Small-Format Food Retailing Memo: Tesco Fresh & Easy CEO 'Delirously Happy' About Chain's Performance to Date

The photograph above of Tesco Fresh & Easy Neighborhood Market CEO Tim Mason is from a profile piece, "Tesco's American dream is still in sight," published in yesterday's The Times (United Kingdom). The Times' caption to the photograph is: 'Not usually a man for taking the back seat, Tim Mason has led Tesco's drive into America and insists that he is 'deliriously happy' with the progress so far.'

Tesco Fresh & Easy Neighborhood Market USA CEO Tim Mason (pictured above) told The Times (United Kingdom) newspaper in a follow-up interview (yesterday) to the November 12 interview published in the paper in which the head of Tesco's Southern California-based small-format convenience grocery and fresh foods chain told the publication the grocer is postponing its launch into the Northern California market, that he's "deliriously happy" with Fresh & Easy's progress and performance to date.

This is the first time we can recall hearing the CEO of a U.S. supermarket chain (U.S or foreign-owned), and a struggling one at that, use such effusive language about the performance of the chain he runs in our nearly 30 years participating in and observing the U.S. food and grocery retailing industry.

The Blog Fresh & Easy Buzz, which covers Tesco's Fresh & Easy Neighborhood Market and the retail food and grocery industry, has a report on the interview with Tim Mason and an analysis of Tesco's Fresh & Easy small-format, convenience-oriented grocery and fresh foods chain.

You can read the story and analysis from Fresh & Easy Buzz at the link below:

Sunday, November 16, 2008: Tesco Fresh & Easy CEO Tim Mason Says He's 'Deliriously Happy' With the Chain's Progress Thus Far; We Prefer Andy Grove's 'Only the Paranoid Survive'

Fresh & Easy Buzz also has a story today about Sacramento, California's Oak Park Neighborhood Association, a group of residents who live in the city's Oak Park neighborhood and who appealed the design of the Fresh & Easy grocery market Tesco is proposing for that neighborhood to the Sacramento Design Review Board after the board approved the company's standard store design without comment.

Tesco has basically two designs for its Fresh & Easy stores that it uses in all of the markets, and new proposed markets, it is in. The first is the design it puts into vacant buildings, which the majority of the grocer's stores in Southern California, Nevada and Arizona are to date. The second design is its Fresh & Easy built from the ground up prototype design. These are new store construction projects rather than remodels of vacant buildings. The proposed Oak Park Neighborhood Fresh & Easy in Sacramento is a new, built from the ground up store.

With the exception of a few minor exterior graphic and signage differences, Tesco doesn't customize or localize the Fresh & Easy stores. The stores in Southern California, Nevada and Arizona essentially look the same outside and inside. There are some differences with the exteriors of the stores in remodeled vacant buildings based on what those buildings looked like on the outside before the remodeling. Those are accidental exterior differences though, not intentionally designed ones.

Based on the presentation by members of the Oak Park Neighborhood Association at the store design appeal hearing on October 15, 2008, the city's design review board incorporated a number of changes into the conditions of the store's design; changes Tesco must make when it builds the store in Sacramento's Oak park neighborhood.

According to the story in Fresh & Easy Buzz, despite the mandated changes, and the fact the grocer is postponing it launch into Northern California which includes Sacramento, Tesco and the developer have purchased the vacant lot where the proposed Fresh & Easy market is to be built for $1.1 million dollars. In other words it appears the grocery chain is going forward with the store. When construction will start is a whole different question.

The owner of the parcel was Kevin Johnson, the former NBA basketball all-star and native of Sacramento. Johnson retired from the NBA a few years ago and returned home to Sacramento, launching a career as a real estate investor and developer. He also founded a non-profit community-based development organization called HOPE. HOPE is headquartered in Sacramento's Oak Park neighborhood, the historically low-income neighborhood in the city where Kevin Johnson lived throughout his childhood, and where the Tesco Fresh & Easy Neighborhood Market grocery store is set to be built on land Johnson, who is now the mayor-elect of Sacramento, sold to the company for a cool million.

Read the story from Fresh & Easy Buzz at the link below:

Monday, November 17, 2008: Sacramento City Design Board Agrees With Oak Park Group on Design Changes For Proposed Fresh & Easy Store; Escrow Closed on $1.1 Million Parcel

Small-Format Food Retailing Memo: Post-Pause Frenzy: Tesco to Open at Least 30 New Fresh & Easy Stores Over Next 90 Days Beginning On July 2

Pictured above is the Fresh & Easy grocery market set to open on July 2 in a shopping center in Manhattan Beach, California. The photograph of the Fresh & Easy store was taken from in front of a Trader Joe's, which is nearly next door to the Fresh & Easy in the shopping center. The two stores even share the same parking lot. (Photo: copyright, 2008 Natural~Specialty Foods Memo.)

Tesco plans to open between 30 -to- 37 new Fresh & Easy Neighborhood Market grocery stores over a 90-day period beginning on July 2 when it opens its first new store, in Manhattan Beach, California, since taking a three month new store opening pause which began in Early April, based on information the retailer published in this press release yesterday.

Tesco currently has 61 of its small-format (10,000 -to- 13,000 square foot) combination basic grocery and fresh foods grocery markets open in Southern California, the Phoenix, Arizona Metropolitan region, and in the Las Vegas, Nevada Metropolitan market area.

In the press release, Tesco announced it will hire an additional 750 new employees over the next 90-days for the new Fresh & Easy Neighborhood Market stores it plans to open during this time period. Most of those new employees will be at store-level.

Additionally, in the press release, Tesco says it employs an average of 25 workers per-store

[Note: In most its previous press releases, Tesco's Fresh & Easy Neighborhood Market has said it employs and average of 20 workers per-store. We assume the average is 20 -to- 25, and the retailer has decided to use 25 rather than 20 now. If not, it would then appear Fresh & Easy Neighborhood Market has either revised the average, or has recently increased the number of employees it has on a per-store basis. You will see below why we mention this. It's not to knit-pick.]

Based on this data in the press release--hiring 750 employees over the next 90 days; the majority of which we know to be store-level hires from our sources--it's a good estimation that Tesco will be opening about 30 -to- 37 new Fresh & Easy stores beginning on July 2 and for the 90-day period following that.

Here's the math: 25 employees per-store on average; hiring 750 new employees over the next 90 days; equals 30 new stores during that three month period. At 20 employees average per-store, it works out to about 37 new stores. Therefore, we estimate Tesco will open between 30 -to- 37 new Fresh & Easy grocery stores over the next 90-days beginning on July 2.

We've been reporting Tesco would resume its rapid new store opening pace with Fresh & Easy at roughly the same frenetic clip it's been opening the stores at since November, 2007, which has been the opening of a new Fresh & Easy grocery store about every two and one-half -to- three days.

Numerous publications have written during the current three month new store opening pause it was likely Tesco would open fewer stores once the break ended. However, we've stated all along that would not be the case.

Rather, we've said, as the data from yesterday's press release and our analysis indicates, Tesco would start its rapid-fire new store opening machine back up once the three month pause ended and resume opening new Fresh & Easy stores once again on the average of about one new store every two and one-half -to- three days, which opening 30 -to- 37 new stores over the next 90 days in fact equates to. In other words, the new store pipeline is full and ready to be opened.

With a current store count of 61 Fresh & Easy stores, opening about 30 -to- 37 new stores over the next three months will give Tesco 91 or slightly more Fresh & Easy stores by early fall, 2008, with about three more months to go in the year still remaining to open more.

Initially, Tesco said it planned to have 200 Fresh & Easy stores open and operating in the Western USA by the end of 2008. Earlier this year the company revised that number downward, saying it would have more like 150 stores opened by the end of 2008.

In large part, Tesco revised that number down from 200 to 150 stores because initially it planned to start opening the about 50 Fresh & Easy stores that will open in the new markets of Bakersfield, Fresno, the Sacramento Metropolitan region and the San Francisco Bay Area, this year. However, the retailer has said those stores won't start opening until early 2009.

Even if Tesco has 100 Fresh & Easy stores open by say October 1, that would still leave 50 new stores to be opened between October 1 and December 31, in order to achieve the 150 stores open by the end of 2008 estimate.

In our analysis that's not likely to happen for a couple reasons.

First, it would mean opening a new store nearly every day, which we don't think Fresh & Easy plans to do; one every three days is hectic enough.

Second, October -to- December is the holiday shopping season--Thanksgiving and Christmas--which is the busiest time of the year in food and grocery retailing, making it difficult if not near- impossible to open that many, or close to that many, stores during the season.

We do believe it possible Tesco could open an additional 30 new stores during those remaining months of 2008 however, which would give the retailer in the neighborhood of 130 stores opened by the end of the year, which is close enough to 150 for even the most ambitious food retailer or pickiest analyst.

As we've written before, we can't recall another grocery retailer in modern food retailing history that's embarked on as rapid of a new store opening blitz as Tesco has with its Fresh & Easy Neighborhood Market USA venture, especially in a concentrated market region like the Western U.S. In fact, in only three Western USA states--California, Arizona and Nevada thus far--for that matter, limiting the geographic region even more.

Of course, doing so is key to Tesco's Fresh & Easy retail marketing and positioning strategy for the small-format Fresh & Easy grocery stores. It's what we call a "critical mass" store opening and location strategy: opening up as many stores within two miles or so of each other in selected markets as fast as possible with the goal of becoming in a sense the de facto neighborhood grocer in those cities and neighborhoods.

The question is: Has the three month new store opening pause given Tesco's Fresh & Easy Neighborhood Market enough time to improve and optimize its marketing, merchandising and operations in its stores so as to better compete for primary shoppers along with creating the means to generate needed new consumer trial?

Our analysis is no it hasn't. However, Tesco is viewing Fresh & Easy as a work in progress. Therefore "getting it right" right now isn't as important as getting more stores open "right now" is for the retailer. Remember, "critical mass" is crucial to Fresh & Easy's overall strategy.

