Small-Format Food Retailing Memo: Hard Times at Tesco's Fresh & Easy; Will Two Proposed Changes Help? Meanwhile the Grocer Opens its 100th Store

Tesco's small-format Fresh & Easy Neighborhood Market USA grocery and fresh foods chain is postponing its plans to begin opening stores in Northern California in early 2009.

Read a report and analysis from the Fresh & Easy Buzz Blog on the development at the link below:

>Fresh & Easy Buzz, Wednesday, November 12, 2008: Analysis: Hard Times at Fresh & Easy - Northern California Expansion to Be Postponed or Shelved Do to Economy; But its Only a Symptom Not the Cause

Additionally, Fresh & Easy Buzz reports Tesco's Fresh & Easy is considering making two major changes -- flip flopping the grocery shelving in all of its stores and redesigning the packaging of its fresh & easy private label packaged goods products -- as a way to increase both store sales and sales of its store brand products in the various grocery products categories.

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

Fresh & Easy Buzz, Wedneday, November 12, 2008: Breaking News: Tesco's Fresh & Easy Considering Two Major Changes, One Physical the Other Design Oriented, to Increase Sales in its 100 Stores

Lastly, Fresh & Easy Buzz has a piece from yesterday about Tesco opening its 100th small-format, convenience-oriented Fresh & Easy market in the Southern California city of Fullerton. It's been about one year since the first Fresh & Easy store officially opened in Hemet, in Southern California.

In its story yesterday, Fresh & Easy Buzz suggested Tesco might postpone the opening of its planned Northern California stores, along with opening the stores later in the year than it has previously said it would.

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

>Fresh & Easy Buzz, Tuesday, November 11, 2008: Southern California Market Report: Tesco Hits A Numerical Milestone Tomorrow Morning As Store Number 100 Opens its Doors in Fullerton, California

Speaking of it being nearly one year since the first Fresh & Easy Neighborhood Market store opened, that first Fresh & Easy store in Hemet, California was actually scheduled to open on November 8, 2007 its official opening day. However, as Natural~Specialty Foods Memo was one of the first publications to report, Tesco actually opened the store a week earlier in a stealth, soft opening to test the first of its small-format markets out prior to its official grand opening. on November 8, 2007.

You can read our piece about that stealth opening at the link below:

>Natural~Specialty Foods Memo, November 2, 2007: Breaking News: First Fresh & Easy Market Opens A Week Early: The Fresh & Easy Neighborhood Market in Hemet, California is open for business a week before it's official grand opening date of November 8.

Retail Analysis Memo: Growth and A Tale of Two Retailers-Tesco and Whole Foods Market: Is One Ripe For Acquisition and the Other Ripe For Acquiring?

Natural~Specialty Foods Memo Analysis and Opinion

Whole Foods Market, Inc. and Tesco's Fresh & Easy Neighborhood Market are two very different food retailers, but they do have at least one similarity.

That similarity is the fact for the last couple years both retail chains have been locking up new store site leases throughout Northern California at a breakneck pace.

Whole Foods, which these days tends to build primarily mega-natural foods supermarkets in the 45,000 -to- 75,000 square foot range, with some exceptions of course, currently has 13 new store locations in various degrees of development in Northern California. Eleven of the 13 locations have signed leases.

Fresh & Easy Neighborhood Market, which is the U.S. division of United Kingdom (UK)-based international retailer Tesco, the third largest retailer in the world, is engaged in its own leasing frenzy in Northern California. Thus far, Tesco has locked up leases on 43 sites for its small-format combination fresh foods and basic grocery stores in Northern California--21 locations in the San Francisco Bay Area, 20 in the Sacramento/Vacaville/Farfield region and one in Modesto, in the Northern San Joaquin Valley, and one in the south coastal city of Seaside near Monterey.

The 43 store locations are just those Tesco has either confirmed or we have identified independently. The retailer is in the process of securing many more new store site leases at present. The first of the 10,000 -to- 13,000 square foot Northern California Tesco Fresh & Easy Neighborhood Market grocery stores are scheduled to begin opening in early 2009. Just as its been the case since November, 2007 in its current Southern California, Nevada and Arizona markets, expect to see Tesco open a new Fresh & Easy store in Northern California about every 3 -to- 4 days beginning early next year.

Whole Foods Market, Inc. though, unlike Tesco's Fresh & Easy, is putting the brakes on its new store opening plans for at least the next year, including in Northern California, which strategically is one of the natural grocer's top new store development markets for the next few years.

