Strategy Session: Tesco's Fresh & Easy Needs to Move From its One Store Brand Fits All Strategy to A 'Three Brand' Store Brand Strategy

Tesco's Fresh & Easy Neighborhood Market uses its fresh&easy private label brand on every store brand item in its stores regardless of retail price point or ingredient profile, including premium, specialty, natural and organic products, as the photogrpah above offers an example of. We suggest the grocery chain create two new store brands: One for premium-specialty products and another for natural-organic items, thus giving the retailer what we call a three brand store brand strategy.

Analysis & Opinion: Tesco's Fresh & Easy Neighborhood Market and its Store Brand(s)

Tesco's Fresh & Easy Neighborhood Market currently uses a one brand name fits all strategy for its store brand merchandising and marketing strategy, with just one very minor exception.

That exception is that in February the grocery chain began merchandising a limited selection of fresh meat and poultry items under the "Buxted" store brand, which it's using as a value or price-focused store brand for the fresh meats category. (We haven't conducted any empirical research on the "Buxted" brand for the price-focused fresh items. But to us the brand name sounds far more "upscale" or "premium" to our ears than it sounds "value" or "low price." [See - March 9, 2009: An English Village, A British Fresh Chicken Brand and Tesco Fresh & Easy's New 'Buxted' Discount Fresh Meat Brand: What Do All Three Have in Common?]

All of the store branded items in the Fresh & Easy stores -- and store brands comprise about 60% of all the SKUs in the markets -- are branded with the fresh&easy name. This includes all store product categories -- dry grocery, perishables, packaged fresh produce (which is nearly all the produce in the stores), fresh, prepared foods, non-foods and fresh meats -- accept for the "Buxted" items.

Single store brand strategy a mistake

We think using the fresh&easy brand name only for its store brand items is a mistake for Tesco's Fresh & Easy.

The main reason this is our analysis is we argue that using a one store brand name fits all strategy allows for zero brand differentiation between discount or value-priced, natural and organic, and premium and specialty items in the stores. There's no brand differentiation among the store branded items based on their retail price, quality or ingredient contents. They are all fresh&easy.

It's our analysis that this unitary and undifferentiated store branding item strategy creates confusion in the minds of shoppers, as well as fails to offer Fresh & Easy the ability to differentiate -- and thus sell more -- it various products based on creating consumer perceptions built on the brand name, which is what packaged goods branding and marketing is all about after all.

The Safeway example

As an example, Safeway Stores, Inc. uses various brand names for its private label products depending on various criteria. The grocery chain uses the "Safeway" store brand name on its value-priced grocery and non-foods items.

It uses the "Lucerne" brand name on its value-priced dairy and perishable items.

And Safeway uses the brand name "Basic Red" for a line of store brand "branded generic" (meaning the most-price-focused line) items, such as paper goods and other non-foods products.

Safeway also has a separate brand name, "Safeway Select," for its perishable and dry grocery premium and specialty items.

Additionally, for Organic products Safeway uses the "O 'Organics" brand name, and it even has a separate brand name, "Eating Right," for its extensive line of healthy and natural items.

The Pleasanton, California-based supermarket chain also uses "Safeway Artisinal" for a select number of upscale specialty products in its fresh bakery and deli departments.

And it uses the brand name "Ranchers Reserve" to designate its Angus variety of store brand beef, for example.

While at this point in time we don't suggest Tesco's Fresh & Easy adopt as extensive of a store brand strategy as Safeway Stores' does -- after all Safeway has about 1,755 stores in the U.S. and Canada, with annual sales of over $40 billion, while Fresh & Easy has 120 stores with annual sales of about $300 million in the U.S. (although its parent Tesco has annual global sales of about $80 billion) -- our analysis leads us to suggest and argue that Fresh & Easy Neighborhood Market does need to expand its one store brand -- fresh&easy -- fits all products store brand strategy to, at a minimum, a three store brand strategy for now.

The three-brand store brand strategy

Here's what we suggest:

First, for now we would retain the fresh&easy store brand name.

We would use it as the chain's value-priced store brand across all categories -- from dry grocery and prepared foods, to fresh meats, perishables and fresh produce. In other words, instead of being "everything" like it is now, brand fresh&easy would be the chain's price-focused store brand.

We would get rid of the "Buxted" store brand. It's only a few months old and nobody likely would even notice if it was eliminated.

The brand name just is wrong for a price-focused fresh meats line in our analysis. It sounds stuffy, even upscale, rather than saying "value" or "low-price."

A new premium-specialty products' store brand

Now that we've established fresh&easy as the price or value-focused store brand, we would then create a new store brand for all of the premium and specialty items currently branded with the fresh&easy name. We would use the brand name across all store categories on items that fit the premium or specialty classification.

This premium and specialty category brand name should not have fresh&easy as a part of it. Rather, just as if it was a manufacturer-marketed packaged goods brand, it should merely have a name. For example, Target uses Archer Farms and Choxie for its premium and specialty store brand items. Kroger Co. uses "Private Selection" as its premium and specialty foods store brand.

Creating a new brand name for the fresh&easy premium and specialty food and grocery items does a couple key things for the grocery chain in the store brands arena.

First, it allows a merchandising separation between the price-focused (the fresh&easy store brand) items and the premium and specialty items. This is key in consumer packaged goods marketing.

Second, it allows Tesco's Fresh & Easy much more merchandising opportunities (which it would have to take advantage of to make work) than it now has.

For example, by branding its premium and specialty items with a new brand name, confusion no longer exists between say a lower priced (and quality) fresh&easy brand chocolate bar and a fresh&easy brand higher-quality premium chocolate bar in terms of the two same brand chocolate bars having significantly different retail price points and ingredient profiles. Consumers are used to premium items having different brand names than price-focused items.

Based on our research and observation we believe that such confusion exists among many consumers that shop at Fresh & Easy markets in regards to the unitary fresh&easy brand name regardless of the price or quality of an item. We think the shopper confusion exists across all fresh&easy branded item product categories and ingredient profiles. The chocolate bar example is merely a convenient and we think illustrative example.

Having separate brand names for store brand price-focused and premium-specialty items allows for better merchandising, pricing, merchandising and marketing strategies for a food retailer. In addition to lending to better product differentiation among shoppers, doing so also gives the retailer far more merchandising, retail pricing, marketing and promotional ammunition.

A new natural-organic products store brand

Next we would create a new, separate brand name for all of Tesco Fresh & Easy Neighborhood Market's natural and organic food and grocery items, including natural and organic fresh foods, which are currently branded under the fresh&easy name, like all of the grocery chain's store brand products are.

Like with the premium and specialty items, this allows for greater product differentiation in the minds of consumers. It also, like with the other examples, allows for far superior retailer merchandising, pricing, marketing an promotional strategies.

Right now, the only difference between a fresh&easy store brand conventionally-grown food item and an organic item is the price, along with the name "organic" (or "natural) being stamped on the fresh&easy item package. From a packaged goods merchandising and marketing perspective this creates confusion in the minds of shoppers.

