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Staying Fresh in a Spoiled Economy

January 14, 2010
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Maintaining low prices is important to Fresh & Easy. In fact, as the economy worsened in 2009 and consumers demanded more value offerings from stores, the retailer expanded its national-brand-equivalent (NBE) tier.

The world was a very different place two years ago when British retailer Tesco launched Fresh & Easy Neighborhood Market in the United States. Consumer confidence was strong back then, and Tesco was certain Americans were ready to welcome an innovative new retail format: a small-footprint store offering semi-upscale fresh foods at discount prices.

Of course, few companies - including Tesco - could have predicted back then that the United States was on the brink of the greatest economic disaster since the Great Depression.

“We certainly didn’t anticipate the severity of the downturn we’re seeing on the West Coast,” said Tim Mason, president and CEO of El Segundo, Calif.-based Fresh & Easy, in Tesco’s 2009 Annual Report (analyzing Tesco’s performance in the financial year ending Feb. 28, 2009). “But we’re now adjusting to the new environment.”

Part of that adjustment involves reducing the frequency of store openings and holding off major territorial expansions beyond its three markets: Arizona, California and Nevada. Mason described the U.S. retail industry of today as being very different from the industry Tesco first began researching several years before opening Fresh & Easy.

In a Nov. 13, 2009, Reuters article, Mason said that when Tesco started doing its research (which included having corporate executives temporarily reside in the homes of American consumers to study their shopping and eating habits), the U.S. consumer confidence index was at the highest level it had ever been. But in October 2008, after the bottom dropped out of the economy, the U.S. consumer confidence index was the lowest it had been since 1967.

“It’s a big change,” Mason said in the article.

Many retailers were running scared when faced with this strong drop in consumer confidence. But Fresh & Easy held its head high and stuck firmly to a new (and still impressive) game plan: to remain fresh by opening stores on a regular basis. Fresh & Easy - which now operates more than 130 stores - still opens one store per week, according to Brendan Wonnacott, spokesperson for the company.

“It’s just a matter of being with the times and really seeing how things go,” he says. “But we’re still progressing and expanding, and we’re really excited to serve these new neighborhoods.”

The neighborhoods Fresh & Easy serves are very diverse, ranging from high-income areas such as Hollywood to underserved low-income areas such as Compton, Calif. Wonnacott says the retailer caters to the typical American consumer and doesn’t see its customers - or the neighborhoods it enters - in terms of income or ethnicity.

“It’s quite simple,” he notes. “We believe everyone deserves fresh and wholesome food they can afford without having to compromise on quality.”

Employing this philosophy, Fresh & Easy recently opened the first store in its newest market (beyond its Arizona, Nevada and Southern California “roots”): Northern California. At press time, Fresh & Easy said it will have six of 12 planned Fresno locations open by the end of February, including a highly anticipated location in downtown Fresno.Each store fits the standard Fresh & Easy profile: a 10,000-square-foot format with easy-to-shop aisles. Wonnacott notes that Fresh & Easy keeps a small footprint and just the right product mix (about 50 percent store brands and the rest national brands) to keep shopping simple and prices low.

How Low Can You Go?

Maintaining low prices is especially important to Fresh & Easy. In fact, as the economy worsened and consumers demanded more value offerings from stores, the retailer expanded its national-brand-equivalent (NBE) tier.

“The [NBE tier] offers customers essentially national brand quality at prices that are far below the national brands,” says Jim Jensen, director, fresh foods at Fresh & Easy.

Each NBE brand covers a different product category. For example, Cinch covers baking goods; Mother’s Joy provides breakfast cereals; and Mary Lee offers pasta, rice and dry dinner mixes. Many of these products also are offered in packaging similar to that of their national brand counterparts.

Jensen says Fresh & Easy makes sure all of its NBE products and packaging have a quality on par with that of the national brands.

“Based on the economic situation, we’ve got a lot of customers and consumers alike who are strapped for cash and looking for the best possible deals,” he notes. “We looked at other competitors in the country that do the [NBE] segment the best, and we replicated the model.”

