Analysis & Commentary: Should Tesco's Fresh & Easy Put An Asterisk Next to its Motto? Yes; Unless it Corrects Four Operational Omissions

The motto of Tesco's Fresh & Easy Neighborhood Market is: "Making wholesome food accessible and affordable to everyone."

The motto is based on Tesco's positioning of the small-format combination basic grocery and fresh foods' chain as being a neighborhood-oriented grocery store designed to serve all consumers as their primary or secondary (fill-in) shopping venue.

This premise is similar to that of most U.S. supermarket chains and mass merchandisers like Wal-Mart. In fact, the original definition and purpose of the supermarket was and is to serve as a one-stop food and grocery retail shopping venue for consumers, regardless of the size of the store.

Tesco's Fresh & Easy however differs in many ways in its operational focus from nearly all other American supermarkets. We aren't referring to the fact its stores are smaller than most U.S. supermarkets, or that is offers a limited assortment of products. Nor are we referring to its merchandising philosophy. There are many grocery stores and supermarkets that are smaller than Fresh & Easy, have different formats and the like.

Rather, we're referring to some of its operational policies that in our analysis make it look more like an elitist specialty store rather than a food store that makes wholesome food accessible and affordable to everyone, which is its motto and positioning.

Fresh & Easy's everyday prices on basic groceries, natural, organic and fresh food and grocery items are good. They are about the same price everyday as deep discounters like Wal-Mart and Costco, and overall a bit lower everyday than most of the competing supermarkets in its market regions of Southern California, the Las Vegas, Nevada Metropolitan region, and the Phoenix Metropolitan region in Arizona, where the current 75 Fresh & Easy stores are located.

However, unlike Wal-Mart and virtually every supermarket chain and independent in America (those that position themselves for everybody), Tesco's Fresh & Easy has a number of operational practices we argue make its claim of being a grocery store for everybody questionable, along with its motto of "Making wholesome food accessible and affordable to everyone" not ring true.

In particular, lets examine four key operational practices (or exclusions) of Tesco's Fresh & Easy which we believe make this point.

Fresh & Easy doesn't accept (paper) personal checks

Virtually every supermarket and mass merchandiser that positions itself to serve all consumers in the United States accepts paper personal checks from shoppers. But not Tesco's Fresh & Easy Neighborhood Market You can pay for your purchases at Fresh & Easy with a debit or credit card - but not with a personal check.

According to surveys conducted by the American Association of Retired Persons (AARP), the national association for older Americans, over half of its millions of members aged 65 and over say they prefer to pay for their purchases at the grocery store with paper personal checks rather than debit or credit cards. Additionally, a significant percentage of those over 70-years old have said they don't even use debit cards. Many who rely only on social security have neither debit or credit cards. Other than using cash, paper personal checks are their only means of payment.

This is a fact not lost on America's banks. The banking industry would love to eliminate paper checks completely. However, because of the preference of primarily older Americans, the wealthiest and fastest growing segment of the population in the U.S., they don't.

Therefore, Tesco's Fresh & Easy is excluding the preferences of America's fastest growing population, those 65 years of age and over, by not accepting paper personal checks in its stores. As a result, the retailer's motto: "Making wholesome food accessible and affordable to everyone," has to be qualified by saying: "Except for the 50% of American consumers age 65 and older who say they prefer using paper personal checks to pay for their groceries at the supermarket.

Fresh & Easy doesn't cash payroll checks

Virtually every supermarket in America, along with Wal-Mart, cashes payroll checks for customers. In fact, most grocery retailers welcome and encourage it because the retail food industry figured out a long time ago it is a great way to create and keep primary customers.

Mega-retailer Wal-Mart even lowered it's payroll check cashing fees earlier this year to encourage more consumers to cash their payroll checks at its stores. Supermarkets (a total of about 6,000 stores) owned by America's three largest grocery chains, Kroger, Supervalu and Safeway, all cash payroll checks in the stores.

Previously Wal-Mart charged a minimum of $4 to cash a payroll check. Then, based on the amount of the check, a percentage charge was added in various increments. But earlier this year Wal-Mart went to a flat $4 fee regardless of the size of the payroll check as a way to encourage more consumers to cash their checks and do business with its stores. Many supermarkets wave the customer fee to cash payroll checks with a minimum dollar amount purchase.

Wal-Mart and America's supermarkets consider cashing customer payroll checks as a customer service, as well as a way to create shopper loyalty.

It's a fact that millions of working poor in the U.S. don't use banks. They cash their payroll checks at a Wal-Mart or a Kroger-owned store, or at other supermarkets (including their local independent), buy groceries, and then use the rest of the money to pay their bills. By cashing these checks for no or a minimal fee, supermarkets save workers who don't have bank accounts money because the only other alternative is to go to check cashing stores, which charge the worker a huge percentage of the check's value to cash it.

Tesco's Fresh & Easy doesn't cash payroll checks for the same reason it doesn't accept personal paper checks. That reason is because it believes there is a labor savings from not having to process the paper vouchers and checks. There is a labor savings from not doing so. But we argue the benefits of doing so far exceed the savings, as does Wal-Mart and nearly every other supermarket chain in the U.S. believe is the case.