Last week after reporting poor sales and profit numbers, Whole Foods announced it planned to scale back the number of new stores it plans to open in the U.S. next year from the 25 -to- 30 it had planned to open in 2009, to just 15. As mentioned above, 13 of those new store locations are in Northern California.

On Friday, David Lannon, president of Whole Foods' Northern California division said that as part of the grocer's 2009 new store opening reduction plan, all but two of the 13 planned new stores in Northern California are subject to not being opened next year as originally planned. He said the retailer is committed to eventually opening all 13 stores in Northern California, but that it's obvious in light of the fact Whole Foods will only open 15 new stores nationally in the U.S. next year, that most of those 13 stores won't open in 2009 as planned.

According to Lannon, the two Whole Foods stores that will open for sure in Northern California is a store in the south coastal city of Santa Cruz (set to open in the first quarter of 2009) and one in Roseville, which is a suburb of Sacramento. That store is scheduled to open in November, 2009. It will only be Whole Foods Markets' second store in the fast growing Sacramento Metropolitan region. The existing store is in Sacramento.

Lannon and a team from the Northern California division office plan to meet with landlords and developers of the 11 leased sites to determine the status of each project and discuss the future in light of Whole Foods corporate plans to reduce the number of new stores it will open next year by nearly half. Final decisions on moving forward and scaling back will be made at Whole Foods' corporate headquarters in Austin, Texas, Lannon says.

Meanwhile, Tesco's Fresh & Easy Neighborhood Market is moving full bore ahead, not only with its plans to open the 42 Northern California combination fresh foods and basic grocery markets next year, but also scouting out additional sites and signing additional leases for them throughout the region.

In addition to the Bay Area and Sacramento region, Tesco is looking for additional store sites (it already has the one in Modesto) in the Northern San Joaquin Valley cities of Stockton, Manteca and Tracy, additional locations in Modesto, and in other communities in the region.

Tesco also is looking for Fresh & Easy store sites in the Monterey/Salinas/Santa Cruz area where it recently inked a deal for a store site in Seaside, next door to Monterey.

Further, it's looking to lock up leases for additional Bay Area stores in all nine counties, along with more stores in the Sacramento/Vacaville/Farfield area.

The retailer's strategy is to have stores throughout the Bay Area, to Sacramento on the I-80 corridor, from Sacramento throughout the Central Valley, and out to the south coast. Five stores are set to open in the Bakersfield Metropolitan region next year, along with six in Metro Fresno. The retailer also is looking for a couple store sites in the Merced County region.

The net result will be to have Fresh & Easy Neighorhood Market grocery stores from Southern California, where there currently are about 37 of the markets (there are 71 stores total thus far in Southern California Metro Las Vegas, Nevada and in the Phoenix, Arizona Metropolitan area), through Bakersfield and Fresno, into the Northern San Joaquin Valley, out to Sacramento, into the San Francisco Bay Area, and over to the south coast, by the end of 2009.

This strategy will give Tesco the beginnings of a critical mass of food stores in California, which it plans to then add additional units to throughout 2009 and 2010, likely ending up with around 200 stores in California by the end of 2010.

One shouldn't attribute the fact Tesco is going forward so aggressively with its new store development program in Northern California, while Whole Foods Market, Inc. is putting the brakes on its, to Whole Foods' being the only one of the two food retailers having sales and profits problems.

Although it hasn't released any sales numbers yet, we know Tesco is losing millions with its start up Fresh & Easy. A big part of this loss is just that start ups lose money, especially very aggressive retail start ups like Fresh & Easy is.

But the start up explanation is only half of the equation. Thus far Tesco's Fresh & Easy stores have been underperforming to Tesco's internal target, which was weekly sales in the average 10,000 -to- 13,000 square foot stores of about $200,000 per-week. Our sources and research says on average the stores have been doing about half that sales number, although they've been picking up in the last couple months because Tesco has been launching some aggressive promotions, including distributing lots of coupons good for a whopping $5 off total grocery purchases of $20 or more in all its Fresh & Easy stores.

The fact is though, Fresh & Easy USA is a major initiative for Tesco, which is the world's third-largest retailer with annual sales of over $83 billion last year. The United Kingdom-based retailer plans to loose money on its Fresh & Easy U.S. venture for sometime--although it didn't initially count on losing as much as it has so far.

