cc Tuesday, September 10, 2013 latimes.com/news

Ron Burkle's Yucaipa buying Fresh & Easy stores from Tesco The British grocer will exit the U.S. after losing about $2 billion over five years. Yucaipa will acquire more than 150 of Fresh & Easy's nearly 200 stores as well as distribution and production facilities.

By STUART PFEIFER TIMES STAFF WRITER Ron Burkle, who became a bil- lionaire reviving faltering super- market chains, will try to turn the money-losing Fresh & Easy stores into a profitable venture. Burkle's Yucaipa Cos. has agreed to buy the El Segundo chain for an undisclosed amount from British giant Tesco, which is bailing from the U.S. scene after losing about $2 billion over five years. Yucaipa will acquire more than 150 of Fresh & Easy's 200 mostly Southern stores and its Riverside distribution and produc- tion facilities, keeping more than 4,000 employees. The deal is ex- pected to close within three Yucaipa Cos. will acquire more than 150 of Fresh & Easy’s 200 mostly months. stores. Above, a store in Hollywood. (Christina House, for the Times / September 11, 2013) The sale marks not only the end of the British firm's badly mis- One key could well be a con- "I think having quality ready-made managed venture but also an op- venience market catering to con- meals, as well as fresh breads any portunity for Burkle to shake up sumers' everyday needs, said Steve time of day, could appeal to a lot the chain — and, possibly, the in- Stallman, president of food indus- of people." dustry. try consulting firm Stallman Mar- Where Tesco went wrong was Burkle, who bought and sold keting. in trying to convert a British such supermarket names as "I think the concept of a more format to the U.S. market, said Grocery Co. and Food 4 Less, European-style grocer where you Burt P. Flickinger III of Strategic would not provide details but said go on a daily basis could appeal to Resource Group, a retail consult- he intended to make changes to a lot of people," he said. ing firm in New York. Fresh & Easy that "will make it Fresh & Easy's ready-made "They had primarily private- even more relevant to today's con- meals "weren't very good at first, label products and low to no ser- sumer." but they got much better," he said. vice, when people in the Southern California markets and across the Tesco was so desperate to un- Johnson said the company Western U.S. want well-known load its failed U.S. stores that it could thrive under Burkle. regional and national brands and a agreed to lend Yucaipa about $126 For one, American consumers choice between staffed and self- million to complete the transac- are trending toward fast-serve food checkout," Flickinger said. tion. The loan is secured by the as households become smaller. Tesco, in deciding to abandon Riverside distribution center. Fresh & Easy, he said, specializes the U.S. market this year, About 50 Fresh & Easy stores in packing food for one or two acknowledged that its effort to will close in the coming weeks, people. compete with natural and organic and about 400 employees will lose More and more, he said, con- retailers such as Trader Joe's, their jobs, said Brendan Won- sumers don't want to go to "70,000 Whole Foods and Sprouts had nacott, a Fresh & Easy spokesman. -square-foot grocery stores. They failed. "The vast majority of Fresh & don't need 10 pork chops." "It was an expensive experi- Easy stores in the L.A. region will Under new ownership, Johnson ment, and Tesco decided to take remain open," he said, but he said, the company has "really good its losses," Flickinger said. would not identify which ones. infrastructure like central kitchens Some in the industry expect Steven Johnson of Foodservice to orchestrate and make money that Burkle will rename the stores Solutions, a Tacoma, Wash., con- right away." Wild Oats, which was the name of sulting firm, said Fresh & Easy a chain of natural foods stores ac- was doomed under Tesco's effort quired by in to sell budget-priced, healthful 2007. Yucaipa, which held an foods and ready-to-eat meals. 18% stake in Wild Oats, owns the Despite wild success in Europe brand name. and Asia, the company failed in "Wild Oats is a well-known the U.S. on two fronts: poor loca- brand and it would be a great way tions and weak customer service. to hit the ground running," said "They did nothing to coddle the Lloyd Greif, an investment banker customers," Johnson said. "They'd who has worked on previous ac- pack three apples under plastic quisitions with Yucaipa. "This even though Americans like to feel transaction just goes to show you their produce. All their market re- that one man’s garbage is another search was based on the European man’s gold." experience." Burkle, the son of a Stater And when the stores opened, Bros. supermarket executive, built the ready-to-eat entrees were lim- his empire buying Food 4 Less in ited. 1987, then a series of chains that "Unfortunately, that turned off included , Ralphs and a lot of shoppers in the beginning, . Yucaipa sold much and they never went back," analyst of it a decade ago. Stallman said. The company has "Burkle's challenge is going to since diversified its investments, be the mix of locations; some in though it bought a stake two years lower-income areas and some in ago in the Great Atlantic & Pacific wealthier areas," he said. "I'm not Tea Co., the supermarket chain positive how it's going to work in better known as A&P. Burkle's net the lower-income neighborhoods worth was estimated this year at without changing some of the $3.1 billion by Forbes magazine. product mix. Prices would have to come down."