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    Published on: December 5, 2012

    Tesco said this morning that it will conduct yet another strategic review of its US Fresh & Easy Neighborhood Market business that "likely" will lead to the sale or shuttering of the division, in which Tesco has invested more than $1.6 billion since 2007. Tim Mason, who has been running Fresh & Easy while serving as Tesco's deputy chief executive, has left the company, Tesco said.

    The announcements came as Tesco CEO Philip Clarke conceded that Fresh & Easy "will not deliver acceptable shareholder returns on an appropriate timeframe in its current form." And, they came as Tesco's UK business saw a third quarter in which its same store sales and market share both declined, creating pressure from investors on the company to give up on its American dream and focus on its core market.

    "It's likely but not certain that our presence in America will come to an end," said Clarke.

    Very likely. The Financial Times this morning reports that "Tesco has appointed Greenhill, the investment bank, to assist with the likely sale of Fresh & Easy ... Tesco’s likely exit from the US is likely to please the grocer’s investors, many of whom have been calling for the company to quit the country and focus on its profitable ventures."

    FT also notes that "Walmart, the world’s biggest retailer by sales, has been tipped as a potential buyer of some Fresh & Easy assets – a move that would complement its decision to open smaller stores in the US." But there apparently are other options, as Clarke said that "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 business."

    The FT story quotes Clarke as saying that while Mason wasn't "pushed out," it was true that "we felt that it was the right time for Tim to leave." Mason has worked for Tesco for 30 years.

    In the UK, the Guardian reports on Tesco's moves this way:

    "Tesco had hoped to build Fresh & Easy into a business as big as its core UK chain. The first Fresh & Easy opened amid much fanfare five years ago and there are about 200 stores in southern California and Nevada.

    "But Tesco's plans were far more ambitious. Within weeks of the first store opening, in Hemet, east of Los Angeles, Fresh & Easy bosses were voicing ambitions to have 1,000 stores across California and then taking Fresh & Easy to the east coast.

    "The retailer built a vast warehouse, complete with America's biggest expanse of solar panels to help power it, and a food factory next door to make the ready meals that UK shoppers buy by the million but were almost unknown in the US. The plans came after two years of intensive research that involved Tesco sending senior executives from the UK to live with Californian families, assess the way they shopped and ate, and to build secret test stores.

    "But their research proved faulty. Almost every aspect of the shops, from their interior decoration to the pack sizes and self-serve tills have been changed. Fresh & Easy also opened as the subprime mortgage crisis and subsequent economic downturn took hold, hitting US consumer confidence and spending power. The chain has also faced opposition from US trade unions."

    From the Wall Street Journal, the coverage included this passage:

    "Since taking the top job nearly two years ago, Mr. Clarke has stood firm behind Fresh & Easy. As recently as June he said there was 'great value in the business,' but today faced an embarrassing climbdown. 'I've had a deep, hard look [at Fresh & Easy], and couldn't see how sustainable shareholder returns could be achieved quickly,' he said.

    "In June, Tesco admitted defeat in its efforts to break into the Japanese market after failing to turn a profit there in nine years. The closure or sale of Fresh & Easy is bound to ramp up the pressure on Mr. Clarke, who is in the middle of a £1 billion plan to revive Tesco's U.K. business, which accounts for two-thirds of revenue."
    KC's View:
    This is happening. They can couch it in whatever terms they like, but there seems to be no question but that Tesco is unloading Fresh & Easy one way or the other. (Tim Mason being fired - and there's no other way to put this, though the Brits would prefer more civilized language - was just the first step in the process.) Once this door has been opened, it is almost impossible to close ... and besides, it doesn't exactly seem likely that Fresh & Easy is going to see things improve anytime soon.

    While Tesco's judgement in the development of the Fresh & Easy format came under question here and elsewhere almost from the moment the stores opened, for a long time I thought that the company had the commitment and deep pockets to get it right. Tesco could blame the economy for some of its problems, but the job of a great retailer is to adjust to market circumstances and get things right. Clearly, Tesco was never able to do that.