Additionally, Fresh & Easy's self-service front-end checkout system also plays into this decision, since processing the paper checks and vouchers generally require employee assistance. Ironically though Fresh & Easy seems to have no problem handling its own $5-off paper coupons, which it distributes via the mail and in the stores.

Not cashing payroll checks, which is Tesco's right not to do, like virtually every American supermarket chain does, is another element that makes living up to its motto: "Making wholesome food accessible and affordable to everyone, rather difficult to do, in our analysis. (The asterisk here is: All consumers except those low-income workers who would like to be able to cash their payroll checks at a Fresh & Easy store like they do at Wal-Mart, Safeway or Kroger but can't do so, and therefore won't likely shop in the Fresh & Easy stores because they will shop where the retailer will cash their payroll check.)

Fresh & Easy doesn't accept W.I.C. vouchers

The U.S. federal government gives the lowest of low-income (many have no income at all and are on welfare) mothers what are referred to as W.I.C. (Woman's, Infants and Children's Program) vouchers to help them purchase nutritional food for their infants and toddlers.

Unlike food stamps, which can be used by low-income Americans in that federal aid program for a wide variety of food products, W.I.C. vouchers are only distributed to mothers, and can only be used at the supermarket to buy specific items such as infant formula, whole milk, cereals, certain types of juices, some varieties of fresh fruits and vegetables and a few other healthy foods. The paper W.I.C. vouchers are given to these low-income mothers for no charge. Retailers redeem them just like a check, getting the full-dollar face-value amount from the federal government.

Tesco's Fresh & Easy, unlike Wal-Mart and virtually every chain and independent supermarket in the U.S., does not except W.I.C. vouchers in its stores. Some convenience stores, farmers markets and drug stores in the U.S. also except these vouchers from poor mothers.

The primary reason Fresh & Easy doesn't except W.I.C. vouchers is for the same reasons it doesn't except personal or payroll checks. Those reasons as mentioned above are because a part of Tesco's model with Fresh & Easy is to eliminate the processing of paper, as a labor and thus cost-saving method, along with its self-service checkout system, which isn't designed for customer service.

Fresh & Easy stores except debit and credit cards. They also take U.S. government food stamps because those now are distributed to people in the form of plastic debit-type cards rather than in a paper form as they have been in the past. Stores process the plastic card like they do a debit or credit card.

By not excepting W.I.C. vouchers from the poorest of the poor mothers, we argue Tesco's Fresh & Easy isn't living up to its motto of "making wholesome food accessible and affordable to everyone", unless that "everyone" has an asterisk next to it that says: "Besides poor mothers who would like to use their W.I.C. vouchers at Fresh & Easy stores to purchase essentials for their infants and toddlers...but can't."

Fresh & Easy doesn't accept manufacturers' coupons

Wal-Mart and every supermarket chain in the U.S. accepts manufacturers' "cents-off" coupons, those little paper squares of free money that arrive in consumers homes mostly in the mail or tucked in the Wednesday or Sunday newspaper. The coupons are increasingly available on the Internet as well.

Manufacturers issue these coupons for their branded products. Consumers redeem them in the stores for a discount. Retailers then ship the coupons to a clearing house and are paid back for the face value of the coupon plus a small handling charge. There is a certain amount of manual labor involved in processing the coupons by retailers. However, in many ways it's "free money" to them in that they are paid back the value of the coupons by the clearing house, which is then paid by the manufacturer.

Tesco's Fresh & Easy Neighborhood Market doesn't accept manufacturers' "cents-off" coupons from shoppers however. If you're a coupon-clipping shopper, which is a growing trend in the U.S. in the current poor economy, Fresh & Easy isn't going to be your neighborhood grocery store since the markets don't accept them.

A just-released survey from the U.S. Promotional Marketing Association's Coupon Clipping Council found that a whopping 89% of the consumers surveyed reported using manufacturers' "cents-off" coupons at the supermarket.

Even more significant, 97% of the 1,000 consumers surveyed who said they are primary shoppers in a family reported using the coupons for food, grocery and household items at the store.

Further, the coupon users in the survey report saving an average of seven percent on their total grocery bill by using the manufacturers cents-off coupons at the supermarket. You can read more about the survey here.

With soaring food and grocery price inflation in the U.S., numerous consumers who've never before used the manufacturers' coupons are turning to them as one way to save money at the grocery store.

While it's true Tesco's Fresh & Easy distributes it's own $5-off coupons good on any total grocery purchase of $20 or more, that's a different process than excepting manufacturers' coupons. Why? Because Fresh & Easy could stop issuing the $5 coupons at anytime, and will have to do so eventually if it expects to make any money in its stores. The manufacturers' coupons however are a constant, something consumers can always count on as a money saving choice if they choose to use them in the grocery store.

Fresh & Easy also issues the coupons because about 60 -to- 65% of the items sold in the stores are under its fresh & easy store brand label. However, that still leaves 35 -to- 40% of manufacturer branded items that shoppers could use the manufacturers' "cents-off" coupons for in order to save money on various items in the Fresh & Easy Neighborhood Market stores.

