News, Analysis & Commentary: Tesco's Fresh & Easy Continues Moving Closer to the 'Value Propostion' Positioning; This Time in Prepared Foods Category

Pictured above are two -- chicken teriyaki and chicken & broccoli alfredo -- of the six new fresh & easy store brand family size, value-priced prepared meals. Note the "serves 4 for $8" label in the top right hand corner of the packages. We think it's a good value message to include the text right on the package.

The Value-Proposition and Prepared Foods Merchandising

Tesco's Fresh & Easy Neighborhood Market continues to move closer to the value proposition merchandising positioning we first began suggesting for the grocery and fresh foods chain about one year ago. [Read more about it in this March 2, 2009 piece: Fresh & Easy Buzz Redux: Much of the Value Proposition-Based Analysis and Suggestions We've Been Offering Now Being Adopted By Tesco's Fresh & Easy.]

The grocer's latest value-based merchandising move is the introduction on March 18 of a line of six new "family size," prepared meals which are designed to feed a family of four for only $8.

The six new meal items being introduced in the Fresh & Easy stores are:

>Lasagna with Meat Sauce, 44 oz.
>Chicken & Broccoli Pasta Alfredo, 40 oz.
>Spaghetti with Turkey Meatballs, 45 oz.
>Chicken Teriyaki with Rice & Vegetables, 45 oz.
>Chicken & Bacon Macaroni & Cheese, 40 oz.
>Chicken Burritos with Green and Red Sauce, 40 oz.

Additionally, Fresh & Easy marketing director Simon Uwins says the grocery chain will be introducing additional varieties in the value-based, family meals line over the next few months.

At $8 each the family size prepared meals are a value offering. But they are in the same general price range as many similar meal deals offered by supermarket chains like Safeway Stores, Inc. (Vons and Safeway in California, Nevada and Arizona), Kroger Co. (Ralphs, Food 4 Less, Fry's, Smith's in California, Nevada and Arizona) and Supervalu (Albertsons). However, these retailers aren't beating Fresh & Easy on the price-point punch. Some are about even, others are a bit higher on comparative items. The $8 price point is a good one for the items at Fresh & Easy right now, in our analysis.

It's important also to remember that in the current economy, fresh, prepared foods are competing with frozen foods items. Shoppers are putting aside any perceived quality differences between fresh, prepared and frozen (and often they aren't quality differences between the two) if the value of the frozen items exceeds that of the fresh, prepared.

For example, Stouffer's line of premium but value-priced meal entrees like its family-sized meat loaf, macaroni & cheese and lasagna are selling extremely well in the recession. The marketer is promoting the family size items in retailer's advertising circulars at discount prices, along with distributing "cents off" coupons for the items. We've seen the Stouffer's brand family-size frozen items ad-priced in the $6.99 range. They are all in the about 40-ounce package size range.

Sales in the frozen food category, particularly of value-priced entrees and meals, are up over 2006-2007 sales because of the recession.

Fresh & Easy behind the prepared foods value curve

However, at a cost of $2 person, the Fresh & Easy family size meal offerings are a good deal. But the grocer is way behind the curve in introducing value-oriented size and priced prepared foods offerings.

For example, Safeway started offering value-based family meal prepared foods items in the same price range in the summer of 2008, as the supermarket chain saw the demand for such offerings growing because of the recession.

Kroger followed suit at its Southern California Ralphs supermarkets and in its Fry's and Smith's stores in Nevada and Arizona just a couple months later.

Supervalu, Inc. also introduced its "Culinary Circle" value prepared foods line last summer as well. [Related story: March 25, 2009: Supervalu, Inc. Introduces New, Value-Plus-Convenience Meal Solutions Program; Features Refrigerated Case 'Meal Centers' in Multiple Store Departments.]

And Wal-Mart's small-format Marketside grocery and fresh foods markets in Arizona, which feature in-store fresh, prepared foods, started offering a selection of value-priced prepared foods items like macaroni & cheese and meatloaf, among others, in family sized offerings in December of 2008, less than two months after the four stores in Metropolitan Phoenix, Arizona opened in early October. In January of this year Wal-Mart's Marketside added to its value-based, family-sized prepared foods offerings and has been promoting the items regularly in the stores in Arizona this year.

Being a near-last mover rather than a first-mover is something that's been the case with Fresh & Easy from the start. It particularly hurts the chain in the fresh, prepared foods category because it touted itself as the "new leader" in the category during the run-up to the opening of its first stores in November, 2007 -- and ever since.

But it hasn't been. It shouldn't have taken the grocer this long to figure out that value is the place to be when it comes to prepared foods in the current economy, which started going in the tank at least a year ago. Safeway started adapting its prepared foods offering in the value direction in June, 2008, for example.

Our October, 2008 suggestion

Tesco's Fresh & Easy did introduce a new line of mix & match prepared foods items for two, priced at $10, in October, 2008, as we reported and wrote about in this piece: Prepared Foods Category Report: Fresh & Easy Introduces New Line of Mix & Match Prepared Foods; We Report, Offer Some Analysis and A Marketing Thought. However that offering was a convenience one, targeted to couples, than it was a family-based, value offering.

In fact, in that very story on October 31, 2008, Fresh & Easy Buzz suggested that what Tesco's Fresh & Easy needed to do was to create a line of family meals for four, perhaps using the new meal for two mix & match line in part as a basis for that value meal creation and marketing.

