The idea behind Fresh & Easy is to create a classless grocer, which can operate in both upmarket and deprived areas offering a range of foods from low-cost basics to gourmet ready meals. The first stores will carry identical ranges, but chief executive Tim Mason said they could be tailored to appeal to different income groups, ethnic backgrounds and even climate. Southern California, he pointed out, was year-round barbecue country – or "grilling" as it is called in the US. Colder climate locations would need more warm-weather food.
The range on offer was developed after research which saw Tesco executives going into shoppers' homes. "We talked to them, we looked in their cupboards, went shopping with them and cooked with them." They also asked them to keep food diaries and shopping diaries, listing what they bought, where from and how much they spent.
The message that came back was that shoppers wanted more fresh food – which they said was either not available or too expensive. They wanted a more varied diet, cheap prices and to spend less time shopping.
Armed with that information Tesco built a mock store in a warehouse. It was a top secret operation, designed to keep Tesco's plans from leaking out to rivals.
Commercial director John Burry was despatched to the east coast to spend $67,000 (£33,000) on groceries to stock the shelves, which were then trucked back across the country. Burry told the store that provided the goods that he was stocking a store on a movie set. The same excuse was used to order bread from an LA bakery, but their cover was nearly blown when the baker asked to see a copy of the movie script to ensure it was a suitable storyline for his products to appear in.
Eventually shoppers were bussed in to give their reactions to the store.
Two of Tesco's UK suppliers signed up for the ride and invested millions in new facilities alongside Tesco's vast distribution centre and ready meal factory east of LA. They supply fruit, veg, meat and poultry to the stores and as ingredients for the range of 120 heat 'n' eat dinners.
The stores, as they appear today, are almost identical to the mock store, which still exists and is used for trialling new ideas. They are not a replica of a standard British supermarket. They have the look of a UK discount store with basic fixtures and polished concrete floors. Each store has a permanent "kitchen table" to encourage shoppers to sample foods, especially the ready meals. The goods are displayed on cardboard trays, so that shelf stackers can replace entire trays rather than filling by hand. The operation is relentlessly low cost so that prices can be pared. At the same time the ready meals coming out of the Fresh & Easy kitchen will offer higher margins.
The shelves include local Latino specialities like cactus leaves (which are chopped and used in salads), tomatillos (a cross between a tomato and a lychee) and "patas de res" – beef feet. The top selling product to date is a ready meal – a burrito designed for American appetites made in Tesco's own food factory, weighing a mighty 15oz and costing $2.99.
In the US state which is the spiritual home of the Toyota Prius and where green is a fashion statement, Fresh & Easy is also keen to stress its environmental credentials – from the world's biggest solar panel on the roof of the distribution centre (which produces enough electricity to power 26,000 homes each year) to its wooden-barrelled ballpoint pens.
But the pursuit of low running costs means the store is also introducing Tesco-style plastic packaging for fruit and vegetables that is virtually unknown in US supermarkets. Apples and tomatoes are packed in neat fours on plastic trays and inside plastic bags. Even single aubergines are in plastic packs. The switch, said one Fresh & Easy executive was high risk: "US shoppers are used to seeing mountains of fruit and veg, we didn't know what they would think of the packaging." But the results, he says, are "encouraging". The move, he says, is better for health and safety , but Fresh & Easy needs it to keep costs low – packs can carry barcodes that loose potatoes can't, so shoppers can scan their own goods at the checkout. Despite Tesco's loud boasts about its environmental concerns, it seems, green is not always good.
The low-cost model has also not endeared the business to everyone in California. The Alliance for Health and Responsible Retailing – a coalition of community, faith, environmental and labour organisations – has criticised Fresh & Easy for employing the majority of its staff on a part-time basis. Backed by Democratic presidential candidate Barack Obama they want a commitment to create "quality jobs" and for the company to stick to its promise to open in "neglected communities". There have also been accusations that the new store chain is anti-union and last week there were protests at one store when City analysts and journalists were visiting.
Mason insists the new business is committed to being "a great place to work" and is paying a minimum $10 an hour plus access to health benefits, compared to the $7.50 offered by rivals. The chain, he says, needs part-timers to be flexible and will not try to stop staff joining a union.
Last week the business suffered a setback when an LA court ruled that Fresh & Easy's huge warehouse breached environmental planning law. The case was brought by a union-backed group and could force the depot to close down, although Tesco said that was extremely unlikely and would not affect their roll-out plans.
The Los Angeles Times has also weighed in, telling Mason to keep his promise to open stores in the so-called "food deserts", such as south Los Angeles which have had no quality grocery outlets since the civil unrest of 1992, if it wants "to continue tooting its socially-conscious horn".
