UK's largest retailer plans major move into Southern California
July 05, 2006
by Rand Green
LOS ANGELES -- Some are calling it the British Invasion. First the Beatles, now this.
Tesco, the largest supermarket chain in the United Kingdom, is planning a major move into the U.S. market, beginning in Southern California and Arizona in 2007. The company made the announcement on Feb. 9, and it is a development that is certain to change the retail landscape here, although just what the nature of the impact will be remains to be seen.
Tesco, which dominates the British market with a 30 percent market share and is the world's fifth largest retailer, plans an initial capital expenditure of up to $435 million per year in the United States. Tesco has international operations, but this will be the company's first entry into the United States.
According to a March 1 article in Slate, an on-line magazine, Tesco plans to "slug it out" with Wal-Mart in California, "a state Wal-Mart has long planned to dominate."
Given that Tesco's planned format in California is an upscale convenience store, conceptually about as far from a Wal-Mart supercenter as possible, the notion that Tesco sees itself as going head-on against Wal-Mart might seem rather curious. But according to the article, Tesco's strategy is a preemptive strike against what it believes is Wal-Mart's next move.
"Wal-Mart has had difficulty penetrating the highly populated, higher-income coastal zones [in California] because the huge, cheap swaths of land on which it likes to park its big boxes are hard to come by," the article said. "Wal-Mart proclaimed [in 2002] it would open 40 stores in the Golden State in five years. So far, it has managed to open only 13."
Eduardo Castro-Wright, Wal-Mart's chief operating officer in the United States, "told the Financial Times last November that it is 'looking at the Neighborhood Market format as a vehicle & to service customers who need convenience for a key reason for shopping at Wal-Mart.' This may prove to be Tesco's real edge. Wal-Mart has always competed on price," according to the Slate article.
The Tesco Express neighborhood stores will stock up to 7,000 items, including fresh produce, and "will be the kind of places where foodies wouldn't be chagrined to run into their neighbors," the article added.
The Tesco Express stores will be similar in size to 7-Eleven stores, according to a March 3 article in the East Bay Business Times. "Perhaps in response" to Tesco's announcement, the article said, 7-Eleven plans to introduce fresh produce at some locations. Others have suggested that the Tesco concept will be closer to that of a Trader Joe's.
Not everyone thinks Tesco's expansion into the U.S. market will be successful. The East Bay Business Times quoted Ted Taft, partner in the retail consulting firm Meridian Consulting Group, as saying he would not be surprised if "five years from now, they won't even be here. I feel the best they can hope for here is to become a niche player."
Dale Liefer of Westlake Produce Co. said, regarding Tesco's plans to enter the California market, "Any time we see a new company come into our area, any time Westlake has a chance to sell a new customer, we're excited about it. That gives us an opportunity. I think a company their size will look to a company our size to do business with, so I think we have an advantage over some of the other suppliers."
Certainly other produce companies that already do business with major chains will be equally eager to offer their services as a supplier to Tesco.
But for many produce companies in the Los Angeles area that service retailers, the bread-and-butter accounts are not the major chains but smaller chains and independents, and particularly ethnic retailers catering to Hispanic and Asian demographics. Those stores are generally not in the same neighborhoods into which Tesco is going to be looking, so Tesco's arrival may have little impact on a substantial portion of the Los Angeles produce trade.
The continued growth of the smaller ethnic chains in Southern California is the force driving many Los Angeles-area wholesalers and distributors. Even for a company such as Westlake, whic does business primarily with the major supermarket chains, the smaller ethnic chains have also become "a point of interest for us," as the company is "pushing hard" to get a bigger share of that business as well, said Mr. Liefer.
Generally, the ethnic markets, and particularly those catering to Hispanics, are viewed as price conscious. But as they continue to grow, "you see a lot of changes, and they are upscaling their stores," said Ted Kaplan of Professional Produce. "Now they all want good quality."
The independent markets are "getting better," said Jesse Martin of Value Produce Inc. They are also "getting bigger," he said.