Of course so are sales, margins and profits, as they must be to any food retailing chain. But the logic within Tesco in the main is those will come later.

Also what will have to come later in our analysis is a re-evaluation of many of the Fresh & Easy Neighborhood Market store locations in all three current market regions--Southern California, Las Vegas and Phoenix, Arizona Metro market.

Most of these Fresh & Easy stores are located in retail store buildings formerly owned and operated by supermarket chains like Albertsons and Ralph's, and in former Rite Aid drug stores, as well as in various former big box retail stores of various retail types.

These various stores were closed by their respective retail operators for various reasons; among them being sales underperformance in the locations.

Fresh & Easy, being a different format than say the Albertsons and Ralphs stores could eventually perform well in these locations. Additionally, in those former non food retailing locations, a food retailer might succeed where a non-food retailer failed. However, we know many cases in which Fresh & Easy stores in these locations aren't currently performing very well, particularly in the Las Vegas market, but in the other two markets as well.

That's not Tesco's primary concern at present however. Rather, "critical mass" is the focus, which is why starting once again on July 2, with the opening of the new Fresh & Easy grocery store in Manhattan Beach in Southern, California, followed by one new Fresh & Easy grocery market opening about every three days for the 90-days following that, Tesco will once again be on a Fresh & Easy Neighborhood Market new store opening tear.

Small-Format Food Retailing Special Report: Is Reno, Nevada Next After Arizona For Wal-Mart's Small-Format Marketside?

Natural~Specialty Foods Memo has learned Wal-Mart is likely to locate one of its small-format Marketside combination basic grocery and fresh, prepared foods markets in a new retail development in Reno, Nevada set to be built at Plumb Lane and Virginia Street, where a commercial developer has recently demolished the old Park Lane Mall to make way for the new mixed-use development. Our source is a knowledable Reno-area Wal-Mart employee who asked we not use his or her name for obvious reasons.

Wal-Mart is set to open four of its brand new Marketside small-format 15,000 square foot grocery and fresh foods stores this summer in the Phoenix Metropolitan region in Arizona. All four of these store locations are within just a few miles of Tesco's Fresh & Easy Neighborhood Market grocery stores, which are of a similar size (10,000 -to- 13,000 square feet on average) and are a similar combination basic grocery and fresh foods format, although the Fresh & Easy stores' prepared foods are made at a central kitchen in Southern California and shipped to the stores DSD-style, while Wal-Mart plans to prepare fresh foods in-store with its Marketside format stores.

The Reno, Nevada Marketside store would be the first location outside of Arizona (which aren't even opened yet) if it's build in the new development.

The new mixed-use development in Reno, where the Wal-Mart employee says the Marketside store will go, is to include retail shops, residential housing and public venues in a new-urbanism-style village design. The area around the old mall and new development in Reno, which has a population of about 200,000, is undergoing much change and gentrification. New urban residential housing including lofts and condominiums are going up nearby and a new public market, perhaps similar to the famous Pike's Place Public Market in Seattle, Washington, is being planned for nearby.

Locating a Marketside small-format grocery and fresh foods store in such a development would make sense, since as we reported here a part of Wal-Mart's strategy with the food stores is an urban one. Over time there is going to be lots of foot traffic in this Reno neighborhood, including thousands of new residents.

Wal-Mart currently has eight stores in the Reno Metropolitan region, which has a population of about 410,000, according to 2007 U.S. Census Bureau statistics.

Seven of the stores are Supercenters and one store is a Wal-Mart discount store, which sells a limited assortment of dry and perishable food and grocery items (no fresh produce or meats though) and lots of non-foods like cleaning products and other household items, in addition to general merchandise, hard goods and soft goods

Three of the seven Supercenters (as well as the Wal-Mart discount format store) are in Reno; two Supercenters are in Carson City, one is in next door Sparks, and one is in Fernley.

As the blog Fresh & Easy Buzz reported here on May 22, Tesco plans to open its first small-format, convenience-oriented basic grocery and fresh foods Fresh & Easy grocery store in northern Nevada in the Silver State shopping center center at Prater Way and McCarren Blvd. in Sparks, which is next door to Reno.

Tesco also is in the process of negotiating for other Fresh & Easy grocery store sites in Reno and the Metropolitan region. For example, according to Karen Melby of the City Works Department, Tesco Fresh & Easy representatives are interested in a site at Sparks Blvd. and Los Altos, in an area called Spanish Springs, in Sparks.

Sources also tell us other potential Tesco Fresh & Easy store locations include South Reno, other parts of Reno, Carson City and Fernley. Additionally, they've mentioned Incline Village in Lake Tahoe as a location Tesco Fresh & Easy representatives are looking at.

Wal-Mart is looking in Southern and Northern California for sites for its small-format grocery and fresh foods Marketside stores.

The Sacramento Metropolitan region and the Reno Metro region are considered generally as part of the same food and grocery market region in terms of market share numbers and advertising buys. Therefore, locating one or more Marketside stores fits in well with the strategy to open stores in Northern California (and Southern), as well as in Arizona, for Wal-Mart.

After all, this is part of the same logic and strategy Tesco is using by opening 19 stores in the Sacramento market, which will start opening early next year, then looking for locations in the Reno Metro region market.

Wal-Mart also has eight Supercenters in northern Nevada, which is a pretty high concentration based on the region's population of about 420,000 residents.

By eventually opening say three -to- four small-format Marketside stores in the Reno Metropolitan area, Wal-Mart could focus on that "fill-in" shopper strategy Wal-Mart USA chief Eduardo Castro-Wright discussed in this piece we published earlier today, while preventing any cannabalization of the Supercenters because unlike Tesco's strategy of being grocery stores for all consumers (supermarkets in the pure definition of the term), Wal-Mart's focus with Marketside is more narrow generally speaking because of its three-format food and grocery retailing strategy.

Small Format Food Retailing Special Report: Tesco's Fresh & Easy is On the Move Towards Goal of Becoming A Statewide Food Retailer in California

The blog Fresh & Easy Buzz, which chronicles, writes about and offers analysis on Tesco's Fresh & Easy Neighborhood Market small-format combination basic grocery store and fresh foods retail food store chain, is reporting today the retailer plans to open five stores in the Fresno, California Metropolitan area in California's Central Valley region.

As Natural~Specialty Foods Memo readers know, we first started writing about Tesco's Fresh & Easy small-format food retailing venture before the retail chain opened its first store in the Southern California city of Hemet, in late October of 2007.

Since then, the fledgling small-format convenience-style grocery chain has grown to 61 stores in Southern California, Arizona and the Las Vegas region in Nevada.

The results of the Fresh & Easy stores opened to date have been a mixed bag. Some are doing well, but others are underperforming considerably.

Of course, the jury is still out, since even the first batch of the grocery stores haven't even been open a full year yet. The first year celebration for Tesco for those stores will come in November-December of 2009.

Meanwhile, Tesco continues to expand the number of Fresh & Easy stores in its base, not only in the three market regions it's currently in, but also throughout California. None of the California market stores outside of Southern California have opened yet, but the retailer is locking up leases on various empty retail buildings it will turn into Fresh & Easy grocery markets, as well as signing a few deals for empty commercial lots or in new developments where it will built new small-format stores from the ground up.

Tesco is currently taking a new store opening break from April until July, after which it will start opening new grocery stores at a feverish pace once again.

In terms of the California Market, Tesco has signed leases to open five stores in the Bakersfield area in the state's southern Central Valley, which is about 100 miles from Bakersfield, 18 stores in the Sacramento market, and 19 stores in the San Francisco Bay Area.

Tesco hasn't confirmed the five Fresno stores yet, but they have applications into the California Alcohol Beverage Control Board for an off-sale beer and wine license, which de facto means they have signed leases on the buildings, since it's a prerequisite in California to have a valid store location/building leased or owned in order to apply to the board for a valid off-sale license.

The first stores in the Central Valley and Northern California are likely to start opening in early 2009, although a couple may open at the end of this year.

Originally, Tesco said it would have about 200 of the small-format grocery markets open in California, Arizona and Nevada by the end of this year, including a number of the Central Valley and Northern California stores. However, in March the retailer revised that number down to about 150 open by the end of 2008, and said it isn't likely any the the Central Valley and Northern California stores would open until 2009.

Tesco continues to keep a stiff upper lip regarding Fresh & Easy store performance. However, as we've reported in numerous pieces, the stores thus far haven't met Tesco's projected sales target of about $175,000 -to- $200,000 a week by this time. We know these numbers aren't hard and fast at Tesco. Rather, they're targets based on break-even numbers needed to meet investment and operations goals.

The sales targets are important though, and that is in part is why Tesco's Fresh & Easy U.S.division took the three month pause; to evaluate operations and marketing and put more focus in those two areas rather than putting all its focus on opening new stores.

From November, 2007 to March, 2008, Tesco opened a new Fresh & Easy store about every three days.

With the five stores coming to Fresno, the Bakersfield stores, the 19 in Sacramento and the 18 in the Bay Area, along with one Fresh & Easy Buzz reported also will be opened in the Northern Central Valley city of Modesto, Tesco is on the way to being a real statewide retailer in California, home to 38 million people and the world's fifth biggest economy on a per-capita basis.

Tesco currently operates about 30 small-format Fresh & Easy grocery stores in Southern California, and plans to open many more in the region. The other half of the stores (61 total) are in Arizona and Nevada.

Adding the Bakersfield, Fresno, Sacramento region and Bay Area stores, which will start opening early next year, to that mix will give the retailer a base of nearly 80 stores in California. Of course, that's not counting all the additional grocery markets in Southern California it will have opened before the year is out, which could be as many as 50.

Tesco could easily have around 150 small-format Fresh & Easy grocery stores in California alone by the end of 2009, depending on a number of variables, including sales at existing stores, commercial real estate trend, and just how fast they can turn leases into stores.

