Fresh and not so easy: Tesco in the US

In 2007, after years of study, Tesco crossed the pond to open its first Fresh & Easy neighborhood grocery store in California. The UK-based supermarket powerhouse has since opened more than 150 stores in California, Nevada and Arizona, sunbelt states that were growing rapidly and had strong economies--until the recent recession.

Tesco's plan to offer fresh produce at low prices seemed the perfect combination for the US market. However, Fresh & Easy ran into fierce competition from long-established supermarkets and from discounters-with-attitude (such as Trader Joe's). The recession didn't help, either.

Having lost millions of pounds on Fresh & Easy, Tesco made some changes to gain sales momentum. For example, the chain originally planned no advertising--it prefers to communicate directly with customers via Twitter, blogging, YouTube, Flickr and the Web. Instead, it reportedly has begun an advertising campaign to increase brand awareness and preference.

Tesco's chief executive now expects Fresh & Easy to turn a profit by the end of 2013. On the other hand, management of the US conglomerate Berkshire Hathaway, which owns 3% of Tesco, thinks that Fresh & Easy has more work to do if the chain is to succeed in the intensely competitive US market. It must increase revenue, attract more customers and reinforce loyalty. What does the future hold for Fresh & Easy?