Tesco Readies U.S. Entry
U.K. grocer Tesco is coming to the U.S. next year with a chain of convenience stores on the West Coast.
Tesco will spend about $436 million a year (GBP 250 million) to build stores in 2007 and 2008.
The U.S. stores will be based on Tesco’s Express format, which has grown to 800 stores in five countries since its 1994 launch. Express stores carry up to 7,000 SKUs and offer fresh produce, wines and spirits and in-store bakery. Stores are about 3,000 square feet (compared to 7,000 to 15,000 square feet for Tesco Metro stores, and 20,000 to 50,000 square feet for Tesco Superstores).
Marketing and Property Director Tim Mason will move to the U.S. to oversee the business; he remains on Tesco’s board of directors. Tesco won’t say how many stores it plans to open, but the retailer expects to break even in its second year of operation.
The U.S. expansion follows other forays outside Tesco’s home turf: The grocer has opened 343 stores in Asia since July 2004, and 305 stores in central Europe. Stores outside the U.K. now account for half its retail space.
“This is a tremendously exciting move for Tesco which will add a new leg to our international expansion,” said Tesco CEO Sir Terry Leahy in a statement. “The United States is the largest economy in the world with strong forecast growth and a sophisticated retail market. It is a market we have researched extensively for many years and over the last year we have committed serious resources to developing a format that we believe will be really popular with American consumers.
Tesco is respected for the long-running success of its loyalty marketing via its Tesco Clubcard, which has 11 million active cardholders. Kroger has adopted Tesco’s model for its own loyalty card (March 2004 PROMO). Tesco also has two highly successful private-label lines, Tesco Finest and Tesco Value.
The company has leveraged its brand equity in the U.K. to expand beyond food retailing into banking (Tesco Personal Finance), telecommunications (Tesco Telecom land-line, mobile and broadband), insurance and online shopping (Tesco.com).