Tesco also plans on opening more stores in the Central Valley, the Bay Area and the Sacramento regional market. Those listed above are just the initial salvo. Tesco's store location people are out there as we write this locking up additional leases throughout California.

As Tesco gets more Fresh & Easy stores open and operating, we will be better able to see if its philosophy and strategy of opening a critical mass of stores fairly close together works.

As we've written in the past, the retailer's goal with its small-format grocery stores is similar to that of Starbucks with its cafes, which is to locate the units a couple miles apart in their market regions so as to saturate an area with the stores. The strategy being to geographically, as well as operationally, be the default neighborhood grocer in a given community.

California is a highly competitive grocery market, so the jury is still out on Tesco's neighborhood grocery store strategy, despite the rapid pace in which it has been opening Fresh & Easy stores. Opening new stores, although not a simple task, is much easier than making them profitable. Stay tuned.

Editors Note: There are numerous stories in the archives about Tesco's Fresh & Easy neighborhood market. You can look through the archives or do a search using the box at the top of Natural~Specialty Foods Memo.

Retail Marketing Memo: Ad Circulars, Promotions and the Web: Aldi USA and Tesco's Fresh & Easy as Small-Format Grocery Store Marketers in America

Despite what you may have heard, Tesco's Fresh & Easy Neighborhood Market isn't the fastest growing, and its far from the biggest, small-format, convenience-oriented discount grocery store chain in the United States.

That honor goes to Aldi USA, the U.S. division of German-based retailer Aldi International, which like Tesco PLC has food and grocery stores throughout the world.

Aldi USA, which already has over 850 small-format, no frills (about 13,000 -to- 15,000 square foot) discount grocery stores stretching from the Midwestern USA, to the Mid-Atlantic and Eastern portion of the country, is adding about 100 new grocery stores each year in the U.S. for the next five years.

If Aldi USA stays on that course, the grocer, which already is the 24th-largest in the U.S. based on annual gross sales, will have somewhere in the neighborhood of 1,400 stores in America by 2013.

Aldi in America

Aldi USA, which opened its first U.S. grocery store in 1976, operates its stores under the philosophy of less-is-more.

It's small-format, no frills discount grocery stores average no bigger than 15,000 square feet and look like a slightly modern version of America's 1970's-era neighborhood grocery store.

The grocery markets carry about 1,300 of the most frequently purchased food and grocery items in the U.S., along with a limited selection of specialty items and various non-foods products.

At least 80% of the grocery chain's food and grocery items are under its own private or store brand labels. These store brand products range from basic dry grocery, refrigerated, frozen and fresh products, to specialty and ethnic foods' items.

The small-format, no frills discount grocery chain sells high quality fresh produce and meats at cheap prices, along with its limited assortment grocery and non-foods offerings.

The stores, similar to Tesco's Fresh & Easy Neighborhood Market in design, are essentially shrunk-down versions of a typical American supermarket.

However, unlike Tesco's Fresh & Easy, Aldi USA grocery stores have a much more specifically-positioned merchandising philosophy and format: basic groceries with some specialty items tossed in at the cheapest prices possible, along with a variety of general consumer products advertised each week in-store and in the grocer's weekly advertising circular.

Aldi USA's eclectic weekly promotions

Aldi USA does lots of in-and-out promoting of everything from major national brand groceries, which they don't carry everyday, to gourmet foods on occasion like "Whole Lobster for the best price in the U.S." and numerous ethnic foods items, usually tied-in with major events like Chinese New Years for Asian foods and the like.

But even more interesting, Aldi tends to promote everything--food and grocery products, furniture, computers, consumer electronics, flowers and plants, garden supplies, clothing and more--under the sun except the kitchen sink (which we bet is on the way) in its weekly advertising circular. These non-food durable and consumer products are promoted and sold on an in-and-out basis.

To say the ads are eclectic could be the understatement of the decade.

For example, take a look here at Aldi USA's weekly ad which breaks today, Sunday, May 4.

Sharing space in the current advertising circular with Pillsbury brand refrigerated biscuits, Klondike ice cream bars, fresh peanuts in the shell, fruit juices and frozen pizza, is an electronic video picture frame, a portable GPS navigation system for $189, an under-the-counter AM/FM kitchen radio, numerous gardening supplies for mom for Mother's Day next weekend, cosmetic items for mom, summer dresses for toddlers, and an eclectic assortment of other food and non-food items.

We forgot to mention the USDA Choice Bacon Wrapped Filet Mignon for only $1.99. And...the Vanderwall Bombe Accent Chest furniture piece for $99.99.

Did we say Aldi USA's weekly ads are eclectic ?

They work too: Aldi USA is growing its store-count so fast because the small-format, no frills discount grocery stores are super-popular and successful in the Midwest, Mid-Atlantic and Eastern regions of the USA.

Aldi's aggressive USA growth program

As part of its 100 new stores per-year growth program, Aldi also is moving into new states and further into regions in those states it's already in. For example, the grocer is making a big push into Florida, where it sees lots of opportunity for its brand of grocery retailing.

The no frills, discount small-format grocery chain also is moving into more regions in the eastern U.S., such as New York state and Pennsylvania, as well as filling out with more stores in those places where it already operates numerous grocery markets.

Aldi USA's focus in the Midwest is similar. The grocer is adding more stores in the regions where it already operates to create stronger critical mass and retail brand recognition, while at the same time moving into new, nearby regions where its opening its first stores.

More on Aldi's weekly ads

Aldi's weekly ads are like the one for this week described above each and every week: A mix of store brand grocery products, national brand products, non-foods items, electronics, furniture, clothing, and many other surprises.

For example, take a look here at Aldi's advertising circular for next week, the week of May 11.

The non-foods theme for next week appears to be automobile care. There's a two-ton hydraulic car jack for only $17.99, a "car creeper," those things used to get under the car to change the oil, for $14.99, and a couple more interesting car-related items which you will have to look and see for yourselves.

Most of the food items in the May 11 ad circular are national brands, rather than varieties of Aldi's various store brands, this time around. There's Tyson brand chicken products, Angel brand Soft bathroom tissue, Nestle Juicy Juice fruit juices, Kellogg's and Quaker snack items and a number of other branded offerings.

Aldi USA posts these weekly advertising circulars on its website at least one week in advance of the ad breaking, and it stays on the site until it ends. There's also a function on the website where people can type in their email address so they can receive the weekly ad circulars right in their email box prior to the ad's start-date.

The Aldi ad circulars (printed copies) also are mass mailed out to residents' homes and available in the stores.

Tesco's Fresh & Easy Neighborhood Market also posts its advertising circulars on its website. However, it's ads run for a three-week period on the website rather than weekly like Aldi's do.

Additionally, although we searched for it, we can't seem to find a function on the Fresh & Easy website in which a customer or potential customer can put in their email address and receive the online advertising circular in their email box like one can with Aldi. Adding this function is cheap to do, and Fresh & Easy is missing the boat by not having such a simple yet powerful tool on its website. [If there is such a feature, and we missed it, it means it's hard to find because we searched all over the site for it.]

Lastly, no place on the Fresh & Easy website's home page does it tell you where you can specifically find the advertising circular. Rather, a user has to guess.

Instead of making you guess, we will tell you where it is: the advertising circular can be found by clicking on the link titled "Fresh & Easy Ideas" in the left-hand column on the home page. It is behind that link where you will find the Fresh & Easy promotional advertising circular.

Why not a link right on the website's home page that says: "Click here for Fresh & Easy's advertising circular/specials?" We think such a simple link would not only be fresh--but EASY as well. Doing so also will result in many more sets of eyeballs reading the Fresh & Easy advertising circular on the website, which we would hope if the retailer's goal.

Learning form Aldi USA's website

Tesco's Fresh & Easy could pick up some general marketing tips, as well as communications quality and ease of use tips, from viewing Aldi USA's website.

For example, Fresh & Easy is still using the exact same website it had set up before it even opened its first store in November, 2007.

The website is really a start-up site in terms of how it's set up rather than one for a grocery chain with 61 stores and about 90 more on the way before the end of the year.

For example, take a look at how the store listing link is set up on the Fresh & Easy website. If a user wants to see where the stores are, he or she has to click on maps, and go through a cumbersome process.

Why not, like nearly every other grocery chain and independent grocer website in the U.S. has, just put a simple list of where the stores are like this one. Fresh & Easy could keep the map function if it likes it, but add a simple store list for quick viewing along with it at least.

There is a zip code box on the Fresh & Easy website, where a user can type in his or her zip code and get a list of stores nearest them. This is a good feature. However, adding a simple store list, and updating it regularly, would make good sense in our analysis.

Food retailer websites are a marketing tool; an extension of the brick and mortar storefront, as well as being a corporate communications and informational tool. As such, they need to look clean, be simple to use, and provide as much information to the user as possible with the least amount of effort.

Fresh & Easy's website has some good features. However, it's overall look, usability and lack of features most other supermarket websites have, just screams "We haven't taken the time to modify the site since we opened our first stores last November." Marketing after all is everything a retailer does--including its website.

Is Aldi USA looking westward?

Meanwhile, there's been some talk since late last year that Aldi USA might start to look west in the USA for some of its small-format, no frills discount grocery stores.

Aldi International already has a western presence in part; the same family that controls the majority of Aldi International in Germany also is the 100% owner of Southern California-based specialty grocery chain Trader Joe's, another small-format success story.

Since the Aldi USA discount format and the Trader Joe's specialty grocery format are different enough that they wouldn't cannibalize each other--many Aldi and Trader Joe's stores exist close by each other in the East, Mid-Atlantic and Midwest already--Aldi USA executives have been exploring coming west with the small-format, no frills discount grocery stores, although it isn't a top priority at present.

The kitchen sink

Meanwhile, we just know one of these weeks we're going to find an Aldi USA weekly advertising circular in our email box that has, along with its normal eclectic mix of food, grocery, nonfood and consumer products...a kitchen sink advertised in it at a bargain price.

