Analysis: Why A Loyalty Club Card Program Makes Zero-Sense For Tesco's Fresh & Easy USA

Yesterday (December 7) the Financial Times reported here that Tesco is planning to bring its successful loyalty card program from the United Kingdom (UK) to its Fresh & Easy Neighborhood Market chain in the Western U.S., siting as its source "A recent advertisement for a new marketing position at Fresh & Easy’s US headquarters in the Los Angeles area [which] lists '2010 planning for loyalty programme' amid the job responsibilities."

The position in question however has to do with Fresh & Easy's existing "Friends of Fresh & Easy" e-mail-based marketing program rather than the grocer having any immediate plans to import the successful loyalty club card scheme from the UK to Tesco's fledgling Fresh & Easy chain.

Fresh & Easy Buzz was surprised to read the Financial Times' report yesterday for two major reasons: First, according to our (good) sources, Tesco's Fresh & Easy has no such near-term plans to begin a loyalty card program like the very successful 'Tesco Clubcard' in the UK and, second, the intellectual and operational "brains" behind Tesco's UK loyalty card program, the firm Dunnhumby, is unable to administer such a program for Tesco Fresh & Easy USA because the firm is prohibited from doing so due to a contract it has in the U.S. with the Kroger Co. supermarket chain, even though Dunnhumby is majority-owned by Tesco.

This Financial Times' report apparently struck the editors and reporters at the supermarket industry trade publication Supermarket News as a surprise like it did us here at Fresh & Easy Buzz.

Today, Supermarket News' reporter Julie Gallagher reported in this story that, according to Fresh & Easy Neighborhood Market spokesman Roberto Munoz, Tesco has no current plans to start-up a loyalty card program at its Western USA-based chain of 130 Fresh & Easy small-format grocery and fresh foods markets located in California, Nevada and Arizona.

In the report, spokesman Munoz told Ms. Gallagher the job advertisement in question is for Fresh & Easy's e-mail-based "Friends of Fresh & Easy" marketing program, which it started earlier this year, and which Fresh & Easy Buzz suggested in concept the grocer create 11 months before that.

What Fresh & Easy Buzz does know is that the topic of importing the loyalty club card program from Tesco UK to the Fresh & Easy USA outpost has been a topic of discussion for a considerable amount of time between Tesco corporate brass in the UK and Tesco Fresh & Easy senior management at its Southern California headquarters.

For example, we were told as far back as 2007 and again in 2008 by a former Tesco Fresh & Easy headquarters employee who was in a position to know that discussions on importing the loyalty card program (or not) were held more than once by the grocery and fresh foods chain's senior management, as well as being discussed with members of Fresh & Easy's buying and merchandising team at the El Segundo, California headquarters.

The decision then, and now, has been to not institute a loyalty card program for Fresh & Easy. The two key reasons for not doing so being (1) the Dunnhumby-Kroger Co. dilemma and (2) the simple fact that it's been believed by the chain's senior management that it's far too soon in Fresh & Easy's development to consider a club card program because of not wanting to create any type of program that might perceptually or actually serve to restrict business, particularly the encouragement of much needed new shoppers to the stores. A grocer has to create loyalty before it rewards it after all.

Analysis

Our analysis here at Fresh & Easy Buzz is that it makes no sense at this point in time for Tesco's Fresh & Easy Neighborhood Market to get into the loyalty club card business for three key reasons:

1. Loyalty card programs tend to work best for large chains with significant market share such as Tesco in the UK and Safeway Stores, Inc. in the U.S. Fresh & Easy has little or no share of the market in its three key market regions: Southern California, Metropolitan Las Vegas, Nevada and Metro Phoenix, Arizona. A grocery chain needs a significant and strong customer base in order to make a loyalty card program work. Fresh & Easy has neither at this point in time. Therefore, adopting a loyalty card program makes little sense.

2. Fresh & Easy Neighborhood Market already has too many self-imposed retail operations' policies that serve to restrict potential shoppers. These include: not accepting manufacturers' cents-off coupons, paper personal checks and WIC Vouchers in any of its 130 stores. Having a 100% self-service checkout system also is a restriction to customers who prefer full-serve checkout or at least being offered the option of having it.

There's no reason at this point in its development for Fresh & Easy to self-impose an additional potential barrier to customer entry policy such as a club card, which would mean that only holders of such a card would get certain promotional offerings and price reductions.

3. Fresh & Easy has far more concerns at this point in time in terms of its operations, marketing and merchandising than the implementation of a loyalty card program. These concerns include: the need to draw more shoppers to its stores, increasing gross margins considerably and still having numerous underperforming stores, among others. Instituting a loyalty card program would in our analysis do nothing to help solve these serious problems. In fact we think instituting a loyalty card program would just distract the grocer from focusing on these and other big issues. It's our analysis that the biggest issue remains the viability of the Fresh & Easy format itself. The jury is still out on that question -- as is the answer.

Conclusion

Therefore, to those at Tesco and its Fresh & Easy chain, we suggest that not implementing any sort of a loyalty club card program at this point in time is the wise decision for the three key reasons we mention above, along with a few others.

The time is not right for such a program, and we don't see any benefits of doing so for Tesco's Fresh & Easy. There are many higher and more important priorities to be addressed, changes to be made, and programs to create and implement in order to achieve success for the chain.

Fresh & Charitable: Tesco's Fresh & Easy Extends Deadline For Schools to Register For School Fundraiser Program

Fresh & Easy Buzz was the first publication to report on December 17, 2008 in this linked story [Fresh & Easy Neighborhood Market Launches 'Shop for Schools' Fund-Raising Program to Aid Schools Near its Stores] that Tesco's Fresh & Easy Neighborhood Market was launching its "Shop for Schools" school fundraising program. Numerous other Blogs and mainstream media publications have since reported on the development, following Fresh & Easy's announcement of the program in this press release on January 7, 2009.

Tesco's Fresh & Easy has now extended the registration deadline to January 30 for schools in Southern California, Metro Las Vegas, Nevada and the Phoenix, Arizona Metro region -- the three Western U.S. markets where the grocery chain has its 110 small-format grocery and fresh foods markets -- to sign up for the program.

The "Shop for Schools" sign-up works like this: "All eligible Kindergarten through 8th grade schools within a three-mile radius of a Fresh & Easy store can participate in the program. For every $20 spent at a Fresh & Easy store, participating schools can get a $1 cash donation," according to Fresh & Easy Neighborhood Market chief marketing officer Simon Uwins. [You can read additional specifics at our December 17, 2008 piece at the link above.]

The program begins on February 1, 2009, ending on March 31, 2009.

[Note to Fresh & Easy Neighborhood Market: We think the program time period is a bit short, just like the school registration period was, which is why the company has extended it. We suggest you consider extending the program period -- say instead of ending it on March 31, run it until at least April 15-16. And since April 15, 2009 is income tax deadline time -- and since income tax revenues to state and city governments are going to be much reduced this year over last because of the recession -- such timing, ending on April 15 or 16 instead of march 31, would be good.

Additionally, schools get most of their revenue from property taxes. Those revenues are going to be way down as well because of the foreclosure crisis and the housing valuation crunch. And nowhere is this going to be more true than in Southern California, Nevada and Arizona, which are three of the top U.S. regions for foreclosures and reduced housing value over the last year. That extra two weeks will help the schools -- which are going to need all the help they can get.]

Tesco's Fresh & Easy says it's already "signed up hundreds of schools in Southern California, Arizona and Nevada in the program."

"We have seen an incredible response to our 'Shop for Schools program'. Schools are telling us they are searching for ways to raise money especially in the current (down) economy," said Fresh & Easy chief marketing officer Simon Uwins. "With school budgets so tight, we are proud we can help our neighbors."

According to Uwins, the "Shop for Schools" program is designed to work like this: "Registered schools will mobilize parents and students to collect Fresh & Easy (store) receipts and then submit them for verification. Fresh & Easy will cut a check to the school for the amount raised. The money raised can be used for whatever the school needs most. The school in each state that raises the most money will receive a $5,000 cash bonus from the company. [Our linked December 17, 2008 piece at top offers additional details.]

Grocers raising money for schools and students is "old school," which we like. Supermarkets throughout the U.S., including in the west, have been and are running similar fundraising programs, ranging from cash donation programs and others to the popular "Apples (computers) for Schools" program, in which free Apple Computers are provided to schools. It's good to see Tesco's Fresh & Easy join in the school fundraising process.

Additional information about the grocery chain's "Shop for Schools" program is available at:
www.freshandeasy.com/shopforschools.

