Thursday, December 6, 2012

Not so Easy. Should Tesco exit the United States?

Without doubt when Tesco entered the United States with a “new concept” Fresh & Easy and there was great fanfare. There were two problems: Frist problem was service or lack of it in the stores. The second was packaging, placement, price, portability, products. Tesco’s analyst could crunch the numbers better and most.  Their category managers focused on a view of the food industry driven by analyst. Yet, they never understood the American food shopping experience.

Yesterday, Tesco stated: “Decision taken to conduct strategic review of Fresh & Easy; all options under consideration…Tim Mason, CEO of Fresh & Easy, to leave “  If success leaves clues this is a bold clue.

This fall Tesco announced “that new capital investment in Fresh & Easy was to be tightly constrained whilst the business focused on reducing costs and improving the profitability of its existing stores…It is now clear that Fresh & Easy will not deliver acceptable shareholder returns on an appropriate timeframe in its current form….

We have therefore appointed Greenhill to assist with the review of options. In recent months, we have had a number of approaches from parties interested in acquiring either all or part of Fresh & Easy, or in partnering with us to develop the Fresh & Easy business. We will communicate progress on this process when we present our full year results for the current financial year in April 2013.”

The concept held great promise for the ready-2-eat and heat-N-eat fresh prepared food niche. All markets are unique.  Tesco simply proved once again that IQ (intellectual quotient) does not trump EQ (emotional quotient).  In the food and beverage sector companies must be mindful that the proper balance of EQ and IQ are utilized. Tesco’s stores are failing not because of food quality but they lack warmth and consumer interactive participation.

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