We also look forward to seeing Tesco's Fresh & Easy make those needed changes to its website. Tesco in the United Kingdom has one of the finest websites of any supermarket chain in the world. We think its USA Fresh & Easy divsion should have the same.

Green Retailing Memo: Tesco's Fresh & Easy Neighborhood Market USA launches New 'Green' Initiatives For Earth Day and Beyond

Tesco's Fresh & Easy Neighborhood Market has just announced two new Earth Day 2008-related environmental retailing initiatives in addition to its previous free "bags for life" reusable shopping bag giveaway which we reported on last week.

Tomorrow on Earth Day, Fresh & Easy will bag all customers' grocery orders for the day at its 61 small-format, convenience-oriented grocery stores in Southern California, Arizona and Nevada in free, reusable grocery bags which the retailer calls "bags for life."

The bags are free for life because Fresh & Easy Neighborhood Market will replace the bags if they are damaged for life. That's for the life of the consumer we believe.

The "bags for life," which are slightly larger and more durable than single-use plastic carrier bags, are made from recycled materials (we don't know if 100%) and 100% recyclable when worn out.

The plastic "bags for life" retail everyday in Fresh & Easy stores for 20 cents each. The grocery chain also sells canvas reusable shopping bags for $2.50 each.

New Earth Day 2008 initiative: Green building web page

Tomorrow on Earth Day, Fresh & Easy Neighborhood Market plans to launch a new web page dedicated to the retailer's various green building initiatives, according to a company spokesperson.

Among the features of the green building web site will be highlights of Fresh & Easy's green building goals and practices, along with a "real time" "green" energy meter from its 500,000 square foot solar panel installation on the roof of the grocery chain's 850,000 square foot distribution center in Riverside, California.

The website energy meter will show how much power the distribution center is generating and using from renewable solar energy in "real time." According to a Fresh & Easy spokesperson, the facilities solar panel array generates about 30% of the distribution center's power needs at present.

Check out the new website tomorrow and you can monitor how much power the solar installation is providing to the mega-Riverside distribution center yourself. http://www.freshandeasy.com/greenbuilding

New Earth Day 2008 Initiative: North America Climate Registry

Tesco's Fresh & Easy Neighborhood Market USA also is announcing it has joined The Climate Registry (TCR), which is an organization that builds on and expands the climate and greenhouse gas measurement and accounting work of the California Climate Action Registry (CCAR). CCAR is a voluntary greenhouse gas reporting organization of which Fresh & Easy is currently a member of.

TCR is an expansion of the California organization's effort. It extends a common carbon footprint reporting standard across North America. Numerous North American businesses are joining TCR as part of their corporate environmental initiatives.

In announcing Fresh & Easy Neighborhood Market's Earth Day 2008 initiatives, company CEO Tim Mason said, "We all have a responsibility to put thought into our impact on the environment. At Fresh & Easy, we take this responsibility seriously, and strive to be good stewards of the environment. Collectively, we can all make a big difference."

Earlier this year, Fresh & Easy Neighborhood Market joined the U.S.-based Leadership in Energy and Environmental Design (LEED) organization. LEED, also known as the U.S. Green Building Council, is a nonprofit third-party certification program and the nationally excepted benchmark for the design, construction and operation of high performance "green" buildings. Learn more about LEED here.

Tesco PLC Reports Fiscal Year Sales and Profits

United Kingdom-based global retailer Tesco PLC, that nation's number one retailer and the third-largest in the world, released its annual sales and profit numbers today.

Tesco PLC, the international retailer that's also the parent company of Fresh & Easy Neighborhood Market USA, the small-format, convenience-style grocery chain we've written much about here at Natural~Specialty Foods Memo, had a strong sales and profit report for the fiscal year. Tesco reported those number today.

We're currently working on an analysis piece on Tesco and Fresh & Easy for publication tomorrow.

We suggest you go to the blog Fresh & Easy Buzz, which is full of news, analysis and commentary, both internationally on Tesco PLC and on Fresh & Easy in the U.S., on today's Tesco sales and profits report.

Click here to go to Fresh & Easy Buzz.

Retail Marketing & Public Relations Memo: What Tesco's Fresh & Easy Neighborhood Market 'Should' Be Doing Now

Last week, Tesco Neighborhood Market chief marketing officer Simon Uwins posted in his corporate blog on the Fresh & Easy website that the small-format, convenience-oriented neighborhood grocery chain was taking a "pause" in its new store opening blitz, which has found Fresh & Easy opening 59 grocery stores in Southern California, Arizona and Nevada since November, 2007. [Read about the Fresh & Easy new store "pause" or "breather" here.]

Blogs such as Fresh & Easy Buzz were the first to report on Uwins' announcement, followed by a number of UK newspapers. The U.S. business press picked-up the story starting on Monday. And yesterday and today numerous major newspapers and news services like the

Associated Press, the Los Angeles Times, San Francisco Chronicle and many others are running stories on the retailer's three month new store opening "pause." Blogs of all sorts are writing about the three month new store opening moratorium and store sales' underperformance issue as well.

Most of these news stories and features (and likely those to come the rest of this week) aren't positive for Tesco's Fresh & Easy Neighborhood Market retail venture in the USA. The new store opening "pause" is the story news peg in all of the pieces, along with reports like those we offered months ago that the 59 Fresh & Easy grocery markets opened to date are seriously underperforming in sales as compared to Tesco's internal sales targets.

Uwins and company should have better prepared for this fact, which any experienced U.S. marketer or PR professional should have known would happen. It can happen to anybody though.

The reason any professional with experience with the U.S. business press should have known how the news cycle would have played out is because of the nature of today's media. First, because the newspaper business in the U.S. is doing so poorly, newsroom budgets and staffing has been lean for the last five years or so. As a result, today's U.S. business and popular press is a reactive rather than investigative enterprise in the main.

Business reporters at America's newspapers--with some exceptions of course--tend to report and write stories based on press releases issued by corporations, or based often times on news reports they find in blogs and other alternative media sources.

For example, the business section reporters who are reporting on the Fresh & Easy "pause" yesterday and today didn't read it on Mr. Uwins' corporate blog--even though it was there for blogs like Fresh & Easy Buzz to find, which reported it last Saturday. Rather, they either discovered the news from that blog, or from the British newspapers which started reporting the story on Sunday and Monday.

As a result though, Mr. Uwins' corporate blog post--which we think was a good idea but not complete as we will explain shortly--offered a news peg for the U.S. business press to generate stories about Fresh & Easy, which hadn't been much in the news in the last month. Since the "news" is that Fresh & Easy is taking this new store opening breather, originally reported by the grocery chain's marketing chief, and that the stores have been underperforming for sometime, based on numerous reports, put the two together and you've got the news peg the publications' went with; and rightly so--it's what is news, especially in the absence of any follow-up prepared by Fresh & Easy.

Mr. Uwins and the Tesco Fresh & Easy Neighborhood Market team should have been prepared for this news cycle however--and even used it to the grocery chains marketing advantage. And, based on the responses from a Fresh & Easy Neighborhood Market spokesman to the reporters in many of these stories, there hasn't been much preparation. His quotes to date have been on the order of: 'Things are going well, the stores aren't underperforming, we don't know where this data (the sales estimates) is coming from.'

Not good. Too boilerplate. Non-responsive. Sounds too much like spin. It's not the spokesman's fault either. He can only go with what he's provided with. It's not an easy roll.

What Uwins and company should have done before publishing the "pause" news in the corporate blog (a communication we agree with) was to be ready for the media before the post was made.

What do we mean by ready?

We suggest Uwins and company should have had three stories (news pegs) prepared and locked-and-loaded for the post "pause" announcement. Remember, today's business press, and even many bloggers, are a reactive lot in most ways.

We would have prepared three "news pegs" in the following areas:

First, we would have had one concrete change to be implemented in the Fresh & Easy stores. For example, a common complaint (which happens to be true) about the stores is that they aren't localized and customized enough to the demographics and character of the neighborhoods they are located in. We would have used this post-pause announcement period to announce a major initiative in which Fresh & Easy plans to start in May bringing in a substantial number of more local food and grocery products into its stores. Neighborhood-oriented merchandising.

For example, bringing in more Southern California-produced fresh produce and specialty products for its stores in that region. There are tons of such goods produced and marketed in the region. Additionally, how about a similar initiative for the Arizona Fresh & Easy grocery stores? An announcement that the grocer will stock many more Southwestern-style food and grocery products, produced in Arizona and New Mexico, in its stores. There are lots of those available as well.

Lastly, for both regions, and Nevada, an announcement that the small-format "neighborhood" grocery chain would be increasing the amount and variety of ethnic foods it merchandises in all 59 stores--Hispanic, Asian and other ethnic foods--based on the specific demographics of a given neighborhood. It's needed.

Such an announcement, say yesterday, would have generated lots of press, which in many cases would mean positive stories along with the more negative new store opening "pause" pieces. In some cases, such an announcement (local foods are big news in the U.S. right now) would have cut-short the "pause" story news cycle for the new "local foods initiative" cycle of stories.

But, if we were in charge we wouldn't have stopped there in our pre-publishing of the "pause" strategy, for the post-pause news cycle period.

April 22, just two weeks away, is Earth Day. Numerous grocery retailers, manufacturers and marketers are planning major Earth Day green marketing or green retailing promotions and activities for the day which celebrates the earth, conservation and environmental stewardship.

We haven't heard of any plans for Earth Day from Tesco's Fresh & Easy.

Our second, "locked-and-loaded" post-pause corporate blog post news peg would have been tied to Earth Day. For example, why not an announcement from Fresh & Easy that it plans to give away thousands of free reusable, canvass grocery tote bags at its 59 stores on Earth Day. Further, that as part of this give-away promotion, it will give one dollar for every free tote bag it gives away to shoppers to local environmental groups and charities in its market areas.

Green or environmental news from retailers is big news right now.

