Tesco CEO Philip Clarke Says His Personal Breakthrough at Tesco Was as its Sausage Buyer Nearly Two Decades Ago

Fresh & Easy Buzz Editor's Note: Tesco group CEO Philip Clarke (pictured above), who was named to the top spot at the United Kingdom-based global food, grocery and general merchadise retailer in March of this year, spoke at the annual IDG Convention held today in London. 

Prior to taking over as CEO from Terry Leahy, who retired in March after leading Tesco plc for 14 years, Clarke, 50, who joined the company over three decades ago as a part time stock clerk while still in high school, was in charge of the retailer's European and Asian retail operations, as well as its corporate information technology function.

Tesco, which is the third-largest retailer in the world after number one Walmart Stores, Inc. and number two Carrefour of France, currently operates 5,380 stores in 14 countries, including 182-store Fresh & Easy Neighborhood Market, which is based in El Segundo, California. The United Kingdom-based retailer has nearly 500,000 employees worldwide.

The topic of Clarke's speech today was: 'Breakthroughs' - describing how the three t's - Technology, Team, Talent - drive change.

Below is what Tesco CEO Philip Clarke had to say today, in his own words:

“Breakthrough” is a word that most people usually associate with science or medicine. A new cure, a new technology that will transform our lives. Retailing, shopkeepers – what breakthroughs have they ever achieved?

Well just think about that for a moment. Refrigeration, the bar code, the milk carton, the supermarket itself: retailers and suppliers have taken new technology – or developed our own –and transformed not just our industry, but our customers’ lives.

Many of you here today – including the IGD itself – have played a major role in this. And I’d like to think that Tesco has done its bit.

Clubcard, our focus on the customer, new formats, new ranges and services – over the years we too have helped shaped the landscape of retailing by breaking through into what were “no go zones” for supermarkets.  

All these breakthroughs, whether at Tesco or elsewhere, are often sparked by a new piece of technology. But I want to argue today that breakthroughs depend on more than just technology. They rely on two more t's:  on teams and talent.

These three Ts – Technology, Team, Talent – drive change. Take one away, and you are unlikely to achieve real, lasting breakthroughs. Create new technology, uncork talent, mix in a strong team, and you have a powerful recipe for change.

Tesco’s strategy today: the challenge of new retailing

During my time at Tesco I have seen the full impact that breakthroughs – some our own, others not – have had on our company. Today we are international, multi-format, multi-channel, a retailer of services, not just food or non-food: Tesco has changed dramatically. And that is largely because we have been strong in terms of technology, team and talent.

To reflect just how much Tesco has changed, I announced earlier in the year that we were going to refresh our strategy. The change is not dramatic, not lurching from one plan to another: it is sensible, careful and thought through.

There is, of course, one thing that will never change. Our world will always revolve around the customer – the customer’s wish for value, range, service, quality. These remain fixed points in our world. All of us here today know that we must deliver on these things or our businesses will fail. So Tesco’s core purpose, to create value for customers to earn their lifetime loyalty – that does not change.  

But we need to respond to the challenge of what I call “new retailing” – the new challenges created by globalisation and the digital revolution, twin forces that accelerate change, increase competition and raise still further the importance of brands. We must show that we are on customers’ side, that we are here to make their lives that bit easier, that bit better.

Embracing new technology

This means embracing new technology. Most of our customers now make little distinction between shopping online and shopping in store. The same must apply to a new retailer. Tesco was the first large retailer to enter the world of the internet. That required a monumental effort in terms of creating new processes, sometimes entirely from scratch, to get customers’ orders to their doors on time. We’ve gone one stage further, and begun click and collect services – so people can order online and then pick up in store.

Now we are going one stage further still. Tesco Homeplus in South Korea has created the world’s first virtual store in the Seoul subway to help time-pressed commuters shop on the go using their smartphones. The walls of the subway station in downtown Seoul are covered with virtual displays of over 500 of the most popular products with barcodes, which customers can scan using the Homeplus app on their smartphones and get delivered right to their doorstep. 

Busy commuters can scan their groceries on their way to work in the morning and, as long as their order is placed before 1pm, their shopping will be delivered home that same evening, creating even greater speed and convenience in the whole shopping experience.

That’s the kind of breakthrough that really transforms people’s lives – and quite possibly our industry.  It relies on state of the art technology – and carefully thought through systems, in which every process is thought through, every person knows exactly what he or she is meant to do. Which brings me to the other two Ts – team and talent.

Team and Talent

As a business that employs almost half a million people, obviously team and talent are critical to Tesco.  They’re so important that I have added to our strategy a clear goal: to build our team so that we create more value than any other. As our business continues to grow and diversify, we need more leaders to run the many, substantial business and support functions within the Group. Our leaders not only have an important role today, but also have a responsibility to help build a bigger and better team for the future.

I know what you may be thinking: we are facing one of the toughest trading conditions this country has seen for decades – what relevance has this to the here and now?

The truth is, though, that it is in such turbulent times that your team is tested the most. It’s in a storm, not calm waters, when a crew is really challenged. That’s why our team matters so much today.  Can we change to meet the new conditions? Have we the stomach for the fight in ever tougher markets? Can we continue to innovate, to stay ahead of the pack, helping our customers as they struggle to make ends meet?

The answer is yes. In the last month here at home we have made the biggest change to our pricing and promotions strategy in many years, investing over £500m in reducing more than 3,000 prices, as well as simplifying and deepening our promotional discounts. We’re absolutely committed to doing what we can to help customers by cutting prices on the nation’s shopping list – the things families buy most often and where it will make the most difference.

It has already been a huge team effort – a 14,000 strong Tesco army worked a total of 90,000 hours on the Sunday we launched The Big Price Drop, changing almost 3 million price labels on shelves up and down the country.   It’s a strong team especially when times are tough.

But there is another reason I care so much about building the team and fostering talent – a personal reason.  I owe a lot to Tesco – it’s given me fantastic opportunities in life. My father ran a Tesco store extremely well - but he didn't have the confidence that training brings to do more than that. I’ve been lucky enough to have that training. In my twenties, working at Tesco, a regional director taught me about process and systems.

Then there was the store manager for whom I worked who taught me about leadership; the new store opening director who taught me about multisite management; John Bird, who ran retail in the UK, who taught me about trading and the importance of cherishing the products we sell.

And in my thirties I learnt about buying, marketing and strategy from some of the finest retailers in the world. Indeed - my personal breakthrough point was when I was the sausage buyer. That’s why these two t’s – team and talent –matter so much to me. And why the object I have brought today is the forerunner to Tesco's Finest range - a pack of Tesco Traditional sausage, circa 1991.

Let’s start with the basics. A strong team needs a clear purpose – a purpose that endures, that appeals to the head, not just the heart. If the purpose of a company is just to make something, that won’t endure: that thing will probably soon become old and then redundant – consigning the company to history. A company needs to explain how it will help people over time. As I said earlier, our core purpose, written in 1997, remains untouched.

Alongside that sits clear values. Values guide a business - and everyone in it. How they behave, how they respond to change, how they talk to each other and their customers. They need to test one, to give you something to aspire to – as well as being simple to understand. Our values are “no one tries harder for customers” and “treat people how we like to be treated”.

And the third bedrock of a strong team is a clear strategy, so clear and simple that everyone knows precisely why they are getting up and going to work each day, so they know what is a priority, and so they understand what success is.

These three bricks – purpose, values and strategy – are the foundations of a team. They answer the questions “why are we here?” “how are we meant to behave?” and “what is success?” But that is just the start.

Each person needs to know how they fit in to company – and, crucially, what is expected of them. They need to own a task – that means being given responsibility for a task, and be made accountable for its delivery.

Ownership focuses minds – and gives people a sense of pride and respect.

You need to communicate that role in simple ways. Many of you here will know the Tesco Steering Wheel, which sets out responsibilities for the entire business, each store, each team. It helps us drive change, and ensure that the whole business is moving together.

But you cannot simply send out missives from head office. Which brings me to communication: a head office culture, one where people are given orders from anonymous managers on high – this kills strong teams. You need to be out there, on the shop floor, talking to the teams, explaining what’s happening, and their role.

That attitude reflects something else that Tesco has long held dear: we want our teams to take risks. By trying nothing new you stay as you are. You must innovate. Yes, that means making mistakes – but you learn from your mistakes. So initiative, risk taking, decentralisation, giving each person the encouragement and freedom to innovate and suggest new ideas – these are critical.

New steps we’re taking to foster talent

These basic principles have guided our approach to building strong teams for over a decade. Our new focus on our team, now part of our strategy, will turbo charge our efforts, and help us embrace new technology.

Recognising the simple, obvious fact that we are a people business – run by people, for people – I want everyone to shoulder a responsibility for fostering talent. That means we need to adopt three additional basic principles to team and talent.

First, an end to thinking in silos, to saying that “recruitment, training –that’s not my job”. Talent spotting, performance reviews, career discussions: these will become critical tasks for the entire Tesco team.

Second, if we are to retain talent, we need to reward talent. For Tesco that means competitive pay at all levels, an opportunity to share in our profits through shares in success, and bonuses linked to performance for all senior managers. More importantly, our people are rewarded through opportunity – at any one time 7,000 members of our UK team are on development programmes specifically designed to help them gain the experience and skills they need to move on to the next Tesco challenge. Little wonder that 80% of our management roles are filled internally.

Third, related to that, we want to nurture our talent so that everyone feels that their best days are yet to come. This is a goal shared by the entire Tesco team, including our partners at USDAW, the trade union with whom we have an industry leading relationship. Nurturing talent means career plans, so everyone knows where they are going, and the type of jobs they need to do to gain the experience and skills to get there. And it means succession plans for jobs: we always have 2 successors identified against our top 500 jobs.  

