Fresh & Easy Offers New Definition of 'Double Bagging;' Says Sales of Reusable Bags Has Doubled Since Introducing its 99-Cent Bag in October

Analysis: 'Green' Retail Marketing

Tesco's Fresh & Easy Neighborhood Market said last week its sales of reusable, canvas shopping bags has doubled since it introduced a budget canvas bag for 99-cents in October, proving economists throughout the world right when they say selling a given good or service for a perceived or real low price will often stimulate consumer demand for that given good or service, say beyond the level of such demand for a $2.99 canvas tote bag, which we believe was about the price of the single canvas bag available at Fresh & Easy before it introduced the additional 99-cent budget version.

Fresh & Easy says it introduced the 99-cent budget canvas bag (pictured above at left), which is made from 100% cotton and the grocer says can hold up to 100 pounds, in October, primarily to reduce the number of single-use plastic carrier bags it uses in its 100-plus small-format, convenience-oriented combination grocery and fresh foods markets in Southern California, Bakersfield, California, Metropolitan Las Vegas, Nevada and the Phoenix Metro region in Arizona. That number is high because unlike nearly all other supermarkets and grocery stores in the Western U.S. do, Tesco's Fresh & Easy does not offer paper grocery sacks along with single-use plastic in its stores. No paper or plastic option.

We think its bad business for Tesco not to offer the paper grocery sack option in its Fresh & Easy stores since all who have experience in the Western U.S. food and grocery retailing market know there is a huge segment of consumers who seriously dislike single-use plastic carrier bags, don't often or always bring reusable bags to the stores, like paper grocery sacks, and might just not shop in stores that don't offer the paper option.

Perhaps a chain that has more business than it needs could get by without offering the paper option. However, Tesco's Fresh & Easy isn't in that category, and by not offering the paper bag option, just as is the case by not accepting paper checks, manufacturers' coupons and WIC vouchers from poor mothers, along with not offering at least one or two full-service checkout lanes in the stores, the grocery chain continues to write its own prescription for doing less business than it could, in our analysis.

In the United Kingdom where Tesco is based, supermarkets don't offer paper grocery bags. The retailer brought this practice, as it did its entire British retailing model in our analysis and in the opinion of numerous Fresh & Easy employees, over with it across the pond when it created Fresh & Easy Neighborhood Market, opening the first stores in November of last year. The movement to banish the plastic bags in the UK is even stronger than it is in the U.S. though.

Paper grocery sacks also are easier to recycle in the U.S. Unfortunately few if any cities allow residents to recycle single-use plastic grocery bags in their curbside recycling programs. Therefore most of the bags end up in the regular home garbage can, thereby ending up in landfills rather than being recycled. Paper grocery bags on the other hand are excepted in all curbside recycling programs, as is paper of every type.

The good news from an environmental perspective is, at least in California, that supermarkets over a certain size (including the Fresh & Easy markets) now have recycling bins in-store where shoppers can bring their single-use plastic carrier bags to be recycled. This is by law in California. The law, which also requires these retailers to sell reusable grocery bags, was passed last June in the Golden State. Neither Nevada or Arizona have such a law at present.

Despite believing strongly it's bad business and bad "green" retailing behavior for Fresh & Easy not to offer the paper bag option and only the free single-use plastic bags, we congratulate the grocer for offering the budget reusable canvas bags for 99 cents. And they are a quality bag for that price. The cheaper reusable bags are, the more consumers' will purchase (and hopefully use) them. Of course that's the key; bringing the bags with them to the store. That's the consumer's responsibility and not the retailer's.

We think reusable bags are the ultimate goal because both plastic and paper grocery bags have environmental problems with them, although recycling of the paper bags is so much higher because the infrastructure is better in place for consumers to do so. And yes, we are aware it takes more natural resource inputs to make a paper bag than it does a thin, single-use plastic carrier bag. But the ease of recycling outweighs that in our analysis. Just look on the s and the beaches in America. You will see tons of single-use plastic carrier bags but hardly a paper grocery sack in site.

Numerous retailers -- Wal-Mart, Target, Safeway, Kroger and many others -- are now selling reusable bags for 99 cents to a couple dollars. Target has even been promoting a canvas reusable bag at 50 cents each for the last few weeks in its stores and weekly advertising circular.

It's just a matter of time, especially in California, before laws are passed throughout the U.S. (many cities already have passed them) that either ban single-use plastic carrier bags completely or in what is becoming an increasingly popular law, places a fee of from 5 cents to a quarter per bag on the plastic bags at the store. If shoppers want a plastic bag they have to pay for it under these laws.

Some city governments also are including paper bags in these fee schemes. We think that's a good idea. And we are betting we are going to see a rash of bag-fee legislation by cities and states, not just for green reasons, but also as a way to generate new funds for the cities in these bad economic times.

For example, New York City mayor Michael Bloomberg said last week he plans to initiate a law that would put a fee on single-use plastic carrier bags at every retail store in New York -- and there are a lot of them. He mentioned the revenue would not just be used for environmental programs but also for the general fund.

Earlier this year the city of Seattle, Washington placed a 20-cent per plastic-bag fee on the single-use bags used at supermarkets in the city.

The California State Legislature had a bill before it this year to levy a 25 cent per plastic bag fee at the point-of-purchase. However, because the legislature was unable to agree on a budget until months after its deadline, that bill, along with many others, was never voted on. A version of it is expected to be brought up again next year.

And of course, San Francisco has banned single-use plastic carrier bags completely at larger supermarkets and drug stores. Palo Alto, where Tesco plans to open a Fresh & Easy Market also has placed a per-bag fee on single-use plastic carrier bags. Other San Francisco Bay Area cities are either in the process of enacting plastic bag fee laws or outright bans.

Cities like Manhattan Beach in Southern California have done the same. That city's ban is set to go in effect before the end of this month. Tesco has a Fresh & Easy store in Manhattan Beach. Therefore it will have to stop using the single-use plastic carrier bags. The grocer will either have to offer free paper bags at the store or force shoppers to either bring there own bag or buy one at the store, which won't likely go over very well with most customers.

Los Angeles County will soon revisit legislation it passed last year that would put a fee on each single-use plastic bag distributed at retail. The law was passed with a provision that state if a statewide fee law isn't passed then the county would go forward with its own law. Since that state legislation wasn't acted on this year, Los Angeles County is now considering going ahead with its own county plastic bag fee law.

Whole Foods Markets stopped using single-use plastic carrier bags in its 280 stores in the U.S., Canada and the UK in April of this year, offering just paper grocery bags for free, while pushing reusable bags.

Last week in Canada, that North American nation's retail grocers' trade association proposed a five cent per single-use plastic carrier bag fee scheme because it wants to get out in front of what is going to happen anyway that the Canadian government will soon pass a bill of its own design. Numerous cities in Canada have passed and are working on passing such laws; some to ban the plastic bags completely.

Loblaws, the largest supermarket chain in Canada, announced last week it will on its own start charging shoppers for single-use plastic carrier bags in its stores. [Canada's Loblaw to charge for plastic shopping bags Markets ...]

Fresh & Easy gives away the as bags to customers at every grand opening celebration and as part of each store's one-year anniversary celebration. Since opening its first store in November 2008, the company has given away over 175,000 canvas bags, according to chief marketing officer Simon Uwins.

Uwins says the grocery chain will introduce a reusable shopping bag made out of organic materials this month. It will sell for $2.99, he says.

Fresh & Easy stores also sell what they call "bags for life." These are reusable plastic grocery bags, popular in the UK. They sell for just 20-cents each at Fresh & Easy. The retailer also says it will replace the bags anytime they wear out for no charge, which is a very good deal for consumers.

Fresh & Easy wouldn't say what the sales of reusable canvas shopping bags doubled to from. Was it from 25 bags to 50? 5,000 -to- 10,000? That would be good information to have. But it appears to be proprietary.

However, doubling sales of the reusable bags in general is certainly a good thing from a "green" perspective. But we do believe Fresh & Easy will eventually be forced to offer paper grocery sacks in its stores because of all the single-use plastic carrier bag bans and fee schemes coming down in California, Nevada and Arizona. We expect numerous new laws to hit in 2009.

Therefore, why not get out in front of such laws. We suggest either offering free paper grocery sacks as an option along with the single-use plastic bags, like all of Fresh & Easy's competitors do, or being even bolder and packing all customer grocery purchases in the reusable "bags for life" the grocer currently sells for the reasonable price of 20 cents each. Perhaps say after a year of using those cheap reusable bags as the free default bag at the stores, combined with an aggressive public education program, Fresh & Easy wouldn't have to give too many out for free after that because shoppers would bring them back with them to the store.

Doing this would be innovative, provide a point of differentiation from the competition, as well as allowing Fresh & Easy to avoid using paper sacks but still be able to offer a free alternative to single-use plastic, which the grocer is going to have to start doing in Manhattan Beach, in San Francisco, and elsewhere very soon. It would be a very "green" bagging solution.

