alcoholic beverage sales at self-service checkouts in their stores.

We've talked to staff members of the author and co-authors of AB 183, who all say the intent behind the law is to require face-to-face transactions between customers and store workers whenever alcohol is purchase in a retail store.

With January 1, 2012 coming fast, Tesco's Fresh & Easy will soon need to announce how it's going to comply with the new law.

Waiting until the last minute to do so - and the last minute is pretty much here - is a mistake because if what the grocer does to comply with AB 183 runs counter to the intent of Ma and her supporters, it could become a major public relations disaster for the grocery chain, which is the last thing it needs as it attempts to break-even (Tesco lost $112 million on Fresh & Easy for the first half of its fiscal year ended in August) by the end of 2012.

Related Stories

October 10, 2011: Gov. Signs AB 183: End of Self-Service Checkout Only in California For Fresh & Easy Neighborhood Market if Stores to Still Sell Alcohol

September 9, 2011: 'Son of Tesco Fresh & Easy Law': Self-Service Checkout Booze Ban Bill Passes California State Senate; Headed to Governor's Desk For Action

September 7, 2011: Self-Service Checkout Booze Ban Bill Fails in California Senate First Time Around; 'Missing Seven' Dems Hold Key to Passage By Friday

September 6, 2011: California State Senate Set to Vote on Self-Service Checkout Booze Ban Bill This Week

August 20, 2011: 'Son of Tesco Fresh & Easy Law': Self-Service Checkout Booze Ban Bill AB 183 Passes Out of California Senate Appropriations Committee; Headed For Senate Floor

July 27, 2011: 'Son of Tesco Fresh & Easy Law' Moving Through State Senate: Will California Determine Fresh & Easy Neighborhood Market's Checkout Scheme?

June 4, 2011: 'Son of Tesco Fresh Easy Law': Self-Checkout Booze Ban Bill AB 183 Sails Through California State Assembly; State Senate Next Stop

May 11, 2011: ‘Son of Tesco Fresh & Easy Law' - California Assembly Appropriations Committee Passes Self-Checkout Ban Bill AB 183 By 12-4 Margin

May 6, 2011: 'Son of Tesco Fresh & Easy Law': California State Assembly Appropriations Committee Hearing For AB 183 Cancelled

May 4, 2011: 'Son of Tesco Fresh & Easy Law': Strong Chance California Legislation to Prohibit Alcohol Sales at Self-Service Checkouts Could Pass This Year

September 30, 2010: Fresh & Easy Neighborhood Market Hopes Governor Schwarzenegger Can Find His Veto Pen Before Midnight Tonight

September 28, 2010: Fresh & Easy Neighborhood Market Hoping Governor Schwarzenegger Prefers His Veto Pen When it Comes to AB 1060

September 25, 2010: Future of Fresh & Easy Neighborhood Market's Self-Service-Only Checkout in California Up to Governor Schwarzenegger

August 24, 2010: California State Senate Sends Bill to Governor That Could End Self-Service-Only Checkout at Fresh & Easy Neighborhood Market

August 15, 2010 piece : Bill to Ban Alcoholic Beverage Sales at Self-Service Checkouts Would End 'Self-Service Only' at California Fresh & Easy Neighborhood Market Stores

July 14, 2008: Breaking News & Analysis: CA Assemblyman Introduces 'Tesco Fresh & Easy Law' to Ban Stores With Self-Checkout-Only From Selling Alcoholic Beverages.

Dollar General Jump-Starts California Launch: Taking Over 5 Centro Mart Supermarkets For Early 2012 Openings

Related Story: February 2, 2011: Centro Mart-Stockton Chairman, Veteran California Grocer Jimmy Lam Has Died.

Tennessee-based dollar-store-dynamo Dollar General plans to hit the ground running hard and fast when it launches both its traditional dollar format stores and its small-box Dollar General Market grocery stores in California next year.

To jump-start its California launch, 38-state, 9,813-store Dollar General has done a deal with Centro Mart, a 65-year-old independent supermarket chain based in Stockton, California, in which Dollar General will take over five of the grocer's seven stores - four in Stockton and one in the San Francisco Bay Area city of Brentwood.

Centro Mart CEO Mel Young says the Stockton-based chain, which until his death earlier in January was run for decades by veteran California grocer Jimmy Lam (see the related story at top), will close the five stores at the end of this month. It will keep two stores, a Centro Mart banner grocery store in the East Bay Area city of Oakley and a supermarket it operates under the Apple Marketplace banner in Lodi, which is near Stockton.