And we’re investing in training. Here in the UK there's a training scheme for every major career stage at Tesco, from core skills training to Apprenticeships and Retail Degrees, which is another of the reasons why around 80% of our management roles are filled by existing team members. This year we’ll also have a record 420 graduates starting our UK graduate programmes. Overseas we’re recruiting around 600 graduate trainees and in Asia, we’ve invested £30m in our newly opened training academy in South Korea where 24,000 people will be trained every year.

Why this matters

Why does this matter so?

We’re now a global business, and we need a world class team if we are to win and to compete. We don’t simply need to attract talent, we need to motivate and retain it. That’s why I spend so much time – I reckon about three quarters of my time – talking to the team, hearing about what they are finding on the shop floor, helping them improve their performance.

Some of you may think “surely this is not a priority now?” Well, let me stress what I said earlier: when tough times hit, it is even more important to be motivating your team, building that team, helping it overcome the hurdles they face. Some of those challenges are practical – others relate to morale: both are important.

And, finally, I care about building our team because of what I said earlier: my own background. Tesco gave me a chance to get up and get on in life. It’s given that chance to many hundreds, if not thousands of people. It is proof that supermarkets are not just an example of business breakthroughs – but social breakthroughs. For our company – like others here today – is an engine of social mobility, helping people realise their ambitions and dreams. And that’s perhaps the best breakthrough anyone can ask for.

Conclusion

So, to conclude where I began, breakthroughs rely on teams, talent and technology. Embrace the technology, build the team, foster talent. Obviously get the processes, the IT, the systems right. But never forget the basics that govern people: a clear purpose, a set of values, a well understood strategy. Never stop talking to people, make them own their responsibilities, and encourage them to take risks. And then make it everyone’s responsibility to nurture talent, to train and to reward teams – so that they always are looking up and moving forwards.

That’s how we have delivered breakthroughs at Tesco –and how I plan to continue to do so in the future.

Thank you for listening.

- Philip Clarke.

Gov. Signs AB 183: End of Self-Service Checkout Only in California For Fresh & Easy Neighborhood Market if Stores to Still Sell Alcohol

Self-service checkout at Fresh & Easy Neighborhood Market.

News/Analysis/Commentary

California Governor Jerry Brown signed AB 183 into law on Sunday, as we predicted he would.

The legislation authored by California Assemblywoman Fiona Ma that becomes law January 1, 2012 bans the sale of alcoholic beverages at self-service checkout stands in all format retail stores in California.

We nicknamed AB 183 the "Son of Tesco Fresh & Easy Law" because like the previous two other legislative attempts in 2008 and 2010 (which we nicknamed the "Tesco Fresh & Easy Law") to ban alcohol sales at self-service checkouts in retail stores in the Golden State, AB 183 will have the most immediate and direct affect on Tesco's Fresh & Easy Neighborhood Market because it's the only grocery chain in California that offers self-service checkout only in its stores, rather than the option of full or self-service.

The "Tesco Fresh & Easy Law" is now a reality for United Kingdom-based Tesco, which has 133 of its 182 small-format fresh food and grocery stores in California. The other 49 units are in Arizona (28 stores) and Nevada (21 units).

All but one or two of the 133 Fresh & Easy stores in California offer wine and beer for sale. A number of the stores also offer spirits for sale on the shelves, along with the wine and beer offering.

AB 183 amends California's offsale beer, wine and liquor license code to require retailers that have existing permits and licenses and who apply to offer alcoholic beverages for sale at future store locations, to sell the adult beverages at full-service checkouts, where there is a face-to-face transaction between customers and store employees.

Therefore, as we've said in our extensive coverage of the legislation, based on the current language of AB 183, Tesco's Fresh & Easy Neighborhood Market is going to have to at a minimum operate one full-service checkout stand in its stores in California in order to comply with the new law banning sales of alcohol at self-service checkouts come January 1, 2012.

The other alternative is that Tesco could stop selling alcoholic beverages completely in its stores in California, thereby leaving its self-service checkout system as it is. That, however, is highly unlikely in our analysis and opinion because alcoholic beverage sales, particularly its proprietary brand wines, is an important merchandising element for Fresh & Easy.

We first suggested in early 2008, before any legislation banning alcohol sales at self-service checkouts was ever introduced in the California Legislature, that one of the key operational mistakes Tesco has made with Fresh & Easy Neighborhood Market is to offer self-service checkout only in its stores. Doing so limits consumer choice and limits the potential universe of customers for Tesco's Fresh & Easy stores, thus limiting sales for the chain.

We continue to believe offering self-service checkout only in the Fresh & Easy stores is a very poor management decision.

On Wednesday (October 5, 2011) Tesco reported a 23% reduction in losses for Fresh & Easy for the first six months of its current fiscal year, compared to the same period last fiscal year.

Tesco lost $112 million (on sales of $470.5 million) on Fresh & Easy for the 2011/12 fiscal year, which ended August 27, 2011. That's compared to a loss of $151 million for the previous fiscal half year. Tesco had 177 Fresh & Easy stores opened at the August 27, 2011 half-year end, compared to 159 units for the same period a year ago. There are currently 182 stores.

The 23% reduction in the half-year loss for Fresh & Easy is a significant one for Tesco. But it's still a very long road to Tipperary. Tesco CEO Philip Clarke says the global retailer will break even with Fresh & Easy by the end of its 2012/13 fiscal year, which is about 16 months away.

Clarke has made numerous changes, mostly cosmetic ones though, at Fresh & Easy since becoming CEO of Tesco in March of this year. These include adding in-store bakeries and a few other design and merchandising additions and changes.

But ironically, in our analysis, the one change Clarke hasn't made but that has the potential to dramatically increase business at Fresh & Easy has just been mandated by the Governor of California.

Were we running Tesco and Fresh & Easy, we would move rapidly to offer shoppers the option of self and full-service checkout not only in the 133 Fresh & Easy Neighborhood Market stores in California, but in all 182 stores in California, Nevada and Arizona, which is something we would have done from the start, as we've noted more than once in Fresh & Easy Buzz.

We would offer both full-service and self-service checkout in the stores and, using Fresh & Easy's new loyalty points card which it's rolling out to all the stores next week, give customers who use the self-service checkouts bonus points for doing so, thereby encouraging them to scan and bag their own grocery purchases.

Offering both full and self-service checkout in this way at all the Fresh & Easy stores not only would comply with AB 183 in California where all but 49 of the stores are located, it would also serve to increase the potential universe of shoppers - those many who hate self-serve checkout and don't shop the stores now because of it - for the Fresh & Easy stores. The result: A stronger customer base and added sales.

Additionally, giving customers loyalty points they can redeem for savings on the new digital loyalty cards Fresh & Easy is introducing chainwide this week would encourage the use of the self-service checkouts, which are a labor-saving tool for the grocer.

The addition of the full-service checkout option chainwide will also allow Fresh & Easy Neighborhood Market to accept paper WIC Vouchers in all its stores, something it currently does in only one store, a unit in South Los Angeles, with plans to also do so at the store in San Francisco's Bayview district.

One of the reasons Fresh & Easy hasn't rolled out WIC chainwide is because of the difficulties the chain has had processing the paper vouchers under its self-service checkout only system. With the full-service checkout option in the stores, accepting WIC would be an easy process, as grocery checkers can simply process the vouchers like it's done at other grocery stores.

The potential sales boost for Fresh & Easy if it accepts WIC at all its stores is considerable. For example, according to the California WIC agency, about 7 million mothers receive the vouchers used to purchase healthy foods like infant formula, fresh milk, whole grain cereals, produce and other similar items in California. Therefore, by accepting WIC at its 133 Fresh & Easy stores in California, Tesco would expand its potential customer universe even more. Currently these 7 million potential customers in California are off the table for Tesco's Fresh & Easy.

Another benefit of accepting WIC in all the stores is that most of the items purchased by customers using the vouchers are at full margin.

This fact could potentially help Tesco with its gross and trading margin problems at Fresh & Easy. For example, on Wednesday Tesco reported a negative -24% trading margin for Fresh & Easy for the first half of its fiscal year. That's an improvement of about 10 basis points over the previous period but remains a serious problem for the retailer in its quest to break even by February 2013. It must get that negative margin into positive territory.

The full-service checkout option will also allow Fresh & Easy to accept paper personal checks and to cash customer payroll checks, which it currently doesn't do, in large part because of the same technical difficulties involved in processing the paper WIC Vouchers at the self-service checkouts.

Just like with WIC, grocery checkers could cash payroll checks and process paper personal checks at the full-service checkouts, thereby adding needed shopper choice and expanding the potential universe of customers for the Fresh & Easy stores.

We first pointed out in 2008, as we did with the self-service checkout only system, how not accepting WIC, paper personal checks and payroll checks is a serious operational flaw for Tesco's Fresh & Easy. [For example, see these two stories - September 7, 2008:  Analysis & Commentary: Should Tesco's Fresh & Easy Put An Asterisk Next to its Motto? Yes; Unless it Corrects Four Operational Omissions; and March 7, 2009: Analysis & Commentary: The Seven Retail Operations Changes Tesco's Fresh & Easy Neighborhood Market Needs to Make to Help it Get On the Success Track.]

From where we sit, closely covering and analyzing Tesco's Fresh & Easy Neighborhood Market for over four years, the passage of AB 183 into law in California is actually an operational blessing in disguise for Tesco if it offers the full-service checkout option, accepts WIC Vouchers in all its stores and invites shoppers to use paper personal checks and cash payroll checks at the checkouts if they so choose to do so as another option in paying for their grocery purchases.

Tesco went with self-service checkout only and the acceptance of plastic debit, EBT (food stamps) and credit cards only for payment at Fresh & Easy Neighborhood Market because it believes the labor savings from not offering a full-service checkout option and processing paper - the WIC Vouchers, personal and payroll checks - trumps the added business Fresh & Easy might get from offering the options.

