Tesco Launches Fresh & Easy Neighborhood Market-Developed 'The Big Kahuna' Brand Wine in United Kingdom, South Korea Stores

"The Big Kahuna" on the shelf at a Fresh & Easy store in California.

Private Brand Showcase

El Segundo, California-based Fresh & Easy Neighborhood Market's "The Big Kahuna" proprietary or private brand wine has been launched in Tesco-owned stores in the United Kingdom and South Korea, along with being offered for sale by the case on the UK-based retailer's Tesco.com website.

Tesco-owned Fresh & Easy introduced "The Big Kahuna" as its in-house value-priced wine brand over three years ago, following a path blazed most successfully in the U.S. by Trader Joe's with its super-popular $1.99 per bottle Charles Shaw brand wine, more commonly referred to as "Two-Buck Chuck," the huge success of which has spawned similar priced value brand copy-cat versions from nearly every major food and grocery retailer in the country.

The Australian-produced "The Big Kahuna" comes in two varieties: Cabernet Shiraz (at top) and Chardonnay.

Fresh & Easy sells the wine in its stores in California (127 units) for $1.99 (750-ml bottle), and for 2.99 per bottle in its Nevada (21 units) and Arizona (28 units) grocery markets.

The wine is being offered at a higher price-point in the UK than at Fresh & Easy Neighborhood Market in the U.S.

For example, Tesco is offering Fresh & Easy Neighborhood Market-developed "The Big Kahuna" wine brand for a considerably higher price on its Tesco.com website in the UK. The current price per case is £22.80 (£3.80 per bottle), which is about $37.18 per case, or $6.19 per bottle, based on today's British pound to U.S. dollar conversion rate. The per-bottle retail in the stores it's currently in is a bit higher.

Tesco has a long history of offering Australian wines in its stores in the UK and in Asia, particularly South Korea. In fact, the British retailer is the largest customer of wine produced in Australia, largely based on the numerous Tesco proprietary or private brand wines produced for the retailer in the country.

It's a logical and smart move for Tesco to offer Fresh & Easy's "The Big Kahuna" brand wine in its UK and South Korea stores as well as online via Tesco.com. Doing so expands the number of points-of-distribution - and thus increases total sales - for the brand, which in turn should allow Fresh & Easy Neighborhood Market to obtain a lower cost of goods for "The Big Kahuna" from its Australian producer.

A lower cost of goods means a better gross margin on the wine for Fresh & Easy, which is important because at $1.99 and $2.99 per bottle retails, along with the shipping costs from Australia, there isn't much gross margin in "The Big Kuhuna," or any other wine with similar overseas origin and the same points.

But even a few pennies cost savings per bottle can add up to nice little profit boost on the wine for Fresh & Easy Neighborhood Market because the value-priced "The Big Kahuna" is a high volume brand for the grocer.

Additionally, since the Australian producer of "The Big Kahuna" also produces additional proprietary wine brands for Tesco, it makes good top and bottom line sense to us to maximize the brand opportunities across all its chains globally for UK-based Tesco whenever it makes sense.

"The Big Kahuna" is the second private brand developed at El Segundo, California-based Fresh & Easy that Tesco is distributing in its stores in the UK, where it's the leading retailer of food and groceries.

The first brand, which we broke the news about in these two stories - June 26, 2011: Tesco Bringing Fresh & Easy Neighborhood Market's 'goodness for kids' Brand to the UK - With a 'Tesco' Twist; and June 27, 2011: Tesco Introduces First Items in Fresh & Easy Neighborhood Market-Developed 'Tesco goodness for kids' Brand in United Kingdom Stores - is "Tesco Goodness for kids", which is based on the "fresh&easy goodness for kids" brand developed in Southern California.

The Australian-produced wine brand with the Hawaiian name, "The Big Kahuna," is the first Fresh & Easy Neighborhood Market-developed private brand product to be sold in Tesco's stores in Asia we're aware of, in this case the country being South Korea.

