Britain's largest retailer may not find much of a welcome mat Thursday when it opens its first stores in Southern California.
The first six of what could become hundreds of Tesco's Fresh & Easy Neighborhood Markets face a rocky reception in the Southland.
Community organizations plan to protest the lack of stores in poor neighborhoods. A labor-oriented group says it will distribute leaflets discouraging shoppers. And the newcomer's large, well-entrenched competitors say they are ready for the challenge.
"We have a business to protect and we have a strategy that will protect it," said Steven Burd, chief executive of Safeway Inc. which owns the Vons and Pavilions chains.
Fresh & Easy is a $2-billion concept that could either revolutionize grocery shopping in California with its Trader Joe's-sized stores -- heavily dependent on house-brand goods and prepared foods -- or flame out like previous British forays into the U.S. supermarket industry.
The new effort combines a belief that consumers think shopping at big stores is inconvenient and that the region's roughly 2,000 supermarkets and ethnic grocers don't offer enough fresh, healthful food.
"We have talked to people across California from all different types of households and what we heard back was very consistent," said Simon Uwins, Fresh & Easy's marketing chief. "People wanted fresh wholesome food available in their neighborhood at affordable prices."
This is no ordinary new business coming to town. Tesco is the world's third-largest retailer, with an international reputation for market research, product development and distribution.
"I am not going to sell these guys short. They have succeeded all over the world," said Michael Besancon, president of Whole Foods Market Inc.'s Southern Pacific region.
Tesco plans is to create a network of hundreds of 10,000-square-foot stores throughout California and into Nevada and Arizona, all supplied from a massive distribution center in Riverside County. It aims to open 200 stores by February 2009.
The stores will be open 8 a.m. to 10 p.m. daily. Each will carry only 3,500 products, barely 10% of what's found in a traditional grocery store. Most goods will be in small packages -- a roll of paper towels, a container of chicken tortilla soup, a flat of six Roma tomatoes. About half the products will carry the Fresh & Easy house label and about 10% will be prepared food, just a microwave stop from the dinner table.
Fresh & Easy won't accept coupons. It won't have a loyalty or club card program. It won't have a union workforce. And for now its only advertising will be a direct-mail flier sent to nearby homes every two weeks.
Some shoppers got an early peek at Fresh & Easy's Hemet store earlier this week ahead of Thursday's official start.
"The unique characteristic of people here is how many different stores they shop in to get food every week," Uwins said. "We are trying to put that all back together in one easy package that is convenient."
The industry is divided on whether Tesco has that right.
"Tesco is very good at understanding consumers around the world and engineering their retail propositions to provide what shoppers want," said Ben Miller, an analyst with London-based IGD, an international food and grocery research firm.
Others aren't so sure.
Hundreds of small stores with limited selection better fits "the European model of grocery shopping, where people have small cupboards and refrigerators," Besancon said.
If it turns out to be a groundbreaking concept, Whole Foods and the other big chains can all quickly roll out small-store formats that would compete with Fresh & Easy for both real estate and shoppers, Besancon said.
Fresh & Easy will also have to overcome other partialities of American shoppers. They like big shopping carts, extra-large value packs and lots of choice.
Shoppers "typically don't like a limited selection unless the price is really good," said Andrew Wolf, an analyst at BB&T Capital Markets in Richmond, Va.
And Fresh & Easy will have to improve upon what Tesco does in one overseas market, said Tom Brodek, who returned to his Studio City home last week after living in Ireland for six months working on a TV series.
Brodek said there were four Tesco markets nearby and "they are, without a doubt, the messiest supermarkets I have ever been in. Unstocked shelves, messy aisles, poorly organized shelves and a feeling that no one really cares about the customer."
Tesco is trying to appeal to California consumers by marketing Fresh & Easy as an environmentally and socially responsible business whose stores will become part of the fabric of their neighborhoods.
But labor and community groups say much of Fresh & Easy's marketing is just spin.
That's why Elliott Petty, a retail policy analyst at the Los Angeles Alliance for a New Economy, will be handing out leaflets -- "informing people about Tesco's track record of broken promises" -- outside the Glassell Park store this afternoon and Thursday.