Neighbors by Location Only: Will Mega-Drug Chain Walgreens' New Focus on Consumables and 'Affordable Essentials' Rob Sales From Tesco's Fresh & Easy?

Competitor News and Analysis

On December 22, 2008 we reported on the development that former Tesco Fresh & Easy Neighborhood Market co-vice president of retail operations Brain Pugh had been hired by the mega-drugstore chain Walgreens in the new position of vice president of format development-Walgreens.

The primary focus of Pugh's new position at the drug chain, which has thousands of stores throughout the U.S., is to focus on growing and strengthening Walgreens' consumables (food and grocery) household products (toilet paper, cleaners, ect.) and health and beauty care merchandising and retailing program. [Read the story here: Breaking News: Mega-Drug Chain Walgreens Hires Former Tesco Fresh & Easy USA VP of Operations Brian Pugh For New VP of Format Development Position.]

In the December 22 story we also wrote about an additional two new hires the drug chain announced at the same time. Those new hires were: Jeffrey Zavada, as vice president and chief sales officer, and Colin Watts, as vice president and president of the Walgreens' Health and Wellness disease management business.

In September, 2008 Walgreens, which is headquartered in Deerfield, Illinois, made an additional major hire, bringing in Kim Feil as its new corporate chief marketing officer.

Ms. Feil, Brian Pugh and chief sales officer Colin Watts were all hired in large part because of their experience in consumer packaged goods marketing, merchandising, operations and sales.
The Hiring of these folks for that experience was not by accident.

Beginning in about the spring of 2008, and intensifying in the early summer of last year, Walgreens made a strategic marketing and merchandising decision to put a greater focus on consumables and related consumer packaged goods marketing, merchandising and sales in its drug stores, including dramatically increasing the number of food, grocery, household and health and beauty care items it will sell in its stores under the retailer's own store brands. These store brands include the Walgreens' brand (across all product categories including food, grocery and beverage) and its Deerfield Farms brand, which is for consumables only.

In the last month Walgreens has been introducing numerous new food, grocery and consumer packaged goods items in its drug stores under these store brands. The retailer also has been promoting consumables and household packaged goods items much more aggressively in its weekly advertising circulars, which are distributed in Sunday newspapers and via direct mail to households, with a particular focus on essential products, including grocery items.

For example, among the numerous food, grocery and non-food consumer packaged goods items in its advertising circular this week include two new products under the Deerfield Farms brand -- fresh butter and a line of packaged cheeses. Essentials. And perishables as well. Walgreens also is now promoting fresh milk and often eggs and fresh bread nearly every week in its advertising circular, as well as essentials such as toilet paper, soap, paper towels and cleaning products, for example.

Even more so the drug chain has increased the number of food and grocery items -- both store brand and national brand -- it runs in its advertising circular each week. This reflects Walgreens' evolving strategy over the last few months of adding additional national, regional and store brand skus of food and grocery products to its stores. This is a strategy and practice the retailer says it will continue.

In fact, beginning February 8, Walgreens is launching a major marketing and merchandising program it's calling "Affordable Essentials." The program, which will focus on consumables, household and related packaged goods "essentials" like milk, bread, toilet paper and the like, is designed to capture an increased share, including from supermarkets, of the dollars consumers are spending on basic or essential packaged goods products during the current recession.

"We've zeroed in on the last things people cut back on when they're in a (financial) pinch," chief marketing officer Kim Feil said at Walgreens' annual shareholders' meeting last week, on Wednesday, January 14.

Ms. Fell described Walgreen's "Affordable Essentials" marketing and merchandising program this way: The drug chain has selected one item from key basic or essential product categories (milk, bread, eggs, laundry detergent, toilet paper, aspirin, disposable diapers, ect.) that recent marketing research shows consumers purchase even in tough economic times like the present. The combined items will then become an "Affordable Essentials" market basket of products. Beginning on February 8, and running indefinitely, Walgreens will offer the items in the "Affordable Essentials" market basket at significantly reduced everyday low prices. The retailer will then tout the affordable market basket of essentials in-store and via all of its various advertising media.

The "Affordable Essentials" product market basket (it's a market basket in the sense of a collection of items rather than an actual physical basket of the goods) will contain a mix of Walgreen's store brands and national brands. The drug chain plans to include plenty of national brands because consumer use of manufacturer's cents off coupons has sored in its stores since about the middle of last year, as it has in other drug stores and in supermarkets throughout the U.S. By offering a strong selection of national brands as part of the program, along with the store brands, Walgreen's believes it can gain added sales since the manufacturers' cents off coupons serve to lower the cost of the items further for consumers but don't impact the retailer's profits because its paid back by the manufacturer.

Walgreen's focus on basic or essential products fits with much of the market-based research and retailer-based scan data currently available. The data is showing consumers are focusing on purchasing basic food, grocery and non-foods packaged goods items at present to a degree not seen in decades. The closest many market researchers and retailers we've discussed the data with say they've seen was the recession of the early 1980's. Most say however the trend towards essential or basic item purchasing is currently even stronger than during that serious recession.

As an example, the market research firm America's Research Group has been conducting regular shopper surveys over the last few months. What it's found, including in its latest survey conducted a little over a week ago, is that shoppers, pressured by debt, credit card bills and fear of losing their jobs, have been reluctant to buy anything beyond essentials. The percentage of shoppers who say in the surveys they are focusing more on essentials has increased progressively since the middle of 2008.

"Retailers are experiencing their most challenging time in three decades," C. Britt Beemer, CEO and founder of the Charleston, S.C.-based America's Research Group consumer research firm says about the results of its latest survey conducted a little over a week ago. "Our survey confirmed that consumers are in deep hibernation, and there is no sign that they will wake up this spring or that the retail outlook will pick up anytime soon," Beemer adds.

At the January 14 annual meeting, Walgreens' CEO Greg Wasson said consumer spending is going to be a challenge for all drug retailers and others throughout 2009, and could get even tighter than it currently is."

He announced that in response to this new consumer behavior Walgreens is moving 29 corporate vice presidents into the field instead of stationing them at its Deerfield, Illinois headquarters in a new local merchandising and operations program. The purpose of the change is to be able to better respond and adapt to local consumer trends and to be better able to focus the stores on their local markets, he said at the meeting.

The Walgreens - Fresh & Easy Connection

There are two interesting and related ironies about Walgreens' new focus on food, grocery and non-foods packaged goods items in relation to Tesco's Fresh & Easy Neighborhood Market.

The first one of course is that former Fresh & Easy chief operations executive Brian Pugh, who left his employ with Tesco's Fresh & Easy on a rather mysterious note (according to some company employees) in September, 2008, as we reported in this story, is now in charge of beefing-up Walgreen's store presence and sales of consumables, including store brands. Consumables, and particularly consumables under its fresh & easy store brand (about 60-65% of the grocery items sold in the stores are under the brand), are the near-100% focus of the Fresh & Easy stores. The stores carry only a very limited assortment of non-foods items.

Just by itself Pugh's moving from Tesco's Fresh & Easy to Walgreens isn't that unique of a development. After all, retailing executives, category managers and others change employers all the time.

But the related irony is that Tesco's Fresh & Easy, of which Brian Pugh was in charge of the retail operations aspects of from the time it started in the Western U.S. until September, 2008, has used Walgreens' as a model in terms of its "critical mass" store location strategy in the Western U.S. markets of Southern California, Metro Las Vegas, Nevada and Metropolitan Phoenix, Arizona. That strategy, like Walgreens in the same three markets where it has hundreds of stores, is one of locating stores rather close together (about two miles apart in concentrated rings) so as to create a retailing critical mass. The strategic goal of such as strategy being to become the de facto "neighborhood grocer" in the area -- in Fresh & Easy's case -- and the defacto "neighborhood drug store" in the specific areas -- in Walgreens' case.

This is a strategy Walgreens has been using for years in various U.S. markets. A few years ago it began turning this strategy into super-high gear in California, Nevada and Arizona. Tesco took notice of it. In large part Tesco used Walgreens (as well as Starbucks' store location strategy) as its model for this "critical mass" store location strategy.

As part of this strategy, numerous Fresh & Easy markets are located next to or just across the way from Walgreens' drug stores. In fact, the two retailers have gone into, and are further going into, numerous shopping centers as co-anchor tenants.

We've talked to a number of retail commercial real estate professionals who work with Tesco's Fresh & Easy. When they started doing so, they were given as one key criteria to identify potential Fresh & Easy store locations based on where Walgreens drug stores were located, as well as to identify locations where Walgreens plans to put new stores in the three markets. As a result, many of Tesco's & Fresh & Easy Neighborhood Market combination grocery and fresh foods stores are located next to or within walking distance (like across a shopping center) to a Walgreens' unit.