For example, this is why Safeway created its hugely successful "O Organics" store brand, which it uses for its organic food and grocery items across all store categories -- from dry grocery and perishables to fresh produce. It's all about packaged goods brand marketing, regardless if its a retailer doing the brand marketing or a classic packaged goods company like P&G or Kraft.

In terms of creating a new store brand for its natural and organic items, Fresh & Easy actually might not even need to create the brand name. Instead it could purchase a brand name that has years of brand equity behind it in the natural and organic products segments.

How about the 'Wild Oats' brand: It's for sale?

Whole Foods Market, Inc. put up the "Wild Oats'" brand name and related intellectual property for sale in March, as a result of a settlement it reached with the U.S. Federal Trade Commission (FTC) regarding the anti-trust case filed by the agency over the natural grocery chain's 2007 acquisition of rival Wild Oats Markets Inc., which was based in Boulder, Colorado. [See- March 17, 2009: Store Location Strategy: Whole Foods Market-FTC Settlement Agreement Puts 32 stores on the Market; What Should Tesco's Fresh & Easy Do About it?]

The majority of the Wild Oats' stores (over 100 total) were based in the Western U.S., where Tesco's Fresh & Easy has its 120 combination grocery and fresh foods markets.

In our analysis, even though Wild Oats no longer exists as a food retailer -- it's stores are part of Whole Foods Market, Inc. now and all branded under the Whole Foods banner -- the Wild Oats' brand name still has equity, particularly in the Western States. Wild Oats was pretty strong in Arizona, Nevada and Southern California, which are the three market regions Fresh & Easy operates in.

The Kroger Co. also sold the Wild Oats' store brand natural and organic products in most of its U.S. supermarkets nationally for a number of years, under a special contract with then Wild Oats Markets Inc. Kroger only stopped doing so when it came out with its own store brand of natural and organic food and grocery products just a few years ago. In fact, Kroger "went to school" on the Wild Oats' branded items it sold in its stores, using the sales data and other related information to help it create its natural and organic store brand.

The Wild Oats brand name is still for sale. And we think it could probably be purchased for a fairly reasonable amount of money by a retailer such as Tesco's Fresh & Easy.

Under the settlement agreement, Whole Foods Market, Inc. and the FTC have establish a special trustee who is handling the sale of the "Wild Oats" brand, along with various stores being offered for sale. The trustee arrangement was designed so that Whole Foods Market can't hold out for a certain price for the brand, perhaps as a way to keep it off the market. [ Store Location Strategy: Whole Foods Market-FTC Settlement Agreement Puts 32 stores on the Market; What Should Tesco's Fresh & Easy Do About it?]

Summary

What we're suggesting at this point in time is that Tesco's Fresh & Easy move from its one brand name fits all store brand strategy -- everything branded fresh&easy -- to a three store brand name strategy -- the fresh&easy brand for price-focus (which would still be the majority of items in the stores), a new store brand name for premium-specialty food and grocery items, and a third new brand name for organic and natural products, including potentially buying the "Wild Oats brand from Whole Foods, or creating a new brand name outright.

We also suggest eliminating the "Buxted" store brand name for the reasons given earlier. We suggest this strongly as part of the three store brand name strategy.

The fresh&easy brand name would return to those price-focused chicken breasts and steaks that have been carrying the "Buxted" brand name since February of this year.

And since Fresh & Easy Neighborhood Market would be creating a new store brand name for all of its premium and specialty items (across all store categories), instead of using a name like "Buxted" for a handful of value-based fresh meats, it would then do the reverse: it would brand the more premium cuts of meat under the new premium-specialty store brand, which is how such a retailer store branding approach really should go anyway. You create a special brand name for your more upscale items rather than a new brand name for just a few price-focused ones.

Another alternative would be to create a new brand name for the premium fresh meats rather than use the new category-wide premium-specialty store brand name. Both options create differentiation.

But you want to "differentiate" the premium meat items, not the price-focused ones because, according to Tesco's Fresh & Easy, all of its fresh meat items -- like all of the fresh&easy branded items in the stores -- have everyday low prices. If that's true, then why a price-focused discount fresh meats brand -- "Buxted." Brand fresh&easy is "value" after all, isn't it? See the potential confusion? That's why you "new brand" the premium, not the majority fresh&easy brand meat and chicken items.

The same principle applies throughout the store categories.

Conclusion:

Our store brand strategic scenario for Tesco's Fresh & Easy is, as we said earlier, for this point in time. It takes into consideration the current (and near and mid-term future) number of Fresh & Easy stores and the chain's current limited sales volume. (You can't really do a Safeway program yet, if ever.)

But creating this three store brand strategy is very important for the grocery chain, particularly because Fresh & Easy relies so much on its store brand -- the 60% -to- 40% store brand to national brand SKU ratio.

As an example of another grocery chain that relies heavily on store brands, look to Trader Joe's, which like Fresh & Easy is a small-format retailer. The grocer has numerous, not one, store brands: multiple store brands for natural, for organic, for Italian products, for certain perishables, ect.

The small-format Aldi USA grocery chain also uses a multiple store brand strategy. It even has separate store brands for gourmet products, Asian foods and Italian food items, along with a store brand for price-focused items, and a couple others.

Tesco's Fresh & Easy publicly says the grocery and fresh foods chain's less than stellar sales to date are do almost completely to the current economic recession. The recession is also the reason it gives for dramatically slowing its new store openings and postponing indefinitely its Northern California market region launch.

We disagree.

In fairness we will attribute say 40% (and we feel that's liberal) of the performance problems at Fresh & Easy to the economic recession, which the grocer's senior management should remember will eventually be over.

That leaves the majority 60% due to internal factors however.

That 60% is simple in our analysis and opinion: It has to do with poor overall merchandising, marketing and operations strategy and implementation at Tesco's Fresh & Easy, the responsible parties being those at the very top of the corporate chart.

For example, the grocery chain still has very serious out-of-stock problems in many of its stores due to problems with its continuous replenishment ordering system and its supply chain logistics process. (more on that in detail in an upcoming piece in Fresh & Easy Buzz.)

On the operations end, Tesco's Fresh & Easy says the recession is the cause of its less than stellar sales performance but refuses to take manufacturers' "cents off" coupons or accept WIC (Woman's, Infants and Children's program) vouchers in any of its stores, even though manufacturer-issued coupon use is at a modern era all time high among consumers, and the U.S. Federal Government recently added nearly $3 billion dollars to the WIC program for poor mothers as part of the economic stimulus package. [Suggested reading - March 7, 2009: Analysis & Commentary: The Seven Retail Operations Changes Tesco's Fresh & Easy Neighborhood Market Needs to Make to Help it Get On the Success Track.]

And from a strategic merchandising and marketing perspective, Tesco's Fresh & Easy has thus far failed to come up with a solid, comprehensive overall merchandising and marketing positioning strategy for the Fresh & Easy format and stores, and then communicate such a strategy to consumers in its markets in a simple, clear way.

The grocery chain needs to address, define and then clearly communicate these types of marketing themes: What is Fresh & Easy -- the format? What makes Fresh & Easy Different - differentiation? Why should I shop at a Fresh & Easy store? What are the benefits of doing so?

These are all internal issues or problems, not economic recession-caused.