    I have to wonder if Fresh & Easy would be shut down or sold if Sir Terry Leahy were still in charge at Tesco; he engineered the US entry after years of saying he had no driving desire to go to the US, and so he may have had more skin in the game. But I also wonder what this does to Leahy's legacy; can he fairly be accused of digging a hole that Tesco from which Tesco could not emerge unscathed? (I do feel sorry for Mason, who has been described to me as a very smart and engaging man. I wonder if he'll stay in the US, or return to the UK...)

    I'm not an expert on this, so I have no idea whether it makes sense to buy Fresh & Easy, or to just wait for 200 or so locations to become available, and then pick up the good ones one by one.

    In the end, this is a shame. Many of us had hopes that Tesco would come up with something really interesting, really different, and somehow move the needle on the grocery shopping experience - just because life and business are always more interesting when new innovations emerge. It moves things forward.

    It seems like a Fresh & Easy sale or closure will solve part of Tesco's problems. But not all of them.

    Published on: December 5, 2012

    by Kevin Coupe

    Last week, we reported on how Vice President Joe Biden went to the opening of a new Costco store in Washington, DC, using the event to a) buy some Christmas presents, and b) offer support to a company where the former CEO, Jim Sinegal, had been a supporter and even spoke at the Democratic National Convention.

    Well, Costco apparently has a lot of bipartisan appeal ... because this week, defeated Republican presidential candidate Mitt Romney visited one of the company's stores in La Jolla, California.

    According to TMZ.com, Mitt and Ann Romney purchased "paper plates, dixie cups, wrapping paper, V8 juice drinks, pretzel snacks, Bisquick and bottled water," as well as a model car.

    Y'know, it seems to me that while Romney was running for president, there was a lot of criticism of him - by both Democrats and his opponents in the GOP primaries - for being part of an exclusive class of people unconnected to the middle class. And certainly, Romney has more money than the vast majority of Americans.

    But I think that it is instructive that since his defeat in the presidential elections, we've seen reports of him pumping his own gas, taking his grandkids to Disneyland, buying Thanksgiving dinner from Boston Market, and now going to Costco. All of which - with the exception of the Boston Market excursion, which I still don't get - seem like perfectly normal, regular guy activities to me.

    The labeling, of course, went both ways. There was plenty of criticism of President Obama as somehow not being American enough, or not understand what America is all about.

    To me, while they are very different men with vastly different experiences, Obama and Romney seem like quintessential American stories ...

    And as I saw the pictures of Romney pushing a cart through Costco, it struck me that maybe over the past year or two, it might have made a lot more sense for the candidates - and us - to be having a real debate about real issues.
    KC's View:

    Published on: December 5, 2012

    There is a terrific piece in Fortune featuring an interview with Walter Isaacson, author of "Steve Jobs," and John Huey, author of "Sam Walton: Made In America." The two biographers are linked, the story suggests, not just by business success:

    "Both created retailing, business, and even societal revolutions. They changed the way we buy, shop, and interact, and even how and where we work and live. The two men were vastly different. Jobs was a business version of a California counterculture icon. Walton was an old-school heartland conservative. And yet they were remarkably similar too: iconoclasts, of course, relentless, and often very tough on the people around them. And that's just for starters. If you really drill down into their lives and careers, all kinds of really cool insights emerge."

    A story about Walton from Huey:

    "One time we're flying, and the air traffic controller comes on the radio and says, 'You're in unauthorized air space.' Got the tail number and all. And Sam just turns off the radio. We keep flying, he's got his spreadsheets taped to his leg, and we're looking for a store -- he's looking for the worst-performing store because that's where we're going to land. And we're flying, and the radar's there, and it's green and it's yellow and it's red, and I'm like, 'Sam, why are we flying to the red?' and he said, 'Because that's the quickest way.' I said, 'That's like a tornado.' He said, 'It's the quickest way'."

    And, a story about Jobs from Isaacson:

    "When Steve was in the hospital in Memphis after the liver transplant, they had to put an oxygen mask on him, and he keeps pulling it off and saying, 'This design sucks.' He asked them to bring him five different options so he could pick a design he liked. It was the same type of thing he would do at the Apple design studio."