Fresh & Easy also offers a wide selection of products under its primary store brand, fresh&easy. According to Jensen, fresh&easy products can be either NBE or premium offerings. For example, the fresh&easy brand offers standard products such as baby lotion or unbleached white flour, but it also offers unique products such as spinach and artichoke tortilla chips and pomegranate-blueberry salad dressing.

Overall, the fresh&easy brand’s food product offerings run the gamut from freshly made meals to salsa and organic lemonade, but they all share two common characteristics: freshness and ease of preparation or consumption. They also provide a better-for-you proposition to the consumer.

“Our fresh&easy brand products contain no artificial colors [or] flavors, only contain preservatives when necessary and have no added trans-fats,” Wonnacott says. “In short, they are made only with ingredients you can pronounce.”

To pair with its food products, Fresh & Easy also retails two exclusive beers (a Mexican lager called Taurino and a pale American lager called Steel Kettle Whistle) and a variety of hand-selected wines from across the globe (several of which have won awards in major wine competitions).

In the near future, Fresh & Easy plans further additions to its food lines. In April 2010, the retailer plans to launch a nutrition-focused line catering to consumers looking to lead healthier lifestyles. Jensen says the line will feature more balanced versions of products already offered by the retailer (such as fresh ready-to-eat meals offering a healthier option to the standard fresh&easy range).

Along with healthier meal options, Fresh & Easy is offering healthier steam-cooking technology in its packaging (called "microsteamers"). According to Jensen, one type of microsteamer is a bowl-and-film combination for steaming fresh ready-to-eat meals (such as Ginger Shrimp with Linguine) in the microwave. The other type of microsteamer is a microwavable bag for steaming fresh vegetables.

Steady As She Grows

Although Fresh & Easy is expanding quite a bit on the food side, it doesn’t limit its private label offerings to edibles - according to Wonnacott, the retailer does quite a bit on the non-food side, too.

Retreat, a private brand of skincare products Fresh & Easy debuted in September 2009, is one line of which the retailer is particularly proud.

Although Jensen does not oversee this particular line, he says Retreat offers destination products under “a Fresh & Easy private label that is befitting of the quality of our best food products.” One interesting Retreat product is a deep moisturizing hand and nail cream described as “a blend of nourishing shea butter and aloe, combined with conditioning birch and mulberry extracts.”

The Retreat line was among the products developed after Fresh & Easy concluded an interesting five-month initiative in September, Wonnacott notes. Earlier in 2009, the retailer said it would listen to what its customers want and deliver more than 1,000 new products (both private label and national brands) that cater to its customers’ needs.

How did Fresh & Easy interact with its customer base to find out what they need? The retailer has its own blog, as well as a Twitter account boasting more than 4,000 followers.

“One of the amazing things about having 4,000-plus people following you [on Twitter] is the feedback you get,” Wonnacott says.

After listening to its customers’ online feedback, Fresh & Easy went back to the drawing board and came up with new products under its fresh&easy brand. The products received rave reviews, especially from customers looking to stretch their food dollars.

Several of these products are created fresh daily in Fresh & Easy’s Riverside, Calif., kitchen. According to the retailer, all of the products prepared in the company’s kitchen first were developed by Fresh & Easy’s corporate chefs.

Particularly popular are six prepared meals the retailer unveiled last spring, each of which feeds a family of four for $8.00. The meals - which include Lasagna with Meat Sauce, Chicken and Broccoli Pasta Alfredo, Spaghetti with Turkey Meatballs, Chicken Teriyaki with Rice & Vegetables, Chicken & Bacon Macaroni & Cheese, and Chicken Burritos with Green and Red Sauce - ended up as the top-selling lines in Fresh & Easy’s range of products produced fresh daily in its corporate kitchen. Products such as these meals are added to “Fresh & Easy Favorites”: a page on the retailer’s Web site that scans Twitter, blogs and other electronic media to pool together the Fresh & Easy private label products about which customers are talking.

Web site visitors can sign up online to vote for their favorite Fresh & Easy products, and also write product reviews. Wonnacott says this interaction not only opens up forums for honest feedback - something the retailer wants - but also offers another channel to reach new people and potential customers.

“It’s amazing the passion our customers have had since day one about our products,” Wonnacott says. “It’s been incredible, and it happens very fast and in all the markets we opened in.”