However, we suggest the last four years of performance by Fresh & Easy since the first stores opened in November 2007 - a loss of about $1 billion - demonstrates the opposite is the case.

Shoppers like options and choice, which is something every experienced grocer knows, particularly in California. By expanding those options and choices like we've suggested in this piece, Tesco will find itself adding customers and sales to its Fresh & Easy stores, which is an option that in our analysis will exceed the labor savings benefits the retailer thinks it's getting currently by limiting customer choice.

Related Stories

September 9, 2011: 'Son of Tesco Fresh & Easy Law': Self-Service Checkout Booze Ban Bill Passes California State Senate; Headed to Governor's Desk For Action

September 7, 2011: Self-Service Checkout Booze Ban Bill Fails in California Senate First Time Around; 'Missing Seven' Dems Hold Key to Passage By Friday

September 6, 2011: California State Senate Set to Vote on Self-Service Checkout Booze Ban Bill This Week

August 20, 2011: 'Son of Tesco Fresh & Easy Law': Self-Service Checkout Booze Ban Bill AB 183 Passes Out of California Senate Appropriations Committee; Headed For Senate Floor

July 27, 2011: 'Son of Tesco Fresh & Easy Law' Moving Through State Senate: Will California Determine Fresh & Easy Neighborhood Market's Checkout Scheme?

June 4, 2011: 'Son of Tesco Fresh Easy Law': Self-Checkout Booze Ban Bill AB 183 Sails Through California State Assembly; State Senate Next Stop

May 11, 2011: ‘Son of Tesco Fresh & Easy Law' - California Assembly Appropriations Committee Passes Self-Checkout Ban Bill AB 183 By 12-4 Margin

May 6, 2011: 'Son of Tesco Fresh & Easy Law': California State Assembly Appropriations Committee Hearing For AB 183 Cancelled

May 4, 2011: 'Son of Tesco Fresh & Easy Law': Strong Chance California Legislation to Prohibit Alcohol Sales at Self-Service Checkouts Could Pass This Year

September 30, 2010: Fresh & Easy Neighborhood Market Hopes Governor Schwarzenegger Can Find His Veto Pen Before Midnight Tonight

September 28, 2010: Fresh & Easy Neighborhood Market Hoping Governor Schwarzenegger Prefers His Veto Pen When it Comes to AB 1060

September 25, 2010: Future of Fresh & Easy Neighborhood Market's Self-Service-Only Checkout in California Up to Governor Schwarzenegger

August 24, 2010: California State Senate Sends Bill to Governor That Could End Self-Service-Only Checkout at Fresh & Easy Neighborhood Market

August 15, 2010 piece : Bill to Ban Alcoholic Beverage Sales at Self-Service Checkouts Would End 'Self-Service Only' at California Fresh & Easy Neighborhood Market Stores

July 14, 2008: Breaking News & Analysis: CA Assemblyman Introduces 'Tesco Fresh & Easy Law' to Ban Stores With Self-Checkout-Only From Selling Alcoholic Beverages.

'Son of Tesco Fresh & Easy Law': Self-Service Checkout Booze Ban Bill Passes California State Senate; Headed to Governor's Desk For Action

self-service or "assisted" checkout at Fresh & Easy.

Breaking Buzz

Assembly Bill 183, the legislation to ban sales of alcoholic beverages at self-service checkout stands in retail stores in California, has passed in the California State Senate and is being sent to Governor Jerry Brown, who has until October 9 to either sign the bill into law or veto it. Today is the last day of the 2011 legislative session and the last day for the California State Legislature to send bills to the Governor for action by October 9.

AB 183 passed late Thursday by just the 21-vote majority needed to gain approval and be sent to the Governor.

Twenty one members of the California State Senate voted in favor of passing AB 183 late yesterday, with 16 members voted against passage of the measure, which if signed into law by the Governor will require face-to-face transactions between retail store employees (full-service checkout) and customers whenever alcoholic beverages are purchased at retail in the Golden State.

Three members of the California State Senate, two Democrats and a Republican, didn't vote on the bill yesterday. Those members are Lois Wolk and Carol Liu (Democrats), and Doug LaMalfa, who is a Republican.

As we reported on Wednesday, AB 183 failed in its first vote in the California State Senate on Tuesday, even though it received 17 votes in favor of passage to 16 opposed, because it failed to get the 21-vote majority required to pass. [See - September 7, 2011: Self-Service Checkout Booze Ban Bill Fails in California Senate First Time Around; 'Missing Seven' Dems Hold Key to Passage By Friday.]

However, as we correctly pointed out in the story, Senator Christine Kehoe (Democrat-San Diego), who is the bill's manager in the California State Senate, was able to get a motion to reconsider the bill passed following AB 183's failure to get the needed 21 votes.

Her reason for doing so was because seven Senate Democrats - Senate Majority Leader Ellen Corbett, along with members Noreen Evans; Carol Liu; Curren Price; Michael Rubio; Lois Wolk; and Leland Yee - didn't vote on AB 183 on the Senate Floor on Tuesday.

Five of the "Missing Seven" Democrats voted late yesterday in favor of passage of AB 183, which is what allowed the self-service booze ban bill to gain the needed 21 votes and pass. Senator Rubio voted against the bill. Senators Wolk and Liu didn't vote on AB 183 yesterday, as was the case on Tuesday.

As we've noted in our extensive coverage and analysis of AB 183 and the two bills that preceded it in 2008 (AB 523) and 2010 (AB 1060), if the legislation that's now been passed by both the California State Assembly and California State Senate and is being sent to Governor Jerry Brown becomes law, it will have the most immediate and significant impact on Tesco's Fresh & Easy Neighborhood Market because the chain, which has 128 of its 177 fresh food and grocery markets in California, is currently the only grocer in the Golden State that offers self-service checkout only in its stores.

Other grocery chains in California, such as Winco Foods, Kroger's Ralphs, Save Mart Supermarkets and a couple others, for example, offer customers a choice of both full and self service checkout in some of their stores. But Tesco's Fresh & Easy has a self-service checkout only model and system which it uses in all its stores in California (128 units), metro Las Vegas, Nevada (21 stores) and metro Phoenix, Arizona (28 units). Fresh & Easy calls its system assisted checkout because if asked store workers will assist customers in scanning and bagging their grocery purchases.

Fresh & Easy Neighborhood Market self-checkout system, like those of all other retailers in California, also requires a face-to-face interaction with a store clerk anytime alcoholic beverages are purchased by customers.

When a customer scans an alcoholic beverage item, the self-service checkout system locks up, alerting store workers. Once this occurs a store clerk goes to the checkout and checks the customers identification card to make sure he or she is 21, which is the legal age required to purchase alcohol in California. The clerk must then punch a code number into the cash register in order for the customer to complete his or her transaction.

Tesco's Fresh & Easy and other opponents of AB 183, such as the California Grocers Association, the California Retailers Association, California Chamber of Commerce and others, argue this safeguard is enough to prevent minors from purchasing alcoholic beverages using the self-service checkouts.

In contrast, proponents of AB 183, which include its author, Assemblywoman Fiona Ma (Democrat-San Francisco), the majority of members of the California Assembly and Senate who passed the bill, and groups like Mother's Against Drunk Driving, the United Food and Commercial Workers Union (UFCW), various law enforcement organizations and others, say allowing sales of alcoholic beverages at self-service checkouts increases the chance minors can game the system and purchase adult beverages.

But the argument over whether or not AB 183 should pass in the California State Legislature is now moot. The legislation passed by a big majority in the California State Assembly in May and by 21 votes (to 16 against) in the California State Senate yesterday.

Now it's all up to Governor Jerry Brown to decide if what we've nicknamed the "Son of Tesco Fresh & Easy Law" (AB 183) because of its singular impact on the grocery chain of the same name becomes law in California. We nicknamed the previous two bills, AB 523 in 2008 and AB 1060 in 2010, both of which had as their goals the banning of alcohol sales at self-service checkouts, the "Tesco Fresh & Easy Law," hence the addition of "Son of" to what is now a four year old nickname for three bills since 2008, all of which have been authored to ban the sale of alcoholic beverages at self-service checkout stands in retail stores in California.

AB 523 failed to make it out of the California State Legislature in 2008. But In 2010, AB 1060 passed in both the California State Assembly and Senate. Republican Governor Arnold Schwarzenegger vetoed the bill at the final hour though, as we reported here - September 30, 2010: Fresh & Easy Neighborhood Market Hopes Governor Schwarzenegger Can Find His Veto Pen Before Midnight Tonight

Jerry Brown, the former two-term Governor of California (1970's-80's), a Democrat who replaced Republican Arnold Schwarzenegger in Sacramento in 2011, has until October 9 to either sign AB 183 into law, veto it, or do nothing. If Brown doesn't sign or veto the bill by the October 9 deadline it automatically becomes law.

Follow the Story Below - Legislation to Ban Sales of Alcoholic Beverages at Self-Service Checkout Stands in California: A History - 2008-2011

September 7, 2011: Self-Service Checkout Booze Ban Bill Fails in California Senate First Time Around; 'Missing Seven' Dems Hold Key to Passage By Friday

September 6, 2011: California State Senate Set to Vote on Self-Service Checkout Booze Ban Bill This Week

August 20, 2011: 'Son of Tesco Fresh & Easy Law': Self-Service Checkout Booze Ban Bill AB 183 Passes Out of California Senate Appropriations Committee; Headed For Senate Floor

July 27, 2011: 'Son of Tesco Fresh & Easy Law' Moving Through State Senate: Will California Determine Fresh & Easy Neighborhood Market's Checkout Scheme?

