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Supermarket giant Wal-Mart has charged a former Tesco executive to come up with plans to torpedo the British group’s debut in America.
Tesco intends to make its US entry later this year with a chain called Fresh & Easy. Wal-Mart’s response is coordinated by David Wild, a former international managing director of Tesco, now working at Wal-Mart’s Arkansas headquarters.
Among the options being considered is the launch of rival stores or adapting existing Wal-Marts to take on Tesco’s planned green mini-supermarkets.
Fresh & Easy will not use Tesco’s familiar red, white and blue livery. Its logo is a green clock superimposed on an apple.
Exact plans are still under wraps, but it has been suggested that Tesco will open with 20 stores in Phoenix, Arizona, before rolling out across the West Coast.
Fresh & Easy will be aimed at urban shoppers and heavily promote organic produce. It is also expected to offer ready meals — which have yet to catch on in America in the way they have in the UK.
The Atlantic crossing has proved difficult for retailers from both sides. Wal-Mart owns Asda in the UK and has so far failed to dent Tesco’s lead in its home market. Both Marks & Spencer and J Sainsbury have made unsuccessful forays into US retailing.
US retail executives believe Tesco will face an uphill struggle in America.
“I think there are a lot of problems with Tesco’s idea,” said one. “The name for a start sounds like a chain of chicken ranches. More than that, you have to question if the supply base is there. Tesco is starting from scratch. People underestimate the differences between European and US retailing. The density of the market, land costs, and the cultural and life-style differences are enormous. Nobody in the US really buys ready meals now. Does Tesco think it can change that?”
The company is investing £250m in America this year. Analysts expect that figure to grow substantially if it is to succeed.
Tesco also faces stiff competition from Whole Foods and Trader Joe’s, supermarket chains that specialise in organic foods.
Most of Wal-Mart’s sales are nonfood items, but the world’s largest retailer has been giving greater emphasis to food in recent years. It has also launched a high-profile green campaign. The sheer scale of the company — its sales last year were $348 billion (£180 billion) — mean it is set to become the world’s largest buyer of organic goods from cotton to coffee.
Wal-Mart has already opened smaller stores, called Neighbourhood Markets, which US retailers believe may be adapted to create something similar to Fresh & Easy.
Tesco plans to open stores in southern California, Arizona and Nevada. The company’s first 1.4m sq ft distribution centre is being built in Riverside, California. It also has a site on Hollywood Boulevard, Los Angeles, near the Kodak Theater, site of the Oscar ceremonies.
The company has applied for licences to sell alcohol in more than 40 locations in the three states and has said it will open 150 stores within two years. The stores will be about 10,000 sq ft, far smaller than most US supermarkets.
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Walmart is always trying to squash anything good.
Walmart neighborhood market sucks frankly it's cold and dreary looking and produce is horrible. They can't compare to other organic markets here in arizona, like sunflower, sprouts and whole foods which is very pricey. I can't wait for the opening of these fresh and easy stores I know I will give it a shot.
I have stopped going to any walmart affiliated store, like sams club.
tom, phoenix, az
I,m an AMERICAN BORN IN THE UK and I know Tesco its a success over there I hope that if it comes over here to the US, I HOPE THEY WOULD CARRY SOME BRITISH FOODS LIKE MEAT PIES and OTHER FROZEN GOODIES WHICH I KNOW ANYONE WOULD TRY and LOVE. NOT MUCH OF SHOPPING IS CATERED FOR THE BRITS and AS MUCH AS I LOVE BEING AN AMERICAN I DO HUNGER FOR SOME FOODS I MISS IF THERES A RESTAURANT FOR MEALS I BELIEVE THATS A GREAT IDEA YEARS AGO K-MART HAD A RESTAURANT ,I THOUGHT IT WAS A GREAT IDEA BUT IT DIDN,T LAST ! anyway I WIOULD LOVE TO SEE IT HAPPEN and GOOD-LUCK
H Thom, Waupaca, Wisconsin
I believe and hope TESCO will be successful here in the states! As a former UK resident I came to appreciate the food quality on offer in my local market and always thought that quality prepared fresh foods would do well here. Wal-Mart is looking rather dowdy lately, reminds me of KMart 10 years ago, they had better not understimate TESCO.
