Tesco's trying to make inroads in US

[Vanhalen 0]

Would be quite interesting if they were able to take off, Tescos are amazingly successful in the UK, its something ridiculous like 40p out of ever £ spent on food in the UK is spent at Tescos, they are making shitloads of money, interesting to try and set up shop in the US where there are so many established retailers. Do you guys think it could work trying to compete against such established names?

 

From bbc.co.uk/news

 

Tesco makes fresh foray to US

By James Gordon

BBC News, Las Vegas

 

One of the Fresh & Easy stores set to open in the US

Tesco hopes to have 800 Fresh & Easy stores by 2012

 

Las Vegas is home to some of the world's biggest hotels and casinos, but just three miles away from the razzle-dazzle of lights on The Strip lies a distinctly un-flashy supermarket - at least compared with the rest of Vegas' glamour.

 

It is called Fresh & Easy and is owned by the world's third biggest retailer, Tesco.

 

Priding itself on offering gourmet-style produce, its branding tries to stress its range of all-natural food.

 

And, as is the trend these days, it is also promoting environmental awareness: the stores are painted green and there is parking for hybrid cars along with bike racks.

 

Its new distribution centre in Riverside in California - where it makes its salads and ready meals - has one of the largest solar-panelled roofs in the US.

 

But is the company taking too much of a gamble by stepping foot on American soil?

 

American focus

 

Certainly it is out to make a name for itself.

 

Five branches have opened in Las Vegas within the past three weeks alone with 20 planned by this time next year.

 

Another 10 are already up and running in Los Angeles and Orange County, with a further three stores opening in Phoenix this week.

 

 

Tim Mason

What we're trying to do is to be very useful and very beneficial to American neighbourhoods and I think we're achieving that

Tim Mason

Chief executive

Fresh & Easy

 

See what US customers think

 

In all Tesco hopes to have 250 Fresh & Easy stores dotted across California, Arizona and Nevada within the next 14 months - and as many as 800 of the outlets by 2012.

 

But expats hoping to stock up on Branston Pickle and Marmite will be disappointed - the stores are designed for American consumers.

 

Tesco's entrance into the US market has been a long time coming, with the company, a £40bn international enterprise, studying US shopping habits for 20 years.

 

The team even sent out researchers to live with 60 American families for two weeks to discover the products they bought and they food they ate.

 

And the physical appearance of the store had been shrouded in secrecy - with a mock outlet set up in an LA warehouse to test designs and train staff.

 

Members of the public who were invited were told they were there to take part in a film about supermarkets.

 

Competitive market

 

But setting up shop - and making it succeed - is not going to be as simple as the brand name suggests.

 

Tesco has had to build a distribution network up from scratch and it aims to source 60% of its products locally.

 

And while it has chosen to target the western US because of the size and density of its urban sprawl, where there are already many other chains looking to sell goods with an emphasis on "fresh" and "cheap".

 

These include Vons, Trader Joe's, Ralphs, Albertsons and of course, the mighty Wal-Mart.

 

Cactus on sale

Some products are quite different to those Tesco sells in the UK

 

Tesco doesn't see Wal-Mart as the main competitor here though.

 

There are comparatively few in this area of the US and the company is still very much focused on its superstore set-ups; nothing like the type of store that Tesco is going for here.

 

But that competition, coupled with the sheer size of the area it aims to cover - a drive from Los Angeles to Las Vegas is almost 300 desert-covered miles - may make things much harder than in the UK.

 

It is a factor that saw Marks & Spencer and Sainsbury's abandon their American dreams in the late 1980s and early 1990s.

 

But Tesco thinks it has got it right and the stores aim to cater for time-starved shoppers who want fresh, healthy food - including ready meals - at "affordable prices".

 

The company is promising to locate some of its outlets in areas that desperately need them.

 

Many low-income, high-poverty areas that have become so-called "food deserts": areas that lack access to fresh, healthy, affordable food.

 

Brand identity

 

European chains have long tried, mostly unsuccessfully, to make inroads into the US.

 

Even US retailers, squeezed by rising costs and big players such as Wal-Mart often end up scaling back or selling out.

 

Fresh & Easy has had its work cut out - with no established brand, no customers and no distribution network.

 

It's a far cry from its UK position where Tesco is the dominant grocery brand.

 

From Tesco Extra to the smaller Express and Metro versions on the High Street, the company controls more than 30% of the UK grocery market.

 

Fresh & Easy have modelled their west coast outlets on the 800 Express stores in Britain.

 

Tesco faces challenges from many established low-cost rivals

A number of established US chains also offer fresh produce

 

The aisles are wide and the shelves no higher than five feet.

 

Each outlet employs between 20 and 30 people and are much smaller than the typical US supermarket.

 

The store has a "kitchen table" area where staff - or as they call them here - crew members - offer customers the chance to try some of the food for themselves.

 

Fresh & Easy chief executive Tim Mason is convinced Tesco has developed a winning formula.

 

"What we're trying to do is to be very useful and very beneficial to American neighbourhoods and I think we're achieving that," he said.

