By David Merrefield
VP, Editorial Director
Things change. Consider, for instance, this week’s Food Marketing Institute show.
Since 1985, the show has returned to Chicago as reliably as daffodils herald spring. But no longer. This year marks the end of that long consecutive run. Next year, the booth show decamps for Las Vegas, and a year later the show will take the form of an educational event to be staged in Dallas, the city where the FMI show was held on several occasions prior to the Chicago era. (After 2009, the FMI booth show and the educational forum are to be held on alternate years.)
The industry changes too. In the last couple of issues of SN, and in this week’s edition too, there have been news articles about a big upcoming change in the competitive landscape, namely the arrival of Tesco on these shores.
While we’re in a reflective mood, let’s recall that Tesco, from the United Kingdom, is far from the first operator from outside the United States to endeavor to put down roots here. Others include Carrefour, Auchan, LeClerc and 3 Guys. Each of those companies had plans to build a chain from scratch, and to overspread the land. Each reasoned they could do so because they had struck on a format and on operating methods that were quite successful elsewhere. They reasoned those features could be imported here with great success. Not so. Each of them is gone.
Others, perhaps exhibiting greater prudence, sought to obtain a foothold in this country by means of acquisition. Those include Marks & Spencer, Tengelmann, Ahold and Delhaize. Of those, the last has enjoyed the greatest degree of success, although it had its share of lean years too. M&S has departed. Tengelmann has spent many years disposing of assets, and continues to do so even as it moves toward concluding the buyout of Pathmark. Ahold is shedding assets, and its continued presence in this country is by no means assured. In sum, one need not be a jingoist to observe that the food distribution business in this country isn’t quite as simple as it evidently appears to be when viewed from elsewhere.
Yet, Tesco asserts that its upcoming foray into this country is replete with potential. Tesco’s chief executive has predicted that the number of stores it will have in this country could exceed its 1,900-store count in the U.K. Recall that Tesco hasn’t opened one store in this country and won’t do so until its 820,000-square-foot distribution center, now under construction, is operational — meaning sometime in the third quarter. Stores are planned for Los Angeles, San Diego, Phoenix and Las Vegas. Incidentally, entering an operating territory with both new stores and a captive distribution apparatus vastly increases the stakes, and the penalty for failure. Indeed, Tesco plans to plow about $500 million per year into development in this country. As for the stores, its models of about 10,000 square feet are to offer convenience shopping, fresh product and prepared food.
In summary, Tesco’s plans have high-risk features and stand somewhat at odds with what American consumers expect of their shopping choice. We’ll see if the fear Tesco strikes into some hearts is warranted, or if establishing in this country proves to involve more heavy lifting than Tesco anticipates.