In fact, since less than half of the items in the stores are manufacturer brands, which means Fresh & Easy Neighborhood Market would receive far fewer manufacturers' coupons than a typical supermarket gets, we find it difficult to understand why CEO Tim Mason believes it would be too much of a labor expense (vs. the benefits of doing so) to accept the coupons in its stores.

Tesco's Fresh & Easy doesn't except the manufacturers' coupons for the same reasons it doesn't accept paper personal checks, W.I.C. vouchers or cash payroll checks: That elimination of manual paper processing combined with its self-service checkout system.

It seems to us though that even if only 50% of U.S. consumers, rather than the 89% in the survey, regularly use manufacturers' "cents-off" coupons, that's a huge percentage of the consumer population for Fresh & Easy to exclude by not excepting the coupons in its stores.

Can the motto, "Making wholesome food accessible and affordable to everyone" ring true if such a large percentage of consumers use manufacturers' coupons but yet aren't able to do so at Fresh & Easy Neighborhood Market grocery stores? You be the judge. We suggest it can't.

Conclusion

Our analysis isn't designed to suggest Tesco's Fresh & Easy doesn't have a right to not accept personal checks and W.I.C. vouchers from poor mothers, or to not cash payroll checks or accept money-saving manufacturers' coupons from shoppers. That's the retailer's choice. And it's the shopper's choice to shop where they can redeem their W.I.C. vouchers (in this case it is no choice) and manufacturers' coupons, use personal checks, an cash their payroll checks.

However, based on these four exclusions - operational practices that virtually every other American food and grocery retailer does as the norm - our analysis is that Tesco Fresh & Easy Neighborhood Market's positioning that it is a food store for everybody is incorrect, and that its motto: "Making wholesome food accessible and affordable to everyone," needs to have an asterisk in front of it.

That asterisk signifies that the for everyone excludes the following:

*Older consumers, and consumers in general, who prefer paying for their purchases with paper checks; or do not even have a debit or credit card.

*The working poor who don't have a bank and would like to cash their payroll checks at Fresh & Easy like they can at Wal-Mart and virtually all other supermarket chains...but can't.

*The poorest of the poor mothers who receive U.S. federal government WIC vouchers so they are able to purchase infant formula, whole milk, juices and other essential nutritious items for the children, and would like to shop at Fresh & Easy and use the vouchers...but can't.

*The tens of millions of American consumers who use and count on manufacturers' coupons to save them money on their groceries at the supermarket. Since they can't use the coupons at Fresh & Easy stores, their preference is essentially an exclusion from the everybody list.

Based on these excluded segments of the consumer population, everybody seems to have shrunk to perhaps half of everybody.

It's our analysis that Tesco's Fresh & Easy is losing out on a substantial amount of business by excluding consumers who prefer to use paper personal checks, cash payroll checks, redeem W.I.C. vouchers and use manufacturers coupons, but can't since the stores don't accept any of these four common transactional forms.

A real irony involves not taking the W.I.C. vouchers. One of Tesco's key strategies with its Fresh & Easy chain it says is to locate stores in low-income inner city neighborhoods like south Los Angeles and elsewhere that are currently underserved by grocery stores that sell basic groceries and fresh foods at reasonable prices. So far the grocer has located two (Compton and Eagle Rock) of its 75 stores in such neighborhoods in Los Angeles county and is building a new store in a low-income neighborhood in south Los Angeles.

What is ironic is it is just these low-income inner city neighborhoods where the majority of W.I.C. vouchers are distributed to poor mothers, many of them single mothers. Without the vouchers, which can only be used for the items stated on them, it's most likely that many of these mothers would not be able to purchase infant formula and other nutritious items for their children. The infants and toddlers would go without. That's why the program was created in the first place.

So, here you have a retailer with a strategy that says it's going to open food stores in these neighborhoods because it wants to provide the residents with better food choices, convenience and low prices, as well as make a profit as a grocer of course. Yet, it is in these very low-income, underserved neighborhoods where the neighborhood grocery store should take the W.I.C. vouchers because it will in most cases be the only decent food store available for residents.

Yet in the case of Fresh & Easy, it doesn't take the W.I.C. vouchers. Therefore, these poor mothers and their children will have a grocery store right in the neighborhood that offers basic groceries and fresh foods--including infant formula, nutritious cereals and fresh juices--at affordable prices but they can't shop at that store using their vouchers.

Therefore, they still will have to ride on the bus to the supermarket or Wal-Mart miles away that accepts the W.I.C. vouchers. Although we don't think it's intended by Tesco, there is a certain cruelty in that scenario.

Strategically Tesco's 'locate Fresh & Easy stores in food deserts but not accept W.I.C. coupons from poor mothers scenario' is like completing half of a puzzle and then declaring you are done. Not only is it incomplete but it makes absolutely no logical sense. Not to mention the poor public and community relations practice of not accepting the W.I.C. vouchers.

