Tesco Bringing Some of Its Own Suppliers to U.S.

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Tesco Bringing Some of Its Own Suppliers to U.S.

NEW YORK -- Tesco, the largest retailer in the United Kingdom, is planning to bring at least two of its favored suppliers with it when the company opens its planned chain of convenience-oriented food stores in the western United States in 2007.

Natures Way Foods, which makes prepared salads and lettuce for Tesco, and 2 Sisters Food Group, one of the largest poultry processors in Britain, are both planning to open sites in the U.S. adjacent to Tesco's planned distribution center in southern California, according to the Financial Times. Neither company currently has U.S. operations.

There is also speculation that Tesco may buy an ownership stake in the U.S. operations of one or both of these suppliers. The Times suggests that the use of favored U.K. suppliers in the U.S. is an attempt by Tesco "to avoid unpleasant surprises and a belief in the industry that the prepared meals business in the U.K. and Europe delivers higher standard products than are currently seen in the U.S."

The extent to which Tesco will utilize U.K. suppliers in its U.S. operations remains unclear. When Wal-Mart began to expand internationally, the U.S. retailer opened up foreign markets to many of its U.S. suppliers. However, it also found that it needed to buy from plenty of local suppliers -- not just for logistics reasons, but also because local customers preferred local brands and products. It will be interesting to see how Tesco deals with this supplier issue.

The U.K. retailer is already facing one unpleasant surprise related to its planned U.S. debut in 2007. The company has run afoul of the burrowing brown owl. The Financial Times reported that a legal challenge has been filed to Tesco's planned food distribution and processing facility in Riverside, Calif. "Two petitions argue that the Tesco development should not have been approved in September without an additional environmental review -- and public hearings -- under the California Environmental Quality Act (CEQA)," reports the Times. The petitions claim that the distribution center proposes a threat to the medium-sized brown burrowing owl, which is listed by California as "a species of special concern."

If Tesco were to lose the suit, it would have to remove all the construction already done at the location, according to the story.