Taken together, we therefore find the two related developments become much more interesting -- and gain some added irony.

With Walgreen's new emphasis on consumables development under the leadership of former Tesco Fresh & Easy vice president of operations Brian Pugh, along with the retailer's "Affordable Essentials" program which begins in a couple weeks, it's feasible that if the mega-drug chain is successful, it will end up taking considerable sales in the basic food and grocery categories away from those many Fresh & Easy stores that are located next to or very near Walgreens' units.

With so many Walgreens drug stores in Southern California, Arizona and southern Nevada -- Fresh & Easy's three market regions with its 107 stores -- if successful with its new consumables and "Affordable Essentials" push, the mega-drug chain could likely take grocery share away from numerous other food and grocery retailers in these markets, not just Fresh & Easy. Fresh & Easy is worthy of singling out though because of the facts we laid out above -- the fact so many of the stores are in close proximity to Walgreens' drug units.

It's also worth noting that Walgreen's has found it needs to focus more on consumables and the essentials program because it's found itself losing sales most particularly to Wal-Mart Stores, Inc.'s Supercenters, which has been the only major discount retailer to increase sales during the recession. Despite that fact, Walgreen's same store sales did increase by slightly over 4% over the previous year in its most recent quarter.

Walgreens hopes its more aggressive focus on consumables and the "Affordable Essentials" grocery and non-foods packaged goods program starting on February 8 will bring more shoppers into its stores. Then once in the stores for those "Affordable Essentials," the drug chain hopes customers will pick up some higher margin items while shopping.

We've argued since about the middle of 2008 that in this current and severe recession nothing is more important for retailers than to create, execute and communicate a unique value principle. Walgreens appears to be moving towards this with its ongoing increased focus on consumables and essentials. It will be interesting to see the depth and focus of the new program beginning on February 8.

Linkage: Related stories from Fresh & Easy Buzz:

>Breaking News: Mega-Drug Chain Walgreens Hires Former Tesco Fresh & Easy USA VP of Operations Brian Pugh For New VP of Format Development Position

>Drug Chain Walgreens to Slow New Store Growth; Despite Tesco Fresh & Easy's Recent Announcement to Do Similar, We Suggest An Analogy is Misplaced

>Key Personnel Breaking News: Co-Vice President of Retail Operations Brian Pugh No Longer Employed At Tesco Fresh & Easy Neighborhood Market

>Breaking News: Tesco plc. Makes Major Personnel Change to Fresh & Easy Neighborhood Market USA Senior Management Team

>Tesco Makes Official Announcement of Jeff Adams' Title and Position at Fresh & Easy Corporate; Confirms Our Report of March 5

>Special Report: Tesco Fresh & Easy Neighborhood Market Experiencing A Category Manager and Buyer 'Brain Drain'

>Tesco's Fresh & Easy 'Taking a Pause' From New Store Openings: A Full Review In the Works

>Special Report: Tesco Fresh & Easy's Director of Grocery Returning to the UK; Grocery Chain Reorganizing its Corporate Buying Department

>Special Report: Today Last Day For Fresh & Easy Neighborhood Market Director of Grocery Charlotte Maxwell; Moving Back to Tesco in the UK

>Vegas Baby!: Tesco Announces Ten More Fresh & Easy Grocery Stores For The Las Vegas Metro Region; it's All About 'Critical Mass'

Tesco Reports Holiday Period Sales; Little to Say About Fresh & Easy; We Offer Some Analysis and Attempt to Fill in A Few Blanks

United Kingdom-based Tesco, the third-largest global retailer after number one U.S.-based Wal-Mart Stores, Inc. and number two Carrefour of France, and the owner and operator of Fresh & Easy Neighborhood Market USA, released its Christmas and New Year 2008-09 holiday period sales figures today. The holiday trading period covers the seven weeks up to January 10, 2009.

The holiday sales numbers are a bit of a mixed bag for Tesco.

The overall good news for the global retailer is that sales for the seven week period ended January 10, 2009 increased by 11.6% over the same trading period last fiscal year. That's strong in total, particularly considering the current global recession.

The bad news for Tesco is that in its home United Kingdom market, which contributes by far greatest percentage of the retailer's annual sales, the retailer of food, groceries, soft goods, hard goods and other consumer products had its worse holiday trading period since the early 1990's. Tesco's UK sales for the seven week period increased by 2.5% over the same period last year. [You can read coverage about Tesco's UK performance at the following links: Financial Times: Tesco 's does better abroad; Daily Mail-UK: Tesco's down, but not out; Scotsman-UK: Tesco's Christmas slowdown sign of troubled times on the high street; The Herald-UK: Yuletide sales growth at Tesco weakest since 1990s; The Independent-UK: Tesco prepared to press the price button.]

The key reason this is bad news for Tesco -- in addition to the fact that the UK is Tesco's home market and its largest one -- is because the 2.5% sales increase is in contrast to a number of other UK food and grocery retailers that had much higher sales increases in the holiday trading period. These include top rivals Asda, which is owned by Wal-Mart Stores, Inc. and is the number two chain in the UK after Tesco, number three Sainsbury's, number four Morrisons, and fast growing Germany-based hard disounter Aldi-UK.

These four chains have been slashing prices hyper-aggressively in the midst of the severe economic recession in the UK. Tesco recently started doing the same, lowering prices on a couple thousand food and grocery items -- and recently said it's planning additional price cuts -- but it was behind the curve in doing so compared to these and a few other competitors. Most UK analysts attribute Tesco's coming late to the price cutting party as the primary reason for its less than stellar holiday trading period sales increase of 2.5% over the previous year.

Below (in italics) is how Tesco summed up its seven week holiday sales period in its financial release today:

Tesco PLC
13 January 2009

TESCO PLC
CHRISTMAS & NEW YEAR TRADING STATEMENT
TESCO DELIVERS IN THE DOWNTURN

The Tesco Group has delivered a strong performance and record sales over the Christmas and New Year period. Group sales increased by 11.6% during the seven weeks to 10 January 2009, driven by continued rapid international expansion and steady growth in the UK. This growth is against the background of challenging trading conditions in all of our markets caused by the global economic slowdown.

Good International Progress

Our overseas businesses generally saw good growth over the Christmas and New Year period, delivering a total International sales increase of 32.7%, helped by favourable exchange rate movements in Europe, and a particularly strong performance in Asia.

In Europe, sales grew by 24%, with growth at constant exchange rates slowing compared with our third quarter, reflecting the economic conditions in parts of Central Europe and in Ireland. We have grown share in all of our markets.

Sales in Asia increased by 43%, with strong growth in Korea, China and Malaysia. The integration of the acquired Homever stores in Korea is going well, with the introduction of the Homeplus Tesco ranges and lower prices proving very popular with customers. Sales at converted stores have increased by more than 50%.

In the United States, Fresh & Easy has been coping well with a severe downturn in the West Coast markets in which it trades. Like-for-like growth is strongly double-digit for the 28 stores which have now been open more than a year.

Steady UK Performance

In the UK, like-for-like sales excluding petrol increased by 2.5% in the period. We report like-for-like sales inclusive of VAT - and adjusting for the reduction in VAT rates, which came into effect in early December, growth on a comparable basis was 3.5%. The stronger growth in volumes and customer numbers we saw in our third quarter has continued.

The Tesco team delivered an even better shopping trip for customers than last year and another profitable seasonal period for the business - by providing very good standards of service and availability.

Non-food sales performance strengthened a little compared to our third quarter; with positive like-for-like sales growth, driven by good market share gains across most categories, including electrical, clothing and entertainment.

Our services businesses have also performed well. On-line sales were very strong in the run-up to Christmas and tesco.com and Tesco Direct combined saw total sales up by over 18% to £273 million in the seven weeks. Sales of digital products, including televisions and laptops, were particularly pleasing.

Tesco Personal Finance (TPF) is now a wholly-owned subsidiary, with the completion of the acquisition in December of the 50% shareholding owned by Royal Bank of Scotland Group PLC. Customer response to our new Tesco savings products has been very encouraging - with over a thousand new accounts being opened per day recently. The resulting increase in balances means that TPF is now self-funding, putting it in a strong position to pursue the strategy we laid out for the business when we announced the acquisition last July.

Asia and Europe Lift Tesco's UK boat

Based on the substantial sales increase percentages for Europe (24%) and Asia (43%), you can see that international sales in those two regions are what lifted Tesco's overall holiday sales numbers to that 11.6% figure. Tesco's total international sales increased by 32.7% for the period, as stated above. It's important to note that the sales numbers aren't like-for-like or same store sales (stores open moer than a year). Therefore, a significant contributor to the huge sales percentage increases comes from new stores opened since the previous year.

