Tesco is Leaving the U.S. What Does That Mean for Fresh & Easy?

Discussion
Apr 18, 2013

So, billions of dollars invested later, Tesco’s grand plan to conquer America is now officially over. The company announced that it was getting out of the U.S. having potential buyers lined up to acquire some or all of the 199-store Fresh & Easy chain.

Tesco, as identified on this site and elsewhere over the years, failed to understand and connect with American consumers after opening to much fanfare in the U.S. market in 2007. The venture, begun under the leadership of former Tesco CEO Sir Terry Leahy, banked on a rapid expansion of stores to help it achieve Walmart-like prices for Whole Foods-quality fresh and prepared foods.

"The falling star of Tesco in the U.S. is a harsh reminder that scale is not the recipe for sustainable value creation," Ajay Bhalla, professor of global innovation management at Cass Business School, told BBC News.

Fresh & Easy management offered this statement on the company’s website: "While we don’t yet know who our new owner will ultimately be, Tesco has already received interest from a number of parties including groups looking to purchase Fresh & Easy as an operating business. We appreciate all the support and love we’ve received from our loyal customers and, even though our parent company plans to leave the U.S., we’re pleased to confirm there are no plans to close any portion of Fresh & Easy."

Can Fresh & Easy make it under new management and its current banner in the U.S.? What do you think is the most likely scenario for Fresh & Easy?

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12 Comments on "Tesco is Leaving the U.S. What Does That Mean for Fresh & Easy?"


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David Biernbaum
Guest
9 years 2 months ago

Totally depends on who will be the new management (??). I think the concept of offering Whole Foods quality at Walmart types of pricing works well, in theory. However, I’m not so sure that the quality is really Whole Foods.

Ryan Mathews
Guest
9 years 2 months ago

As I’ve said consistently since 2007—this comes as NO surprise. I never bought the concept in the first place and never had a single laudatory word to say about Fresh & Easy.

Therefore, in the interests of consistency alone, my bet is the format—as is—will not survive. The problem wasn’t (primarily) ownership, it was conceptual.

Changing owners is not enough to save the format.

Gene Hoffman
Guest
Gene Hoffman
9 years 2 months ago

Tesco’s U.S. experiment may have appeared fresh but it didn’t prove easy.  Tesco started with a conceptual error and its remained thus.

Fresh & Easy might still succeed here under its current banner providing its new management is in the American retail mode. That suggests a retailer knowledgeable of Southern California and the southwest retailing milieu might be the best successor. Without that happening, F&E will be part of the retail’s never-ending passing parade.

David Livingston
Guest
9 years 2 months ago

Probably cannot survive. Poor site selection will be too hard to overcome. I can see a handful of sites being taken over by Trader Joe’s, Grocer Outlet, and the rest by dollar stores. It is very difficult to revive a supermarket chain that has been run into the ground by its previous owners, even when they do have good locations. Now with Fresh & Easy having poor secondary locations, the chances of being taken over by a legitimate retailer are slim to none.

David Zahn
Guest
9 years 2 months ago

Hey Tesco, it’s Amazon on the line. They want to know if they can use those sites for lockers for their drop-offs. At pick-up time, it might be the most people in the building at any one time!

Camille P. Schuster, Ph.D.
Guest
9 years 2 months ago

I like the concept of Fresh and Easy. I do not think the locations chosen fit the concept. With that in mind, the current format in the current locations is not sustainable. A different format in those locations may be sustainable.

Marc de Speville
Guest
Marc de Speville
9 years 2 months ago
How many of the armchair coroners of F&E asked customers what they thought, I wonder? In fact, it did attract a core of very loyal fans, across all age and social-economic groups. But that fan base did not grow fast enough to please the relatively short-term requirements of institutional shareholders. It can take decades for really new formats to take off — as was the case with Trader Joe’s transition from a slightly weird surf-dude place that sold quirky stuff to the cult food retailer it is today. The timing was particularly unfortunate, coming in just at the top of the real estate cycle ahead of one of the worst recessions in living memory. Yes, the arrogance of Tesco’s previous management played a part too and some might see its U.S. exit as just retribution. But at least they tried to shake up what remains in general a very staid and not particularly well-run industry, and on paper F&E remains a good concept that suits modern trends to smaller stores, convenience, low prices/soft discount/own label,… Read more »
Mark Price
Guest
Mark Price
9 years 2 months ago

F&E was known for self-service checkout, lack of coupons and ready-to-eat meals that were not compatible with local tastes. Most of those issues are easily remedied by an acquirer. A chain focused on RTE meals with a good selection of organic and fresh produce starts to sound a bit like a RTE version of Whole Foods, which has proven successful.

In an industry with 3% margins, success is never easy, but this business does not look too broken for a good try.

Jack Pansegrau
Guest
Jack Pansegrau
9 years 2 months ago

I agree with Spev. As a loyal F&E shopper in Palm Springs, I absolutely love F&E with its fresh produce and fresh-in-store bakery. I will miss F&E if the new buyer decides to change it. Just try getting fresh kale or lettuce at TJ’s — all their greens are bagged.

F&E has much better selections of fresh meats and fish than TJ’s. So as a once confirmed TJ shopper, I am now nearly as devoted to F&E, shopping at TJ for 25% of what I used to. So I agree — the concept, in my opinion is viable, but it takes time to shop it and discover it.

Kai Clarke
Guest
9 years 2 months ago

This was a poor proposition from the beginning. The intricacies of the American consumer are difficult for American based retailers to manage, let alone foreign based ones. Technology, rapidly changing formats and footprints, finicky consumers, and unique food offerings all make for a difficult retail environment. Add to this the lack of American culture and communications and you have made a difficult situation worse.

Fresh and Easy will probably fade away, just like the others in their historical context. Goodbye Fresh and Easy!

Craig Sundstrom
Guest
9 years 2 months ago

“German company Aldi broke the U.S. Frankly, I’d have expected the 2nd biggest supermarket in the world to be able to as well. Very disappointing. We don’t make anything and we’re not even a very good nation of shopkeepers anymore.” — “Dapper” writing in The Guardian.

Ouch!! Different day, different company, same story: RW commenters are split on whether/not the underlying ideas make sense, but management makes such a hash of things the point becomes moot. In answer to the question: I think they will be liquidated. The claim that “Tesco has already received interest” will/should be considered in light of the fact that the same execs told us only weeks ago they were still committed to the concept.

Scale will be even harder to achieve if the locations are broken up, and only someone arrogant, desperate or a real fool would purchase this intact …not that the world lacks people with those traits. The ultimate question is: does America really need another supermarket chain? Did it six years ago?

W. Frank Dell II, CMC
Guest
9 years 2 months ago

This is not the first time a European retailer thought they were smarter than the locals. There is a market for smaller stores, just ask Aldi and Sav-A-Lot. Also Walmart and others are testing a smaller format.

What has to change is the European Spartan decor and product mix. Prepared food is still not a winner for the supermarket yet. This is because restaurants provide home delivery. Yes, someone can make these locations work, but they must be tailored to the individual market with products these consumers want, at the right price.

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