We suggest Tesco take a look at each of these four practices in light of its positioning for Fresh & Easy and its motto, which is: "Making wholesome food accessible and affordable to everyone." We think that asterisk is in order at present.

Or better yet, Tesco might consider completing the puzzle by including the four operational missing pieces described above in how it runs Fresh & Easy. If it does so, we think the current for everyone positioning and Fresh & Easy store motto would be warranted without the asterisk. If not, we urge the retailer to add that asterisk for the sake of full disclosure.

Analysis: The 'Cognitive Dissonance' Between Tesco's Fresh & Easy Neighborhood Market Format Strategy and Present Format Reality; Just Ask the Mayor

As Fresh & Easy Buzz has written about in a number of pieces, it's our analysis that Tesco's Fresh & Easy Neighborhood Market format has a serious identity problem among consumers, something the retailer denies publicly.

For example, according to Tesco PLC CEO Sir Terry Leahy, Fresh & Easy Neighborhood Market CEO Tim Mason, and Fresh & Easy marketing director Simon Uwins, the target market for the Fresh & Easy small-format, combination basic grocery and fresh foods markets is "everybody" (all consumers); hence the name "Neighborhood Market."

All three Tesco executives have stated this positioning statement about the format and the stores numerous times in print and verbally to multiple audiences. It's also a major part of the retailer's marketing PR materials.

The Fresh & Easy grocery stores are designed to appeal to all shopper demographics, unlike say Trader Joe's and Whole Foods Market which are more specialty-oriented food stores.

Fresh & Easy's entire strategy is based on this positioning. It's goal is to be the neighborhood grocer, which is why it is employing what we call a "critical mass" retail store strategy, opening stores within about one and a half -to- two miles of each other in the key market areas of Southern California, the Phoenix Metropolitan region, and the Las Vegas, Nevada Metro area. The retailer will be doing the same in Northern California where it will start opening stores early next year.

Fresh & Easy's merchandising strategy also is based on the premise that the stores are for "everybody." That's why the grocery markets offer a limited assortment of store brand and national brand basic grocery items priced at an everyday low price, fresh meats and produce, fresh, prepared foods priced reasonably, and a limited assortment of specialty wines and foods, along with some non-foods.

Tesco's strategy and goal with Fresh & Easy is to be a primary shopping venue, and a limited secondary one, just like Safeway, Albertsons, Basha's, Wal-Mart and other supermarkets. The difference, similar in some ways to Aldi and Sav-A-Lot for example, is the the Fresh & Easy grocery stores are small-format and limited assortment, rather than being a traditional supermarket.

As our analysis has shown we suggest, consumers are confused. Those customers who regularly shop at Fresh & Easy stores "get it" (the format). However, that is rather meaningless since if they didn't "get it" they wouldn't shop at the markets.

Rather, what has meaning (and accounts for lost potential sales) is the fact so many consumers don't "get it." And Tesco needs these shoppers to try the stores if the retailer expects to be successful.

A perfect example of this format confusion, or "muddle" as we call it, happened recently with the City Council in the Southern California city of Rancho Cucamonga, where Tesco is proposing opening a new Fresh & Easy grocery store.

Read the short story below from The Sun, a daily newspaper based in San Bernardino in Southern California's Inland Empire region where Tesco has its Fresh & Easy corporate headquarters and distribution center, an a number of Fresh & Easy stores. We will offer some analysis and comments below the piece from The Sun:

R.C. clears way for specialty market

British concept grocer Fresh & Easy eyeing location near winery building
Wendy Leung, Staff Writer, The Sun, San Bernardino
05/08/2008

RANCHO CUCAMONGA - It's not unusual for new businesses to be scrutinized by those not familiar with their concept.

When the Korean-inspired frozen yogurt chain Pinkberry came on the scene, people couldn't help but ask, "Is this really yogurt?"

Now that the British concept grocer Fresh & Easy is eyeing a location in this city, the question that keeps popping up is, "Is this a supermarket?"

The City Council mulled this query Wednesday and decided - no.

Fresh & Easy - a market with a "think small" approach - wants to open a 14,000-square-foot store on the northeast corner of Vineyard Avenue and Foothill Boulevard, behind the historic Thomas Winery building. The property is zoned speciality commercial, and the Planning Commission ruled in March that the grocer didn't fit that designation.

The City Council, perhaps lured by the display of spinach and artichoke chips and Spanish chorizo brought by the store's representatives Wednesday, overturned the Planning Commission decision by a unanimous vote, saying the grocer is indeed different from typical supermarkets.

Mayor Don Kurth said there isn't any doubt in his mind that Fresh & Easy is a specialty store. Addressing the representatives of the property owner, Kurth said, "I think you've got a home run there."

British retailer Tesco began tapping into the U.S. market last fall and has opened two locations in Upland. More stores are on the way for San Dimas, Fontana and another Rancho Cucamonga location at Haven Avenue and Town Center Drive.

Construction for the Thomas Winery Plaza store is expected to begin at the start of 2009. Property owners intend to demolish the two buildings that currently house Antonino's Ristorante, Yatai Sushi Express and other businesses before constructing a new building that would incorporate winery elements.

