Tesco Plans 100 Stores in Four Cities in U.S. Launch

DAVID SCHWARTZ

PHOENIX — British grocery giant Tesco plans to jump into the highly competitive U.S. food marketplace with 100 small, neighborhood specialty stores in four Western cities by the end of 2008, a top company executive said at a meeting with community leaders here last week.

Tim Mason, chief executive officer, Tesco USA, said Britain's largest retailer will plunk down stores in Phoenix, Los Angeles, San Diego and Las Vegas as it launches its first foray into the U.S., beginning late this year. He declined to reveal where the first store will open, but Tesco did confirm that the name of the stores will be “Fresh & Easy Neighborhood Market” and will feature a green-and-white, clock-shaped logo.

Plans are for the global company to spend $450 million annually for the next several years on the launch, which will include 20 locations in the Phoenix area.

“We've enjoyed strong success in countries throughout Europe and Asia, and we're excited to be bringing that success to America,” Mason told the group of economic development officials. “We felt that the Western cities' diverse lifestyles were a perfect fit for our company.”

He told reporters later that the company also will continue its attempt to grab market share in other cities if the initial launch goes well.

“We hope the thing will be very successful, and if it is, then we would plan to roll it out quite rapidly,” said Mason, who said the company has eyed the U.S. market for several years.

The company's plans have been shrouded in secrecy. Even the format's name was not officially confirmed by Tesco until the announcement was made in Phoenix.

Mason said the company will come to market with a roughly 10,000-square-foot neighborhood store, built for convenience and dedicated to serving health-minded, time-pressed consumers. The stores will be much smaller than traditional supermarkets.

“What we're trying to do is offer specialty market quality for an affordable price,” he said. “These are not high-end esoteric products that ordinary people don't like to eat.”

Fresh groceries and prepared meals will be at the heart of its offerings, and each store will carry a private-label brand with products free from added trans fats, artificial colors and preservatives. The stores will not sell tobacco products. Beer and wine will be available.

Mason said the stores will try to set themselves apart from competitors by offering a different product mix and shopping experience, with hard-to-beat prices and superior customer service.

“The sum of that comes together as a neighborhood market that is different and new compared to other stores,” he said.

Tesco is seeking success in a country that has seen two other British retailers — Sainsbury and Marks & Spencer — try and fail in recent years. Mason said the difference is that Tesco is starting from scratch and building a distribution system that needs the volume proposed to be viable.

Mark Husson, a New York-based analyst with HSBC Securities, London, said the company's move into America was inevitable, with 100 stores the bare minimum to make economic sense. But he said the venture is not without considerable risk.

“It's quite a big gamble,” Husson told SN. “It's not such a massive financial gamble, but it is a reputation gamble. They may get a lot of sales, but whether they make a lot of money remains to be seen.”