Tesco Fresh & Easy, Research and Course Correction: What 'Was' Said and 'its' Context Matters Little; What 'Is' Matters Much, What's Done Matters More

Fresh & Easy Buzz has written much about the various forms and modalities of research that can be used in the food and grocery retailing sector as a way to both better understand consumers, along with better understanding the food retailing market vis-a-vis what a grocer's competitors (and for a new grocer entering a market its upcoming competitors) are doing -- and why they are doing it.

There is no more important use of research, ranging from market-oriented research and analysis to consumer-focused research, than in using it to help gain a better understanding of what is a central fact of American food and grocery retailing: That it is a regional, sub-regional, sub-sub regional, local and neighborhood enterprise.

For example, if you take a state like California -- the nation's largest and the one where Tesco's Fresh & Easy Neighborhood Market is based and has the majority (in Southern California and Bakersfield in the southern Central Valley thus far) of its current 113 small-format grocery and fresh foods markets -- it's not one market, nor even a series of regional markets. California is best viewed as three or four (or even five) regional markets, then broken down into sub-regional markets, sub-sub regional markets on down to local.

The three major regions of the Golden State -- Southern California, the Central Valley and Northern California (each with sub-regions and sub-sub regions within) -- have many similarities in terms of consumer behavior as it relates to food and grocery retailing. But the qualitative differences are vast in terms of demographics and other key variables.

And within each of these three regions there are significant differences as well. What the popular and powerful former Democratic Speaker of the U.S. House of Representatives, Thomas "Tip" O'Neill was famous for saying about American politics, that "All politics is local," can in the main also be said about American food and grocery retailing, which is something we've written often about in Fresh & Easy Buzz. Tip probably would have made a pretty good grocer with that understanding. It served him well in politics, after all.

We've also written often about ethnographic research, and have used an applied Anthropological research modality (participant and non-participant research) in some cases in our coverage and analysis of Tesco's Fresh & Easy and the food and grocery retailing business in general

On Saturday, February 21 we wrote this piece about some comments attributed to Tesco Fresh & Easy Neighborhood Market CEO Tim Mason in a brief story published in the February 22 edition of the Sunday Times of London. Since those comments and direct quotes from Mr. Mason in the story track arguments we've been making for nearly a year about the research the grocery chain did prior to launching its U.S. food and grocery chain -- research in fact that the retailer has publicly said formed the basis for the Fresh & Easy format -- we thought the CEO's remarks in the Times' report were right on, albeit a bit late in coming. We even called the comments attributed in the story to Mr. Mason"healthy" ones.

We also thought they were a good basis for creating a bridge in which the chain and its CEO could now go forward with the changes it needs to make in the Fresh & Easy format, merchandising, marketing and operations if it hopes to succeed in the ways Tesco has planned on doing with the grocery and fresh foods chain in the Western USA.

You can read our February 21 piece here: A Healthy 'Mea Culpa': Tesco Fresh & Easy CEO Tim Mason Says 'We Got it Wrong;' Comments Tend to Agree With Fresh & Easy Buzz Analysis and Arguments.

It appears though that Mr. Mason's comments attributed to him in the Sunday London Times' story were "taken out of context," according to the Tesco Fresh & Easy Neighborhood Market spokesperson, although we've yet to hear from CEO Mason in print in this regard.

We wrote about this development on February 24 here: The 'Mea Culpa' 'Mea Culpa' By Proxy With A Dash of Spin: Tesco's Fresh & Easy Now Says CEO Mason's 'We Got it Wrong' Comments 'Out Of Context.'

What's interesting is that it really doesn't matter if Tesco Fresh & Easy Neighborhood Market CEO Tim Mason said what was attributed to him or not in the Times' story, or if it was "taken out of context" and thus required clarification from the corporate spokesperson (although it is interesting that clarification was in another publication rather than in the Sunday Times) The fact is, Tesco's Fresh & Easy is struggling. And all of that struggle isn't just because of the current economic recession. The chain was struggling pre-recession.

In fact, based on what Tesco has said Fresh & Easy is, and promoted it to the press as -- a neighborhood grocery and fresh foods market for "everybody" (all consumers) that offers everyday prices 15-20% below competitors' everyday prices -- one would think the stores would be thriving in a recession, for that format as described by Tesco would appear to a reasonable observer to be just the retail prescription for cash-strapped shoppers in an economic recession. But this isn't the case at present.

Our analysis is that a major part of Tesco Fresh & Easy's problems goes back to this research -- research the grocery chain touted as being extensive, comprehensive and nearly ground-breaking in its public relations push prior to opening its first stores in November, 2007. Tesco failed, or did so poorly, to do the most basic of all research we argue -- the type of market-based research that would have allowed the retailer to gain an understanding of American U.S. food and grocery retailing in general and Western USA food retailing, particularly with a focus on California, Nevada and Arizona and each states sub-regional, sub-sub regional and local markets.

Had it done this type of research -- and hired an American research team with strong knowledge of the respective local markets to conduct it independently for the company -- it would have learned that no such food retailing gap existed in the market in terms of any lack of grocery chains and independents selling the types of products Tesco offers at the Fresh & Easy stores.

For example, there is nothing revolutionary -- despite the many articles to that effect that were published in the mainstream press before the first Fresh & Easy stores were opened -- about the prepared foods sold at Tesco Fresh & Easy. In fact, California grocers are among the innovators in fresh, prepared foods merchandising, and many have been doing in a major way what Tesco just started doing with prepared foods for a good 15 years, getting better at it each year.

It's not that Tesco should not have opened the Fresh & Easy stores, and as we often say -- "Don't rule Tesco out ever. But it is that, in our analysis, the research was flawed, and we also think some ethnocentrism played a role in how it was conducted.

And as a result, that flawed research -- too much emphasis on focus groups and elaborate in-home ethnographic research and not enough market-based study in an informed and unbiased way -- resulted in Tesco doing so many wrong things with Fresh & Easy that it positioned the stores in a way from the very start that dramatically decreased its odds of success.

Tesco's Fresh & Easy has also been super-slow on the draw in course-correcting. It appears CEO Mason is realizing some changes are "now" needed -- such as focusing on value and stronger and more frequent promotions, two things we've been emphasising and suggesting in our analysis for about eight months -- but those changes needed to come in about the third quarter of 2008, when it was clear the current direction -- which we've still not figured out is -- was not working. It's not too late though. We think Fresh & Easy has strong potential if fixed.

But now Fresh & Easy's corporate spokesperson has said CEO Mason does not believe any of the initial research was flawed -- that it was just fine. That Mr. Mason's comments in that regard were taken out of context. That he meant nothing of the sort. Instead, the company's position is that any problems at Fresh & Easy are due to the current recession, according to spokesperson Brendan Wonnocott in the Supermarket News report and in a couple other published reports yesterday.

We think that's too bad. Why? Because the research is flawed, or the conclusions drawn from it are, take your pick, and it is our analysis that unless that is realized by CEO Mason and the other senior executives at Tesco's Fresh & Easy, it isn't likely they will be able to make the changes needed to move the grocery chain forward to success.

For a thoughtful and interesting analysis of that research, we suggest you read a piece posted yesterday by Applied Anthropologist Grant McCraken in his Blog: "This Blog Sits at the Intersection of Anthropology and Economics." The piece, "Ethnography is not an in-home interview," directly addresses the Tesco Fresh & Easy research within the framework of ethnographic research, which is the writer's specialty. Click here to read his post.

We will offer additional original analysis and thoughts on the research and related issues in an upcoming post in Fresh & Easy Buzz.

Supplemental reading from the Fresh & Easy Buzz archives:

February 21, 2008:http://freshneasybuzz.blogspot.com/2008/02/supermarket-news-fresh-easy-not.html

March 24, 2008: The Analysis of Tesco's Fresh & Easy From Piper-Jaffray's Mike Dennis in This Interview Published Today Sounds A Lot Like Ours For the Last Few Months

April 1, 2008: Supermarket News' Fresh & Easy Cover Story: Industry Analysts and Others Agree With Our Multi-Month Argument That Fresh & Easy Stores Need Local Focus

April 3, 2008: Our 'Fresh & Easy Stores' Lack A Sense of Place' Theory is Growing; Read What We and Others Are Saying Tesco Needs to Do With Fresh & Easy

April 9, 2008: USA Today Discusses Themes We Sound Off On Here at Fresh & Easy Buzz Near-Daily: Neighborhood, Community and 'Sense of Place' in American Retailing

April 28, 2008: Having Trouble in the Neighborhood (Market)? Who You Going to Call? Gene Hoffman Would Be a Good Start

May 16, 2008: Tesco is Incorporating New Interior Design Elements and Enhancements Inside its 61 Fresh & Easy Neighborhood Market Grocery Stores

May 7, 2008: May 7, 2008: Feature & Analysis: Tesco is Launching A Major 'Local Foods' Program in the United Kingdom; Why Not Do the Same At Fresh & Easy USA?

