Message From Across the Pond: Tesco is Right Square in the Middle of the 'Banish the (Plastic) Bags' Campaign in the United Kingdom

Britain's London Daily Mail newspaper launched its "Banish The Bags" campaign, designed to eliminate the offering of single-use plastic grocery or shopping bags by retailers in the United Kingdom on February 27.

In the seven days since the daily newspaper launched the campaign, the UK movement to get retailers to stop giving away and using plastic carrier bags has picked up a full head of steam.

The very day after the kick-off by the Daily Mail of its "Banish The Bags" campaign in its February 27 edition of the paper, UK grocery, hard goods and soft goods retailer Marks & Spencer announced it would begin charging customers the equivalent of about 10 cents U.S. per plastic bag in all 600 of its stores in the UK.

Marks & Spencer says it believes charging for the plastic shopping bags will result in about a 70% reduction in their use in its stores. There is precedent for this dramatic reduction in plastic carrier bag use as a result of charging shoppers a per-bag to have their goods packaged in the bags: Ireland put a tax or fee nationwide on plastic carrier bags over a year ago, and the government reports a near 90% reduction in the number of plastic shopping bags being used in the country.

The Daily Mail's campaign also is winning major support from politicians, environmental groups, some businesses and many consumers. Just yesterday, Britain's Prime Minister Gordon Brown told the nation's grocers and other retailers he would give them one-year to solve the plastic carrier bag problem in the UK on their own. If not, he said he will push-through legislation which will most likley be in the form of a complete ban on the use of the bags by all retailers. British Parliment already is debating a bill written by local officials in London to ban the plastic bags in that city.

The Daily Mail, its readers, various groups and numerous politicians are putting the pressure on the nation's grocery (and other) retailers to either adopt a per-bag fee scheme like Marks & Spencer has or to eliminate plastic grocery bags all together from their stores.

Three of the UK's "big four" supermarket chains--Sainsbury's, Asda (owned by Wal-Mart) and Morrison's--have come out and said they are considering a Marks & Spencer like fee scheme for their stores if customers want their goods packed in single-use plastic bags.

The Co-op chain, another major food retailer in the UK, stopped using single-use plastic carrier bags in its stores some time ago. And, ironically, USA-based Whole Foods Market, Inc. announced a month ago--before the campaign--that it would eliminate plastic grocery bags in all of its stores in the U.S., Canada and the UK. starting on April 22. Whole Foods' currently has just one store in the UK, in London. However, the natural foods grocer is looking to open additional stores in the nation.

The UK's leading upscale grocer, Waitrose, also has said it is considering--and will likley implement--some sort of per-bag fee for those customers who want their goods packed in a single-use plastic carrier bag.

The two Germany-based, small-format discount grocery chains in the UK, Aldi and Lidl already charge for plastic bags. In fact, doing so has been a part of the no-frills grocery chains policies for sometime. Aldi has 900 stores in the U.S., and charges a per-bag fee for plastic bags in America as well. Both grocery chains also charge for plastic grocery bags at home in Germany.

The only member of the UK's "big four" supermarket chains to came out against the idea completely, is the nation's number one retailer, Tesco plc. Tesco plc. CEO Sir Terry Leahy said the mega-chain believes customers have the right to choose what type of carrier bag they want their groceries and other goods packaged in, and said Tesco has no plans to either charge shoppers a per-bag fee, or to stop using the plastic bags in its stores.

Tesco gives shoppers points on their Tesco Clubcard, which are redeemable for discounts and other store specials, if they bring their own reusable shopping bags instead of taking a paper or plastic bag from the store. The retailer says it prefers this scheme to either charging shoppers for the bags or eliminating the use of them completely in its stores.

Tesco's position on the issue has set off a firestorm among the UK Press, consumer advocates, politicos, environmental groups and consumers. The London Daily Mail is using its pages to praise Marks & Spencer and vilify Tesco as the anti-green monopolist retailer.

In today's edition of The Evening Standard, the newspaper published full-color photos from various locations near Tesco stores in the UK, showing property litered with single-use plastic carrier bags. The paper dispatched its photographers all over the countryside to find areas near Tesco supermarkets that were strewn with plastic grocery bag debris--and find them they did indeed.[View the pictures and read the piece here.]

