EL SEGUNDO, Calif. -- U.K. supermarket giant Tesco is reportedly on track to open its first U.S. stores on the West Coast in 2007.
In its recent first-half earnings report, the retailer said that it had acquired a number of store sites. And U.K. newspaper The Daily Mirror reported on Monday that Tesco had secured its first store site in Las Vegas, although its proximity to a school could, under Clark County law, prevent the company from selling alcohol at that location.
A liquor and gaming board spokesperson told the paper: "[image-nocss] The school is within 1,500 feet [of a school] so there will be a hearing on November 28."
Tesco said in September that it would invest about $470 million to enter the West Coast with a new formatdesigned for the American market. It is expected to open about 150 stores in Southern California and the Las Vegas and Phoenix areas. It has set up its U.S. headquarters in El Segundo, Calif., and has purchased an 88.4-acre site along Interstate 215 south of Riverside, Calif., for a distribution center to service those regions.
The company has said that its U.S. storesto be called Tesco Fresh & Easy storeswould be based on its Tesco Express format in Britain, suggesting that they would be about the size of a typical Trader Joe's grocery store. Like that chain, Tesco Express sells fresh produce, meat, packaged goods, prepared foods, wine and other beverages.
The company also plans to take over a shuttered Albertsons market in Los Angeles' Glassell Park. The 32,500-sq.-ft. location will be among the first of a group that the world's third-largest retailer will open on the West Coast next year. It is a strategy of developing local scale. They want to build enough market share to matter, Darrell Rigby, who heads the global retail practice of consultant Bain & Co., Boston, recently told the Los Angeles Times.
Meanwhile, Tesco is taking two of its favored British food suppliers along on its bid to open a new chain of small-sized supermarkets in the western United States next year, reported The Financial Times.
Natures Way Foods, which produces prepared salads and lettuce for Tesco, and 2 Sisters Food Group, one of Britain's leading poultry processors, are both planning to establish sites adjacent to Tesco's planned distribution centre in southern California.
The move is the latest surprise in Tesco's U.S. expansion strategy, which centers on an unprecedented bid to establish both a store network and a proprietary distribution system at the same time, according to the report.
Natures Way has not previously worked outside the U.K., the report said, but has now set up a U.S. subsidiary, Wild Rocket Foods, which is recruiting staff for its U.S. operation. 2 Sisters Food Group produces Buxted and Hermanns brand poultry, as well as private-label products for supermarkets including Tesco. In 2005, it acquired Rannoch Foods, a producer of prepared foods.
Tesco's decision to rely on established relationships with British suppliers rather than new relationships in the U.S. is believed to reflect both its desire to avoid unpleasant surprises and a belief in the industry that the prepared meals business in the U.K. and Europe delivers higher standard products than are currently seen in America, said the newspaper.
Prepared mealsincluding salads and cooked chickensare expected to be play a significant role in Tesco's plans to open about 150 small neighborhood market stores around Los Angeles, Las Vegas and Phoenix.
It is not clear whether Tesco has taken a stake in the U.S. operations of the two companies, which have both set up Delaware-based corporations, the report said. Both are seeking planning approval for facilities on land at a business park at Riverside, Calif., that is part of an 88-acre lot bought by Tesco earlier this year.
Planning documents describe the site as "a Tesco food distribution and manufacturing campus"; however, as previously reported, their plans may be complicated by a legal challenge that is calling for additional environmental reviews of Tesco's plans for its site, located in a business park in a former U.S. Air Force base. Ray Johnson, a lawyer who has in the past challenged developments by Wal-Mart, is calling on the planning authorities to subject both suppliers' projects to a potentially time consuming environmental impact study.
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