Fresh & Easy Neighborhood Market USA

Notice that there are no sales percentages provided in the Tesco release for Fresh & Easy Neighborhood Market USA, like is the case for Europe and Asia. This is all Tesco says in the release reprinted above regarding Fresh & Easy: " In the United States, Fresh & Easy has been coping well with a severe downturn in the West Coast markets in which it trades. Like-for-like growth is strongly double-digit for the 28 stores which have now been open more than a year."

That's a rather dearth of information compared with what's offered for Europe and Asia. Any analyst worth his or her salt must ask this question: Since there are 28 Fresh & Easy stores that have been open for more than a year, which includes the seven week holiday trading period, why not any sales data, like for Europe and Asia, on how those 28 stores did year-over-year? We will let the reader be the judge. However, if sales were higher in the period this year compared with last year, wouldn't it be likley for Tesco to tout such a fact like it is with Europe and Asia?

The statement: "Like-for-like growth is strongly double-digit for the 28 (Fresh & Easy) stores which have now been open more than a year" is really meaningless. Those with experience in the field of financial public relations might see it as filler; as a way to say "nothing" but still say "something."

Based on our sources, research and analysis, we believe the reason there's no mention of sales numbers or percentages for the 28 Fresh & Easy stores is because such numbers are very poor. In other words, they would pale in comparison to the Europe and Asia sales percentages -- and perhaps pale even when compared to the 2.5% UK sales increase.

As we've been reporting, Tesco is struggling with Fresh & Easy Neighborhood Market USA -- and was doing so long before the U.S. financial crisis and economic recession became full-blown.

Tesco will release its preliminary 2008-09 financial results on April 21. These should include a breakout for Fresh & Easy USA similar to the one Tesco provided for the first time in its 2008 reporting in mid-year.

Meanwhile, Tesco plans to continue opening new Fresh & Easy Neighborhood Market combination fresh foods and grocery stores in its existing Western USA markets of Southern California, Metropolitan Las Vegas, Nevada and in the Phoenix, Arizona Metro market region.

That new store opening pace has been dramatically slowed down however. For example, today Tesco's Fresh & Easy distributed this press release in which it said the Southern California based grocery chain plans to create 200 new jobs through new store openings in the next two months.

In the press release, as in all of its releases, Tesco's Fresh & Easy Neighborhood Market says each of its stores employes between 20-30 workers. Using the grocer's own published figure, this works out to the following:

>20 employes per store = 10 new stores in the next two months.
>25 employees per store = 8 new stores in the next two months.
>30 employees per store = 6 -to- 7 new stores in the next two months.

From November, 2007 until recently, Tesco has been opening a new Fresh & Easy market about every two -to- three days. Using the figure of a new store opening every two -to- three days, that amounts to about 10 new stores opening a month, or 20 new stores over a two month period.

In contrast, based on the new jobs numbers (the 200) over the next two months published by Fresh & Easy in its press release, and using the mid-point number of 25 employees per-store, that means the retailer plans to open only about four new stores a month for the next two months, for a total of about eight stores in the next two months, give or take a store or two.

In other words, Fresh & Easy is going from opening an average of at least 10 new stores per month to date, to opening on average just four new stores a month for the next two months, based on the 200 jobs creation figure it has in its press release. That's an over 50% reduction in new store openings.

This dramatic reduction comes on top of the fact that Tesco's original plan and public statements were that it would have at least 200 Fresh & Easy stores open by the end of 2008. The Fresh & Easy Neighborhood Market USA division then later reduced that number to having at least 150 stores open by the end of 2008. However, the reality of the situation is that Tesco had about 106 Fresh & Easy grocery and fresh foods markets opened and operating by the end of 2008. That's dramatically fewer than 200, and significantly less than 150.

In addition, Tesco's Fresh & Easy has postponed its entry into the Northern California market where Fresh & Easy Buzz has identified about 48 store location sites the retailer has in various states of preparation, ranging from stores that could be opened right away, to sites only recently leased. Fresh & Easy has confirmed 37 store locations for Northern California, 19 in the Sacramento/Vacaville Metropolitan region market and 18 in the San Francisco Bay Area.

Tesco's business plan for Fresh & Easy USA called for having about 300 stores opened by the end of this year. That number included being in the Northern California market by mid-2008, with a significant number of stores, at the least the confirmed 37, by the end of 2009.

That's obviously not going to happen. In fact, based on our analysis, we don't think Tesco will have many more than about 150 of its small-format Fresh & Easy grocery and fresh foods markets opened and operating by the end of this year. That's about half of what the retailer touted for well over a year before its first stores even opened in November, 2007. It's also about the same number of stores Fresh & Easy revised downward and said it would have open by the end of 2008.

We don't judge the performance of a food and grocery retailer by the number of stores it's opened over a year or two. But we do evaluate that retailer on its planning. And to open only half of the number of stores in its business plan will be a major fiasco in planning for Tesco. It demonstrates what was in our analysis a fundamental lack of real research of and in the Western USA market.

This is ironic because Tesco has touted the "extensive research" it conducted prior to entering the market. The problem is that research was mostly focus-group research rather than a combination of such consumer-based research combined with strong market-oriented and competitor research. Focus groups and similar consumer-focused research can tell a company much about a market's consumers. But it tells them nothing about the competitive aspects of markets in terms of how food retailing is done and who the competitors that do it -- and what they do -- are.

This is where Tesco made a major mistake. It convinced itself it was filling a major food and grocery retailing void in the three Western U.S. markets with the Fresh & Easy format, when in fact had it done proper research it would have discovered just how multi-formatted food retailing is in these markets, thereby better preparing itself for the highly competitive climate it now finds itself in. Tesco Fresh & Easy CEO Tim Mason essentially admitted this to be the case, that it thought it was filling a major food retailing void, in an interview with the London Times newspaper in the fall of 2008.

We've argued that those who rule Tesco out with Fresh & Easy, or with any of its other global food and grocery retailing ventures, do so at their own peril because the company is a world class retailer. But we've also argued that in the case of Fresh & Easy, Tesco has failed thus far to create a clear format, then position it well, including merchandising, and then properly communicate the retailing offering via a solid, coherent and consistent marketing program.

Instead, Tesco's Fresh & Easy is all over the place, as we've argued in the Blog often. Initially, for months Fresh & Easy was positioned primarily as a "revolutionary" fresh, prepared foods retailer with groceries as a significant sideline. Then the retailer went off on a tangent, promoting specialty and gourmet foods far and above basic groceries. Then it started to put more of a focus on basic groceries at low everyday prices. Then it focused most of its efforts on being a "green" (as in environmentally-friendly) food retailer over and above creating an identity as a value grocer or prepared foods retailer. Now it appears to be moving closer to positioning itself as a value grocer but is not doing so in any comprehensive way.

Fresh & Easy can be a grocer that is "green," sells specialty and natural foods, offers an extensive selection of prepared foods, and is in the basic grocery business with a value proposition. But it can't position itself as all of these things. Rather, it needs to create a core identity like small-format grocery chains Aldi USA (position: hard-discount basic grocer that also sells and offers many other things but only as part of that core positioning) and Trader Joe's (position: a discount natural and specialty foods retailer) have, for example.

Once created, that core positioning then becomes the basis for all it does, everything else is just a part of that whole. That position is the wheel and all the other things -- "green," specialty and natural, ect. -- are mere spokes on that wheel.

Once this retail identity is established, then all of Fresh & Easy's marketing needs to be centered on communicating that core positioning to the consumer, just like Aldi USA and Trader Joe's do so well.

We've asked numerous consumers to tell us what "Aldi" is and what "Trader Joe's" is in terms of its format. Most who are familiar with the respective chains/stores can do so easily -- and most offer a similar version of the same definition. In contrast, when we ask shoppers to tell us what a "Fresh & Easy" market is, they find it hard to answer. And in terms of the responses, they're generally all over the map. It's like the old psychology 101 story about ten people, each grabbing a different part of an elephant, and all then describing an animal other than an elephant. We're talking retail identity here.

Every good marketer and retailer knows when this (lack of retail identity) is the case it's because there's been a failure to communicate the position of the retail format, in this specific case Fresh & Easy Neighborhood Market, in the mind of the consumer. That's Tesco's challenge with Fresh & Easy -- create or decide on what Fresh & Easy is -- clearly define it internally -- then focus everything it does around that core position, then communicate that core position in a solid, comprehensive and consistent way to consumers. The whole has to be greater than the sum of its parts.