About introducing the 99-cent canvas bags in October, Simon Uwins says: "We want to make it easier for our customers to make green purchasing decisions," said Simon Uwins, Fresh & Easy chief marketing officer. "By offering affordable canvas bag options we can encourage customers to reach for a reusable bag instead of one that might end up in a landfill."

We do sincerely congratulate Tesco's Fresh & Easy Neighborhood Market for offering the affordable canvas bags. But the problem with that statement, and with using the 99-cent canvas bag as a green marketing vehicle by using it as a news hook in this press release, is that it is to landfills where most of the single-use plastic carrier bags Fresh & Easy offers as its only free bagging option in its stores go.

In other words, by only offering single-use plastic carrier bags as the free, default bag in its stores, Fresh & Easy is encouraging the filling of landfills as much as is it is trying to discourage that behavior by offering the cheap canvas bags. That poses some risks, particularly when trying to tout the program from a "green" marketing perspective, in our analysis. It's tough to sell, and tough for consumers to buy.

Offering a second alternative like the paper grocery sacks or the "bags of life" for free would make the "green" message much more consistent and much easier to buy, in our analysis and opinion. But make no mistake about it, we do like the 99-cent canvas bags.

More on the Northern California Rural Strategy: An Existing Ford Auto Dealership in Grass Valley, CA Could Become A New Fresh & Easy Market

Downtown Grass Valley, California (pictured above) is considered a model for small towns and cities in the U.S. The city has retained the downtown's historic character as one of California's Gold Rush-era towns while at the same time adding a modernistic touch such as the use of colorful facade awnings.

Upcoming New Markets News: Northern California

Earlier today we wrote in this post, "Despite Postponing its Northern California Launch, Fresh & Easy Continues to Grab New Locations in the Region, Including Going Rural," about Tesco's Fresh & Easy Neighborhood Market signing a lease for a new store location in the Goldtown Plaza Shopping Center in the small (13,732 population) Northern California town of Oroville in Butte County.

In the piece we said, among other things, this signals an interesting and important strategy for Fresh & Easy in Northern California, where the grocer has yet to open a store and has postponed its new market launch, because it indicates the retailer is pursuing a rural sub-region strategy along with its current metropolitan region store location strategy for the Northern California market.

In addition, we suggested in the piece now that Tesco has signed a lease for one of its small-format, convenience-oriented grocery and fresh foods markets in a more rural region in Northern California -- Oroville in Butte County -- you could look for it to do more of the same, along with continuing to pursue its metropolitan region focus in the market.

The Union newspaper, which serves Northern California's Nevada County, north of Sacramento, reports today a Tesco Fresh & Easy market could be going into a location in the Nevada County city of Grass Valley which has for years been home to the city's Ford auto dealership. The dealership is moving to the nearby and larger city of Auburn.

Don Neronde, the co-owner of Grass Valley Ford, 'announced Wednesday he is relocating his Ford dealership to Auburn from Grass Valley at year-end, as was widely expected, but he said in an interview that Fresh & Easy is a leading candidate to build a store where Grass Valley Ford has been located, as well as another store in Brunswick Basin (a part of Grass valley),' according to the story in The Union by staff writer Jeff Pelline.

"It won’t be vacant long,"said Neronde, referring to his dealership at 800 S. Auburn St. in Grass Valley.

Note the potential second Fresh & Easy store location (Brunswick Basin) in the city as well.

You can read the entire report from The Union here.

The story mentions that Rite Aid also is interested in the Grass Valley Ford site. This makes since for two reasons: The Ford dealership is too large for a Fresh & Easy market all by itself and the grocery chain often locates its Fresh & Easy stores next door to a drug chain store like Rite Aid or Walgreens. Each chain could take half of the dealership and remodel the building into their respective stores, something Fresh & Easy has done numerous times with a variety of vacant buildings.

An interesting aside is that the story quotes a Fresh & Easy spokesperson as saying the retailer is just in its "early stages" in Northern California. [The quote: "People from Fresh & Easy are expected to visit the area again later this month, Neronde said. A spokesman for Fresh & Easy said the store’s expansion in Northern California was in the “early stages,” but he pointed out the store had announced plans for 19 sites in the Sacramento region earlier this year.]

Fresh & Easy is far from "in the early stages" in Northern California. Tesco has been signing leases for stores in Northern California since early -to- mid 2007, and originally planned to have its first batch of stores open in the region well before the end of this year.

As we've reported, that target was changed to early 2009. That launch date has now been postponed. Based on our sources we believe the first Fresh & Easy stores in Northern California are likely to open in mid-2009. But that's in flux at the present. [We aren't faulting the reporter for The Union regarding the quote, by the way. He was merely reporting what the spokesperson told him. And from the spokesperson's perspective, we suppose one could say "in the early stages" since no Fresh & Easy stores have yet to open in Northern California.]

Regarding Fresh & Easy potentially going into the Grass Valley Ford Dealership location, we did some checking with sources today, and it's far from a done deal yet. We learned the grocery chain is interested but has yet to sign anything, not even a letter of intent. Perhaps Ford dealer Don Neronde has some strong verbal agreements though, which it does sound like from the optimism or positive attitude he expresses in the story in The Union.

There also are other parties interested in the Ford dealership site. The dealership also isn't currently zoned for a retail food store. That situation could be changed by the city of Grass Valley though.

Grass Valley is an interesting city. It's a small town of about 12,000 residents. Those residents are a mix of natives and transplants, many from the San Francisco Bay Area who have moved to the town because of its natural beauty, counter-cultural nature in many ways, it's strong artistic community, and its low cost of housing (at least a decade ago) compared to the Bay Area. The population has grown by 21% since 1990, which demonstrates the growth from the Bay Area and other region migrants.

The Sierra foothills town, which was one of the places where much gold was discovered during the 1800's California Gold Rush, has an attractive and historic downtown district which you can read about here.

Grass Valley and Nevada County also are tourist destinations. The region also is on the way to the northern Nevada resorts of Lake Tahoe and Reno (gambling, ski resorts, ect.). Therefore Grass Valley, Auburn and other towns in the region draw travelers from the Sacramento region (which is just a little over an hour way), the Bay Area and other parts of Northern California on a regular basis. This greatly benefits the region's restaurants and to a lessor degree food and grocery retailers.

The current population of Nevada County is just over 100,000 residents.

Like Oroville, Grass Valley is much more rural than the metropolitan regions -- the Bay Area and Sacramento/Vacaville -- where Tesco's Fresh & Easy Neighborhood Market has thus far focused its store locations on. Grass Valley and Nevada County are contiguous to Sacramento though (a little over an hour away), and midway between that region and northern Nevada, where Tesco also plans to open some of its Fresh & Easy grocery and fresh foods markets.

Grass Valley and Oroville, which are about three hours apart in very different regions, both are small towns, each having fewer than 14,000 people. Butte County (Oroville) and Nevada County (Grass Valley) both also are small counties for California; Nevada County having just over 100,00 residents and Butte County with just slightly over 200,000.

Obviously Tesco is now interested in the more rural parts of Northern California as well as the metropolitan regions, which makes sense because as we've been writing all along, the retailers strategy, correct or incorrect, is what we call "critical mass," picking select regions -- Southern California, Metro Las Vegas, Nevada, Metro Phoenix, Arizona and now Northern California -- and then creating sub-regions within those markets and opening Fresh & Easy small-format, convenience-oriented neighborhood grocery and fresh foods markets within about 1.5 -to 2 miles from each others in those given neighborhoods.

We will have more to say about this strategy in light of the fact the first batch of Fresh & Easy stores have now been open slightly over a year, in an upcoming piece.

Food Retailing & Organized Labor: Tesco's Fresh & Easy Gets Some Company as the UFCW Union Launches Campaign to Unionize Wakefern's PriceRight Banner

Southern California-based Tesco Fresh & Easy Neighborhood Market no longer is the only non-union food and grocery chain in the U.S. to be the subject of a direct, focused and aggressive campaign by the United Food & Commercial Workers (UFCW) union to unionize its chain's store-level employees.

On Friday the UFCW launched a major campaign to unionize store workers of the PriceRight discount supermarket chain, which is owned by Elizabeth, New Jersey based Wakefern Food Corp., the largest retailer-owned food and grocery cooperative in the United States.

Wakefern operates supermarkets in the eastern U.S. under two banners, PriceRight, which are price-impact, discount supermarkets, and ShopRight, which are more conventional supermarkets with a bit of an upscale flair.

The retail and wholesaler food co-ops ShopRight banner stores are unionized. However, the PriceRight banner stores aren't.