Compared to Tesco, Whole Foods Market is a tiny food retailing fish, with sales in the $6 -to- $7 billion dollar a year range. However, Whole Foods isn't much of an international retailer, with just a few stores in Canada and a handful of stores in the United Kingdom, the rest being in the United States. Therefore, that fact, combined with its focus on the natural and organic foods categories (it doesn't have the sales luxury of selling basic groceries in other words) makes Whole Foods a very impressive food retailer in scale and sales domestically. It's just not anywhere near the scale of a Tesco--or a Walmart, Inc., Kroger, Safeway, SuperValu and numerous others.

And in the case of going forward with new store opening plans rather than putting the brakes on such plans, being an $80-plus billion a year international retailer that has lots of cash on hand helps, compared to being a $7 billion a year retailer who's fate--unlike Tesco's which has operations all over the globe---lies 100% on its U.S. stores' performance, which thanks to the poor U.S. economy is taking a serious battering right now.

Nonetheless, Tesco would covet having a $6-plus billion a year U.S. division like Whole Foods Market, Inc., although it would likely prefer it to be under a more traditional food and grocery retailing format, rather than one focused on natural, organic, fresh and specialty foods categories. Or perhaps it wouldn't? The U.S. economy will boom once again, and upscale will be back in for many.

But, we also know that Tesco senior management has looked on Whole Foods in the U.S. in many ways with a keen eye, particularly admiring what its done in the organic fresh foods and grocery categories. And when Whole Foods opened its first store in London in the UK last year, Tesco watched closely. Unfortunately for Whole Foods Market, Inc., the retailer has lost $18 million to date on that London store, but business has picked up at the 70,000 square foot London food emporium, and it's drawing many more shoppers than it was just a year ago.

In the UK, Tesco is very deep in the natural and organic foods categories across all store categories, including dry grocery, fresh foods and even non-foods, particularly with its own store brands, which are the leading selling items in many categories throughout Britain.

Tesco is the UK's leading food and grocery retailer, controlling an impressive 31% share of the country's food and grocery sales market. Number two Wal-Mart-owned Asda has about a 17% share. Number three Sainsbury's about 15.5%. The remaining percentage is split among numerous food and grocery chains, including Morrisons (4th ranked) the Co-operative Group (now number 5 after just having acquired the Somerfield supermarket chain), Waitrose, Marks & Spencer, small-format German discount grocers Aldi and Lidl, and and a few others.

Last year when the U.S. Federal Trade Commission (FTC) made the first of its many legal challenges (which are still going on) against Whole Foods Market, Inc.'s acquisition-merger of Wild Oats Market, Inc., saying the deal would give Whole Foods' monopoly power in the supernatural food retailing category--an argument we've argued is wrong--we wrote that the FTC and others are forgetting Whole Foods Market, Inc. is a rather small fish in terms of overall food and grocery retailing in the U.S. (There are 21 retailers ranked above Whole Foods in terms of annual sales in the U.S. Further, the majority of these retailers are regional rather than national food retailers like Whole Foods is.)

As a result we wrote that Whole Foods Market, Inc. itself could become an acquisition target in the near-to-medium term, especially since major U.S. retailers like Safeway Stores, Inc., Kroger Co., SuperValu, Inc. and many others have moved into the natural and organic foods retailing space in a big way.

Thinking about how Whole Foods is having to scale back its plans to open about 30 stores in the U.S. next year to 15, while Tesco will likely open well over 100 new Fresh & Easy stores next year in California alone (granted the Fresh & Easy markets are much smaller than the average new Whole Foods store is), as well as is now moving into India and further growing its already impressive international business, our thoughts turn back to that Whole Foods as a potential acquisition target, as this month marks about a year since the Wild Oats acquisition.

While we believe based on source information Tesco eventually has bigger strategic plans in the U.S. than acquiring say a Whole Foods Market, Inc.--such as possibly acquiring something on the order of a Safeway or SuperValu, Inc. for example, along with growing Fresh & Easy into the Chicago Metro, Florida and New York markets--acquisitions are as much situational as they are long-term strategic opportunities.

A year ago, with its stock at an all time high, not even a Tesco or Wal-Mart, Inc. would likely consider acquiring the natural foods chain, even if they coveted doing so. But today, Whole Foods' stock is 70% below that all time high of just a year ago, and its being forced to cut back on its rapid new store growth program dramatically for the first time in two decades.