Interestingly, we suggested in this March 8, 2011 piece - March 8, 2011: Tesco's Fresh & Easy ♥'s California With 27 New Varieties of Proprietary Brand Wines From the Golden State - that Tesco should take a few or all of Fresh & Easy's then new proprietary brands of California wines to the United Kingdom and South Korea.

Perhaps a few of those brands of wine produced in California will be the next ? Stay tuned.

Related Stores

Read more about wine at these links: California wine competitions, Fresh and Easy proprietary wines, Fresh and Easy wine, fresh and easy wine category, liquor wine beer categories, wine awards, Wine Category Report, wine merchandising,  Side by Side wine, category wine

Additionally, you can read past stories in our Private Brand Showcase feature here.

Category Management Report: Fresh & Easy Conducting Wine Category Review and SKU Rationalization; We Offer Some Analysis

Tesco's Fresh & Easy Neighborhood Market has been conducting a category review and sku rationalization in its wine, craft beers and liquor category, Fresh & Easy Buzz has learned from sources involved in the process. The focus is primarily on wines, which is a key product category for the Fresh & Easy stores.

All of the current 96 Fresh & Easy stores, except two in Southern California we are aware of (Hollywood and Van Nuys), sell wine and craft beers. A number of the combination grocery and fresh foods markets sell hard liquor along with wine and beer. Not all of the units offer the spirits for sale however. The Hollywood and Van Nuys stores don't have permits to sell alcoholic beverages of any kind.

The wine category sku rationalization process is being led by category manager Karen Fletcher, who came to Fresh & Easy Neighborhood Market USA from Tesco in the United Kingdom as part of the start-up team. Ms. Fletcher is a native of Britain.

The category review also comes not to long after Fresh & Easy Neighborhood Market went through a series of changes in its grocery merchandising department, which found former director of grocery Charlotte Maxwell, also a British national, leaving Fresh & Easy corporate headquarters and her position to return to Tesco in the UK to accept a director position at corporate headquarters there, as we've thus far been the only publication to report.

Ms. Maxwell was replaced as Fresh & Easy's corporate director of grocery merchandising by Sean McCurley, who previously was director of fresh foods. That position was equal to Ms. Maxwell's in terms of the company structure. Mr. McCurley also is a British citizen.

As part of the wine category review and sku rationalization, Fresh & Easy is looking at reducing the overall number of skus the stores carry in the category, focusing on fewer items and maximizing total sales per item count, according to our sources. Some slow moving wine skus have already been discontinued.

There also has been some merchandising-related discussion as part of the category review involving flipping the wine and beer aisles towards the store's freezer case sections from their current locations, although our sources said they aren't sure of the current status of this previous discussion.

When Fresh & Easy Neighborhood Market USA was first organized, the wine and beer department was under the grocery department, which is normally the case with food retailing companies. However, sometime later category manager Karen Fletcher requested her category be placed in the fresh department and that she report to Sean McCurley, who ran fresh at the time, rather then Ms. Maxwell, who then was in charge of grocery.

Fresh & Easy's senior corporate directors approved of the change. Following Ms. Maxwell's departure back to Tesco in the UK and Sean McCurley assuming her grocery director position, the wine, beer and spirits category was moved back over to grocery with Ms. Fletcher's blessing, according to our sources.

Wine primarily, but also beer and spirits, is a major focus for Fresh & Easy, as it is internationally for Tesco. Karen Fletcher was brought over to the U.S. to build the category as an integral part of the Fresh & Easy merchandising mix. Part of that strategy includes having numerous proprietary, specialty-blended wines produced for the grocery chain, including numerous wines from Australia. Tesco is among the leading retail buyers of Australian wines in the world.

Wine category analysis

The wine category hasn't yet been all that Tesco has expected it to be at the Fresh & Easy stores. Our analysis is this has to do with a number of factors, most notably the fact California wines, which Fresh & Easy stores are short on compared to its competitors, are much more popular than foreign wines in California, Nevada and Arizona, where the current 96 Fresh & Easy grocery and fresh foods markets are located.

