By Steve Hawkes
Tim Mason has heard it all. Ever since the Tesco executive launched the supermarket giant’s Fresh & Easy venture in America a year ago, analysts have accused him of missing sales targets by a mile, while unions pushing for negotiating rights have complained that staff morale has fallen through the floor.
The critics were out again last week after The Times revealed that, faced with recession, Mr Mason was being forced to slow the store rollout programme. Worried? He hardly looks it. One minute, he’s jumping on to a Fresh & Easy rickshaw for a photo shoot; the next, he’s leading a chorus of Happy Birthday at the head office in Palm Beach, Los Angeles, to mark the chain’s first anniversary.
Asked about the prospect of a looming supermarket price war in America, he jokingly cites the line about amplifiers in This is Spinal Tap, the spoof “rockumentary”: “We’ll do better than the rest,” he says. “Our knobs go up to 11.”
Mr Mason dismisses speculation that Tesco’s most daring foray of the past decade is turning into failure. He wants people to focus on the “exceptional” achievement of the past 12 months.
In the dozen countries where Tesco operates, it has always entered a market by taking over an existing business, Mr Mason says. Fresh & Easy is a new concept, based on the Tesco Express convenience stores In Britain, and from a standing start it operates 100 stores, each of about 10,000 sq ft, across Southern California, Arizona and Nevada.
While Fresh & Easy will not reach its original target of having 200 outlets by February 2009, Mr Mason expects to reach that goal by this time next year — that’s one new store every three or four days.
Whatever doubts analysts may have, they appear not to be shared by two of Tesco’s biggest rivals in America, Wal-Mart and Safeway. It seems that have seen enough and have responded to the threat with small-store formats of their own.
Nearly 600 Tesco staff played some part in setting up the business, including personnel managers flown out for three months last year to help with recruitment. They were easy to spot, coming in every Monday morning bright red from a weekend on the beach.
“Looking at the past year, you have to be deliriously happy,” Mr Mason says. “At the same time, we are absolutely focused on what we need to do for this business to be as absolutely successful as it can be.
“It has taken a bit longer to penetrate catchments around the stores than we thought it would [and] I think the reason is because this is the first mature market, well-served market, that we have opened into, so actually it’s not filling a vacuum and, therefore, has to earn its place. But as we go into the second year, we would expect to see unbelievably good like-for-like growth.”
Mr Mason, chief executive of Tesco’s operation in the United States, believes that one of the biggest problems of the past year has been a failure to make enough of Fresh & Easy’s price credentials. It claims to be 20 per cent cheaper than the average American supermarket, such as Ralphs or Albertsons, but it relies on an everyday low-price model rather than one-off specials, which can grab customers’ attention.
The emphasis on promotions is far stronger now. The array of fresh and chilled American and Hispanic foods, including breakfast burritos, carne asada and shrimp siu mai, still dominate a Fresh & Easy store. However, shoppers are greeted with specials as they walk through the door – After Eights are going for $2.99 a box in Manhattan Beach – as well as weekly offers, such as three apples or three pears for 98 cents. You could be forgiven for thinking that you had walked into an Aldi.
Mr Mason says: “There is a real difference between the way Fresh & Easy loyalists and secondary shoppers perceive us. The loyalists have worked out that Fresh & Easy is incredibly good value for money day-in, day-out. It’s a great deal for 52 weeks of the year. The ones who haven’t used it as much, it’s taken them longer to work that out, so we have got to use communication to accelerate that process and get them up the learning curve faster.”
The need for a change in emphasis stems from a high-profile three-month pause in the store opening programme in March. First revealed in a blog by Simon Uwins, Fresh & Easy’s marketing director, the move was taken as a clear sign that Tesco was struggling to read the market, despite years spent researching American shopping habits. The brake has also been put on a much-heralded move into Northern Californian cities, including San Francisco and Sacramento.
Mike Dennis, retail analyst at Piper Jaffray and a long-time sceptic of the Fresh & Easy story, reacted with a note questioning whether Tesco may decide to “head for the exit” and quit America, writing off £1 billion of losses and capital investment in the process.
Mr Mason reponds: “People can write what the hell they like, but my view is the best thing for us to be is prudent.
“With each of the businesses I’ve been involved in, whether it’s with Express, Extra, dot.com, Tesco Personal Finance, Fresh & Easy, you have a business plan and Tesco has a tendency to set very stretching targets. I don’t think any one of them has at first hit that plan, so what you do is adjust your original plan and adjust your original activities to bring the two back together, so ultimately you generate good returns and good returns for your shareholders.
“When something is going really well, like the store extensions in the UK, which are going phenomenally well, then you go as hard as you can.
“When things are not quite getting there, well, we slowed down our early rollout of dot.com ten years ago until we improved the operating model, as it wasn’t clear to see how you’d make money. Now if you think about how much money most people managed to lose because they didn’t do that, well I think it gives you a great insight into how Tesco manages these things.”
One look at the American media suggests that Mr Mason’s caution could be well-founded. British executives upset about the doom and gloom in newspapers on this side of the Atlantic would have turned pale at news in America last week covering housing foreclosures, credit card charges, airlines cutting routes and the financial perils faced by the country’s carmakers. In one small town east of San Francisco, 90 per cent of homeowners are in negative equity.
Mr Mason says: “The better we do, the faster we will go. If it proves to be hard yards, then we may have to go slower, but we will be opening stores all the time.
“The only difference it will make is that we become the fastest ramp-up in history – instead of absolutely the very, very fastest ramp-up in history.”
If you could change one thing in the financial and commercial environment, what would it be?
The economic turmoil is obviously a difficult situation for everyone, but for Fresh & Easy, by offering great value and not compromising on quality, we are in a great place to offer customers a good deal
Who is or was your mentor?
There have been many influential people to me, especially at Tesco, but (Sir) Terry (Leahy), in particular, is a real mentor to me
Does money motivate you?
I’ve got seven kids, so absolutely.
Which business person do you most admire?
Not quite one person, but the Medici family of Florence
What was the most important event in your working life?
It has to be moving to LA, to start Fresh & Easy. It’s proving to be an amazing opportunity. Bringing Clubcard to the UK market comes a close second
What gadget must you have?
What does leadership mean to you?
To create a compelling vision and share it. To lead by example, motivate others and create a positive team-based culture where everyone is treated with respect
How do you relax?
Watching my kids play sports, re-learning golf and eating with my family
The bloggers’ view
“I have tried to like it. They just opened a new one in Palm Desert. With their robotic checkout stations … their stupid product selection … their employee-vacant aisles. Hmmmm … I always feel like I’ve entered some food twilight zone. Please don’t make me go back”
Jim Bob H (www.yelp.com)
“I actually like them better than Trader Joe’s. I like their prepared meals, a bit on the expensive side but very convenient. They have nothing but self-checkout, which was weird but it’s the future. At least they had someone to bag my stuff and gave me a $5 off $20 coupon”
Mr Hollywood D (www.yelp.com)
“These Fresh & Easy people are clearly lovers, dreamers, grocery store poets, obviously from Seattle or somewhere, where people still do manifest the almost Emersonian hope of locally grown fresh organic produce at prices your neighbors can afford. With a hint of tarragon”
Sandra Tsing Loh (www.scpr.org)
“The only time I would see myself shopping there is if most of the population was infected by some rage-inducing virus and I was one of few to survive and needed food”
Corazon R (www.yelp.com)Tags: America, culture, difference, future, Los Angeles, Manhattan, market, marketing, Newspaper, Pedicab, Pedicab News, Product, recession, rickshaw, route, San Francisco, Story, US, weekend