Or, the grocery chain could even go bolder. It could follow in the footsteps of Whole Foods Market, Inc.--which beginning on April 22 (Earth Day) will no longer offer single-use, free plastic grocery bags in its 270-plus stores in the U.S., Canada and England.

Fresh & Easy could announce it's decided to offer only paper grocery bags produced from 100% post-consumer recycled paper, along with reusable grocery tote bags in its U.S. stores. In fact, such an announcement would be even more powerful if it was done in conjunction with the free reusable tote bag scheme suggested earlier.

Either way, just doing one or both, we guarantee there would be a significant batch of news stories generated on the announcement in the U.S. media. [Just Google or Yahoo Search Whole Foods plastic grocery bags to get a flavor for what we are suggesting in terms of news coverage. Also, just wait until a few days before Earth Day for the Whole Foods plastic bag self-ban stories to come flowing in.]

Just as we mentioned above about the "local foods initiative" story, one or both of these Earth Day news pegs would result in considerable positive news coverage, along with the more negative "pause" and store sales underperformance stories currently all over the pages of newspaper business sections and in online editions. Further, just as with the "local food" news peg--and even more so because both that announcement and the Earth day one would be timed to be released fairly shortly apart--the "pause" and sales underperformance story news cycle would be shortened in our analysis, experience and opinion.

Lastly, we would have one more bullet in our "pre-pause" corporate blog post/"post-pause" post-publication strategic media arsenal. We might or we might not use it right away depending on the results of our above news pegs, by the way.

This third and last strategy would be to have Fresh & Easy CEO Tim Mason and his new, soon to be number two man, U.S.-born Jeff Adams who currently is the CEO of Tesco's Tesco Lotus retail division in Thailand, issue a joint-statement saying the retailer recognizes there are some sales underperformance and other format, operations, marketing and merchandising problems with the Fresh & Easy stores, which is why as CEO Mr. Mason ordered the new store opening "pause." [Mason hasn't issued a statement or said a word on the "pause" to date. Not a good communications strategy. Further, believe it or not, the press loves it when a CEO comes out and walks-the-walk and takes charge. It hurts a little at first. But starts to feel real good soon after.]

Further, in the statement, we would have CEO Mason state that in part this is why Adams, a U.S. native, has joined the senior executive team. That he's coming in, from his highly successful run as CEO of Tesco-Lotus, to provide a fresh mind (one that was formed in the U.S.) and a new set of eyes as Fresh & Easy enters a new phase, after the amazing task of opening 59 of the small-format basic grocery and fresh foods markets in a mere 150 or so days.

Further, in the statement Adams would offer his two-cents worth, not to mention talking about how happy he is to be returning to the USA, land of his birth, to be involved with what might just be one of the most interesting grocery grocery retailing ventures in the U.S. in the last five decades, which it is. This isn't spin, it's all factual--and real.

There's an old saying in politics and political campaigning: 'If you have a problem...hang a lantern on it.' We all know the converse: most corporations and politicians (and others) get in trouble not because they address an issue or mistake head-on, but rather because they deny it or even attempt to cover it up. Like its often said about Richard Nixon's Watergate fiasco: 'It wasn't the third-rate burglary that lost Nixon the Presidency; it was the cover-up.'

We aren't suggesting Tesco is covering anything up about Fresh & Easy. Nor are we naive enough to think or suggest any corporation should fully disclose its operational difficulties (first it has to know them though) completely if it chooses not to.

What we are suggesting though is two-fold: First, as we write this, Tesco's Fresh & Easy appears to have absolutely no strategy for dealing with the mostly negative stories that are appearing mostly in the business sections of U.S. and UK newspapers this week. As we have outlined above, there exists a strategy for doing so; one that should have been in place already.

Second, Tesco's Fresh & Easy has not just an image problem, but a real retail format, operations, marketing and merchandising one. But these aren't end of the world problems. They're "fixable," especially by one of the world's most innovative and successful retailers, which Tesco is. However, to fix these problems, those in charge first have to discover them; and do so despite personal pride or hubris. The suggestions we offer are part of hanging that lantern on these problems, as well as thinking strategically when it comes to marketing and media relations.

The story, of course, is still developing. Stay tuned. By the way, with some fast-moving and nimble work, Fresh & Easy could still launch a campaign like we describe above before the week is out.

Retail Memo: Former NBA All-Star Kevin Johnson Behind One of the Seven Tesco Fresh & Easy Grocery Markets Coming to Sacramento, California

Former NBA basketball star, and Sacramento, California native, Kevin Johnson is the driving force behind bringing one of the 19 Tesco Fresh & Easy Neighborhood Markets we recently reported are coming to the region, to the city of Sacramento's Oak Park neighborhood.

And, that's not all: Yesterday, the former ex-Phoenix Suns' guard announced he is running for Mayor of Sacramento, challenging current, three-term incumbent Mayor Heather Fargo, who last week joined Tesco Fresh & Easy Neighborhood Market CEO Tim Mason at a press conference in front of a future Fresh & Easy grocery store in Sacramento, to announce the retailer's plans to enter the Sacramento market with 19 stores, seven of which will be in the capital city.

Johnson made his announcement in a press conference at the Guild Theatre in Sacramento's low-income Oak Park neighborhood, where the 42 year-old basketball star was raised.

Echoing U.S. Democratic Presidential candidate Barack Obama's call for "change," Johnson said: "We need a change in the city. As I went out the last month and talked to people around the city, folks have said to me they believe city government is non-responsive, tired, uninspired and bureaucratic. they want something different in Sacramento. (They're) clamoring for change."

It is in this very Oak Park neighborhood, Johnson's boyhood home, where he is bringing a Fresh & Easy grocery store. Since retiring from the NBA and moving back home to Sacramento, the former NBA star has been a real estate developer, including establishing a non-profit community development corporation called St. Hope.

Johnson devotes a great deal of his time to his St. Hope non-profit organization. Among its projects has been transforming the failing Sacramento High School into a successful Charter School.

The St. Hope community development organization also has developed the '40 Acres Art Gallery and Cultural Center' in the low-income Oak Park neighborhood. The cultural center includes residential lofts, a bookstore and a Starbucks cafe.

Oak Park is one of the city's oldest neighborhoods. It's been seeing a renaissance in recent years, as projects such as those by Johnson's organization, as well as those by private developers, are revitalizing it. The neighborhood also has become popular in recent years because it's one of the most affordable in the city in terms of housing. Numerous young professionals have moved into the neighborhood, buying old houses and remodeling them, which is changing the area's demographics somewhat, although it's still low-income.

Johnson owns about 37 properties in the Oak Park neighborhood. He recently had to issue a public apology regarding the condition of a number of these properties, when the Sacramento Bee, which is the region's major daily newspaper, ran a story reporting that half of his properties had been sighted by the city for code violations over a 10-year period. The violations included vacant lots being fallow, along with garbage being allowed to fill the empty lots.

Johnson responded quickly to the Bee article however, and has moved to clean up all the lots in the neighborhood, according to the Sacramento planning department, which enforces the city's residential and commercial property codes.

Johnson's latest project is bringing one of the 19 Sacramento area Fresh & Easy grocery markets to the commercial core in the Oak Park neighborhood, on a piece of property he owns there. The neighborhood is underserved by grocery stores, especially those that offer a selection of everyday groceries at reasonable prices, along with fresh foods like produce and meats. Johnson --in partnership with Tesco's Fresh & Easy--aims to address this lack of a grocery store in the place where he was raised.

One of Tesco's strategies with its U.S. Fresh & Easy small-format, convenience-oriented grocery stores is to locate stores in what it calls "food deserts," neighborhoods that currently are underserved by grocery stores. Oak Park fits that strategy--and with the NBA All Star, and perhaps future Sacramento mayor--behind the project the location could be gold for Fresh & Easy.

When neighborhood residents and community groups heard the news about a month ago that Johnson was bringing a Fresh & Easy Neighborhood Market to the neighborhood, the response was almost universally positive. Neighborhood groups had been trying to bring a grocery store that fits the bill of offering basic groceries along with lots of fresh foods to the neighborhood for a number of years. The Oak Park grocery market is scheduled to open in 2009, probably about mid-year.

If Johnson is elected mayor, Tesco's U.S. Fresh & Easy Neighborhood Market venture just might have an important friend at Sacramento City Hall.

Special Report: Looks Like We Were Right: Tesco's Fresh & Easy Neighborhood Market Northern California DC Likely to Be at Arch Road Site in Stockton

We first reported in the early Fall of 2007 that Tesco's Fresh & Easy Neighborhood Market plans to locate a Northern California distribution center (DC) in Stockton, California, which is located in the Northern San Joaquin Valley, about 30 miles from Sacramento, and about an hour from San Francisco. [On the color-shaded map above, Stockton is light green under the San Joaquin Valley color-key. Its at the very top on the map, right under Greater Sacramento, which is in red.]

We can now report it looks like the distribution site will be at Arch Road and Newcastle Road in southeast Stockton. The site is right off Highway 99, which is the major truck and freight transportation artery throughout the Valley and onto Freeway 580, to the San Francisco Bay Area. Numerous food and grocery industry companies operate distribution centers in the general region because the area is centrally located.

The potential distribution center site is 474 acres. We don't know how much of it Tesco will use. The land is owned by Opus West, a real estate development firm. Opus West is a division of the Opus Group, a $2.1 billion a year national real estate development company based in Minneapolis, Minnesota.

As we reported months ago, the Stockton DC could serve Tesco's Fresh & Easy grocery stores as far south as Bakersfield (Kern County)in the Central Valley and in the Northern California region, including the Bay Area and Sacramento Metro region stores.

Tesco's Fresh & Easy has signed leases for 18 stores in the San Francisco Bay Area and 19 stores in the Sacramento region to date. The retailer is currently negotiating for more store sites in the Bay Area and in the Sacramento region. Fresh & Easy also is looking at sites in nearby Stockton--where the DC is likely to be located--and nearby Tracy, Manteca and Modesto. One of the grocer's 19 Sacramento region grocery stores is in Galt, which is only about 15 minutes from Stockton. [Tracy and Manteca are in San Joaquin County. Modesto is in Stanislaus County.]