June 4, 2011: 'Son of Tesco Fresh Easy Law': Self-Checkout Booze Ban Bill AB 183 Sails Through California State Assembly; State Senate Next Stop

May 11, 2011: ‘Son of Tesco Fresh & Easy Law' - California Assembly Appropriations Committee Passes Self-Checkout Ban Bill AB 183 By 12-4 Margin

May 6, 2011: 'Son of Tesco Fresh & Easy Law': California State Assembly Appropriations Committee Hearing For AB 183 Cancelled

May 4, 2011: 'Son of Tesco Fresh & Easy Law': Strong Chance California Legislation to Prohibit Alcohol Sales at Self-Service Checkouts Could Pass This Year

September 30, 2010: Fresh & Easy Neighborhood Market Hopes Governor Schwarzenegger Can Find His Veto Pen Before Midnight Tonight

September 28, 2010: Fresh & Easy Neighborhood Market Hoping Governor Schwarzenegger Prefers His Veto Pen When it Comes to AB 1060

September 25, 2010: Future of Fresh & Easy Neighborhood Market's Self-Service-Only Checkout in California Up to Governor Schwarzenegger

August 24, 2010: California State Senate Sends Bill to Governor That Could End Self-Service-Only Checkout at Fresh & Easy Neighborhood Market

August 15, 2010 piece : Bill to Ban Alcoholic Beverage Sales at Self-Service Checkouts Would End 'Self-Service Only' at California Fresh & Easy Neighborhood Market Stores

July 14, 2008: Breaking News & Analysis: CA Assemblyman Introduces 'Tesco Fresh & Easy Law' to Ban Stores With Self-Checkout-Only From Selling Alcoholic Beverages.

Self-Service Checkout Booze Ban Bill Fails in California Senate First Time Around; 'Missing Seven' Dems Hold Key to Passage By Friday

Self service or "assisted" checkout at Fresh & Easy.

"It ain't over 'til it's over."  -Yogi Berra

AB 183, the bill that if it becomes law would ban sales of alcoholic beverages at self-service checkout stands in grocery and other types of retail stores in California, has failed to gain the needed 21-vote majority required to pass in the California State Senate.

But the voting is far from over.

Following a 17-to-16 vote in favor of passage of AB 183 late yesterday, Senator Christine Kehoe (Democrat-San Diego), who is carrying the legislation in the California State Senate for its author, Assemblywoman Fiona Ma (Democrat-San Francisco), made a motion to reconsider, which was approved by all 40 members of the Senate.

As a result, yesterday's vote is what's called an unofficial ballot, which means AB 183 will come up for another (the official) vote before Friday, which is the last day of the current legislative session and the deadline for both houses of the state legislature to pass bills and send them to the Governor.

Should AB 183 pass in the Senate and then be signed into law by Governor Jerry Brown, it will have a singular immediate impact on Tesco's Fresh & Easy Neighborhood Market because the retailer, which has 127 of its 177 fresh food and grocery stores in California, is the only chain in the Golden State that has a self-service checkout only system. The other 49 Fresh & Easy markets are in metro Las Vegas, Nevada (21 units) and metro Phoenix, Arizona (28 stores)

AB 183 requires all purchases of alcoholic beverages to be transacted in a face-to-face interaction with a store clerk, which means full-service checkout.

Many retailers in California offer self-service checkout in their stores but as an option along with the traditional full-service checkout. For these retailers a ban on sales of alcohol at self-service checkouts merely means customers will have to use the full-service checkouts when buying booze.

But for Tesco's Fresh & Easy, if AB 183 becomes law it will mean the retailer will need to at a minimum convert at least one of the checkout stands in each of its California stores to a full-service unit, in order to comply with the face-to-face interaction provision of the bill.

The long range future implication of the legislation for all retailers in California is that should they want to offer self-service checkout only in a store, such as a supermarket where alcoholic beverages are sold, they can't do so, instead having to offer some form of mixed self and full-service checkout in order to fulfill the legal requirements of AB 183.

The 'Missing Seven' Democrats

The reason AB 183 fell four votes short of gaining the 21 votes (simple majority) needed to pass is because seven members of the California State Senate, all Democrats, failed to vote, either because they were absent or abstained from voting on the measure.

Among the seven members who didn't vote for AB 183 yesterday was Senate Majority Leader Ellen Corbett, a Democrat from the Northern California city of San Leandro.

The remaining six members, all Democrats, who failed to vote on the bill yesterday are: Senator Noreen Evans; Senator Carol Liu; Curren Price; Michael Rubio; Lois Wolk; and Leland Yee.

According to our sources, Senator Kehoe filed the motion to reconsider yesterday based on the absence of some or all of the seven members of her party, including the Senate Majority Leader.

Based on our ongoing reporting and analysis of the legislative bill and process, at least four of the "Missing Seven" members - and possibly all seven - plan to vote in favor of passage of AB 183 when it comes up for a vote again, which could be as early as today.

The bill needs favorable votes from just four of the seven members in order to gain the 21 votes required for passage. Stay tuned.

California Legislation to Ban Alcohol Sales at Self-Service Checkouts: Follow the Story at the Links Below

September 6, 2011: California State Senate Set to Vote on Self-Service Checkout Booze Ban Bill This Week

August 20, 2011: 'Son of Tesco Fresh & Easy Law': Self-Service Checkout Booze Ban Bill AB 183 Passes Out of California Senate Appropriations Committee; Headed For Senate Floor

July 27, 2011: 'Son of Tesco Fresh & Easy Law' Moving Through State Senate: Will California Determine Fresh & Easy Neighborhood Market's Checkout Scheme?

June 4, 2011: 'Son of Tesco Fresh Easy Law': Self-Checkout Booze Ban Bill AB 183 Sails Through California State Assembly; State Senate Next Stop

May 11, 2011: ‘Son of Tesco Fresh & Easy Law' - California Assembly Appropriations Committee Passes Self-Checkout Ban Bill AB 183 By 12-4 Margin

May 6, 2011: 'Son of Tesco Fresh & Easy Law': California State Assembly Appropriations Committee Hearing For AB 183 Cancelled

May 4, 2011: 'Son of Tesco Fresh & Easy Law': Strong Chance California Legislation to Prohibit Alcohol Sales at Self-Service Checkouts Could Pass This Year

September 30, 2010: Fresh & Easy Neighborhood Market Hopes Governor Schwarzenegger Can Find His Veto Pen Before Midnight Tonight

September 28, 2010: Fresh & Easy Neighborhood Market Hoping Governor Schwarzenegger Prefers His Veto Pen When it Comes to AB 1060

September 25, 2010: Future of Fresh & Easy Neighborhood Market's Self-Service-Only Checkout in California Up to Governor Schwarzenegger

August 24, 2010: California State Senate Sends Bill to Governor That Could End Self-Service-Only Checkout at Fresh & Easy Neighborhood Market

August 15, 2010 piece : Bill to Ban Alcoholic Beverage Sales at Self-Service Checkouts Would End 'Self-Service Only' at California Fresh & Easy Neighborhood Market Stores

July 14, 2008: Breaking News & Analysis: CA Assemblyman Introduces 'Tesco Fresh & Easy Law' to Ban Stores With Self-Checkout-Only From Selling Alcoholic Beverages.

California State Senate Set to Vote on Self-Service Checkout Booze Ban Bill This Week

Self-service or "assisted" checkout at Fresh & Easy.

The California State Senate is set to vote on AB 183, which if passed in the legislative body and signed into law by Governor Jerry Brown will ban the sales of alcoholic beverages at self-service checkouts in retail stores in the Golden State, before the week is out.

In its official language, AB 183 prohibits holders of off-sale beer, wine and liquor licenses from selling alcoholic beverages using a customer-operated checkout stand located on the licensee's physical premises. [You can read the legislative analysis here.] In other words, any purchase of alcohol will require a face-to-face interaction with a store clerk if the bill becomes law in the Golden State.

Friday, September 9 is the last day of the current legislative session, and the last day both houses of the California State Legislature can vote on and pass bills in the session before it recesses until January 4, 2012.

A simple majority, 21 votes, is needed for AB 183 to pass in the California State Senate.

The bill, which originated in the California State Assembly (hence the AB designation), passed by a 48-to-26 majority in that body on May 26 of this year.

Based on our analysis, AB 183, which is authored by Assemblywomen Fiona Ma (Democrat-San Francisco), has enough votes (with a few to spare) to pass in the California State Senate.

If we're correct and the bill passes by the end of Friday's session, AB 183 will then be sent to Governor Jerry Brown, who like Ma and the majority of the bill's backers in both houses is a Democrat.

If the Governor receives AB 183 by the end of legislative business Friday, he has until October 9 to either sign or veto the bill.

If AB 183 doesn't pass or for some reason isn't voted on in the California State Senate by Friday, it will be dead for this legislative session.

If we're correct and AB 183 passes in the California State Senate this week, the opponents of the legislation, which include Tesco's Fresh & Easy Neighborhood Market, the California Grocers Association and others (see the lists at the end of this piece), will then need to stage a last-ditch effort to persuade the Governor to veto it by the October 9, 2011 deadline.

Governor Brown hasn't spoken out publicly in favor of or against AB 183, which isn't surprising since as the chief executive of the state with the second-highest unemployment rate (12.2 %) in the nation (after Nevada) and a huge budget deficit, he has bigger fish to fry than the self-service checkout booze ban legislation.

However, based on our reporting and analysis, we believe the Governor is leaning towards signing the self-service checkout booze ban bill by an about 60% (sign) to 40% (veto) margin, which is far from the slam-dunk many of its supporters thought would be the case earlier this year.

'Tesco Fresh & Easy Law'

Legislation to ban sales of alcoholic beverages at self-service checkouts in retail stores in California was first authored in 2008. That bill, AB 523, failed to make it out of the California State Senate.

In 2010 another bill, AB 1060, passed both houses of the California State Legislature but was vetoed by then Governor Arnold Schwarzenegger.

