Implementing Grass-Fed Beef Sales at Fresh & Easy Neighborhood Market

I submit herewith a justification report plan for your company entitled “Implementing Grass-Fed Beef Sales at Fresh & Easy Neighborhood Market.” The plan consists of a qualitative study about the potential benefits of selling grass-fed beef products in your grocery store chain. I know this information comes to you all at a time of company-wide rebuilding, and I am confident that my proposal will help improve both the company’s image and sales. My findings are backed up by globally conducted consumer research into target markets for grass-fed beef and small-format grocery stores such as Fresh & Easy. I sincerely hope that you can seriously consider my plan and potentially implement it in the new year.

Executive Summary

Fresh & Easy Neighborhood Market, Inc. is a grocery store chain operating 150 stores in three states in the Western United States: California, Arizona, and Nevada. The company is a former subsidiary of Tesco Plc, and is currently owned by Yucaipa Companies, LLC. The company prides itself on being a friendly environment where customers can go to buy fresh, wholesome food at affordable prices.

This justification report has been written in the hopes of convincing Fresh & Easy’s management to start carrying grass-fed beef products in their stores. The popularity of grass-fed beef has been on the rise for the past decade, and information about the benefits of eating grass-fed beef compared to conventionally prepared beef, which is corn- or grain-fed and much less healthy for human consumption, has become widespread thanks to its increased usage in restaurants. Everything from the finest, dry-aged steak to the humblest hamburger – though not one you’d find at any fast food joint, of course – has been enhanced by the introduction of grass-fed beef to the market. Grass-fed beef is also sold at a higher premium than conventional beef, and consumers are more than willing to pay extra to eat a healthy, better tasting product.

With the chain’s financial status up in the air following Tesco’s sale of the company to Yucaipa, the sales of a trending product like grass-fed beef stands to make a significant impact on the company’s revenue. Its image can also improve by carrying grass-fed beef; consumers will be glad to see that the store is continuing to make good on its promise of selling healthy food, and suppliers will be happy to see that their product, often coming from smaller, family-owned farms and ranches, can receive wider exposure through sales at a grocery store chain instead of one day a week at the local farmer’s market.

Introduction

This report plan is directed at Fresh & Easy Neighborhood Market Inc., a grocery store chain based in California, Nevada, and Arizona. In the wake of the company being sold to Yucaipa Companies, LLC by British retailer Tesco, and the company’s filing of Chapter 11 bankruptcy protection, new outlets of revenue were explored in order to attract a broader customer base and ensure that the company’s values in-store are in line with the company’s mission: to provide fresh, nutritious food at a competitive price with larger grocery store chains such as Ralphs or Vons. After conducting extensive research, beginning the sale of grass-fed beef in-store appears to be one of the best methods to achieve this goal.

Problem Statement

Tesco’s foray into the U.S. grocery store market, Fresh & Easy, was supposed to be a game-changer. However, a slew of problems including labor disputes, customer complaints, and supplier dissatisfaction plagued the company. (Li, 2013) Renowned retail consultant Bill Bishop said of the company’s failure to gain ground: “Fresh & Easy…failed from the beginning because it was a retail concept and retail execution that was built for the British market…Tesco never served up a store that was suitable to American consumers.” (Brickley, 2013) In November of this year, Tesco finalized the sale of its subsidiary to Yucaipa, who has since promised to reinvigorate the brand and provide “healthy, high-quality product at an affordable price.” (Brickley, 2013) One such product that can and should be offered in the rebranded Fresh & Easy is grass-fed beef. The popularity of grass-fed beef is on the rise in the United States. It is a healthier, more humanely produced product than conventionally produced beef, and consumer research shows that grass-fed beef tastes better as well (Gwin et al., 2012). Incorporating grass-fed beef products into Fresh & Easy stores may be one of the easiest ways to re-obtain consumer confidence in the chain, and selling grass-fed beef at competitive, affordable prices also makes an increase in sales more likely, bolstering the chain’s flagging finances.

Method Used

In this study, research and data were obtained from various academic journals and industry studies involving two main topics: grass-fed beef itself, and the success of small grocery store chains. This study was designed to explore consumer preferences in price and taste of beef products, and how Fresh & Easy can effectively promote sales of new grass-fed beef products. Due to the varied scope of the collected information, the study is qualitative in nature.

Findings

With regards to grass-fed beef, the 2012 study conducted by Gwin, Durham, Miller, and Colonna provides the greatest amount of information about consumer preferences in beef selection, in addition to giving some insight into the target market of grass-fed beef products. The study, which used ground beef cooked into burgers as its sample product, showed that there was a definite preference for the taste of grass-fed beef over conventional beef. Consumers were also more likely to be willing to pay higher prices for grass-fed beef, though this depended on a few different variables (see Figure 1), including:

• The consumer having prior knowledge about grass-fed beef’s benefits (willing to pay more)

• The consumer being a frequenter of “natural” grocery stores such as Trader Joe’s or Whole Foods, or purchasing organic and locally-raised food (willing to pay more)

• The consumer caring about the welfare of the animal (willing to pay more)

• The age of the consumer (unwilling to pay more)

• The income of the consumer (variable based on income, but with a tendency to be unwilling to pay more)

The study also found that the type of grocery store consumers frequented influenced their opinion on grass-fed beef versus conventional beef. Shoppers who purchase their groceries at mainstream stores as opposed to natural stores expressed favorable views of grass-fed beef products: “86% perceived it as healthy, 60% as more humane than conventional beef, 62% as better for the environment than conventional beef, 50% as flavorful, and 56% as safe.” (Gwin et al., 2012) Mainstream and natural store shoppers also both were strongly affected by food safety concerns, leading a slight majority of consumers in both categories to switch to natural or organic beef. The study also showed that consumers are 25% more willing to pay a higher premium for grass-fed beef now than they were a decade ago.