Additionally, Wall Street, which as recent as 6-7 months ago was super-bullish on Whole Foods Market, Inc.'s stock, is now bearish on the natural foods retailer. Whole Foods after all is a public company with numerous major institutional stockholders who must be satisfied. This is particularly the case since these investors are used to Whole Foods' stock going north rather than south in terms of value--at least until now.

This brings us to Tesco. If it wants to be a major player in food and grocery retailing in the U.S., it's going to have to eventually acquire a good-sized retailer or two at least. Although it's launched what is perhaps the most aggressive food retailing start up in modern history in the U.S. with Fresh & Easy, even if it opens 150 stores a year for the next five years (doable but tough to sustain and do well), it will still be a minor overall player with about 800 small-format stores. Nothing to sneeze at, but not in the big leagues either.

With Whole Foods' stock 70% below last year's high, along with the retailer having to scale back its new store opening plans for next year by nearly 50%--which means it doesn't have enough cash to go forward even while turning in poor sales and profit numbers in the short term--Whole Foods' is ripe to be acquired. The natural grocery chain also announced yesterday it will lay off about 43 employees at its Austin, Texas corporate headquarters.

If Tesco were to acquire Whole Foods, it could do many things for the international retailer. First, it would give it an immediate annual sales base of nearly $7 billion in the U.S., which is nothing to sneeze at, even for an $83-plus billion a year international retailer.

Second, it gives Tesco what arguably is the best upscale natural, organic and fresh foods format in the world. Imagine what a retailer the scale of Tesco could do with Whole Foods if it could do it right?

Third, it gives Tesco, which has the cash to expand Whole Foods internationally, an upscale natural, organic and green retailing format that it could expand throughout Europe, Australia, parts of Asia and even to the oil rich Arab countries where the UK's upscale Waitrose and the U.S. gourmet grocer Dean & Delucca are opening stores.

Lastly, at home in the UK, which on a per-capita basis has become the world's leading organic foods retail market, Whole Foods would give Tesco a banner which it could use to eventually dominate the natural foods' retailing space like its done in the grocery and general merchandise spaces with its various Tesco banner stores, ranging from hypermarkets to its small-format Tesco Express convenience-style grocery stores.

We believe Whole Foods CEO John Mackey and the company's board of directors would fight any acquisition, and likely would fight a deal offer from a British-based chain like Tesco even more so. However, if Whole Foods' performance doesn't improve dramatically in the next two quarters say, such a fight could be very difficult if such an acquisition were to come from Tesco or any other major retail chain. Nobody knows this better than John Mackey and the Whole Foods' board, since it was a fledgling, poor performing Wild Oats Market, Inc. it acquired about a year ago.

Is Tesco interested in acquiring Whole Foods Market, Inc.? We don't know. However, like we mentioned earlier in this piece, acquisitions are as much situational as they are long-term strategic. What we do know is that a couple U.S. supermarket chains are watching Whole Foods' performance closely, and that the A (acquisition) word has been tossed around by these chains, at least hypothetically.

What we do know is that Tesco has the cash to acquire Whole Foods without any trouble if it wants to. The possible political battle if it were to be a hostile acquisition, which would likely be the case at least right now, is another matter altogether. We doubt if Tesco is up for that just now.

However, when it comes to publicly-owned food retailing chains, circumstances change rapidly. Performance rules the day. For example, before investor Ron Burkle bought a major chunk of Wild Oats Market, Inc., became chairman of the board, and engineered the replacement of the company's CEO, both Wild Oats' board and key executives were adamant they would never sell to Whole Foods. That changed rather fast once Burkle got involved.

One could see a similar situation happening with Whole Foods. In fact, Burkle was a major player in brokering the Whole Foods-Wild Oats acquisition-merger. He's been rather low-key of late in the supermarket sector, but Whole Foods' current situation is one that brings out Ron Burkle and other investors like him who are adept at engineering just such acquisitions once they make a substantial investment in a company. Burkle still has stock in Whole Foods Market, Inc. from the Wild Oats acquisition, by the way.

Don't be shocked if in the not too distant future you see Whole Foods going from being charged by the FTC and others as a monopolist acquirer to being acquired itself.

Will it happen this year; next year? We have no idea. What we do know is that the chances of Whole Foods being acquired now are about 100% higher than they were just a year ago. That alone is worth paying attention to.

Editor's note: Watch for an upcoming story and analysis of retailer's we think would benefit overall by acquiring Whole Foods Market, Inc. An 'America's top Whole Foods Market, Inc. acquisition parade' if you will.