Existing businesses will relocate within the plaza because there is 15,000 square feet of vacant property, said Jerry Ogburn, a representative of the property owners.

The Thomas Winery building, with Coffee Klatch and Bobby Baja's as tenants, will not be affected. The historic building is billed as the state's oldest winery and is the reason for the specialty commercial designation.

One of the reasons why the Planning Commission was hesitant to give Fresh & Easy the specialty label is the city has no definition for specialty food stores.

But the council members said after several visits to the Upland locations, they were ready to deem it special.

"I couldn't classify it as a supermarket," said Councilman Dennis Michael. "And if I can't classify it as a supermarket, I have to go with a specialty store."

Ogburn said this is probably the first time that the question of whether Fresh & Easy is a supermarket became a sticking point.

Councilwoman Diane Williams agreed that Fresh & Easy was a specialty store but was far from being a fan.

"If the word specialty means unique...individual, then it doesn't necessarily have to be attractive, it can be ugly," she said. "This isn't ugly but it's certainly not the most attractive store I've ever been in. In fact, it's a real turn-off."

Councilman Rex Gutierrez, who applauded the store's commitment to environmentally friendly designs, attributed the grocer's spartan interior to its country of origin.

"I can understand the plainness," he said. "To me, it's typical English practicality."

Fresh & Easy Buzz Analysis:

Which is it: a food store for everybody? Or is it a specialty store. The mayor obviously thinks it's a specialty store; in fact he seems to have "no doubt in his mind" that's just what Fresh & Easy is.

We wonder why the Fresh & Easy Neighborhood Market representatives--the ones who brought the chips and chorizo--didn't correct the mayor and explain to him that Fresh & Easy is a grocery store for "everyone" just like a supermarket is; that in fact that's the retailer's stated positioning for the format and stores?

Well, probably because the reason the city's planning commission turned Tesco down for the new Fresh & Easy market was because they said the store didn't offer enough of a unique quality to be approved. The city has some sort of "we have enough supermarkets in the city already-oriented planning and design guideline."

Since the mayor was obviously bowled over with the "home run" specialty store aspects of Fresh & Easy--not having a doubt it is a specialty foods store--and a majority of the council felt the same way, thereby overturning the planning commission and approving the store, we would expect the Fresh & Easy representatives attending the meeting decided to leave well enough alone in terms of the format confusion, declare victory and go home.

Now it would be just fine if Fresh & Easy wants to be a specialty store; which as the format is it really basically is. But that's not the strategy or the positioning: the stores are designed to be primary (and to a limited degree secondary) food and grocery shopping venues for "everybody."

Hence the problem, or format confusion or muddle, we've been describing for a long time here on Fresh & Easy Buzz.

As we've said, a good part of this problem has been the failure of Tesco to properly communicate what Fresh & Easy is to consumers. The retailer has relied on public relations "free media" marketing to create its message and communicate its positioning. It hasn't worked.

In order to position and communicate a format such as Fresh & Easy in the desired manner, a retailer must use paid advertising it can control along with public relations-oriented marketing. Why? So it can control it's message and say what it wants and needs to, that's why.

We've also reached another conclusion in our analysis: We don't think Fresh & Easy Neighborhood market executives know what the Fresh & Easy format is. They may have at one time; but not anymore.

Here's one hint why: When Fresh & Easy executives were interviewing new public relations firms in Southern California a couple months ago, among the conflicting charges they gave to those firms was to simultaneously position and gain publicity for the stores as leaders in premium wine and specialty foods sales, restaurant-quality prepared foods purveyors, and the cheapest grocery stores in town. That's conflicting.

Of course, as we've argued previously, in many ways the advertising campaign is putting the cart before the horse, as Tesco has much to do to create a format for the Fresh & Easy stores--as well as in it's operations policies--in order for the stores to be grocery markets "everyone" (or nearly everyone) will be interested in shopping in. That's just not currently the case.

Everybody vs specialty: A few examples:

To be a grocery store for "everybody" in the U.S., you have to take checks. Fresh & Easy doesn't take traditional paper checks, just ATM and credit cards.

If you're operating a specialty foods store it's fine not to take checks.

You also need to cash payroll checks, especially in California, Nevada and Arizona, where many Hispanic immigrant consumers (and others of various ethnic groups use their supermarket as their bank, cashing their payroll checks then buying groceries after at that store every two weeks like clockwork. Ask ("everyman") Wal-Mart why it charges a flat fee of $4 to cash payroll checks regardless of their size, and encourages the practice? Ask Safeway Stores why its stores bring cash in by the armored car load on the 1rst and the 15th of every month, which generally is payroll check cashing time for most of these consumers.

Specialty foods stores hardly ever cash payroll checks, which not only is fine, but also wise.

To be a grocery store for "everybody," you can't have self-service checkout (and only assist shoppers with it if they ask).