The UFCW union kicked off it campaign against Wakefern's PriceRight banner on Friday at a store in Providence, Rhode Island, where about 100 demonstrators picketed against the non-union status of the stores, Fresh & Easy Buzz has learned. The pro-union demonstrators held signs and distributed UFCW literature to store employees and shoppers.

Workers at the Providence store, and employees at a couple other PriceRight supermarkets, have expressed a desire to join the UFCW union like the workers at their sister banner ShopRight already are members of, according to UFCW spokesperson Amber Sparks. Therefore the union, which represents 1.3 million supermarket clerks in the U.S., Canada and Puerto Rico, decided to launch the unionization campaign at the Providence, Rhode Island PriceRight supermarket beginning last Friday, she says.

The UFCW's Sparks adds that after the workers expressed this desire to become unionized, Wakefern began distributing anti-union literature to their store employees, which further intensified the UFCW's decision to launch the campaign.

One of the reasons the PriceRight employees have said they want to join the union is because many of them are employed part time and therefore aren't eligible for Wakefern's health insurance plan, the UFCW's Sparks says. Under UFCW contracts with U.S. supermarket companies, part time as well as full time store-level workers are eligible for health insurance, which is paid primarily by the employer but also partially paid by workers through their union dues.

The UFCW also argues that since the ShopRight employees are unionized there exists a disparity between the workers at those stores and the PriceRight non-union supermarkets owned by the same company --Wakefern.

Wakefern Food Corp. did not have a reply to an inquiry we made regarding the UFCW campaign as of our press time today. The retailer-owned food cooperative hadn't issued a statement about the campaign as of the end of business today either.

The UFCW union's Amber Sparks says the PriceRight unionization campaign will be expanded in the coming days and weeks to other stores, both PriceRight and ShopRight units, in addition to the Providence Rhode Island supermarket.

Wakefern is owned by 43 members who individually own and operate the PriceRight and ShopRight banner supermarkets. Currently there are about 213 stores operating under the two banners. The PriceRight discount supermarkets and ShopRight supermarkets are located in New Jersey, New York, Connecticut, Pennsylvania, Rhode Island, Massachusetts and Delaware.

The retailer-owned cooperative has 2007 sales of about $10 billion.

Wakefern serves as the distribution, marketing and merchandising arm of the company. The food cooperative says the 213 stores serve over 4 ½ million customers weekly in their respective markets.

Based out of its headquarters in Elizabeth, New Jersey, Wakerfern has 2.5 million square feet of warehousing and distribution space, according to the company's Web site. It's transportation fleet is one of the largest private fleets on the east coast of the U.S. It consists of 400 tractors and 2,000 trailers, and traveled more than 35 million miles in 2007, the Web site says.

The first PriceRight discount supermarket opened in just 1995.

The PriceRight discount supermarkets average only 35,000 square feet and size, offering a limited assortment (compared to other discount supermarket chains which are generally much larger in size) of fresh foods and groceries positioned at everyday low prices.

Fresh produce is a major feature of the PriceRight stores. Each store's produce department averages 6,000 -to- 7,000 square feet, which represents about 20% of the total store's square footage. That's a high percentage compared to the supermarket industry average.

The independently-owned discount supermarkets operate on a no frills-type philosophy similar to SuperValu's Sav-A-Lot and Aldi's small-format discount stores. Sav-A-lot and Aldi stores are about half the size of the PriceRight discount supermarkets though, as are Tesco's Fresh & Easy Neighborhood Market stores.

An example of PriceRight's no-frills merchandising and operations philosophy is that the stores encourage shoppers to bring their own shopping bags. If a customer doesn't do so they must pay a nominal fee for each paper or plastic grocery bag the store uses to sack the shopper's grocery purchases in is charges the customer at checkout.

The stores also offer a limited assortment of grocery products. These include both national brands and store brands under the PriceRight private label brand.

The PriceRight banner's marketing slogan is: "To Offer Impossibly, Inconceivably, Incredibly Low Grocery Prices."

The UFCW's launch of its campaign to unionize store-level employees of Wakefern's PriceRight banner comes less than a week after Democratic candidate, and now President-Elect, Barack Obama won the Presidency of the United States by a substantial majority of votes.

As we wrote about in this November 4 election day story, "U.S. Organized Labor, Including the UFCW Union, is Feeling Good Tonight About A President Obama and Stronger Democratic Majority in Congress, "America's organized labor movement, including the UFCW, has a new bounce in its collective union organizing step following the victory of Barack Obama, along with the majority Democrat victories in the U.S. House of Representatives and U.S. Senate.

President-Elect Obama has said he favors the "Employee Free Choice Act," legislation supported by the majority of House and Senate Democrats. The act includes what's called the "Card Check Provision," which allows non-union company employees to merely check a "yes" box on a card if they want union representation rather than go through the long secret ballot voting process which is current U.S. labor law.

Organized labor is the major proponent of the "Employee Free Choice Act." The legislation passed the House by a majority but lost in the U.S. Senate by just two or three votes in 2007. Even if passed, President Bush, who opposes the measure, said he would have vetoed the act, preventing it from becoming law. He returns to Crawford, Texas as a private citizen in 72 days though, after Barack Obama is inaugurated in late January, 2009.

However, with a more pro-organized labor President, Barack Obama, who says he supports the legislation, along with a clear majority in the House and near (and possibly solid) veto-proof majority in the Senate, the unions, including the UFCW, feel sure the legislation can be passed and signed by the new President in 2009.

The majority of U.S. corporations and small businesses oppose the "Employee Free Choice Act," as do such trade organizations as the Food Marketing Institute (the supermarket industry trade group), the National Association of Retailers and the U.S. Chamber of Commerce, among others.

As we wrote about in this piece on October 28, "The UFCW Union, Tesco's Fresh & Easy, U.S. Labor Relations, and Next Week's Presidential and Congressional Election," the UFCW plans to organize numerous non-union supermarket chains beginning now and in the coming years.

In addition, we've been reporting and writing all year about the hope by the UFCW, which is one of the reasons the union worked so hard to get Barack Obama elected President even though they didn't support him in the Democratic Party primary, that if a Democratic President and Democratic majority won big in November, which they have, it, along with the other U.S. labor unions, would be able to get the "Employee Free Choice Act" passed through Congress and signed by a President Obama.

Based on recent comments by U.S. House of Representatives' Democratic Speaker of the House Nancy Pelosi, it sounds like the House will bring new legislation on the free choice act up either early in the 2009 session or towards the middle of the year.

With a now clear Democrat majority in the House of Representatives and at least 57-58 current (plus the two Senate seats still held by Obama and VP Joe Biden which the Democratic governors of both Illinois and Delaware will appoint Democrats to soon) Senate seats, which is a majority, it appears if it is brought up for a vote in 2009, which is very likely, the "Employee Free Choice Act" will pass by a majority in both houses.

The only thing Senate Democrats fear is if they don't end up with a 60 seat majority, the Republicans can filibuster the legislation, preventing it from passing. With a sure 59 seats (57 at present plus the Obama and Biden seats), but not 60 yet (there still are three close Senate races undecided though), the Democrats would have to get at least one Republican or one or two of the independents in the Senate to vote with them, which is a distinct possibility. One of those independents is former Democrat Joe Lieberman. He voted for the "Employee Free Choice Act" bill last year.

Meanwhile, we expect to see the UFCW announce a major campaign to unionize yet another U.S. supermarket chain either before this year is out or early in 2009.

The union has been trying for years to unionize Wal Mart, Whole Foods Market, Inc. and Trader Joe's. However the UFCW doesn't have strong, active campaigns targeting those three chains presently, like it does focusing on Tesco's Fresh & Easy Neighborhood Market and now Wakefern's PriceRight banner.

Additionally, there are a few other non-union chains in the UFCW's direct line of fire. Stay tuned to Fresh & Easy Buzz to find out which chain's those are.

Sacramento's Oak Park Neighborhood Association Files Appeal On Design of Proposed Neighborhood Fresh & Easy Store; Hearing Set For Oct.15

Upcoming New Markets News Report: Northern California - Sacramento

Dustin Littrell, a member of the Oak Park Neighborhood Association and a resident of that Sacramento, California neighborhood where Tesco plans to build one of its 19 confirmed Fresh & Easy small-format, convenience oriented combination grocery and fresh foods stores in the Sacramento Metropolitan region, has filed a design review appeal on behalf of the group with the city over the store's design and related locational elements. The Sacramento-area Fresh & Easy stores are set to begin opening in 2009.

The appeal prevents Tesco's Fresh & Easy Neighborhood Market from doing any work on the site in the Oak Park neighborhood at Broadway & 34th until a hearing is held by the city of Sacramento Design Review Commission and a decision is made on the appeal, according to Matthew Sites, the design review team lead on the development for the city.

The neighborhood association met earlier this year regarding the design of the Fresh & Easy store in Oak Park, which is to be built on land owned by former NBA basketball star and current candidate for Mayor of Sacramento Kevin Johnson, as we've reported and have written about previously in Fresh & Easy Buzz.