Below (in italics) is part of what we said in that October 31 piece:

"Of course the mix and match nature of the new prepared foods line also has utility for families of any size. In fact, because the meals are designed for two, a family of say four can buy two different combinations, say a pasta and side dish combo and a meat and veggie combo, and then share it all family style. Twenty dollars for four is still a reasonable meal deal. Plus there likely will be leftovers.

In fact, it would be a good idea for Fresh & Easy to do some marketing around the new line in that regard. Say offering a mix and match meal deal for a family of four using the 30 items, positioning it around a theme such as: "Family Style Eating at an Affordable Price -- Mix and Match Dinners for Four With Leftovers to Boot

Doing so would be a good way to appeal to larger families (can do a version for six as well), along with encouraging larger single purchases (and a bigger market basket or total ring), in addition to using the "dinner for two theme." We call it "mix and match" merchandising and marketing."

Here is what Tesco Fresh & Easy Neighborhood Market's marketing director, Simon Uwins, said in the March 18, 2009 press release announcing the new six item value-based family meals: "Customers are telling us they are looking for larger sizes to feed their families on a budget. Our kitchen products have been very popular - like our chicken alfredo and macaroni & cheese - so we are introducing portions that are large enough to feed a family of four for only $8."

The recession has gotten so much worse since October, 2008 that our research shows price-points on prepared foods meals for four are hottest at $10 and under. Therefore, we think Tesco's Fresh & Easy has set a good price point on the meals at $8.

Safeway has been offering a couple prepared foods meal deals for four at $8 -to- $10 each week and has been doing extremely well with the items. The supermarket chain generally rotates two different such items each week.

Having the six items available at the $8 price-point in the Fresh & Easy stores everyday is a good move by the grocer, in our analysis.

Cross-merchandising as margin leverage

We noticed the six value-meals well-displayed in two Fresh & Easy stores we visited last week.

We would highlight the six items in the prepared foods refrigerated cases in all the stores even more so though, perhaps even putting a colorful banner of sorts around the item facings to highlight the "family sized" and value-priced" nature of the meal deals. Set the items out from all the others.

We would suggest featuring the six prepared foods items this way in all the stores, with lots of signage demonstrating the value -- cost of only $2 per person for a family of four, compare that to a restaurant meal, as an example.

We also would build small displays on the floor below where the items are featured in the refrigerated cases. These displays would feature tie-in family meal items like napkins, paper plates, a beverage and other related items. At $8 an item the margin on the family meals can't be much. Therefore these cross-merchandising displays will add incremental sales to the purchase. related cross-merchandising works.

For example, if a shopper picks up a package of paper napkins, plates and a 12-pack of soda with an $8 meal deal, that's potentially an added $8 in incremental sales.

The signage on the display needs to tie in to the family prepared foods meal deals above in the refrigerated case. The key words are: "family," "value," "quality," "deal."

A promotional opportunity for Fresh & Easy

We think Tesco's Fresh & Easy is missing a great promotional merchandising opportunity to combine its prepared foods and basic grocery offerings together into a store-wide, value-based promotion.

Here's what we would do: Starting on say May 1 (May Day), we would launch a special four week store-wide promotion using the theme "Dine Out at Home with Fresh & Easy." The four-week special promotional event would bring all of Tesco Fresh & Easy's grocery and prepared foods offerings together in a cross-merchandising promotion.

We would feature lots of prepared foods items, including the six value-priced family size meal deals, for sale during the four weeks at discount prices. We would also feature numerous related basic grocery items, both national brands like Coke and Pepsi, for example, and fresh & easy store brands across all categories, in displays throughout the stores, all under the "Dine Out at Home With Fresh & Easy" theme. Value and fun being the premise.

All of the displays would tie-in to this theme -- prepared foods, fresh foods, grocery and non-foods items alike. Displays would feature beverages and snacks, desserts and paper plates, napkins and beverage glasses. There would be wines cross-merchandised with cheeses. Prepared foods items would have signage designating this theme, as would all the non-refrigerated items throughout the store.

Value priced produce would be included, as would meats.

We also would bring in some special items that fit the dine out at home theme. These could be in and out items that would boost sales and create shopper interest and excitement. For example: Pre-pack shippers of music CD's and DVD's. Simple decorating items for dining out at home like candles and the like. A pre-pack shipper or two featuring board games to play at home for families.

Additionally, we would set up food sampling stations in the stores, out in the aisles. This creates excitement rather than segregating all the food sampling back in the Fresh & Easy stores' "The Kitchen" area, which is removed from the store floor. Sampling in the aisles creates excitement. We would sample the prepared foods items daily, paired with other items.

We would create a "Dine Out at Home With Fresh & Easy" family menu and party guide. Promote it. Create excitement around the theme. The focus being on how to dine out at home in style for little money. A slice of heaven in the recession.

Lost of themed decor and signage in the stores. Everything tied-in to the theme. And the month-long promotion advertised in external media using all the thematic tie-ins.

May Day and the entire month of May marks spring and the prelude to summer, a time of renewal. Tout a renewal of spirit in the recession with the month-long promotion. Make dining out at home exciting and affordable. Showcase the prepared foods offerings at value prices mixed with basic and specialty grocery items all offered at discount prices.

This would be old fashion grocery merchandising and marketing at its finest. It's what Tesco's Fresh & Easy needs. Shoppers love bargains, especially right now. But they also love retail excitement.

Offer a shopper sweepstakes, some in-store giveaways, drawings; a contest in which the customer of each Fresh & Easy store who comes up with the best dining out at home recipe wins a prize, for example. Make it fun. Demonstrate the value for consumers in "Dining Out at Home with Fresh & Easy." Include shoppers in the promotion. Make it interactive.