The Evening Standard also published its own research called "Tesco (plastic) Bags By The Numbers." According to the paper, Tesco gives out 3 billion single-use plastic carrier bags each year. the Evening Standard says 3 billion plastic grocery bags would stretch a distance of 750,000 miles if laid end-to-end.

Further, In the article here the newspaper offers a number of other remarkable statistics regarding the 3 billion plastic bags the UK's number one retailer, with a 34% share of the nation's retail grocery market, gives out annually. Key among those statistics is that only one in 200 of the plastic bags are recycled, which means the other 199 out of the 200 end up as litter or in landfills.

The movement to legislate, tax (or charge a fee) or outright ban the use of single-use plastic carrier bags in a worldwide one. At the end of 2007, China announced it would completely ban the use of the bags by all retail stores in the nation. A number of countries in Africa have done the same.

In the United States, the cities of San Francisco and Oakland, California have banned grocery retailers which have stores over 10,000 square feet from giving shoppers plastic grocery bags, even if the shoppers want them and are willing to pay for the bags. And, as we mentioned above, Whole Foods Market, Inc will no longer give shoppers plastic grocery bags After Earth Day, 2008, which is April 22. Further, Trader Joe's , the popular U.S. specialty grocer, uses only paper grocery bags in 90% of its stores.

Dozens of cities and states in the U.S. currently have legislation pending to legislate or ban single-use plastic carrier bags. The per-bag tax scheme doesn't have much if any currancy in the states. Rather, what we are seeing is that on the state government level, legislators are tending to pass recycling-type lws, while on the municiple or city level outright bans are the order of the day.

In France, the nations two largest supermarket chains, Carrefour and Auchan, have voluntarily stopped using single-use plastic carrier bags in their stores throughout the country. And, of course, Ireland's successful nationwide tax on plastic carrier bags has made them go from the majority-used grocery bag, to the minority one, with a near 90% reduction in the number of bags circulating in the country.

Tesco looks to not only be fighting a lone battle in the UK, as the nationwide frenzy to ban single-use carrier bags heats up in large part because of the daily media attention devoted to the isssue by the Daily Mail's "Banish The Bags" campaign, but also do to the simple fact that its an international issue.

Tesco's USA Fresh & Easy Neighborhood Market offers customers their choice of paper or plastic grocery bags, as do most grocery retailer's in the country. The stores also sell reusable shopping bags. However, as mentioned earlier, Trader Joe's offers only paper bags (and sells reusable bags) in nearly all of its U.S. stores. And Whole Foods Market, Inc., which is a major trendsetter in U.S. food retailing, will no offer the plastic bags after April 22. Numerous other retailers are considering eliminating single-use plastic bags in their stores as well.

Least Tesco thinks it isn't going to face the very same issue it is facing in the UK in the U.S. with Fresh & Easy, the retailer is dead wrong. The issue is heating up across the pond in America.

Last year, the California State Legislature passed a bill that requires all large supermarkets to place plastic carrier bag recycling bins in their stores, and to offer reusable shopping bags for sale in every store. The California Grocers' Association, the industry's state trade group, helped write the legislation, as the group saw outright bans like San Francisco's and Oakland's coming and hopes to head them off in other California cities with this new law.

Cities in the U.S. are allowed to pass their own laws (home rule) even if a state law like the one involving the plastic bags exists. There are at least 40 cities in California right now debating plastic grocery bag bans for their cities.

New York and New Jersey passed a recycling law like California's this year as well. However, the movement in the U.S. is toward outright bans, led by local governments. Cties across the country--big and small, urban and rural--are considering plastic carrier bag bans.

Meanwhile, back home in the UK, Tesco, parent company of Fresh & Easy Neighborhood Market, finds itself isolated--perhaps happily--as the only one of the "big four" that has publicly proclaimed it has no plans to either levy a per-bag fee on plastic carrier bags or stop offering them completely in its stores.

We bet Tesco changes its mind on the issue very soon.

Additional Resources:

>Read the London Daily Mail's "Banish The Bag" kickoff story here.