Wednesday, July 23, 2008: Fresno, California Fresh & Easy Grocery Store to Be First in Chain to Include Local, Community and Neighborhood Design Elements and Features

The 'Mea Culpa' 'Mea Culpa' By Proxy With A Dash of Spin: Tesco's Fresh & Easy Now Says CEO Mason's 'We Got it Wrong' Comments 'Out Of Context'

The photograph above of Tesco Fresh & Easy Neighborhood Market CEO Tim Mason is from an exclusive interview piece the CEO did with the London Times, which was published on November 12, 2008, the same UK-based newspaper Tesco's Fresh & Easy says attributed or quoted comments made by the CEO "out of context" in the report its Sunday addition ran two days ago. You can read two pieces (November 12 and 16) we wrote about the interview here: Analysis: Hard Times at Fresh & Easy - Northern California Expansion to Be Postponed or Shelved Do to Economy; But its Only a Symptom Not the Cause and here: Tesco Fresh & Easy CEO Tim Mason Says He's 'Deliriously Happy' With the Chain's Progress Thus Far; We Prefer Andy Grove's 'Only the Paranoid Survive.' There's a link to the November 12 story in the Times at both of our links above. [Photo credit: Times of London.]

Analysis & Commentary

In this piece [A Healthy 'Mea Culpa': Tesco Fresh & Easy CEO Tim Mason Says 'We Got it Wrong;' Comments Tend to Agree With Fresh & Easy Buzz Analysis and Arguments] on Saturday, February 21, we wrote about a report in the Sunday Times of London in which Tesco Fresh & Easy Neighborhood Market CEO Tim Mason is attributed and quoted as saying the retailer got it wrong when it came to the research that formed the basis for what the Fresh & Easy format is and how the stores are merchandised and operated.

Since it has been our argument and offering (along with including positive suggestions) for over a year that Tesco did indeed "get it wrong" with its self-touted "extensive" and "in-depth" research -- which was too heavy on consumer focus groups and ethnographic research (researchers spent time in consumers' homes observing their food-related behaviors) and almost completely lacking in gaining an understanding of the food and grocery retailing business and market in California, Nevada and Arizona, in our analysis -- when we read the Sunday Times' story with the quotes and words attributed to Mr. Mason it made perfect sense to us that he would say what was attributed to him.

Upon reading the words attributed to CEO Mason, we said two things: "Good for him, he is now standing tall," and "It's about time" the grocer admitted what it knows to be the case regarding the research and the conclusions it drew from it, mainly that a major food retailing opportunity gap (the Fresh & Easy format) existed in the three markets that was just waiting to be filled.

No such major opportunity gap existed, in our analysis and in that of others who know the markets well. That doesn't mean Tesco shouldn't have launched Fresh & Easy. Just that the premise based on the research was faulty, in our analysis and opinion.

It is always better in business, politics and other related endeavors to define your problems rather than let others do it for you. This is what we felt CEO Mason achieved in the comments attributed to him in the Sunday Times' report. Experienced marketing and PR hands call this "hanging a lantern" on your problems. Once you define them for yourself it puts you more in the driver's seat. It also makes it easier to move forward on your own terms. It also feels good to do.

This morning however we were treated to an e-mail containing a story from the online version of the supermarket industry trade publication Supermarket News. That story, titled, "Fresh & Easy On Course, Company Says," contains what appears to our eyes, and experience, to be what we are referring to as the "'Mea Culpa,' 'Mea Culpa' by proxy." (See the title of our February 21 piece. Some might say it's even "spin."

The angle of the Supermarket News report is that Tesco Fresh & Easy CEO Tim Mason's comments in the Sunday Times' piece were "taken out of context," according to what the story reports Fresh & Easy Neighborhood Market's spokesman, Brendon Wonnacott, told the reporter.

We reprint the brief report from this morning's Supermarket News (in italics) below. Here is a link to the story as well.

Fresh & Easy On Course, Company Says
Feb 24, 2009
By ELLIOT ZWIEBACH

EL SEGUNDO, Calif. — Comments to the Sunday Times of London by the head of Fresh & Easy Neighborhood Stores here — to the effect that Tesco has been operating under mistaken assumptions in the U.S. — were taken out of context, a chain spokesman told SN yesterday.

“We’ve been very clear from the beginning that Fresh & Easy is continually evolving,” Brendan Wonnacott explained. “Making changes is something we’ve done from the start and will continue to do. That shouldn’t be surprising — that’s just being a good retailer.”

The newspaper had quoted Tim Mason, chief executive officer of Fresh & Easy, as saying, “We may have assumed certain elements of the Fresh & Easy brand would do the work for us, and we would not have to go down and dirty on price. That may have been a mistake.”

According to Wonnacott, “The economic environment has changed immensely over the past several months, [during which] we have heard consistently from our customers that they are more conscious of price, and like any good retailer, we are responding. We rearranged our flier a few months ago to highlight a few key products at great prices. We have simply turned up the volume on price communication so people know we offer high-quality products at great prices.”

Since the onset of the recession, for example, Fresh & Easy has launched a 98-cent produce pack that has helped increase produce sales by more than 11%, Wonnacott said; and it has continued to introduce more national-brand products in its stores and added larger sizes of detergents — all in response to customer requests for help stretching their budgets, he explained.

“We continue to evaluate different categories where we may complement the existing Fresh & Easy product range and help customers make their dollars go even further.”

All of what Mr. Wonnacott says -- the introduction of the value-based 98-cent produce packs (a value proposition we like because we've been suggesting for many months that value-based is where the grocer needs to move to and focus more on), adding more national brands (something we first suggested in early 2008) and the like are true -- and he says it well.

And since we weren't present when CEO Mason and the writer of the Sunday Times' piece talked, we have no idea if the words attributed to Tim Mason in the story were taken out of context. We should add that Tesco and Tesco Fresh & Easy often goes to the UK-based Times' when it has news to report on an exclusive basis. [See the photo caption with links at the top of this piece.]

In fact, in our February 21 piece we even used the word "healthy" to describe the words attributed in the Sunday Times' story to Mr. Mason, and to his showing in our opinion strong leadership ability in saying them, regarding Tesco Fresh & Easy's operating the Southern California-based 113-store small-format, convenience-oriented grocery and fresh foods Fresh & Easy chain under bad assumptions cleaned from the company's research.

After all, it is no secret to many that Mr. Mason and other Tesco Fresh & Easy executives, along with some of the top Tesco plc brass back home in the United Kingdom, have voiced concern and discussed at length the pre-Fresh & Easy launch research that formed the basis for the format and wondered how and why it was of less than top-flight quality.

And in standing tall and saying so in the Sunday Times' piece, Tim Mason showed the things of a leader -- the confidence to admit a mistake, a determination to correct it and move on once admitted, and a touch of humility backed up by a nice sash of resolve. (Note how much positive street credibility President Barack Obama has recently got for saying he got it wrong on a couple of key things so far in his Presidency.)

But now the spin. By having the Tesco Fresh & Easy Neighborhood Market corporate spokesperson "clarify" CEO Mason's comments to the Sunday Times' for its report -- adding nuonce and conflict to the reported statements and saying they were taken out of context -- it's our analysis and opinion that the company has now just added an unnecessary element to the reported statements. (We aren't putting down the corporate spokesperson for doing his job.

There was nothing wrong or negative about what Mr. Mason was reported to have said. In fact, it was refreshing and could have formed a great premise to go forward with the changes the CEO knows need to be made, and plans to make.

If the comments were taken out of context, the simple thing would have been to contact the Sunday Times' writer and express that viewpoint. We are rather sure he would have done a follow-up story, particularly since the UK-based newspaper writes about Tesco regularly.

Additionally, Tesco and Tesco's Fresh & Easy has chosen to go to the British papers rather than U.S-based papers whenever CEO Mason has specific (non press release) news he wants to put out publicly, so its not like there isn't precedent in terms of media relations with Tesco, Tesco's Fresh & Easy and the British mainstream press. CEO Mason is British after all, and was an executive at Tesco in the UK before coming to America to head-up Fresh & Easy. [See the photo caption and links at the top of this piece.]

