Tesco moves TO the US but not INTO the US

“Based on extensive research, we’ve built a store from the ground up for the American consumer,” said Tim Mason, Fresh & Easy CEO. The new retail concept drew large crowds of customers and competitors, curious to see if Fresh & Easy would be true to its name and to Tesco’s promise of bringing fresh, easy and affordable meal choices to shoppers in a streamlined, “neighborhood market” format. With 10,000 square feet of selling space and about 3,500 SKUs, the stores are much smaller than the standard US supermarket.

However, rather than use existing US suppliers, Tesco is importing its own system, and making what is believed to be an unprecedented investment in new stores and a new distribution system concurrently. 2 Sisters is investing US$70 million in a processing plant on a 10-acre site next to Tesco's vast new centralised distribution centre in Riverside county, east of Los Angeles, while Wild Rocket, a US subsidiary of the Langmead Group, a Sussex-based lettuce grower that built a national UK business from its relationship with Tesco, is investing US$100 million nearby.

Fresh & Easy's own-label Big Kahuna Australian wine, for instance, is imported by Cornerstone, a new US subsidiary of Copestick Murray, a wine company based in Wiltshire, England. Fresh & Easy's own-label bags of sugar snap peas, washed salad, fresh fruit and fresh juices are prepared by Wild Rocket Foods. Greg Sage, Tesco's international spokesman said, "They've grown with us over many years in the UK, and now they are growing with us in the US."

In addition, the retailer has signed a US$25 million five-year contract with Polymer Logistics , the Aim-listed Netherlands-based company that in the UK provides and services the reusable shelf-ready plastic trays that Tesco, as well as its rivals J Sainsbury and Asda, use to ship breads, meat and vegetables.

Tesco will also use its own truck fleet to make single deliveries to its stores. In the US, most of the leading supermarkets still rely on separate deliveries from their main suppliers.

Tesco has announced 122 US locations to date, with 30 scheduled to open by year’s end and 50 scheduled to open by the end of February 2008 in Southern California, Phoenix (Arizona), and Las Vegas (Nevada). The company plans to have 200 stores operating by the end of next year. Tesco is reportedly investing US$2 billion over 5 years in its US debut.