Beyond the Press Release: A Couple Reasons Why Fresh & Easy Neighborhood Market is Expanding its 'Gourmet' Private Brand

Private Brand Showcase
Analysis

Tesco's Fresh & Easy Neighborhood Market announced today it's introducing 12 new fresh-refrigerated ready-to-heat food items under its "fresh&easy Gourmet" brand, which it introduced into its stores in California, Nevada and Arizona in January of this year.

In today's press release, which you can view here, Tesco's Fresh & Easy says it introduced the "gourmet" fresh-prepared foods brand in February 2011.

It's true February is when Tesco's Fresh & Easy Neighborhood Market announced the debut of the brand in a press release.

But "fresh&easy Gourmet" was actually launched in January of this year, as we were the first to report in this story - January 21, 2011: Tesco's Fresh & Easy Neighborhood Market Introducing New 'Gourmet' Private Brand - about three weeks before the fresh food and grocery chain announced the launch of the first batch of items under the brand, which it did on February 8 in this press release.

[Read our story here - February 8, 2011 - Private Brand Showcase Déjà Vu: Fresh & Easy Neighborhood Market Announces its New 'Gourmet' Brand - along with this piece from the day before - February 7, 2011: Getting There First...Plus, Are Tesco's Fresh & Easy and Safeway Traveling Down A Similar Private Brand Aisle? - for details and extensive background and analysis on the "fresh&easy Gourmet brand.]

The 12 new items in the grocer's "fresh&easy Gourmet" line are divided into three categories - fresh-prepared meals, Gourmet (meals) for two and fresh pizzas. All the items are refrigerated and ready-to-heat. (See a list of the 12 new items here.)

Upscale-specialty focus continues

The introduction of the additional SKUs in the "Gourmet" fresh-prepared foods' line just six months after the introduction of the brand is further evidence of an important phenomenon we first pointed out, based on our reporting, observation and analysis, in late 2010 and have continued to offer evidence of since then about Fresh Easy's private brand focus.

That phenomenon is the grocer has since late 2010 focused (not exclusively of course) its own-brand efforts into a more upscale-oriented specialty and higher-end niche in order to attempt to create private brand product differentiation vis-a-vis its competitors, as well as in an attempt to come out with products that can potentially offer higher gross margins, which is something Tesco's Fresh & Easy needs to achieve in a major way. The jury remains out in our analysis as to how this strategy is working thus far.

The quote from John Burry, Fresh & Easy Neighborhood Market's chief commercial officer (head of buying and merchandising in U.S. industry terminology) in the press release issued today also strengthens our analysis, first developed last year, that the Tesco-owned chain of 176-stores has been and continues to move into a more specialty-gourmet-upscale niche in terms of its primary private brand development focus.

The quote: "Customers love our Gourmet products, so we expanded the range with some truly unique and exciting meals only available at Fresh & Easy," said John Burry, Fresh & Easy Chief Commercial Officer. "We are happy to continue to bring more restaurant-quality, fresh food options for our customers to eat at home, as more and more people look for ways to save money."

Our point isn't that Fresh & Easy Neighborhood Market is focusing exclusively on this higher-end and specialty niche. Rather, it's where the grocer has been putting the majority of its private brand focus, starting in late 2010 and continuing to the present.

More unique niche items, higher gross margins

It's all about trying to give consumers a reason to shop at Fresh & Easy - differentiation; unique own-brand products. Think Trader's redux, for example, except in the case of fresh-prepared foods Trader Joe's isn't a key player, as it prefers the frozen foods' category over fresh-prepared when it comes to meals, side-dished and the like.

It's also all about gross margin. In order to break-even with Fresh & Easy by the end of Tesco's 2012/13 fiscal year, which ends February 2013 (about 19 months from now), which Tesco CEO Philip Clarke has publicly said will happen, the grocer must get its gross margins (and overall operating margin) up dramatically. [See - April 19, 2011: Tesco's Fresh & Easy Neighborhood Market Posts Biggest One-Year Loss Yet - $307 Million Loss on Sales of $818 Million.]

Increasing gross margins is one reason Tesco's Fresh & Easy is focusing more on the upscale-specialty niche when it comes to private brand new product development. than it has in the past.