There are companies such as Ramirez Bros. that specialize in Hispanic items. Others, such as Progressive Produce, which started a Hispanic products business about a year-and-a-half ago, are responding to the growing demand from that sector of the market.
Business is "starting to pick up a little bit with more independents coming in," said Tom Espineda of Tom E Produce. Some of the smaller retail chains that Tom E does business with have recently picked up new stores that had previously been "an Albertson's or something that they had to close," he said. "We are seeing more of that happening here."
"Independents have really grown in the last four or five years," said Bill Vogel of Tavilla Sales Co. of Los Angeles. "The large chains are abandoning certain stores in certain neighborhoods. Independents are coming in and taking over and doing really good business, obviously at lower prices."
"Independents are doing well," said John Corsaro of The Giumarra Cos. "I think that is kind of the beauty of Los Angeles. &You've got so many different models from Trader Joe's to Whole Foods to Wal-Mart to Safeway and Albertson's," as well as the independents. "You've got a shoe for every foot."
(For more on the Los Angeles market, see the July 3 issue of The Produce News.)
Labor problems top issue for FFVA leaders
July 04, 2006
by Joan Murphy
WASHINGTON -- With immigration reform in limbo, the border crackdown continuing and planting season around the corner, the Florida Fruit & Vegetable Association's top leaders see the continuing farm labor shortage as the most pressing issues facing growers today.
The association's top leaders met June 23-24 and the top issue on the agenda was the concern over dimming prospects for immigration reform in Congress.
"Labor is the most important challenge facing Florida producers today," FFVA Chairman Tony DiMare said during the two-day meeting.
Earlier this month, Republican leaders in the House announced plans to hold hearings on the issue around the country this summer, a move likely to affect the future of the already passed legislation awaiting conference.
Sally Tibbetts, a staffer for Sen. Mel Martinez (R-FL), told the association's board of directors that the House leadership's plan to hold hearings "isn't necessarily a bad thing" because it may help House lawmakers understand the Senate bill provisions.
The bad news, though, is the walkouts organized by immigrant workers to protest border security-only legislation may not have helped the cause, she said. After those images led nightly news programs, members of Congress received calls from constituents saying they didn't want a guest worker program in the bill.
Supporters of a bill that would contain a temporary guest worker program for agricultural workers are still hopeful that Congress can bridge the differences between the two versions of the bill.
The best chances may come after the election during a lame duck session.
But while the political battle for immigration reform has been splashed across the front pages of daily newspapers, a little known regulation proposed in June by the U.S. Department of Homeland Security also may affect the labor crisis.
The Bush administration announced proposed rules that would make it easier for employers to verify employment eligibility and hold them accountable for the workers they hire. One regulation would change the rules for employers when handling so-called no-match letters from the Social Security Administration.
"Most businesses want to do the right thing when it comes to employing legal workers," Homeland Security Secretary Michael Chertoff said in announcing the new proposals. "These new regulations will give U.S. businesses the necessary tools to increase the likelihood that they are employing workers consistent with our laws. They also help us to identify and prosecute employers who are blatantly abusing our immigration system."
When a worker's Social Security number does not match the worker's name on tax or employment eligibility documents, the federal government sends out a "no-match" letter asking them to resolve the discrepancy. The government estimates as many as 10 percent of the more than 250 million wage reports the Social Security Administration receives each year don't match up.
The "no match" proposal -- now subject to a 60-day comment period -- would tighten the system and increase the responsibility of employers in situations when they receive a no-match letter from the SSA or DHS. It also describes "safe-harbor" procedures for employers to use in dealing with such a letter.
With the latest crackdown on border security and new regulations that tighten hiring procedures, many growers are taking another look at the ailing H2A program to find an adequate workforce, said FFVA's Ray Gilmer. The program may be "clunky" and require on- site housing, but it could offer an alternative, he said.
But one thing is certain: Growers need to pay close attention to these issues, he said. No matter what happens in Congress, there will be a different system for authorizing workers, he added.