Fresh & Easy calls it quits

Discussion
Oct 22, 2015

Before the first Fresh & Easy store opened in the U.S., Tesco was riding high and there were some who spoke of the new format in terms of transforming convenience store retailing in the U.S. From the outset, however, there was evidence of trouble and eventually Tesco bailed on its American experiment and sold the business to Ron Burkle’s Yucaipa Cos. Hopes that new ownership would result in a change of fortune for Fresh & Easy were never realized as the news broke yesterday that the company is in the process of closing down for good.

Fresh & Easy has sent layoff notices to its roughly 3,000 employees and plans to liquidate in the coming weeks. Some stores will be closed while others will be sold. The company has claimed that it had cut losses under Yucaipa and was moving closer to break even. The decision to close its doors, according to reports, was the result of not being able to obtain financing and reach the level of liquidity it needed to continue operations.

Fresh & Easy

Source: freshandeasy.com

Yucaipa acquired 167 stores from Tesco and immediately closed 50 locations. The current store count for Fresh & Easy stands at 97. Potential suitors, according to an Orange County Register report, for Fresh & Easy locations include Aldi and Grocery Outlet, two chains that are ramping up expansion in California.

Editor’s Note: A 2007 RetailWire poll found that 72 percent expected Fresh & Easy to be successful in the U.S. Only 17 expected it to fail.

What is your postmortem on Fresh & Easy? What caused its demise? What retailers are most likely to benefit once it has gone?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"It is clear that Tesco was taking on a lot of factors and even though they had been incredibly successful in their own market and in some overseas markets, the U.S. was one step too far."
"Interesting concept that catered to the small household, but was never properly executed or promoted. The real estate for most of the stores was awful, the neighborhoods where it located were high density family neighborhoods, and there are several other cringeworthy factors."
"Honestly, I was one of the few that predicted success and a game changer within the U.S. Having been very familiar with Tesco while our company had a UK category management operation, I expected "best in class" execution."

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17 Comments on "Fresh & Easy calls it quits"


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David Livingston
Guest
6 years 7 months ago
Most of us predicted that Fresh & Easy would be dead on arrival when they first opened. They did zero meaningful research, had no relevance in the market and opened in poor locations just to get stores open. You couldn’t do any worse if you did it on purpose. Not many retailers will benefit since the stores were doing little to no volume anyway. Competitors and customers will not even notice they are gone. I can’t see other grocers wanting their locations since they are mostly poor locations. Aldi wants to be in Walmart’s parking lot, not in the middle of a low-rent strip mall. There might be a handful of locations that will become grocers but generally retailers do not like to take locations with a legacy of failure. Fresh & Easy might have had a better chance by just opening a few stores, in good locations, and only in one metro area. Given that they just randomly splattered stores all over the West Coast with no rhyme or reason and with no due… Read more »
Dr. Stephen Needel
Guest
6 years 7 months ago

I was one of the 17 percent that expected it to fail. The assumption that U.S. shoppers in these markets wanted fresh, easy and healthful food, even at reasonable prices, was a research issue, and one that Tesco chose to ignore. Fact is, they didn’t want what Fresh & Easy was offering, the offering was never clear and the original locations were questionable.

Roy White
Guest
Roy White
6 years 7 months ago

This is a glaring case of unavoidable failure. Fresh & Easy was an interesting idea inexpertly carried out and now the price has been paid. Done professionally it might have worked, but it wasn’t and there wasn’t anything Yucaipa could do about it.

Graeme McVie
Guest
Graeme McVie
6 years 7 months ago
When Fresh & Easy was opening in the U.S., I remember reading that they needed a minimum number of stores to justify the cost of opening their own distribution centers. My initial reaction was that they might struggle to find enough good locations in such a short period of time such that each store would be a positive contributor to their earnings. It now sounds like they couldn’t make a significant number of their locations profitable so maybe there was a reason that established grocers had not selected these locations in the past. I also remember thinking that Fresh & Easy were going to be trying a different approach/format in order to stand out from the same-old grocery format that existing players were currently employing. At the time I wondered if Tesco had unearthed a not-before-realized golden opportunity or if there was a reason that established grocers were not deploying this approach/format. And then there were some of the struggles that international grocers had been having in successfully expanding into new countries (e.g., Walmart’s unsuccessful… Read more »
Hy Louis
Guest
6 years 7 months ago

I hope this does not discourage foreign investment from companies like Lidl. Tesco was so arrogant they continued to keep going in the wrong direction to a point of no return. Then insult us year after year by telling us they would be profitable “next year.” Most retailers are prudent enough to know when to pull the plug. Good examples are Target in Canada or Haggen. Those two retailers quickly saw there was no point in continuing and knew when to slam on the breaks. Like most titanic business failures, inexperience and arrogance caused its demise.

Ed Rosenbaum
Guest
6 years 7 months ago

Sad but predictable from the start. Tesco did not do a good job of learning the marketplace. Better research might have made a difference. We will never know. Their locations are not prime so unloading them could be a problem.

Martin Amadio
Guest
Martin Amadio
6 years 7 months ago

It seems today everyone was part of that 17 percent. I was always part of the 17 percent. I remember reading stories about how Tesco was going to shake up the channel in the U.S. and feeling like a naysayer. Tesco entered the U.S. market in an arrogant manner and had “it” handed to them.

One did not have to conduct very deep market analysis to recognize that the cultural, demographic, geographic and societal differences between the American Southwest and Tesco’s home turf could not be more striking. The shifting sands of today’s grocery marketplace are difficult, at best, for indigenous players to navigate. Why then would an interloper like Tesco think they could walk in and show Americans how it’s done? The answer is corporate arrogance.