In addition, in our analysis the one brand fits all store brand strategy is one of these internal problems. It's far to simplistic, particularly for a retailer like Tesco, which is the third-largest food and grocery retailer in the world.

Many brand marketers and brand researchers, such as Tom Pirovano of AC Nielsen, believe that grocery chains should completely disguise their store brands, not using the name of the chain in the brand name at all.

For example, in a May 13 post in Nielsen's "The Shopper Wonk" Blog, Pirovano offers retailers 11 tips to grow their store brands. His tip number two is this: "Disguise your premium store brands. Many consumers still associate private label with cheap knockoffs. There – I said it. But what if they don’t know it’s a store brand? Look to position premium store brands as exclusive products like Choxie at Target and Canopy at Walmart." [You can read his full post here.]

We agree in large part with Pirovano's analysis regarding store branding. But there are also very successful exceptions, particularly when using a chain name on one brand as part of a multi-store brand strategy such as what Safeway and Target are doing. Like Safeway, Target uses its name -- "Target" -- for its price-focused store brand of packaged goods, then uses the other brands like Archer Farms and Choxie.

In the case of Tesco's Fresh & Easy, it's our analysis that the fresh&easy store brand will work fine for the near -to- medium, and perhaps even long term, as the grocery chain's price-focused (which means majority item) store brand. In fact, as the price-focused store brand we think it offers some benefits to the grocery chain, particularly right now and over the next couple years, in the area of creating name awareness overall for the Fresh & Easy retail brand, which it needs as a relatively new entrant to the markets it's in.

But this is our position only as part of the three store brand strategy we describe in this piece.

Once the two new store brands -- the premium-specialty and natural-organic -- have been created and slotted, we then suggest Tesco's Fresh & Easy go from there to create additional store brands -- but in a very careful and methodical way over time -- that would add value, achieve stronger product differentiation and give more meaning to the store's merchandise mix and marketing strategy.

We haven't been extremely impressed with Fresh & Easy's from the top store brand strategy thus far. So we would strongly suggest bringing in consultants with actual experience in the Western U.S. markets, and in store branding, before doing any brand creation, such as the recent creation of "Buxted," which actually isn't a brand creation but the use of a brand from Tesco Fresh & Easy's fresh foods supplier, United Kingdom-based 2 Sisters Food Group, which is Fresh & Easy's in-house supplier.

This observation is also one of the reasons we think buying a brand like "Wild Oats" could be a very good idea for Tesco's Fresh & Easy, then rebranding all of its current (and new) natural and organic products under the "Wild Oats" brand. We would do this across all store categories -- from dry grocery to fresh, preapred foods. Any item that's "natural" or "organic" would get the "Wild Oats" brand.

We believe that moving to this initial three store brand strategy will better position Tesco's Fresh & Easy in the store brands arena in many ways, as we've detailed throughout this piece.

Doing so also offers a much richer ability to price, merchandise, market and promote store brands.

And most important, we think the strategy will over time provide much more shopper brand differentiation vis-a-vis the current single fresh&easy store brand, and that with all things being equal, the net result will be increased sales and more return customers to the Fresh & Easy markets, including many more consumers than currently is the case that will shop the stores in part because of its store brands selection.

[Follow Fresh & Easy Buzz around on Twitter.com at www.twitter.com/freshneasybuzz.]

Supervalu, Inc. Introduces New, Value-Plus-Convenience Meal Solutions Program; Features Refrigerated Case 'Meal Centers' in Multiple Store Departments

Pictured above is one of the "4:15" freestandling merchandising cases in Supervalu, Inc.'s new "Simply Good Meals" meal solutions program. This and similar merchandising units will be located in store produce and meat departments in 1,300 Supervalu owned and operated supermarkets to start.. Other meal solution destination merchandising units will be located in store deli departments.

Competitor News: Merchandising Developments

Supervalu, Inc., which operates the Albertsons banner supermarkets in Southern California and southern Nevada, along with a total of about 2,500 supermarkets under numerous banners nationwide in the U.S., today announced the introduction of a new meal solution destination in-store program it calls "Simply Good Meals." Supervalu, Inc. had 2008 sales of $45 billion.

The "Simply Good Meals" concept offers prepared and easy-to-prepare food items that are merchandised in branded, standalone refrigerated cases which are located in various store departments. The offerings are designed so shoppers will find complete, easy-to-make meal solutions in one spot in the various store departments.

The focus is on offering affordable, convenient meal solutions to capture shoppers who are looking for what to prepare for dinner that night while shopping in the store.

For example, Most stores will initially feature up to four "Simply Good Meals" in-store destinations, including two in the produce area, one in the meat section and one in the deli department. Some stores will also have additional meal and soup destinations in the deli area, according to a Jim Smits, Supervalu's group vice president for fresh foods.

One of the destinations -- known as "4:15" (as in the time of day) -- will feature a selection of items targeted to busy moms and designed to create a good, easy, home-cooked meal for a family of four for under $15 and, in many cases, in 15 minutes or less, according to Smits.

"Research shows that most people don't know at 4 o'clock what they are having for dinner that night, and in many cases, these hurry-up meals result in less-than-balanced and more expensive food choices," Smits says.

"We wanted to make it easier for our customers to answer that inevitable 'what's for dinner' question by providing them with simple, convenient, affordable ideas for creating a real home-cooked meal."

Smitts adds in explaining the merchandising philosophy behind the new meal solution-centered program: "The 'Simply Good Meals' program addresses consumers' needs for convenience, value and family meal-time help at a time when concerns about the economy are causing changes in their eating and shopping behaviors.

According to the Food Marketing Institute, 71 percent of consumers are cooking at home more and eating out less at restaurants. Yet on a typical weekday, nearly 53 percent of consumers don't decide what's for dinner until a couple of hours or less before the meal. While time constraints continue to drive demand for quick and easy meal solutions, moms frequently find that meals at cheaper price points are incomplete or less satisfying.

In addition, most moms equate cooking with emotional meaning, with eight in 10 saying they show their love for their families by making home-cooked meals as often as possible, and 74 percent saying they put a lot of care and emotion into their cookin, according to Yankelovich. At the same time, nearly 45 percent of women say they tend to prepare the same meals all the time, and others simply lack the time and skills to cook."

Items in the "4:15 meal solutions" destination area will include offerings like those listed below, according to Supervalu:

>Ready-to-heat beef roast, potatoes and a salad.
>Lasagna, salad and French baguette.
>Pork teriyaki tenderloins, a side dish and salad.

Initially the meal solutions will change every other week, ensuring a variety of different menus for busy, on-the-go moms, according to Supervalu's Smits.

Additionally, all of the meal solutions offer paint-by-the-numbers-style simple preparation instructions.

Supervalu said today it will initially roll the meal solutions program out in 1,300 of its 2,500 U.S. supermarkets to start, beginning right away.

There's nothing particularly unique about the more value-based meal solution-centered offering from Supervalu in terms of the products offered and the concept of meal solutions, which is something Supervalu and most other supermarket chains have been doing for a number of years, although the merchandising practice has become more pronounced since last year when the recession hit hard.

