Tesco turns food maker with Fresh &; Easy
US chain of grocery stores Fresh & Easy Neighborhood Market,
launched last month in California.
Rather than use only American food manufacturers, many of its food products will be made in its own 800,000 square-foot Fresh & Easy kitchen in Riverside county LA, shortening the supply chain and ensuring the products will meet the UK retailer's own standards. Forty per cent of the ingredients for the kitchen being provided by UK suppliers, and the rest is sourced locally including all of its poultry, which will come from California. "Our private brand has no artificial colors or flavors, no added trans fats, and only uses preservatives where absolutely necessary," said chief commercial officer John Burry. "Because people with busy lives shouldn't have to compromise, we offer a range of prepared meals, made fresh in our own kitchen at Riverside, using the same fresh ingredients sold in the stores." This is the first time Tesco has chosen to sell food it has produced, despite owning 12 other businesses in Europe and Asia. Although all the food produced for the Fresh & Easy stores is aimed at the American consumer, the chain does not consider itself at a disadvantage because of its UK origins. International corporate affairs manager Greg Sage told FoodNavigator.com: "We have spent 20 years researching the US market and have recruited a strong local team. We have been working with food manufacturers in the UK for many years to develop our prepared foods and have sent an experienced team to the US." The researchers even spent time in the homes of consumers to establish American eating and lifestyle trends. According to the Financial Times, Tesco took this innovative step because it was concerned about US standards in producing prepared meals. The British newspaper reported Tim Mason head of Tesco's US operations as saying: "The reason for doing it ourselves was that there was no one here that could do it to the same standards." Food is distributed from the kitchen daily. The report claimed that the proximity of the suppliers and the kitchen to the warehouse means that lettuce, for example, can go from the soil to the shelves in three days. Tesco is the third largest retail company in the world. It is not the first UK retailer to put its efforts into stores in America. Others have not fared too well, so it remains to be seen if this innovative business plan will help lead to success. UK retailers Marks & Spencer opened up food chains in the US in 1988 when it acquired King's Supermarket. It finally cut ties with the chain last year to focus on the UK. Similarly, Sainsbury's ended its activities in the US in 2004 to put its attention to declining profits in the UK. Tesco has already experienced some problems with its US venture. A preliminary court order made last week could require Tesco to make significant changes to its distribution facility to comply with California environmental regulations. Tesco however reportedly said this would not affect its expansion plans, as it still intends on opening 50 stores by February 2008, and 200 stored by February 2009. Tesco is putting £250m ($506m) into the Fresh & Easy business after an initial investment of £89m ($180m), and it expects US operations to be profitable from the third year.
