Fresh & Easy Slow to Arrive in Sacramento Area

Consumers in the Sacramento, Calif., area will have to wait a bit longer for the debut of Fresh & Easy Neighborhood Markets.

Twelve months after the British-owned chain announced plans for roughly 20 stores in the Sacramento region as part of a major push into Northern California, area shoppers saw the original early 2009 opening date come and go, according to a report in the Sacramento Bee.

There has been little visible progress at many of the sites, the newspaper reported. The company has yet to pull a building permit for a proposed store on Sunrise Boulevard in Rancho Cordova. Another building, a former Tower Records and Books store, on Watt Avenue, is still empty.

A handful of sites -- including a former Ralph's on Bradshaw Road near Rancho Cordova and another location on Northgate Boulevard -- show signs of remodeling or near completion, the newspaper reported. The company continues to close deals for sites and is making its rent payments, real estate brokers and property managers said.

The company did not disclose any opening dates.

Fresh & Easy is the first major U.S. venture for the United Kingdom's giant Tesco PLC, the world's third-largest retailer. The chain opened its first store in November 2007 in Southern California. It now has more than 110 locations, including sites in Nevada and Arizona.

Tesco doesn't report financial details for Fresh & Easy, but analysts say the chain's rollout has been bumpy. Chief Executive Tim Mason conceded in an interview with the Times of London last month that the company misread some aspects of the bargain-oriented U.S. market and is rethinking its pricing strategy.

Fresh & Easy stores are roughly 10,000 square feet -- a quarter the size of a full-size supermarket -- and offer a limited selection of groceries and a wide range of prepared foods. Garrick Brown, research director for commercial real estate broker Colliers International, told the newspaper the model hasn't clicked outside of young, urban areas.

"They were under the assumption that they'd do well in suburban areas. But they were exactly wrong," he said.

Tesco ties the slowdown in its Northern California expansion to the U.S. recession.

But Jim Prevor, a grocery-industry expert based in Florida, told the Sacramento Bee the delay also is tied to Tesco's troubles at home in the United Kingdom. There, the company is dealing with a terrible economy and is battling serious new competition from discounters.

If Tesco's U.K. fortunes improve, it has the deep pockets to keep tweaking the Fresh & Easy model until it finds something that can succeed in the U.S. market, Prevor said.

But if it continues to struggle at home, Tesco may look to retreat.

"In six months you might see a partnership with an American retailer," Prevor predicted. "Or they might just put a lock on the door and say, 'This was a mistake. It didn't work out.' "

Fresh & Easy spokesman Brendan Wonnacott told the newspaper the company is "absolutely committed" to opening the Northern California stores.

"The main thing is to get the infrastructure in place," he said, chiefly a regional distribution center. The chain's existing stores in the Southwest are served by a 700,000-square-foot warehouse and commissary in Riverside.

Fresh & Easy did not reveal the location of its Northern California warehouse, but real estate brokers and grocery insiders have said since late 2007 that it will be in the Stockton area.
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