For example, people over 65 years old, the fastest growing age group in the U.S., don't generally like to scan and bag their own grocery orders. They also don't like to have to ask for help doing so. Some will ask for help. Some will do it on their own--at least once. Many though will do it once and never return to the store. Others will hear about it and never try Fresh & Easy. With this group being the fastest growing age cohort in the U.S.--and the most affluent--that's a lot of "everybody" to exclude.

If you're operating a specialty foods store or deep discount niche market, it's fine to offer self-checkout, after all you're going after a niche market, not everyone.

To be a grocery store for "everybody," you need to carry more than 30-35% of the already limited assortment grocery items in your stores under national and regional brands, along with your own store brand--especially when that store brand has zero brand equity in the market. As we've suggested before, Fresh & Easy's roughly 65% store brand, 35% national and regional grocery brand mix needs at a minimum to be adjusted to a 50-50 mix.

If you're a specialty foods store like Trader Joe's, it's fine to offer 65% or even more of the grocery products under a store brand since you aren't trying to target everyone anyway.

To be a grocery store for "everybody," you need to offer at least half of all your produce items in bulk, rather than having then 100% pre-packaged. And 50% is being generous. It's probably more like 75%.

If you are a specialty foods store like Trader Joe's, its fine to sell all of your fresh produce pre-packaged because like with Trader Joe's, produce is merely a sideline rather than part of a strategy targeting of targeting all consumers. Trader Joe's doesn't care if shoppers purchase most of their produce elsewhere, although they like it when customers buy most of it at their stores.

There's a form of cognitive dissonance going on at Tesco about what Fresh & Easy really is at present and what they want it to be (and their stated strategy for it), in our analysis.

The format, marketing, merchandising and retail operations all scream specialty foods store. But the strategy and investment is one of a grocery store for all consumers: a combination basic grocery and fresh foods store with everyday low prices that is designed to be the primary and to a limited extent secondary food and grocery shopping venue for consumers in the stores' market regions.

There are numerous other examples--and you can find them throughout Fresh & Easy Buzz--of format, merchandising and operational changes which in our analysis Tesco needs to make and evolve in order to make a success of the small-format, convenience-oriented for "everyone" Fresh & Easy grocery stores; unless of course they want to reposition them as specialty foods stores, which the mayor of Rancho Cucamonga would say would be a "home run."

When We Suggested Adding 'Local Foods,' We Meant Local to the U.S. Fresh & Easy Stores Not the UK: Tesco to Add 'British Foods' to Fresh & Easy

Nancy Luna, a business reporter for the Orange County Register newspaper in Southern California, as well as the writer of a food blog at the paper called The Fast Food Maven, is reporting in her blog United Kingdom-based Tesco plans to make some changes and additions in terms of product selection in its small-format, convenience-oriented Fresh & Easy Neighborhood Market grocery stores.

Among these product mix changes and additions--which Fresh & Easy Buzz has heard bits and pieces about as well over the last few weeks--include adding more international food items, with a particular focus on increasing the variety and quantity of British foods in the stores, and adding an overall greater variety of fresh & easy store products in general, especially in the fresh meat and deli departments.

More British food products ?

Regarding Tesco adding more imported foods from Britain in the Fresh & Easy grocery stores, this is a very interesting development to Fresh & Easy Buzz for a couple of reasons.

For about the last five months or so, we've been monitoring a website, and some times participating in it by posting questions, called BritishExpats.com. The website is a community of interest and sharing for United Kingdom expats living in the U.S. and elsewhere in the world.

We first became interested in the BritishExpat.com website because a UK native living in California sent us an email with a link to a post on the site in which numerous Brits living in California, Arizona and Nevada, where Tesco currently has its 61 Fresh & Easy stores, were commenting on and complaining that the British grocer Tesco's Fresh & USA grocery markets were very poor "British grocery stores."

In other words, the perception of the 20 or so UK expats living in these three U.S. states who commented on the website post was that Tesco's Fresh & Easy stores were American versions of a British food store; sort of a British specialty foods store created in the U.S. to sell British foods.

We didn't correct them--a good observer doesn't do that if he or she wants to learn from observation. Rather, intrigued by the misperception of what the Fresh & Easy grocery stores are--they're everyday low-price basic grocery stores/ fresh, prepared foods markets, with a slight specialty foods twist, according to Tesco--we've continued to monitor the British expat website fairly regularly for the last few months.

We also started paying very close attention to other websites, like Chowhound.com and yelp.com. Both are restaurant and grocery store consumer review sites, where people post reviews of various restaurants and grocery stores, and others comment on the reviews and their experiences with the stores.

Over the last few months of monitoring these websites, along with the British Expat site, we've read numerous posts by both people identifying themselves as UK natives living in the U.S. and just plain old U.S. natives. Expats and natives alike in these particular posts on the websites talked about spending time in the UK, liking many of the foods, and bemoaning the fact Tesco's Fresh & Easy doesn't do a very good job of being a "British grocery store" in America.