The retailer also listens to its customers’ responses through in-store customer panels. Jensen says Fresh & Easy conducts internal panels with employees to get feedback on new products being developed, but nothing compares to the immediate feedback from customer panels for understanding what is being done right and what needs improvement. Jensen says the panels provide important feedback the retailer shares with its suppliers.

“I think the one thing that makes us a bit unique on the supplier side is that unlike a lot of retailers that are kind of too busy and refer to their suppliers as ‘vendors,’ we think about [our] suppliers as ‘partners’ - they’re in on this mission with us,” he says.

Jensen says Fresh & Easy doesn’t just request suppliers to be involved in a product from start to finish - it requires them to be involved. Whether suppliers are checking quality specifications at the manufacturing facility or sitting in on a consumer panel in the store, Fresh & Easy wants their involvement all the way through.

“We work very closely with our supplier partners on all aspects of the products they produce [for us],” Wonnacott adds. “In some cases, suppliers have even changed their standards to meet ours.”

Jensen also cannot stress enough Fresh & Easy’s serious commitment to food safety.

“We have roughly a third of our commercial group which is devoted to quality assurance and food safety,” Jensen explains. “We have folks for every single category that work with the folks that buy and procure and develop products and link directly with the supplier base.”

Jensen adds that Tesco performs some of the most stringent factory audits in the world, making sure the factories with which it does business are operating at a standard that’s among the best in the world. Fresh & Easy employs those same audits. This way, customers get not only the products they demand, but also assurance of safety.

Proof in the Products

In the end, it’s all about development. Fresh & Easy’s customers know if the retailer doesn’t have a product they want, the item potentially could be invented. And the retailer knows it can rely on its customers to communicate their needs. These certainly are challenging times for Fresh & Easy (or any other retailer, for that matter), but if the retailer keeps putting the customer’s wants first, it stands to do quite well, even post-recession.

Sir Terry Leahy, CEO of Tesco, noted in Tesco’s 2009 Annual Report that customers clearly enjoy the fresh foods and private label products offered at Fresh & Easy. And at the end of the day, he believes Fresh & Easy’s operations remain very good and quite strong.

“Clearly, nobody would have chosen to open into the scale of recession that we’ve seen [in the United States],” he said, “but the customers love the stores and they appeal right across the income range and age range, and that bodes well for their long-term appeal. …We are expanding the business at a good rate, and morale is high.” PLB

Sidebar: Fresh & Easy Neighborhood Market Snapshot

Headquarters: El Segundo, Calif.

Chief Executive: Tim Mason, president and CEO

Banner: Fresh & Easy Neighborhood Market

No. of Stores: More than 130 (in Arizona, California and Nevada)

No. of Employees: 20-30 per store

Private Label Brands: Allegro, Bistro International, Blossom, Cape Nova, Cinch, Cucina Grand, fresh&easy, Hermosa Baking Company, Mary Lee, Mother’s Joy, MunchTime, Snack Worx, Sweet Frost and more

Sidebar: LEED-ing the Way

It’s pretty big news for a retailer to expand in a down economy. It’s even bigger news if that retailer is making extra efforts by building sustainable stores.

On Sept. 24, 2009, Fresh & Easy Neighborhood Market CEO Tim Mason was joined by Kathy DeRosa, mayor of Cathedral City, Calif., and California Sen. John Benoit to open the retailer’s first LEED (Leadership in Energy and Environmental Design) Gold-certified store, as established by the U.S. Green Building Council and verified by the Green Building Certification Institute (GBCI).

According to the El Segundo, Calif.-based retailer, its Cathedral City store achieved LEED certification - the nation’s preeminent system for the design, construction and operation of high-performance green buildings - for energy use, water use, lighting and incorporation of several other sustainable strategies, such as using 90 percent recycled steel for the building’s structure.

“Achieving LEED Gold certification for our Cathedral City store further demonstrates our commitment to the environment and sustainable consumption,” Mason said. “Designing our buildings to use less energy is a win-win: We are able to use less money, which we can pass on to customers, and we have less of an impact on the earth.”