For example, the new "fresh&easy Gourmet" meals for two retail for $9.99 each, which is a higher price-point than the grocer's similar "fresh&easy brand" prepared meals of a similar serving size.

The gross margins just aren't there to date with Fresh & Easy's overall private brand offering, which comprises about 65% of the about 5,000 SKUs offered in its stores.

The higher-end, higher retail price-point items carry a higher gross margin than the mainstream "fresh&easy" brand items do, which explains in part its strategy of focusing on them more so at present.

Expect to see the trend continue when it comes to the grocer's private brand development across all categories.

Related Stories

February 8, 2011: Private Brand Showcase Déjà Vu: Fresh & Easy Neighborhood Market Announces its New 'Gourmet' Brand

February 7, 2011: Getting There First...Plus, Are Tesco's Fresh & Easy and Safeway Traveling Down A Similar Private Brand Aisle?

January 21, 2011: Tesco's Fresh & Easy Neighborhood Market Introducing New 'Gourmet' Private Brand

December 23, 2010: New Items Show Fresh & Easy Neighborhood Market's Niche-Specialty Category Private Brand Development Focus

December 13, 2010: House (Sparking) Cider Rules at Fresh & Easy Neighborhood Market

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That's Amore: Fresh & Easy Neighborhood Market Introduces New 'Gourmet' Frozen Pizzas For $3.99 Each

Private Brand Showcase

In Napoli where love is king

When boy meets girl here's what they say...

When the moon hits your eye like a big pizza pie

That's amore

When the world seems to shine like you've had too much wine

That's amore

- That's Amore: By Dean Martin

[Click here to listen to "That's Amore" while you read the story]

Tesco's Fresh & Easy Neighborhood Market is introducing a new line of frozen artisan Italian pizzas under its 'fresh&easy Gourmet' brand, which the grocer debuted in January of this year. [See - January 21, 201: Tesco's Fresh & Easy Neighborhood Market Introducing New 'Gourmet' Private Brand; and February 8, 2011: Private Brand Showcase Déjà Vu: Fresh & Easy Neighborhood Market Announces its New 'Gourmet' Brand.]

There are three SKUs in the new frozen Italian pizza line - Margherita, Four Cheese and Pesto & Arugula.

According to John Burry, the chief commercial officer (head of buying and merchandising in U.S. industry terminology) for United Kingdom-based Tesco's Fresh & Easy Neighborhood Market, the fresh&easy brand Gourmet pizzas, which were created by the grocer's in-house chefs, "are handcrafted in Visso, an Italian village just outside Rome known for its extremely pure water from Monti Sibillini National Park . The dough and sauce are made on-site by the pizza maker who gives the pizzas a traditional, rustic Italian crust by double-proofing the dough and baking the pizzas in a stone oven," Burry says.

Margherita is the classic Italian pizza variety, made with just crust, tomato sauce or marinara, mozzarella cheese and fresh basil. It's often called the 'Italian Flag" because when prepared, most famously in Italy's Neapolitan region, its colors mimic that of the national flag. The fresh&easy Gourmet frozen pizzas uses just those ingredients, keeping to the traditional Italian recipe.

The fresh&easy Gourmet Four Cheese Pizza also follows a traditional Italian recipe, using mozzarella, edamer, emmanthal and gran moravia cheese, along with Italian balsamic vinegar from Modena.

The Pesto & Arugula Pizza is modeled after a popular variety in Italy's Liguria Region, which is famous for its pesto. The variety contains basil, crushed garlic, grated hard cheese, pine nuts and olive oil. All of the ingredients are from Italy.

The three varieties are also very popular in the United States, where over the last few years many consumers have been trading-up to higher quality premium pizzas, making a choice of quality (smaller pizzas) over quantity, huge and inexpensive belly-filler pizza pies that use inferior ingredients, including in some cases artificial cheese.

All three varieties of the fresh&easy Gourmet brand frozen Italian pizzas, which based on their size are designed to serve two or three people (depending on appetites of course), sell for an introductory price of $3.99 each. (More on that below.)

The Italian pizzas contain no artificial colors or flavors, high-fructose corn syrup or added trans fats.