We nicknamed the two bills, both authored by Assemblyman Hector De La Torre (D-South Gate, Southern California) and backed primarily by the United Food and Commercial Workers (UFCW) union, the "Tesco Fresh & Easy Law" because if either bill had become law it would have affected Tesco's Fresh & Easy Neighborhood Market more directly than any other retailer in California since it's the only chain we've been able to find that offers self-service checkout only at its 128 stores in the Golden State.

Tesco has 177 Fresh & Easy stores, all of which offer self-service checkout only, or what the grocer calls "assisted checkout" because if asked a store worker will assist shoppers with the checkout process. The 49 remaining Fresh & Easy stores are located in metropolitan Las Vegas, Nevada (21 units) and metro Phoenix, Arizona (28 stores.)

Enter 'Son of Tesco Fresh & Easy Law'

But just when Tesco's Fresh & Easy Neighborhood Market thought it might be able to catch a break following the 2010 veto, San Francisco Assemblywoman Fina Ma, who's also the Speaker Pro Tempore of the California State Assembly, the second highest leadership position, introduced what we've nicknamed the "Son of Tesco Fresh & Easy Law," AB 183, in late January of this year.

This time around Ma and the bill's supporters have done two things De La Torre didn't: Built a much broader coalition in favor of the legislation, which includes numerous law enforcement organizations, and downplayed the UFCW union's involvement in AB 183.

For example, in 2008 and again in 2010 the UFCW was front-and-center in touting the self-checkout booze ban legislation. This time around the union has remained largely in the background, although as we've noted in our coverage of AB 183 it's a key supporter of the legislation.

The support particularly of law enforcement will be key if as we've said AB 183 passes this week in the California State Senate.

On one side the California Grocer's Association, California Chamber of Commerce and other opponents will be attempting to bend the Governor's ear, asking him to veto the self-checkout booze ban bill.

But on the other hand, in addition to the UFCW union and the powerful MADD (Mothers Against Drunk Driving) organizations, there will also be numerous California law enforcement organizations who argue that allowing sales of alcohol at self-service checkouts makes it easier for minors to purchase alcoholic beverages in stores, even though there's little empirical evidence to support the position, including that offered in the official legislative analysis of AB 183

A number of these law enforcement groups supported AB 1060 last year. But this year they've been much more vocal in their collective support. Supporters have also added many more law enforcement groups to the list of supporters.

As such, it will be difficult for the Democratic Governor to veto AB 183, as the forces behind it - important Democrat legislators and allies like Ma and others, the unions, MADD and law enforcement organizations statewide - make for a rather potent combination for Brown to buck should he want to veto the bill, which in practice will only directly affect one retailer in California, Tesco's Fresh & Easy Neighborhood Market.

But the Governor is unpredictable and has been known to buck what is often seen as conventional political wisdom, such as he did earlier this year when he vetoed the card check bill passed in the legislature which would have allowed farm workers in California to vote on unionization by filling out a card rather than using the traditional secret ballot voting process. The legislation though had much more riding on it for the Governor and the state than does AB 183, which most residents of California have little idea of, and if they do care little about.

We should know before or by Friday if AB 183 has passed in the California State Senate, as our analysis suggests will be the case, and is then sent to the Governor for his signature or veto. Stay tuned.

Key Supporters of AB 183

California Police Chiefs Association (co-source)
California Professional Firefighters (co-source)
Mothers Against Drunk Driving (co-source)
Association for Los Angeles Deputy Sheriffs
California Association of Addiction Recovery Resources
California Association of Alcohol and Drug Program Executives, Inc.
California Association of Alcoholism and Drug Abuse Counselors
California Council on Alcohol Problems
California Labor Federation
California Narcotic Officers' Association
California Nurses Association
California Teamsters Public Affairs Council
City and County of San Francisco Police Department
Consumer Federation of California
County Alcohol and Drug Program Administrators Association of California
Los Angeles County Probation Officers Union
Marin Institute
Riverside Sheriffs' Association
United Food and Commercial Workers Union
Western States Council of the United Food and Commercial Workers

Key Opponents of AB 183

California Chamber of Commerce
California Grocers Association
California Hispanic Chambers of Commerce
California Independent Grocers Association
California Manufacturers and Technology Association
California Retailers Association
Central City Association of Los Angeles
Information Technology and Innovation Foundation
Los Angeles Area Chamber of Commerce
National Cash Register Corporation
Neighborhood Market Association
Tech America
Valley Industry and Commerce Association 

Source: State of California Legislative Analyst's Office

California Legislation to Ban Alcohol Sales at Self-Service Checkouts: Follow the Story at the Links Below

August 20, 2011: 'Son of Tesco Fresh & Easy Law': Self-Service Checkout Booze Ban Bill AB 183 Passes Out of California Senate Appropriations Committee; Headed For Senate Floor

July 27, 2011: 'Son of Tesco Fresh & Easy Law' Moving Through State Senate: Will California Determine Fresh & Easy Neighborhood Market's Checkout Scheme?

June 4, 2011: 'Son of Tesco Fresh Easy Law': Self-Checkout Booze Ban Bill AB 183 Sails Through California State Assembly; State Senate Next Stop

May 11, 2011: ‘Son of Tesco Fresh & Easy Law' - California Assembly Appropriations Committee Passes Self-Checkout Ban Bill AB 183 By 12-4 Margin

May 6, 2011: 'Son of Tesco Fresh & Easy Law': California State Assembly Appropriations Committee Hearing For AB 183 Cancelled

May 4, 2011: 'Son of Tesco Fresh & Easy Law': Strong Chance California Legislation to Prohibit Alcohol Sales at Self-Service Checkouts Could Pass This Year

September 30, 2010: Fresh & Easy Neighborhood Market Hopes Governor Scharzenegger Can Find His Veto Pen Before Midnight Tonight

September 28, 2010: Fresh & Easy Neighborhood Market Hoping Governor Schwarzenegger Prefers His Veto Pen When it Comes to AB 1060

September 25, 2010: Future of Fresh & Easy Neighborhood Market's Self-Service-Only Checkout in California Up to Governor Schwarzenegger

August 24, 2010: California State Senate Sends Bill to Governor That Could End Self-Service-Only Checkout at Fresh & Easy Neighborhood Market

August 15, 2010 piece : Bill to Ban Alcoholic Beverage Sales at Self-Service Checkouts Would End 'Self-Service Only' at California Fresh & Easy Neighborhood Market Stores

July 14, 2008: Breaking News & Analysis: CA Assemblyman Introduces 'Tesco Fresh & Easy Law' to Ban Stores With Self-Checkout-Only From Selling Alcoholic Beverages.

Tesco Says Sayonara to Japan, Good Morning to Sacramento

News & Analysis

United Kingdom-based Tesco, which operates 5,400-plus stores in 14 countries, announced today it plans to eliminate its operations in one of those nations - Japan - while expanding its geographic reach across the Pacific Ocean in the Western United States by launching its Fresh & Easy Neighborhood Market chain into the Sacramento, California metropolitan region next year, as we reported it would do in this story on Monday (August 29): Meaningful Move or Too Little Too Late? Fresh & Easy Neighborhood Market Planning Early 2012 Metro Sacramento Market Launch.

The announcement today in the United Kingdom by CEO Philip Clarke, who took over in March of this year from Terry Leahy who during his 14-year term as Tesco's chief executive launched the global retailer into the largest (United States) and third-largest (Japan) countries in terms of total dollar sales of food and groceries (China is second), that Tesco would put its 129 small-format stores in Japan up for sale and exit the market overshadowed the announcement made today by Tim Mason, Tesco deputy CEO and CEO of Fresh & Easy Neighborhood Market, that the 177-store Fresh & Easy chain would enter the metro Sacramento, California market next year, beginning with the opening of six stores.

Tesco's Fresh & Easy Neighborhood Market currently operates as far south in California as the San Diego region, throughout Southern California, in the Bakersfield, Fresno and Modesto metro regions in the Central Valley, in the San Francisco Bay Area and in Vacaville, which is about midway between Sacramento and the Bay Area, along with operating stores in the Las Vegas, Nevada and Phoenix, Arizona metropolitan regions. There are 128 stores in California; 28 units in Arizona; and 21 Fresh & Easy markets in Nevada. (See here, here and here for detailed information.)

Mason, who is based at Fresh & Easy Neighborhood Market's headquarters in El Segundo (Southern), California where he remains CEO of the venture as well as serving as group deputy CEO of Tesco's global operations, a position he was appointed to in March 2011, made the announcement today at a groundbreaking ceremony held on a vacant lot at the future Fresh & Easy store at 34th Street and Broadway in Sacramento's Oak Park neighborhood.

At Mason's side was former NBA basketball star and current Mayor of Sacramento, Kevin Johnson, who's development company sold the parcel of land the store will sit on to Tesco in 2008. Johnson, who is a native of Sacramento and returned home when he retired from the NBA a few years ago, was raised in Sacramento's Oak Park Neighborhood. (See the story linked at top for more information.)

"I'm excited to welcome Fresh & Easy to our neighborhood," Mayor Johnson said at the ceremony today. "Fresh & Easy is not only bringing more good jobs to Sacramento, but also high-quality, healthy food at affordable prices to neighborhoods that don’t always have access to such foods."

CEO Philip Clarke's announcement today across the pond in the UK though is the one that generated the most interest from Tesco's investors and competitors - and the most ink from the press on both sides of the pond. In fact, little if any of the coverage we've seen so far today even mentions the announcement made today by Mason about Fresh & Easy's launch into the metro Sacramento market next year, which we wrote about Monday before the plans were publicly announced by the grocer.

A number of British publications are using Tesco's exit from Japan as a logical news hook however, asking and suggesting that Philip Clarke's next move might be to pull the plug on Fresh & Easy before the year is out.

