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Is this a case of defying the critics' expectations? Or doth Tesco protest too much?

For the second time in a week, Tesco's Fresh & Easy chain in the western US has issued a press release designed to hype a positive access of the company's business, even as critics and analysts lambaste the company for they are feel are the inadequacies of the Fresh & Easy format. Earlier this week, the emphasis was on how Fresh & Easy's private label was so popular that the chain was adding another 250 SKUs to its own label lines.

Today, it is about how Fresh & Easy is at least a partial solution to $4-per-gallon gasoline. The press release reads as follows:

"Fresh & Easy Neighborhood Market customers already know the grocer for its high quality fresh, wholesome food at affordable prices. But what many customers may not realize is that Fresh & Easy may help save customers money on gas. As a true neighborhood market, Fresh & Easy offers everything a family needs at prices that are easy on the pocketbook all in a location that is easy on the gas tank.

"When developing Fresh & Easy, customers told the company they often shopped at several stores, sometimes miles from their neighborhoods, all in order to find the freshest, most authentic food at the most affordable prices. Fresh & Easy is located right in the neighborhood and provides fresh, high quality food, as well as favorite brand products, at honest, everyday low prices everyone can afford. With the cost of gas rapidly increasing, Fresh & Easy provides customers with the convenience of everything they need in one place, which saves them time in the car and money at the pump.

"Based on a recent study from The Nielson Group, gas share of customers’ weekly shopping ranged from 12 to 16 percent in 2007. As gas prices continue to rise, Nielson expects consumers’ gas share of their weekly spend to rise to 19 percent. With gas prices hitting $4 per gallon in many places, consumers are spending even more of their household budget on gas."

And Simon Uwins, Fresh & Easy's chief marketing officer, is quoted as saying: "We save our customers time and money by locating stores that offer everything they need at honest, low prices right in their neighborhood … No one should have to travel miles to get fresh, wholesome food they can trust at prices they can afford."

KC's View:
Interesting that Tesco would choose to emphasize the locations of its stores, since one of the things I keep hearing from other retailers when they look at the map is that I appears to them that there seems to be little consistency to the company's real estate choices. The theory goes that Tesco's location choices were largely experimental – they tried a lot of different neighborhoods and situations because they wanted to see what worked, and at some point will may a more specific choice, open lots more in those kinds of neighborhoods and close the stores that didn't work out.

That seems to me to be an expensive way to do research, but I know a number of retailers who hold that theory, and they're all smarter than I am. So there you have it.

I would make one observation about the gas savings logic. It suggests to me that maybe Tesco doesn’t quite get the whole Southern California car-driven mindset. Sure, it is a place where people are spending more and more money on fuel. But it also is a place where people have very little choice – there are few options to getting in your car to go practically anywhere, and so people are out and about anyhow. They often are stopping at the store while going to and from someplace else.

Sure, Fresh & Easy has the potential to save people a little bit of money on gas. But that strikes me as shaky reasoning.

That said, I continue to believe that Fresh & Easy in the long-term is going to evolve into a viable and competitive entity, and that the people who think otherwise don't understand how big and smart Tesco is. I got an email yesterday from an MNB user suggesting that Tesco has turned into a "laughing stock" because of what is viewed as its debacle in the US. That's just silly, and underestimates the Tesco machine. (And by the way – the smart US retailers I referred to above almost to a person continue to believe that Tesco will be a force. To be reckoned with in the US.)

By the way, there would appear to be a concerted effort at turning around some of the Fresh & Easy coverage.

In the UK, the Evening Standard had a piece yesterday about "independent research" conducted by a company called Execution Research that concluded that Fresh & Easy has become a "new cult retailer" and is an "incredible success story." According to the story, "Execution found shoppers rated the chain ahead of both Trader Joe's and Whole Foods in terms of freshness, and even beat Wal-Mart for value for money. Execution said that it expects shopper numbers to grow from the current 20-30 per hour as brand awareness increases."

I'm a fan of Tesco, and I believe that Fresh & Easy will eventually be a success. But even I'm not buying that most customers like it better than Trade Joe's and Whole Foods in terms of freshness. Not yet, anyway.

This study was based on interviews with 700 customers. I'd like to know who they are and how they were chosen.