Mr. Johnson faces incumbent Sacramento Mayor Heather Fargo in a winner take all election on November 4.

Kevin Johnson was born and raised in Sacramento's Oak Park neighborhood which historically has been a low-income neighborhood but is going through a gentrification process. When Mr. Johnson returned to live in Sacramento after retiring from the NBA a few years ago, he started his own development company, which included a non-profit community development division. He also founded the HOPE foundation non-profit for youth which is headquartered in Oak Park. Johnson also owns numerous rental houses and vacant land in the neighborhood, including initially owning the property the Fresh & Easy store is to be built on.

The outcome of the meetings held earlier this year by the Oak Park Neighborhood Association was a decision by the group to prepare its own version of what they wanted the Oak Park Fresh & Easy store to look like in terms of how it would and should fit into the style and scale of their neighborhood.

The neighborhood association then created what they call the "community's plan" for the store.

At its July 3 Oak Park Neighborhood Association meeting the plan was presented to the members in attendance and "was chosen unanimously by the members present over the Tesco Fresh & Easy Neighborhood Market plan" and design for the store in the neighborhood, Mr. Littrell told Fresh & Easy Buzz. A professional designer who lives in the neighborhood and is a member of the Oak Park Neighborhood Association then created a professional drawing of the group's design for the neighborhood Fresh & Easy store.

Mr. Littrell says the Oak Park Neighborhood Association met with representatives of Tesco's Fresh & Easy Neighborhood Market and presented the association's "community plan " to them. The company disagreed with the neighborhood residents version. The Oak Park neighborhood group then revised the plan, according to Mr. Littrell, taking into consideration some of the things in the plan that the Tesco Fresh & Easy representatives said they disagreed with from their perspective.

The neighborhood group then met with the Fresh & Easy corporate representatives a second time, presenting the revised plan to them at the meeting and hoping for some sort of compromise, according to Mr. Littrell and others who were in attendance.

Tesco's Fresh & Easy rejected the neighborhood group's revised plan, stating they decided to go with their original plan, which is the Fresh & Easy built from the ground up prototype store.
Tesco Fresh & Easy Neighborhood Market representatives then presented their original plan with some minor changes such as landscaping and a couple others to the city of Sacramento Design Review Board. That plan for the Fresh & Easy store was approved by Bill Crouch, who is the city of Sacramento's Design Director.

According to Mr. Littrell and other members of the Oak Park Neighborhood Association, the chief concerns the neighborhood residents have about the Fresh & Easy store design include: the store's size or footprint; the way it's located (the facing to the street) on the lot; the parking layout; and how the store area is landscaped. Each of these issues was addressed in their group's "community plan" for the neighborhood's Fresh & Easy grocery market. Fresh & Easy Buzz has read a copy of the neighborhood groups design plan.

The city of Sacramento has a design review process in which citizens like Mr. Littrell and groups such as Oak Park Neighborhood Association can file a formal appeal with the city's Design Review Board if they feel their concerns haven't been satisfied in meetings with developers or companies and businesses proposing new commercial developments like the Fresh & Easy grocery store in the Sacramento neighborhood.

Mr. Littrell filed such an appeal against the approved design of the Oak Park Fresh & Easy store. He says he did so, with the backing of the Oak Park Neighborhood Association's members, because at this point it is the neighborhood residents' only recourse.

A hearing on Mr. Litrell's and the group's appeal was set by the city of Sacramento Design Review Board for September 17. However, according to Matthew Sites, the board's team lead, Tesco's Fresh & Easy requested the hearing be postponed until October 15, which the city's Design Review Board agreed on, according to Mr. Sites in a letter he sent to Mr. Littrell.

The new hearing has been set by the Design Review Board for October 15.

Along with representatives from Fresh & Easy and the Oak Park Neighborhood Association headed up by Mr. Littrell, representatives of Holloway Land Company, the developer of the parcel where the Fresh & Easy store is going in the neighborhood, also will attend the October 15 appeal hearing, according to the the design board's Matthew Sites.

Once each side is heard at the appeal hearing, the city of Sacramento Design Review Board will then weigh the Oak Park Neighborhood Association's arguments against the existing Fresh & Easy store design plan, along with those of Fresh & Easy in favor of its original plan, then arrive at a determination. Since its an appeal, the neighborhood group probably needs to make a stronger argument against the plan than Fresh & Easy likely has to make for it, since the city department previously approved the Fresh & Easy plan.

Sacramento's Oak Park neighborhood currently isn't served by a grocery store that offers basic groceries and fresh foods at affordable prices. Members of the neighborhood and Sacramento city officials have been trying for a number of years to bring such a grocer to Oak Park. When it was announced earlier this year that Fresh & Easy would build a store at the location, the news was greeted with much fanfare initially in the neighborhood, and city officials took credit for helping to bring the Fresh & Easy grocery store to the "food desert" neighborhood.

The big question now though is if Fresh & Easy wins at the appeal hearing and goes forward and builds the Fresh & Easy store in the neighborhood as planned using its original design without compromising with the neighborhood residents, what sort of loss of good will might that create in the neighborhood for Fresh & Easy?

For example, might residents of the neighborhood boycott the market because they feel it's design, street facing, parking and landscaping don't fit into the neighborhood properly? Such a boycott could hurt store sales dramatically, as well as become a major negative from a community and public realtions perspective.

Additionally, Mr. Littrell and other members of the neighborhood group argue the way the Fresh & Easy plan is at present creates a traffic safety problem. Could this become a major issue if there isn't some sort of compromise between Fresh & Easy's position and that of the neighborhood residents who desire changes in the store's design and siting, including some traffic mitigation measures?

The issue is a serious one from a local Sacramento and neighborhood perspective. Oak Park is one of the city's oldest and most historically rich neighborhoods. Many of its current residents moved into the neighborhood because they want to be part of turning it around. They've purchased abandoned houses and remodeled them. Other residents have started small businesses in the neighborhood.

Volunteerism also is big in Oak Park, ranging from arts programs for kids to other neighborhood-centered programs. Neighborhood localism and an appreciation for the neighborhood's history and culture is very important to most Oak Park resident and can be seen in various ways throughout the neighborhood, including public murals and in paintings and photographs in public buildings and businesses.

We will be following up on this story, reporting anything of interest prior to the appeal hearing on October 15, as well as reporting on the outcome of the hearing itself.

This is the first Fresh & Easy store development thus far we are aware of that's been opposed by a neighborhood group. A group of residents and city officials in Southern California's San Fernando Valley did recently oppose the selling of beer and wine by a Fresh & Easy store in their neighborhood. Fresh & Easy recently stopped selling beer and wine at that store, which is the only one of the current 90 stores that doesn't offer those beverages for sale.

[Note: The letter regarding the continuance of the appeals hearing from September 17 -to- October 15 is at this link: Broadway and 34th Continuance.pdf (459KB).]

'The Promotional Pundit:' How Wal-Mart Can Use its Supercenters to Create Customers For its New Small-Format Marketside Stores in Arizona

Pictured above is a 200,000 square foot Wal-Mart Supercenter in the Phoenix, Arizona Metropolitan area. There's plenty of room inside the mega-stores for a 400-600 square foot 'Marketside' promotional kiosk.

We've been discussing the theme in Fresh & Easy Buzz that Wal-Mart, Inc.'s new Marketside format and stores -- the first four which opened officially on Saturday in the Phoenix, Arizona area cities of Gilbert, Chandler, Mesa and Tempe -- are a different retail animal from a strategic positioning standpoint than Tesco's Fresh & Easy stores are because for Wal-Mart Marketside is just one part of a four-format (Supercenters, Sam's Club, Neighborhood Market supermarkets and now Marketside) food and grocery retailing retail format strategy while Fresh & Easy is currently a single-play, single-format strategy in the U.S. for Tesco.

For example, we discussed the theme as part of an observational, analysis and commentary piece in the Blog published yesterday: "Wal-Mart's Marketside is More Than the Sum of the Parts of its Other Formats; While Time and Consumers Will Judge, We See the Format As A Stategic Fit."

In this piece today we outline and explain what we believe is a powerful marketing and merchandising aspect and tool of Wal-Mart's multi-format food and grocery retailing strategy which the retailer could use to not only create what we believe could be thousands of new customers (trial) for its four Phoenix region Marketside stores, but also use as an ongoing high-impact, low-cost marketing and cross-promotional tool which leverages its existing resources.

Those specific existing resources are the Wal-Mart Supercenter stores located in and near the four cities where the Marketside grocery and fresh foods stores are located.

Wal-Mart has about 70 Supercenters currently open and operating in Arizona. Additionally, there are a number of these Supercenters in and around Gilbert, Chandler, Mesa and Tempe, the four cities where the new Marketside stores are located.