The British grocer vs. British food store identity problem

In other words--and its a piece we've been working on for sometime but will offer it in part here--Tesco's Fresh & Easy has a serious identity problem, which means a retail positioning problem, among numerous consumers--native and expat alike--which is they think Fresh & Easy stores are "British food stores "rather than what the stores really are, which is a basic grocery and fresh foods grocery market designed by Tesco to serve all consumer segments and demographics, and to become a chain-store version of the typical American neighborhood grocery store, with a few twists like offering lots of fresh, prepared foods, specialty wines, and organic foods offerings, along with the basic groceries.

That's Tesco's (not well communicated) positioning for the Fresh & Easy stores folks, regardless if your a plain old American or an expat.

So, this is why when we first started hearing rumors that Tesco planned to add numerous authentic British food items to its stores, our first reaction--with no disrespect intended to our many British friends and correspondents--was to laugh out loud.

Now, don't get us wrong--we like and have much respect for British food and grocery products produced in the UK. In fact, in another life, for a time we even imported and marketed many UK-produced food and grocery products to the U.S. and elsewhere and made a buck or two doing so.

It's just we happen to know from our Britishexpat.com chums that many of them have been asking Fresh & Easy senior management to make those "British grocery stores" in America better by adding lots more British food products, for bloody damn sake.

And it sure looks like Fresh & Easy listened. Ms. Luna's report is true we believe as it mirrors the rumors we've been hearing for the last three weeks or so.

And, Fresh & Easy Buzz is pleased our British expat chums will now likely have a better selection of home-produced food products available to them at the Fresh & Easy stores.

But folks...how many British expats--other than the Fresh & Easy guys--do you really think live in Southern California, the Phoenix, Arizona Metropolitan region, and Metropolitan Las Vegas, Nevada, where the current 61 Fresh & Easy grocery stores are located? That's a question, we've haven't done a census. We do know it is somewhat less than Hispanics, Asians, African Americans, Italians, Irish, Russians and a couple other ethnic or national groups though.

However, we doubt if we would need hundreds of census takers and a Supercomputer borrowed from NASA in order to do a count and tabulation of the number of British expats who live in these three Western U.S. regions.

The real problem dear readers, isn't that the Fresh & Easy stores haven't had enough produced- in-the-UK-products, it's that so many consumers--native Western U.S. and expat alike--have a false perception of Tesco's Fresh & Easy grocery markets as being British food-oriented stores rather than what they are--basic grocery and fresh foods markets which just happen to be owned and operated by a supermarket chain from Britain.

That my friends-- as Republican Presidential candidate Senator John McCain always says when he is a bit nervous or wants to create voter intimacy--is a real problem, and one our analysis shows runs far deeper than just among those specific consumers on the websites we mentioned above.

Of course, once a consumer goes into a Fresh & Easy grocery market, they see it's not a British food store. And, we aren't saying this is a massive, universal misperception--just that it's a serious and significant one. The key point is Tesco needs to drive new consumers into the stores, and such misperceptions hamper that effort seriously.

We don't think adding a bunch more British-produced food and grocery products will hurt the Fresh & Easy stores all that much overall--they have much bigger problems. But it won't do them any good overall either in terms of this consumer misperception of the stores, which we don't believe Tesco's Fresh & Easy senior management has any awareness of. It's there, contract an independent survey, and you will be surprised at the results if the questions are chosen properly.

As we mentioned, we've been working on a piece about this "identity" and "positioning" problem for a few weeks now, so we will have more in-depth analysis on the issue at a later date. However, in light of Ms Luna's report, and the comments we've been hearing from our correspondents, we wanted to address the issue a bit in this piece.

The Fresh & Easy format and marketing positioning muddle

The "British foods grocery store vs. the basic grocery store which just happens to be run by a British based company" identity and positioning problem illustrates what we've called on Fresh & Easy Buzz the "format and positioning muddle" that Tesco has created with its Fresh & Easy Neighborhood Market grocery stores.

In terms of the retailer's positioning of the stores and format, it's just all over the place.

Successful grocery retailers tend to have solid, defined positioning elements regarding what their stores are--and aren't. Think Safeway's "Lifestyle" stores, Whole Foods Market as a natural foods' grocer, Aldi and Save-A-Lot as small-format discount grocers, for example. Clean, clear positioning.

As in all marketing, the more clear a food retailer's proposition and positioning is, the better consumers "get it," and buy your offering--be it a hair care product, a loaf of organic bread, an automobile or a grocery store.

Fresh & Easy's proposition and positioning is all over the map. It's a store for everybody on the one hand. On the other hand, the retailer is positioning the stores with its new PR firm as the place to shop for organic foods and specialty wines.

Tesco wants the stores to be primary shopping venues for consumers who live in the neighborhoods where the stores are located. But all of Fresh & Easy's produce is either packaged in plastic tubs or plastic bags.

For decades, one of the top reasons consumers have given in the massive, annual consumer survey the supermarket trade group Food Marketing Institute (FMI) conducts as a primary reason for choosing a primary grocery store is...you guessed it, the retailer's fresh produce offering, and specifically offering a wide variety of fresh, bulk (read not in packages), high quality produce.

