Tesco to face Japanese competition in the US

By Anita Awbi

- Last updated on GMT

Related tags Supermarket

As Tesco prepares to take its lucrative convenience store blueprint
to the American west coast, it may find stiff competition waiting
from a Japanese retailer busy establishing a similar niche empire.

FamilyMart, the Japanese-owned supermarket chain, has already opened two premium convenience stores in California - and hopes to add another 248 by the end of 2009.

The stores have been opened under the Famima!! banner and promise to bring a new community lifestyle experience to the west coast, offering a cross between delicatessen, quick-service restaurant and traditional convenience store.

The shops also provide a banking service, a stationary department, newsstand and internet terminals. And they stock fashionable Japanese delicacies, such as sushi, noodles and a selection of imported groceries to appeal to middle-income shoppers.

Both Tesco and Famima!! are targeting the local shop market, with planned store sizes of around 2-3,000 square metres. Although Tesco could not confirm it will compete in the premium sector, its current Tesco Express format supplies a range of fresh produce, takeaway food, Tesco Finest, private label and famous name brands.

Verdict, a UK research group, claims the US has seen a shift away from traditional grocery stores towards discounters such as Wal-Mart, Target and Kmart which have developed their food ranges while competing fiercely on price. Research indicates that in the last five years higher end retail has also begun to expand, taking advantage of foodies and health conscious consumers.

And a study by the Institute of Grocery Distribution (IGD) claims that convenience stores are best placed to tap the growing trend in premium grocery demand, so the Famima!! format may well find its niche with affluent Californians.

Famima!! CEO sees the development of a premium chain in the US as a turning point for the company that already operates more than 6,000 supermarkets in Japan and 5,000 across Taiwan, China, Korea and Thailand.

When the first stateside Famima!! shop opened last year, he said: "Our strong track record in overseas markets shows that we have a successful formula to make Famima!! a household name in the US."

And the FamilyMart CEO added: "This initiative is expected to add crucial momentum to the implementation of our pan-Pacific plan, which aims to create a global network of 20,000 stores."

But Tesco seems unfazed by the competition. The multi-national retailer has been researching the American retail market for years and has experience of overseas competition in the convenience, supermarket and hypermarket sectors.

The firm, currently the world's fourth largest food retailer, operates convenience stores in the UK, Ireland, Malaysia, Thailand and Korea.

Greg Sage, Tesco's international corporate affairs director, told FoodandDrinkEurope.com​: "We have been researching the US market for 25 years and we have a good idea about what competition is there, but we have a good model.

"We have an offer that we think will be very popular with consumers. And we enjoy the competition."

Tesco will make an initial US investment of £250m, funded entirely through existing resources. It will start the planned expansion on the west coast in 2007, and expects the operation to break even after two years.

In the UK, Tesco is the fastest growing chain in the convenience sector, increasing its neighbourhood market share by 0.4 per cent in 2005 to 5.4 per cent, according to Verdict.

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