Each Wal-Mart Supercenter is a form of media in and of itself in that tens of thousands of shoppers visit a typical Wal-Mart Supercenter each week. That's why so many consumer packaged goods marketers use (and pay to do so) Wal-Mart as their in-store advertising and promotional medium -- point-of purchase displays, brand signage, in-store brand videos, ect. It's also why Wal-Mart uses what's referred to as in-store shopper marketing so frequently. This essentially is using the store as the marketing medium as we described above.

With that introduction to the premise, here is one marketing and merchandising campaign we would launch right away for the four Phoenix region Marketside stores using the various Wal-Mart Supercenters located in and around the four Phoenix area cities.

The Marketside Supercenter Kiosk Campaign

First, we would install a "Marketside Kiosk" in every one of these nearby Supercenters. The kiosk would be about 400 -to- 600 square feet in size and located in a promenant part of the Wal-Mart Supercenter. Many Supercenters have space in the front of the stores designed for such promotional purposes. So in most cases that's where our kiosk would go.

The design of the in-Superstore Marketside Kiosk would mimic how the Marketside stores look essentially in terms of graphics and the like. It would be a mini faux Marketside store if you will.

The focus of the kiosk would be informational -- with brochures about Marketside, coupons to be used at Marketside handed out and related informational pieces. The kiosk would have a person working in it at all store hours. It also would be sensual -- tastes of Marketside preapred foods items being sampled in the kiosk.

Additionally, the Marketside in-Superstore kiosk would focus primarily (but not exclusively) from a merchandising or product selection aspect on the prepared foods offerings at the Marketside stores.

Prepared foods

For example,there would be a service refrigerated case in the kiosk where a person would hand out free samples of a changing selection of the various fresh, prepared foods offered in the four Marketside stores.

Mini mock-up

The kiosk would also have some mock shelving and such with a representative selection of products sold in Marketside so as to create that "Mini Marketside" store effect for the kiosk as we described earlier. Doing so also provides and reinforces the informational purpose of the in-Supercenter Marketside Kiosk.

Cross-promotional tool

We also would use the kiosk (and parts of the Supercenter) as a cross-promotional tool.

For example, we would place point-of purchase signs at every checkout lane in the front-end of the Supercenters. These signs would tell customers checking out that if they purchased $25 or more at the Wal-Mart Supercenter they could come over to the in-store Marketside Kiosk with their purchase receipt and receive a coupon good for free prepared foods items (say a $6 dinner entree) at one of the four Marketside stores.

We would run this promotion say twice a week for a month to start to create impact. Also, doing so on a more frequent basis could get expensive.

This in-store promotion does two things. First it drives shoppers over to the in-Supercenter Marketside Kiosk. Second, it ties-in what they purchased at the Supercenter with what they now can get for free at Marketside. We think it's a safe bet the majority of the Supercenter shoppers aren't going to have been previously aware the Marketside stores exist. They would be with this in-store promotion. They also sould spread the news through word of mouth advertising.

The cross-promotion is all about creating awareness of -- and driving consumers to -- one or more of the Marketside stores. Since you are dealing with existing Wal-Mart shoppers under the Supercenter roof, that's an additional bonus, since there's an implied loyalty to Wal-Mart by virtue of the fact the shoppers are shopping a Supercenter.

A 'Taste of Marketside'

Another in-Supercenter promotional event we would hold, using the Marketside Kiosk as the central organizing principle and marketing vehicle in-store, is a "Wal-Mart Supercenter Taste of Marketside."

We would pick a Saturday in which we would bring in selected employees from all four of the Arizona Marketside stores to the nearby Supercenters. Sampling stations would be strategically set up throughout the Supercenter -- from the produce department to the automobile parts department -- where prepared foods items from Marketside would be sampled to Supercenter customers by the visiting Marketside store employees. Of course, as part of the tasting the employees would hand out Marketside brochures, coupons and other promotional goodies to Supercenter shoppers, along with the various "tastes of Marketside" in the form of the prepared foods samples.

Each shopper also would receive a raffle ticket from the folks at the sampling stations. We would hold a drawing every 30 minutes in which a $25 gift certificate for free goods at the Marketside stores would be given away.

In order to get in the drawing, the shoppers would have to bring their raffle ticket to the in-Superstore Marketside Kiosk. That's where the raffle would be held. The drawing would take place in the kiosk and the winner announced each 30 minutes over the store's public address system. This would serve to not only create excitement but bring the shoppers back to the kiosk for a second look at Marketside. (they also need to return to the kiosk to get their coupon when they win the raffle.) It also makes shoppers linger longer -- and perhaps make additional purchases -- in the Supercenter. That's promotional synergy.

Synergy

Such promotional campaigns as we describe above are all about creating synergies. And only multi-format retailers can do so in the way we describe.

Additionally, the promotion is all about the "piggy back effect." That is using the established "big guy" (the Wal-Mart Supercenter) to assist the new, fledgling "little guy," (Marketside). Of course because of the synergies, the "big guy" benefits from assisting the "little guy," which is how it should be in muti-format retailing cross promotions, as well as it should be with life in general.

Marketside Kiosk as central promotional element

The Marketside Kiosk is the central promotional element -- and glue -- of this in-Supercenter cross-promotional campaign. The actual tactics we listed and detailed are far from the only ones that can be used once the kiosk is set up in the Supercenters. Additional promotions can be created, as well as having additional promotions feed off the ones we described.

The store is the medium, the kiosk the message

The store (Supercenter) is the marketing medium and the Marketside Kiosk is the message.

Think of it as just another aspect of shopper marketing. But instead of promoting brands and products in-store, you're promoting one of Wal-Mart's other formats -- it's newest one and the one that is different from all the others because of its "food-centric" premise, Marketside.

A promotion like this, which is cheap and uses existing resources (the Supercenters), can only be done by a multi-format retailer, as we mentioned earlier. You've got to have more than one format and the stores to do it.

We think its powerful because of the captured consumer audience that exists in the Supercenters, the pleasure shoppers get from food sampling in-store, the synergies it creates for both Marketside and the Supercenters, and a number of other high-impact reasons.

Most important, it will create much awareness about and drive lots of new customers to the four new Marketside stores in the four Phoenix Metro region cities. And once that phase of the in-Supercenter campaign is over, the kiosk can easily be used if desired for various promotions designed not only to generate new custoemrs for Marketside but also to retain them, along with coming up with various ways to assist in increasing the market basket sizes at the Marketside stores.

Think of it using a trade show analogy as well. The Wal-Mart Supercenters are the trade show floor, the Markeside Kiosk is the trade show booth, and the Supercenter customers are all prospective customers for the trade show's (in this case Marketeside) product, which is being offered in the "booth."

After all, the "big guys' (Supercenters) should always be the first in the family (Wal-Mart, Inc.) to give an assist to the "little guy," (Marketside). And with such synergies in play, that "big guy" will gain additional benefits for giving his smaller cousin (Marketside) that helping promotional hand.

Coming soon: What Tesco's Fresh & Easy can do counter-promotionally as a single-format retailer.

News & Analysis: Employees At Two More Fresh & Easy Grocery Stores Could Soon Request UFCW Union Recognition From Tesco's Fresh & Easy

Employees of at least one and possibly two additional Fresh & Easy grocery stores could soon request formal recognition from the company to become union stores. Beyond that though, what might a union contract between Fresh & Easy employees, the UFCW union and Tesco's Fresh & Easy Neighborhood Market actually look like?

On September 17, we wrote and published this piece about store employees at a Tesco Fresh & Easy Neighborhood Market grocery store in Huntington Beach, (Southern) California formally requesting union representation at their store. The employees sent a letter to Fresh & Easy Neighborhood Market CEO Tim Mason requesting this formal union recognition and affiliation with the United Food & Commercial Workers (UFCW) union.

Thus far, Tesco has not replied to the employees letter. A Fresh & Easy Neighborhood Market spokesperson has said the company is evaluating the letter and request. However, there has been no public statement to date on the Huntington Beach store employees request to be recognized as a union shop from either Tesco Fresh & Easy CEO Tim Mason or Tesco PLC. CEO Terry Leahy.

Fresh & Easy Buzz has now learned employees of two more additional Fresh & Easy stores could soon be making a similar request to Tesco's Fresh & Easy Neighborhood Market to be recognized as UFCW-affiliated union stores. Both of the stores are located in Southern California.

At least in one of the two stores, the initial impetus for generating union interest among employees came from a UFCW member who has been working at that store for many months, which is similar to the tactic the UFCW used at the Huntington Beach store, as we reported in our September 17 story.

In that instance, Graham Ozenbach, a UFCW member on leave from his job at a Southern California Vons supermarket (Vons is owned by Safeway Stores, Inc. and is a unionized chain), had been working undercover at the Huntington Beach Fresh & Easy store since December, 2007.