The merchandising aspect of the program, the placement of the branded meal solution centers in different store departments, does offer some originality though. By placing the branded meal centers in the produce and meat departments, as well as in the deli/prepared foods sections, Supervalu has the potential of addressing customers at multiple points-of-purchase and decision-making in-store.

Such a multi-departmental merchandising strategy is a good one we believe because it attempts to catch the shopper with a meal solution idea in departments other than deli/prepared foods, thereby increasing the point of opportunity in which the customer is offered the selling proposition.

The meal centers also are a form of cross-merchandising, which enhances the opportunity for incremental sales since the concept is that shoppers will buy the multiple components (items) of the "meal" rather than merely an item or two. Such meal-centered cross-merchandising works in food retailing, as long as the cross-merchandised items are good and the pricing is appropriate.

This isn't Supervalu, Inc.'s first offering in the value-based meals and related prepared foods segment. The new meal solutions program follows the introduction by the grocery company last year of its "Culinary Circle" brand, a value-priced fresh, prepared foods line in all of its stores, including the Albertsons banner.

The "Culinary Circle" brand items are all prepared foods however. The items in the "Simply Good Meals" program include heat-and-eat and quick fix items that need some minimal preparation and value-adding (salad dressing on a salad type of stuff) at home. The average time to prepare the meals in the "Simply Good Meals" program is about 15 -to- 20 minutes, according to Supervalu.

In terms of the price point -- the under $15 -- it's our analysis based on research that the hot button meal solution price-point at present is about $12 and under for a complete meal for four. For example, Safeway Stores and Raley's, two supermarket chains with numerous stores in California and other western states, have since the middle of 2008 been offering meal solutions deals priced at under $12 and $10 and under for four. These offerings have been very popular at the two supermarket chains.

A number of the Supervalu "Simply Good Meals" program offerings come in at about $10 -to- $12 for four. We think those will be the most popular offerings in the program in the current recessionary climate.

Tesco's Fresh & Easy currently operates 116 combination grocery and fresh foods markets in California (Southern and Bakersfield), Metro Las Vegas, Nevada and in the Phoenix, Arizona Metropolitan region.

Supervalu, Inc. operates the Albertsons chain in Southern California. The chain is number three in market share overall in Southern California after Kroger Co.'s Ralphs and Safeway Stores' Vons.

Supervalu also operates the Albertsons banner supermarkets in southern Nevada, along with in Washington state, Oregon, Idaho, Montana, Wyoming and Utah.

The Albertsons stores in Arizona however are owned and operated by the private equity firm Cerebus, as are the Albertsons banner stores in New Mexico, Colorado, Texas, Louisiana and Arkansas.

Cerebus licenses the Albertsons brand name from Supervalu for these stores. The reason for this split is because Cerebus acquired those divisions from Albertsons, Inc. as part of the 2006 $9.7 billion acquisition of the company by Supervalu, in which Cerebus, drug chain CVS and Kimco Realty Company were investors.

Cerebus acquired all of the Albertsons, Inc. divisions mentioned above, along with a couple others like Northern California, which Cerebus sold last year to Modesto, California-based Save Mart supermarkets. Save Mart now operates those stores in the San Francisco Bay Area and Sacramento region under the Lucky banner. The Lucky stores are the number two market share leader in the Bay Area ,after number one Safeway.

Supervalu, Inc. also owns the 16 Bristol Farms supermarkets in Southern California and one store in San Francisco in Northern California. It acquired the small chain in the deal for Albertsons, Inc. in 2006. Albertsons bought then independent Bristol farms a few years before that.

Bristol Farms is an upscale, specialty-oriented format. It's a pioneer in fresh, prepared foods development and merchandising, albeit with most of its offerings at higher price-points. However, Supervalu has learned much about the fresh, prepared foods category, for example, since acquiring Bristol Farms nearly three years ago. Some of that knowledge has resulted in changes and product improvements overall in the category for Supervalu, including at its Albertsons stores in California and Nevada.

Supervalu, Inc. also owns the small-format, no frills, deep discount Sav-A-Lot chain. The Sav-A-Lot stores, many of which are franchised to independent operators, aren't included in the new meal solution program. [Supervalu, Inc. is growing Sav-A-Lot significantly. Read our December, 2008 piece where we detailed some of that growth here: Competitor News: Supervalu Inc.'s Small-Format, No Frills, Extreme Value Sav-A-Lot Chain Beefing Up its Executive Ranks as Part of its Growth Program.]

An English Village, A British Fresh Chicken Brand and Tesco Fresh & Easy's New 'Buxted' Discount Fresh Meat Brand: What Do All Three Have in Common?

Tesco's Fresh & Easy is currently promoting "Buxted" Boneless-Skinless Chicken Breasts for $1.77 pound and Boneless New York Steaks for $3.99 pound in its advertising flier. Both promotional price-points are extremely competitive ones in the three states, California, Nevada and Arizona, where its 115 grocery and fresh foods are located.

When Fresh & Easy Buzz first learned Tesco's Fresh & Easy Neighborhood Market was preparing to introduce a new fresh meats store brand named "Buxted" the first two images that resonated in our mind were: 'sounds upscale or high-end, and sounds British.'

The name "Buxted" for a food product brand sounds to our ears and internal brand radar gauge to be upscale-high-end (even a bit stuffy) rather than discount or value-based, which is how Tesco's Fresh & Easy has positioned and priced "Buxted,", as the brand name for its new line of value-priced fresh meat products.

A Fresh & Easy Buzz reader offered a different take recently. She said when she first heard the name "Buxted" she immediately thought of the popular "Buxton" brand of leather wallets and handbags. (We did point out to her that Fresh & Easy is offering fresh beef, like the New York steaks it has on sale in its advertising flier this week, under the "Buxted" fresh meats brand -- and that since both leather wallets and beef steaks do come from the same animal -- there is somewhat of a connection between the two brand names and the respective products offered under the two brands.

We've since done a little research after our first impression of the "Buxted" brand name, asking consumers to name which of the two -- upscale brand or discount brand -- comes immediately to their minds when they hear the brand name "Buxted." So far we've asked 31 consumers; 23 have said "upscale," two said "who cares," four said "they had no idea," and two said "discount." We continue the exercise.

But "Buxted" it is for Tesco's Fresh & Easy when it comes to its value or discount-priced line of fresh meat products, which includes chicken as well as beef.

Since the other thought that came immediately to mind when we heard "Buxted" as the new fresh meat value brand name for Tesco's Fresh & Easy was that 'it sounds British, English,' we went investigating.

And indeed we were correct.

"Buxted" just happens to be the name of a civil Parish (think county if you are an American), as well as the name of a village, Buxted village, in the Parish, which is located in Uckfield, East Sussex, United Kingdom. It's right next door to Coopers Green, and just a stones' throw from Maresfield, as you can see on the map above.

Buxted Parish, of which the village of Buxted is a part, even has its own Web site, which you can view here.

Buxted, which has a storied, and some say important, history, today has about 3,300 residents, according to its Web site. The village and surrounding area is rural and bucolic, the stuff of English countryside drawings and paintings.

