Tesco out to Rise in Phoenix and Set US Shopping Ablaze; SUPERMARKETS

The Birmingham Post (England), August 28, 2007 | Go to article overview

Tesco out to Rise in Phoenix and Set US Shopping Ablaze; SUPERMARKETS


Byline: By Tim Gaynor Special correspondent

The site for one of Tesco's first stores in the United States is a sun-scorched intersection in the sprawling Phoenix valley, opposite two pay-day loan firms and a gas station minimarket.

There is a dollar store nearby and a Mexican butcher's shop, but the nearest supermarket selling fresh food is several long, hot city blocks away. The site is what Tesco calls a "food desert," which the company is targeting with its much anticipated Fresh & Easy Neighborhood Markets.

The world's third-largest food retailer is seeking to woo US shoppers with smaller convenience stores of around 10,000 square feet emphasising ready-to-eat meals and fresh produce in areas that are underserved by supermarket and grocery store chains.

The entry into the world's largest consumer market is being watched closely by investors, and now as the first of more than 100 new stores in Phoenix, Las Vegas and Southern California take shape behind hoardings, there is a buzz building in local communities.

"People in the area are excited about Fresh & Easy coming in. They see it as a good use of the building and a great addition to their neighbourhood," said Claudia Walters, the vice-mayor of Mesa.

"People think it will be convenient to get in, get some things they like, and get out. They are also interested in the fresh food concept," she added.

Tesco, which trails only Wal-Mart and France's Carrefour in the global food retailing market, has more than 3,200 stores in Britain, Central Europe and the Far East.

The US rollout, with the first food stores tipped to open in November, is based on the Tesco Express format in Britain and follows meticulous market research here.

Greg Sage, Tesco's international corporate affairs manager, said the firm, which posted net profit of more than EUR3 billion (pounds 1.507 billion) in 2006, has been studying the US market for 20 years.

In preparation for its US debut, Tesco mocked up a store amid great secrecy in Los Angeles and invited a group of customers in to shop. "We worked with more than 60 US customers who we asked to keep a diary for two weeks while we looked into their cupboards to try and understand how American consumers lived their lives," said Mr Sage, who is British.

The result identified a ready niche market for fresh food and ready prepared meals in areas of cities that had largely been ignored by rival US supermarkets, analysts say.

"There is a gap in the market for this kind of operation - they are not going head to head with Wal-Mart or any of the big supermarkets," said Bryan Roberts, an analyst with Planet Retail.

"Big supermarket operators tend to locate at out-of-town or edge of town locations. You can't slap a store of 80,000 square feet slap in the middle of Phoenix or Los Angeles," he added.

Mr Roberts said he is "broadly positive on Tesco's prospects" Stateside. One of the venture's key advantages would be its ability to draw on the chain's strength in targeting merchandise and product selection "extremely well". …

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