Tesco aims for 100 U.S. stores by February

LAS VEGAS (Reuters) - Tesco, Britain's biggest retailer, said on Wednesday it hopes to have 100 "Fresh & Easy Neighborhood Markets" in the United States by February of 2008.

The grocery stores, which will be smaller than traditional supermarkets, will focus on ready-to-eat meals and offer more fresh and environmentally friendly products than what is sold at mainstream U.S. grocery and convenience stores.

"We want to sell fresh, healthy foods," Tim Mason, chief executive of Fresh & Easy Neighborhood Market, said at a press conference in Las Vegas, one of four U.S. cities where the stores will open this year. "It's not a beer and chips business."

All of the products sold at "Fresh & Easy" will be free of trans fats, artificial colors and artificial flavors, Mason said. The stores will not sell cigarettes or tobacco, but will offer beer and wine.

The much-anticipated launch of Tesco's "Fresh & Easy" markets in the United States has been shrouded in secrecy, with the company offering few details about the store formats or plans for the roll-out.

MAKING WAVES IN U.S. MARKET

The new chain is expected to make waves in the competitive U.S. grocery market, which is dominated by No. 1 retailer Wal-Mart Stores Inc..

The president of one local grocery chain, who will be competing head to head with Tesco in Las Vegas, turned out for the brand's launch at the Wynn hotel and casino on the city's well-known Strip.

"They sound like they have a wonderful business plan, well financed and well thought out. Those of us who are already here will have to improve our offerings to match theirs," said Richard Crawford, president of the Green Valley Grocery chain, which has more than two dozen stores in the Las Vegas area.

The largest U.S. grocers after Wal-Mart -- such as Kroger Co., Supervalu Inc. and Safeway Inc. -- are already remodeling stores and adding prepared meals and better produce to keep shoppers from turning to discount shops or niche chains such as Whole Foods.

Tesco has not decided whether its U.S. workers will be unionized. Large U.S. grocery chains employ union workers, while Wal-Mart does not.

"It's a decision we will leave to employees," Mason said.

FOOD DESERT

Tesco's stores will be about 10,000 square feet in size, smaller than traditional supermarkets to make shopping faster and easier. A traditional U.S. grocery store has about 45,000 square feet while a Wal-Mart supercenter, which sells groceries and other merchandise, can be as big as 200,000 square feet.

Fourteen "Fresh & Easy" stores are in the works in the Las Vegas area, and 20 are slated to open in Phoenix, the company said. Los Angeles and San Diego are the other two markets Tesco is targeting in the launch.

Mason declined to give a target number for further store openings or give a sense of pricing, to avoid tipping off his competitors.

He said, however, that the markets are designed to serve customers of all income levels. "Fresh & Easy" markets will be in a range of neighborhoods, including ones that Tesco said have been underserved by traditional supermarkets.

"What we have been preparing to do is go back into some areas which have become a food desert," Mason said. "Places where major grocery chains have pulled out."

Mason said Tesco had secured around 100 sites in the four target areas where it plans to open stores by the end of February.

"Phoenix is already in the public domain ... we will be making announcements about Los Angeles, San Diego and Orange County over the next few weeks," he said.

To advertise their "green" credentials, all of the markets will have partially green exteriors and a white sail-shaped logo. They will also make use of natural light to cut down on energy bills and emphasize recyclable packaging.

Tesco plans to spend $400 million a year in the United States for the next five years as it expands the chain.

(Additional reporting by Jessica Wohl in Chicago)