UK's largest retailer plans major move into Southern California
UK's largest retailer plans major move into Southern California
LOS ANGELES -- Some are calling it the British Invasion. First the Beatles, now this.
Tesco, the largest supermarket chain in the United Kingdom, is planning a major move into the U.S. market, beginning in Southern California and Arizona in 2007. The company made the announcement on Feb. 9, and it is a development that is certain to change the retail landscape here, although just what the nature of the impact will be remains to be seen.
Tesco, which dominates the British market with a 30 percent market share and is the world's fifth largest retailer, plans an initial capital expenditure of up to $435 million per year in the United States. Tesco has international operations, but this will be the company's first entry into the United States.
According to a March 1 article in Slate, an on-line magazine, Tesco plans to "slug it out" with Wal-Mart in California, "a state Wal-Mart has long planned to dominate."
Given that Tesco's planned format in California is an upscale convenience store, conceptually about as far from a Wal-Mart supercenter as possible, the notion that Tesco sees itself as going head-on against Wal-Mart might seem rather curious. But according to the article, Tesco's strategy is a preemptive strike against what it believes is Wal-Mart's next move.
"Wal-Mart has had difficulty penetrating the highly populated, higher-income coastal zones [in California] because the huge, cheap swaths of land on which it likes to park its big boxes are hard to come by," the article said. "Wal-Mart proclaimed [in 2002] it would open 40 stores in the Golden State in five years. So far, it has managed to open only 13."
Eduardo Castro-Wright, Wal-Mart's chief operating officer in the United States, "told the Financial Times last November that it is 'looking at the Neighborhood Market format as a vehicle & to service customers who need convenience for a key reason for shopping at Wal-Mart.' This may prove to be Tesco's real edge. Wal-Mart has always competed on price," according to the Slate article.
The Tesco Express neighborhood stores will stock up to 7,000 items, including fresh produce, and "will be the kind of places where foodies wouldn't be chagrined to run into their neighbors," the article added.
The Tesco Express stores will be similar in size to 7-Eleven stores, according to a March 3 article in the East Bay Business Times. "Perhaps in response" to Tesco's announcement, the article said, 7-Eleven plans to introduce fresh produce at some locations. Others have suggested that the Tesco concept will be closer to that of a Trader Joe's.
Not everyone thinks Tesco's expansion into the U.S. market will be successful. The East Bay Business Times quoted Ted Taft, partner in the retail consulting firm Meridian Consulting Group, as saying he would not be surprised if "five years from now, they won't even be here. I feel the best they can hope for here is to become a niche player."
Dale Liefer of Westlake Produce Co. said, regarding Tesco's plans to enter the California market, "Any time we see a new company come into our area, any time Westlake has a chance to sell a new customer, we're excited about it. That gives us an opportunity. I think a company their size will look to a company our size to do business with, so I think we have an advantage over some of the other suppliers."
Certainly other produce companies that already do business with major chains will be equally eager to offer their services as a supplier to Tesco.
But for many produce companies in the Los Angeles area that service retailers, the bread-and-butter accounts are not the major chains but smaller chains and independents, and particularly ethnic retailers catering to Hispanic and Asian demographics. Those stores are generally not in the same neighborhoods into which Tesco is going to be looking, so Tesco's arrival may have little impact on a substantial portion of the Los Angeles produce trade.
The continued growth of the smaller ethnic chains in Southern California is the force driving many Los Angeles-area wholesalers and distributors. Even for a company such as Westlake, whic does business primarily with the major supermarket chains, the smaller ethnic chains have also become "a point of interest for us," as the company is "pushing hard" to get a bigger share of that business as well, said Mr. Liefer.
Generally, the ethnic markets, and particularly those catering to Hispanics, are viewed as price conscious. But as they continue to grow, "you see a lot of changes, and they are upscaling their stores," said Ted Kaplan of Professional Produce. "Now they all want good quality."
The independent markets are "getting better," said Jesse Martin of Value Produce Inc. They are also "getting bigger," he said.
There are companies such as Ramirez Bros. that specialize in Hispanic items. Others, such as Progressive Produce, which started a Hispanic products business about a year-and-a-half ago, are responding to the growing demand from that sector of the market.
Business is "starting to pick up a little bit with more independents coming in," said Tom Espineda of Tom E Produce. Some of the smaller retail chains that Tom E does business with have recently picked up new stores that had previously been "an Albertson's or something that they had to close," he said. "We are seeing more of that happening here."
"Independents have really grown in the last four or five years," said Bill Vogel of Tavilla Sales Co. of Los Angeles. "The large chains are abandoning certain stores in certain neighborhoods. Independents are coming in and taking over and doing really good business, obviously at lower prices."
"Independents are doing well," said John Corsaro of The Giumarra Cos. "I think that is kind of the beauty of Los Angeles. &You've got so many different models from Trader Joe's to Whole Foods to Wal-Mart to Safeway and Albertson's," as well as the independents. "You've got a shoe for every foot."