That's not going to happen, based on our reporting and information, although the exit from the country on the other side of the Pacific Ocean will draw much closer attention from investors and the media to Tesco's U.S. operations than has been the case - expect here at Fresh & Easy Buzz - at least for the next week or so.

Clark said in a statement today Tesco is exiting Japan because the retailer has determined it's unable to build a business in the country of sufficient scale to make a profit.

"We have reviewed our portfolio in Asia and the performance of our business in Japan. Having made considerable efforts in Japan, we have concluded that we cannot build a sufficiently scalable business," he said.  

"We have decided to sell our operations there and focus on our larger businesses in the region, in line with our priority of driving growth and improving returns. I want to thank our colleagues in Japan for their continued dedication to the business. With good stores in good locations across Greater Tokyo, we will be undertaking a formal sale process over the coming months and the business will continue to trade as usual in the meantime."

Tesco has been in Japan for eight years and has lost about £250 million  on the venture.

Unlike in the U.S. where Tesco started up Fresh & Easy Neighborhood Market from scratch, the retailer entered Japan in 2003 by acquiring the C2 Network, which ran stores under the Tsurakame name.

Its 129 stores in Japan are all small-format and trade under the Tsurakame, Tesco and Tesco Express banners.

Annual sales for the 129-store operation are £500 million ($812 million), making it the retailer's smallest operation out of the 14 (soon to be 13) nations it's in. Tesco reported sales of about $818 million for Fresh & Easy in its most recent fiscal year ended February 2011.

Tesco said today about half of its 129 stores in Japan are profitable.

Tesco's about $406 million loss over eight years in Japan pales in comparison to what it's lost in the three years and 10 months its 177-store Fresh & Easy Neighborhood market chain has been in operation in California (128 stores), Nevada (21 units) and Arizona (28 stores). That amount is about double the Japan lose and in less than half as many years. For example, Tesco lost $300 million on Fresh & Easy in its most recent fiscal year ended February 2011.

Meanwhile across the pond at the future store at 34th Street and Broadway in Sacramento's Oak Park neighborhood, Tim Mason announced the first six Fresh & Easy stores the grocer plans to open in the metro Sacramento region in 2012. The locations of those stores are:

>34th Street and Broadway, Sacramento
>Watt Avenue & El Camino Avenue, Sacramento
>Mack Road and Franklin Boulevard, Sacramento
>Lincoln and Sterling Road, Lincoln
>Elk Grove Florin Road and Calvine Road, Elk Grove
>East Natoma Street and Blue Ravine Road, Folsom

As we reported Monday, Fresh & Easy Neighborhood Market is currently targeting early 2012 for the opening of the first one or more of the six stores. Based on our current information, the three units in Sacramento proper are likely to be the first units opened next year. That could change of course.

Five of the six stores are among the first batch of 19 future locations Tesco's Fresh & Easy Neighborhood Market announced in February 2008 it planned to open in the Sacramento/Vacaville region. Of those 19 stores, one unit has been opened so far, the store at Elmira & Nut Tree in Vacaville, which was opened earlier this year.

The Vacaville store is one of 13 Fresh & Easy units in Northern California Tesco has opened this year. Eleven of the stores are in the San Francisco Bay Area. Besides the Vacaville store, the one other unit outside the Bay Area is the store in Modesto.

Interestingly, the unit at East Natoma and Blue Ravine in Folsom, which is a suburb of Sacramento, isn't one of the 19 stores announced in February 2008. There is a store in Folsom on that list, which you can view here, but it's at Greenback & Madison.

The East Natoma and Blue Ravine location was acquired by Tesco's Fresh & Easy post 2008, as were a number of future store sites in the Sacramento area, which we've identified here and here.

On the other side of the Pacific, Tesco said today its putting its 129 small-format stores up for sale.

Based on the division's small market share of less than one half of one percent - which is about the same market share percentage Tesco has with Fresh & Easy in California, metro Las Vegas, Nevada and metro Phoenix, Arizona - and the not so great performance level of the stores (half profitable), we expect the UK-based global retailer to take a fairly serious haircut on any sale it agrees to. Japan's post-earthquake economy, which was so great before the quake and tsunami, also makes buying the stores a less attractive proposition, in our analysis.

Across the pond in the UK today Tesco CEO Clarke took great pains in a conference call with members of the press to downplay any comparisons between the retailer's decision to bow out of Japan and the potential for doing the same with Fresh & Easy in the United States anytime in the near future. He essentially said the two operations are very different in kind and by degree.

There's truth in that statement. But also some spin.

The central reason Tesco gave today for saying sayonara to Japan - that it doesn't see being able to build a business of proper scale and thus become profitable in the country - is a key factor in evaluating Fresh & Easy Neighborhood Market because Clarke, like CEO Terry Leahy before him, along with Tim Mason, all say the key to breaking even and then making a profit with the U.S. chain is to get acheive the proper "scalability" needed to achieve that objective.

That optimum "scale" started out in 2006 under Leahy as being about 1,000 Fresh & Easy stores over five or six years. later Leahy and Tesco amended that amount to around 500 stores during the same period of time.

Earlier this year Clarke said it would take 400 Fresh & Easy stores by the end of Tesco's 2012/13 fiscal year for it to break even with the chain. A couple months later Clarke said Tesco will break even by February 2013 with 300 stores, saying that's what's needed to achieve "scalability."

There are currently 177 Fresh & Easy stores, which is 123 units away from that 300-store magic number. Tesco's fiscal 2011/12 half-year just ended. The retailer will report half-year revenue and the profit/loss at Fresh & Easy in October. It will be interesting to see what the loss is in terms of it being a benchmark to what Clarke and Mason say will be break-even in 18 months, when the 2012/13 fiscal year end in February 2013.

Tesco attempted to achieve "scalability" for eight years in Japan. It's pulling out, having given as the key reason it's inability to achieve it.

Philip Clarke and Tim Mason are on the record as saying the key strategy to breaking even and eventually making a profit with Fresh & Easy Neighborhood market is to achieve proper "scalability." They've now defined that "scale" as 300 stores in operation by February 2013, at which time the two men say Fresh & Easy will break even.

Terry Leahy, considered Britain's wizard of retailing by his peers and most analysts, was wrong about achieving proper "scalability" in Japan, and that was after eight years rather than the five it will be in February 2013 for Fresh & Easy. It was up to Clarke to pull the plug on Japan, which in the greater scheme of things for Tesco globally was the correct move to make in our analysis.

But Leahy is gone and now it's Clarke's turn. And he needs to think long and hard about whether he, like Leahy was about Japan, is wrong about what it's going to take to get Fresh & Easy Neighborhood Market to break even in 18 months, not to mention become a viable business and start making a profit. In our analysis it is, after all, more than a "scalability" issue.

Meaningful Move or Too Little Too Late? Fresh & Easy Neighborhood Market Planning Early 2012 Metro Sacramento Market Launch

News/Analysis/Commentary

Tesco's El Segundo, California-based Fresh & Easy Neighborhood Market is planning to open its first stores in the Sacramento metropolitan region in Northern California early next year, according to our sources, and has recently posted advertisements for store managers on the Internet in advance of its entering what will be a new market region for the 177-store small-format fresh food and grocery chain in 2012.

On Wednesday (August 31) Fresh & Easy Neighborhood Market will hold a ground breaking at the site of what will be one of its first Sacramento-area stores to open next year, at 34th and Broadway in Sacramento's Oak Park Neighborhood. Joining Tesco group deputy CEO Tim Mason, who's also the CEO of Fresh & Easy, and other senior executives at Wednesday's ground breaking will be Ex-NBA basketball star and Mayor of Sacramento Kevin Johnson, who once owned the site of the future Fresh & Easy store in the Oak Park neighborhood where he was raised, along with members of the City Council.

Mayor Johnson's neighborhood

It should come as no surprise to regular readers of Fresh & Easy Buzz that Tesco's Fresh & Easy will kick off it plans to enter the metro Sacramento market with a ground breaking at the Oak Park-Sacramento location Wednesday - or that Mayor Johnson will be attending the event. It's Mayor Johnson's neighborhood after all.

In 2008 Johnson's then Kynship Development Company sold the Oak Park parcel to Fresh & Easy Neighborhood Market for $1.12 million. In December 2008 that deal held up the incoming mayor's swearing-in ceremony for a couple hours, as we reported here - December 3, 2008: Swearing-In of New Sacramento, CA Mayor Kevin Johnson Delayed A Few Hours Over A $2.2 Million Tesco Fresh & Easy Agenda Item.

Johnson was sworn-in though that same day and has gone on to become a very popular mayor in Sacramento, along with drawing national attention. He's also one-half of what is a major political power couple in the making: He will soon get married to Michelle Rhee, the former chancellor of the Washington D.C. Public school system, who is considered a leader, if not the leader, in public school educational reform in America. Rhee's Student's First organization has as its ambitious mission nothing less than the transform of public education in the U.S.

The mayor also has a background in public school education reform. After retiring from the NBA he returned to his hometown of Sacramento and went into business as a developer. He also set up the non-profit St. Hope organization. Among the numerous programs the foundation started a few years ago was a charter school that replaced the then-failing Sacramento High School into what has become a much more successful school than it previously was.

Johnson has focused much of his work with the non-profit St. Hope organization on the low-income Oak Park neighborhood where he was raised. After taking office as mayor in 2008 he severed his day-to-day ties with St. Hope.

He also focused much of his for-profit real estate acquisition and development efforts in the neighborhood prior to becoming Mayor of Sacramento. For example, in March 2008 when the then 42-year old Sacramento native announced he was running for mayor, Johnson owned about 37 properties in Oak Park, as we noted in this piece on March 7, 2008: Former NBA All-Star and Sacramento Native Kevin Johnson is the Driving Force Behind a Fresh & Easy Market in Sacramento's Oak Park Neighborhood. Notice what we said in the very last sentence in the story linked above.

