Monday, December 03, 2007

Tesco Makes A Move To Enter Region With Food Shop In Fairfield

Tesco Makes A Move To Enter Region With Food Shop In Fairfield
By Jon Ortiz -

The rumors are true. British grocery giant Tesco PLC is coming to Northern California.

Tesco has already made waves with the small-format Fresh & Easy stores it debuted in Southern California and Las Vegas last month. Now the company has applied for a liquor license for a store in Fairfield.

That signals Northern California's tumultuous grocery industry is in for more shake-ups with what will likely be dozens of nonunion Fresh & Easy stores reaching for shoppers who buy food at traditional supermarkets and big box stores.

"I can confirm that we're looking at a number of locations in Sacramento," said Brendan Wonnacott, a spokesman for the chain. "But there's nothing firm to announce. We're still in the early stages."

Until now Tesco has kept mum about its plans outside of Southern California, where it is spending $2 billion to pepper cities with more than 120 Fresh & Easy stores supplied by a mammoth manufacturing plant and distribution center in Riverside. The company has already opened 15 stores. Another 35 will open by February. No date has been announced for the Fairfield store.

The Southern California stores debuted to curious and excited throngs of shoppers, according to various news accounts. Meanwhile, organized labor has denounced Tesco for refusing to pledge certain wage levels and health benefits.

Tesco's response: Unionization is out of our hands.

"Look, we offer full benefits, a $10-an-hour starting wage and a quarterly bonus," Wonnacott said. "As far as outside representation, it's up to the employees. It's their right."

People familiar with the chain say the stores' size – 10,000 square feet, slightly smaller than a Trader Joe's – and emphasis on fresh goods and ready-to-eat meals aim squarely at consumers who feel inconvenienced by shopping at big box stores or are bored by the fare often found at traditional grocery retailers.

About half of a Fresh & Easy's inventory is privately labeled and contains no artificial colors or flavors, no added trans fats and "preservatives only when absolutely necessary," according to Tesco.

The stores offer national brands, but not the variety found in traditional grocery stores.

"Fresh & Easy is unlike anything that the supermarkets or Wal-Mart are doing," said Camille Schuster, president of Global Collaborations, an Escondido retail consulting firm. "They're going to shake things up."

TNS Retail Forward, a consulting group based in Columbus, Ohio, on Thursday published a study suggesting that Fresh & Easy "potentially represents a significant threat to the U.S. food retailing industry." By 2011, the report predicts, the stores could reach $4 billion in U.S. sales and $10 billion by 2015, placing the chain among the top 10 grocery retailers in the country.

Tesco also is marketing Fresh & Easy as a socially conscious chain with a solar-powered distribution center and trucks outfitted with environmentally friendly refrigeration systems. The company says it plans truck routes around traffic patterns and neighborhood routines to minimize their impact on local communities.

And Tesco has pledged to enter so-called "food deserts" in Southern California, including underserved neighborhoods in south Los Angeles where reasonably priced fresh food has been scarce since riots waylaid businesses there in 1992.

The company is looking for similar opportunities in Sacramento, Wannacott said.

Still, community groups have questioned Tesco's commitments. A recent study found less than 10 percent of prospective Fresh & Easy locations, for example, are in high-poverty areas. Most are near existing grocery stores, the researchers found.

"We stand by our commitment to serve underserved neighborhoods," Wannacott said, noting that Fresh & Easy is opening next year in Compton, which lost millions of dollars 15 years ago to looting and arson. "It makes sense to put stores in neighborhoods that want them. But it takes time to get these things done."

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