>You can read additional articles about the UK "Banish The (plastic) Bag" campaign here

In Vino Veritas: Fresh & Easy Store Brand Wines Win Two Silvers and Lots of Bronze Medals; Trader Joe's 'Two-Buck Chuck' Chardonnay Wins a Double-Gold

Seven of Tesco Fresh & Easy Neighborhood Market's Fresh & Easy store brand wines recently have been awarded medals at the San Francisco Chronicle and California State Fair Wine Competitions.

The San Francisco Chronicle Wine Competition is the largest judging of U.S-produced wines in the nation. Entered wines are judged by a panel of wine experts from all sectors of the industry--wine writers, buyers, vintners and others--over a period of days according to international wine judging rules.

The California State Fair Wine Competition is arguably the most prestigious wine competition in the United States, and is recognized internationally among members of the global wine industry. It's held as part of the California State Fair in Sacramento each year. It's judges are among the most experienced and prestigious wine experts in the world.

The recently-concluded 2008 San Francisco Chronicle Wine Competition judged 4,235 wines entered by 1,500 wineries from throughout the U.S.

Five Fresh & Easy brand wines won a bronze medal in the competition in their respective categories. Those wines are: Fresh & Easy Hilltown Cabernet Sauvignon ($6.99 bottle), Fresh & Easy Napa Family Vineyards Merlot ($10.99 bottle), Fresh & Easy Hilltown Merlot ($6.99 bottle), Fresh & Easy Hilltown Chardonnay ($6.99 bottle), and Fresh & Easy Hilltown Sauvignon Blanc ($6.99 bottle).

Additionally, a sixth store brand--Fresh & Easy Family Vineyards Cabernet Sauvignon ($10.99 bottle) won a Silver medal in the San Francisco Chronicle competition.

Over at the California State Fair judging, where over 3,000 wines from 600 different wineries competed, Fresh & Easy store brands scored well with one of its wines. That wine, Fresh & Easy Northwood Cabernet Sauvignon earned a Silver Medal in the prestigious wine competition. Further, the wine received 92 points out of a possible 100. The Northwood Cab was one of six wines in the Silver award category to receive the highest score a Silver medal-winning wine can obtain in the judging.

The Fresh & Easy brand Northwood Cabernet Sauvignon sells for only $3.99 bottle in the grocer's Southern California stores, and $4.49 bottle in its Arizona and Nevada grocery markets.

The Fresh & Easy brand wine won in the 2007 California State Fair Wine Competition, which was held last summer. The event is held every year beginning in late July and ending on September 3. The 2008 competition runs from late July to September third this year.

Tesco's Fresh & Easy Neighborhood Market hired Philip Reeman, who is one of only 265 wine experts in the world to have earned the title Master of Wine, to create its Fresh & Easy store brand wines.

Fresh & Easy also has taken a page from Trader Joe's wine merchandising innovation (it's incredibly-selling Charles Shaw brand $1.99 bottle of wine called "Two-Buck Chuck") and is selling its own version called "The Big Kahuna (TBK)." TBK is from Australia and comes in two varieties: Chardonnay and Cabernet Sauvignon-Shiraz. TBK sells for $1.99 in the Southern California Fresh & Easy stores and for $2.99 in the Arizona and Nevada grocery markets.

Trader Joe's "Two-Buck Chuck (TBC)" comes in seven varieties: Charles Shaw brand Chardonnay, Cabernet Sauvignon, Merlot, Sauvignon Blanc, Shiraz, Valdiue (like a Beaujolais Nouveau) and in a limited addition Pinot Grigio.

Charles Shaw brand is a California wine though, produced exclusively for Trader Joe's by Ceres, California-based Bronco Winery, using wine grapes from California's Central Valley and Napa-Sonoma regions. The Charles Shaw "Two-Buck Chuck" brand is sold only at Trader Joe's grocery stores.

The Tesco Fresh & Easy wine folks will need to kick "The Big Kahuna" up a few notches though if they expect to compete with Trader Joe's "Two-Buck Chuck."

TJ's $1.99 bottle of wine surprised the wine world at this very same 2007 California State Fair Wine Competition by winning a prestigious "Double-Gold" medal for its "Two-Buck Chuck" Chardonnay, beating out wines which cost as much as twenty-times it's $1.99 retail price. The Double Gold Medal means the wine was judged to be the best Chardonnay out of all Chardonnay variety wines entered in the competition, regardless of price. [Read more about the "Two-Buck Chuck" win here at the very bottom of the linked page.]