 

"I mean, we haven't come here to be a small business. There's no point in coming to America and planning to be a small business."

 

The figures appear to back up that ambition.

 

'Early days'

 

Tesco is putting £250m a year into the business after an initial investment of £89m, and it expects US operations to be profitable from the third year.

 

Editor of trade magazine Retail Week, James Thompson, believes Tesco has made an impressive start.

 

"It's obviously early days, but certainly in California they appear to have found a niche for fresh food and convenience stores," he said.

 

"The scale of their rollout plans show Tesco is committed to its Fresh & Easy operation for the long term."

 

Fresh & Easy: Customers' Views

Tesco has opened its first Fresh & Easy stores in the US, with plans to have about 800 outlets by 2012.

 

But what are the first impressions of US shoppers who have paid a visit?

 

JEANIE JANICE, LAS VEGAS, NEVADA

 

Jeanie Janice

 

There's a lot of easy-to-prepare foods that look fairly good and fairly healthy still.

 

This is my first time here and I love it already.

 

The prices seem a lot more reasonable here too - I think that's a major plus.

 

It's very clean and open too.

 

 

LINDA TUMAGER, LONG BEACH, CALIFORNIA

 

Linda Tumager

 

It's interesting. I like the variety and some of the prices.

 

I usually go to Costco and Vons.

 

I'll probably be back.

 

VICKY YOUNG, CALIFORNIA

 

I think it's great, it's really nice, clean, the aisles are wide, you can see the prices.

 

Everything that belongs to the store brand is very clearly marked and it's beautifully packaged.

 

I can't believe how nice it is.

 

JORJE APARCICO, EAGLE ROCK, CALIFORNIA

 

Jorge Aparcico

I think it's very nice.

 

The size of it is perfect. I don't need 18 brands of peanut butter - just one or two.

 

It cuts down the shopping time a lot. I've been looking forward to this place to open.

 

LYNNE FRANCE, LAKESIDE, CALIFORNIA

 

Lynne France

I like this store, I've already started shopping.

 

I was looking at the fresh things. I'm anxious to try some of their own brand products.

 

I was looking at the ingredients and I think it's going to be a good brand.

 

I like the fact that the shelves are short too and the way they've put it together.

 

Each section leads onto the next.

[Your Paragon of Virtue 0]

All-natural is organic right?

[NoCalMike 0]

All-natural is organic right?

 

I dunno, I mean a strawberry is natural vs "strawberry flavoring" but I am not sure if it has to necessarily be an organic strawberry to considered natural. I believe organic strictly has to do with the way the food is grown.

[Maztinho 0]

Organic rating can use only limited pesticides, and I think organic dairy has to have the cows fed only on organic rated feed. But Natural doesn't equal Organic.

 

From reading the article it seems that it's more of a Super Convienance Store instead of an actual grocery store or Super Market. Oddly enough I was bored at work in the break room and read this article in the Grocer's Magazine my manager always has laying around.

[Guest Vitamin X]

Organic is no artificial pesticides, fertilizers, etc. and they have to be USDA-certified. Organic produce tends to cost more because the stricter regulations force farmers to commit more labor to it (or at least that's their reasoning for it).

 

check out: http://en.wikipedia.org/wiki/Organic_food

 

The use of "all-natural" when products are labelled are fairly misleading since there's no regulation on what "all-natural" could really be defined as. Organic is organic.

[Your Paragon of Virtue 0]

So all natural is a buzzword, while organic has some actual meaning to it? Gotcha.

 

VX, do you eat organic? I know recently you've started to eat healthier so I figured that might have been one of the steps that you've taken. I'm slowly getting convinced to eat organic. I'm gonna try and see if it actually makes a difference as to how I feel, to justify the higher price tag.

[Maztinho 0]

Working in produce and tasting organic vs non-organic the organic stuff seems to lack flavor in stuff like bananas, mangos, and the apples. The lettuces and other greens are about the same, while I don't doubt that organic stuff is better for you the taste is awful.

[Guest Vitamin X]

Oh yeah definitely. I think everyone should try to eat organic whenever possible, but there are certain things that are organic that are a waste of money- for example, with the whole green fad that's going on now (and it's sad that it's even a "trendy thing" now..) there are a lot of products being sold here in the U.S. that are organic or "all natural" that barely make any sense for it to be that. For example, organic toilet cleaner and organic shampoo. Sorry dude, but even if you're mixing it with organic ingredients, something about chemicals being mixed in doesn't exactly strike me as very natural.

 

Although more important for the food choices I make at the grocery store is actually buying local over buying organic. I could tolerate conventional foods if it didn't have to travel 3-5 days in some truck sucking up gas and driving transportation costs higher for most Americans and contributing to global warming in the process.

 

And opposed as to what Massito said up there, organic tastes a lot better or just the same. Keep in mind whatever the difference is in non-organic foods that have a certain flavor as opposed to natural or organic foods, is synthesized and artificial.