(For more on the Los Angeles market, see the July 3 issue of The Produce News.)
Tesco, the largest supermarket chain in the United Kingdom, is planning a major move into the U.S. market, beginning in Southern California and Arizona in 2007. The company made the announcement on Feb. 9, and it is a development that is certain to change the retail landscape here, although just what the nature of the impact will be remains to be seen.
Tesco, which dominates the British market with a 30 percent market share and is the world's fifth largest retailer, plans an initial capital expenditure of up to $435 million per year in the United States. Tesco has international operations, but this will be the company's first entry into the United States.
According to a March 1 article in Slate, an on-line magazine, Tesco plans to "slug it out" with Wal-Mart in California, "a state Wal-Mart has long planned to dominate."
Given that Tesco's planned format in California is an upscale convenience store, conceptually about as far from a Wal-Mart supercenter as possible, the notion that Tesco sees itself as going head-on against Wal-Mart might seem rather curious. But according to the article, Tesco's strategy is a preemptive strike against what it believes is Wal-Mart's next move.
"Wal-Mart has had difficulty penetrating the highly populated, higher-income coastal zones [in California] because the huge, cheap swaths of land on which it likes to park its big boxes are hard to come by," the article said. "Wal-Mart proclaimed [in 2002] it would open 40 stores in the Golden State in five years. So far, it has managed to open only 13."
Eduardo Castro-Wright, Wal-Mart's chief operating officer in the United States, "told the Financial Times last November that it is 'looking at the Neighborhood Market format as a vehicle & to service customers who need convenience for a key reason for shopping at Wal-Mart.' This may prove to be Tesco's real edge. Wal-Mart has always competed on price," according to the Slate article.
The Tesco Express neighborhood stores will stock up to 7,000 items, including fresh produce, and "will be the kind of places where foodies wouldn't be chagrined to run into their neighbors," the article added.
The Tesco Express stores will be similar in size to 7-Eleven stores, according to a March 3 article in the East Bay Business Times. "Perhaps in response" to Tesco's announcement, the article said, 7-Eleven plans to introduce fresh produce at some locations. Others have suggested that the Tesco concept will be closer to that of a Trader Joe's.
Not everyone thinks Tesco's expansion into the U.S. market will be successful. The East Bay Business Times quoted Ted Taft, partner in the retail consulting firm Meridian Consulting Group, as saying he would not be surprised if "five years from now, they won't even be here. I feel the best they can hope for here is to become a niche player."
Dale Liefer of Westlake Produce Co. said, regarding Tesco's plans to enter the California market, "Any time we see a new company come into our area, any time Westlake has a chance to sell a new customer, we're excited about it. That gives us an opportunity. I think a company their size will look to a company our size to do business with, so I think we have an advantage over some of the other suppliers."
Certainly other produce companies that already do business with major chains will be equally eager to offer their services as a supplier to Tesco.
But for many produce companies in the Los Angeles area that service retailers, the bread-and-butter accounts are not the major chains but smaller chains and independents, and particularly ethnic retailers catering to Hispanic and Asian demographics. Those stores are generally not in the same neighborhoods into which Tesco is going to be looking, so Tesco's arrival may have little impact on a substantial portion of the Los Angeles produce trade.
The continued growth of the smaller ethnic chains in Southern California is the force driving many Los Angeles-area wholesalers and distributors. Even for a company such as Westlake, whic does business primarily with the major supermarket chains, the smaller ethnic chains have also become "a point of interest for us," as the company is "pushing hard" to get a bigger share of that business as well, said Mr. Liefer.
Generally, the ethnic markets, and particularly those catering to Hispanics, are viewed as price conscious. But as they continue to grow, "you see a lot of changes, and they are upscaling their stores," said Ted Kaplan of Professional Produce. "Now they all want good quality."
The independent markets are "getting better," said Jesse Martin of Value Produce Inc. They are also "getting bigger," he said.
There are companies such as Ramirez Bros. that specialize in Hispanic items. Others, such as Progressive Produce, which started a Hispanic products business about a year-and-a-half ago, are responding to the growing demand from that sector of the market.
Business is "starting to pick up a little bit with more independents coming in," said Tom Espineda of Tom E Produce. Some of the smaller retail chains that Tom E does business with have recently picked up new stores that had previously been "an Albertson's or something that they had to close," he said. "We are seeing more of that happening here."
"Independents have really grown in the last four or five years," said Bill Vogel of Tavilla Sales Co. of Los Angeles. "The large chains are abandoning certain stores in certain neighborhoods. Independents are coming in and taking over and doing really good business, obviously at lower prices."
"Independents are doing well," said John Corsaro of The Giumarra Cos. "I think that is kind of the beauty of Los Angeles. &You've got so many different models from Trader Joe's to Whole Foods to Wal-Mart to Safeway and Albertson's," as well as the independents. "You've got a shoe for every foot."
(For more on the Los Angeles market, see the July 3 issue of The Produce News.)