It was in February 2008 that United Kingdom-based Tesco announced its plans to enter the metro Sacramento market region, saying it would open 19 Fresh & Easy stores, including seven units in the city of Sacramento.

The grocer's initial plans were to open the first stores in the Sacramento area in late 2008-to-early 2009. But Tesco's financial struggles with Fresh & Easy Neighborhood Market have resulted in what will end up being an about four year delay of those original plans when the first stores open in the Sacramento market next year if all goes according to current plans.

In early March 2008 Fresh & Easy Neighborhood Market CEO Tim Mason and Sacramento's then-Mayor Heather Fargo, who Johnson defeated in the local election, held a press conference in front the the very same future Fresh & Easy store in the city's Oak Park neighborhood to announce the Tesco-owned grocer's plans to open stores in the city and region.

Tesco's Fresh & Easy finally opened its first Fresh & Easy stores in Northern California in March of this year. It has opened 13 units in the region to date.

Sacramento bound, locations waiting in the wings

The retailer has opened one of those 19 stores, the unit at Elmira & Nut Tree in Vacaville. Vacaville isn't in the Sacramento metropolitan region however. The city is located about midway between Sacramento and the San Francisco Bay Area. It's about a 45 minute drive from Sacramento on Interstate 80.

Besides the original 19 stores publicly announced by the retailer, we've identified five additional future Fresh & Easy store locations the grocer has acquired in the Sacramento metro region since 2008. Those sites are in the following cities: Carmichael (5025 Marconi Avenue); North Highlands (3525 Elkhorn Boulevard); Gold River (2210 Sunrise Boulevard); Granite Bay (8701-8705 Auburn Folsom Road); and Placerville (Missouri Flat Road & Forni Road).

We've also identified three additional future Fresh & Easy store locations in the greater Sacramento region. Those future stores are: Oroville (Butte County), at Goldtown Plaza Center; Sutter Creek (Amador County), Sutter Creek Crossroads at Hwy 104 and Hwy 49 (see here); and Clearlake (Lake County), Hwy 53 and Dam Road. (see here); along with a location in Suisun City (Sunset Center at Sunset and State Highway 12), which is in the Sacramento/Vacaville region.

Tesco's Fresh & Easy Neighborhood Market hasn't publicly announced or confirmed any of these additional locations. However, we've identified them using multiple sources, including filings by Fresh & Easy with the state of California for alcoholic beverage permits and licenses for future stores at each of the locations.

According to our sources, the Oak Park location will be one of the first two or three Fresh & Easy stores to open early next year in the Sacramento region. The Oak Park neighborhood, like San Francisco's Bayview-Hunter's Point where Fresh & Easy opened its newest store in the 5800 Third Street development last week, is underserved by grocery stores offering fresh food and groceries at affordable prices. Such areas have become commonly referred to as "food deserts."

Oak Park is also home to an extremely strong neighborhood organization. In 2008 Dustin Littrell of the Oak Park Neighborhood Association filed an appeal with the City of Sacramento against Fresh & Easy Neighborhood Market's design plan for the store in the neighborhood. Littrell, who's a designer by profession, included in the appeal a number of detailed proposed design changes for the future store at the location, including site changes he says would have improved traffic flow at and around the store.

The grocer fought the appeal for a time. But after the City of Sacramento Design Review Board agreed with most of the neighborhood group's proposed design changes for the store, Tesco's Fresh & Easy made a deal with Littrell and other neighborhood association leaders, agreeing to incorporate the majority of their proposed design changes in its plan; changes that were mandated by the city anyway. Fresh & Easy then closed escrow on the parcel, which it bought from Kevin Johnson's development company. [See - November 17, 2008: Sacramento City Design Board Agrees With Oak Park Group on Design Changes For Proposed Fresh & Easy Store; Escrow Closed on $1.1 Million Parcel.]

We covered and wrote about the Oak Park Neighborhood Association vs. Fresh & Easy Neighborhood Market store design issue extensively. You can read our stories at the following links: Oak Park Sacramento, Fresh and Easy Sacramento, Fresh and Easy Sacramento Metropolitan Region, Oak Park Fresh and Easy store design appeal.

Why Sacramento now?

Tesco plans to enter the Sacramento metro region with its Fresh & Easy chain early next year comes in a year in which the retailer has been focusing all of its new store growth in California.

Thus far this year it has opened 23 new Fresh & Easy stores, all in California. Of those stores 13 units are in Northern California - 11 of which are in in the San Francisco Bay Area. The other two stores are the unit in Vacaville and a store in Modesto, which is in the Northern San Joaquin Valley. Modesto is about 70 miles from Sacramento. Vacaville is about a 30 minute drive from the capital city.

Fresh & Easy Neighborhood Market also plans to continue to focus its new store growth in the Golden State for the remainder of the year. According to our sources, all the currently planned new store openings for the remainder of this year are in California.

Its been over a year since Tesco has opened any new Fresh & Easy stores in metropolitan Las Vegas, Nevada, where is has 21 units, and metro Phoenix, Arizona, where there are 28 Fresh & Easy markets. In fact, the retailer closed six stores each in the two market regions in November 2010, along with one store in Southern California, for a total of 13 units. (See here for details.)

Our sources also tell us that Tesco's focus in 2012 in terms of new store growth will be almost exclusively in California, where it has numerous future locations in both Northern California (over 50 sites in the area alone), Southern California and the Central Coast, along with a few in the Central Valley.

Entering the Sacramento market though will cost Tesco some money in terms of ongoing marketing and promotional costs, in addition to the nornal operational expenses involved in starting up. The region, where the dominant grocery chains currently are locally-based Raley's (133 stores and about $3.3 billion in annual sales), Modesto-based Save Mart (249 stores and about $5 billion in annual sales) with its Lucky banner supermarkets and Food Maxx discount warehouse stores, and Safeway Stores, Inc. (the fourth-largest food retailer in the U.S. and the overall market share leader in Northern California where it's headquartered in Pleasanton), is becoming increasingly competitive.

[See the numerous stories and analysis at this link - Northern California Special Report - for a good primer on just how competitive Sacramento and all of Northern California is fast-becoming.

For example, Sprouts Farmers Market and Sunflower Farmers Market are both focusing on opening numerous stores in the Sacramento region next year. Sprouts currently has two stores in the region, one unit in Roseville and another in nearby El Grove. Sunflower Farmers Market opened its first store in Northern California earlier this year. That store is also in Roseville.

Additionally, discount chain Target has added its "P-Fresh" fresh food and grocery sections to a number of its discount format stores in the Sacramento region and has plans to add more next year.

And Walmart Stores, Inc., the world's largest retailer and leading seller of food and groceries in the U.S., is putting a major focus on the Sacramento metro region with its smaller-format (30,000-60,000 square-foot) Walmart Market stores, having thus far acquired a number of sites for the stores in the region, with plans for more. Walmart also has plans for more supercenters in the Sacramento area.

We expect Walmart to open its first Walmart Market unit in the Sacramento region in early 2012. That first store - or at least one of the first units - will likely be the location at Highway 65 and Second Street  in Lincoln, which is near Sacramento, where Tesco has had a future Fresh & Easy store site (at Lincoln and Sterling) since early 2008. [For more details see - January 10, 2011: Walmart 'Gets Real' With Smaller-Format Grocery Store Initiative in California; First Stores On Tap; and July 6, 2010 story - Walmart Looking for Store Sites in Northern California For 20,000 Sq-Ft Neighborhood Market by Walmart Prototype Store.

A Fresh & Easy Buzz correspondent recently saw workers inside the vacant former Rainbow Market store in Lincoln tearing out interior materials and loading them into a Walmart Stores truck trailor parked in the parking lot, signaling work has began on turning the building into a Walmart Market grocery store.

A number of other Walmart Market grocery stores - which at their smallest (about 30,000 square-feet as is the case with the Lincoln unit) have three times the selling space as Tesco's 10,000 square-foot Fresh & Easy stores, carry four-to-five times the number of SKUs as Fresh & Easy (which offers about 5,000 SKUS), and offer a full selection of produce, meats and fresh-prepared foods plus in most cases an in-store pharmacy - will be located near the current planned Fresh & Easy Neighborhood Market locations in the Sacramento region.

Sacramento: Continue to pay or start to play

Last year as part of a nearly year-long special report on food and grocery retailing in Northern California we wrote a series of stories about whether or not Tesco would launch Fresh & Easy into Northern California in 2011 (which it ultimately did, opening the first stores in March of this year), starting with this report - April 19, 2010: Tesco Debating Whether to Launch Fresh & Easy Into Northern California This Fiscal Year... or Wait.

We followed the April 2010 report up with this story - June 26, 2010: Tesco Planning to Announce in July When First Northern California Fresh & Easy Neighborhood Market Stores to Open . Three weeks later on July 18 our 'The Inside' columnist wrote this: July 18, 2010: When it Comes to Northern California - its Competitors are Rome Burning and Tesco's Fresh & Easy Neighborhood Market is Nero Playing the Fiddle.

On July 29, 2010 we reported in this story - July 29, 2010: Tesco's Fresh & Easy Neighborhood Market Putting Together List of Managers Interested in Transferring to Northern California - that the wheels were in motion at Fresh & Easy regarding a Northern California launch.

On August 19, 2010, less than three months after we started reporting and writing about the retailer and Northern California, Tesco's Fresh & Easy announced in a press release it planned to open its first eight stores in the region in March 2011, as we wrote about here: Tesco Will Open its First Eight Fresh & Easy Neighborhood Market Stores in Northern California in 'Early 2011.'

