Tesco, the world's number three retailer and the number one food and grocery sales market share leader in its home country of the United Kingdom with about 32% of the nation's total retail food sales, is launching what appears to be the biggest local foods sourcing and merchandising program in the UK.
Last year, Tesco opened five new local foods' regional buying and marketing offices in the UK cities of York, Leicester, Plymouth, Peterborough and Horsham, making it the first supermarket chain in the UK to develop such an extensive regionally-based structure designed to procure and market locally-based food and grocery products.
Each of the five local offices has a buyer and marketing person who's jobs are to find and procure high-quality, locally-produced products to sell in Tesco's UK stores.
As part of its local foods procurement and marketing program, Tesco also has started holding "Meet the Farmer" local foods events in its UK supermarkets.
Since Tesco launched the program, called "Local Sourcing", last year, the retailer says it's five regional UK offices have thus far launched over 1,00 new, local food and grocery product lines in its stores, bringing the total number of locally-produced products the retailers sells currently to about 3,000. Tesco also says it's added 90 new local suppliers to its vendor list.
Tesco UK also has an executive in charge of the local sourcing program, Emily Shamma. Ms. Shamma says UK consumers want to buy quality local food and to support local producers by doing so.
Tesco customers also want to buy more local foods to cut down on food miles and the resulting carbon emissions, Shamma says.
Further, UK consumers see locally-produced foods as having overall superior quality to food products imported from elsewhere, as well as liking the idea they can know more about how the local products are produced (because the goods are local) compared to imported food and grocery products.
Tesco plans to further grow its local foods' sourcing and marketing program, according to Ms. Shamma. She says the retailer's goal is to sell more locally-produced food and grocery product lines than any other UK food retailer.
To further this aim, Tesco also has set up a fund designed to help small, local farmers expand their businesses. This is similar to what U.S.-based natural foods' retailer Whole Foods Market, Inc. is doing for small farmers in the United States as a way to promote small-scale agriculture and local food production.
Tesco has put ~1 million-p ($1.95 billion U.S.) in the fund to use to help give local farmers and producers a leg up in expanding their operations.
The British retailer also has created a local technical team in each of the five regional offices. The team offers and provides free help to the local producers in the areas of manufacturing, packaging, quality assurance and marketing. part of the reason for creating these dedicated technical teams is so Tesco can make sure the local producers have the means available to meet the retailer's overall product quality control standards for the goods it sells in its UK stores.
Samma also says Tesco doesn't just want to make local foods available in its stores to wealthy consumers. Rather, the goal is to make local fresh produce for example more affordable so that it's available for UK consumers of all income levels, she says.
Tesco's current goal is to sell ~400 million-p ($780 million U.S.) worth of locally-produced food and grocery products in its stores this year, with a longer-term goal of selling ~1 billion-p ($1.95 billion U.S.) worth of the locally-produced bounty by 2011.
Tesco PLC had gross sales internationally of about
$84 billion U.S. in 2007.
The locally-produced products Tesco has introduced in its stores just since last year when it opened the five new regional buying offices range from fresh produce like Yorkshire cucumbers and locally-raised fresh meat, pork and poultry products, to locally-produced ice cream and beer. The local foods initiative is across all store product categories, from fresh and frozen, to refrigerated and shelf-stable.
Tesco's main competitors in the UK--Wal-Mart-owned Asda, Sainsbury's, Morrisons, Waitrose, the Co-op and a couple others--also are to various degrees involved in local foods sourcing and marketing programs. Besides Tesco, probably Waitrose and Sainsbury's, followed by the Co-op, are the second, third and fourth most aggressive in local foods procurement and selling in their respective stores in the UK.
None of these competitors however has created as aggressive and as comprehensive local foods program as Tesco has with its five fully-staffed regional offices. And perhaps they don't need to. There are many ways to procure and sell locally-produced foods in their stores.
However, based on the fact Tesco has added 1,000 new locally-produced products in its stores, and 90 new local vendors to its roster in less than a year, it seems the regional buying office concept complete with the in-house technical teams is working well for the retailer--and for the local farmers and food producers who thus far have been able to get their goods into Tesco's UK supermarkets, which exist in nearly every city and town in the nation.
Tesco's Fresh & Easy USA and local foods
As regular Fresh & Easy Buzz readers are aware, we've argued regularly that one of the weaknesses--both from merchandising and sales aspects--of Tesco's current 61 small-format, convenience-oriented grocery stores in the Western U.S., is that the stores are not localized in terms of their features on a community and neighborhood basis and in their product mixes.
For example, we've suggested that on top of the basic Fresh & Easy store format, the grocery chain add some custom features based on where the store is located.
For example, some Southwestern-oriented and Latin-oriented flair for the Arizona stores as well as custom features in the Southern California stores to reflect the history, culture and demographics of the different regions and communities the stores are located in, rather than taking a cookie-cutter store design approach, which currently is the case.
We've also suggested strongly the Fresh & Easy stores need to sell more locally-produced food and grocery products--foods from California in the Southern California stores, more foods produced in Arizona in those stores.
There are thousands of fresh and shelf-stable locally-produced products available in both states that aren't currently for sale in the Fresh & Easy stores.
We aren't suggesting Tesco bring in thousands of these local products--the Fresh & Easy stores are limited assortment grocery stores after all. Rather, the retailer just needs to add a solid variety of locally-produced food and grocery items throughout store categories--from fresh produce, meats and dairy, to dry grocery, on top of its core fresh & easy store brand and limited number of national brands product mix.
The stores already have some locally-produced products, especially in the fresh produce category by virtue of the fact much fresh market produce is grown in the west. However, the selection is minimal and spotty, especially outside the produce category.