We aren't seeing signs yet of that happening at Fresh & Easy Neighborhood Market USA. Changes have been made but nothing is consistent. More parts keep getting added but they just make it more difficult to find the whole it seems.

In our analysis, Tesco's Fresh & Easy Neighborhood Market has yet to decide (maybe it doesn't know?) what Fresh & Easy is, and then develop and implement a strong, clear and consise merchandising, operations and marketing program and communicate it in a consistant way to consumers, both in-store and externally.

Bloggers-at-Large -- Geelizzie: 'Fresh & Easy and Broke Car Blues'

Bakersfield, California-based Blogger and self-employed craftsperson "geelizzie" (real name Elizabeth) had a bad day today in that southern Central Valley, California city famous for its oil wells and being the home of country music stars like Buck Owens and Merle Haggard.

You see (and we bet you can relate) "geelizzie" has been having car problems. Below is what she says about her car and car problems today in a post in her "geelizzie" Blog titled: "Fresh & Easy and Broke Down Car Blues" (no doubt a title in honor of Bakersfield's status as "Nashville of the West"):

"First, the car. It's really really broken and needs major major work. We are waiting for a complete estimate and then will decide if the work will get done or not. My car is one of those cheap throwaway cars that when it starts falling apart means that it will keep falling apart until all that is left is a trail of auto parts strewn across the road.

Do we pay $2000.00 to fix a car that isn't even worth $2000.00 or take that money and put it on a new car? If we fix the old car, do we have any confidence at all that something else won't break down next week? It was probably good that the weather kept us from traveling on Christmas Eve because the car would definitely have broken down somewhere on the trip over the mountain and then we would have been spending our Christmas on the side of the road.

We had to go put $470.00 in tires on the truck yesterday so that Keith would have something to drive to work today. Regardless of what we decide, this will be the last year that we drive old beat up cars, a new car is in the future. (unless the economy finishes totally melting down and nobody has a job, of course.)"

Having been there before "geelizzie" -- We can relate. And, we sure enjoyed reading your description of the situation.

After dealing with car issues, "geelizzie" and husband Keith (did we mention she has six cats and wonders how they multiplied so fast?) decided to do some grocery shopping.

She had previously heard about Tesco's Fresh & Easy coming to Bakersfield -- the first two of a planned five stores in the area opened the first week of December -- so off they went to do their shopping in their city's newest entrant in the food and grocery retailing game. [From Fresh & Easy Buzz, December 3, 2008: Tesco Opens its First Two California Fresh & Easy Stores Outside of Southern California in the Central Valley City of Bakersfield Today. And here: Upcoming New Markets News: Tesco's Fresh & Easy Confirms Bakersfield, CA Stores; Says First Two Will Open Next Month on December 3rd, 2008.]

The shopping trip is the second aspect of the title ("Fresh & Easy and Broke Down Car Blues") of her Blog post today after all. And off to the new Bakersfield Fresh & Easy grocery and fresh foods market "geelizzie" went.

What did she find? And what did "geelizzie" think about what she found?

Well, in order to find out you have to click this link and jump to her Blog in order to read her full post about the store visit, along with her review of Tesco's Fresh & Easy Neighborhood Market. We will say though -- her shopping trip wasn't an improvement for her over her experience involving her "throw away car" earlier today.

And since Fresh & Easy Buzz is a full-service Blog, you can also read "geelizzie's" post, "Fresh & Easy and Broke Car Blues, here."

PS: If you read this "geelizzie," do let us know if husband Keith shouted "GEE-LIZZIE" when he took his first bite of that fresh & easy tamale bake entree?

[Editor's Note: Are you a Blogger? Have something you've written about Tesco's Fresh & Easy Neighborhood Market? If so, feel free to submit it to us for consideration as part of Fresh & Easy Buzz's 'Bloggers-at-large' feature, in which we occasionally publish story's written by other Bloggers. Send submissions for consideration to: freshneasybuzz@yahoo.com.]

Fresh & Easy and Arizona's St. Mary's Food Bank Network Partner to Help the Hungry; U.S. Food and Grocery Industry Stepping Up Aid; You Can Help Too

Hunger in America and the World: Arizona USA Market -- and Beyond

Arizona's St. Mary's Food Bank Alliance, which provides emergency food assistance to people throughout the state, and Tesco's Fresh & Easy Neighborhood Market jointly said last week the Southern California-based small-format grocery and fresh foods chain, which operates 28 stores in the Phoenix region, has donated a quantity of food products over the last year to the Arizona group's food bank network that equals 705,300 meals.

According to Fresh & Easy's chief marketing officer Simon Uwins and Mary Shannon, the CEO of the St. Mary's Food Bank Alliance, the grocer and the non-profit group struck-up a relationship shortly after Tesco opened its first Fresh & Easy stores in the Phoenix Metro region market in November-December 2007. The Fresh & Easy markets have been donating fresh food , including produce, and grocery products to St. Mary's since then.

"Our relationship with Fresh & Easy Neighborhood Market is unique and particularly valuable because it has allowed us to enhance the amount of fresh produce we are able to distribute," St. Mary's CEO Terry Shannon says.

"Because of the unprecedented need for food, particularly in the last four months, everything Fresh & Easy is able to donate to us through their 28 Arizona stores, has fed many Arizonans we would otherwise not be able to serve."

Numerous other supermarket chains and independents in Arizona, such as Wal-Mart, Bashas, Safeway, Albertsons, Fry's and others, donate food to the food bank alliance, as well as conduct in-store food drives for the region's food banks and other emergency food relief groups.

Corporately, Wal-Mart recently donated $2.5 million to Feeding America, the national food bank network in the U.S., and pledged to give at least 90 million pounds of food to the organization each year over the next few years.

This unprecedented need for food by food banks and organizations feeding the hungry -- who are looking more like all of us every week -- has grown dramatically over the last few months as the recession has worsened and the unemployment ranks continues to swell.

For example, Feeding America (formerly America's Second Harvest Food Bank) says demand for food and groceries from the thousands of food pantry and related community organizations it provides food to is up by about 50%. Local food programs report similar numbers, some even saying the number of people seeking help from their programs has far more than doubled in just the last few months.

The food and grocery retailing industry, along with food manufacturers, has stepped up its giving to Second Harvest and other groups as well. Numerous retail chains like Wal-Mart, Kroger and Safeway Stores, Inc. recently announced they will be giving what totals millions of dollars (collectively) worth of turkey's, hams and other holiday food items to Feed America next week, for example.

In California, Nevada and Arizona (where Tesco's Fresh & Easy has its 104 fresh food and grocery markets), three of the U.S. states hardest hit by the housing foreclosure crisis and high unemployment (for example, California's unemployment rate soared from 7.4% in October to 8.4% in November, it was reported by the state government yesterday) the increased demand for food assistance is particularly strong -- and growing.

For example, last week food pantries in San Francisco and Los Angeles said the demand is so strong for food assistance that they are about 40% behind (supply) the ability to meet the needs of the growing number of people seeking even short-term assistance. They are sending out an emergency SOS for donations.

St. Mary's Food Bank Alliance head Mary Shannon says the demand for food assistance in Arizona is up a whopping 70% this year. For example, the food bank network distributed its highest number of emergency food boxes in history during the November Thanksgiving holiday weekend this year, according to CEO Shannon. [11/26: Food Bank Delivers RECORD-BREAKING AMOUNT OF FOOD BOXES.]

Ways You Can Help:

To our readers: We encourage you to donate what you can, as we are doing, to your local community food bank or programs that help those who need emergency food assistance.

If you live in the U.S. and are looking for a central place to donate, you can do so to Feeding America at its Web site here. Feeding America provides food grants free of charge to food bank and emergency food programs throughout the U.S.

Arizona's St. Mary's Food Bank Alliance also excepts donations via its Web site here.

The United Nation's World Food Programme, which provides food assistance to people in developing and underdeveloped countries, also is in need of help. You can learn more at its Web site here.

You can also help provide food to the hungry in underdeveloped nations without spending a dime. Go to the FreeRice.com Web site here, play the vocabulary game, and for each answer you get right, participating companies will donate 20 grains of rice to the United Nation's World Food Programme. It's a fun and simple way to help the hungry -- and it only takes a few minutes of your time. For example, we just spent 10 minutes playing the vocabulary game and ended up donating over 1,000 grains of rice in that short amount of time.

>Click here for a list of various hunger relief organizations and programs in the U.S.

>Click here for a list of global hunger relief organizations.

>Click here to read about ways you can donate food for the holiday season.