Even more so, it has to do with the highly competitive nature of wine, beer and spirits retailing in each of these markets. Not only are major supermarkets like Safeway Stores, Inc. major wine retailers in the Western U.S., for example, but there are category killer retailers like Beverages & More and Cost-Plus World Market, along with Trader Joe's and many others (including scores of independents), that have been selling wine in these markets very successfully for decades. These retails know the market, the customer base, and the wine producers almost as much as they know their own family members in many cases.

As a result, Fresh & Easy has far more competition in its Western U.S. markets than say Tesco has in its home market of the UK when it comes to wine retailing.

The wine category product mix at Fresh & Easy also lacks proper regionalization, sub-regionalization and localization. Perhaps this has been recognized and is one of the reasons for the category review and sku rationalization?

Like it has done with its entire product mix, Tesco basically has tried to merchandise its Fresh & Easy stores in many ways like they are British small-format stores (read Tesco Express) in the UK, merely transplanted to the Western U.S. This has resulted in lots of failures, lost sales and missed opportunities.

Additionally, when it comes to the wine category, there arguably isn't a category that it's more important to regionalize, sub-regionalize and localize. Wines that do extremely well in Northern California, for example, often sell poorly in Southern California. The same regional differences hold true in Nevada and Arizona. Wine brands in the U.S. are regional and even sub-regional. What sells well in San Francisco often isn't what sells well just 80 and 90 miles away in the Central Valley cities of Stockton or Modesto, for example.

Further, since Fresh & Easy has so many proprietary brands, wine brands consumers have never heard of, they have had to hope shoppers might merely like the price or how the bottle looks and give them a try. That's a tough way to sell wine, especially in California.

A number of the proprietary Fresh & Easy wines have done well though, particularly its $1.99 a bottle ($2.99 in Nevada and Arizona) Big Kahuna brand, which is a clone of Trader Joe's famous and super-successful "Two Buck Chuck" value-priced wine brand and line. Big Kahuna is an Australian wine. TJ's "Two Buck Chuck," which last year won the top award in the California State Fair Wine Competition, is a California wine. It's produced by Ceres, California-based Bronco Winery.

In terms of the wine category review and sku rationalization, Fresh & Easy needs to add more California wines, sub-regionalize and localize its wine brand and item selection and merchandising program if it wants to be a successful wine retailer in its respective markets, in our analysis.

This is especially true in California, which is a bigger wine sales market than Nevada and Arizona combined are. (Southern California alone and Northern California alone are both respectively even bigger than both states combined. Since California is the major U.S. wine-producing state, as well as one of the top wine regions in the world, consumers are much more familiar with wines then elsewhere in the U.S. The state also has the highest per capita wine consumption in the U.S.

It also follows that the state has the most competitive and generally the best wine retailers in the country.

California wine consumers are big on sub-regional differences. For example, consumers in Southern California want lots of wines from the Santa Barbara region (a major local wine producing region) want lots of wines in stores from that region, along with from elsewhere in California, the U.S. and the world.

In Northern California (which is the main wine-producing region in the state) consumers expect to see lots of Napa and Sonoma-produced wines on store shelves, along with wines from the coastal region and the Central Valley and Foothill regions. Farther up north it's important to add far Northern California and even some Oregon and Washington State-produced wines.

In fact, in the Central Valley, a good wine retailer also merchandises as many wines from that home region and the nearby Sierra Nevada foothill region than he or she does from Napa and Sonoma.

And in coastal Northern California (the Monterey-Big Sur wine region), good wine retailers there will put a major focus on wines from that wine-producing area.

It's all about localization -- and California is full of local, micro wine regions.

Having a basic selection of proprietary, branded wines is fine for Fresh & Easy. However, as long as that is the major focus in the stores it won't be a top wine retailer in its respective markets. There are too many good wine retailers doing the right things for that to happen.

However, if as part of this category review the retailer focuses on the three things we outlined earlier, it has a far better chance of improving its current wine category sales and eventually joining the ranks of the top wine retailers in the markets it has its stores in.

When it comes to wine merchandising and retailing in the Western USA, especially in California, everything is local, despite the fact imports have an important place in the overall category product mix.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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