Trader Joe's has set the bar high for Fresh & Easy's same-priced "The Big Kuhuna" wine. We suggest both Trader Joe's and Fresh & Easy Neighborhood Market enter its respective $1.99 premium-value wines, "TBC" and "TBK," in this year's 2008 California State Fair Wine Competition, which is only about five months away.

The two small-format grocers--one owned by the United Kingdom's Tesco (F&E), the other by Germany's Aldi supermarkets (TJ's) can then have an old fashion 'smackdown' in the premium-quality/value priced wine segment. May the best wine...or grocery chain...win.

Vox Populi: The People Speak: A Rose (By Any Other Name) Gives Props to A Fresh & Easy Store

Rose, a single, professional woman who lives in Phoenix, Arizona and works as a project administrator in the construction industry, looks to us like the kind of customer--and potential Fresh & Easy booster--Tesco should nurture.

Not only is Rose, who also writes a blog called A Rose By Any Other Name, a professional woman in an industry that's dominated by men, she also returned to college as an adult to complete her BA degree, which she finished in 2005. Now she is completing her Masters Degree, in addition to working full-time. [Read more about Rose here.]

We don't know Rose personally. But we can tell by her bio on the blog she is a busy, time-pressed woman. Rose also is a great demographic for a food retailer--well-educated, professional, literate (writes her own blog), a homeowner (she says she bought a new home in 2007) and well-traveled; she's lived all over the U.S. in her lifetime.

Rose also likes the Fresh & Easy store she recently visited for the first time last night in the Phoenix, Arizona area where she lives.

Rose says overall she was impressed with what she saw and that is reminded her of "the old neighborhood markets that I went to as a kid."

We've wrote enough though...read what Rose writes about her shopping trip to the Fresh & Easy store in the Phoenix area last night here.

Fresh & Easy's Rocky Start and First 100 Days in Orange County California: The Orange County Register's 'Fast Food Maven' Reports

Southern California's Orange County (know as the O.C. to those with teenagers who fell in love with the TV program of that name, or watch the MTV reality programs set in places like Laguna Beach) has become one of the most competitive grocery retailing markets in the Western United States over the past five or so years.

This coastal region of Southern California, named for the fact it once contained more acres of Orange groves than it did houses or shopping centers, is in many ways a food retailer's dream. The vast majority of Orange County's population is middle -to- upper-middle class, and there is a substantial affluent class as well. There's also a strong demand on the part of many of the region's consumers for high-quality foods--and they aren't afraid to pay extra for them.

In terms of grocery retailing in Orange County, Southern California-region market share leaders Vons (owned by Safeway Stores, Inc.) and Ralphs (owned by Kroger Co.) are the total grocery sales market share leaders in the region. However,the big guys have numerous other grocers which offer upscale stores, extensive specialty, ethnic, natural and organic groceries, as well as extensive offerings of fresh, prepared foods, nipping at their market share.

Among those upscale grocers are Bristol Farms, which is a homegrown gourmet grocery retailer now owned by SuperValu, Inc. Gelson's is another popular upscale grocer with stores in the region. Gelson's offers lots of specialty and gourmet foods in its stores--as does Bristol Farms--in addition to an extensive selection of in-store-prepared foods, and lots of natural and organic products. Gelson's is a publicly-owned grocer (trades under the Arden Group name) but is firmly a locally-based food retailer.

Other serious players in Orange Country include supernatural and lifestyle food retailer Whole Foods Market, Inc. Orange County is a major focus for Whole Foods' and its "new generation" food emporiums averaging 55,000 square feet -to- 70,000-plus square feet. These stores offer such a massive and varied selection of in-store-prepared foods offerings and sit-down restaurants that the Texas-based grocer recently coined the term "groceraunt" to describe these new generation food stores.

Small-format specialty grocer Trader Joe's also is hugely popular in Orange County. There are even TJ's groupies in the region. If these TJ's fans' particular city doesn't happen to have a Trader Joe's, they will drive to the nearest city in Orange County that has one on a regular basis.

