Sep 12, 2013
The Yucaipa Companies LLC is purchasing Fresh & Easy Neighborhood Market from United Kingdom-based Tesco PLC, and plans to retool the operation into a more successful format. Just what that format will be – and its potential for success – is up for debate.
"Fresh & Easy is a tremendous foundation," said Ron Burkle, managing partner of Yucaipa. "Tesco should be applauded for giving their customers an affordable, healthy, convenient shopping experience. Its dedicated employees and great base of customers give us a solid starting point to complete Tesco's vision with some changes that we think will make it even more relevant to today's consumer. We plan on continuing to build Fresh & Easy into a ‘next-generation convenience retail experience,' providing busy consumers with more local and healthy access for their daily needs."
According to Fresh & Easy, the company's assets include a world-class infrastructure designed to facilitate the manufacture and distribution of high-quality, fresh products. This capability gives Fresh & Easy the ability to provide the highest level of freshness and convenience available.
"Yucaipa is a very savvy firm, however I'm not sure what they see in the Fresh N Easy stores," said Jeremy Diamond, director of The Diamond Group, a retail consultancy in Baltimore, Md. "Fresh N Easy was a money-losing enterprise from the beginning as Tesco entered one of the most competitive supermarket regions in the U.S. Its biggest asset is the real estate for the Fresh N Easy locations, as well as the distribution and manufacturing facilities."
If Yucaipa can take the Fresh & Easy assets and turn them into the right "next generation convenience experience," as Burkle mentions, it could be a potential windfall, according to Bill Bishop, chief architect of retail consultancy Brick Meets Click. "It'll depend largely on how much they had to pay and how well they can repurpose the assets," Bishop told Progressive Grocer. "If I were them, I'd change the stores to a limited assortment hard discount model similar to Aldi and Save-A-Lot. This business model can be extremely profitable and there is nothing like it today operating in those markets. Even if only four out of five stores converted successfully, it would be a homerun financially."
Yucaipa said the purchase is expected to be complete within three months, and in the meantime it is business as usual for most Fresh & Easy stores.
The Yucaipa Companies is an investment firm that has completed mergers and acquisitions valued at more than $35 billion.