In addition to Mr. Ozenbach, there are additional UFCW organizers working in Fresh & Easy grocery stores as part of the union's strategic plan to unionize the grocery chain's store-level employees.

Employees at one of the two additional Fresh & Easy stores could request within weeks to be a union store in the same way the Huntington Beach store workers did about two weeks ago.

The other Fresh & Easy store is not as far along in terms of there being a consensus among store employees to do so.

Should employees at a second and possibly third Fresh & Easy grocery store request formal UFCW union affiliation from Tesco's Fresh & Easy Neighborhood Market, it likely will increase the pro-unionization pressure on the retailer, since having employees at just one store (Huntington Beach) do so could allow Tesco to argue its merely an exception -- that employees at the grocery chain's other 86 stores aren't asking for it. But having employees at a second and then third store request union status begins to look more like a movement or a trend towards the unionization direction.

UFCW organizers know getting employees at a second Fresh & Easy store to request union recognition is key, which is why they are working very hard to do so.

U.S. labor laws allow Tesco to deny the request by the Huntington Beach store employees -- as well as by employees at any other Fresh & Easy market -- to be recognized as a UFCW-affiliated union store.

If Tesco does deny the request, the store employees then must, with the UFCW's assistance, submit a petition for unionization. Once that is done, the store employees can then hold an open ballot vote. If a simple majority of store-level employees vote in favor of joining the UFCW in that election, the store then will be certified as a union shop under U.S. labor regulations and laws.

Still would need a contract

However, if passed and unionization is certified, that doesn't mean the Fresh & Easy employees would automatically start getting the same pay and benefits workers at unionized Southern California supermarket chains like Vons, Ralphs, Albertsons, Stater Bros and others get.

Instead the UFCW and Tesco's Fresh & Easy Neighborhood Market would have to negotiate and agree on a labor contract between the two parties. This can be a very long and complicated -- as well as contentious -- process.

In Southern California, as in most parts of the U.S., the region's supermarket chains generally operate under the same contracts with the UFCW. When a previous contract is up, the union usually negotiates with a region's top two or three chains. Once those chain's agree on a new contract with the union, the region's other chains and unionized independents generally adopt that contract as well.

We say generally because in the last round of UFCW-supermarket chain negotiations in California, it was two regional chains -- Stater Bros. in Southern California and Save Mart in Northern California -- that were the first to sign contracts with the UFCW ahead of Safeway Stores, Inc. and Kroger Co. (which owns the Ralphs chain in California), which are the two largest unionized supermarket companies in California.

Different formats equal different job descriptions

Since there are major qualitative format and operational differences between Tesco's Fresh & Easy and all of the unionized supermarket chains in California, we expect if Tesco does ultimately allow its store-level employees to be represented by the UFCW, the Tesco-UFCW contract will have to look different than the union's current Southern California supermarket chain contracts look.

All of the unionized supermarket chains and independents in California generally have the following in common: They are standard-sized (and larger than standard) supermarkets; they offer full-service checkout and bagging for customers; carry an extensive selection of products requiring lots of hand stocking of shelves by employees; cut meat from primal cuts into case-ready cuts right in-store; and merchandise bulk produce (with some pre-packaged), which requires lots of prep work by store produce department employees.

On the other hand, Tesco's Fresh & Easy grocery markets have self-service customer checkout. Store employees are instructed to assist customers with the checkout if they ask. But cashiering isn't a major part of a Fresh & Easy store employees' job description like it is for employees who work in a unionized supermarket.

Additionally, all of the fresh & easy store brand grocery products, which represent about 60-65% of all the grocery category products merchandised in the stores, arrive at the Fresh & Easy stores from its distribution center in cases that are "shelf-ready."

Rather than having to cut open each case and stock it on the shelf as is the case at unionized supermarkets, the Fresh & Easy store employees zip open the case and stock the full case onto the store's warehouse-style shelving. There's no taking an item out of the case one at a time and stocking it on the shelf as is commonly the case at unionized supermarkets, with the exception of those unionized warehouse format stores (which are a small percentage) that use tray packing.

The Fresh & Easy store employees do have to traditionally cut open the non fresh & easy brand grocery product (about 35% of the products) cases. But they too are tray-packed on the shelves, which requires far less work and time than hand stocking does.

All fresh meat items, and about 95% of all of the fresh produce items, arrive at the Fresh & Easy grocery markets pre-packaged. All the store clerks do is open the cases and stock the meat and produce cases with the already packaged products.

As such, Fresh & Easy stores have no departmental structure like the unionized supermarkets do. These stores -- Safeway, Vons, Ralphs, Stater Bros. Albertsons and the others -- operate the meat and produce departments departmentally. Meat department workers just work in that department, same with produce, bakery, general merchandise and deli. The largest department being grocery, which includes checkout and essentially everything else except the departments mentioned above.

The meat department workers in the union supermarkets cut meat from boxed primal cuts (very few if any break down entire sides of beef anymore, although some still do) into roasts, steaks and other case-ready items, grind meat like hamburger, and do other cutting tasks, along with wrapping most of the cuts in the meat department. [There is a separate classification at lower pay for "meat wrappers." many of the meat cutters wrap as well as cut though.]

Additionally, many of the union supermarkets have full-service meat cases along with self-service, which mean customer service can be another part of the job.

Unionized produce department workers also do much prep work, unloading cases and bins of produce, trimming and preparing bulk produce before stocking it in the department, and building fresh bulk produce product displays in the stores.

The work of the majority of union meat cutters and produce clerks therefore is far different and considerably more extensive than what workers at Fresh & Easy stores do regarding the two fresh categories. This is by Tesco's design of the Fresh & Easy format, which has at its core centralizing much of the replenishment functions at its distribution center, thereby minimizing store labor.

What a potential conract might look like

As a result of these differences in format between Fresh & Easy stores and the vast majority of unionized supermarkets in the U.S. -- which results in Fresh & Easy store workers having qualitative and quantitative differences in their job descriptions and duties compared to the majority of unionized supermarket chain workers -- it's our analysis that if Tesco does eventually go union with Fresh & Easy -- as it is union-affiliated in nearly every other country in the world where it has stores -- it's probable Fresh & Easy store workers will operate under a different contract than the UFCW has with the region's unionized supermarket chains.

It's also probable such a contract would include lower wages than the Vons, Ralphs, Stater Bros. and other supermarket chain employees receive, along with less of a health benefit package than these union supermarket workers get under the contracts with these chains.

There already is precedent for this. The UFCW has different classifications (we mentioned a couple earlier) with the unionized supermarket chains mentioned above.

The main union classification is for a grocery clerk, the primary job description of which is to check out customer purchases at the front end (grocery checkers) of the store and to stock shelves (grocery stockers) and do related merchandising duties. These are the grocery clerks, along with most of the produce clerks and meat cutters, that in California make about $20 an hour after a full year or so of work experience in the union.

However, there are other store classifications, including courtesy clerks, who's job description is limited to bagging groceries, doing store cleanups, putting "go-backs" back on the store shelves and a few other limited duties. These workers make considerably less an hour (although more than the $10 an hour ($9 in NV and AZ) Fresh & Easy pays all its Southern California store employees accept for the store manager and assistant manager) than grocery clerks do under the union contract, although they get the same benefits package.

There also are "general merchandise" clerks. These store workers work strictly stocking items that fall under the general merchandise and health and beauty aid categories. They aren't permitted under the union contract do work in any other areas of the store or to stock items onto the shelves in any other categories.

Our analysis is the ultimate make-up of a UFCW-Tesco Fresh & Easy contract would be a hybrid of the existing contracts the union has with the supermarket chains and something new, which would likely include a different categorization of Fresh & Easy workers.

This categorization/job description would in our analysis probably look something like a combination of the union grocery clerk, courtesy clerk and general merchandise examples above.

We also believe it would be a combination of the three hourly wage scales for each of those union supermarket job categories. In other words, Fresh & Easy store employees would likely make less hourly than workers in the grocery clerk classification who work at Vons, Ralphs and the other union chains currently do.

As far as we can discover, Fresh & Easy Buzz is the first publication to mention and discuss this aspect of the UFCW-Tesco Fresh & Easy ongoing union issue. We do so because we think its not only news -- but is an important element of this ongoing story.

There's a perception -- and in many cases we've noticed an assumption -- among many people that if Tesco's Fresh & Easy does go union, it will be the same contract as what currently exists among the UFCW and the various supermarket companies in the region.

Our analysis is that such an assumption is incorrect, along with such a perception. Rather, it's likely if Tesco's Fresh & Easy eventually does become unionized -- which we suggest one shouldn't assume will happen anytime soon or at all -- it will end up having a different contract -- with a lower wage scale -- with the UFCW than is currently the case with the contracts the union (and union supermarket workers) has with Southern California's unionized grocery chains and independents.