Below is how the town council describes Buxted Parish:

"Buxted Parish, which includes Five Ash Down and High Hurstwood is situated in the High Weald Area of Outstanding Natural Beauty between the North and South Downs. The Weald was originally an area of land between two lines of chalk hills called the North and South Downs. Weald is an old English word for "forest" and this area across Kent and Sussex included Ashdown, Tilgate and St. Leonard's forests which remain today. Uckfield and Crowborough are the nearest market towns."

The village of Buxted lies on the A272 roadway from Heathfield to Uckfield road. The name of the village derives from "Bloc Stede," meaning the "stand of beeches" (A beech wood), according to local historians and the village council.

Buxted is a small village (that's the village sign pictured above) with very few local retail shops or services. The main shopping center for residents is in Uckfield, which is just a few miles south.

Historically, Buxted got an occupational and economic boost in 1331 when the export of unwashed wool was prohibited by King Edward III. He encouraged weavers from Flanders to settle in England. They brought their weaving and dying techniques to England, and at Buxted , they produced silk materials.

but a bigger economic bang was to come to Buxted. The cannon making industry in the Weald (think county again) started in 1543 at a furnace on the stream at Hoggets Farm lying to the north between Buxted and Hadlow Down .

The reason for this is because Buxted Parish was a major producer of iron, which the cannons were made out of. Over the following years the area became rich from the iron industry, and the village of Buxted benefited from supplying the forges and furnaces in the area.

but all good things, like the iron industry and cannon-making, come to an end eventually. And such was the case in Buxted. When the iron industry collapsed in the early 1800's the village of Buxted reverted to its rural roots. [You can read a bit more about the history of Buxted here and here.]

But, you are probably asking ...What's the connection between Buxted Parish and the village of Buxted ... and meat -- particularly Tesco Fresh & Easy Neighborhood Market's new "Buxted" brand of discount-priced fresh meats?

Well, it's all about the chicken; "Buxted Chicken" to be precise.

At one time Buxted was super-famous for its chicken processing industry. The British wholesale Buxted Chicken Company had a large chicken processing factory in the village of Buxted, as well as one in nearby Five Ash Down.

Although the Buxted chicken factory closed down in the 1980s, and the site is now owned by the Woodland Trust, the factory in Five Ash Down remains, and the main industry and economic claim to fame in Buxted Parish and the village of Buxted is still the chicken business.

The well-known British "Buxted" brand chicken was the brainchild of Britain's Antony Fisher, who went on to found the Institute of Economic Affairs, a respected think tank and public policy center in the United Kingdom (UK).

'Buxted' brand at Tesco-UK and Tesco Fresh & Easy USA

"Buxted" brand chicken is owned and distributed in the UK by West Bromwich-based 2 Sisters Food Group, which is owned by Boparan Holdings Ltd.

2 Sisters Food Group supplies chicken under the "Buxted" brand, as well as for private label, to Tesco in the UK, which owns and operates El Segundo, California-based Fresh & Easy Neighborhood Market in the U.S. states of California, Nevada and Arizona (115 stores at present). 2 Sisters also supplies other major UK supermarket chains like Marks & Spencer and others with "Buxton" brand chicken.

"Buxted" is 2 Sisters' original fresh poultry brand. It later added a second brand, 'The Devonshire Red." The company also does a large volume in private label sales. It's markets other fresh meats and foods along with chicken. [The "Buxted" brand logo above is from the 2 Sisters' Web site.]

"Buxted" is not a discount fresh chicken brand for 2 Sisters in the UK. Rather, it's a "value-added" brand. The company sells private label chicken to Tesco and others that those retailers then use as their store discount or value brands.

Today, 2 Sisters Food Group, which was founded in 1993 and is privately-held, has 13 manufacturing sites in the UK, one in Holland and one in U.S.A. The company says it employees over 5,500 people globally, and that it has annual sales exceeding £650 million (pounds). That's about $830 million U.S. It works closely with Tesco in Thailand, for example.

This is the very same 2 Sisters Food Group that Tesco brought with it in 2007 to the U.S. to be the "in house" procurement and distribution arm for all of the fresh foods (including meats) sold in its combination grocery and fresh foods Fresh & Easy Neighborhood Market stores. 2 Sisters set up shop in Riverside County, in Southern California, where Tesco's Fresh & Easy distribution center is located. [Suggested reading, August, 2008: UFCW Union Reports Tesco Fresh & Easy Neighborhood Market's Prepared Foods Supplier to Labor Board For What it Says is Unfair Firing of Six Employees.]

So you see, Tesco's Fresh & Easy reached back home to the UK to come up with the brand name -- "Buxted" -- of its discount-priced fresh meat line. That's why it sounds British ... because it is.

And, Tesco's Fresh & Easy is using "Buxted" as its discount or value fresh meats (including chicken) brand in the U.S. But as we mentioned above, that's not the positioning of the brand in the UK.

Oops they did it again: 'Buxted,' Fresh & Easy, local marketing and merchandising

It appears to us that by naming its new, value brand of fresh meats after an existing British brand (and a village in England), Tesco's Fresh & Easy has learned nothing from what has been one of its failures to date, in our analysis, which is the turning of a blind eye to the local nature of food and grocery retailing in the U.S.

Why not a brand name for the new fresh meats value line that would resonate in the minds of consumers in California, Nevada and Arizona rather than one imported from the United Kingdom? Perhaps something like "Pacific Pride"? or "Western Value?" Just a thought.

Perhaps it won't matter that the brand, like nearly all of Fresh & Easy's merchandising and marketing, is of British design, which the grocery chain then attempts to stuff into American food retailing, since the focus of the "Buxted" brand is price

But then, if "brand" doesn't matter, why even create a new store brand for the fresh meat line? Just keep the fresh & easy store brand label on the meats (that's the brand on all the other fresh meats sold in the stores) and offer a selection of the items for discount prices on promotion, which is what the retailer is doing with "Buxted" anyway.

Obviously Tesco's Fresh & Easy thinks "brand" matters, even on a line that's focus is discount priced. Why else create a new one?

Therefore, why "Buxted"?

As we said, in our analysis, and in the majority of opinions we've thus far gleaned from the 31 consumers, with more to come, "Buxted" in the first place sounds more upscale or high-end than it does discount or value. (Of course each consumer will be the individual judge of that.)

But the fact the brand name is a British import, and has no brand relevance to America in general and to the Western U.S. specifically, boggles the mind just a slight bit. It reminds us of the very same ethnocentric behavior Tesco Fresh & Easy's senior executives have axhibited from day one.

Of course, we could be wrong. Perhaps brand "Buxted" will do well.

But in the world of brand naming and marketing it's a fact that it helps to create a brand name that has some relevance to the customers it's being targeted to. It's also a fact of food and grocery retailing in the U.S. that taking a local marketing and merchandising focus is a major key to success.

It appears in naming its fresh meats value line "Buxted," Tesco's Fresh & Easy believes both of these marketing and merchandising realities are either wrong or irrelevant.

Thus far this attitude and approach has proven less than successful for the grocer. You just can't force-feed a British food retailing model into U.S. food retailing culture and practice, and fail to take a regional and local approach to private-label product branding and food retailing in general, and expect to do well in America because the nature of food retailing in the U.S. is a regional, sub-regional, sub-sub-regional and local business.

