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Randall Benton / rbenton@sacbee.com

Workers stock shelves at a Fresh & Easy that opened last month in south Sacramento. Tesco invested $2 billion in its U.S. subsidiary.

Fresh & Easy parent to exit U.S. market; fate of Sacramento-area stores unknown

Published: Thursday, Dec. 6, 2012 - 12:00 am | Page 6B

The supermarket version of the British invasion appears to be over.

The struggling Fresh & Easy chain was effectively abandoned Wednesday by its British parent, Tesco Plc. Tesco will conduct "a strategic review" of Fresh & Easy, which will probably result in a sale. That will end Tesco's effort to conquer the western United States with small, boutique-like stores.

Fresh & Easy opened five stores in greater Sacramento last spring, the initial step in what was supposed to be a 17-store blitz.

While Fresh & Easy hasn't made a serious dent in greater Sacramento, it's part of a wave of nonunion competition that has threatened to overwhelm Raley's and the region's other traditional supermarket powers in recent years. Competition from the likes of Fresh & Easy was a driving force in the recent 10-day strike at Raley's.

Fresh & Easy's departure doesn't mean the onslaught of new grocers is ending, said Abby Friedman, a research analyst in Sacramento with Cassidy Turley commercial real estate.

She noted that Wal-Mart, the leader of the nonunion pack, opened four new stores in the region this fall. Fresh Market, a North Carolina chain, opened its first California store in October in Roseville. Other chains have arrived as well, including Sprouts.

"It's still happening in this area," Friedman said.

Launched in 2007, Fresh & Easy opened 199 stores in California, Nevada and Arizona. Tesco reportedly invested $1.6 billion on store openings and the construction of a distribution center in Riverside.

"It's kind of indicative of the failure of that small-market concept, that small, specialty-market concept," said Bob Reynolds, a grocery industry consultant in Moraga. "People just didn't respond."

The stores measure about 16,000 square feet, he said. Traditional supermarkets are 50,000 square feet and up.

"The business had many positives, (but) its journey to scale and acceptable returns will take too long relative to other opportunities," Tesco Chief Executive Philip Clarke said in a press release.

© Copyright The Sacramento Bee. All rights reserved.

Read more articles by Dale Kasler



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