Packaged produce is fine for a specialty grocer like Trader Joe's, which doesn't rely on the category to be a major contributor to overall store sales. But a grocery chain like Tesco's Fresh & Easy, which says its format and retail positioning is to serve all classes of consumers, as well as to be a primary as well as secondary and tertiary food shopping venue, would be wise to listen to what the American consumer says they like when it comes to fresh produce.

Fixing the muddle is imperative

We've given Tesco the benefit of the doubt regarding its format and positioning muddle--and still do to a large extent--since the first stores have only been open for about 7 months. We understand start ups and appreciate and respect works in progress.

However, the first stores' one year anniversary isn't all that far away, and rather than showing incremental improvement in the Fresh & Easy positioning process, Tesco in our analysis has really created more confusion because it lacks an overall retail format and positioning philosophy--or is just failing to properly communicate it if it has one--in which to tie all the desperate elements--cheap groceries on the one hand, upscale fresh foods, organics and specialty wines on the other--together.

Such an overall positioning hat rack in which to hang the many different merchandising elements and product mixes (the various hats) contained in the Fresh & Easy stores can be found--and communicated well. For example, Costco Wholesale has been and is doing it well. So is Safeway with its "Lifestyle" format supermarkets, which mix basic groceries with upscale premium and organic offerings.

In order to be successful in the medium to long run--even in the short run for that matter--Tesco needs to find this overall positioning element and then communicate it effectively in everything its does--from its stores and advertising circular, to its media advertising (which is nearly nonexistent), public relations initiatives and on its website. Everything a retailer does is marketing and merchandising, even how he or she says hello to a shopper in a store.

Meanwhile, the good folks over at Britishexpats.com will be happy if Fresh & Easy does bring in lots of authentic produced-in-the-UK food and grocery items. And, those people from wherever they were born who enjoy British foods and can't find them at the many supermarkets and specialty foods stores in the west that already stock them, might enjoy picking up an item or two if they shop the Fresh & Easy stores.

But, won't it just increase the misperception already out there among many consumers that Tesco's Fresh & Easy USA grocery stores are British food stores come to America?

More British foods: To publicize or not?

We would suggest Fresh & Easy not publicize the introduction of these new British food and grocery products too much. Especially unless it realizes its early publicity--in which hundreds and maybe thousands of articles were written in the business sections and other pages of U.S. newspapers with the headline, "British Grocer Invades America,"--actually helped to create the false perception among numerous consumers that Fresh & Easy stores were going to be "British foods" grocery markets rather than what they really are.

You see my friends, this publicity in part created the format and positioning muddle we discussed above. It's also why the expats writing in the website have been so disappointed in their British Fresh & Easy food stores which lack a decent offering of produced-in-the-UK foods and grocery products like a good "British foods store" in America should. We mean...if that's what Fresh & Easy was, of course.

We must ask a simple question: If the Fresh & Easy stores are basic grocery stores and fresh foods markets featuring everyday low prices and designed to be primary and secondary shopping venues, or in Tesco's words, " designed to serve everybody," why in the bloody hell is the retailer spending its time focusing on such a tiny niche when so much needs to be done in the larger scheme of things?

Introducing other fresh & easy store brand new items

Regarding Fresh & Easy's bringing in additional new items under its fresh & easy brand, and labeling them with "blue colored" "NEW" tags, that could be a good idea.

It all depends on the products brought in and if they serve the overall positioning of what the stores are. And, as stated above, currently that positioning is a muddle, which leads to the conclusion of "who knows," regarding if those new items are a good, bad or neutral idea. Remember, everything a retailer does is positioning.

At any rate, the addition of the new fresh & easy branded items, including those in the fresh meat and deli categories, isn't really a major development. Fresh & Easy initially planned to add numerous new items at about this time of the year (not the British foods ones though). That's a small part of the reason for the April -to- July new store opening pause. It is a "new" thing though, and Ms. Luna is correct to report on it in our analysis.

After all, getting the retailer's in-house food product production operation process completely up and running hasn't been easy. In fairness, it wouldn't be easy to accomplish for any retailer that's been opening a new store every two or three days for the last seven months like Fresh & Easy has. In our view, its impressive Tesco had as many fresh & easy store brand products on the shelves as they did when the first stores opened in November, 2007.

Fresh & Easy stores need product mix review not just additions

As we've suggested numerous times, we think Fresh & Easy needs a complete review of its product mix. The mix does not reflect the markets the stores are in as well as it should and could. The stores also are missing some key national brands in various categories. These are brands and key items any grocery store that wants to be a primary or even secondary shopping venue must have.

And, of course, we continue to argue Tesco needs to customize the stores on top of tits basic format (simple to do), so they reflect at least some minor local features of the communities and neighborhoods they're located in. This includes some customization and localization (adding more local foods) of the overall store product mix, which is something Tesco is doing in a big way in the UK, as we wrote about here last week.

We just mentioned three of four "big picture" focuses that would help Fresh & Easy greatly in its positioning. these areas, along with a few other key factors, are where the grocery chain should be focusing its energy, efforts and cash if it wants to be a success in America, in our analysis and view. Now, about that fresh & easy store brand Marmite currently in development...?