But, the village of Buxted in the UK is a lovely place. That's for sure. Although it's having a tough go economically right now.

And we should add: We hope the "Buxted" brand of value-priced fresh meats is a huge success for Fresh & Easy, both because we want the stores to succeed -- the more competition the better for the entire industry, not to mention keeping the jobs (and adding more) of the great store-level employees who work for the grocery chain -- but also because the value-priced meat line, like the 98-cent produce packs recently introduced by Fresh & Easy, along with some other recent value-based developments, just happen to fit the "value proposition" model we started developing and describing in the Blog over a year ago (and have continued to do), that in our analysis is where Tesco needs to go -- and has been moving towards -- with Fresh & Easy Neighborhood Market. [Fresh & Easy Buzz Redux: Much of the Value Proposition-Based Analysis and Suggestions We've Been Offering Now Being Adopted By Tesco's Fresh & Easy.]

But, in terms of "Buxted," when we hear the name or see it on a package of meat, particularly steaks, we just can't get that thought of the "Buxton" leather wallets out of mind.

A British Grocer in King Arthur's Court? Trader Joe's is Ending its Long Relationship With King Arthur Brand Flour ... Enter Tesco's Fresh & Easy ...

Food and Grocery Merchandising in a Land Called America

King Arthur brand Flour is considered by the culinary-informed to be arguably the finest quality baking flour in the land.

Not so many years ago finding King Arthur Flour at retail was quite a chore, it then generally being sold only at specialty stores and more upscale and specialty foods-oriented supermarkets. You know, those us common folk only shop at on special occasions.

Despite that fact, many King Arthur brand-loyal subjects (consumers) in the land called America sought out the flour anyway, often traveling for many miles in their four-wheeled chariots to a store that sold King Arthur Flour. Others went right to their local grocer and asked him to carry it, which many then did -- and do.

But then the bakers, the packagers and the marketers that comprise the King Arthur Flour company -- which is employee-owned -- joined forces with what then was a small chain of specialty grocery stores named Trader Joe's. The Trader and the King; a perfect match thought many of the loyal subjects of the brand.

Then like bread dough rising on a warm cupboard, Trader Joe's grew and grew, in the process introducing more and more subjects in the land called America to the King Arthur Flour brand -- and making it easier for the brand's already many brand-loyal subjects to get their King Arthur Flour closer to home, since Trader Joe's was spreading throughout the land. And unlike at the upscale stores, subjects of all classes trade with the Trader.

And as Trader Joe's grew in size, popularity and store-count, other grocers throughout the land -- not just the upscale royalty of the food retailing world -- also started carrying King Arthur Flour on their store shelves. What was once royal in terms of retail distribution was becoming much more common.

But the Trader still stood alone as a key retailer of King Arthur Flour. And for years the relationship between the employee-owned company and the specialty grocer thrived.

But alas, like happens in many relationships, King Arthur and the Trader are now parting company. Trader Joe's has decided to stop carrying King Arthur Flour in its about 304 specialty grocery stores located throughout the land called America.

Below (in italics) is what the "Baker-Bloggers" at King Arthur Flour are saying about the end of the Trader Joe's relationship this week in a post titled, "Say it ain't so, Joe's," in their "Bakers' Banter" company Blog:

"Breaking up is hard to do.

Just ask all of us here at King Arthur Flour. We’re suffering the heartbreak of a broken relationship.

We’ll survive. Everyone does. And someday we’ll think back on this time with fond nostalgia.
But right now, it hurts.

A number of years ago, when King Arthur Flour wasn’t a widely known national brand, we joined forces with a not-quite-ready-for-prime-time grocery chain. It was a match made in heaven. We needed distribution in other areas of the country; Trader Joe’s needed a quality flour to anchor their baking aisle.

We started a business relationship.

And the rest, as they say, is history.

King Arthur Flour, thanks in part to our exposure in Trader Joe’s, is now available at supermarkets across the land. Wherever you live, there’s a market selling King Arthur Flour somewhere fairly close by."

But wait... As they say, when one door closes, perhaps a new one opens?

About 18 months ago a grocer from Britain, a land that knows a thing or two about Kings, road into America and opened its first small-format combination grocery and fresh foods stores, which many say are one-part Trader Joe's and one-part mini-Costco's. And they aren't just for royalty either. Rather, the stores welcome the masses, boldly proclaiming "Fresh & Easy is for everybody."

Today that grocer, Tesco's Fresh & Easy Neighborhood Market, has 115 of those little (10,000 -to- 13,000 square-feet) grocery stores -- not as many as Trader Joe's (yet), and the Fresh & Easy stores are only in three states -- California (Southern California and Bakersfield so far), Nevada (Metropolitan Las Vegas) and Arizona (Metro Phoenix) -- but its a fast-growing chain, despite its current struggles.

And in the United Kingdom, the mighty Tesco, who's CEO, Sir Terry Leahy, has been knighted by Britain's Queen, is the King of all grocer's, controlling a whopping 30% of all food and grocery sales in that land of the royal -- and the not so royal.

And across the globe, in that great British flair that once found the UK sitting on top of the world as a great Empire, Tesco (the world's third-largest retailer) is marching, trailing only Wal-Mart (number one) and France's Carrefour (world's second-largest retailer) in the battle for global retailing domination.

So we posit -- might King Arthur's ending its relationship with Trader Joe's be a "royal" opening for Tesco's Fresh & Easy to ride in and stock the renown King Arthur Flour in all of its stores in California, Nevada and Arizona -- many of which are located very close to Trader Joe's markets -- thereby pleasing the legions of brand-loyal King Arthur Flour customers who soon will no longer be able to buy the product at Trader Joe's? And might we add, in the case of Fresh & Easy, making an extra buck or two, along with creating some potential customer loyalty, as well as perhaps offering a bit of a royal poke at Trader Joe's.

One door closes -- another opens.

We would jump on the opportunity right away. King Arthur Flour has some of the most brand loyal customers of any niche brand in the U.S. [You can get a hint of that strong consumer brand loyalty by reading the reader comments on the post in the King Arthur Flour Company "Bakers' Banter" Blog here.]

Merchandising Report: Touch Me and I'm Yours

This fresh produce says: Touch me, fondle me, caress me. I'm farm fresh, ripe, succulent and delicious. Go ahead, feel me and see for yourself. Touch me and make me yours.

Two Ohio State University researchers conducted an experiment recently in which they set out to test the proposition that consumers are more likely to buy an item in a store if they first touch and fondle it. All good food and grocery merchandisers know this, which is why good produce department managers and others build massive displays of product, creating not only a visually appealing, but also a tactile opportunity for shoppers to interact with the product. It's all about appealing to shoppers' senses - visual, touch, taste, smell.

The two Ohio State researchers also say they found an even more interesting result from their study: That shoppers are willing to pay more for an item if they touch it first. They suggest handling an item in a store creates an attachment between the shopper and the item touched, which leads that shopper to be more likely to buy the item, and to even pay a higher price for it, than if he or she hasn't touched or handled the item first.