If Fresh & Easy Neighborhood Market begins a localization program like we suggest--and like Tesco is doing in the UK--it will find itself creating stronger bonds--and more business--with the consumers in its market regions.
All of the reasons given by Tesco's UK local foods sourcing chief Emily Shamma as to why the retailer is going big with local foods sourcing and marketing in the UK exist equally among U.S. consumers, especially in the Western U.S. where Tesco has its Fresh & Easy grocery stores.
California, Arizona and to a lessor degree Nevada are top U.S. farming states. Further, California's Central Valley is the world's number one agricultural producing region. Residents in these three states love locally-produced foods, and will even purchase them at a slight premium over foods from other parts of the U.S.
California also is the home of the local foods movement and has many food retailers like Whole Foods Market, Raley's, Safeway Stores, Bristol Farms, Gelson's and numerous others who are focusing extensively on procuring and selling locally-produced foods in their stores.
Both California and Arizona also are top specialty, natural and organic food and grocery product producing states in the U.S. Local producers in these two states produce everything from scores of types and varieties of fresh produce and locally-raised beef, poultry and pork, to nuts, milk, cheese, wine, breads, oils, shelf-staple grocery products of every kind and more.
Tesco could have an absolute field day procuring and selling locally-produced foods in California and Arizona for its Fresh & Easy grocery stores. And, it wouldn't take all that much too succeed at it if done right.
A careful and thoughtful addition of a few locally-produced food and grocery products in every category of products in the Fresh & Easy stores would have the overall effect of making a big difference in terms of achieving that "localization" formula we discussed earlier. The category-wide local foods product mix needs to be selected carefully however.
Doing so also builds consumer loyalty. As Tesco's local foods guru Emily Shamma said about UK consumers wanting to buy locally-produced foods and support local farmers, so too do U.S. consumers want to do--and are doing--the same thing. This is particularly true among Western USA consumers in California, Nevada and Arizona, who count numerous local farmers and local food producers among their family members, friends, relatives and business associates.
Local foods procuring and advertising "locally-grown" on the menu also is big with mid-range to higher-end restaurants in the Western USA. These restaurants, especially the higher-end ones, are major food trend setters, and their local foods' initiatives have made buying and eating local even stronger among consumers in the region.
U.S. consumers also want to buy local foods for environmental, as well as for product quality and local farmer-producer-support reasons. And they're doing so. That's why local farmers' markets are so popular in the U.S., especially in the Western U.S. These local fresh fruit and vegetable farmers' markets, which also sell all sorts of other local food and grocery products, have grown by 50% in number and customer counts in just the last decade.
In California, a state with nearly 40 million people, nearly every city and small town has a farmers' market which starts in early spring and runs into the fall. Most big and medium cities even have farmers' markets that operate year-round. Further, most larger cities in the Western US have at least two or three--and often more--farmers markets, many of which operate every day of the week.
Americans also are buying local foods in significant numbers at grocery stores, as evidenced by the fast-growing trend among numerous supermarket chains, independent grocers and natural foods' retailers to stock as much of the locally-produced products as they can in their stores.
Many of these food retailers have created "local foods" shelf signs, which they put on every locally-produced product sold in their stores. These grocers also label all the local foods' items in their weekly advertising circulars with bright-colored flags which identify the advertised item as "Local."
Many of the supermarket chains, such as Whole Foods, Safeway, Raley's and others also are partnering with local farmers and local food producers directly, guaranteeing them the retailer will buy the farmers' entire crop of say sweet corn or melons in return for the exclusive marketing and selling of the local crop or products.
If you pay attention to weekly supermarket advertising circulars like we do, you'll notice in just the last year how many more chains and independents have started advertising and promoting locally-produced products every week, as well as how such major food retailers like Safeway Stores, Whole Foods Market and even mid-range chains have increased the number of local items they promote each and every week in their ads as well as in-store.
Local is big. In the Western USA, its rapidly becoming as big as organic.
The opportunity certainly exists for Tesco's Fresh & Easy Neighborhood market USA to launch a local foods initiative. After all, its stores are located in the heart of America's local foods-producing region, the Western USA. The Western U.S. also arguably is home to the most "local foods loyal" consumers in America.
Additionally, Fresh & Easy has the infrastructure and commitment to local foods' procurement and marketing from parent company Tesco's UK local initiative. All Fresh & Easy needs is a few American-bred, experienced local foods procurement and marketing experts to manage the program.
Going local is even going to be more imperative for Fresh & Easy next year when it enters the Northern and Central California markets of Bakersfield, Sacramento and the San Francisco Bay Area with about 43 or so stores, which will start opening in early 2009. Central and Northern California consumers are even more fiercely local foods-oriented than their Southern California, Nevada and Arizona neighbors.
Additionally, the economies of Central and Northern California are still heavily-based on agriculture, including small, local farmers and food producers.
Further, the "foodie" culture, especially in the 7-million resident-strong San Francisco Bay Area is increasingly demanding quality, locally-produced foods, and even in today's bad economic times a high percentage of Bay Area consumers are willing to pay a premium for foods produced locally in the region. Of course, these shoppers would love--and buy even more of--affordable local foods.
We believe an affordable local foods initiative done well, just like an affordable organic foods program executed well, could go a long way towards creating a strong identity and better positioning for Tesco's Fresh & Easy Neighborhood Market USA's small-format grocery stores and the Fresh & Easy brand in general.
There currently isn't a major food retailer of note in California, Arizona and Nevada offering organic and local foods at truly affordable retail prices, except Trader Joe's to a certain extent in the organic space, on a regular basis.
We believe based on our analysis if Tesco's Fresh & Easy could accomplish those two goals--creating and sustaining solid affordable organic foods and local foods' marketing and merchandising programs--the grocery chain would be helped greatly in its goal to succeed in the highly competitive Western U.S. retail food and grocery market.
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