Trader Joe's has its U.S. headquarters in Southern California where the specialty chain was founded. However, it's owned owned by Germany's Albrech family, which also owns the Aldi small-format discount supermarket chain. There are almost 900 Aldi stores in the Midwest and Eastern U.S. Aldi has stores throughout Europe and in other countries in the world as well.

Another up-and-comer in Orange County is Sprouts Farmers Market, a small but growing chain of small-format natural foods stores based in Arizona. [Read more about Sprouts here.] Orange County is a key target region for Sprouts, which is owned by the Boney family who founded two small natural foods chains--Boney's Marketplace and Henry's--in Southern California, and operated the chain's for years before selling them to Wild Oats Markets, Inc.

Orange County also is about to get a branch of that famed New York gourmet grocer Dean & Deluca. The gourmet grocer is building what will be its largest specialty foods emporium in Orange County. The store is about 22,000 square feet. Not only will it be filled with the most upscale of upscale fresh foods and groceries, it also will sell an extensive variety of high-end kitchen accessories and equipment.

The store also will include one of the gourmet retailer's famed "Dean & Deluca Cafes," which offers gourmet coffee's, baked goods, white table-cloth restaurant-quality meals and snacks. The Orange County store is scheduled to open in Fall of 2009.

Safeway's Vons' also has branches of its own upscale specialty supermarket format called Pavillions in Orange County. Von's created the upscale retailing format in the 1980's, when the chain was still a locally-based retailer under private ownership. After Safeway acquired Von's, they continued to expand the Pavillions' stores throughout Southern California. In fact, with its Lifestyle format development, Safeway is even making the Pavillions' stores more upscale and specialty-oriented, while still offering full-selections of basic grocery items in the stores.

Kroger-owned Ralph's also is entering the upscale, specialty grocery retailing niche in Southern California--and in Orange County. The retailer created its own upscale format called Ralph's Fresh Fair. The stores are big--50,000 square feet -to- 70,000 square feet--and like the name implies offer extensive selections of fresh foods (including prepared) along with lots of specialty and organic items, as well as a full selection of everyday grocery items.

Tesco's Fresh & Easy in Orange County

It's amidst this competitive grocery retailing backdrop that Tesco's Fresh & Easy Neighborhood Market entered the Orange County market in late 2007. The grocer currently has six of its small-format, convenience-oriented grocery markets in the county. Additionally, three more of the 10,000 square foot -to- 13,000 square foot grocery stores--which feature a selection of basic grocery products with an "everyday low price" emphasis, combined with offerings of fresh, prepared foods, specialty and organic items, fresh, packaged produce and meats, wines and craft beers--will open soon. Additional Fresh & Easy stores are planned for Orange County as well.

Unlike Whole Foods, Bristol Farms, Dean & Deluca, Sprouts Farmers Market and Gelson's however, Tesco's Fresh & Easy doesn't make its prepared foods in-store. Rather, the grocer makes and packages the prepared foods items at a central kitchen at its Riverside County distribution center in Southern California, and then delivers the items, along with other fresh foods, daily to its stores using a direct-store-delivery (DSD) system.

Nancy Luna, a business reporter who covers retail food stores and restaurants for the Orange County Register newspaper, has been following Tesco's Fresh & Easy grocery store developments and openings in the county since the first stores opened late last year.

Ms. Luna has a piece in February 28th edition of the Register in which she writes about Tesco's Fresh & Easy and its "rocky start." You can read her piece from the paper's business section here.

The reporter also writes a blog for the paper called the "Fast Food Maven." She named her blog that because as a working mother she says she likes to find high-quality, quick meals for her family. Luna has a piece in her blog called "Fresh & Easy: The first 100 days." It's a companion piece to the business section story, but allows her to expand on the business section story blogger style. Read her piece here.

As you can see by our overview, grocery retailing--just like surfing or parasailing at Laguna beach--isn't for the timid in the O.C.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

A Consumer Correspondent Reports on and Reviews the Family Visit Tonight to a Fresh & Easy Store in Southern California's Inland Empire Region

We recieved the email below this evening from a reader and correspondent who went shopping today at a Fresh & Easy grocery store in Southern California's Inland Empire region.