Fresh & Easy Buzz isn't sure we completely buy that finding based on the study. We think there might be some third variables involved. For example, we suspect the retail price of the item, touched or not, plays a major part in the consumer purchasing decision. We also suspect a key variable is whether or not the shopper planned to purchase such an item prior to entering the store. In other words, how much of the purchase decision is pre-planned vs. impulse.

We do believe, based on extensive experience though, that shoppers will purchase higher priced food and grocery products such as fresh produce, specialty foods and related items, if they are displayed in a visually appealing way that encourages shoppers to pick-up and touch the items. And we all know food tastings, which appeal to another human sense, taste, work to sell product, not to mention the power of smell, say fresh bread baking in the in-store bakery.

For example, we've done experiments at retail in which we've placed identical quality items next to each other, in which one display is "plain Jane" and the other visually attractive and designed so that shoppers are tempted to touch the items in that display. (We've also used simple, cute signs on the displays that say "touch me." They work.) We then observed the shoppers. Overwhelmingly they pick up, touch and buy the items in the more appealing display, which also are priced higher than the identical items in the less than appealing display next to it, and in most instances shoppers purchase the more expensive item they've touched rather than the identical item next to it which is priced for less. Again, it's all about appealing to the human senses, in this case visual and tactile.

In these retail experiments we've noticed that a key variable is the difference in price between the two items in the displays. Shoppers tend to go for the higher priced (more visually appealing and tactile-encouraging display) if its no more than about 30% higher than the other display (the "Plain Jane"). But when we doubled the price on items the shopper purchasing behavior dropped significantly, even though a number of shoppers still picked up the items in the more appealing displays.

Despite our cautions as to the Ohio State researchers' results, what the researchers found in their controlled study is similar to what we've observed in the retail experiments we've done and described above. That in part is why Fresh & Easy Buzz was interested in the researchers' work; and why we are publishing it in this piece.

Andrea Thompson, a staff writer for the Web site LiveScience.com has an overview piece on the Ohio State Researchers' study. You can read that piece here. There also are links to the actual study there.

The Ohio State researchers used non-consumable products in their study, such as a coffee mug. However, when it comes to tactile sensations, as every good food and grocery merchandiser knows intuitively, fresh foods and packaged goods are the perfect vehicle for merchandising in ways that encourage shoppers to interact with the items.

But good food and grocery merchandisers also know that in tough economic times like today economics plays a major role in shopper purchasing decisions regardless if they touch an item or not. But we do believe touch is such a key aspect to shopping (just watch women shop in a clothing boutique, or men in a sporting goods store, for example) that we suspect when it comes to higher prices goods many shoppers are avoiding touching items they want but know they can't afford in this current down economy. Why create an attachment to those $250 designer stiletto high heels, or that $200 golf putter -- or even those $6.99 per pound organic purple heirloom tomatoes we avoided touching (and buying) at Whole Foods Market the other day -- when you know you can't (or shouldn't) afford to purchase them, after all.

The Ohio State research, along with our explanations of the experiments we conducted at retail, are important pieces of information for retailers and merchandisers of all sorts though in bad economic times like the current recession. That's because when sales are down across the board like they are currently, and in particular in the case of higher margin food and grocery items, it's even more important to get creative in terms of merchandising and display building.

Retailers and other merchandisers need to wake shoppers up in-store right now like never before with visually appealing and tactile-encouraging displays and other forms of merchandising. That's where the added and incremental sales will come from.

For those retailers and outside merchandisers reading this, we suggest you try some of the experiments we've described. Use cute and humorous signs on a display that ask shoppers to "touch me." Take an item you sell on the shelf everyday say for $1.59. Build an attractive and tactile-encouraging display using it, then mark the item up to $1.99 and see what happens. Even try this: Put a sign on that display that says: "I might not be cheap...but I'm worth it... Touch me and find out for yourself." Tough times require innovation and creativity.

And for shoppers, beware of displays like the one we just suggested above. Don't let such "merchandising" force you to spend more money than you need to at the grocery store. Compare product quality, container size and price. And remember, when you see displays in a store like we've described, know they are there to encourage impulse buys. But don't avoid such displays completely, as grocery retailers often use displays to offer some of their best deals in-store.

One thing is for sure: touching, including touching products, is something that's innate to us as humans. That much every schoolboy knows.

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

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

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

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

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

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

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

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

Tesco PLC
13 January 2009

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

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

Good International Progress

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

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

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

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

Steady UK Performance

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

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

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

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

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

Asia and Europe Lift Tesco's UK boat

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

Fresh & Easy Neighborhood Market USA

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Breaking Buzz: Fresh & Easy Hires Hispanic Market PR Firm to Say 'Si, Se Puede! (Yes We Can) to Latino Consumers; We Suggest it's Doubtful

Tesco's Fresh & Easy Neighborhood Market has decided it needs to better communicate its brand, along with its small-format, combination grocery and fresh foods stores in general, to Hispanic consumers in Southern California, southern Nevada and the Metropolitan Phoenix, Arizona region -- which are three of the regions with the highest percentage of Hispanic consumers in the U.S. -- where its 100-plus stores are located.

To this end, Fresh & Easy has retained the Los Angeles-based public relations firm RLPR + Marketing, which specializes in the Hispanic or Latino market, to handle marketing related and other forms of communications and publicity outreach to Latino consumers via the Hispanic media in these three Western U.S. markets, Fresh & Easy Buzz has learned.

The Los Angeles-based Latino market-focused public relations firm was retained by Fresh & Easy in late 2008. The firm's major focus for Fresh & Easy begins this month though.

RLPR does not replace Fresh & Easy's public relations firm of record, APCO Worldwide. APCO Worldwide employee Brendan Wonnacott serves as the corporate spokesperson for Tesco's Fresh & Easy Neighborhood Market USA and the firm handles general PR and marketing communications for the grocery chain.

Rather, RLPR's mission for Tesco is to better position and communicate the Fresh & Easy grocery and fresh foods chain among Hispanic consumers through media relations efforts targeting the Hispanic media, as well as through special events and others forms of marketing communications.

PLPR, which also has an office in New York, bills itself as an 100% Hispanic and woman-owned firm.

The firm's focus is on the fast-growing Latino consumer market. It was started in 1996 by then 25-year old Roxana Lissa, who began with one employee, herself, and an office in her Southern California home. Since then, RLPR has grown to become one of the largest independent Hispanic PR firms in the U.S.

Among the clients RLPR currently does work for include consumer package goods company General Mills, Dutch beer giant Heineken, the national honey board, and others.

Fresh & Easy Buzz is aware of the work of RLPR. In terms of choosing a PR firm focused on the Latino market, it's a good choice for Fresh & Easy, or for any other company for that matter. The firm is creative and has a strong track record.

Merchandising-Operations: 'Si, se puede! for Fresh & Easy doubtful

The problem with Tesco's Fresh & Easy vis-a-vis the Hispanic consumer base, which comprises about 30-40% of the total population in Southern California and Arizona, isn't a PR or marketing issue. Instead it's a merchandising issue.

The Fresh & Easy grocery and fresh foods markets just aren't very Latino-consumer friendly. And in Southern California and Arizona in particular, there are numerous grocery retailers that specialize in Hispanic consumers specifically. And even chains such as Safeway and Ralph's have neighborhood marketing programs in which they focus stores in neighborhoods with high Latino populations on the Hispanic consumer.

