A new chain of mid-size grocery stores -- each about the size of a Trader Joe's -- is quietly being readied for a full-scale assault this fall on Southern California.
With little fanfare so far, Tesco, Britain's largest retailer, is spending as much as $2 billion to launch Fresh & Easy Neighborhood Market, starting in the Southland, Las Vegas and Phoenix. Tesco, with more than $80 billion in annual sales, already operates in 13 countries and has about 370,000 employees.
The company already has about 100 stores in the works that might alter the supermarket landscape, possibly driving down prices and competing for workers, all at neighborhood locations away from huge shopping centers.
Traditional supermarkets have the most to lose, said Mohan Sodhi, a UCLA-trained management professor at City University in London, because the Fresh & Easy stores "will be closer to your home and easier to get into and out of."
"The U.S. is known as a graveyard for U.K. companies who have gone there and failed," he said. "But Tesco has gone against the grain to go into California."
Competitors recognize the threat and are working to blunt the attack. "We don't exactly know what they are going to do in their stores," Michael Schlotman, chief financial officer of Ralphs parent Kroger Co., recently told investors. "But you can rest assured" that the chain is "strategizing on exactly what kind of a reaction we need."
Preparations for the launch come as Southern California's major supermarket companies are locked in negotiations over a new contract with the grocery workers union. The union hopes to organize Fresh & Easy workers, but Tesco says it's too early to discuss its labor strategy.
It says it will offer competitive wages and benefits, including healthcare coverage and a retirement savings plan for employees who work at least 25 hours a week.
The first stores are expected to open in late October or early November. The company plans to offer a selection of foods, liquor and personal items and create about 2,500 jobs over the next year. But don't expect the British firm to stock hometown favorites such as sausage rolls, creamed tapioca and Yorkshire pudding.
Offerings at Fresh & Easy will be "less processed" than most packaged food, said Simon Uwins, Tesco's chief marketing officer. "We won't use artificial colors, artificial flavors and added trans fats." And the company won't sell cigarettes.