As the writer says, the store opened this week. The correspondent also publishes a personal blog called occassionalpiece. We have no commentary on our correspondent's review. It stands on its own. We have, however, recieved a number of similar reviews from readers and correspondents over the last few weeks. Our correspondent read our piece here

(Note: Tesco Fresh & Easy Neighborhood Market's U.S.corporate headquarters and 850,000 square foot distribution center is located in the Inland Empire region county of Riverside.)

By: Occasionalpiece. Received: March 1, 2008 @ 7:50pm.

Here's our review of our foray into our local Fresh and Easy (3/1/08) which opened this week. Out of stock on many items. Most of their flowers (first thing seen when entering the store) were wilted or bruised. Produce unappetizingly displayed ("naked" and in black plastic crates). French bread was stale. Indian nan was good and fresh. For dinner we had their tortilla soup: basically inedible with an astounding 1300 mg of sodium per serving (way too salty) with a funny smell & weird texture. (Try Von's tortilla soup for something delicious.) Tortilla chips: either they were stale or thick, but there was no "fresh" taste. Potato chips: merely OK. I kept remembering our trips to England, thinking, yeah, this feels like eating British food. You're dead on: no ambiance or sense of place. We think it's a cross between Food4Less, 7-11 and TJoe's--although without TJ's charm, quirkiness, delicious food, and excellent produce. Who's their customer? Their target audience? Bottom line? I give it about six months.I'm from the Inland Empire in Southern California.

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Editor's Note:

Fresh & Easy Buzz is an independent blog. We have no affiliation with Tesco plc. or Tesco's Fresh & Easy Neighborhood Market. Additionally, we do not own stock in Tesco plc. Further, we currently have no economic relationships such as buying and selling with Tesco plc., nor do we currently work for any companies or vendors who sell to Tesco or Tesco's Fresh & Easy Neighborhood Market.

We would like to here from you. Please feel free to comment and offer your opinions always in our comment box at the end of every post. Additionally, you may email us at: freshneasybuzz@yahoo.com. We welcome tips, ideas and other information at that email address. Should information you provide us be used in a story on the blog--if it passes our vetting and fact-checking process--we will not use your name unless you give us permission to do so.

A Report From the UK: British Supermarket Industry Writer Weighs in on Tesco's Fresh & Easy in the USA: We Offer Some Analysis and Commentary

James Thompson, a writer and columnist for the United Kingdom-based trade publication Retail Week, gave his homeland's number one retailer Tesco a bit of that famous British stiff upper lip and a vote of confidence in a column in yesterday's edition of the publication.

Responding to analysis last week by the New York-based investment firm Piper Jaffray, and additional analysis by people like us and a couple others, Thompson writes that in time he believes "Tesco will surely adjust its product proposition as it expands (Fresh & Easy) rapidly along the west coast and further inland" in the Western U.S.

In his above opinion, Thompson is referring to analysis--which we were one of the first to point out and have been strong in suggesting--that Tesco needs to better localize its Fresh & Easy grocery store product mix and retail operations to neighborhood demographics, traditions, history and culture. (In fact, we are just about the only voice talking about this regularly, as well as offering suggestions as to how Tesco could achieve this important merchandising element in American grocery retailing.)

To make his point that the British grocer will eventually alter its merchandising scheme in its U.S. Fresh & Easy stores, Thompson points out that Tesco plc. CEO Sir Terry Leahy did just that, and admitted so, with the retailer's supermarkets in Eastern Europe after they were introduced in the 1990's.

Tesco entered Eastern Europe with its supermarkets, first in Hungary in 1995, and in Poland, the Czech Republic and Slovakia in 1996. After some serious faltering with the stores in Eastern Europe, Tesco did make some changes as Thompson points out, paying more attention to local merchandising schemes, product selection, customs, culture and history.

[Of course, the U.S. is a far-bigger and historically less-forgiving market than Eastern Europe, simply do to its sheer economic size and hyper-aggressive competitive grocery retailing climate.]

Thompson also gives Tesco props for its rapid-fire Fresh & Easy store launch in the U.S. He argues the grocer has "launched it's U.S. operation (Fresh & Easy)--including a hugely impressive warehouse and vertically integrated food facility--bang on time and has not yet faltered in its roll-out program, which has surpassed 50 stores." There are 55 Tesco Fresh & Easy Neighborhood Market grocery stores open to date in Southern California, Arizona and the Las Vegas, Nevada Metropolitan region.

