Tesco Details Growth Plans for Las Vegas

ELLIOT ZWIEBACH

LAS VEGAS — Fresh & Easy Neighborhood Market, the pending U.S. entry from Britain-based Tesco, plans to open 14 locations here by the end of Tesco's fiscal year in February, in addition to 20 locations in Phoenix and an unspecified number of stores in California.

The company will disclose plans for locations in Los Angeles, Orange County and San Diego in the next few weeks, Tim Mason, chief executive officer of Tesco's U.S. business, said here last week.

Speaking to a gathering of civic leaders and real estate executives, Mason said Tesco has 100 Fresh & Easy stores in the development pipeline, “and most will open by February.”

He declined to comment on reports that Tesco is scouting locations in Sacramento, in Northern California; he also said industry reports of an interest in the Denver market started “because we did part of our original consumer research there.”

Asked if the company has ambitions to expand nationally, Mason said, “We'll expand based on our success. But right now we have plenty to worry about on the West Coast. And being candid, we haven't had time to do research and development elsewhere, but obviously we would before deciding to expand.”

Mason said he sees conventional supermarkets as the primary competitors for the Fresh & Easy banner.

“We consider anybody who sells food as competition,” he said. “But on a narrower basis, supermarkets are probably our main competition, because for short trips, the customers are similar. But what we'll be doing is offering newer, more contemporary ways of buying food.”

The difference will be the quality of the offerings, Mason pointed out. “We believe people will fall in love with certain recipes and products in our stores, and the stores will be easy to shop — light, bright and ordered rather than dark, crowded and cluttered — plus the prices will be very affordable and the service will be very nice.”

In response to an SN question, Simon Uwins, chief merchandising officer, said Fresh & Easy has no plans to use the Tesco name anywhere in the stores.

“We're not a business with big ambitions to make Tesco a global brand,” he explained. “What we do in each country we enter is talk to people and find out what they want.”

Of the 11 countries in which Tesco operates, it uses the Tesco name in all but four of them, Uwins said.

Each 10,000-square-foot Fresh & Easy store will be staffed by between 30 and 40 employees, Mason said.

In response to a question, Mason said it is “up to the employees” whether or not they want to be unionized.

Representatives from the United Food and Commercial Workers Union stood outside the meeting room at the Wynn Hotel here where Tesco was holding the presentation, handing out flyers that called on people to “tell Fresh & Easy that American workers deserve no less than the same freedoms and respect as workers in England,” where Tesco operates unionized stores.

Because the stores will be geared toward healthy eating, they will not sell tobacco products, including cigarettes, Mason indicated.

During his presentation, Mason stressed that Fresh & Easy's prices will be “affordable,” although he declined to be more specific, “because that would give the competition six months to decide what to do,” he said.

To help familiarize U.S. consumers with the kind of fresh products the chain will offer, each store will have a tasting station, called The Kitchen Table, staffed by people with knowledge of the products, their ingredients and the methods of preparation, Mason said — the first time Tesco is taking that approach to marketing, he told SN.

“The Kitchen Table will be the heart of the store,” he said. “Why should consumers take our word for how good the food is? The biggest element of marketing is to allow people to sample the products, and that's what we'll do.”

During the meeting, Fresh & Easy unveiled the exterior look of the stores it will open in ground-up locations — green-colored buildings with extensive use of glass across the front “to let natural light in,” Mason said.

He said the stores will include a mix of existing buildings and ground-up sites. “To move as quickly as we needed to get scale, we felt we couldn't wait to get new buildings up,” he explained. “Besides, most shopping centers are well located to serve existing communities, which is where we need to be to be flexible in terms of repurposing buildings.”

All stores will be identical in layout, Mason told SN, except at a couple of locations where the shape of the building dictates a slightly revised layout.

Fresh & Easy will concentrate on neighborhood locations, with a mix of freestanding units and stores in shopping centers, with parking for approximately 60 cars.

“What we're trying to do is to give people fresh and healthy foods in a single shopping trip near where they live,” Mason explained. “We're not taking a social or demographic approach to sites — we're approaching all income levels.”

He said the company is “prepared to go back into areas that are known as food deserts, areas where grocery chains have pulled out, because we believe those will be very good markets for us.”

The “dream ticket” for a Fresh & Easy store, he added, is to be located adjacent to a drug store, a drive-through bank and a coffee shop.

“If we can get those types of stores together, those are absolutely the best neighborhood locations we're looking for, because that allows people to stay close to home.”

Mason said Tesco has looked at possible acquisitions in the U.S. “for two decades or more, but we never found anything that was appropriate or useful. America is a fair market, and its assets are well valued, so you can't buy anything cheaply.

“Then we realized that, starting from scratch, we could design stores more for 21st-century shoppers.”

Mason explained that Tesco is launching its U.S. effort in the West “because we felt that, with big cities and diversified lifestyles and very vibrant population and economic growth, it was a good place to start.”