Tesco's Fresh & Easy Hits the Retail Trifecta in Las Vegas; Opens Three New Stores Today in the City

Tesco's Fresh & Easy Neighborhood Market hit the retail trifecta today in Las Vegas, Nevada, opening three new small-format Fresh & Easy fresh food and grocery markets today in the city.

The three new Fresh & Easy markets are at the following locations in Las Vegas:

• Desert Inn & Pecos McLeod
• Lake Mead & Hollywood
• Charleston & Sloan

With the three new Fresh & Easy stores opening today, Tesco Fresh & Easy Neighborhood Market now has 19 stores in the Las Vegas, Nevada Metropolitan region.

Tesco held grand openings at all three stores today. The retailer also donated $1,000 per-store to a local charitable organization, the Children's Heart Foundation, a local elementary school, the Jacob E. Manch Elementary School, and the Eldorado Cross Country Team, a local running team. Tesco's Fresh & Easy Neighborhood Market donates $1,000 to a local non-profit group each time it opens a new store.

Tesco is far from finished opening new Fresh & Easy grocery markets in the Las Vegas market though.

The retailer says it will open six new stores in the Las Vegas area (Clark County) alone in October, at the following locations on the dates listed:

• Eastern & Fremont -- October 8
• Las Vegas & Pecos -- October 8
• Las Vegas & Lake Mead -- October 8
• Vegas & Buffalo -- October 15
• Eastern & Wigwam -- October 29
• Vegas & Jones -- October 29

With the opening of its three new Las Vegas stores today, Tesco now has 87 Fresh & Easy Neighborhood Market grocery stores operating in Southern California, the Las Vegas Metro region, and in the Phoenix, Arizona Metropolitan market.

Critical mass in Vegas?

Now having 19 stores in the Las Vegas market -- with 25 by the end of October when the six new markets open next month -- Tesco should be able to build some critical mass in terms of starting to become a major player in the market region, which has a population of about 2 million residents.

After all, 25 stores in a region with that population, where most of the residents are concentrated in the city of Las Vegas, is enough to begin to start putting market share numbers of at least some minor significance on the board.

It will be interesting to see if more (Fresh & Easy stores) means more (new business) in the Las Vegas Metropolitan market, or if it just spreads the current volume of business the stores are doing around to the other locations.

Key Personnel Breaking News: Co-Vice President of Retail Operations Brian Pugh No Longer Employed At Tesco Fresh & Easy Neighborhood Market

Brian Pugh, Tesco Fresh & Easy Neighborhood Market's co-vice president of retail operations has left the company, according to information obtained by Fresh & Easy Buzz.

Additionally, we've independently and directly verified Mr. Pugh no longer works for Fresh & Easy Neighborhood Market at its corporate headquarters in El Segundo or elsewhere for the grocery chain.

Brian Pugh left Fresh & Easy Neighborhood Market around the first week of this month, close to the the Labor Day holiday.

In addition, Brian Pugh's wife, who worked for Fresh & Easy Neighborhood Market and whom he met while both worked at the corporate headquarters office in El Segundo, also is no longer with the company, leaving at about the same time he Pugh did.

Mr. Pugh was one of the original Tesco Plc. executives who came to the U.S. to start up the Fresh & Easy Neighborhood Market small-format, convenience-oriented, combination basic grocery and fresh foods chain.

Others key senior corporate executives who in addition to Brian Pugh came from Tesco's United Kingdom or other international divisions to Southern California to start-up Fresh & Easy, and who remain in positions with the company, include CEO Tim Mason, director of marketing Simon Uwins, Tony Eggs, who's head of the retailer's store development program, and others.

As we reported in August, Charlotte Maxwell, who came from Tesco's UK operations to head Fresh & Easy Neighborhood Market's grocery merchandising department, recently returned to Tesco-UK to accept a director-level position there. Her title at Fresh & Easy corporate was director of grocery merchandising.

On March 12, 2008, we reported in this piece, "Breaking News: Tesco plc. Makes Major Personnel Change to Fresh & Easy Neighborhood Market USA Senior Management Team ," that Tesco was reassigning Jeff Adams, the then CEO of Tesco-Lotus in Thailand, to Fresh & Easy Neighborhood Market to share the vice president of retail operations position and duties with Brian Pugh.

Nearly three months later, as we reported in this May 29, 2008 story, Tesco Fresh & Easy Neighborhood Market confirmed in a press release our March 12 report that Jeff Adams had joined Fresh & Easy at the El Segundo corporate office and that he would be sharing duties with Brian Pugh; both men holding the title of co-vice president of retail operations.

In the May 29 piece we discussed how unusual of an arrangement having co-vice presidents of retail operations is for a grocery chain, commenting in the story that time will tell how such an arrangement works out.

Less than four months later, Mr. Pugh has left Fresh & Easy Neighborhood Market. Jeff Adams now is the vice president of retail operations for the chain, holding that title alone.

We haven't learned the specific reason Brian Pugh left Tesco Fresh & Easy Neighborhood Market, at least not to the verification standards we employ in reporting on Fresh & Easy Buzz. Further, we aren't suggesting Mr. Pugh's departure had anything to do with the relationship between him and Jeff Adams or the fact they shared the position.

However, we have learned two things. First, according to sources in the UK in a position to know, it appears Mr. Pugh no longer works for Tesco Plc. Additionally, we've learned Brian Pugh's departure from Fresh & Easy corporate was rather abrupt -- that he hadn't discussed with any co-workers having any plans to leave the company, nor that he was leaving to accept another job opportunity in the industry or elsewhere.

Mr. Pugh's voice mail at Fresh & Easy's El Segundo office still works. However, it doesn't have his recorded voice on the system. Additionally, his company mobile phone no longer works. An employee verified he no longer works for the company.

Brian Pugh is the latest in a long line of Tesco Fresh & Easy Neighborhood Market headquarter employees to leave the grocery chain this year.

As we reported in this August 17, 2008 story, "Special Report: Tesco Fresh & Easy Neighborhood Market Experiencing A Category Manager and Buyer 'Brain Drain'," five category managers and buyers have left the company in just a four -to- five month period -- from February -to- June, 2008 -- this year.

Additionally, about 11 category managers and buyers overall have left Fresh & Easy since it set up shop at the corporate office in El Segundo, California about two year's ago.

Further, as we mentioned above, and reported in this piece on August 17, 2008, " Special Report: Tesco Fresh & Easy's Director of Grocery Returning to the UK; Grocery Chain Reorganizing its Corporate Buying Department," Charlotte Maxwell, who was the director of grocery merchandising since Fresh & Easy launched in the U.S., recently left, returning to the UK to accept a director level position with Tesco there. Ms. Maxwell is a British citizen. [Click here for an addition story on Charlotte Maxwell's departure from Fresh & Easy.

Brian Pugh has a prior working history with both Jeff Adams, who up until this month he shared the vice president of retail operations title and position with, as well as with Tesco Fresh & Easy Neighborhood Market CEO Tim Mason.

Those who know both Mr. Pugh and Mr. Mason describe them as friends. Jeff Adams and Brian Pugh worked closely together in the past at Tesco-Lotus in Thailand. Both men also are former employees of Wal-Mart, Inc.

Since Brain Pugh and Mr. Adams shared the vice president of retail operations position, we don't expect there to be a major problem in terms of Jeff Adams' getting up to speed on the portion of the shared duties that belonged to Mr. Pugh.

However, Brian Pugh did have an institutional memory of the chain since he was part of Fresh & Easy's start up. That knowledge could be a loss to the grocery chain, along with other aspects of his knowledge and experience.

Guest Contributor: Tesco's Approach to Strategy Communication. By: Robert S. Kaplan

The Tesco steering wheel, a tool the company uses to drive performance, communicate and help employees drive into the future.

From the Fresh & Easy Buzz Editor's Desk: Robert S. Kaplan, the Baker Foundation professor of business at Harvard Business School and chairman of the Palladium Group consulting firm, is, along with David P. Norton (his partner and the founder of the Palladium Group), the creator and intellectual force behind the Balanced Scorecard, which is a strategic methodology and organizational and operational structure used by corporations throughout the world.

Kaplan and Norton has authored five books together, along with numerous articles, on the Balanced Scorecard. Their latest book about the Balanced Scorecard method is titled: The Execution Premium: Linking Strategy to Operations for Competitive Advantage. You can read a detailed biography of Robert S. Kaplan here.

Kaplan and Norton recently completed the 2008 version of their firm's annual European Balanced Scorecard Summit in London The awalys well attended conference is a much sought after ticket by corporate strategists, chief executives and others.

Tesco PLC, which owns and operates Fresh & Easy Neighborhood Market USA, was represented at the 2008 European Balanced Scorecard summit by its CEO, Sir Terry Leahy. Mr. Leahy made a presentation at the summit. Robert S. Kaplan writes about the Tesco CEO's presentation in the September 2, 2008 issue of the Harvard Business Review.

