Tesco Exits U.S. Grocery Market; Yucaipa Plans To Turn Fresh & Easy Around

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September 19, 2013

Tesco Exits U.S. Grocery Market; Yucaipa Plans To Turn Fresh & Easy Around

British grocery retailer Tesco PLC agreed to dispose of most of its unprofitable Fresh & Easy chain to billionaire Ron Burkle’s Yucaipa Cos.—at a cost to Tesco of approximately $235 million, according to The Wall Street Journal (Sept. 11).

British grocery retailer Tesco PLC agreed to dispose of most of its unprofitable Fresh & Easy chain to billionaire Ron Burkle’s Yucaipa Cos.—at a cost to Tesco of approximately $235 million, according to The Wall Street Journal (Sept. 11).  

The Food Institute Reports that Fresh & Easy, launched amid fanfare in November 2007 in California, has more than 150 stores in California, Arizona and Nevada. The Riverside, CA, distribution and production facilities are also included in the acquisition. The remaining stores will close in the coming weeks, according to the UK retailer.    

Tesco Chief Executive Philip Clarke said the move “offers us an orderly and efficient exit from the U.S. market, while protecting the jobs of more than 4,000 colleagues at Fresh & Easy.” 

The Fresh & Easy format, a mix of convenience store and supermarket, set out with an aggressive plan of store openings, three per week, and the goal of penetrating the U.S. market. Competitors such as Safeway and Wal-Mart were quick to test small store formats to rival the British newcomer. However, by 2009, in the midst of a lackluster economy and difficulty attracting U.S. shoppers, Tesco started to curtail store openings. In late 2012, Tesco signaled that it wanted to get out of the U.S. market, conceding after five unprofitable years. 

The purchase will “give us a solid starting point to complete Tesco’s vision with some changes,” according to Ron Burkle, managing partner of Yucaipa. “We plan on continuing to build Fresh & Easy into a next-generation convenience retail experience, providing busy consumers with more local and healthy access for their daily needs.”

Yucaipa expects to complete the acquisition within three months. “In the meantime, it is business as usual for most Fresh & Easy stores.” 

California-based retail analyst Ed Odron said he believes that Yucaipa will make headway with the stores, according to The Packer (Sept. 11). Yucaipa will have a better understanding of what customers in those areas want, noted Odron.  While some store locations may be spun off to Subway or similar franchises, Odron believes most of the Fresh & Easy stores will remain food outlets, but not under the Fresh & Easy banner.  

Will Yucaipa revive the Wild Oats banner?

“I don’t see (Wild Oats) in those neighborhoods,” said Odron. “It doesn’t seem conducive to Wild Oats type operation.”

 

Looking Ahead

In an article about Kroger’s acquisition of Harris Teeter, Spencer Jakab reporter for The Wall Street Journal said, “The new threat is Amazon.com Inc.’s grocery ambitions. So far, though, it looks more like an ordinary rock than kryptonite for supermarket chains,” according to The Wall Street Journal (Sept. 12).