    One interesting note from the story is that when Jobs and Walton got sick, they both responded the same way - looking for unorthodox cures, because they were convinced in some way that typical rules did not apply to them.

    The piece notes that both Walton and Jobs were concerned before their deaths that, in their absence, their companies might get screwed up by people who didn't understand their essence.

    And, it draws an interesting comparison to other American icons. Jobs, the story suggests, was like Thomas Edison, while Walton was more like Henry Ford.

    Interesting piece ... and you can read the whole thing here.
    KC's View:

    Published on: December 5, 2012

    Online Media Daily reports on a new study from Epsilon suggesting that most people don't ant to get marketing messages on their mobile phones.

    According to Epsilon's Channel Preference 2012 report, "80% of U.S. consumers surveyed are not yet interested in receiving location-based mobile offers during or after a visit to a brick-and mortar store. Mobile users, however, were more likely to be open to receiving messages via digital means than non-users. Consumers overall continue to favor direct mail over e-mail and company Web sites as communication methods ... Almost three-quarters (73%) said they get a lot of emails they don’t open, and 67% said they get too many emails in a day."
    KC's View:
    Here's an interesting tidbit from the study: "A majority surveyed again reported getting an emotional lift from postal mail, with 62% of Americans saying they enjoy checking their mailbox."

    Really? Because at least 62 percent of the time, the stuff I get out of the mailbox goes right into the trash can or recycling bin.

    Published on: December 5, 2012

    USA Today reports this morning that Starbucks is unveiling a new, limited edition $450 Starbucks card that "blends two growing trends: consumer love of gift cards and upper-end exclusivity. The costly gift card follows another recent, pricey rollout: a limited brew coffee sold in 46 Starbucks stores, which fetches $7 for a 16-ounce cup."

    According to the paper, the introduction puts the coffee company as the "forefront of what could be yet another cultural hot button: the super premium gift card. The Starbucks Metal Card isn't made of plastic, but steel. Each specially etched card, loaded with $400, costs $50 to make, which Starbucks says explains the $450 price tag.

    "Starbucks will make only 5,000 of them. But you can't buy them at any Starbucks store. They'll only be sold via the luxury goods website, Gilt.com. The card comes with gold-level Starbucks card membership benefits, such as gifts and freebie refills on brewed coffee and tea."
    KC's View:
    I'm not sure I really get this, but then again I'm not the target audience. I don't know how this burnishes Starbucks' broader image ... it seems to me that it creates an opening for companies like Dunkin' Donuts and McDonald's to present themselves as coffee for the average American.

    Then again, maybe I'm reading too much into this.

    But here's an interesting thing. Selling steel Starbucks cards (which, by the way, will set off security alarms in airports) seems to be counterintuitive to consumer trends, which has many of us moving away from physical cards to virtual cards on our smart phones. I want to carry fewer cards, not more of them ... and my experience with rich folks is that, for some reason, their wallets always seem thinner than everybody else's.

    Published on: December 5, 2012

    USA Today reports that Amazon is launching a new kids' entertainment service, called the Kindle FreeTime Unlimited monthly service, which "lets children aged 3 to 8 watch, read and play all the Cinderella and Thomas the Tank Engine videos, books and apps they can for a flat price starting at $2.99 per child for Amazon Prime members. Available starting today on the 7-inch display Kindle Fire and Kindle Fire HD models – and coming next week to the 8.9-inch Kindle Fire HD – the all-you-can-consume plan costs $4.99 per child or $9.99 per family for non-Prime members (Prime members get a $6.99 monthly family rate).

    "The curated content includes movies, TV episodes, games, educational apps and books from Disney, Nickelodeon, PBS, Sesame Workshop and Houghton Mifflin Harcourt," the story says.
    KC's View:
    The Amazon strategy here seems really simple: Get 'em while they're young.