Instead someone decided to do a little spinning to the Supermarket News' reporter, and he reported it like any good reporter should. But it's our analysis that this "clarification" from Fresh & Easy not only was unneeded, but now takes what was a story at the end of its news cycle and created a new news cycle for it.

Instead the company should have used CEO Mason's bold and leadership-oriented comments attributed to him in the Sunday Times' story as the basis of the changes it plans to make with Fresh & Easy. Such a headline would read: "Confident CEO admits mistakes, vows to build on those mistakes with changes designed to greatly improve Fresh & Easy."

But instead the impression left is: "What did CEO Mason really say?" "And why does a corporate spokesperson need to interpret and clarify what the company leader said?" In other words, they've gone and muddied the whole thing up in our analysis.

We don't think you would see this happening with Safeway Stores, Inc. CEO Steve Burd, or just retired Wal-Mart Stores, Inc. CEO Lee Scott, who remains chairman of Wal-Mart's board of directors, for example, to offer just two examples of industry CEO's. The reason is because doing so would diminish the perception of their leadership ability to all stakeholders -- investors, employees, suppliers, industry peers and others.

It's key for stakeholders to clearly understand that when the person at the top is speaking out, he is doing so for himself and the company. And that if he or she feels something they said to a reporter was taken out of context, then they say so and describe what and how in their own words rather than via proxy.

As a result, Mr. Mason now needs to step back in and talk to the reporter who wrote the piece in the Sunday Times so that he clarify in what ways he believes his comments were taken out of context in the piece.

If not, the Tesco plc and Tesco Fresh & Easy stakeholders are left confusion -- with what to us were healthy, leadership-oriented made comments by the Tesco Fresh & Easy CEO in the Sunday Times' story, but which now today have been amended by the company spokesperson in the Supermarket News report, including suggesting the Sunday Times' writer took Mr. Mason's comments out of context, leaving confusion as to what was said, as well as to who is running the shop over in El Segundo.

Bloggers-At-Large: The UK's 'Village Postmaster' Offers His Thoughts On Tesco Fresh & Easy CEO Tim Mason's 'Mea Culpa'

The "Village Postmaster" is an independent retailer, town postmaster and Blogger -- the "Village Counter Talk" Blog -- in the lovely and bucolic village of West Chiltington, West Sussex, United Kingdom.

He's also a longtime observer of and posts often about United Kingdom-based global retailer Tesco, which owns and operates El Segundo, California (Southern)-based Fresh & Easy Neighborhood Market, which currently has 113 small-format (10,000-13,000 square foot) grocery and fresh foods markets in Southern California, Metropolitan Las Vegas, Nevada and Metro Phoenix, Arizona, in the Western United States.

Tesco plc is the leading food and grocery retailer in the UK. It controls about a 31% market share in the nation. Tesco is the third-largest retailer in the world, after number one U.S.-based Wal-Mart Stores, Inc. and number two Carrefour, which is headquartered in France.

As a longtime independent retailer, as well as having his store in West Chiltington, West Sussex UK serve as the town's post office, "The Village Postmaster" offers his experiences and insights in his "Village Counter Talk" Blog from the perspective of an independent entrepreneur. The Blog is followed closely by many in the United Kingdom and beyond.

For example, here's what columnist Vickie Woods of the London Daily Telegraph newspaper says about "The Village Postmaster" and his "Village Counter Talk" Blog: "The 'Village Postmaster' is a curmudgeon, and 'Village Counter Talk' is one long enjoyable moan about the somewhat embattled job of keeping a business going in the face of desperate odds."

The United Kingdom's "Village Postmaster" read our piece in Fresh & Easy Buzz published yesterday in which we reprinted a brief report from today's Sunday London Times about Tesco Fresh & Easy Neighborhood Market CEO, and Tesco PLC senior corporate officer, Tim Mason being quoted as saying the grocer "got it wrong" from the start about various aspects of its Fresh & Easy chain, and then we detailed in the post how Mr. Mason's comments, as attributed in the Times' report, sound like they came right out of the pages of Fresh & Easy Buzz, in terms of our analysis, arguments and suggestions over the last year-plus. [You can read our piece from yesterday here: A Healthy 'Mea Culpa': Tesco Fresh & Easy CEO Tim Mason Says 'We Got it Wrong;' Comments Tend to Agree With Fresh & Easy Buzz Analysis and Arguments.]

We weren't surprised to see today that longtime Tesco-watcher, independent retailer and Blogger "The Village Postmaster" has already offered his own view of the issue today in his Blog in a post titled: "Tesco Own's Up At Last." He does follow Tesco and its USA Fresh & Easy venture rather closely, after all.

You can read what "The Village Postmaster" has to say in his post today in the "Village Counter Talk" Blog here.

A Healthy 'Mea Culpa': Tesco Fresh & Easy CEO Tim Mason Says 'We Got it Wrong;' Comments Tend to Agree With Fresh & Easy Buzz Analysis and Arguments

Pictured above is the Fresh & Easy Neighborhood Market store on famous Hollywood Boulevard, in Hollywood, California. The Fresh & Easy market is nearby the Kodak Theatre, where the annual star-filled Academy Awards show, also called the Oscars, will take place tomorrow night. The envelope please: It's now about 15 months since the fist batch of Fresh & Easy stores opened. Will Tesco Fresh & Easy Neighborhood Market CEO Tim Mason be able to make the small-format, convenience-oriented grocery and fresh foods chain a "star?"

In a brief story to be published in tomorrow's Sunday London Times, Tesco Fresh & Easy Neighborhood Market CEO Tim Mason and the Southern California-based grocery and fresh foods chain's chief marketing director, Simon Uwins, tell the Sunday Times' William Kay that the retailer's "extensive" market research in the Western U.S. market regions of California, Nevada and Arizona, research Tesco has been touting as top-flight and comprehensive for over two years, was wrong and mistaken.

"We may have assumed that certain elements of the Fresh & Easy brand would do the work for us and we would not have to go down and dirty on price. That may have been a mistake," Tim Mason, CEO of Tesco's Fresh & Easy Neighborhood Market USA, is quoted as saying in the report.

It not just about getting "down and dirty" on price though, although that's a reality in the current deep economic recession. It's all about creating a comprehensive Fresh & Easy format rather than the current muddled format, placing value at the center of that comprehensive format and then communicating it in a clear and regular way to consumers, as we've been suggesting the grocer needs to do since we started Fresh & Easy Buzz.

We reprint the full Sunday Times' report below (in italics):

Tesco admits: We got it wrong in US
February 22, 2009
The Sunday Times
By William Kay, Los Angeles

THE head of Tesco’s US operation, Fresh & Easy, has said its early market research was mistaken and it may make big changes to the stores.

“We may have assumed that certain elements of the Fresh & Easy brand would do the work for us and we would not have to go down and dirty on price. That may have been a mistake,” said Tim Mason, head of Tesco’s US business.

Ahead of Fresh & Easy’s launch in November 2007, Mason trumpeted the in-depth research that was done to identify a gap in the West Coast grocery market.

Marketing director Simon Uwins said: “We went into people’s houses, talked to them about food and food shopping. We went into their kitchens and poked round pantries.”

Unfortunately, Mason now admits, they did not poke around their garages, where they would have found huge freezer chests bulging with stockpiled meat bought on special offer.

“There’s less loyalty in the American market,” said Mason. “A Brit has to hear it a few times before you accept that people make up their mind where to go each week when they check out the special offers round the kitchen table.

“In a key moment at a focus group, one man told them that he had stopped shopping at Fresh & Easy because they no longer sent him a flier promoting the latest special offers.

“We came out of that meeting and said we had better make sure we hit everyone in the area with fliers.”

Recession has slowed expansion. There are 113 Fresh & Easy outlets and plans to have 200 branches have been put back at least six months. [Here is a link to the story as well.]

Analysis: Tesco Fresh & Easy CEO Tim Mason takes a page right out of Fresh & Easy Buzz

Mr. Mason's comments and quotes should sound rather familiar to regular readers of Fresh & Easy Buzz.

For over a year we've been writing and offering analysis in numerous pieces that Tesco's "extensive" pre-Fresh & Easy launch research was questionable, since the grocer failed to discover so many basic aspects and practices of how food and grocery retailing in America works.

These research failures include such simple basics as how Americans prefer fresh, bulk produce over pre-packaged, to (a major Fresh & Easy Buzz theme) the regional, sub-regional, sub-sub regional and local nature of grocery retailing in the U.S. -- that there are regional markets like the Western U.S., then sub-regional markets within those which have extensive differences, like California, Nevada and Arizona, then additional sub-sub regional markets within those, such as Southern, Central and Northern California, and then even local markets within those sub-sub regional ones, right on down to the neighborhood level. There are niches within the niches. Just ask Safeway Stores, Inc. what it discovered when it finally started taking its neighborhood merchandising-marketing program seriously in the late 1990's.