Our analysis throughout 2010 (and long before that) was that Tesco should focus first in Northern California on opening the numerous locations it has in the San Francisco Bay Area. It's done just that - as noted earlier 11 of the 13 stores opened in the region so far are in the Bay Area.

We also said (best described in the July 18 column by 'The Insider') that by waiting to launch into Northern California in 2011 rather than doing so earlier, like in mid-to-late 2009 or even 2010, Tesco was late to the party for a number of reasons, including timing its entry two years late when the region's competitive profile had increased considerably compared to 2009.

But our analysis remains that from a strategic perspective, despite being extremely late to the party it was the right move for Tesco to launch in Northern California, with a focus on the Bay Area, rather than continuing to postpone, which among other things would have meant continuing to pay monthly rents on even more vacant building, plus its mothballed distribution center in Stockton, that it currently is. At least 13 of the more than 50 locations the grocer has in Northern California are open and operating.

This brings us to the metro Sacramento market and 2012.

Basically Tesco is left with two choices: Either start opening its numerous locations in the market region next year or continue to keep them vacant and pay for the privilege. It's chosen to do the former rather than the latter, despite the fact the Sacramento and San Francisco Bay Area regions are very different and distinct markets, although they are geographically close and have some similarities.

More expenses, continued price and margin pressures

Tesco CEO Philip Clarke has said the world's third-largest retailer will break even with Fresh & Easy by the end of its 2012/13 fiscal year, which is just 18 months away. The 2012/13 fiscal year ends in February 2013.

But in our analysis it isn't going to happen for a variety of reasons. First off, on the expense side of the ledger Tesco is spending a considerable amount of money on a variety of changes it's making to its existing Fresh & Easy stores, all of which we were the first publication to report on beginning early this year. Tesco and Fresh & Easy have since publicly confirmed all of the changes we reported on.

The major changes Tesco is in the process of making to its Fresh & Easy stores include: remodeling the store bakery sections and adding small in-store bakeries with ovens; moving the floral departments to the front of the stores; and replacing the reach-in style frozen food cases with more modern and energy-efficient upright frozen food display cases with glass door fronts. (You can see photos of the in-store bakery and upright frozen food cases here.)

Other changes include: resetting the health and personal care sections in the stores; removing the fixed location Kitchen Table in-store food sampling stations and replacing them with mobile units; and adding high-quality faux wood floors to some of the units, such as the store in Manhattan Beach, California, which is the first store to get the floors. According to a source in a position to know, the wood floors cost $75,000-$100,000 per-store.

The source says Fresh & Easy plans to install the floors over the existing cement floors in up to one third of its 177 stores, which if it does will cost a few million dollars. That's a wasteful and non-sales generating expense (even if the floors are only added to 10 stores) for a chain losing so much money - $300 million in Tesco's most recent fiscal year ended in February 2011 - not only our analysis but in our experience in the industry as well.

The wood floor, which we've seen at the Manhattan Beach store and is without a doubt of a high quality, actually looks out of place with the rest of the Fresh & Easy interior package, which is spartan and includes warehouse-style shelving and other more minimal design features. When it comes to grocery store interior design, the whole is always greater than the the sum of its parts, even if those parts are high quality and expensive like the wood floors are.

The numerous changes to the existing stores will cost Tesco many millions of dollars at a time when it needs to control rather than increase its expenses on Fresh & Easy Neighborhood Market.

On top of these fresh expenses Tesco continues to pay monthly rent on at least a score of future store locations in California, Nevada and Arizona which it has yet to open, along with its mothballed Northern California distribution center, which sits empty in Stockton except for the security guard out front who keeps watch on the vacant building every day.

In terms of sales and operations, the markets Tesco has its 177 Fresh & Easy stores in are among the most competitive in the United States - and they're getting even more competitive as new grocers enter them - Winco Foods is coming to metro Phoenix, Arizona in 2012, for example - and existing players open new stores - Walmart's major focus in California with its supercenters and Walmart Market, for example - along with the continued growth of Target, Costco, Safeway Stores, Trader Joe's, Whole Foods Market, Sprouts, Sunflower Farmers Market and a couple other grocers in California - for example.

Add in the continuing poor economy - California, where 128 of the 177 Fresh & Easy stores are located has the second-highest unemployment rate (a bit over 12%) in the U.S. after Nevada, for example, and Arizona isn't much better - along with a state government that's broke.

Analysts don't see the state's economy improving much in 2012, although some areas like the San Francisco Bay Area and coastal portions of Southern California are doing better than the state as a whole is.

As a result, the continuing poor economy - particularly in California where all but 49 of the 177 Fresh & Easy stores are but also in Nevada where the grocer has 21 units and Arizona (28 stores) - combined with the heavy competition in those markets means continued pricing pressure, which in turn means Tesco isn't going to be able to raise retail prices on the products it sells in its Fresh & Easy stores significantly enough to add the much needed margin growth required to break-even with Fresh & Easy by the end of the 2012/13 fiscal year end.

Tesco reported a negative 38% margin for Fresh & Easy for its most recent fiscal year ended February 2011. In contrast, to serve as a comparitive illustration Whole Foods Market recently reported a plus-36% margin for its most recently-ended fiscal year. Whole Foods' has about the highest margin of any grocer. But few if any grocery chains can make a profit with a margin under 20%.

This intense competitive environment also makes it difficult for Tesco to reduce or eliminate the regular use of its deep-discount store coupons which offer shoppers up to 20%-25% off their total grocery purchases. Fresh & Easy has most recently tried to reduce the heavy frequency in which it issues the coupons both online and via direct mail pieces to shoppers homes. However when the grocer does so, the stores see a reduction in sales, which is why, based on our monitoring of the coupon distribution, we've recently seen an increase in the frequency in which the grocer is once again issuing the coupons.

Launching in the Sacramento region in early 2012 - a new market with all the expected an unexpected costs such a launch can bring, particularly to a chain like Fresh & Easy which needs numerous stores in a region to open based on its strategic plan - is only going to add to the cost side for Tesco in terms of its attempt to break even in the next 18 months. Therefore, the launch, coupled with the other factors we've noted above, will in our analysis prevent Tesco from breaking even with its U.S. venture by fiscal 2012/13-end.

No break-even in 18 months

In fact, we will offer a prediction. The prediction is between now and the end of fiscal 2012/13, Tesco CEO Philip Clarke will say publicly that the retailer will not meet its goal of breaking-even with Fresh & Easy by fiscal 2012/13-end, perhaps offering as the "primary reasons" Tesco's decision to make the major changes noted in this piece, along with the continuing poor economic conditions in California, Nevada and Arizona.

Such an announcement, if we are correct, could come as early as October of this year, when Tesco announces its first-half fiscal year financial results. The first half of Tesco's 2011/12 fiscal year end this month. Much more likely though - October 2011 is too early in our assessment - if such an announcement comes, it will come in mid-2012 when Tesco announces the results of the current fiscal year which ends in February of next year.

Of course we could be wrong in our analysis. Tesco could break-even with Fresh & Easy as Clarke says it will 18 months from now. If so we will be the first publication to offer our congratulations and say our prediction is wrong.

Can Tesco make a viable business out of Fresh & Easy?

Meanwhile Tesco will launch into the metro Sacramento region at about the same time next year as when Walmart Stores begins opening the first of what it plans to be numerous Walmart Market smaller-format grocery stores.

At the groundbreaking ceremony on Wednesday at the site of the future Fresh & Easy store in Sacramento's Oak Park neighborhood, Tim Mason, Tesco group deputy CEO and CEO of Fresh & Easy Neighborhood Market, will perhaps announce the locations of one or more additional of Fresh & Easy stores it plans to open first in the Sacramento area, along with the Oak Park unit. (We are working on finding out ourselves.)

Mayor Johnson will be there - the popular former NBA all star who sold that very same parcel of land that will house the Oak park Fresh & Easy store to Tesco - and he and the members of the Sacramento City Council will welcome Tesco to their city with open arms.

Members of the Oak Park Neighborhood Association will also be at the ceremony on August 31. They will celebrate the coming of a store they thought would open at least two years ago, along with celebrating the fact they first began trying to lure a grocer to the neighborhood a number of years before Tesco agreed to come with Fresh & Easy in late 2007-early 2008.

Like was the case in San Francisco's Bayview Hunters-Point, where all the local chains like Safeway Stores and others said no, so to did Raley's, Safeway, Save Mart and others say no thanks to putting a store in Oak Park. Tesco said yes. And in our analysis the location is going to be a good one for Fresh & Easy Neighborhood Market, just as we've said Bayview-Hunters Point will be an excellent location for the grocery chain.

But hanging over Wednesday's ceremony and formal announcement by Tesco's Fresh & Easy that's it's headed to California's capital city of Sacramento will be that most important question, which is can Tesco break-even with Fresh & Easy Neighborhood Market by early 2013, and even if it does can the United Kingdom-based retailer go beyond that most basic metric and eventually turn Fresh & Easy into a viable and profitable food and grocery retailing enterprise for the company in America, having invested about $1.5 billion in it so far and sustaining an operating loss since the first stores were opened in November 2007 that's approaching $1 billion?

We've offered our analysis on the first part of the question, predicting Tesco will not break-even with Fresh & Easy by the end of its 2012/13 fiscal year. The jury remains out for Tesco as to the second part of the question, whether or not it can ever make something viable and profitable out of Fresh & Easy.

But if our prediction about Tesco failing to reach break-even by the end of its 2012/13 fiscal year with Fresh & Easy is correct, Clarke will have to address the second part of the question before then. His decision and that of Tesco's board will be: If Fresh & Easy Neighborhood Market isn't at or very close to break-even by then, does it make financial sense to keep on going or will it be time to pull the plug on Fresh & Easy and stop the losses, instead investing the money back home in the UK, in Central Europe (another growth region) or in Asia, which is where Tesco is putting its most major growth focus on over the next few years?