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It’s unusual in today’s economic climate for an expanding retailer to generate a lot of buzz. But Fresh & Easy Neighborhood Market is a major exception. The grocery chain, owned by UK-based grocery giant Tesco PLC, has taken western states by storm, opening about 60 stores in four months in Arizona, California and Nevada. Now the company is in the midst of a three-month breather and is temporarily stopping its expansion. The move prompted many, including some here, to voice speculation, with some wondering if the slowdown was tied to the economy. No, says Scott Whitney, real estate director for the chain, which operates 10,000-sf units that stress low price and convenience. Whitney recently spoke with GlobeSt.com about Fresh & Easy’s expansion strategy.

GlobeSt.com: What do you expect to accomplish during your store-opening breather?

Whitney: One of the things that we decided to do very early on before we opened our first store was to open 50 to 60 locations. This breather has been planned from day one before we even had a store opened. There has been a lot of attention out there that this was a red flag and we were stopping to reevaluate. That’s not the case. The reason we did it when we made the decision to come to the US, we spent a lot of time researching on the front end so that we could come up with a concept that was custom-built for the US market. In doing that, all of the information and research that has been done was done in a way that was customer driven. This breather was built in so that we could take that three-month window to reevaluate and through exit surveys we’ve been doing since day one figure out what customers like and what they would like to see different. That’s what this window has been built in for.

GlobeSt.com: Are there any changes you have come up with so far that might change your opening strategy?

Whitney: We have done some minor refreshes of the stores. We did change our signage package on the interior a little bit to make it a little more user friendly and easier for the customer to find certain items and particular products.

GlobeSt.com: How is the economic downturn impacting your expansion plans?

Whitney: It’s actually creating opportunity for us. Fresh & Easy is not demographically challenged. We can go into very affluent high-income markets, and we can go into Compton, CA, where we are open and operating. From an economic threshold, we don’t have a barrier like some of the other retailers in the market today. We’re not ethnicity challenged either. Our CEO likes to say that “everybody eats.” The other component with the concept is the fact that our price point comes in anywhere between 20% and 30% lower than your average supermarket today. You’re getting a high-quality, fresh product that’s delivered daily or twice daily at the distribution center and replenished at the store level, and you’re getting it at a price point that’s lower than your traditional supermarket. As we enter this downturn or recessionary time, the other factor that comes into play with our concept is that it’s a benefit because people are looking to save money. It’s been kind of a boom for us.

GlobeSt.com: Have you noticed that any centers or projects you were going into being put on hold or delayed?

Whitney: For the most part we’ve been able to meet our projected demand for stores. But there have been situations when developers have had the inability to attract other tenants to round out their project. We alone sometimes can sustain a developer’s project. We have seen that happen on occasion where because the developer can’t find other tenants, there has been a factor where projects were lost. We haven’t seen a lot of it, but we have seen some of it. What also separates us is the types of sites that we’re looking for. As the name implies, Fresh & Easy Neighborhood Market, we won’t necessarily go for that power center location. We’re more of the drugstore type of mentality where we want to find a hard corner located well within a neighborhood. That has enabled us to continue and sustain our growth.

GlobeSt.com: Are you looking at any non-traditional sites right now or sticking strictly to that format?

Whitney: One of the things that people see us as is your typical US retailer. But with Tesco being from and born in the UK, Europe has primarily had mixed-use projects for decades if not centuries because of the availability of land. That’s one of the things we’ve embraced, are mixed-use projects. In Northern California I have quite a few mixed-use projects where I have a prominent location on the ground floor with residential above. We’ve embraced it early on and understand how to make it work. We’re not challenged by it.

GlobeSt.com: What is the difference in US consumers from your base in Europe?

Whitney: I think you’d find a lot of the same general types of merchandise, but when Tesco came here they had been looking for about 25 years. Specifically they had been studying the US for about four years. Our product range is really geared to the US consumer, and that product type is based on what the consumer wants and looks for. You would find similarities in general, but as far as UK-branded products, that would not necessarily be the case.

GlobeSt.com: Why did you decide to start your expansion in the West Coast and not in a different part of the country?

Whitney: We chose to come to the West Coast because in order for us to start and get critical mass in a relatively short period of time, because of the population base in California and the western states, that was the driving factor at the end of the day. We did come to the US with the US in mind. We didn’t come here to just do the East Coast or the West Coast. It is an entire country plan that we will have in place and implement.

GlobeSt.com: Is there a timetable as to when you’ll expand in other regions?

Whitney: We are absolutely researching other opportunities and portions of the US. As far as when and where, we’re still doing an evaluation process. But I would imagine that we would roll out in to other markets within the next two to five years.

GlobeSt.com: How do you see the grocery sector changing a few years down the road?

Whitney: When you look at our self-branded products, there are no additives or preservatives unless absolutely necessary, there are no trans fats or artificial flavors or colors. If you look at our peanut butter and turn the label around, it’s peanuts and salt and that’s it. From a consumer perspective, one of things we have found and that we’re really excited about is that people are trying more than any other time to make wholesome choices for themselves and their families. When you can turn a product around and read the label and really understand what it is that you’re providing for you family, that really is revolutionary. You can go through a supermarket today and look at the ingredients in a lot of the nationally branded products and they’re difficult to pronounce, let alone identify what they are. I think that’s a trend we’re going to see in the future here, not only from us, but from a lot of the other grocers.

GlobeSt.com: What is the biggest challenge to your US growth?

Whitney: We’ve been very blessed. One of the neat things about being with a new company is that you’re starting with a blank canvas. We’ve got a phenomenal site-research department that has really taken the time to work with our brokerage and development network that we’ve established to strategize a long-term network of stores. The benefit is that starting from scratch, you don’t impact existing stores. When you get critical mass you start to impact those stores, but you can plan for it by creating a long-reaching and long-term growth strategy. From that perspective we’ve been very fortunate. We’ve been very pleased with the week-over-week growth that we’ve had with the stores that are opening, and every week we’re seeing positive same-store comps. The nice thing about being a startup arm of the third-largest retailer in the world is that to date we’ve done everything for cash and done 60 stores. Having that financial stability as well has been able to free the pressure for us.

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