We've suggested that despite the research being bad, something Mr. Mason has only admitted now, such things happen, but that Tesco's Fresh & Easy should have admitted it long ago and then course corrected. It has started doing a bit of that course correcting of late, including taking our advice in terms of beginning to build a better value proposition. But it is nearly a year too late in doing so, as we've written previously.

Another major theme in all of our writing and analysis has been that's what lacking with Fresh & Easy's merchandising, marketing and operations is the creation of a value proposition and then the communication of that proposition in a clear, concise and repetitive manner. It appears our argument has now found receptive ears.

By value proposition we of course mean discount pricing, both everyday and promotional -- after all from day one Tesco claimed Fresh & Easy was and is about 15% cheaper everyday than its food retailing competitors stores are, which hasn't tuned out to be true based on our research -- but not just discount pricing. Value is much more than that. Value is appealing to consumers on multi-levels, and it must include their pocket books. It's Convincing them your offering provides the best value for the best price.

As we frequently suggest, for Tesco's Fresh & Easy,that value proposition needs to be the hub of its wheel, with all of its other offerings -- prepared foods, natural and specialty foods, specialty wines, ect. -- then being the spokes of that hub and wheel.

Based on our extensive research, which has included talking to numerous past Tesco Fresh & Easy employees, it's, as we've previously reported and discuss in the Blog, our analysis that what Tesco has done to date with Fresh & Easy is essentially assume it could force-feed its model of British food and grocery retailing into the Western U.S. and convince consumers that they would prefer it to what they are used to and like -- food retailing Western USA style, which means appealing to the consumer and focusing locally like a laser beam on the communities and neighborhoods served.

The U.S. is a decentralized (there really is no national chain, Wal-Mart comes the closest to being one), super-competitive, multi-format food retailing market. And unlike the United Kingdom, regional supermarket chains and independents are a key and significant force in U.S. grocery retailing.

In California alone there are numerous multi-billion dollar, privately-held chains that are top market share players in their sub-market regions. These include Stater Bros. (about $4 billion in annual sales) in Southern California's Inland Empire region, Bashas (about 3.4 billion in annual sales) in Arizona, and Raley's (about $3.6 billion in annual sales) and Save Mart (about $6.5 billion annual sales) in regional markets in Northern California.

There are a few others over the billion dollar annual sales mark as well, along with many multi-store independents approaching a billion dollars in annual sales, and even more in the hundreds of millions and high tens of millions in annual sales.

Then there's the really big guys -- Wal-Mart, Costco, Target, Safeway, Kroger Co., Supervalue, (and many more), along with the big niche players -- Trader Joe's (about $5 billion), Whole Foods Market (about $6 billion) (and numerous medium and smaller niche players too) -- and the ethnic grocers (particularly Latino consumer-focused food retailers) in California, Nevada and Arizona).

Did we forget to mention the legions of high-volume single store independent grocers in the U.S.? And California is one of the strongest single-store independent markets in the nation, as one example.

And let's not forget the mega-drug chains like Walgreens, CVS-Long's and Rite-Aid, all of which increasingly are offering and discount promoting more and more food and grocery items. For example, this weeks 12-page advertising circular from Walgreens, the largest U.S. drug store chain (maybe should change the name to Walgreen's drug & grocery) looks more like a supermarket ad circular -- about 60% of the items are groceries, including dairy and deli items -- than a traditional drug chain (or Walgreens') advertising piece.

We aren't sure if this "British food-grocery retailing model "force-feeding" approach by Tesco has been because of pure hubris, which is something former and present company employees have suggested to use is the reason. But whatever the reason, in our analysis its been in many ways "Ted Mack time" (an important American pop culture reference to know) by Fresh & Easy's leaders thus far for Tesco, which is one of the best overall global retailer's in the business.

[If you do a search in the "search box" at the top of Fresh & Easy Buzz -- use words like "value proposition," "localism," "research" -- as well as looking through the Blog archives (even better) -- you will find that Mr. Mason's revelation in the Sunday Times' piece mirrors our analysis, arguments and suggestions rather closely in terms of where Tesco's Fresh & Easy has gone thus far -- and where it needs to go.]

It is said that admitting mistakes is the first step towards correcting them. We hope that's the case for Tesco's Fresh & Easy, especially because the grocer has some of the finest and most dedicated store-level employees in the business.

It's also important to note that unlike Tim Mason, many CEO's will never admit, particularly in print, that they "got it wrong." Instead, they would rather go down with the ship still saying they were right; that the environment was just wrong. For example, look how long it has taken General Motors' CEO Rick Waggoner to admit GM "got it wrong." And the timing was pretty close to the company's asking for billions of dollars in loans from the U.S. government, at that. Therefore we give Mr. Mason credit for having the confidence and wisdom to say what he said.

But the fact that Mr. Mason is admitting the grocer "got it wrong" should also shed some light on just how serious (as in not so positive) Tesco's struggles with Fresh & Easy are. Keep in mind Tesco will soon report its financials, including those at Fresh & Easy Neighborhood Market USA.

We have seen some positive signs in recent weeks in terms of changes in Fresh & Easy's merchandising and marketing. Of particular note appears to be the movement, albeit in baby steps, by the grocery chain more towards the value proposition-based model we've long been suggesting it needs to do. On the item side of this equation these developments include the introduction of what Fresh & Easy calls its 98-cent value produce packs. It also includes the addition of more nationally branded grocery products into the stores.

Fresh & Easy also has been sharpening its promotional pricing -- offering better deals -- and improving its in-store merchandising, particularly in the grocery category.

For example, when we visited a number of stores between the 2008 Thanksgiving and Christmas holidays we noticed pre-pack shippers being tastefully used in the stores. Prior to that Fresh & Easy had a "clean floor" policy, in which it didn't allow shippers on the store floor. The shippers we viewed then were all featured national brands, which is a good idea for the grocer because it helps augment the primarily store brand (about 60%) model and focus in the stores. The shippers, many of which contained items with a higher ring but were price-discounted well, also help increase market basket size for the stores.

We also saw an end-cap display we liked. It featured a number of well merchandised fresh & easy store brand grocery items. On the display were stacks of paper Post-It Notes, along with a sign that basically said: "Take a Post-It Note, write-down your favorite fresh & easy brand items and stick it on the display." The display (shelving) was covered with Post-It Notes, with customers' favorite fresh & easy branded items hand written on the slips of paper.

This is the type of creative merchandising the grocery chain needs to nurture and do more of. It's creative and interactive, inviting shoppers to participate in the grocer's business. We suggest Mr. Mason find out who came up with this idea and put them in charge of "creative merchandising" for the entire chain.

But it's our overall analysis at this point in time that Tesco's Fresh & Easy has yet to create this comprehensive value proposition and merchandising and marketing program. We suggest it follow up on its recent value-based offerings and the type of creative and successful (the items on that particular store's Post-It Note display were selling at a brisk pace) merchandising exemplified by the display we described, and build these various elements (the parts) into a value-based overall (the whole) merchandising and marketing program which then must be positioned and communicated well.

Value needs to be the hub of the Tesco Fresh & Easy wheel (format and overall offering) and then all of the other offerings (prepared foods, natural-organic-specialty groceries, wines, ect.) need to be the spokes. The other offerings are important. But they need to fit in with the overall value proposition and support it rather than detract from it in what we've termed as a "model or format muddle" that exists with Fresh & Easy at present.

We will return later for some further analysis on the topic and issue. But that's all for now.

The Brief: Which One is the Real Story About Fresh & Easy Neighborhood Market's Three Month New Store Opening Pause?

Yesterday, we published this story from the Financial Times, in which reporter Elizabeth Rigby interviewed Tesco Fresh & Easy Neighborhood Market USA CEO Tim Mason, which was published in the Sunday, June 16, edition of the financial publication

In the Financial Times piece, Ms. Rigby, directly quotes CEO Mason as saying about Fresh & Easy Neighborhood Market's three month new store opening pause, which began in April and ends on July 2, when a new store in Manhattan Beach, California opens: That the (three month pause) break "hadn't always been planned."

Below is the Financial Times' story from yesterday (reprinted in italics), with the relevant paragraph (paragraph number 8) in bold:

Tesco’s US chief eyes further expansion

By Elizabeth Rigby in Los Angeles

Published: June 15 2008

Tim Mason, chief executive of Tesco’s US operation, has hit back at critics of the Fresh & Easy chain and signalled that Tesco is preparing to expand beyond the West Coast.

In his first interview since launching in California last November, Mr Mason told the Financial Times that Fresh & Easy was thriving, in spite of suggestions of poor early results.

He said the decision to bring in US-born Jeff Adams as an operations director was about preparing for the future, rather than a signal that the new business was struggling.

“We have always known we will need more executive vice-presidents in operations because this country is so big that as soon as we go into a new geography, we will need someone to run it, so we have brought him in a little early,” said Mr Mason, adding that rumours he was returning to the UK were a “complete fabrication”.

Tesco’s US ambitions are being closely followed by investors and competitors. The British retailer is investing up to £250m a year in the next four years on the West Coast and could end up with a multibillion-pound business if it succeeds in a market where many British retailers have failed.

A bullish Mr Mason dropped heavy hints that Mr Adams, the former Tesco chief in Thailand, would be deployed to another part of the US – most likely to be in the Chicago and the Midwest – once the 61-strong chain reaches critical mass in California, Nevada and Arizona.

Expansion would require more investment than the £1.25bn earmarked for the five-year West Coast project. Asked whether Tesco was ruling out a move beyond the West Coast until after 2012, Mr Mason said: “I wouldn’t say that. We wouldn’t do anything else until we have explained how we are doing here.”

Mr. Mason, who unnerved investors and analysts when he “paused” the store roll-out programme in March for three months, admitted that the break “hadn't always been planned”, but said he was “surprised that everyone went mental” on news of the three-month break.

“I was critical of myself, really, because you ought to see these things coming.

“I felt that it was just so obviously the right thing to do having opened 60 stores,” said the executive on his first public store tour since launch.

Mr Mason also clearly states that the three month new store opening pause was not always planned in this transcript of the interview with him by staff writer Elizabeth Rigby, published as well in the June 16, 2008 edition of the Financial Times. Below is the relevant Q and A:

Financial Times: So it (the three month pause) had always been planned but you just hadn’t told anyone [externally] about it?

Tim Mason: It hadn’t always been planned. One of the views that I have about being successful in business is not your ability to foresee everything and plan for it, but your ability to change to changing circumstances. Actually, your teams have to able to cope with change, and people can’t have a nervous breakdown when you do it and so what we much more about saying was, given the number of stores we have opening it would be much more sensible that instead of using that energy to open stores we should us that energy to have a series of projects about opening stores better.

Things like how you make them launch better, how you get them going better. The second stream of work is how you align the amount of stock you need with the sales you are going to get, because the problem is because you err on the side of the customer you have a lot of stock.

Read the full transcript of the interview here.

The Brief

On March 29, 2008, Fresh & Easy Buzz was one of the first publications to report on the three month new store opening pause, after reading a March 26, 2008 post about it by Tesco Fresh & Easy Neighborhood Market marketing chief Simon Uwins in his corporate blog. You can read our March 29 piece about the new store opening pause here. It includes our analysis, based on sources, that the "pause" wasn't always planned.

In his March 26 blog post, which was the first announcement of the "pause" by Fresh & Easy Neighborhood Market, Uwins says in the relevant paragraph from the post:

"However, after opening our first 50 (Fresh & Easy stores), we planned to have a 3 month break from openings, and other than a couple more in Phoenix, we're taking it (albeit, in our usual fashion, with 59 stores already open)."

You can read Mr. Uwins' entire March 6 post, "pausing for breath at Fresh & Easy," here.

As is perfectly clear from reading Mr. Uwins' post, and the relevant paragraph in bold above, he is saying Fresh & Easy Neighborhood Market planned the three month new store opening pause all along; after the first 50 stores were opened.

However, that's the complete opposite of what CEO Mason told the Financial Times reporter, and she quoted him directly as saying, in yesterday's piece, as you can read above.

Further, it is a fact that every Tesco PLC and Tesco Fresh & Easy Neighborhood Market spokesperson and executive quoted in the press since Mr. Uwins' March 26 "pause" announcement post on the corporate blog, and up until yesterday's Financial Times' piece in which Mr. Mason says it wasn't always planned, has stated to the press the three month new store opening pause was always planned, just like Mr. Uwins reported in his March 26 blog post, which you can read completely for yourself at the link above.

Further, here is a link from Google to numerous stories written about Fresh & Easy's three month new store opening pause, first announced by Mr. Uwins in his March 26, 2008 blog post. Feel free to read through as many of the stories as you like--and do your own key word searches as well. We doubt if you will be able to find one story in which a Tesco Fresh & Easy Neighborhood Market spokesperson says the three month new store opening break wasn't always planned.

The evidence suggests from March 26, 2008 -to- June 15, 2008 (the day before the Financial Times' piece was published) Tesco Fresh & Easy Neighborhood Market's corporate communications line has been as Mr. Uwins first wrote in his blog, and was repeated by corporate spokespeople, that the three month new store opening pause was always planned.

That is until yesterday of course, when Tesco Fresh & Easy CEO Tim Mason is quoted as telling the reporter for the Financial Times that the three month new store opening break wasn't planned all along at all.

Therefore, based on this empirical evidence, it appears the story line from Fresh & Easy for nearly the last three months has either not been true, that Mr. Mason was misquoted in yesterday's Financial Times story, or that there has been one very big mix up in terms of story lines at Fresh & Easy Neighborhood Market headquarters.

Fresh & Easy Buzz has never thought the three month new store opening pause was that big of a deal, like many other publications did, or it appear Fresh & Easy thinks they did. Although, as we reported here on March 29,2008, we did know it had much more to do with merely "kicking a few tires," and such--which also if fine. Much of what the pause had to do with--creating a warmer store decor package, adding new products and other changes, all things interestingly enough we've been suggesting for months--have played themselves out since April.

Even though we were one of the first publications to break the news, we have never been one of the analysts that's gone "mental," to quote Mr. Mason from yesterday's Financial Times piece.

However, we do get somewhat "mental" over what can only be one of three possible reasons for the discrepancy between Fresh & Easy's nearly three month story line that the new store opening pause was always planned and CEO Mason's statement in yesterday's Financial Times that the "pause" really wasn't always planned after all: (1) False communication to the press for nearly the last three months, (2) a very serious misquote (which we doubt is the case) by the esteemed Financial Times, or (3) an extremely serious communication problem among Fresh & Easy Neighborhood market executives and spokespeople, which if it were the case would likely send Tesco PLC CEO Sir Terry Leahy to the bullpen not just for relief pitchers, but for replacements. Neither of the three options above are good ones.

Corporate spokesman don't say what they want to say; they are paid to communicate the company, and CEO's message. Therefore, we doubt if the Fresh & Easy corporate spokesman and the other executives were unclear on what to say for the last nearly three months. However, CEO Mason's statement published in the Financial Times interview yesterday is the complete opposite of what they have been telling the press for nearly three months.

Therefore, we are left with a brief, supported by empirical evidence, that for nearly three months Tesco's Fresh & Easy Neighborhood Market told the media the three month new store opening pause was something that was always planned. But yesterday, the CEO of Fresh & Easy, Tim Mason, told the Financial Times the complete opposite.

The first tactical rule of corporate communications is to get your story straight among all the players. But that's merely tactical. The ethical and correct rule of corporate communications for all corporations that want to have credibility with the press and other stakeholders is to tell the truth, or don't offer uneeded details or explanations in the first place.

Further, if you do create a story line, make sure all the players stick to it. Having the CEO state something completely the opposite of what company spokespeople have been telling the press for nearly three months isn't likely to add to their--or the company's--credibility quotient. In fact, it likely will tarnish it greatly.

If Mr. Mason was misquoted in yesterday's Financial Times story, or if there has merely been a huge mix up in terms of the corporate story on the pause at Fresh & Easy headquarters, we suggest the company correct the record right away; either in stating Mr. Mason was misquoted in the Financial Times' piece, or that there was a serious communications melt down among Fresh & Easy headquarters people in terms of the nearly three month story line that the three month break had always been planned, when it really hadn't, as Mr. Mason is quoted as saying in the Financial Times story yesterday.

Alas, we don't think either an explanation or correction will be forthcoming. We also are surprised the Financial Times' editors who edited yesterday's piece didn't catch the discrepancy. Of course, it happens to the best of us.

Meanwhile, without some explanation of this major discrepancy from Fresh & Easy Neighborhood Market CEO Tim Mason and the other executives who've been acting as spokespersons telling the press for the last nearly three months the new store opening pause was always planned, serious and discerning members of the press, as well as other stakeholders, are going to view the company's credibility with a rather jaundiced eye, since this brief is based on what was said by the players, and nobody else.

