Tesco's Plan of Attack

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Tesco's Plan of Attack

LONDON -- A Tesco executive recently sat down with a number of British publications to reveal more information about the company's Fresh & Easy Neighborhood Markets venture. Among the information revealed were plans to open one Fresh & Easy store every two and a half days -- about three per week.

In the Sunday Telegraph, Tim Mason, the chief executive of Tesco USA, explained the U.S. entry, 25 years in the making, is an attempt to become a truly global player. Mason -- the son-in-law of Tesco's former chairman Lord McLaurin -- is widely seen as a possible successor to Tesco chief Terry Leahy. For Mason, the U.S. represents the biggest job interview in the world.

Sir Terry Leahy, Tesco's chief executive, believes its U.S. business could be as big as its U.K. one. At present, Tesco's U.K. sales are £35.6 billion, according to the report.

Of the 50 stores expected to open between the launch in late fall and February, 30 will be located in Phoenix and 14 in Las Vegas, according to the report. Initially, the chain will be limited to California, Arizona and Nevada, although rumored it will be national.

In the medium-term, 500 stores could be opened. While sales targets are not known, the division is expected to break even by the end of the second full year of operation.

"It is potentially of massive significance as it positions Tesco for the 21st century, not the 20th century, and it is massively important for America and Americans," Mason told the Telegraph. "If we are successful, it will consolidate Tesco's position as an international retailer. If it is not successful it will be deeply embarrassing for me, but the business will be OK."

An interesting point Mason makes is the difference between the U.K. version of convenience stores vs. the U.S. Tesco plans to fill what it sees as a void in the U.S. market with its own brand of "convenience stores" -- described as a small shop selling a wide range of fresh groceries. This differs from the c-stores of the U.S., which are described as having "beer, chips, cigarettes and gas, and they are not particularly welcomed by the community," Mason said.

While the venture is not a c-store, it is surely not a drugstore either, Mason said. "America needs another drugstore chain like Custer needed more Indians," he said.

The Fresh & Easy chain will offer high-quality healthy food, half of which will be the company's private label goods with no trans-fats, artificial colors or flavors.

"American customers want food that is less mucked about with, less processed. They are desperately keen to feed their children better than they do. They are concerned about their kids and the fact that they are getting obese and they can't control it," Mason said.

At Tesco's El Segundo head office, 150 employees are working to launch the concept. Mason is the only board member in the company's history to lead an overseas expansion. With him is Tony Eggs, who ran Tesco's property department in the U.K. and is fulfilling the same role in the U.S., according to the report.

"There is a feeling we are at the beginning of something big. Everyone sits within 20 feet of my office," Mason said. New employees are inducted with a Magic Monday. Every Tuesday, all staff gathers in the "village square-type" center of the office and Mason updates them on developments, the report stated.

"If you're the boss who doesn't make it a fun place to work, then it is a dereliction of duty," Mason said.

But the chain will not enter the U.S. without some challenges. The company has yet to decide if it will recognize unions, although it will recognize employees' right to join a union.

And U.S. unions are responding. The United Food and Commercial Workers (UFCW) union stated it will stall the chain's debut with mass picketing if Tesco does not talk with them, reported the Observer.

"The market Tesco is entering is very heavily unionized," UFCW spokeswoman Jill Cashen told the paper. "It is in its financial best interests to enter into a union relationship. We have in the past successfully mobilized our community to turn business away from companies who are not offering union representation to employees."

Analysts expect the company to mimic nonunionized competitors such as Whole Foods and Wal-Mart. The company also promised to pay employees better than Wal-Mart, according to the report.