Several sources also helped better illustrate Fresh & Easy’s corporate culture and how implementing the sale of grass-fed beef products could help the company’s image. In Stahlberg and Maila’s Shopper Marketing, Simon Uwins, the chain’s former Chief Marketing Officer, explains that when Tesco was forming the brand identity for the chain, they discovered through their market research that consumers felt their potential competitors were not selling wholesome, fresh food at affordable prices. In an effort to stand out to consumers, company policy was that “no Fresh & Easy brand product should contain artificial colors or flavors or added trans fats, and they should use preservatives only where absolutely necessary.” Fresh & Easy was designed to be the place where customers could go to buy great food locally at low prices. However, despite the thoroughly researched foundation behind the company’s philosophy, the chain has been unable to find success, especially compared to similar small-format stores such as Trader Joe’s and Wal-Mart Marketside, both of which were considered by consumers to be more effectively designed since they used more traditional retail strategies and layouts. (Lang, Soesilo, & Lanconi, 2012) The company has been wildly unsuccessful over the course of the five years it has operated in the Southwestern U.S., with Tesco suffering an expected loss of $2 billion on its efforts: an initial $1 billion investment exacerbated by cumulative annual losses of nearly $1 billion. Tesco also failed to tailor the individual Fresh & Easy stores to their neighborhoods, a practice that has helped make Tesco such a successful company in its home country of the United Kingdom. As one shopper put it, “It really felt like aliens that crash-landed here in their Tesco-mobile and didn't even look around to see what Americans liked.” (Li, 2013)

Analysis

Tesco’s foray into the U.S. market was a massive flop across the board. While, initially, shoppers were swarming the new Fresh & Easy stores, over time, the cracks in the façade began to show through. Tesco was able to emulate its competitors, but failed to overtake them because, as Trader Joe’s founder Joe Coulombe states, “somehow their research got it all wrong.” (Li, 2013) Tesco’s sale of the subsidiary to Yucaipa is perhaps the best thing to happen to the chain since its first stores opened up. Yucaipa has experienced multiple successes in the past with revitalizing grocery store chains. Besides fixing the other problems with Fresh & Easy – the oddly limited selection, confusing layouts, and a lack of a human touch, to name a few – Yucaipa will need to work on new endeavors for Fresh & Easy to involve itself in so its stores will stand out from the pack. Incorporating the sale grass-fed beef products into the store is a big way that the new and improved Fresh & Easy can catch the eyes and wallets of customers. Although grass-fed beef is sold at a higher price than conventional, grain-fed beef, Fresh & Easy is the kind of chain that would be able to make it a competitive offering with the chain’s traditionally carried products such as organic meat products. Selling grass-fed beef in stores would also help promote better relationships with suppliers and small farmers, who really only are able currently to sell their beef either directly to restaurants or at farmer’s markets. A grocery store that carries grass-fed beef is hard to find, but if Fresh & Easy can become the go-to store for consumers looking to purchase grass-fed beef, then the company will have a unique factor that its other competitors simply cannot match. Not only that, but grass-fed beef tastes better, is leaner than conventional beef, and is produced in a more humane manner, lining up perfectly with Fresh & Easy’s brand philosophy of providing wholesome, fresh food at affordable prices.

Conclusion

In this report, I explored the possible outcomes of U.S. grocery store chain Fresh & Easy beginning to sell grass-fed beef. Based on my findings through a qualitative study, implementing this as a new product has a strong potential to set Fresh & Easy apart from its competition. Grass-fed beef has reached new heights of popularity in recent years with consumers, and adding it to the inventory will help draw in a new customer base while simultaneously stimulating the old one to purchase this new product. Current fans of the store should have no qualms about finding a product that they may have been wanting their neighborhood grocery stores to be selling for years, especially if they are already choosing to shop at Fresh & Easy based on the type of food it sells and the healthy lifestyle it promotes. While Fresh & Easy’s new owner Yucaipa has its work cut out when it comes to the fixing the various other problems to bring Fresh & Easy back from the brink of failure, engaging in new tactics to warm consumers to the rebranded stores – such as starting to sell grass-fed beef products alongside its current meat offerings – will really help turn the chain around.

References

Brickley, P. (2013, November 22). Yucaipa cleared to take over 150 Fresh & Easy grocery stores. NASDAQ.com. Retrieved November 27, 2013, from http://www.nasdaq.com/article/yucaipa-cleared-to-take-over-150-fresh--easy-grocery-stores-20131122-00582

Gwin, L., Durham, C. A., Miller, J. D., & Colonna, A. (2012). Understanding markets for grass-fed beef: taste, price, and purchase preferences. Journal of Food Distribution Research, 43(2), 91-111.

Lang, M., Soesilo, P. K., & Lancioni, R. (2012). Do small format supermarkets improve the shopping experience?: Field study assessment of two alternative U.S. strategies. International Journal of Applied Behavioral Economics, 1(4), 1-8.

Li, Shan. "Five years in, Fresh & Easy markets are a flop." Los Angeles Times 21 Mar. 2013, sec. Business: n. pag. Los Angeles Times. Web. 17 Nov. 2013. <http://articles.latimes.com/2013/mar/21/business/la-fi-fresh-easy-woes-20130321>

Uwins, S. (2010). Tesco Fresh & Easy, USA. In M. Stahlberg & V. Maila (Eds.), Shopper marketing: How to increase purchase decisions at the point of sale. (pp. 235-239). London: Kogan Page.

(Appendix omitted for preview. Available via download)