News Report: Theives Get $32,000 in Early Morning ATM Machine Heist at Chula Vista, California Fresh & Easy Store

Thieves smashed the front window of the Chula Vista, California Fresh & Easy store before dawn this morning, making off with $32,000 from the store's ATM machine. [Photo credit: Albert Johnson - SignOnSanDiego.]

Two thieves clad in black clothing pulled a heist early this morning at the Fresh & Easy Neighborhood Market store at 865 East H. Street in Chula Vista, California, making off with $32,000 from an ATM machine inside the grocery and fresh foods market, according to a report today in the San Diego Union newspaper, which Fresh & Easy Buzz verified with the Chula Vista Police Department.

'Surveillance video from the Chula Vista Fresh & Easy Neighborhood Market store shows that two men backed a light-colored pickup to the front door of the market on East H Street near Paseo del Rey just after 4:15 a.m., Chula Vista police Sgt. Ken Heinz told the San Diego Union.'

'The two men stepped out of the truck and smashed the glass doors with a rock, Heinz said. They wrapped a chain around the ATM and dragged it into the parking lot. They ripped off the machine's cover and took out the container where the money is stored, according to the story.'

The two thieves were dressed in black, wore masks, gloves and hooded sweatshirts, according to the surveillance video which captured the early morning caper.

You can read the full report from the San Diego Union here.

Today's successful early morning heist at the Chula Vista Fresh & Easy, in which the thieves smashed the store's front window in order to gain access to the ATM machine, isn't the first time such a robbery was attempted in recent times.

As we reported in this story [News Report: Fresh & Easy Store ATM Machine 'To Go' is a 'No Go' For Burglars] on October 30, four robbers using a very similar method to that of the Chula Vista thieves attempted to grab the ATM machine from inside a Fresh & Easy grocery and fresh foods market in San Diego, California's Point Loma district. Chula Vista is located just south of San Diego.

Tape from the surveillance camera at that Fresh & Easy market on Catalina Boulevard near Talbot Street in the Roseville-Fleetridge neighborhood in Point Loma showed four people shattering the store's glass front door, entering the store, and once inside attaching a huge cable around the ATM machine, San Diego Police Sgt. Kerry Tom said at the time of the October 30, 2008 attempted heist.

Unlike the robbers this morning at the Chula Vista Fresh & Easy though, those four thieves at the Point Loma store in October failed in their objective to grab the ATM machine.

As an example, in that attempted October 30 ATM heist, once the cable was affixed to the cash machine inside the Point Loma Fresh & Easy store, the burglars attached the other end of the cable to a stolen Chevy Suburban sitting out front. They then took off in an attempt to drag the ATM machine down the street. But instead of getting away with the entire cash machine, the robbers pulled only the cover off, leaving the rest of the ATM machine (and all the cash inside it) still inside the store.

San Diego police found the Chevy Suburban abandoned down the street as part of their investigation of the failed ATM heist at that Point Loma area Fresh & Easy.

Could the robbers who got away with the $32,000 from the Chula Vista Fresh & Easy market early this morning be two of the four who failed in their attempt to boost the Point Loma store cash machine a couple months ago? The thieves' MO and the geographical closeness of the two stores suggest it's possible.

Fresh & Easy Neighborhood Market Launches 'Shop for Schools' Fund-Raising Program to Aid Schools Near its Stores

Tesco's Fresh & Easy Neighborhood Market is launching what it is calling its "Shop for Schools" program.

Under the program, which is similar to many offered by other U.S. supermarket chains in its market regions, Fresh & Easy will donate $1 for every $20 a customer spends at a Fresh & Easy grocery and fresh foods market from February 1, 2009 -to- March 31, 2009, to a participating school the customer designates.

Fresh & Easy says it has sent registration forms to every qualifying primary school within a three-mile radius of all of its stores in Southern California, Southern Nevada and in the Phoenix, Arizona Metropolitan region. The schools have until January 23, 2009 to register with Tesco's Fresh & Easy to participate in the program.

Fresh & Easy says it created the program, which starts on February 1 of next year, because the grocer wants to be a good neighbor in the communities where it has its stores. On its Web site notice about the program, Fresh & Easy says: "We know how important schools are to our neighborhoods and how critical fundraising is to provide your schools with needed resources. So we created 'Shop for Schools' to help."

The supermarket industry in the Western U.S. has over the years become a significant source of providing extra funding via donations for special programs for school districts.

For example, most of the major supermarket chains and many independents in California, Nevada and Arizona participate in the "Apple in Schools" program, in which they donate a certain percentage of money, based on customer purchases similar to the new Fresh & Easy program, to be used to provide Apple computers to schools for no charge.

Among those chains and independents in California, Nevada and Arizona include: Safeway Stores, Inc., Ralphs, Stater Bros. Albertsons, Bashas, Save Mart, Raley's and many others.

Additionally, numerous chains and independents conduct various regular promotions such as "script," gift card and others in which they add contributions to customer purchases, the proceeds going as cash donations to local schools. Modesto, California-based Save Mart, which operates about 250 stores throughout Northern and Central California, is one of the top supermarket chain's in raising money for schools, for example. It operates various different programs throughout the year designed to raise money for the schools in its market areas, including making substantial corporate donations to numerous schools.

Food manufacturers also run programs to assist schools. For example, for decades the Campbell Soup Company has run a program in which consumers collect the labels off its famous red and white line of condensed soup, turn the labels into Campbell's, and in return the company donates a certain amount of money per-label-turned-in (up to a limit) to schools.

Part of the reason behind the supermarket industry getting involved in raising money for schools has to do with the local nature of how K-through-12 education is funded and run in the U.S.

The schools are run locally rather than by the federal government, as is the case in many other western democracies. It's often referred to as "home rule." Community residents elect a school board, and the board hires the school administrators and makes policy, similar to how a corporate board of directors operate, at least in concept.

Schools in the U.S. also are funded primarily by local tax dollars. And the portion of money the federal government gives to schools is distributed by the states to the county level, which then is distributed to local school districts.

Over the last about 30 years, money for extra curricular programs at K-through-12 schools in the U.S. has been steadily reduced, especially for programs like art and music and for things like field trips. Along with this funding reduction, the overall funding hasn't kept up with all the new technologies like computers and Internet connections available to educators and schools. In fact, money for basic school supplies is barely available as well, which is why it's not uncommon to see teachers often spending their own money to purchase needed classroom supplies.

This is why programs like those conducted by food retailers and others -- fund raisers -- are so important and unfortunately needed by the schools.

We tip our cyber hat to Fresh & Easy Neighborhood Market for creating its "Shop for Schools" program and following the lead of the many retailers here before them who continue to raise money for schools. We believe retail promotions like Fresh & Easy's "Shop for Schools" that offer the grocer an opportunity to increase sales while at the same time give something back to communities are win-wins.

[Editor's Note: one thing we do at about this time each year is to make as much of a contribution as we can afford to one or more local schools. The end of the year, and before the start of a new one, seems a good time to do so -- thinking of new beginnings in terms of the new year reminds us of the new beginnings a good education can provide for a child. Although this is a tough year for donations, we encourage Fresh & Easy Buzz readers to join us in making whatever donation you can ($10 is even great) to your local schools.]

Two Motor Home Nomads, Laurie & Odel, Visit and Review A Southern California Fresh & Easy Neighborhood Market Store In Yucaipa

On April Fool's Day, 2003, a couple named Laurie and Odel, along with their cat Luna, hooked their Jeep (which they've named Jules) to the back of their motor home (named Scoopy) and took off to explore North America.

According to the Blog, "Semi-True Tales Of Our Life On The Road," that the couple publishes to chronicle their travels, "Odel is the primary driver and vehicle master. Laurie is navigator and correspondent (the Blogger). And Luna is their feline companion and queen of all she surveys." "Come enjoy the ride with us", is their invitation to readers of the Blog.

Laurie and Odel, traveling North America by motor home now for five years, are currently staying at the Mission RV Park in Redlands, (Southern) California, visiting the southern portion of the Golden State until January 20, according to their latest Blog entry.

The Mission RV Park is near the Southern California city of Loma Linda, where Tesco's Fresh & Easy Neighborhood Market soon will open a new combination grocery and fresh foods Fresh & Easy market just a few blocks from the RV Park.

Laurie, who as she says is the couple's correspondent, says their curiosity was peaked about what a Fresh & Easy Neighborhood Market is when they saw the "Coming Soon" sign for the future store in Loma Linda near the RV Park where the freeway travelers are currently staying.