 

Also, for some reason organic milk tends to last a lot longer than conventional. Everytime I look at the expiration dates, they always seem to be at least a month or so ahead of when I'm buying it, while conventional milk tends to only be fresh for like, only a week longer. Same thing with soy milk.

[Maztinho 0]

My banana/mango assessment was taking a non-organic and an organic and taking a bite out of one and then the other of equal ripeness and the organic ones tasted like shit.

 

It might just be that we have to get them shipped in through our warehouse and then down so the quality isn't as high nor are they as fresh as if I was buying them out of a Farmer's Market in Southern Cali or something, but the flavor wasn't there at all. The apples same thing, just no flavor when you compared them to the non-organic counterpart. It might be an acclimating to the taste of them, or maybe just maybe the several organic fruits I've tried have been unusually poor, but they don't taste like what they should taste like.

[Guest Vitamin X]

I don't think that's a very logical point though; if you consider that organic growing methods are as natural as they could be, then eating an organic fruit or vegetable IS eating it "as it should taste like" (or rather, if you want to be cheesy about it, "as nature intended"). I live in an area where I could get awesome, fresh apples though, organic or not, and they both taste great. I haven't been able to tell much difference between organic and non-organic bananas, but organic citrus tastes muuuuuuch better.

 

To be honest though, there shouldn't really be a huge difference in taste. I wonder if people ever consider that when they're trying out organic vs non-organic food that they perhaps have some kind of mental block on it that affects how they interpret the taste?

 

It's kind of like the same thing with sushi. Many people who I know would otherwise enjoy it are turned off by the fact that, "EW! IT'S RAW FISH!! IT'S RAW FISH!!" and so even when they try it, they think it's some kind of gross-out thing. But I digress.

 

Massito, where do you live?

[NoCalMike 0]

I don't see how organic could have much of a different taste. Organic vs. Non-Organic has to do with pesticides being used when it is grown, so unless you are trying to say pesticides make something taste better!?! Now, if you were arguing that a keebler cookie tasted better then an organic cookie, you would have ground to stand on because you could compare the ingredients.

 

Also, depending on where you live, produce in general has a different taste. When you live in an area where that is rich in agriculture you tend to have better tasting produce because it is locally picked, and is usually picked at the right time. When you live in a big city that is far away from the farms, fruits/veggies are actually picked before they are ripe and are counted on to keep ripe-ining(sp?) during the duration of the travel and while it sits on the grocery store shelf, so you have to be picky with what pieces you actually pick out and purchase.

 

This issue comes into play more and more as locally owned family farms close down and instead we get huge giant corporate farms somewhere supplying more people with food from farther away....

 

I am not sure where everyone lives but around here in addition to most of the produce being grown locally, we have numerous farmers markets available where you can basically pull up onto the farm property and they are selling fruits and veggies right off the farm. This is really the best way to get your produce if possible.

[Guest Tzar Lysergic]

I have the benefit of being in a farming community with plenty of hookups. I have an egg lady, a beef guy, and a pig/vegetable guy. The only times I ever buy produce is during the winter.

[Guest Vitamin X]

See, now THAT'S awesome. The Farmer's Market here (reportedly one of the best in the country according to the NYT) had a few people who sold farm-fresh eggs and let me tell you, that shit was AMAZING. I have never had regular ol' fried eggs taste so good since I was a kid and my grandma lived on a farm in Florida.

 

This issue comes into play more and more as locally owned family farms close down and instead we get huge giant corporate farms somewhere supplying more people with food from farther away....

This was true to a certain extent, but I think that trend is starting to reverse, thankfully.

 

Of course one of the worst issues that U.S. farmers face is a farm subsidy bill which keeps the cost of high-demand (often fattening or generally bad-for-you foods, of course) product low and keeping healthy stuff like greens and other vegetables expensive. Congress is considering making changes to the bill, although I'm not exactly sure what's going on with it right now.

[Maztinho 0]

I live in Southern Utah about two hours outside of Vegas. And I've retried some of the organic fruits and they just don't taste good compared to the non-organic. And I'm not being overtly picky either, the mango had zero flavor at all, and it was at the perfect ripeness. It tasted like paper, and not anything like a mango. The Fuji Apple I had tasted the same (it was crisp and juicy, but a flavorless juicy).

 

Conversely I lived in Brazil for a couple of years and the feira open air market stuff was spectacular though I can't vouch for the organicness of it knowing that it was picked early that morning really upped the flavor value of it. And we do get a bunch of locally grown produce from farmers around the area which could account for the non-organic being mo' better.

 

At this point I'm betting that our warehouse is getting the top tier stuff for bigger stores and giving us the shafted Organic fruit since we don't have a large market for it.

[Guest Vitamin X]

Yeah conversely, here in Oregon, there is a huge market for that stuff so we get good organic stuff. That might just be the case.

[Cheech Tremendous 0]

Count me in the group of not understanding how an organic fruit or vegetable could taste worse than it's pesticide induced counterpart. I'm not picky about buying organic, but every time I do I am usually pleased with the overall quality of the product.

 

But then again, I live in Oregon like VX so maybe I'm not getting a good read on this stuff.