Tesco will make of a success of its US venture Fresh & Easy, industry executives told the World Retail Congress in Barcelona today (9 April).
The UK retail giant’s move across the Atlantic has attracted criticism amid rumours that the business has missed internal sales targets since its launch in November.
Tesco has labelled the speculation as “scaremongering” but two weeks ago the company decided to put the brakes on its US expansion plans amid the economic slowdown in the country.
David Simons, a non-executive director at private-label supplier Greencore, said it was “too early days” to hand down a definitive verdict on Fresh & Easy.
“We have become very impatient in the UK,” Simons said. “Most of the big retailers and manufacturers that turn into success stories actually take a long time in the germination. That is what you are going to see with Tesco. It has the will, the patience and the resources to make it succeed. It may take them a few years but it will succeed.”
Tesco has faced questions over the pre-dominance of private-label products in its Fresh & Easy outlets. Compared to markets in Europe, the private-label channel in the US is relatively under-developed and some industry watchers believe US consumers are reluctant to switch away from big brands.
Bryan Roberts, global research retail manager for analysts Planet Retail, said the success of Aldi and Trader Joe’s in selling a wide range of private-label products had prompted Tesco to stock fewer brands.
“By offering sufficient quality in the private-label offering, consumers will buy into that,” Roberts said. “Clearly, Tesco is going to lose money in the short term and clearly sales are going to be below external – and probably internal – projections but I think Tesco is there for the long haul. Tesco may have to tweak it slightly and bring in some of the big brands but it wouldn’t surprise me at all to see Tesco succeed and actually re-educate American shoppers about the benefits of private label.”
Belinda Youngs, chief marketing officer of Canadian grocer Sobeys, which sells private-label products under its Compliments brand, said Tesco will need to re-educate the US consumer.
“Private label in the US is still very much on the price proposition, the lower-quality and value proposition, and that is going to take some time and education [to change]. I think Tesco will be successful and there is too much scepticism on rumour.”
Tesco, which runs 61 Fresh & Easy outlets in the US, is expected to give a more detailed picture of how the business is performing when it publishes its full-year financial results next week.