This feat is yet another feather in the retailer’s very green cap. According to Fresh & Easy, its stores use 30 percent less energy than a typical supermarket - thanks to technology such as solar tracking skylights, LED lighting and automatically dimming lights.

The retailer also recycles or reuses all of its shipping and display material and uses environmentally friendly trailers to transport food. The company proudly notes that it is a pilot member of the LEED Volume Certification Program, and that it has invested in a 500,000-square-foot solar roof installation on its Riverside, Calif., distribution center.

“Building operations are nearly 40 percent of the solution to the global climate change challenge,” noted Rick Fedrizzi, president, CEO and founding chair of the U.S. Green Building Council. “While climate change is a global problem, innovative companies like Fresh & Easy are addressing it through local solutions.”

Sidebar: The Good, the Bad and the Nitpicky

These days, choosing a grocery store at which to shop is almost like choosing a religion. You have consumers who are quick to hold fast to a single retailer, consumers who prefer to shop around and give each retailer an equal shot, and consumers who are so fed up with the number of options (or “shop-tions”) that they grow skeptical of the whole shebang and stay at home instead.

One only needs to type “Fresh & Easy Neighborhood Market” into Google to find blogs about the retailer run by people in all of the aforementioned categories. Sure, Fresh & Easy has its own blog (www.freshandeasy.com/blog). But the El Segundo, Calif.-based retailer stirs up so many emotions inside consumers that they feel compelled to write about it. Here are a couple of blogs worth checking out:

Temple of Fresh&Easy (www.templeoffreshandeasy.blogspot.com): Describing itself as “The Neighborhood Market Obsession Turns Religious,” this blog clearly is run by a loyal follower of the retailer. The evangelistic site offers readers information about new products, diet solutions, recipes and more. The blog also claims: “High Priestess OakMonster, Sister Amy, Sister ‘Nette (Temple of Fresh&Easy’s operators) and other ‘believers’ are not employed by F&E or Tesco, nor do we get paid for this blog. We just love the products and the store, so we happily spread the word to all!”

• Fresh & Easy Facts (www.freshandqueasy.com): This anti-Fresh & Easy site operates much in the vein of many anti-Walmart sites. In fact, the site even refers to Tesco (Fresh & Easy’s owner) as “The Walmart of Britain,” claiming the retailer sells spoiled food, uses pesticides on organic produce and is hypocritical when it comes to caring for the environment. Although many of its news items are severely out of date, the site encourages viewers to “spread the word about Tesco’s record” through petitions, volunteer efforts and more.

 • Fresh & Easy Buzz (www.freshneasybuzz.blogspot.com): This middle-of-the-road blog is dedicated to providing “news, analysis, insight and opinion about Tesco’s Fresh & Easy Neighborhood Market and the grocery industry.” The blog offers straightforward, balanced news about the retailer and other goings-on in the supermarket industry. The page is not gung-ho about Fresh & Easy, but it also is not knocking at the retailer’s door with torches and pitchforks, either.

Sidebar: A Simple Message

After spending nearly two years establishing itself in neighborhoods across Arizona, Nevada and Southern California, Fresh & Easy Neighborhood Market decided to unveil a long-awaited, well-planned marketing effort. Brendan Wonnacott, spokesperson for the El Segundo, Calif.-based retailer, says after Fresh & Easy opened its 130th store, it decided to launch its first advertising campaign to introduce the retailer on a much wider scale to the areas it serves.

“This is really the first full-scale advertising that we’ve undertaken since opening our first stores two years ago,” he says.

According to a Sept. 11, 2009, post on Fresh & Easy’s blog, the retailer sat down with customers to explore the different ways it could market itself. Besides in-store and online ads, the retailer created billboards and posters featuring short-and-sweet messages such as “Sticker shock. In a good way.” and “Ingredients you can pronounce. Prices that make you smile.”

The advertising campaign also featured radio spots with loyal customers telling stories about the benefits they reap by shopping at Fresh & Easy. On its blog, the retailer said it was very satisfied with the message the campaign communicated.

“What emerged was refreshingly straightforward: Show how keeping things simple lets you be both better and cheaper, and let your loyal customers tell the story for you,” the blog read.

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