Tesco also plans to locate at least six stores in Bakersfield, in the heart of Central California. The retailer also is looking for sites in the Fresno Metropolitan area, which is only about 30 minutes away from Bakersfield. The Fresno stores could be serviced by either the Stockton distribution center or the 850,000 square foot Fresh & Easy Neighborhood Market DC in Riverside, in Southern California, as the distance to the region is about the same from either Stockton or Riverside.

The 37 stores in the Bay Area and Sacramento are only the beginning for Tesco in Northern California. Based on what our sources tell us, we believe the grocer wants to have at least 50 -to- 60 stores open in the region by the end of 2009. The first Fresh & Easy stores in Northern California are scheduled to start opening as early as late 2008, but most likely won't begin opening until early 2009.

As we often write, Tesco is pursuing a "critical mass" store strategy in California, the Phoenix Metropolitan region in Arizona and in the Las Vegas, Nevada Metro area. This strategy is to locate a "critical mass" of stores in a given region, similar to what the Starbucks and Walgreen's Drug chains' do for example.

As a result of doing this, not only is consumer awareness increased and marketing and advertising costs better leveraged, but from a positioning standpoint it serves the goal of attempting to become the logical or defacto neighborhood grocer in the region, in part by virtue of having so many stores in the area.

This strategy is especially key for Tesco in California, where it is opening the highest proportion of its stores in the three states. The retailer is pursuing what we call a "ring the bay" strategy in the San Francisco Bay Area, locating stores throughout the region in order to maximize the variables we discussed above. It's pursuing the same strategy (minus the bay) in the Sacramento region.

The strategy for Northern California is modeled on what Tesco has been doing in Southern California, which is choosing regions like Orange County, the Inland Empire and the San Diego region, building numerous stores there, and creating that "critical mass," so as to be seen as a logical neighborhood grocer for community residents. The philosophy is, that like Starbucks or Walgreen's, if you see us everywhere in a region, you will shop with us. It's similar to the version of the independent neighborhood grocer, accept its a chain model

Retail Memo: News & Analysis: Bakersfield, California Next New Region in the Golden State For Tesco Fresh & Easy Neighborhood Market Stores

Bakersfield, California, best known as once being one of the top oil-producing regions in the United States, along with being the boyhood home of famous country western singers Buck Owens and Merle Haggard, will be the next new region in California that Tesco's Fresh & Easy Neighborhood Market marches into, when it opens at least six of its small-format, convenience-oriented grocery stores in the region either at the end of this year or in early 2009.

Tesco, the world's third-largest retailer, plans to open three Fresh & Easy grocery markets in Bakersfield--two in the northwest portion of the city and one in the southwest side of town. The retailer also plans two open two stores in the nearby Bakersfield suburbs of Delano and Wasco. Bakersfield, Delano and Wasco are located in Kern County. [Kern County is shaded in light green in the map above. See San Joaquin Valley on the map key.]

These six stores are only the initially units Tesco has planned for the region. Our commercial real estate sources, along with a source in the local community, tell us the grocer is looking for additional sites in the area for its grocery stores, which merchandise a limited-assortment of Fresh & Easy store brand and national brand everyday groceries, along with specialty and natural foods, fresh produce and meats, an extensive selection of prepared foods, wines and craft beers, fresh flowers, and some non-foods' products.

Fresh & Easy grocery stores average 10,000 -to- 13,000 square feet. There currently are 59 of the stores in Southern California, Arizona and the Metro Las Vegas, Nevada region. The retailer plans to open many more stores in these three states, especially in California and Arizona. Based on statements from Tesco, we believe the retailer wants to have as many as 200 stores opened by mid 2009.

Additionally, Tesco has signed leases for an initial 18 Fresh & Easy stores in Northern California's San Francisco Bay Area and is negotiating for more store sites in that region. Further, the grocer has inked leases on 19 sites for its small-format grocery markets in the Sacramento region in Northern California. Tesco also is negotiating leases for additional grocery store sites in the Sacramento area, as well as in the Northern San Joaquin Valley cities of Stockton, Tracy, Manteca and Modesto.

Fresno, which is between Bakersfield and the Stockton/Modesto region, also is on the retailer's radar screen for Fresh & Easy store locations. As reported here yesterday, Tesco will likely sign a lease for a Northern California distribution center on land in Stockton, California, which is about a 30 minute drive from Sacramento and an hour from San Francisco.

Tesco's initial Bakersfield region Fresh & Easy grocery markets will be at the following locations:

• Olive Drive and Jewetta Avenue, Bakersfield
• Brimhall Road and Jewetta Avenue, Bakersfield
• Panama Lane and Stine Road, Bakersfield
• Cecil Avenue and High Street, Delano
• Highway 46 and Griffith Avenue, Wasco

The first of the initial six Bakersfield region Fresh & Easy grocery stores could open as early as the end of this year. However, it's more likely the stores will start opening in early 2009.

Most of these six stores will go into empty, existing commercial retail buildings in the region. This is a practice Tesco is employing for its Fresh & Easy stores. The retailer will locate a vacant (usually former supermarket or similar retail store) retail building, obtain a lease for it with generally favorable terms, and remodel the building to fit its 10,000 square foot -to- 13,000 square foot Fresh & Easy Neighborhood Market format. [Read a piece on this issue here.]

Not only does the grocer have a lower start-up cost by following this practice, versus building stores from the ground-up (although it is doing some of that), it also is able to go from lease to getting the store open and operating much faster, since the building shell and all its infrastructure is already in place, and Tesco has only to gut the interior, create a Fresh & Easy grocery store inside, and give the exterior a moderate remodel in order to create its Fresh & Easy store and retail brand.

Welcome to Bakersfield

Bakersfield is located in Kern County in the heart of California's Central Valley. It's about 110 miles from Los Angeles to the south and around 110 miles from Fresno to the north. The city's population is about 324,000, making it California's 11th most populous city. The Bakersfield Metropolitan region--which includes Delano and Wasco--has a population of about 780,000, which makes it the 65th largest metropolitan region in the United States.

The Bakersfield Metropolitan region has been fast-growing in the last few years. In fact, the city of Bakersfield is the 11th fastest-growing city in the U.S., according to data from the U.S. Census Bureau.

The city is actually more Midwestern USA than typical Californian in its culture, economy and political attitudes. The main sectors of the region's economy are: farming and agribusiness; the oil industry (petroleum extracting and refining); manufacturing, warehousing and trucking; and services, such as retail. Bakersfield also is home to a campus of the California State University system.

Bakersfield holds as a claim to its fame being the hometown of two famous country music legends, Merle Haggard and Buck Owens. both local country music stars made good have streets named after them in the city. And, Country Western is the music style of choice in Bakersfield. The city has dozens of country music venues (including a club owned by the family of the late Buck Owens), along with a number of professional recording studios. Bakersfield often is referred to as Nashville-West. The city also has a country music culture: you are more likely to see more people out at night wearing cowboy boots and hats than you are woman wearing stiletto high heels and men wearing suits and ties.

Politics in Bakersfield also is much more conservative than it is in the rest of California. The region has far more registered Republicans than it does Democrats. And, there are many more voters who describe themselves as conservative than in nearly every other part of California.

Politics is changing a bit in the region though. About 35% of the area's residents are Hispanic. Most of the region's Latino's are immigrants, thus immigration is a big issue for them. They tend to agree with Democrats more on the issue than they do with Republicans. As a result, the Democratic party is seeing an increase in party registration in the area, largely from Hispanics. African Americans comprise only about 5% of the area's population. Asian Americans are even less than that. Nearly 60% of Bakersfield population is white.

The region also is famous for its red-hot summers. It's not unusual for Bakersfield to have temperatures of 105 -to- 110 degrees for weeks at a time throughout the summer. Note to Fresh & Easy: You should make those Bakersfield region stores as energy efficient as possible. Also: look for higher than average air conditioning and other related bills from about May through September.

Analysis: Grocery retailing in Bakersfield

The Bakersfield grocery retailing market can best be described--like the region itself--as meat and potatoes. However, that doesn't suggest some of the region's key players--Safeway Stores, Inc-owned Von's, Modesto-based Save Mart, SuperValu-owned Albertsons and Save-A-Lot banner stores, Costco Wholesale, Kroger Co.-owned Food-4-Less and Foods Co., Smart and Final, Winco and Sam's Club--don't offer specialty, natural and organic groceries and produce, or prepared foods--because many of the them they do. There's also a Trader Joe's specialty grocery store in Bakersfield.

Rather, it just means you won't find scores of upscale, gourmet and natural foods stores in Bakersfield--Whole Foods Market, Gelson's, Bristol Farms, Raleys, Sprouts Farmers Market and others--like you do find in abundance in Southern and Northern California.

In particular, Safeway's Vons', offers good selections of specialty, natural and organic foods and grocery products in its stores, especially in its newer or remodeled stores, which have or are being converted to Safeway's upscale Lifestyle format. And, of course, Costco Wholesale is a major merchandiser of specialty and natural grocery products at reasonable prices. Some of the newer Save Mart banner stores (Save Mart also has Food Maxx warehouse stores in the region) also have good offerings of specialty, natural and organic products.

What all the above mentioned food retailers really do bring to the Bakersfield region though is heavy competition, especially on basic, everyday grocery products offered at a low-price. Costco, Save Mart's Food Maxx, Kroger's Food-4-Less and Foods Co, Winco, Wal-Mart's Sam's Club, and SuperValu, Inc.'s Save-A Lot are all no frills' warehouse-style, discount grocery stores. Price is king at these outlets.

Safeway's Vons, Save Mart's Save Mart banner supermarkets, and SuperValu, Inc.'s Albertsons, banner all focus on the lowest possible prices in their stores as well in the market because of this price pressure (even though two of the three retailers own both warehouse stores and supermarket banners) exerted by the highly competitive warehouse format sector.