My friends here find it hard to believe when I tell them that the food on offer in British supermarkets was a much better quality, IMHO, than we are used to here, lets hope TESCO gives them an education in fresh quality!
AL LINDNER, Brush Prairie, USA/Washington
I have an idea of what the prepared meals are. I have read comments that Americans don't do those. I disagree, if you consider the frozen dinner isle, which are prepared meals, we do buy them and use them. One comment here is that the supermarket prepared meals now offered are poor quality and I agree. That is why we buy more frozen dinners than "fresh".
Tesco makes good prepared meal for American tastes, I can see them having success in the Fresh & Easy format.
Andy, Green Bay, Wisconsin USA
I always said that if tesco was to invest in america, walmart would blow them out of the water by under cutting them, even at a loss as they can afford to, tesco will not survive in the usa
shug, angus, tayside
Tesco are doing the smart thing by investing cautiously in Arizona and not going for gold in New York or LA.
The c-format focussing on organics is an interesting first kick of the can but one thing I'm sure of (having worked there for over 10 years) is that they've done their homework in making that choice. I'm also sure it won't be easy for them at the start but they'll evolve as they improve their understanding of the market and that's where (a) competitors underestimate them and (b) where they'll really score big-time.
Another way to frame this: do you think Tesco will still have a US prescence in 5 years? I 100% do
Brian Jones, Vancouver, Canada
As a Brit of 7 months residence in the USA I will be keeping fingers crossed that Tesco succeed over here but having fed my family at a local deli today for $24 about 13 pounds I don't think it will be easy. We had hot sandwiches unlimited salad bar and the kids gourged themselves on meat balls and spaghetti and as much ice cream and sodas as they could squeaze in for the equivalent of about 3 quid a piece and the quality wasn't too bad either. Based on UK prices its cheaper to eat out than eat pre prepared meals over here and thats what people do 3-4 times a week. Supermarkets are for toilet rolls breakfast cereal and the odd bowl of fruit!!
US ready meals are vile it will take a long time to convince the monied folks to look in the chilled food isle for those,
Chris Jenner, Houston, TX
Although not a Tesco fan I will watch their first foot on American soil with great interest.
In recent years they appear to have done their homework thoroughly before moving into foreign ventures.
Their biggest market outside the UK is South Korea where Walmart recently decided to pull out.
Yes, interesting times ahead.
Ian Henderson, Perth, Scotland
As a Brit who has lived in the United States for 16 years I would love to see Tesco in the United States offer the quality and range of food products that they sell in the UK.But will they do this?And how wil they do this?The tastebuds of home grown Americans are distinctly different from British tastes. One example, Americans in general have no experience of fruit cake, currant buns and puddings. You just cannot buy such items here except online from speciality importers. And the quality of prepared meals is generally poor and not a patch on the produsts on British shelves.If Tesco is merely going to duplicate the food lines that every American supermarket is selling they are wasting their investment. The margins of supermarkets are very low and there are too many ruthless competitiors. Where will the "new" product lines such as prepared foods and fruit cake be sourced.?Would it make commercial sense to export British food lines to the USA.? I will follow this story with growing interest.
Brian , Petesburg, Virginia, USA
left the uk over 30 years ago,and do not use tesco when visiting ,as over priced in comparison to manyother sources, as proven by their profits.
often in the usa,and the same applies to wal mart,especially their poor quality food and their injected meats.
but whole foods was the most over vamped outlet,selling austalian lamb at over double the price of another major chain,and beef at the same margins.
in summary think tesco might shake the established structure, if they can recruit staff that care,and do a quality and price job in the market place,source decent cheeses and bread at a sensible price, and import real bacon.
john haydon rowe, el ejido,