Thompson is right in the main about the store roll-out program. Tesco has essentially met its new store opening schedule despite some close calls. As we've written before, since the first stores opened in early November (the Hemet, California store actually soft-opened in late October), Tesco has opened a new store every two -to- three days on average, which is an impressive roll-out.

Thompson is wrong however regarding Tesco's huge 850,000 square foot distribution center in Riverside, California. It's is an impressive facility, that's for sure. That's not where he is wrong though. We agree on it's impressiveness, including its huge solar panel array on the roof.

Rather, Thompson fails to point out that Tesco didn't obtain the proper permits involving environmental and other aspects when it built the facility. As a result, Riverside County halted work on the DC, which ended-up costing Tesco additional money, and more importantly has affected its supply chain operations, as well as delaying the retailer's ability to fully-use the facility.

Chief among Tesco Fresh & Easy's distribution and supply chain problems has been frequent out-of-stock conditions in its stores. These out-of stocks are particularly serious in the fresh foods category, and especially among its fresh, prepared foods offerings.

This is the "vertically integrated" aspect of the Riverside distribution center Thompson is eluding to. Tesco has set up a commercial kitchen facility at the DC. There it prepares all of its Fresh & Easy brand fresh, prepared foods. It then distributes the prepared foods items to its stores on a daily basis in a direct-store-delivery (DSD) manner.

Prepared foods' out-of-stocks were horrible in the stores in November and December of 2007. This was particularly true in the late afternoon and evening hours. The conditions have improved somewhat in most of the stores--but the out-of-stock situation still exists.

In other words, Tesco's Fresh & Easy distribution center and vertically integrated prepared foods' operations have been less than problem-free. Thompson fails to mention these facts. But in fairness, he likely isn't aware of them. However, we do agree with him that Tesco's Fresh & Easy store roll-out process has been impressive. In fact, it might be too rapid.

We don't doubt that Tesco will fix the out-of stocks situation in the fresh, prepared foods category at some point. But that's not the key point. Rather, since many of the retailer's potential new customers went to shop at a Fresh & Easy store for the first time because they had heard so much about its extensive prepared foods offerings, but found major out-of-stocks in the category, their first impression wasn't a good one in many cases. If the problem isn't solved soon, it could come to define the chain in the short-to-medium run.

Essentially, as a start up, all of Fresh & Easy's customers are new ones. Making a bad first impression makes it very difficult to get return shoppers, let alone create primary shoppers, which is what the chain must do to achieve its goal of being a neighborhood grocery store rather than a convenience store chain.

We have received a number of emails from Fresh & Easy store-level workers, and have had conversations with others. They tell us training has been lacking a bit, and that turnover has been higher than it should be in their opinions. These correspondents attribute this primarily to the rapid-fire new store opening pace the retailer is conducting. They also tell us though, that in the main, they are enjoying working in the Fresh & Easy stores.

Our analysis also is that Tesco's rapid-fire new store opening pace has hurt the merchandising at the existing stores. We think the format has strong potential. However, the basic grocery, prepared foods, fresh produce and meat, and specialty products overall product selection needs lots of work. Of course, it appears to us Tesco has decided to follow a strategy of opening a critical mass of stores first, then fixing the problems later. Since timing can be everything at retail, it will be interesting to see if that strategy works.

Additionally, the pricing scheme, especially on the basic grocery items, also needs to be reviewed. Overall, the prices are low--perhaps too low to make margin--but the overall scheme is off in that many items are priced lower than need be and others are higher than they should be.

Tesco needs to spend more time studying Western USA supermarket pricing schemes and adjust Fresh & Easy's retail pricing to be more in line with the overall Western U.S. retail grocery industry pricing strategy. The U.S. is probably the most regional retail grocery market in the western world. Not only do product selections vary considerably in the west, Midwest and east coast, but so do the pricing schemes.

What we do agree with Thompson about is that Tesco is a good food retailer in terms of the nuts and bolts, along with innovation. Under CEO Leahy's leadership over the last years, the chain has doubled it's store count and sales, gone into parts of the world where U.S. supermarket chains seem to have no interest in going do to their largely non-global focus, and solidified its position at home in the UK as that nation's number one retailer, with a commanding 34% market share.