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: Was Tesco's Fresh & Easy Neigborhood Market 'Listening' to Our April 2 Memo?

NSFM Editors Note: Below is a Tesco Fresh & Easy Neighborhood Market corporate press release distributed by PR Newswire. It just landed in our email box a couple minutes ago (April 8, 2008)

We suggest you read the press release which we've reproduced in its entirerty below. Then read our piece, "Retail Marketing & Public Relations Memo: What Tesco's Fresh & Easy Neighborhood Market 'Should' Be Doing Now," which we wrote six days ago on April 2, 2008, and have reproduced directly below the Tesco Fresh & Easy corporate press release. First the Fresh & Easy press release below:

Fresh & Easy to Give Away Free 'Bag For Life' For Earth Day

Grocer offers free reusable bags on April 22nd

EL SEGUNDO, Calif., April 8, 2008 /PRNewswire/ -- In celebration of Earth Day, Fresh & Easy Neighborhood Market today announced its 61 stores will bag groceries with free reusable "bags for life" for customers on April 22nd. The company encourages customers to reuse these bags and lessen their impact on the environment.

(Photo: http://www.newscom.com/cgi-bin/prnh/20080408/AQTU198.)

Fresh & Easy offers its customers two different types of reusable bags, including a $2.50 canvas bag and a plastic reusable "bag for life," which retails for $.20. The "bag for life" is larger and more durable than standard grocery bag and, if damaged, Fresh & Easy will replace the bag for free, forever. These bags are made with recycled material and are 100% recyclable.

"We want to make it easier for our customers to make more environmentally friendly decisions," said Tim Mason, Fresh & Easy CEO. "If everyone in the neighborhood shops with reusable bags, we can really make a difference."

Fresh & Easy has made a considerable effort to be a good neighbor and steward of the environment. For example, the company only sells energy efficient light bulbs, uses LED lighting in external signs and freezer cases, offers plastic, aluminum and glass recycling, and provides preferred parking for hybrid vehicles.

More broadly, Fresh & Easy has committed to build LEED (Leadership in Energy and Environmental Design) certified buildings and voluntarily joined the California Climate Action Registry to disclose its greenhouse gas emissions. At its distribution center in Riverside the company invested $13 million in a solar roof installation, which is one of California's largest
at 500,000 sq. ft.

More information regarding Fresh & Easy Neighborhood Market can be
found at http://www.freshandeasy.com/.

###

Below is our April 2, 2008 piece. Please pay special attention to the text highlighted in green.

Retail Marketing & Public Relations Memo: What Tesco's Fresh & Easy Neighborhood Market 'Should' Be Doing Now.
By Natural~Specialty Foods Memo: April 2, 2008

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, Fresh & Easy has not just an image problem, but a real retail format, operations, marketing and merchandising one as well. 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.

###

NSFM Editor's Note: We think Fresh & Easy's Earth Day-themed resusable "bags for life" giveaway is a decent first step towrds the comprehensive program we outlined above in our April 2 piece--if it's followed up rapidly with more action.

Although the "freebie" Earth Day reusable carrier bags aren't the canvass type (or even the type we describe below which Fresh & Easy should sell in addition to the two types of reusable carrier bags it already sells), but rather the cheap, 20 cent bags--it's still something--and far better than no giveaway at all.

Further, the fact Fresh & Easy will replace these free "bags for life" (hence their name) as part of the promotion is fantastic. An excellent concept in our opinion. Why? It offers a good deal for consumers, as well as suggesting in a small way Fresh & Easy wants you to be our customer "for life." Lots of little things designed to create primary shoppers can add up to a "big thing"-- eventually gaining more primary shoppers.

[Note to Fresh & Easy: Supermarket chains all over the U.S.--and Wal-Mart and target too--are selling very attractive reusable carrier bags made out of a light cloth material for 99 cents or one dollar each. Check out Wal-Mart's current advertising circular, for example. There is a picture of its dollar reusable shopping bag in the promo flier

In terms of the type of plan and program we laid out for Fresh & Easy in our April 2 piece, there's much more for the retailer to do to make it an overall comprehensive plan. Good starts become better with the next step.

By the way, we aren't suggesting causality between our April 2, 2008 piece and tonight's (April 8) press release from Tesco's Fresh & Easy. We were trained in the scientific method far to well to think that "correlation equals causality."

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.]