Tesco is prepared to spend up to $2 billion over the next five years as it looks to stake its claim to the American grocery market. The British retailer is currently looking at 300 potential sites in southern California, Arizona and Nevada to build what the company is referring to publicly as its "neighborhood market."
The British retailing giant expects to open its first stores in the second half of 2007. Tesco USA CEO Tim Mason told the Los Angeles Times that the company is looking at a number of locations in underserved urban areas that need to be "re-energized."
The only confirmed Tesco location to date is a space in the Glassell Park section of Los Angeles that previously housed an Albertsons. The 32,500 square-foot store is larger than other properties Tesco is said to be looking into, which typically run about 15,000 square-feet with two-thirds devoted to sales.
Tesco's Mason said the company is looking at operating "smaller, simpler grocery stores" that allow consumers to quickly pick up what they need without having to visit multiple stores.
"One of the things that we found unique about American consumers is that they shop frequently here, and that they shop in a lot of different stores," said Simon Uwins, chief marketing officer for Tesco USA.
Tesco plans to focus on fresh foods, prepared meals and packaged goods. The company is placing a strong emphasis on its distribution network to deliver fresh foods and prepared meals to American consumers.
"One of the problems of distribution in a place as vast as America is that most of the freshness is used up in trucks rather than in people's refrigerators," said Mr. Mason.
To help it meet its U.S. distribution challenges, Tesco has brought over suppliers from its U.K. home. Natures Way Foods and 2 Sisters Food Group (see RetailWire 11/28/06, Tesco Brings Suppliers Along for U.S. Adventure) will open facilities in California. Tesco has bought 88.4 acres in an area south of Riverside to open its local distribution center.
Tesco expects to hire approximately 2,500 people in its first year. It has had talks with the United Food and Commercial Workers (UFCW) union but has not decided if it will open with a unionized workforce. Either way, Mr. Mason said Tesco is looking at hourly wages paid in areas where it plans to open stores. The company intends to offer a competitive compensation package including bonuses, a 401(k) and health benefits.
"We know that we have to be a good employer if we want to attract people in this market," he said.
Discussion Question: Which of the known details about Tesco's plans for the U.S. have really caught your attention?