Ever the fair analyst, Thompson says "Tesco has no divine right to succeed in the U.S. and skeptics are right to question whether Fresh & Easy, in its present guise, is the ideal format." Further, he says, "Like other UK retailers that have gone before (Marks & Spencer and Sainsbury's for example), it (Tesco) could well find the U.S. market a tough nut to crack." However, he adds, "but the smart money is on the Cheshunt (Tesco's UK headquarters) retailer getting it right in the long-term--albeit with some refinements to Fresh & Easy along the way."

Tesco's UK "friends" in the business and trade press haven't been as optimistic as Thompson regarding Tesco's chances of making it with Fresh & Easy in the U.S. In our analysis, much of the "making it in the U.S." by the British mega-retailer will ultimately boil down to understanding and then practicing an important fact of U.S. grocery retailing: Localism.

Safeway Stores, Inc. learned the importance of the local approach after years of avoiding the fact. For example, in the 1980's you could go into a Safeway supermarket in San Jose, California, in a neighborhood where 70% of the residents were Hispanic. What you would find would be a six-foot or so Hispanic Foods section, containing mostly the basics of Hispanic or Latino grocery products and ingredients. The same in produce, the same in meat.

You could then drive 15 minutes outside of the neighborhood, to a neighborhood in a nearby city in which 65% or so of the residents were Asian. There you would find a three-foot section of Hispanic groceries--the chain's basic set.

The primary difference between the six-foot "expanded set" in the store with a 70% Hispanic demographic and the three-foot core set in the store where 65% of the shoppers were of Asian ethnicity, was that the six-foot set had more brands of the basics, and more facings. There were more brands and facings of peppers, beans, and other commodity items but very little if any key specialty items. In other words, with a few exceptions, there was no demographic product selection targeting based on a neighborhood's ethnic makeup and other variables.

Go in that same San Jose store today though, in that same neighborhood, which is now about 80% Hispanic, and you will find a store-within-a-store Hispanic foods section. Not only does the section have all the basics, it has scores of Hispanic specialty items, and even non-foods. The produce department is full of specialty produce used by Hispanic consumers. The fresh meat department is the same: specialty cuts of meat, poultry and fish designed to appeal to the ethnicity of the primary shopper in that store.

Safeway now does the same in the Asian foods' category. Further, the grocer micro-targets within a given category. For example, down the road from that San Jose store in the neighborhood with a 65% Asian ethnic demographic, is a neighborhood with a substantial population of immigrants from India. As a result, Safeway has a large Indian foods section within its Asian mix in that store.

The neighborhood marketing goes on and on: in the natural and organic foods' categories product selections are grown as the demographics warrant, foods targeted to African Americans are expanded in neighborhoods where the segment is high in population count, greatly expanded gourmet foods selections are created in high-income and "foodie-oriented" neighborhoods, and more. The local focus is where it begins, then its taken down to a neighborhood level and even looked at on a neighborhood-within-a-neighborhood level.I

It's no accident that when Safeway began implementing its local and neighborhood-oriented marketing programs in the mid-1990's as part of its Lifestyle store format development, the chain's fortunes began to dramatically improve. It was one of a number of key marketing and merchandising elements which has contributed to the grocer's success over the last decade.

Unlike some U.S. grocery industry analysts, commentators, consultants and grocery executives, we believe Tesco is in the U.S. for the long haul.

The retailer continues to roll-out a new Fresh & Easy grocery market in Southern California, Arizona and Nevada every few days, has signed leases for at least 18 stores (and has more in the pipeline) in the San Francisco Bay Area, has 19 store location leases inked (with more awaiting its pen) in the Sacramento region, is looking for store sites in the Chicago, Illinois area, has discussed going into Florida and New York, and may even be checking out the Pacific Northwest states of Oregon and Washington for store locations.

Fresh & Easy is far from a test for Tesco in the U.S. Rather, it's a long-term venture. As a result, the grocer needs to get it right. After all, it has about $2 billion riding on Fresh & Easy's success not to mention that strong British pride. [Read James Thompson's piece here or at the link above.]