Daryle Hier
Guest
Daryle Hier
6 years 7 months ago

This was an easy one. Poor forecasting, which also involved a recession, created their demise. I’ve talked to some in the industry and although most of them thought the Fresh & Easy concept was a good idea, planning and research obviously weren’t adequate.

I was indifferent to the concept and wasn’t sure about its potential. I’m no longer in an area that was served by Fresh & Easy — and this is anecdotal, but a few of my friends still visit the stores and they regret they are closing.

In the end, neither Tesco nor anyone else thought we’d have a Great Recession and I’m concerned more casualties of this poor economy will continue.

Ed Dunn
Guest
6 years 7 months ago

Walmart now has some great order online/grocery-pickup locations to scoop up at a discount in urban areas.

Jack Pansegrau
Guest
Jack Pansegrau
6 years 7 months ago

I guess I’m the only one who will suffer loss. I regularly visit my Palm Springs Fresh & Easy. It had the freshest meats and fish at fair prices, a fresh bakery, freshly prepared meals that are way healthier than any other store, fantastic fresh hummus and salsa and good fresh produce. I switched from Trader Joe’s to F&E and never started to patronize our new Whole Foods. I realize there were many poor locations, but properly rolled out, I sincerely believe there was a place for Fresh & Easy and I will seriously grieve their passing.

J. Peter Deeb
Guest
6 years 7 months ago

This needs to be a lesson to any business to conduct your due diligence before entering a new endeavor or expanding your current business (see Haggens). Simply replicating a model that works elsewhere or expanding a current business without good research has a large economic and human cost when it fails.

My biggest surprise in the Fresh and Easy debacle was Yucaipa trying to salvage the operation.

Craig Sundstrom
Guest
6 years 7 months ago

My post mortem? Hubrisal edema; extensive internal bleeding from the pro-forma ….
Too graphic? OK—it was either a good idea poorly executed or a bad idea poorly executed; unless someone else tries something similar and succeeds at it, we’ll never really know.

Carlos Arámbula
Guest
6 years 7 months ago

Interesting concept that catered to the small household, but was never properly executed or promoted. The real estate for most of the stores was awful, the neighborhoods where it located were high density family neighborhoods, it failed to talk to Hispanics—in any language, and there are several other cringeworthy factors.

I don’t feel its absence will benefit any other retailers—that’s how bad it was. But it should serve as a cautionary tale to follow the old adage of global brand with local flavor. Tesco is not the only one with a failed grocery concept in Southern California, the Japanese grocery giant FAMIMA also tried entering the market at about the same time, but failed due to similar reasons.

Dave Wendland
Guest
6 years 7 months ago

Honestly, I was one of the few that predicted success and a game changer within the U.S. Having been very familiar with Tesco while our company had a UK category management operation, I expected “best in class” execution. The challenge for Tesco was threefold: 1) wishful thinking that the U.S. would simply gravitate to the Fresh & Easy format without a memorable point of difference to shoppers; 2) lack of understanding—and appreciation—of the U.S. marketplace and consumer attitudes; and 3) misguided growth plans that looked too far beyond startup expectations to an impractical expansion strategy. (I’d also add that their selected market was suspect.)

Who wins? Probably nobody in particular and certainly not the U.S. consumers who will not realize the supply chain efficiency and store operational excellence Tesco has demonstrated in other markets.

Peter J. Charness
Guest
6 years 7 months ago

In the end, shoppers didn’t see enough reason to change their shopping habits and go to Fresh. From my standpoint, there were plenty of better competitive options, most of which were better choices. In terms of who benefits? I don’t think in total Fresh & Easy was big enough to cause even a blip in terms of where their loyal shoppers are going to go.

Lee Peterson
Guest
6 years 7 months ago

Their failure won’t stop someone from thinking they can learn from this failure and succeed despite it. Just ask Lidl.

#1 cause of death IMO was real estate. I remember touring the first 5 stores in LA when they opened and being stunned by the lousy sites they had picked.

#2 was the assumption that their own private label (F&E tuna?) was going to succeed. Trader Joe’s built theirs up over 20 years time, so dropping the F&E label into all categories before anyone was familiar with their brand at all was a classic case of ego in charge.

#3 poor fresh merchandise. American’s love abundance and touch and feel when it comes to produce … to wrap it in shrink wrap = kiss of death

And that’s just for starters; it probably goes up to 20.

Mike B
Guest
Mike B
6 years 7 months ago

Though I initially predicted failure, I actually got to kind of like these stores. The fresh items were pretty good and the private label line was pretty high quality. They had a few interesting imported items also.

I felt under Burkle the stores went way downhill. Replacing the prepared foods coolers with soda coolers that looked like a 7-Eleven may have been a good idea for shrink, but it removed the centerpiece of Fresh & Easy, the prepared foods. Bakery quality also decreased under Burkle. And, pricing increased drastically.

I do wish I’d have gotten to see their new concept in Las Vegas.

Someone else will pick up the good pieces of Fresh & Easy and run with them. Probably multiple someone else.

It’s been a fun eight years, I’m shocked they survived this long. Can’t say they didn’t try….

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Braintrust
"It is clear that Tesco was taking on a lot of factors and even though they had been incredibly successful in their own market and in some overseas markets, the U.S. was one step too far."
"Interesting concept that catered to the small household, but was never properly executed or promoted. The real estate for most of the stores was awful, the neighborhoods where it located were high density family neighborhoods, and there are several other cringeworthy factors."
"Honestly, I was one of the few that predicted success and a game changer within the U.S. Having been very familiar with Tesco while our company had a UK category management operation, I expected "best in class" execution."

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