As a result, she says on December 6 they visited a Fresh & Easy market in nearby Yucaipa, which they had first spotted while going on a wet Thanksgiving Day hike nearby.

North American traveler and Blogger Laurie offers a review of the Yucaipa Fresh & Easy market in a recent post in the couple's Blog...she also offers some comments from husband Odel, the vehicle master who went shopping at the store with her.

In addition to being a freeway diva and Blogger, Laurie appears to be an accomplished "foodie," offering some tasty recipes on her Blog.

In her post about the Fresh & Easy store shopping trip her food knowledge also comes out as she describes how she approaches shopping. She's a good photographer as well, as the Fresh & Easy Yucaipa store collage picture she took (above), along with other photographs in the Blog, demonstrate.

Read what the co-road warrior and correspondent-in-chief half, Laurie, of the North American motor home traveling couple has to say about their first time visit to the Fresh & Easy market in Yucaipa, California here.

Food & Grocery Retailing in the Recession: Wal-Mart CEO Describes Changes in Consumer Behavior-More Cheap Basics, More Cooking at Home; More Leftovers

If it's Sunday, it's "Meet the Press." But it's likely that the coffee viewers were drinking while watching the news program early Sunday morning was a basic brand brewed at home rather than a Mocha Latte from Starbucks.

NBC's "Meet the Press," America's Sunday morning news program of record, where U.S. Presidential candidates (and President-elect Barack Obama who appeared last week), foreign leaders and sometimes heads of major U.S. corporations go to address the leading political, social and economic issues of the day, featured a round table discussion yesterday on the news show which had outgoing Wal-Mart Stores, Inc. president and CEO Lee Scott as a member.

Scott recently retired from his CEO position at Wal-Mart and will be replaced at the end of January, 2009 by head of global operations Mike Duke. Scott will remain with the U.S.-based global mega-retailer in an advisory capacity for a couple years.

Wal-Mart CEO Scott joined a roundtable discussion moderated by NBC News' David Gregory, who was recently named as the permanent replacement for the late Tim Russert as moderator of the news program, on yesterday's "Meet the Press," which also featured: Michigan Gov. Jennifer Granholm; former Massachusetts Governor, Republican Candidate for President, investment banker and entrepreneur Mitt Romney; former Hewlett-Packard CEO and economic advisor to John McCain's campaign for President, Carly Fiorina; and Google CEO Eric Schmidt. The discussion topic was the state of the U.S. economy, the financial crisis and recession, and American consumers.

The Wal-Mart CEO said on the program yesterday that the retailer is seeing major changes in the ways its customers are behaving in the current, serious economic recession.

"The number one concern among consumers today is their job, plain and simple," Scott said yesterday on "Meet the Press."

He offered this example and analysis from Wal-Mart USA's pharmacy group: "In our pharmacy group, we have increases in prescription drugs, but not at the same rate it was," he said. "What we're seeing is an increase in self-treatment."

Scott also said customers are changing the types of foods they buy at Wal-Mart.

"We're seeing an increase in food storage as people are cooking more at home," he said. They are "using leftovers more extensively," and buying more frozen food.

Scott also said on "Meet the Press" yesterday that small businesses, which comprise a significant segment of Wal-Mart shoppers, particularly at the chain's Sam's Club wholesale stores, are changing their buying patterns and behavior. For example, he said cash-strapped restaurant owners, a group that buys regularly from Sam's Club, are shopping the stores more frequently to buy supplies as one day's cash flow allows them to buy supplies for the following day. No food storage among these small business customers, according to Wal-Mart's research.

Lee Scott also made a bit of news yesterday on the news program, saying the chain, which is the largest corporation and retailer in the world, as well as being the number one retailer of all products, including food and groceries in the U.S., has reached out to the incoming Obama Administration, offering to share its expertise in the health care and environmental areas with the President-elect, along with working in both areas with the new administration when it takes office in January 2009.

Scott said these are two areas that profoundly are effecting Wal-Mart shoppers and the companies that do business with Wal-Mart as vendors and service providers.

Wal-Mart "has reached out to President-elect Obama's team to work on the U.S. health care and energy issues," he said, adding that people critical of Wal-Mart's involvement in political debates were "on the wrong track."

"These are not times to be self-serving," Scott said. "We have a responsibility to participate."

[You can view a video of yesterday's roundtable discussion on "Meet the Press" here.]

Some would say, particularly in this serious recession where new customers are flocking to Wal-Mart daily in search of bargains as the chain's sales and profits the last two quarters have reflected, to paraphrase that old saying about automaker General Motors ("What's good for GM is good for America," an ironic quote today), 'What's consumer behavior today at Wal-Mart is likely similar if not the same consumer behavior in general today in the U.S.'

As such, the trends Lee Scott reported yesterday on "Meet the Press," particularly this one: "We're seeing an increase in food storage as people are cooking more at home," he said. They are "using leftovers more extensively," and buying more frozen food, is something all U.S. food and grocery retailers should take to heart, and focus their respective merchandising and marketing efforts around now.

Regarding Tesco's Fresh & Easy Neighborhood Market, Fresh & Easy Buzz has been writing now for months that the grocery chain needs to focus on a value proposition in its merchandising and then create a marketing and communications program to tout that value proposition in a strong, clear, concise and repetitive way.

Instead Fresh & Easy's merchandising and marketing focus all year has been more like that of a specialty foods retailer operating in good economic times.

For example, Fresh & Easy promotes mostly prepared foods (a little prepared foods promo is fine but far less than it's doing now in this recession would be wise). Read Lee Scott's research observation above. More cooking at home. Using more leftovers. Buying more frozen food. Buying more basic groceries on sale and storing them.

For Thanksgiving Fresh & Easy promoted a gourmet turkey wrapped in smoked bacon and sage rather than a basic bird at a cheap price like nearly all other major chains did.

And when it comes to its public relations campaign, Fresh & Easy issues news release after news release about "green" retailing, premium, prepared foods and new store openings, but near-none about the values offered in its stores.

It's fortnightly (bi-weekly) advertising circulars reflect mostly this specialty foods retailer in good economic times promotional activity as well. The grocery chain has yet to produce one value-packed advertising circular similar say to what the small-format discount grocery chain Aldi USA does each week. (http://www.aldiusa.com/.]

After all, according to Tesco, Fresh & Easy is a convenient neighborhood grocery and fresh foods store designed for "everybody" to shop at for food and groceries, featuring everyday low prices at least 15% below the everyday prices of its competitors.

This model and message isn't being communicated, nor is Fresh & Easy's merchandising emphasising this positioning in its stores, even though it is what it should be doing with a near 100% focus in this current down economy, which is even more down in California, Nevada and Arizona where Tesco operates its 104 Fresh & Easy stores than it is in many other U.s. states.

Based on Tesco's description of what Fresh & Easy is, that they are no frills stores for "everybody," with about the lowest prices around vis-a-vis the competition, the stores should be doing very well right now. They aren't.

While Scott and Wal-Mart learn about this new, recessionary customer, and focus the chain's stores on this customer which is paying big dividends for the chain, Tesco's Fresh & Easy Neighborhood Market USA seems oblivious to the current recessionary marketplace realities in its merchandising and marketing.

If at the helm of Fresh & Easy, we would be focusing near all of our merchandising, marketing and operational efforts in a laser beam like fashion on that value proposition, on the basic grocery and related categories like Wal-Mart is doing, and is winning out by doing so, across the board.

Perhaps a mission statement something like this: Fresh & Easy: "We are a no frills grocery market where you can get food and groceries for the best prices. No gimmicks. No fancy displays. Just the best prices available on groceries and fresh foods (and a few special treats as well) when you need them. We know the times aren't easy. That's why Fresh & Easy is here for you."

Marketing & Promotions Report: Manufacturers' Coupons Becoming the 'New Black;' Use Among Consumers Soaring; Marketers Distributing More Than Before

Fresh & Easy Buzz has been writing for the last few months about how manufacturers' cents off coupons are becoming the "new black" in this recessionary economy -- that in fact not only are the coupons gaining popularity among consumers of all income levels; they are even becoming chic to use. We call it the phenomenno part of the making of the new, frugal American consumer.

One of the reasons we've been researching and writing about the growing consumer use and marketer distribution of manufacturers' cents off coupons, is because Tesco's Fresh & Easy Neighborhood Market does not accept the little pieces of free retailer money in its Fresh & Easy grocery and fresh foods markets, despite the fact that as close as you can get to 100% of all the grocery chain's competitors not only accept the coupons, but encourage their use by shoppers.