The introduction of the fresh&easy Gourmet premium frozen Italian pizzas is the latest example of what we first identified - correctly so far - in late 2010 as a major new private brand development trend at Tesco's Fresh & Easy, which is a focus on creating and launching more upscale, premium, specialty, gourmet and natural/organic types of products than it has in the past. [See - December 23, 2010: New Items Show Fresh & Easy Neighborhood Market's Niche-Specialty Category Private Brand Development Focus; and December 13, 2010: House (Sparking) Cider Rules at Fresh & Easy Neighborhood Market, for examples of our thesis.]

We've tied this flight-to-quality and niche-oriented product private brand developmental trend at Fresh & Easy Neighborhood Market in part to the Tesco-owned fresh food and grocery chain's need to increase its margin from what's currently a negative-38% to in the plus category. Theoretically at least, premium and gourmet types of private brand products generally allow a retailer to take a higher margin because consumers are willing to pay more for the quality items. Therefore, following that notion, if a retailer offers - and sells - enough higher-end specialty food items, at higher gross margins than it can get on everyday grocery items, it's overall profit margin should eventually rise.

Additionally, specialty and premium-oriented foods under a retailer's private brands - think Trader Joe's - can help a retailer create a niche among shoppers, along with over time developing loyalty from consumers because they like the retailer's brands - Think Trader Joe's again - and products under those brands, and therefore will become regular customers of the retailer's stores.

It's our analysis that all three of these things are the main drivers of Fresh & Easy's current focus on developing more niche-oriented specialty, premium, gourmet, healthy and natural types of private brand items.

Prices at $3.99, the fresh&easy Gourmet artisan Italian Pizzas should sell well, since the everyday price point is considerably lower than similar offerings of similar sized pizza's by brands like Wolgang Puck and California Pizza Kitchen. Retailer's like Trader Joe's, Safeway and others already offer similar artisan pizza's in their stores.

Pricing: Food for thought

The $3.99 price point is excellent. However, considering the ingredients for the frozen artisan pizzas come from Italy, where the pies are also made by hand, and adding in the cost of shipping the pizza's from Italy to California in a frozen state (have you seen the soaring cost of fuel and ocean and air shipping recently?), we doubt Fresh & Easy's gross margins are where they should be on the items. And if you add in promotional pricing and discounting from customers using the Fresh & Easy coupons, the margin becomes even slimmer.

We've seen similar pizzas everyday priced for $4.99 - $6.99. We would go $4.99 each everyday on the items - then discount the pizza's every so often for $3.99 on ad.

In fact, it's our analysis that the $3.99 price-point is actually too low - and thus takes away from the premium quality positioning of the artisan pizzas. There's a psychology to price when it comes to specialty and premium food products. Priced too low consumers perceive the items as not gourmet. Too high, they just won't buy them, at least not in significant volume.

But at the current price of $3.99 each, although we haven't tasted the fresh&easy Italian pizzas yet, we're willing to say it sounds like it could be ... "An offer you can't refuse." And ... "That's Amore."

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Readers: See and read the numerous past stories in our Private Brand Showcase feature at this link - private brand showcase.

Private Brand Showcase Déjà Vu: Fresh & Easy Neighborhood Market Announces its New 'Gourmet' Brand

Private Brand Showcase: The '24/7' news cycle

Yesterday we published this piece - February 7, 2011: Getting There First...Plus, Are Tesco's Fresh & Easy and Safeway Traveling Down A Similar Private Brand Aisle? - in which, among other things, we discussed the fact that Fresh & Easy Buzz reported on January 21, 2011 that Tesco's Fresh & Easy Neighborhood Market was in the process of introducing a new private brand, 'Fresh & Easy Kitchen Gourmet,' which the fresh food and grocery chain has yet to publicly announce the launch of.

But that was yesterday. This afternoon, a mere 24-hours after our piece was published, Tesco's Fresh & Easy has made that announcement in this press release, which includes an attachment featuring a "menu" of the 'Fresh & Easy Kitchen Gourmet' brand fresh and frozen products.

Since we first reported on the grocer's new private brand on January 21, Fresh & Easy has added a line of three frozen deserts to its 'Fresh & Easy Kitchen Gourmet' brand. The three SKUs are: Dark Chocolate Raspberry Gelato Truffles; Lemon Tartlets; and Mixed Berry Tartlets.

In its announcement today, Fresh & Easy Neighborhood Market refers to its new brand simply as 'Gourmet,' in one case, and 'fresh&easy Gourmet,' in another instances in the press release.

However, the actual brand name on the product packages is: 'Fresh & Easy Kitchen Gourmet.' So that's what we call the brand. We believe in the old adage: 'What it says is what it is.'

As noted in our January 21, 2011 report, "Gourmet" is the focus of the brand's name. But because 'Fresh & Easy Kitchen' is also used as part of the brand name on the package labels, it's technically a co-brand, incorporating the Fresh & Easy name.

Tesco's Fresh & Easy is pegging its announcement today to the upcoming Valentine's Day holiday, which is good timing from a promotional merchandising point of view because in addition to the many customers who go out to eat at restaurants for the special day, along with those who cook Valentine's Day meals from scratch at home, there's also a growing segment of people who are looking for higher-quality but affordable prepared meals which they can heat-and-eat at home for Valentine's Day evening dinner, coupled with some fresh flowers for the table, a bottle of champagne, and some decadent chocolate for dessert.

As we all know, timing can be crucial - whether it involves a publication's reporting on a grocer's launching of a new private brand, or a retailer announcing the introduction of that brand, tied to a particular special event or holiday it hopes will help it sell the new branded products. And in today's brave new world of the '24/7' news cycle, we've all got to struggle to keep up.

Related Stories

February 7, 2011: Getting There First...Plus, Are Tesco's Fresh & Easy and Safeway Traveling Down A Similar Private Brand Aisle?

January 21, 2011: Tesco's Fresh & Easy Neighborhood Market Introducing New 'Gourmet' Private Brand.

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January 21, 2011: Tesco's Fresh & Easy Neighborhood Market Introducing New 'Gourmet' Private Brand

January 20, 2011: Fresh & Easy Neighborhood Market's 'eatwell' Brand Frozen Meals Take Center Stage In-Store This Week

January 18, 2011: Fresh & Easy Neighborhood Market Launches 'Extra-Low Every Day Low Price' Merchandising Program

January 6, 2011: Fresh & Easy Neighborhood Market Hopes 'eatwell' Makes For A Healthy 2011

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Tesco's Fresh & Easy Neighborhood Market Introducing New 'Gourmet' Private Brand

Private Brand Showcase
News/Analysis

Tesco's Fresh & Easy Neighborhood Market is introducing a new private brand - 'fresh & easy kitchen Gourmet' - in most of its stores this week, starting with a line of refrigerated, ready-to-heat fresh-prepared meals, heat-and-eat refrigerated soups, and a line of heat-and-serve frozen meals.

The new brand is actually better described as a new "co-brand" because Fresh & Easy Neighborhood Market uses its exiting "Fresh & Easy Kitchen" brand name along with "Gourmet" on the packaging, making it a co-branding effort similar to what the grocer does with its 'Fresh & Easy goodness' brand.

As you can see in the photograph above though, the focus of the name of the new brand is clearly "Gourmet," with "Fresh & Easy kitchen" being secondary, both in font size and label placement on the product packages.

Tesco's Fresh & Easy has not formally announced or introduced its new private brand.

Fresh meals

The initial line of 'Fresh & Easy kitchen Gourmet' refrigerated, ready-to-heat meals includes the following upscale-sounding varieties: Chicken Milano, Fontina Chicken, Portabella Mushroom Pappardelle (pasta), Apricot Pork Tenderloin, Slow Braised Beef, Braised Lamb Shank, Mediterranean Salmon, Lobster Ravioli, and Champagne Shrimp.

The fresh, ready-meals retail for $5.99-$6.99 everyday, depending on the variety. In addition to the fresh-prepared meals, there's also a refrigerated, ready-to-heat soup line under the new private brand. The first two items being launched this week in the gourmet soup line are French Onion and Crab & Sweet Potato Bisque.

Frozen meals

The first items being introduced this week in the 'fresh & easy kitchen Gourmet' frozen meals line are: Braised Beef in Red Wine Sauce, Pork with Portobello Mushroom Sauce, and Mediterranean-Style Fisherman Stew.

All three frozen meals are priced at $6.99 each.

Additional private brand upscaling

Late last year we noted in two stories in Private Brand Showcase - December 23, 2010: New Items Show Fresh & Easy Neighborhood Market's Niche-Specialty Category Private Brand Development Focus and December 13, 2010: House (Sparking) Cider Rules at Fresh & Easy Neighborhood Market - that the new private brand and new item development at Tesco's Fresh & Easy has been and will continue to be headed in a more upscale/premium/specialty niche or focus rather than in a discount or price-focused direction. The grocer's new 'fresh & easy kitchen Gourmet' brand, its first new private brand of 2011, offers added evidence that our analysis is correct.

The brand is not only premium and upscale in its actual name - "Gourmet" - but also in the nature - the product names and ingredients - of the first batch of SKUs introduced in the fresh and frozen product lines.

The $5.99-$6.99 price points are in range as well, although its our analysis that the jury will be out for some time as to whether or not Fresh & Easy is able to obtain repeat sales on the items, considering the portion size/price point combination. Shoppers are trading up compared to the previous three years. However, spending $28, the cost of buying four fresh or frozen meals for a family of four, is something many shoppers aren't likely ready to do on a regular basis at present.

Fresh & Easy's prices on the items are in line with many of its competitors, and lower than some of its other competitors, however.

Fresh & Easy's private brand lineup

The addition of the 'fresh & easy kitchen Gourmet' brand (or co-brand) brings to five the number of private brands Fresh & Easy Neighborhood Market currently has in its portfolio. Those five retailer brands are:

>Private brand name: fresh&easy = basic store brand. Categories so far: across all store categories: Dry grocery. Refrigerated. Frozen. Includes natural and organic products.

>Private brand name: eatwell = healthy foods' brand. Categories so far: Refrigerated and fresh-prepared foods, frozen, dry grocery.

>Private brand name: fresh & easy goodness = private brand targeted to kids, with a healthy foods' focus. Categories so far: dry grocery/drinks

>Private brand name: Mother's Joy = line of breakfast cereals. Categories so far: dry grocery. Just the cereal line.

>Private brand name: fresh & easy kitchen Gourmet = gourmet/premium brand. Categories so far: fresh-prepared foods, frozen.

>Private brand name: retreat = non-foods brand. Categories so far: Health and body care.

Gourmet

According to our sources, Tesco's Fresh & Easy doesn't currently have immediate plans to extend the 'fresh & easy kitchen Gourmet' brand into other categories, such as dry grocery, beyond its current fresh-prepared refrigerated foods and frozen food categories.

However, Fresh & Easy Neighborhood Market usually starts a new store brand out, except for its fresh&easy flagship private brand, with products in just one and sometimes two categories. This was the case with its 'eatwell' healthy foods brand. The grocer launched the brand in early 2010 with a line of ready-to-eat and ready-to-heat fresh-prepared foods items. A few months later Fresh & Easy extended the brand into the dry grocery category, followed by branding a line of frozen meals under 'eatwell,' all in the same year, as we reported on and wrote about here.

As such, we will be watching the further development of Fresh & Easy's new 'fresh & easy kitchen Gourmet' private brand throughout the year.

Private Brand Showcase: 2011 stories

January 20, 2011: Fresh & Easy Neighborhood Market's 'eatwell' Brand Frozen Meals Take Center Stage In-Store This Week

January 18, 2011: Fresh & Easy Neighborhood Market Launches 'Extra-Low Every Day Low Price' Merchandising Program

January 6, 2011: Fresh & Easy Neighborhood Market Hopes 'eatwell' Makes For A Healthy 2011

January 5, 2011: Safeway Adds 'Open Nature' to its Natural-Organic-Healthy Foods' Private Brand Portfolio

January 4, 2011: Fresh & Easy Neighborhood Market Kicks Off 2011 With an Appeal to 'eatwell'

[Click private brand showcase for a selection of stories from 2010.]