Perhaps there's a simple explanation for this discrepancy? If so, although we don't speak for anybody but Fresh & Easy Buzz, we think other members of the press, as well as other stakeholders, would like to hear it, as we would.

Tesco Fresh & Easy Neighborhood Market CEO Tim Mason 'Shows A Little Leg' in Interview With the Financial Times; What About the Ankle?

Fresh & Easy Buzz Editor: Since early this year, Fresh & Easy Buzz has been suggesting Tesco Fresh & Easy Neighborhood Market CEO Tim Mason get out from behind his desk at corporate headquarters in Southern California--both physically and metaphorically--more often and talk more to the press and others about who he is and about his goals for Fresh & Easy in America. Or, as our British friends like to say..."Show a little more leg."

Mason has done so sporadically, but nowhere enough as is needed for the head of a fledgling grocery chain owned by an offshore-based corporation, which is trying to make it's mark in American food and grocery retailing.

Tim Mason is starting to "show a bit more leg" however, as is evidenced by two pieces published in today's Financial Times by staff writer Elizabeth Rigby.

Earlier today, we published this piece in which Mr. Mason told Ms. Rigby that Tesco's Fresh & Easy Neighborhood Market could be moving sooner rather than later beyond its current Western USA base markets of Southern California (soon in Northern California as well), the Phoenix Metropolitan region in Arizona, and the Las Vegas, Nevada Metro market, into the Chicago, Illinois market with its small-format combination basic grocery and fresh foods format Fresh & Easy grocery markets.

As Fresh & Easy Buzz readers are aware, we first published that Tesco has long range plans to move beyond the Western U.S. market into the Chicago region--and likely Florida and New York as well--back in December, 2007. (You can do a search on the blog and find numerous mentions of it.)

In the interview with the Financial Times' Ms. Rigby, Fresh & Easy Neighborhood Market CEO Mason suggests that's one of the reason's Jeff Adams was reassigned from his former position as CEO of Tesco-Lotus in Thailand to his current position as Co-executive vice president for operations at Fresh & Easy USA.

In the piece by Ms. Rigby, the writer joins Mr. Mason at the Eagle Rock Los Angeles neighborhood branch of Fresh & Easy for a more human look at the CEO and the Fresh & Easy chain.

Interestingly, in her piece she mentioned "bloggers," and then goes on to quote nearly every constructive criticism Fresh & Easy Buzz has made to date about Tesco's Fresh & Easy grocery stores. She also mentions "bloggers" and analysts who say the Fresh & Easy model (or format) won't work. Fresh & Easy Buzz readers know this blog (and analysts) has never said that, so we part company there if we are being referred to collectively with possible other bloggers who may or may not have written that before. [Note: We haven't read one serious blogger or analyst who's gone that far, by the way.]

In the piece, Mr. Mason also addresses as legitimate many of the issues Fresh & Easy Buzz was one of the first publications to bring up and offer analysis on, such as the use of the $5 coupons, and the resulting margin hits that is causing, overall store sales, and turnover levels, although he doesn't address them in any depth in the interview, just for the first time essentially acknowledges them as valid.

Additionally, among the product selection "tweaks" mentioned in the article are the additions of more named branded products like Coca Cola soda and charcoal briquets at discount prices; a fix Fresh & Easy Buzz has been suggesting since last December. [$5.99 for a 24-pack of Coke isn't competitively hot, by the way. It's currently the average promotional price at most Western U.S. supermarkets. If you buy four 24-packs though, then use the $5 Fresh & Easy Coupon which is good for purchases of $20 and over, then it's hot. But since $5.99 per 24-pk of Coke is near retailer cost, what's hot also is money losing in that scenario for a retailer.]

In fact, Fresh & Easy Buzz reader and correspondent Vegas Mike was responsible for getting the first Fresh & Easy store in Las Vegas to carry charcoal briquets when he tried to buy a bag in the store some months ago he told us but they didn't sell any at all at the time. He suggested backyard cookouts were a pretty big event in Vegas, and that Fresh & Easy was missing out on lots of sales, not to mention customer convenience, by not selling the item. Soon after, the stores started carrying charcoal briquets, in Las Vegas and elsewhere.

And, of course, Mr. Mason doesn't address in the interview piece--nor does it appear the interviewer asks about it--a fact Fresh & Easy Buzz is well aware of from inside Tesco sources, which is that the margins at Fresh & Easy are very poor ones currently, and have been since November, 2007.

This is due to a variety of factors: the ubiquitous use of the $5 coupons (which can be used by shoppers for orders as small as $20); the daily up to 50%-off fresh product markdowns; the less than targeted sales volumes in the stores, which means Fresh & Easy's product procurement costs for its fresh & easy store brand items are higher than most of its chain competitors like Safeway Stores, Inc and SuperValu, Inc. are; the special display-ready cases it requires vendors to special-make for the chain (more added cost of goods); the retailer's cumbersome vendor requirements (more added cost of goods); and a number of other factors unique to the grocer which taken in sum are currently resulting in less than adequate margins for Fresh & Easy Neighborhood Market. [We will bee addressing the margin issue in an upcoming analysis piece.]

Mr. Mason was smart to choose the Financial Times to do his "coming out" interview though, as the United Kingdom-based financial publication has been very favorable to Tesco and its Fresh & Easy launch in the U.S., including being the only publication to run a story on a dubious piece of research conducted by a British investment bank named Executive Research Ltd., which said the results of its research proclaim Fresh & Easy is "America's New Cult Retailer," despite the fact the first stores opened only eight months ago, and half of the current 61 stores have been open for less than half that time. [Note: Ms. Rigby did not write that piece.]

Ms. Rigby also adds a needed human touch in her description of Mr. Mason, talking about his "lucky" green-striped shirt which he's worn to all of the Fresh & Easy grocery store grand openings he's attended.

Mr. Mason has waited too long to "show a little leg" as the leader of Tesco's Fresh & Easy Neighborhood Market USA in our analysis. However, better late than never perhaps; if its a trend rather than a one-time event with just one publication which has generally been favorable to the cause in its coverage to date. We say this not because it matters to Fresh & Easy Buzz if Tim Mason is more public as CEO. But rather because in our analysis it matters to the success of Fresh & Easy.

There is no substitute for having the CEO of a fledgling retail grocery store start up do the talking as often as possible. The press and consumers want to hear from the top on key issues, rather than a "spokesperson."

We also happen to know Mason has a strong and at times humorous personality. But since he seldom speaks out most people aren't aware that's the case. In fact, now that the Fresh & Easy CEO is "showing a bit more leg," we have a question: "What about the tattoo of the Fresh & Easy logo clock on the ankle?" Could be a great story if true.

Fresh & Easy Buzz has been told by two sources in positions to know that Mr. Mason has a tattoo of the Fresh & Easy clock, which is part of the retail chain's logo as you can see in the graphic above, branded on one of his ankles in the form of a tattoo, in order to express his brand marketer's dedication to the brand and the mission. We're told the grocery chain chef even showed the tattoo to Fresh & Easy Neighborhood Market headquarters employees at a staff meeting. Mr. Mason was head of marketing for Tesco PLC in the UK before coming to America to head up Fresh & Easy.

We haven't reported the tattoo officially because we haven't had demonstrative evidence, such as a photograph or confirmation from Mr. Mason. However, since we are asking about the tattoo of the Fresh & Easy clock in the form of a question, which allows for different standards for us than those we've imposed for reporting news on the blog, this piece is an appropriate place to mention it.

If true, we think having a tattoo of the Fresh & Easy clock on an ankle would make an even better "color piece" than one including the green-striped "lucky" shirt reproduced below from the Financial Times. After all, it's an ultimate brand marketer's "permanent" dedication to the cause.

Read the piece in today's Financial Times, "U.S. Tesco chief dons lucky shirt to fend off criticism," below:

US Tesco chief dons lucky shirt to fend off criticism

By Elizabeth Rigby, in Los Angeles

Published: June 15 2008

It is an archetypal sunny Monday morning in Los Angeles and Tim Mason is standing outside the Eagle Rock Fresh & Easy store in his “lucky” green-striped shirt, which he fishes out of the wardrobe every time he cuts the ribbon on a new neighbourhood shop.

Today there is not a store opening; there has not been one of those for the past three months after Mr Mason, chief executive of Tesco US, pressed the pause button on the 200-store roll-out to “smooth out any wrinkles”.

But it is clearly a big enough moment for the special shirt to come out – it is also the first time that Mr Mason has spoken publicly about Tesco’s US ambitions since he officially opened this very same store seven months ago.