We've been researching the coupon trend closely, as regular readers know from previous stories in the Blog. We continue to find more and more consumer package goods manufacturers and marketers expanding their use of cents off coupons, increasing coupon distribution, and coming up with new methods for distributing the coupons in the current recession, where maximizing sales is job one.

Below are some new developments we've discovered within the current, fast-growing manufacturers' coupon trend:

>Procter & Gamble, the largest consumer packaged goods advertiser in the U.S., is producing a retail version of BrandSaver, the coupon booklets that the company inserts in Sunday newspapers 14 times a year. A temporary store named BrandSaver Live opened the first week of December on West 57th Street at the Avenue of the Americas in Manhattan.

At the store, which is a temporary holiday promotional location and closes today, visitors can receive advance copies of the BrandSaver coupons to be distributed with Dec. 14 newspapers (this Sunday), along with samples and demonstrations of products like Clairol, Downy, Olay and Tide. If the store does well P&G says it plans to do it more -- and in other cities.

Jim Leish, a P&G marketing vice president, says the temporary coupon store idea is just another aspect of the company's increased useage of coupons, particularly as a way to generate new consumer trial, but also as a way to rasie brand awareness and combat store brand sales.

>All You magazine, published by the Time Inc. division of Time Warner and sold by Wal-Mart Stores is offering subscribers to a new weekly e-mail newsletter, All You Deals and Meals, a sneak peek at the coupons to appear in the coming issue of the magazine.

"Our reader is a value-driven consumer," says Diane Oshin, publisher of All You magazine, which regularly runs so many coupons in each issue that it carries a coupon index. Oshin says numerous new readers are picking up the magazine as well, including those in higher income levels.

Speaking of Wal-Mart, the mega-retailer is now offering a real time text messaging program program in which consumers can sign up and then receive real time texts to their mobile phoes and other handheld devices alerting them to "super specials" at Wal-Mart stores. Manufacturers' coupons are often included in a version of the message sent to home computers e-mail accounts.

>Valpak Direct Marketing Systems, which distributes coupons under the Valpak brand, has been advertising on national programs like "ABC World News" and the "Today Show." Valpak's business is booming as more manufacturers use it to distribute coupons and more consumers use its coupon drops. The advertising is a way to create even more awareness for the coupon marketer, it says.

>New technologies enabling the distribution of manufacturers' cents off coupons like never before. For example, There are now hundreds of Web sites where coupons can be obtained by with the click of a mouse and a push of the printer on button rather than clipping Just a few of these sites include: coupons.com, couponcabin.com, couponcode.com, couponmom.com, 8coupons.com, fatwallet.com and shortcuts.com. Many also deliver coupons by e-mail messages. A search of Google using "manufacturers' coupons" will bring up more coupon sites than you can even deal with, for example.

Many of the online coupon sites also allow for customization. Consumers can type in what kinds of coupons they are interested in, say paper towels or bagged mixed salad greens, and get listings for just those coupons. Many also allow for searching by brand, along with other custom criteria.

Online coupons also are in real time for consumers. A shopper can go to the sites right before going to the supermarket, take her grocery list and then search for coupons for the items on the list. Unlike FSI's and direct-mailed paper coupons, there's no having to wait for the Sunday newspaper or the Tuesday coupon envelope in the mailbox.

In 2007, 89% of the U. S. consumer population said it used coupons, according to data from the Promotional Marketing Council's Coupon Council, which track the usage of manufacturers' coupons. In 2006, that number was 86%.

The data for 2008 won't be out until next year. However, Charles Brown, co-chairman of the Coupon Council and vice president for marketing services at NCH Marketing Services in Deerfield, Illinois., a unit of Valassis Communications, which is one of the top manufacturers' coupon distribution companies in the U.S., says he's looked at some of the 2008 data that shows 94% of U.S. consumers say they are using the manufacturers' cents off coupons.

All of the coupon industry people we've been talking to say their business is strong, and that they are seeing higher redemption rates among consumers of the coupons compared to the 1990's and even 1980's. One executive told us the last time he remembers such increased use of coupons by shoppers was in the severe recession of the 1970's, which many economists are comparing the current recession to.

Food and grocery retailers are backing up those claims. Chain grocers and independents tell us coupon use has soared in their stores, particularly since September of this year when the news of the financial crisis first hit. The retailers also said they saw much higher coupon use during Novembers busy Thanksgiving holiday grocery shopping period than most can recall experiencing in many years.

The store director of a supermarket affiliated with a major U.S. chain recently let us look at just one days take of manufacturers' cents off coupons in his store. He didn't need a garden wheel barrow to haul the coupons up to the office -- but almost.

We couldn't check with Tesco Fresh & Easy stores because, as we mentioned, the grocery chain does not accept manufacturers' coupons. It's reasoning is because it wants to save labor by having its store-level employees handle as little paper as possible.

In addition to not accepting the coupons, that's also the logic behind Fresh & Easy Neighborhood Market not accepting paper checks of any kind and not accepting WIC paper vouchers (they look like a check), which are the food coupons given to the poorest of the poor mothers to be used for infant formula, whole milk, fresh fruit juice, whole grain cereals, fresh produce and a few other items for their infants and toddlers. Retailers get paid 100% for the value of the WIC coupons by the federal government.

Fresh & Easy does accept some paper though -- paper money. Currency. But that's it. Besides that its just plastic debit cards and credit cards. The grocer does accept food stamps because the federal government distributes the food stamps on plastic cards similar to debit or credit cards.

Fresh & Easy also issues its own paper coupons, which it accepts in its stores. The current version, which it mails out frequently and gives out in its stores now in a more limited fashion (up until a couple months ago they were given out in multiples in the stores), is $6 off purchases of $30 or more. That's a good savings for a consumer -- and unlike specific manufacturers' coupons, a shopper can use the $6 off coupon on everything in the store, as long as they purchase $30 or more worth of food and groceries.

The coupons aren't so great for Fresh & Easy though. That's because unlike manufacturers' coupons, which retailers get paid for by the manufacturers 100% plus a few cents per coupon in handling charges (hence our "free money" comment earlier), the $5 off Fresh & Easy coupons come right out of the grocery chain's profits. Ouch. And sense the retailer uses the deep discount coupons regularly, and has done so since the first stores opened a year ago, those coupon discounts amount to lots of dollars not being kept by Fresh & Easy.

Besides that, with manufacturers' cents off coupons becoming the "new black," at least the economic recession version of that popular color in everything, Tesco's Fresh & Easy is missing out on much added sales in its stores.

We've talked to numerous consumers who say they don't shop at the stores because they don't accept manufacturers' coupons. We've also talked to many who said they buy far less at Fresh & Easy stores because they can't use the cents off coupons. And among those, most tell us they only shop at Fresh & Easy when they have one of the retailers' $6 off coupon in hands.

Tesco is really missing the boat by not accepting manufacturers' coupons like just about 100% of the grocery chain's competitors do. But it's Tesco's boat, so they have the right to sink it any way they see fit. Although their stockholders and the great Fresh & Easy store employees would disagree with us on that.

Would accepting manufacturers cents off coupons make a huge dollar difference to Fresh & Easy in sales. Probably not a huge difference. But it would make a significant one.

And even more importantly it would make a huge perceptual difference. It's hard to convince consumers you operate a value-based grocery chain, for example, when you don't accept the manufacturers' coupons. Fresh & Easy wants to be viewed as such a value-based grocer. The cents off coupons are a major aspect of food and grocery shopping behavior in the U.S., like it or not. And it is consumer perception that counts in the long run.

Now, if you add accepting paper personal checks and cashing payroll checks, along with accepting the WIC vouchers, which all of Fresh & Easy's competitors of note do, on top of also accepting the manufacturers' coupons, we think that could amount to a very nice sales boost for Fresh & Easy.

Even more important is it would improve the grocer's value proposition and its value perception among consumers.

After all, when it comes to the cents off coupons, there must be a very good reason why just about 100% of Fresh & Easy Neighborhood Market's food and grocery retailing (and most all drug stores) competitors accept the cents off coupons, despite the fact they are pesky to deal with, right?

Reader Resources

Recent, related posts from Fresh & Easy Buzz:

December 6, 2008: Use of Manufacturers' Coupons Soaring Among U.S. Consumers; Coupon Delivery Systems Going High-Tech; But Fresh & Easy Stores Don't Accept the Coupons

Wednesday, November 26, 2008: Consumer Briefing: The New, Frugal and Near-Broke American Consumer is Staying Home For the Holidays

Sunday, August 24, 2008: Sunday Supplement: 'America's Cheapest Family' Helping to Spur Increased Use of Manufacturers' Coupons At the Grocery Store; Accept At Fresh & Easy