Dollar General will lease the five Centro Mart stores. Its not acquiring Centro Mart.

Dollar General will convert four of the five Centro Mart stores into Dollar General Market grocery stores, which feature fresh foods as well as groceries, and the remaining supermarket will become one of its traditional dollar stores, according to Todd Vascos, Dollar General's executive vice president and chief merchandising officer.

Vascos says Dollar General will begin converting the Centro Mart stores shortly after they are closed, targeting all five for spring 2012, most likely March-April, openings.

Dollar General announced its plans to enter Nevada and California earlier this year. So far the retailer has opened five of its Dollar General Market grocery stores in metro Las Vegas, Nevada.

The retailer currently operates 62 Dollar General Market stores in the U.S.

The Nevada stores are the first Dollar General Market stores the retailer has opened since 2007. Since then it has revamped the format, making numerous changes to the original version.

Centro Mart's Young says Dollar General approached the grocer about acquiring the stores earlier this year.
He says Centro-Mart agreed to the deal in part because of long-time CEO Jimmy Lam's death earlier this year, along with the heavy competitive climate in Northern California, which has made it tough for the independent chain to compete.

Dollar General is also looking for additional locations in Northern California for both its traditional dollar stores and its Dollar General Market.

Our commercial real estate sources, many of whom are regular readers of Fresh & Easy Buzz, tell us the retailer is looking in the San Francisco Bay Area, Sacramento metro region, the Central Valley and farther north for locations, including paying special attention to the numerous vacant big and small-box store buildings currently on the market.

The dollar store retailer's plans also include Southern California, for both its dollar stores and Dollar General Market grocery stores. Like in the north, our commercial real estate sources tell us Dollar General is looking for numerous locations in the region.

Dollar General reported its third quarter financials today.

In a conference call reporting the results, CEO Richard Dreiling didn't address the Centro-Mart deal specifically, but said the retailer plans to open about 40 Dollar General Market grocery stores nationally in 2012. That number includes the five stores in Northern California, plus additional units in "new and existing markets."

Dollar General is entering into a short-term lease for a distribution center near Bakersfield, California which will serve the new stores in California and Nevada, along with existing stores in Arizona, Dreiling said today. The facility will open in the first half of 2012, he said. That timing fits with the April-May planned opening of the five to-be-converted Centro-Mart stores in Northern California.

Dreiling also said today that a major effort with Dollar General Market in its newest two markets, (Nevada and California) as well as nationally, will be to focus on food dessert regions where residents are underserved by grocery stores offering fresh foods and groceries at reasonable prices.

The CEO also said today that Dollar General is expanding its perishables offering in both the grocery markets and in its traditional dollar format stores.

"Fresh and refrigerated foods helped us drive customer traffic and increase basket size by serving a greater share of our customers' needs," Dreiling said. "We will continue to take an aggressive stance towards improving our in stock position. This is a never ending effort which requires focus on store-level perpetual inventory accuracy as well as improved execution across ordering, fulfillment, stocking and delivery."

CEO Dreiling also said today that private brand expansion is a key part of the Dollar General's ongoing strategy, saying the retailer is expanding product sourcing to new categories and importing from new countries. "To further expand our private brands we’ll be adding 150 new SKUs as we move into new categories," he said.

Dollar General reported fiscal 2011 third quarter (13 weeks ended October 28, 2011) net income of $171 million, compared to net income of $128 million in the third quarter (13 weeks) of fiscal 2010.

Excluding expenses in the 2011 third quarter of $0.9 million ($0.7 million, net of income taxes) relating to a secondary offering of the company's common stock by certain selling shareholders and excluding losses in the 2010 third quarter of $8 million ($5 million, net of income taxes) relating to the early repayment of long-term obligations, Dollar General's net income increased 29 percent, according to the retailer.

Consumable product sales continued to increase at a faster pace than non-consumables in Dollar General's third quarter, with the strongest growth across the food and snack categories, according to CEO Drieling. "Salty snacks, carbonated beverages, coffee and milk were the largest contributors," he said today.

The fact consumable sales are outpacing all other categories for Dollar General is in part what's making the retailer high on growing its Dollar General Market grocery store format, including in California, which with nearly 40 million residents has the highest population in the U.S.

Dollar General's entry into California next year adds yet another competitive layer to what already is a highly competitive food and grocery retailing scene, from Southern California and the Central Valley, to Northern California, where the retailer will open its first five grocery stores in the soon to be former Centro-Mart locations in early 2012.