In fact, the market share differences between Save Mart, SuperValu, Kroger Co.'s Food-4-less and Foods Co. and Safeway Stores, Inc.'s Vons is so close as to make the numbers near meaningless. Costco isn't far behind either.

Since half of Tesco's Fresh & Easy small-format grocery stores' business comes from selling basic groceries at low prices, the retailer will find a very competitive environment in Bakersfield in the low-price positioning sector when it opens it first stores there at the end of this year or in 2009.

Fresh & Easy's other offerings--prepared foods, specialty, natural and organic groceries, wines and craft beers, might find a less competitive market. However, both Vons and Albertsons are kicking-up both their specialty, natural and organic grocery selections (fresh produce too) in their respective region stores, as is Save Mart in its Save Mart banner stores.

In fact, because these grocers' stores are so much bigger than a Fresh & Easy Neighborhood Market store--they average 40,000 square feet -to- 65,000 square feet, compared to Fresh & Easy's approximate 10,000 square feet--most already merchandise a greater selection of specialty, natural and organic foods (including produce) than a normal Fresh & Easy grocery market does in general.

Rather than in the city of Bakersfield itself, Tesco's biggest opportunity with its small-format Fresh & Easy stores, might be in the surrounding smaller communities, such as Delano and Wasco. Many of these cities have populations ranging from 15,000 -to- 40,000 but have few grocery stores in them, especially those offering both basic groceries and more upscale offerings like prepared foods. This strategy--locating more stores outside Bakersfield in these smaller cities rather than in the city--might prove more successful to Tesco in our analysis.

Bakersfield is growing, not just in population but in food sophistication as well. So the timing could be good for Tesco, especially in relation to the fresh, prepared foods and other specialty-oriented product selections sold in the Fresh & Easy stores.

Of course, this growth in the Bakersfield region hasn't only been noticed by Tesco. Our sources tell us Whole Foods Market, Inc. is considering locating a supernatural lifestyle store in the city, and that Trader Joe's is considering opening an additional specialty market in the area as well. Vons, Albertsons and Save Mart also are upgrading their supermarkets, and specialty product selections--including prepared foods--in Bakersfield.

In other words, Tesco's Fresh & Easy Neighborhood Market could take some share away from these established retailers in the region. But its impending arrival also could spur these grocers on to prepare a very competitive welcoming for the United Kingdom-based retailer's small-format, convenience-oriented Fresh & Easy grocery stores come early next year.

Retail Memo: News & Analysis: Tesco Confirms 19 Fresh & Easy Grocery Markets for the Sacramento Metro and Suburban Region in Northern California

Tesco's Fresh & Easy Neighborhood Market confirmed today it plans to open 19 stores in the Sacramento Metropolitan region of Northern California, as well as in nearby Vacaville and Galt.

Seven of the small-format grocery stores, which average 10,000 square feet -to- 13,000 square feet, will be in the city of Sacramento. Nine of the markets will be in the nearby suburbs. (See the graphic below.) Two of the Fresh & Easy stores will be in Vacaville, which is about 25 minutes from Sacramento, and one store will be in Galt, which is less than 15 miles from Sacramento, and is about midway between the capital city and Stockton, where Tesco plans to locate its Northern/Central California distribution center.

On Monday, January 28 we reported that Tesco had applied for liquor licenses for four Fresh & Easy grocery stores in the city of Sacramento (2 stores) and two stores in the nearby suburb of Folsom. We discovered this fact via liquor license applications, which are public data. As a result, we were one of the first publications to report that Tesco would enter the Sacramento region in Northern California, along with signing leases for 18 stores to date in the nearby San Francisco

Tesco's confirmation of the 19 Sacramento/Vacaville-area grocery markets, along with the confirmation it will begin opening the first of its initial 18 Fresh & Easy stores in the San Francisco Bay Area at the end of this year or in early 2009, brings to a total of 35 the number of Fresh & Easy Neighborhood Market small-format grocery stores the retailer has thus far confirmed for Northern California.

Vacaville is located about 20 miles from Sacramento, off Interstate I-80, which is the primary route from Sacramento to the San Francisco Bay Area. Vacaville is about an hour drive from San Francisco and a little over 30 minutes to the East Bay Area cities of Berkeley and Oakland. Interstate 80 rings the Bay from the Bay Bridge east, out to Fairfield (where Fresh & Easy is locating a store), then on to Vacaville, the University city of Davis, and into Sacramento.

Locating a critical mass of stores in the Sacramento Metropolitan region, then out to Vacaville and Farfield, then into the Bay Area, is the same strategy Tesco is using in Southern California. This "critical mass" strategy emulates retailers like Starbucks and Walgreen's Drugs, small format retailers which locate a critical mass of stores in city's and neighborhoods so as to position their stores as a "neighborhood" retailer.

Additionally, we can report that Tesco is looking for additional new store locations in both the Sacramento and Bay Area regions. In fact, the British grocer already has a number of other location leases locked-up (in addition to those announced) and is in negotiations for more store sites in both the Sacramento and Bay Area regions. We hope to be able to report some of those locations soon here.

As we reported first in December and again in the January 28 piece, Tesco also plans to open a new distribution center in Stockton, California to serve its Bay Area and Sacramento region Fresh & Easy stores. Stockton is located in the Northern San Joaquin Valley, about 30 miles from Sacramento, and about 60 miles from San Francisco. The location is generally no more than one hour's drive-and in many cases less--to all of the 35 confirmed Northern and Central California store locations to date. Tesco's Fresh & Easy Neighborhood Market has not yet confirmed the Stockton distribution center. Additionally, Stockton is about a 15 minute drive from Galt, where one of the 19 Sacramento-area stores will be opened.

Sacramento's Mayor joins F&E CEO Mason for AM presser

Tesco's Fresh & Easy Neighborhood Market CEO Tim Mason made the Sacramento region new store announcement with a splash this morning. He was joined by Sacramento Mayor Heather Fargo and City Councilman Ray Tretheway in front of an empty commercial building located at Northgate Blvd. and San Juan Blvd. in the city of Sacramento. The grocer will remodel the empty building into a Fresh & Easy grocery market.

By having the city's mayor at his side, Mason signaled Fresh & Easy wasn't just another grocery retailer opening a new store in town, but rather is a grocer that's making a major commitment to the city and region by opening an initial 19 stores in the region next year, with more to come.

Having Mason at her side also was good for the Mayor. Sacramento, like all of California is being battered by the sub-prime housing crisis, increasing unemployment and a host of other economic ills. Being able to announce a new business venture like Fresh & Easy moving into her city at this time will score her some major political points with voters.

The retailer also made another smart move by choosing the empty Tower Records building on Watt Avenue in Sacramento as one of its future Fresh & Easy grocery store locations. Tower Records, which later grew into a national chain, which went bankrupted in 2006, was founded in Sacramento in the 1960's--and the Watt Avenue location was its flagship store.

When the Watt Avenue Tower store closed, there literally was a period of mourning in Sacramento for the local independent record store that went on to be a huge mega-chain, then fell on hard times and was shut down.

Tesco's Fresh & Easy should gain considerable goodwill from the community for leasing, remodeling and opening one of its grocery markets in the Tower building, which is what it's called. The building has been empty for over two years.

[Note to Fresh & Easy Management]: It would be wise, and good business, to preserve aspects of the former Tower Records building when you remodel it into a Fresh & Easy market. Perhaps you should call it "Tower Fresh & Easy," or some version of that. Remember, everything is local in America, especially in Sacramento. And, in the case of an iconic building like the Tower Records' site, retaining some aspects of the building's history and culture (a plaque on the front of the new Fresh & Easy store with the history of the building would be a nice touch) will not only go a long way towards creating excellent community relations--but customers as well.]

The timing and style of the announcement was particulary good for Fresh & Easy since analysts like us and others have been writing about how the retailer's current 55 stores in Southern California, Arizona and Nevada are not performing up to expectations. [You can read our most recent analysis on Fresh & Easy store performance in posts made on Tuesday and yesterday on the blog.]

Of course, marketing an PR are only part of being a successful grocer. As we've suggested in our pieces this week, Tesco's Fresh & Easy has major operations challenges to solve and improve in addition to opening dozens of new stores and creating good PR events.

The retailer shouldn't be counted out though. Doing doing so is foolish. Tesco is the world's number three retailer, and it's track record at home in the UK and elsewhere in the world is impressive.

Tesco also has lots of cash. That's helpful to any start up. What we believe Tesco hasn't learned yet though is: it can't do retailing in the U.S. in the same way it does retailing in the UK and Europe.

Fresh & Easy is missing a key American element: localism. This missing element can't be fixed as easily as the operational problems we've pointed out in our analysis. However, its just as important--maybe even more so. And, it's essential.

Competitive environment: Welcome to Sacramento

Nowhere does Tesco need to grasp the importance of tailoring its Fresh & Easy stores better to the local environment and neighborhoods than in Sacramento and its metropolitan and surrounding region.

Sacramento has been one of the fastest-growing cities in California throughout the last decade. The Sacramento Metropolitan region has a population of nearly 2 million people. The city of Sacramento has a current population of about 600,000. In addition to being California's capital city--which means lots of well-educated state government workers--Sacramento has a mixed economy. Agriculture and agribusiness remain huge in the region, as does light manufacturing, warehousing and transportation.

The fastest growing sector in the Sacramento region's economy is in the service sector, both in state government, associated non-profit organizations like law and lobbying firms, and in the private sector. This includes the health professions, law, finance and retail. In the last 15 years the city has been transformed from being a central city in a primarily agricultural region (with the exception of state government), to the urban city center of a booming metropolitan and somewhat cosmopolitan area.