In spite of his attempts at keeping a low profile on the Fresh & Easy project, it has drawn critics far and wide – from bloggers to some industry analysts – who say the model will not work.

They argue that the stores have too few branded goods for US shoppers, the look is too utilitarian, and the wrapped fruit and vegetables are “unappealing”, while the self-service check-outs are unpopular. The three-month suspension in store openings, meanwhile, was seen a sign that the wheels were coming off Fresh & Easy before it had even got going.

“I was surprised everyone went mental,” says Mr Mason, reflecting on the reaction to the pause in openings.

“It just seemed at the time the most sensible use of resource. This is a tiny business and there is limited resource. So you have a choice, you can use that [resource to run the business] and open stores as well or you can use that resource to work out how to open stores better, but you can’t do both.”

The tweaks to the model are evident as soon as you walk towards the store. It is all about low prices. At the entrance, there are palettes stacked with bags of charcoal for $4.99 (£2.56) and 24 packs of Coca-Cola for $5.99.

The first thing customers see as they enter the doors is a four-feet high mountain of San Pellegrino water for 99 cents a bottle and a new “extra low prices” unit stacked with discount offers on fresh meat and prepared meals.

“When we first started we didn’t have any high-low promotions at all,” explains Mr Mason.

“What we discovered, because we were the new kid on the block, was that people didn’t get the price image,” he says, grabbing a packet of sirloin steak that has been reduced from $5.99 to $2.99 a pound.

He has “turned the volume up on price” by introducing 30 promotional lines in stores. The price cuts on these products run in fortnightly blocks, with promotional leaflets dropped through neighbourhood letterboxes in an effort to attract locals.

“It has dramatically improved the price image,” says Mr Mason, who says that his stores are still 10-25 per cent cheaper than rivals such as Trader Joe’s, owned by the family trust of one of the German billionaire brothers behind Aldi, and the Safeway-owned Vons stores. He is sure increased footfall will follow. “We probably won’t do it forever. We track [our price image] every week by exit surveys, and this has improved it by about 20 points.”

Perhaps as a sign that sales were not quite what it wanted – Mr Mason will not comment on turnover levels – Tesco has also being more aggressive in marketing and couponing.
“[We were looking at] how you make [stores] launch better, how you get them going better,” says Mr Mason. That meant extending its couponing to all households within two miles of each store.

“It was just question of trying to find the point at which it triggers and we know, from the UK, if you are trying to build and shape discounts, it is what you need to do,” says Mr Mason as he stops in the wine aisle.

The operating model needed attention. Wastage was too high, although again he will not talk numbers.

“The second stream of work is how you align the amount of stock you need with the sales you are going to get. The problem is because you err on the side of the customer you have a lot of stock.

“You need to work on the [product] range, you need a good ordering system. Trying to have the range and variety at the sort of level of turnover that American stores do is difficult. British stores take three or four times the amount of turnover that American ones take.”

There have been another 23 new ready meals put into the stores, from classic meatloaf to shepherd’s pie. Mr Mason says that Fresh & Easy has about 120 different ready meals now, with another 60 to be made in the coming months.

“We needed to hit a period of improving the operating model and letting everything bed in a bit, so when we come back to opening four or six stores a week we are a more robust business,” he says. “There are plenty of people who don’t have any great desire to see us successful, you know. They will say stuff that is not [true], but you have to put up with it and get on with it.”

On July 2 that is exactly what Mr Mason will be doing, as he puts on his lucky green shirt and cuts the ribbon on shop number 62 in Manhattan Beach, next door to the head office.

“You need a store with real customers in it that you can drop into,” says Mr Mason. Is he worried about being next door to a Trader Joe’s? “It is the closest we have ever been to one,” he says, smiling, “but we will do just fine”.

You can read a complete transcript of the Financial Times' interview with Tim Mason here.

Tesco Fresh & Easy CEO Tim Mason Speaks to the Financial Times in Interview Published Today; Confirms Chicago Expansion We First Reported Last Year

Pictured above is the Fresh & Easy Neighborhood Market in Manhattan Beach, (Southern) California, scheduled to open on July 2. The store will be the first Fresh & Easy market to open since early April, when the retailer took a three month new store opening pause. The photograph was taken two weeks ago by Fresh & Easy Buzz roving correspondent Reno Tom, from in front of a Trader Joe's grocery market, which is just a short stroll from the new Fresh & Easy store. Both stores even share the same parking lot in the shopping center. The charcoal briquets in the photograph's foreground are for sale in front of the Trader Joe's store.

Tesco’s US chief eyes further expansion
By Elizabeth Rigby in Los Angeles
Published: June 15 2008

Tim Mason, chief executive of Tesco’s US operation, has hit back at critics of the Fresh & Easy chain and signalled that Tesco is preparing to expand beyond the West Coast.

In his first interview since launching in California last November, Mr Mason told the Financial Times that Fresh & Easy was thriving, in spite of suggestions of poor early results.

He said the decision to bring in US-born Jeff Adams as an operations director was about preparing for the future, rather than a signal that the new business was struggling.

“We have always known we will need more executive vice-presidents in operations because this country is so big that as soon as we go into a new geography, we will need someone to run it, so we have brought him in a little early,” said Mr Mason, adding that rumours he was returning to the UK were a “complete fabrication”.

Tesco’s US ambitions are being closely followed by investors and competitors. The British retailer is investing up to £250m a year in the next four years on the West Coast and could end up with a multibillion-pound business if it succeeds in a market where many British retailers have failed.

A bullish Mr Mason dropped heavy hints that Mr Adams, the former Tesco chief in Thailand, would be deployed to another part of the US – most likely to be in the Chicago and the Midwest – once the 61-strong chain reaches critical mass in California, Nevada and Arizona.

Expansion would require more investment than the £1.25bn earmarked for the five-year West Coast project. Asked whether Tesco was ruling out a move beyond the West Coast until after 2012, Mr Mason said: “I wouldn’t say that. We wouldn’t do anything else until we have explained how we are doing here.”

Mr. Mason, who unnerved investors and analysts when he “paused” the store roll-out programme in March for three months, admitted that the break “hadn’t always been planned”, but said he was “surprised that everyone went mental” on news of the three-month break.

“I was critical of myself, really, because you ought to see these things coming.

“I felt that it was just so obviously the right thing to do having opened 60 stores,” said the executive on his first public store tour since launch.

Copyright The Financial Times Limited 2008.

Read a complete transcript of the Financial Times' interview with Tim Mason here.

Tesco PLC News: Fresh & Easy USA CEO Mason Second-Highest Paid Tesco Executive Last Year

Salaries and bonuses for Tesco PLC's top executives soared last year, rising 18%, according to a report in today's Guardian UK newspaper.

Tim Mason, CEO of Tesco's Fresh & Easy Neighborhood Market small-format, convenience-oriented grocery retailing venture in the states, was the number two earner, right behind Tesco PLC CEO Sir Terry Leahy.

Mason, Tesco PLC's former marketing director who moved to Southern California to head the Fresh & Easy venture, received additional monies for making the move to the U.S. to run Fresh & Easy, in addition to his salary, various perks and bonus, according to the story in today's Guardian.

Read the Guardian story here.

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

United Kingdon-based Tesco plc. has made its first major change to the senior management team of its Fresh & Easy Neighborhood Market grocery store venture in the U.S.

Jeff Adams, the American-born chief executive of Tesco's Tesco Lotus retail business in Thailand, is moving to Tesco's Fresh & Easy's Neighborhood Market's Southern California-based corporate headquarters as the second in command to CEO Tim Mason.

As our readers are aware, we recently reported that our sources have been telling us that average weekly sales at the 58 Fresh & Easy grocery markets opened to date in Southern California, Arizona and Nevada, are seriously below company targets for this point in time.

Based on information from multiple sources, we estimated in February overall weekly sales at Fresh & Easy stores of about $70,000 -to- $100,000, compared to the retailer's goal of $175,000 -to- $200,000 per week. About a week after our report, the Wal-Street investment firm Piper Jaffray said its research shows the stores underperforming as well. The firm suggested the stores were averaging about $170,000 a week in sales which was about $30,000 less than Tesco's weekly sales numbers of $200,000 are.

In a follow-up analysis, we suggested Piper Jaffray's weekly numbers were too high. We offered that, based on the firm's much higher estimate than ours, we would give the retailer the benefit of the doubt and use our high weekly sales number of $100,000 as the average, which still results in significant underperformance for the stores relative to the retailer's internal targets.

We also argued--and continue to argue-- that a $200,000 a week (too high) estimate at this point in time for Tesco demonstrates a fundamental lack of knowledge of the competitive nature of the Western U.S. retail grocery market. It also shows a failure to properly research the numerous start ups in the region that have failed, or taken years to break even.