    Published on: December 5, 2012

    The NPD Group is out with a new study saying that "total consumer traffic through convenience stores (c-stores) was down 2.1 percent in third quarter (July, August and September) 2012 versus the same quarter last year ... NPD’s convenience store market research reports that the traffic decline this quarter was largely driven by lower purchase frequency (5.9 visits per 30 days), but was also influenced by a slight decline in the overall reach of the channel (only 50.2 percent of consumers aged 16+)."

    According to the report, "The decline in third quarter visits was typically more severe among major oil company-branded c-store chains (especially those more overly dependent upon gasoline), while small independent chains did slightly better."
    KC's View:

    Published on: December 5, 2012

    Advertising Age writes that as Hostess Brands begins liquidating its brands amid enormous media coverage, it seems likely to experts that snack cake brands such as Twinkies are likely to be scooped up quickly, though it may be harder to sell bread brands such as Wonder Bread.

    The story says that the snack cake brands have generally been more successful that the bread brands, which have been hurt by the general move to healthier whole grain breads.

    AdAge writes that "the Hostess brand (which is used on snack cakes) is actually gaining in popularity, according to Landor Associates' BrandAsset Valuator, which measures traits such as differentiation, relevance, esteem and consumer knowledge."
    KC's View:

    Published on: December 5, 2012

    ...with brief, occasional, italicized and sometimes gratuitous commentary...

    • In New Hampshire, the Union Leader reports on the "buy local" trend, suggesting that during the current holiday season "there is a growing awareness that shopping for gifts made in America helps jobs stay stateside."

    Indeed, there is a website called Made In The USA Challenge that the story points to as drawing a direct line between buying American and saving US jobs.

    ""The average American spends over $700 annually on holiday shopping," says Sarah Mazzone, the blogger who started the site. "If just $64 of this was spent on gifts made in the U.S.A., the economic impact would equate to the creation of 200,000 American jobs. So I challenge you to spend $64 on American made gifts this holiday season."

    Full disclosure: Made in the USA Certified is an MNB sponsor. But I would have run this story anyway, because I've long believed that this is a smart marketing move for many retailers and manufacturers.

    FastCasual.com reports that "Starbucks in the United Kingdom is cutting paid lunch breaks, sick leave and maternity benefits for thousands of workers ... About 7,000 staff signed revised employment terms this week, which included the removal of paid 30-minute lunch breaks and paid sick leave for the first day of illness ... The new contract terms also remove cash incentives for becoming manager or partner and bonus plans for women returning after they have had a baby."

    The changes come as Starbucks comes under considerable criticism in the UK for not paying income taxes there and saying that its UK stores do not make money, even though it has said in some forums that its British operations are among its most profitable global businesses.

    The story also says that Starbucks is creating a new pension plan for UK workers, allowing them "to contribute 1 percent of their salary, which will be matched by the company. It is also removing a three-month vesting period for life insurance coverage."

    • The US Senate yesterday defeated a proposed amendment to the National Defense Authorization Act that would have allowed states with a sales tax to require online merchants selling there to collect sales taxes from shoppers.

    Like I said yesterday, I have no problem philosophically with the amendment. But I have a real problem with it being attached to a totally unrelated bill. So I guess I'm happy about its defeat.
    KC's View:

    Published on: December 5, 2012

    ...will return.
    KC's View:

    Published on: December 5, 2012

    A reminder, if I may...

    I will be in Chicago at the end of the week, attending the Friday performance of "A Klingon Christmas Carol," in which my eldest son has a role, at the Raven Theater. (You can check it out here .)

    BTW ... I got an email yesterday from an MNB user who attended the show last weekend; this particular member of the MNB community actually was in the show last year, and he informed me that my son David earned our family "much honor."

    Since I'm going to be in Chicago, I thought it might be nice to have one of our little MNB get-togethers before the show. So I'll be at the bar at Bin 36, located at 339 North Dearborn Street, if anyone would like to join me for a glass of wine (not Klingon bloodwine, alas), from 4:30 pm to 6 pm. (I'll have to leave at 6 if I'm going to make the 7:30 pm curtain for "A Klingon Christmas Carol.")

    We can raise our glasses and say, "Heghlu'meH QaQ jajvam!"
    KC's View: