Tesco starts small in U.S. to win big

By Rachel Sanderson

LAS VEGAS (Reuters) - Tesco's (TSCO.L) new U.S. venture Fresh & Easy has unveiled ambitious expansion plans including wanting shoppers in the urban centres it targets never to be more than a mile from one of its stores.

Three weeks after launching near Los Angeles, Fresh & Easy's Chief Executive Tim Mason told reporters on a road trip to some of the discount chain's first 15 stores that the number of outlets would swell to around 200 by February 2009.

Plans are also advanced to open a second distribution centre in Stockton in northern California. Like the first one near Los Angeles, the centre could serve up to 500 stores.

Mason said he saw "enormous possibility". "We want the stores to be no more than two miles apart so no one has to travel more than a mile to get to a Fresh & Easy," he said.

Fresh & Easy's roll out in Las Vegas, Los Angeles, San Diego and Phoenix is being closely watched, with Tesco (TSCO.L), the world's third-largest retailer after Wal-Mart Stores Inc. (WMT.N) and Carrefour (CARR.PA), bankrolling it to a tune of 250 million pounds per year over five years.

Industry analysts predict the small, 10,000 square-foot convenience markets will cause a shake up of what is the world's most competitive retail market and the home of Wal-Mart.

TNS research analysts this week forecast Fresh & Easy could be the 10th largest U.S. retailer by 2015 with revenues of $10 billion. Fresh & Easy has said it will pass through breakeven in its second year of trading.

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