The Tesco Christmas Dinner Pizza - A Festive Feast Without the Fork

Private Brand Showcase

United Kingdom-based Tesco, which owns 184-store El Segundo, California-based Fresh & Easy Neighborhood Market, is having trolley carts full of fun in Britain this year developing and merchandising limited edition private brand food products for the Christmas holiday season.

For example, yesterday (read here) we wrote about Tesco's limited edition Tesco Finest brand "Crispmas Dinner" collection, a line (range in British industry terminology) of Christmas dinner-inspired crisps (potato chips) in flavors like mince pie and roasted turkey with stuffing, which it's now offering for sale in its stores in the UK, for the Christmas and New Years' the holiday season.

But saying "Merry Crispmas" to shoppers with its "Crispmas Dinner" snack crisp collection is merely the tip of the festive feast-inspired iceberg of creativity coming from Tesco's private brand product developers.

Enter Tesco's first-ever Tesco private brand Christmas dinner pizza (pictured at top and below), which the retailer is introducing in its stores in the UK this week.

The chilled, ready-to-heat pizza, which is a carnivore's delight, features a turkey, sage and onion stuffing, and is piled high with sausage, smoked bacon and mozzarella cheese.

Here's how chilled foods range product developer Louise Sampson, the proud parent of the turkey and pork-packed Christmas dinner pizza, describes the Tesco holiday creation:  "We set out to create a pizza for all those people who simply can’t wait until Christmas Day for the festive feast and wanted a sneak taste beforehand. We have created a pizza worthy of the big occasion with a stone-baked thin base which allows the toppings to take centre stage."

The timing of the Christmas dinner pizza could be spot on for Tesco.

Why? Because pizza has recently become the most-popular prepared foods item (chilled and frozen) sold in UK supermarkets.

For example, in 2010 British consumers bought a total of 466 million pizzas from UK stores, as compared to a mere 156 million curries, according to data compiled in August of this year by Kantar Worldwide's UK office.

Tesco has been taking advantage of the booming pizza market in the UK - its corporate spokesperson says over the last 18 months its been overhauling, upgrading and developing new pizza varieties, and now offers 119 different refrigerated and frozen pizza varieties in its stores there.

Tesco is the leading food, grocery and general merchandise retailer in the UK.

It has an about 30% market share, according to research firm Kantar Worldwide, which is nearly as much as the number two and three chains, Walmart-owned ASDA and Sainsbury's, have combined, which is about 36%. Number four supermarket chain Morrisons has about 13% .

Together the four supermarket chains are refereed to in the UK as the "Big Four," largely because together they account for nearly 80% of all the food and groceries sold in the nation.

The Tesco Christmas dinner pizza not only is a creative seasonal item for Tesco, it also allows for plenty of food product fun and buzz creation. We're writing about it after all.

The idea of taking the makings a traditional Christmas dinner and putting it on a pizza might seem odd at first. However, with the exception of the turkey and stuffing, the other items - turkey, ham, bacon, onions and cheese - are pizza-topping mainstays. In the case of turkey, we're surprised it isn't used more often than is it as a pizza-topping, particularly since roasted chicken has become a popular choice for more upscale pizza offerings.

In our analysis and opinion, Tesco's Christmas dinner pizza could serve two classes of consumer, those, like Louse Sampson opined about, who want an early taste of what will be their traditional Christmas dinner to come in a few weeks, and those who, not wanting to go to all the work of shopping for and preparing a traditional Christmas dinner for Christmas Day, instead buy a few Tesco Christmas dinner pizza's along with their favorite beverages and keep it simple, enjoying a festive feast without all the hassle - and without the fork.

Suggestion: Tesco's Fresh & Easy Neighborhood Market chain should jump on the Christmas dinner pizza bandwagon and whip up a limited edition version of its own at its kitchen facility in Riverside County, California.

Why? No U.S. grocery chain offers such an item, for one. But even more so, it would be a fun and attention-getting creation (and in our estimation perhaps even a good seller) - the Fresh & Easy Christmas dinner pizza - for the grocer this Christmas and New Years' holiday season.

The clock is ticking. But there's still time if the Fresh & Easy fresh-prepared foods' product development team obtains the recipe from the mother ship in the UK this week and gets producing, post-haste.

Photo credit: SMS, exclusive to Fresh & Easy Buzz.

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