Tesco has certainly created high expectations for its U.S. debut. With pronouncements such as offering "Whole Foods quality at Wal-Mart prices," Tesco has led some to talk in terms of the company revolutionizing the American grocery industry with its Fresh & Easy Neighborhood Market format.
James Anstead, a retail analyst with Citigroup, is in that camp. Recently, according to a BBC report, Mr. Anstead wrote, "Tesco's entry could potentially go down as a genuine turning point in the industry, possibly comparable with Wal-Mart's decision to start opening Supercenters in the 1980s."
While Tesco comes into the U.S. well capitalized (it plans to invest $250 million), the chain opens with the knowledge that it is not the first British retailer to take on America. Tesco follows Sainsbury's and Marks & Spencer to the States. These chains both opened in the U.S. with high hopes, only to eventually pull up their stakes and head home.
At least one pundit, Chris Ayres of The Times of London, believes Tesco's U.S. venture is headed for failure. Mr. Ayres, who serves as the paper's Los Angeles correspondent, reasons that the retailer doesn't understand what shoppers in California want despite all the time and money it has spent trying to get to know them.
For one, Mr. Ayres wrote, "Sir Terry (Leahy, Tesco's CEO) is trying to sell the residents of the most diet-fixated, calorie-paranoid, carbohydrate-obsessed city on Earth a combination of red meat, pasta, bread, cheese and booze. A round of applause, please, for the Fresh & Easy marketing department. Incidentally, if someone offered you a beef lasagna and bread at an LA dinner party, you'd sue them. A three-cheese lentil and tofu lasagna you might get away with - but you'd still be unpopular."
Another problem is Tesco's pre-packaged meals, according to Mr. Ayres. He cites the chef-prepared meals offered fresh daily in stores such as Whole Foods, Bristol Farms and Gelson's and wonders if consumers in LA are interested in products that represent "a refrigerated, prepackaged niche somewhere above Wal-Mart and below Whole Foods."
While the company's official opening is scheduled for tomorrow, the chain has already gotten started with a soft opening at a location outside of Los Angeles in Hemet, Calif.
Bob Pratt of The Press-Enterprise (Riverside, Calif.) was among those to shop the Hemet store and he admitted experiencing some disappointment entering a Fresh & Easy for the first time. He was looking for a Trader Joe's-like experience only to find that while Tesco offers about three aisles of comparable items, most of the store was akin to Smart & Final.
"The food is touted as fresh, easy-to-make and healthful," wrote Mr. Pratt. "It does have smartly packaged fruit, produce and meats, but I was shocked to see Lay's potato chips, Banquet TV dinners, Stouffer's lasagna, Lucky Charms and Fruit Loops cereals and, I'm not kidding about this, Velveeta Shells and Cheese, the ultimate in processed food."
Prices at the store, based on Mr. Pratt's account, were extremely competitive. He mentioned purchasing a bottle of Argentine Terrazas Malbec for $7.99 while elsewhere he has paid $15.
As to where he finally comes down on Tesco's first iteration, Mr. Pratt wrote, "I'm not likely to drive across town to shop at Fresh & Easy often, but when the San Jacinto store opens down Esplanade Avenue from my work, I suspect I'll be a regular. Perhaps someday I'll try the exquisite Velveeta Shells and Cheese."
Those interested in getting a look inside Fresh & Easy without traveling to California can see a video of the store at the Fresh & Easy blog site: www.freshandeasy.com/blog
Discussion Questions: Based on what you've heard and seen to this point, have you any firm opinions about the Fresh & Easy Neighborhood Market format? What do you expect Tesco will learn from the first stores it opens in the U.S.? Has Tesco demonstrated the requisite flexibility in other markets to make you believe it will make the necessary adjustments needed here to succeed?