Grocery retailing in Sacramento and the surrounding region has a decidedly local flair. The region's number one (in market share and store count) grocer is Raley's, which is based in the nearby city of West Sacramento. Raley's is a prvately-held, family-owned supermarket chain that's been in business in the Sacramento region for 73 years. The locally headquartered grocery chain has 120 stores and does about $3 billion a year in sales.

The Sacramento-based food retailer operates four store banners: Raley's, Bel-Air Markets, Nob Hill Foods and Food Source. Raley's stores are 55,000 square foot -to- 80,000 square foot superstores. The stores are fairly upscale and offer lots of prepared and other fresh foods, along with tons of grocery products (including lots of organics) and a huge selection of non-foods. Most of the new Raley's banner stores are closer to the 80,000 square foot size. The Raley's banner is the chain's original retail brand.

The Bel-Air banner is an upscale supermarket format. The stores average 40,000 square feet (older stores) -to- 60,000 square feet (newer stores). They're similar to the Raley's stores--lots of upscale fresh foods, but fewer nonfoods do to their size (but still plenty). Bel-Air was an acquisition for Raley's. The Bel-Air chain at one time was Raley's chief competitior in the region. In the 1980's, Raley's acquired the grocery chain from the Wong family, who founded and operated the chain for over 50 years.

Nob Hill Foods also is an acquisition for Raley's. Like Bel-Air, Nob Hill was a long-time family-owned chain. It was based in the South Bay Area city of Gilroy, where two generations of the Bonfonte family operated it for about 60 years. Raley's acquired Nob Hill Foods in the 1990's and consolidated its headquarters in its West Sacramento facility.

Food Source is Raley's discount warehouse-type store format. The grocer created the banner in the 1980's as a way to get into the growing no frills, discount warehouse store category in the region at the time. It's the grocer's smallest banner in terms of the number of stores, but does significant sales volume in its niche.

Citizen Raley's

Raley's also is a leading corporate citizen in the Sacramento region. Sacramento's semi-pro baseball team, the River Cats--which in a big city like Sacramento without a professional baseball team serves as a very popular popular equivalent--plays it games at Raley Field, a state of the art baseball stadium in the city built in large part by the grocer.

The grocer is the number one donor to programs that feed the hungry and homeless in the region. Last year it gave over $15 million dollars to food pantry's and other programs which provide food assistance to families and individuals in need.

In fact, Raley's has its hand in nearly every charitable venture in the region--from Boy Scouts and Girl Scouts, to educational scholarship assistance, environmental causes and literally many dozens more. Additionally, the Raley-Teel family, majority-owners of the Raley's grocery chain, also has its own charitable foundation, which gives additional millions each year to local non-profit groups and supports other charitable causes locally.

The other two major grocers in the Sacramento region--Safeway Stores, Inc. (number two market share) and Save Mart, Inc. (number three market share) are fairly local guys as well. Safeway, which has about 21% of the region's grocery sales market share, has its corporate headquarters in the East Bay Area city of Pleasanton, which is only about 70 miles from Sacramento. Save Mart, which entered the Sacramento region market for the first time last year when it bought Albertsons' Northern California Division from an investment banking firm, is headquartered just 60 miles away in the Central Valley City of Modesto.

Between the three grocery chains--Raley's, Safeway and Save Mart--they control about 85% of the total grocery sales market share in the Sacramento market region. The remaining 15% share is split between Food-4-Less, a multi-store deep-disount warehouse format grocer, numerous independents, Longs Drugs, a couple Trader Joe's stores, and the one Whole Foods Market, Inc. store in the region, which is located in Sacramento. (Note: Whole Foods' is looking to add at least one, and maybe two stores in the region in the next two years.)

Union supermarket chains vs. non-union Fresh & Easy

Raleys, Safeway Stores and Save Mart also are union supermarket chains. On average, the three chains pay their full-time store-level retail clerks about $21.00 hour. Full-time means the clerks' have one full year of full-time hourly experience as a union grocery clerk. Part-timer pay ranges from about $12.00 hour -to- the $21.00 hour amount. The $12.00 hour is an entry-level wage for some positions, and it goes up in increments about every three months per the agreed upon contract between the grocery chains and the union. Nearly all store level workers with six months' to a year's experience make between $15.00 and $21.00 hour.

The union contract also provides store workers with one of the best medical insurance plans in the U.S. It is comprehensive, has lower than average employee contributions, doctors office co-pays and prescription drug out-of-pocket costs for the workers. The plan also offers very affordable dental, vision and mental health plans for reasonable employee contributions.

The union supermarkets also provide a career path for workers who choose to make a career out of the retail grocery industry and work at store-level for 25 -to- 30 years and then retire. The joint employer-union pension plan pays out about $3,500 -to- $4,000 month to union clerks who retire after 25 -to- 30 years in the industry. This is in addition to collecting monthly Social Security pension payments.

Employers make the largest contribution to the worker pension plan. Employees contribute a small percentage out of their paychecks every two weeks as well. Additionally, all three of these union grocery chains--Safeway, Raley's and Save Mart--offer some form of additional retirement plans on their own to workers. Safeway offers a discount stock-purchase plan, while Raley's and Save Mart offer profit-sharing-type programs, since both are privately-held companies. Save Mart has 255 stores throughout Northern and Central Califronia, and annual sales of about $6.5 billion.

Tesco's Fresh & Easy Neighborhood Market currently pays store-level workers $10.00 hour. There currently is no established higher hourly wage for current workers when they achieve one year's experience like at the union supermarket chains.

The 10,000 square foot -to- 13,000 square foot grocery stores employee about 20 workers per-store, according to the company. All of the store employees, with the exception of a couple managers, work part time. Those part-timers who want to can work up to 20 hours a week, which qualifies them for a health insurance plan.

However, we've compared a Fresh & Easy store employee's health plan to the union food retail chains' plan, and the union plan wins across the board: it's more comprehensive, has less of an employee contribution, provides for lower employee co-payments, and offers a number of other benefits.

According to a Tesco Fresh & Easy spokesman, the retailer also offers bonuses of up to 10% to store-level workers if they meet certain performance criteria. The bonus is once a year. Fresh & Easy doesn't currently offer store-level employees a retirement plan. They also don't get discounts at present on Tesco plc. stock, like Safeway employees do with Safeway stock.

Trader Joe's, which has only a couple stores in the region, Whole Foods (it has one store), and Wal-Mart, which only has a handful of Supercenters in the Sacramento area, also are non-union shops like Tesco's Fresh & Easy Neighborhood Market.

Sacramento shoppers are historically 'local-loyal'

Sacramento region shoppers have long been super-loyal to Raley's. Just ask Safeway Stores, Inc. Despite the fact that its a chain based nearby, has more than 10 times the number of stores and does at least $40 billion more in annual sales than Raley's, its never been able to overtake the local grocer in market share in the region, despite trying hard to do so for at least four decades.

Tesco's Fresh & Easy Neighborhood Market would be wise to learn as much as it can about the "local nature" of grocery retailing in the Sacramento region. Over the last 40 years, Safeway left the market twice, under two different ownership structures, because of Raley's domination. It was only again in the 1980's--and particularly in the 1990's with its Lifestyle format stores--that Safeway began to make some inroads in the market.

Fresh & Easy senior management can expect a strong response by Raley's, Safeway and Save Mart when it enters the Sacramento market next year. For example, in terms of retail pricing, all three--but especially Raley's and Save Mart--won't hesitate to lower prices if Fresh & Easy comes in with its discount pricing structure on basic grocery items like it has in Southern California, Arizona and Nevada, which it will do in Sacramento because doing so is key to its format and positioning. As the ancient Chinese saying states: 'May you live in interesting times

Related Stories From Our Archives:

>Retail Memo: "Tesco's Fresh & Easy Neighborhood Market @ 50 (Stores): Analysis, Observation and A Few Suggestions for Some Ways Forward. >Retail Memo: "New Details and Analysis About Safeway's Small Format Summer Bay Area Surprise for Tesco's Fresh & Easy Neighborhood Market." >Retail Memo: "Wal-Mart Heating-Up the Competition Against Tesco in the UK (As Well as At Home in the USA).

>Retail Memo: "Wal-Mart's New Small-Format 'Marketside' Grocery Store Logo Unveiled." >Retail Memo: "Tesco Fresh & Easy Insight: A New Store Blooms in Compton, CA; F&E's Chicagoland March; A Sacramento Neighborhood and F&E Get Hiched." >Retail Memo: "Raley's Attempts to Come Full-Circle With New Private-Label Natural and Organics Products' Brand." >Tesco Fresh & Easy Neighborhood Market Update: "New Nielson Study Analyzes the Chain's Affect on Competitors."

>Breaking News: "Tesco's Fresh & Easy Confirms it Will Open 18 Stores in San Francisco Bay Area." >Retail Memo: "Designing the 'Perfect' Small-Format Grocery Store in A 'Near-Perfect' Place." >Retail Memo: "Wal-Mart and Safeway Stores Could 'Box' Tesco in With New Small-Format Stores." >Tesco Fresh & Easy Neighborhood Market Update: "Fresh & Easy and the UFCW Union." >Retail Memo: "The Small-Format Revolution Continues to Heat Up."

>Mid-Week Marketing Memo: "Three Reasons Why Tesco's Fresh & Easy Neighborhood Market's Venture Could be a Huge Success--and Three Reasons it Could be A Historic Food Retailing Failure." >Monday Morning Java: "Safeway Small-Format Stores on the Way." >Tesco Fresh & Easy Update-Northern California: "Tesco Inks Deals for Three New Fresh & Easy Store Locations in Northern California's San Francisco Bay Area, Distribution Center in Stockton."

>Tuesday Talking Points Memo: "Eastward Bound for Fresh & Easy." >Tesco Fresh & Easy Update: Oakland: "Oakland May be the Central Front in Tesco's Fresh & Easy Neighborhood Market's Northern California Invasion in 2008." >Breaking News: "First Fresh & Easy Market Opens A Week Early." [Click here to read one or more of these pieces from our archives.]