However, we also said that if we are wrong--which based on our source information we doubt--and the Piper Jeffrey weekly sales number of $170,000 is correct, then Tesco should be happy and revise their expectations--and sales projections--downward, since if the retailer is really doing average weekly sales of $170,000 in its stores, then its doing far better then our analysis, our sources' analysis, and the analysis of others writing about Fresh & Easy believe.

In our February 21 piece linked here, as well as in numerous other pieces, we've suggested to Fresh & Easy senior management that the fledgling chain needs a major shot of "Localism" in its format, merchandise mix, and overall style of doing business in the Western USA.

Perhaps bringing American-born Adams on board as Fresh & Easy Neighborhood Market's number two reporting directly to Tim Mason is a step in that direction. After all, not one member of the pre-Jeff Adams Fresh & Easy senior management team is a U.S. native. Now there is one.

Tesco Fresh & Easy Chief Tim Mason Sidesteps Questions on Store Performance But Says its Full-Bore Ahead for Fresh & Easy

Tesco Fresh & Easy Neighborhood Market CEO Tim Mason was in Sacramento, California last week as we reported here to announce the grocer's signing of leases for an initial 19 grocery store sites in the Sacramento region, including seven in the city of Sacramento.

While Mason was in Sacramento, he sat down with Jon Ortiz, a business reporter for the Sacramento Bee, for a Question and Answer session, which is published in today's edition of the Bee.

In the Q&A piece with the Sacramento Bee's Ortiz, Mason addresses the topic we were one of the first to report on--and one of only three industry analysts to put numbers to--which is that Tesco's Fresh & Easy grocery stores' are under-performing based on the company's sales goals.

Here is the reporter's question, and CEO Mason's answer:

Reporter Ortiz: "Some industry experts have speculated that Fresh & Easy isn't meeting its sales goals. How is the business performing?"

Tim Mason: "We are delighted with a lot of things about the business. We're delighted with the quality of staff that we've been able to attract. We're delighted with their morale and enthusiasm for the business. We're delighted with the response that we are getting from customers to the quality of the products and the value of their money, the ease of the shopping trip and the quality of the service.

Every week we get more customers. Every week we take more money. And nearly every week our basket size (average amount of spending per customer) [Our note: It's almost always called 'average ring' in the U.S. grocery retailing industry.] goes up. So the board of Tesco and I are pleased with the progress that we're making, and we think we've made a very good start."

In journalism, public relations and politics, CEO Mason's answer to reporter Ortiz's question is called a "non-denial denial." However, in our opinion it is as close to an admission as is going to be given that our--and others'--analysis is correct that Tesco's Fresh & Easy stores are under-performing in gross sales compared to corporate targets for this point in time.

However, unlike other analysts reporting on this issue, we believe Fresh & Easy's Mason--and Tesco CEO Sir Terry Leahy--are worried about this sales under-performance, but not critically. We argue this is the case because our analysis tells us Tesco is employing what we call a "build enough stores as fast as we can and they will come" strategy. In other words, the retailer's strategy is to first get open and operating a critical mass of stores as fast as possible, then fix the problems. We aren't suggesting they are right, by the way.

However, as we have pointed out in numerous pieces (read through our February and January archives on the blog) this is a gamble.

It's particularly a gamble because four months' after the first Fresh & Easy store opened in late October, 2007 in Hemet, California, the grocer still faces serious out-of-stock conditions in many of its stores, especially in the fresh foods and fresh, prepared foods' categories. Unfortunately for the retailer, this problem is one of its logistics and distribution system, rather than being caused by massive sales.

If Fresh & Easy doesn't fix this problem soon it could define the chain in consumers' minds as "that store that's always out of what I want." Such adverse positioning is very difficult for a grocer to overcome.

There are other problems as well. We detail some of them, and offer suggestions for moving forward in this piece we wrote on February 21, 2008

Additionally, unlike some other analysts, we believe despite these serious operations and merchandising problems that need immediate attention--and fixing by Tesco--that the British grocer is in it for the long-haul--good or bad--in the Western USA.

The retailer is building a new store about every three days in Southern California, Arizona and Nevada. Tesco has signed leases for an initial 18 sites for its small-format, convenience-oriented grocery stores in Northern California's San Francisco Bay Area, and inked deals on 19 sites in the nearby Sacramento region in Northern California. The first stores in Northern California are set to begin opening in late 2008 or in early 2009.

Tesco's Fresh & Easy also plans to build a distribution center in Stockton, California to service its Northern California grocery markets. (Sacramento Bee reporter Ortiz asked Mason about this distribution center in the Q&A. Mason confirmed the retailer would locate a DC in Northern California to serve its stores in the region when they open. However, he didn't go on the record regarding the Stockton location.) We stand by our report that the DC will be in Stockton.

Further, Tesco has explored potential store sites in the Chicago, Illinois region and has looked at possible opportunities in Florida and New York. The Pacific Northwest regions of Oregon and Washington are on the retailer's longer-term planning sheets as well, according to our sources.

Since, as we suggest, Tesco plans to be in the U.S. for the long-haul with its Fresh & Easy grocery store venture, unless it starts fixing its most serious distribution, logistics and store-level problems soon, the retailer is going to burn far more cash than it's budgeted for the venture. In fact, that $2 billion investment could double.

And, perhaps even far more serious, if it doesn't fix the out-of-stocks and other most serious problems now, they could come to define the grocer with shoppers, and not in a positive way.

Read the Q&A interview by Sacramento Bee reporter Jon Ortiz with Tesco Fresh & Easy Neighborhood Market CEO Tim Mason here.

Documentary, 'Can Tesco Conquer America' Airs Friday, February 8 on Britain's Popular 'Tonight' Program

Britain's popular 'Tonight' television program on ITV1 will air a full-length documentary it has produced called "Can Tesco Conquer America" tomorrow (Friday, February 8) night at 8:30pm. The documentary is about Tesco's Fresh & Easy Neighborhood Market food retailing venture in the United States; particularly in California, Arizona and Nevada to date.

'Tonight' reporter Ginny Buckley traveled to the U.S. where she was given a behind the scenes look at how Tesco researched and planned the venture, the store design and format, and its marketing campaign. She interviews Fresh & Easy Neighborhood Market CEO Tim Mason, other company executives, and food retailing industry experts and observers in the U.S.

You can read more about the documentary here, including a numer of the topics and issues it will cover tomorrow night. Additionally, if and when the UK network posts an online video version of the program, we will post it here for our readers.

Fresh & Easy Goes Hollywood: New Store to Open Next Week

The soon to open Fresh & Easy store on Hollywood Blvd. See the "stars" in the foreground on the "Walk of Fame"?

Tesco will open it's first store-of-the-stars next week, when a Fresh & Easy Neighborhood Market opens at 7021 Hollywood Blvd., on Hollywood's (California) famous "Walk of the Stars."

Hollywood Blvd. is where celebrities of movie, television and other show biz fame have stars on the sidewalk with their names on them. The street also is home to the famous Mann's Chinese Theatre, and to the fairly new Kodak Theatre, where the Academy Awards and EMMY Awards celebrations are held each year.

The Fresh & Easy Hollywood Blvd. store will have its grand opening on Wednesday, January 23. The store, located at Hollywood Blvd. and Sycamore, will have a ribbon-cutting ceremony to kick the grand opening off. Fresh & Easy CEO Tim Mason will be joined by local officials, neighborhood residents and store employees at the ribbon-cutting.

Grand opening events will go on all day. These include food samplings, store tours and entertainment. Fresh & Easy also will donate $1,000 to a local non-profit organization to be named.

Above is the Fresh & Easy store location in a center on Hollywood Blvd. in Hollywood.

The Hollywood Blvd. neighborhood where the new store is located is an interesting one. The area has become increasingly residential over the last five years. It also hosts thousands of tourists daily, especially in the spring and summer. They come to view the "Walk of Stars," tour the theaters, and enjoy the sights. These sights include numerous street vendors and other interesting folks, who all are looking for their shot at stardom.

The neighborhood also has a vibrant nightlife scene. There are numerous restaurants, cafes and nightclubs, that draw people from all over the region.

There currently are few grocery stores in the immediate neighborhood, so the location should be good for Fresh & Easy. It also should provide the retailer with some interesting publicity for it's retail operation: The Hollywood tabloids and blogs love to report on celebrity sightings at the city's supermarkets. It's likely they will add the new Fresh & Easy market to their location list, especially with it being right on Hollywood Blvd.