Fresh & Easy has miles to go before it can compete with these retailers for the Hispanic food and grocery dollar. It's all about merchandising and very little about marketing or PR.

For example, nearly 100% of the fresh produce in Tesco's Fresh & Easy stores is pre-packaged. Study-after-study conducted in the Western U.S. market over the last 15 years has shown that Hispanic consumers prefer bulk produce far and away over pre-packaged. Can you recall the last Hispanic-focused supermarket you've been in that had even 25% of its fresh produce pre-packaged in bags and plastic tubs like Fresh & Easy stores do, for example?

In surveys Latino shoppers site and abundance of fresh, bulk produce and an extensive selection of fresh meats and fresh fish as the two most important categories they consider when choosing a supermarket. Tesco's Fresh & Easy has neither.

Additionally, Fresh & Easy stores don't cash payroll checks. A significant number of Hispanic consumers in California, Nevada and Arizona essentially use supermarkets, such as Safeway, Ralphs, Frys and Bashas in Southern California and Arizona, or mass merchandisers like Wal-Mart, as their retail banks. They cash their weekly or bi-weekly payroll checks at the store (or in the case of those on government assistance, their government checks), then do their grocery shopping at that store. Another strike against Fresh & Easy vis-vis the Latino consumer.

Studies demonstrate Latino consumers are far more brand and store-loyal than other ethnic groups in the U.S. are Therefore, Hispanic shoppers will stick with a supermarket that cashes their payroll checks, spending nearly 100% of their food and grocery dollars with that retailer. Since Fresh & Easy stores don't cash payroll checks, they aren't even in the ballgame for this significant segment of Latino consumers.

Further, Fresh & Easy stores do not accept WIC (Woman's, Infants and Children's Program) Vouchers, which are given to poor mothers by the U.S. government so they can purchase specific, nutritious items such as infant formula, low-fat whole milk, fruit juice, whole grain cereals and fresh produce for their babies and toddlers. Many poor Hispanic mothers receive these vouchers from the U.S. government. These mothers do the primary grocery shopping for their families. Since Fresh & Easy doesn't accept the WIC Vouchers, they are automatically excluding these poor Latino mothers (and poor mothers from all ethnic backgrounds) from using them (and therefore from shopping in) the grocer's stores.

Back to merchandising: Hispanic consumers cook at home far more than Anglo consumers do. Therefore, they are ingredient food and grocery buyers primarily rather than fresh, prepared(ready-to-heat and ready-to-eat) foods shoppers. Since a significant percentage of the products in Fresh & Easy stores are prepared foods, this aspect (and thus potential for sales) of the chain's merchandising is mainly lost among Hispanic consumers, who of course buy some prepared foods, but do so overall in far lower numbers than Anglo consumers do.

When it comes to fresh meat, which along with fresh produce Latino (and Asian) consumers purchase in far higher numbers than Anglo shoppers do, Fresh & Easy stores have few of the types of cuts of beef, for example, that Hispanic consumers generally purchase. These include thin cuts of round and flank steak and the like. The same is true regarding types of pork roasts and cuts. The case is the same when it comes to the stores' fresh fish and seafood selections.

Moving to the core of the store, to the dry grocery category, Hispanic consumers tend to be much more brand loyal than Anglo consumers are, particularly when it comes to first generation immigrants from Mexico and Central America. The 15 years of research on Hispanic consumers in the Western U.S. mentioned earlier bears this out.

Latino shoppers look for trusted, category-specific authentic brands -- Herdez (salsa), Embassa (peppers), Pagasa (pasta and cookies), El Tapitio (hot sauce), Juanita's (hominy), Nestles's
various Hispanic brands (canned milk, ect.), and numerous others -- across all grocery categories rather than store or private label versions, and are willing to pay a premium for these trusted brands in their respective categories.

However, since about 65% of the grocery category items in Fresh & Easy stores are under the retailer's fresh & easy store brand, there just isn't enough room to carry the numerous Hispanic brand products most Latino consumers require a supermarket carry in order for it to be their primary food shopping venue. And, Fresh & Easy stores don't currently carry anywhere near the number, or proper variety, of such skus to make them very attractive to most Hispanic consumers.

We have no doubt a creative PR firm such as RLPR will be able to raise Fresh & Easy's profile among Hispanic consumers in Southern California, Nevada and Arizona. That's what they do -- and they do it well overall.

But no marketing communications campaign can take a current format, Tesco's Fresh & Easy, that's not particularly appealing to Latino shoppers, and make it so. Doing that is a merchandising-operations issue.

You can put organic arugula and purple heirloom tomatoes in a burrito after all -- but it's still a burrito. In a similar vein, you can drive Latino consumers into a grocery store with a marketing communications campaign but if that store doesn't suit their shopping needs they aren't likely to return, especially with all the alternatives that do fit their shopping needs in the respective market regions.

As the Fresh & Easy format is today -- majority pre-packaged produce rather than majority bulk, lack of abundance, meager fresh meats that appeal to Latino's, a dearth of key authentic Hispanic brands and skus, policy of not cashing payroll checks, and other aspects we haven't mentioned -- Tesco's Fresh & Easy Neighborhood Market isn't a format that in our analysis offers much appeal to Hispanic consumers as either their primary or even secondary shopping venue for food and groceries.

If Tesco wants to gain a greater share of the Latino consumer dollar -- which with an about 30-40% population percentage range in Southern California, Nevada and Arizona (and much higher in parts of Southern California and Arizona), isn't a bad idea -- it needs to focus first on merchandising, on creating an attractive format for Hispanic shoppers, then communicate that reality to them. As it is now, the grocery chain's Latino marketing program will be all sizzle (marketing) and very little steak (Hispanic consumer merchandising).

But this has been the norm for Tesco's Fresh & Easy since before the first stores even opened in the fall of 2007 -- putting PR over merchandising; the sizzle over the steak. This has surprised us since we know Tesco corporately to generally put merchandising (being a merchant) over being a promoter.

Thus far though that isn't the case with Fresh & Easy Neighborhood Market USA -- which is why in our analysis the business is struggling. Success in food and grocery retailing always puts merchandising, operations and execution over marketing and PR.

In the case of Fresh & Easy's Latino consumer outreach program, we suggest the retailer needs to look at its policies and merchandising, and if it wants to attract more Hispanic shoppers focus on those keys aspects much more seriously before expecting a marketing campaign will win it very many Latino customers.

[For some of the best and most comprehensive research conducted on Hispanic or Latino consumers we suggest the work of Dr. David Hayes-Bautista, who is currently the director of The Center For The Study of Latino Health and Culture at the University of California (UCLA) Medical School in Los Angeles, California. Much of the research we site in our piece comes from Dr. Hayes-Baustista and his staff's work over the years.

Another good source of research information on Latino consumers, particularly with a focus on the Western USA, is the Southern California-based Mexican American Grocers Association (MAGA). You can view the trade group's Web site here. MAGA holds a conference and convention each year, focusing on the Hispanic consumer. This year's conference is March 10-12 in Palm Springs, California.]