Mr. Kaplan's piece about what Tesco CEO Leahy discussed at the recently-ended summit provides interesting insight into Tesco PLC's current organizational, operational and communications structure.

Reproduced below is the article:

Tesco's Approach to Strategy Communication
by Robert S. Kaplan
September 2, 2008

I recently returned from London where we held our 2008 annual European Balanced Scorecard Summit. Each of our summits features the induction of companies into the Balanced Scorecard Hall of Fame. We had several firsts at the London conference as we inducted the first two companies from Russia, the first Irish company, the first Middle East company, and the first enterprise from France, its Ministry of Defense.We also noticed a distinct increase in delegates coming from companies in emerging markets, such as Tanzania, Namibia, Cyprus, Iran, Saudi Arabia, and Egypt. It's clear these countries are diversifying beyond their traditional simple manufacturing and agricultural companies into higher-value industries. As these companies march northward on the value chain, their need for more sophisticated management techniques will only increase.

In addition to the induction ceremony, we heard from leaders of world class companies, including Infosys, Old Mutual, BP, Nippon Boehringer, Solvay Pharmaceuticals, and HSBC--all presenting on how they approach strategy and execution, specifically using our Balanced Scorecard (BSC) method.

Sir Terry Leahy, CEO of Tesco, gave one of my--and the audience's-- favorite sessions. He described the challenges of delivering a distinctive and consistent buying experience to consumers in every store when you have more than 400,000 employees in multiple countries. It's a classic concern: How can you keep local store managers and employees engaged in satisfying consumers in their shopping experiences? Extended out a little: How can you keep distributed frontline employees--regardless of industry--engaged with and acting on the company's central strategy?

Leahy explained his approach: "Tesco doesn't want one leader. We want thousands of leaders who take initiative to execute the strategy."

To make this goal a reality, in the early 1990s, Tesco went through a process to clarify its mission, values, and strategy. Based on our first Harvard Business Review BSC article, Tesco communicated its new strategy to its employees via a "steering wheel," a simple symbol and metaphor for a tool intended to drive performance and help employees navigate into the future.

The Tesco steering wheel has four 90 degree arcs, representing the four BSC areas of focus: financial, customer, operations, and employee performance. Every store gets a monthly steering wheel update, a summary of its metrics within each of the four arcs, so that all employees in Tesco's multiple regions and formats get feedback on their performance. Tesco supplements its steering wheel report with "shopping lists" that capture key elements of the strategy in simple forms that employees can follow in their everyday activities. The steering wheel has helped the company stay focused on its strategy even as it experienced rapid growth over the past two decades.

Recently, Tesco added a fifth dimension, community, to the steering wheel report to encourage employees to be excellent citizens in the communities where they work and live. While praising the simplicity of the steering wheel display and its power to communicate to employees, Sir Terry emphasized that it is not easy, requiring extensive consumer research, data collection, and analytics to make sure that the objectives and metrics remain relevant as consumer preferences evolve and competition heats up. But in part because the steering wheel ensures all employees are aware of and can act on the strategy, Tesco has become an engine of social mobility, allowing employees from whatever background or education to advance in the company. Last year, Tesco filled 3,500 management positions, 27 directors, 200 store managers, and 8,000 department heads by promoting from within the organization.

Resources:

>You can learn more about the Balanced Scorecard and how it links strategy, operations and communications here.

>Bruce Tempkin, who writes a blog called Customer Experience Matters, read Mr. Kaplan's Sptember 2, 2008 Harvard Business Review (HBR) piece about Tesco CEO Terry Leahy's presentation at the European Balanced Scorecard Summit. Mr. Tempkin has a September 11 post discussing it in his blog. We suggest reading it. It's a short post. Click here to read it.

>For more on the Balanced Scorecard click here.

Pie in the Sky or Pie in the Face to Tesco's Fresh & Easy: Does Wal-Mart, Inc. Plan to Build A $10 Billion A Year 'Small-Mart' Empire?

Wal-Mart sees Marketside as $10bn chain

From the: Financial Times
By Jonathan Birchall in New York
August 7, 2008

Wal-Mart, the world’s largest retailer, says the new small Marketside grocery stores it is to launch this autumn could expand to a chain of more than 1,000 stores, delivering $10bn-plus in annual sales.

The retailer plans to open 10 of the 15,000 sq ft Marketside stores initially, including four in the Phoenix area, where they will be competing directly with Tesco’s recently launched US Fresh & Easy store concept.

Wal-Mart’s executives have described the Marketside stores as a pilot project, although it is the first new store format to be launched by the company in a decade. But a job advertisement for the retailer indicates the scale of its ambitions for Marketside, saying the format “is expected to start with 10 stores and evolve to between 1,000-1,500 stores with over $10bn annual sales."

At less than a 10th of the size of the average Wal-Mart superstore, Wal-Mart said the new stores would be aimed at “the needs of a time-starved, higher-income consumer that is interested in convenience and premium fresh, natural and organic offerings.”

The approach contrasts with Wal-Mart’s experience with the Wal-Mart Neighborhood Market stores it launched 10 years ago, which are about the size of a traditional US supermarket.

In response to an inquiry from the Financial Times, Wal-Mart stressed the Arizona stores were a pilot project. The retailer subsequently removed from its website the job advert that included the more ambitious targets.

Wal-Mart’s superstores are built around high volume and low cost, and the group has faced challenges in adapting to the supermarket-sized Neighborhood Market stores it launched in 1998, opening more than 140 outlets. The Marketside stores will require a fast turnover of stock, which could be a difficult fit with Wal-Mart’s distribution system.

Tesco has opened more than 60 Fresh & Easy stores in California, Arizona and Nevada since November and plans to have several hundred operating during the next two years.

Wal-Mart, the largest US grocer with more than 20 per cent of the market, is developing the Marketside format as growth slows at its 2,500-plus superstores.

The Marketside format is also expected to spearhead a broader drive by the retailer to improve its overall grocery offering.

Safeway and SuperValu, two of the largest US supermarket chains, are also experimenting with small, local formats.

Fresh & Easy Buzz Editor's Note: Below is a selection of original reporting news stories, features and analysis about Wal-Mart's Marketside format stores from Fresh & Easy Buzz:

August 7, 2008: Food Retailing & Labor Unions: Canada's Supreme Court to Hear Case that Could Change Wal-Mart's, and Others, Non-Union Status in North America

June 24, 2008: Competitor News: Wal Mart Launches New 'Marketside' Website; Announces First Four Stores in Arizona to Open in the Fall Rather Than Summer

June 23, 2008: Competitor News: Wal-Mart's Marketside On A Hiring Tear; Getting Closer to Opening Small-Format Fresh Food & Grocery Stores in the Phoenix, AZ Region

June 20, 2008: Competitor News: Wal-Mart Executive in Charge of Small-Format 'Marketside' Format Development Leaving to Join UK Bicycle Retailer Halfords Group PLC

June 16, 2008: Wal-Mart and Tesco: The Cross-Atlantic Competition Continues to Heat Up; Almost Hot Enough to Make Uber-Cool British Secret Agent James Bond Flinch

June 9, 2008: Breaking News and Analysis: German Small-Format Discount Grocery Chain Lidl is 'Coming to America' By 2012 Says Chief Executive Klaus Gehrig

June 8, 2008: Arizona Region Market Report: First Signs of A Weakening Might Be Starting to Show in the 'White-Hot,' 'Super-Competitive' Arizona Market

June 6, 2008: Is A Wal-Mart 'Marketside' Small-Format Grocery and Fresh Foods Store Coming to Reno, Nevada?

June 6, 2008: Wal-Mart USA Chief Eduardo Castro-Wright Confirms Fresh & Easy Buzz Reportage on 'Marketside,' Adds Information From the WM Corporate Side

May 18, 2008: Wal-Mart Looking For Sites in California For it's Small-Format 'Marketside' Grocery Stores

April 11, 2008: Wal-Mart to Open Two More New 'Neighborhood Market' Stores in the Phoenix Metro Region; Still On-Track to Open New Marketside Stores This Summer

February 22, 2008: Wal-Mart and Tesco Locked in Heated Cross-Atlantic Competitive Battle in the USA and UK

February 12, 2008: Wal-Mart's New Logo For It's 'Marketside' Small-Format Grocery Stores Unveiled

January 18, 2008: Wal-Mart and Safeway vs. Fresh & Easy

January 16, 2008: Wal-Mart and Safeway Stores Could 'Box' Tesco in With New Small Format Stores

January 14, 2008: Citigroup Supermarket Industry Analyst Confirms Wal-Mart Small Marts in Arizona

January 14, 2008: Wal-Mart Confirms it Will Test New Small Store Format Later This Year

January 13, 2008: The Battle of the Retail Titans Begins: Wal-Mart to Open Small Format Stores in Arizona