President and CEO, Tesco USA
Introduce a new food concept into a crowded market.
EL SEGUNDO, Calif. — Tim Mason is definitely a man to watch.
In fact, most of the grocery world is likely to be watching Mason as he presides over the entry of British retailer Tesco into the competitive mix in the Western U.S. beginning later this year.
Mason, 49, is president and chief executive officer of Tesco USA, whose debut is fraught with possibilities and challenges: possibilities for Tesco to make a significant mark in the U.S. with a store focused primarily on fresh foods and private-label products; challenges because its target markets of Los Angeles, San Diego, Las Vegas and Phoenix already have a full roster of established players not interested in surrendering any market share to a British upstart.
Rather than seeing the potential perils, Mason appears focused on the job at hand. Asked what he considers his biggest challenge in introducing American consumers to Fresh & Easy Neighborhood Market, Mason replied, “The challenge is ensuring that customers have the shopping trip they want.”
Perry Caicco, an analyst with CIBC World Markets, Toronto, told SN he believes one of Mason's biggest challenges will be to figure out how to convey the essence of the new format to consumers. “Ideally, these will be hybrid stores that combine the quality of restaurants with the convenience of drug stores and the pricing of supermarkets, and while introducing customers to a new way of shopping is not unheard of — just think back to warehouse clubs — it can take time and will depend on consistent, superb execution.”
A potentially bigger challenge for Mason, Caicco said, will be figuring out the labor component for the 10,000-square-foot stores Tesco will operate.
“With small-surface stores that offer fresh and prepared foods, Tesco will have to rely heavily on outsourcing to sophisticated suppliers to make the economics work,” he pointed out. “And those suppliers will have to have an enormous capacity for creativity, quality control and collaboration for the process to work.”
John Heinbockel, an analyst with Goldman Sachs, New York, said Mason's primary challenge will involve getting sufficient scale for the stores to have an impact and making sure the supply chain, and especially the cold chain, is right, “or the quality of goods will be hurt,” he said.
U.K.-based Tesco is not taking the challenge of a U.S. entry lightly, going so far as to separate Fresh & Easy from its other international operations — with Mason reporting directly to Tesco's chairman, Sir Terry Leahy, rather than to Phillip Clark, who heads Tesco's international operations in central Europe and Asia.
“This [U.S. move] is a big opportunity for Tesco, and it basically doesn't want to take anything away from its international business to put resources into the U.S.,” a British observer told SN. The fact the U.S. operation is separate from other international ventures “reflects the focus the company is putting on the U.S.,” he added.
Another indication of that special focus, he noted, is that start-up costs for the U.S. business will be included in the profit-and-loss statement for the U.K. parent company rather than the international segment.
Mason is an executive with his finger on the consumer's pulse, Ben Miller, program manager for IGD, a British-based research company, told SN. Tesco's strategy is to put the customer first, he said, pointing out that the company's marketing department, which was headed by Mason, has always championed the customer's point of view.
“Mason is the guy who developed Tesco's loyalty card program, which has enabled the company to use that information to achieve a level of customer insight unmatched in the U.K.,” Miller said.
Tesco's traditional template for international growth has been “to move forward through small-scale acquisitions and then use that base to understand the market and the local trends. And it usually went in on a joint-venture basis, where it looked for a small acquisition and moved forward from there,” another U.K. observer told SN.
“But after working with Safeway on GroceryWorks and Kroger with dunnhumby, Tesco apparently felt it knew the U.S. market and was ready to do something new and completely different,” he added.
Mason directed extensive consumer research in Southern California and Phoenix in which Tesco employees actually lived with consumers to observe their buying and eating habits.
According to Miller, “Tesco did the same thing in Japan, where employees lived with local families to understand trends and shopping habits on a day-to-day basis.”
Mason joined Tesco in 1982 and held a variety of positions in retail operations and buying before being named marketing operations director for the company in 1993. He was subsequently named chairman of Tesco Ireland and Tesco.com and was also responsible for property acquisition and development in the U.K. Mason was named a Tesco director in 1995.
Tesco opted to locate its U.S. business in Los Angeles “because Southern California is the pot of gold,” one of the U.K. observers pointed out. “It's a big metropolitan market, from which expansion to Las Vegas and Phoenix, two of the fastest-growing cities in the U.S., was easy — plus, the people follow very healthy lifestyles there, which provided Tesco with an opportunity to fill the gap between a convenience store like 7-Eleven and a conventional supermarket operator.”
He said Tesco's decision to move into the U.S. was not a surprise.
“On one side, the evidence has been there that it would happen eventually,” he said. “Tesco's international strategy over the past five or six years has been to focus on central Europe and Asia.
“But everyone knows Tesco has been looking at the U.S. for 20 years, given its involvement with Safeway and Kroger. It's simply been looking to find the right way to do it.”