Supermarket giant Wal-Mart has charged a former Tesco executive to come up with plans to torpedo the British group's debut in America. Tesco intends to make its US entry later this year with a chain called Fresh & Easy. Wal-Mart's response is coordinated by David Wild, a former international managing director of Tesco, now working at Wal-Mart's Arkansas headquarters.
Among the options being considered is the launch of rival stores or adapting existing Wal-Marts to take on Tesco's planned green mini-supermarkets.
Fresh & Easy will not use Tesco's familiar red, white and blue livery. Its logo is a green clock superimposed on an apple.
Exact plans are still under wraps, but it has been suggested that Tesco will open with 20 stores in Phoenix, Arizona, before rolling out across the West Coast.
Fresh & Easy will be aimed at urban shoppers and heavily promote organic produce. It is also expected to offer ready meals ‹ which have yet to catch on in America in the way they have in the UK.
The Atlantic crossing has proved difficult for retailers from both sides. Wal-Mart owns Asda in the UK and has so far failed to dent Tesco's lead in its home market. Both Marks & Spencer and J Sainsbury have made unsuccessful forays into US retailing.
US retail executives believe Tesco will face an uphill struggle in America.
"I think there are a lot of problems with Tesco's idea," said one. "The name for a start sounds like a chain of chicken ranches. More than that, you have to question if the supply base is there. Tesco is starting from scratch. People underestimate the differences between European and US retailing. The density of the market, land costs, and the cultural and life-style differences are enormous. Nobody in the US really buys ready meals now. Does Tesco think it can change that?"
The company is investing £250m in America this year. Analysts expect that figure to grow substantially if it is to succeed.
Tesco also faces stiff competition from Whole Foods and Trader Joe's, supermarket chains that specialise in organic foods.
Most of Wal-Mart's sales are nonfood items, but the world's largest retailer has been giving greater emphasis to food in recent years. It has also launched a high-profile green campaign. The sheer scale of the company ‹ its sales last year were $348 billion (£180 billion) ‹ mean it is set to become the world's largest buyer of organic goods from cotton to coffee.
Wal-Mart has already opened smaller stores, called Neighbourhood Markets, which US retailers believe may be adapted to create something similar to Fresh & Easy.
Tesco plans to open stores in southern California, Arizona and Nevada. The company's first 1.4m sq ft distribution centre is being built in Riverside, California. It also has a site on Hollywood Boulevard, Los Angeles, near the Kodak Theater, site of the Oscar ceremonies.
The company has applied for licences to sell alcohol in more than 40 locations in the three states and has said it will open 150 stores within two years. The stores will be about 10,000 sq ft, far smaller than most US supermarkets.
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Wal-Mart May Try to Challenge UK Supermarket Chain Tesco's Opening of USA Green Convenience Stores
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Wal-Mart plots to scupper US Tesco
The Sunday Times, March 4, 2007
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