Possibly the first and last time that I belong in the same sentence as Sir Terry Leahy, but it would appear that we both have a large amount of egg on our faces this morning.

Possibly the first and last time that I belong in the same sentence as Sir Terry Leahy, but it would appear that we both have a large amount of egg on our faces this morning.

Like him, I was fairly bullish on the prospects for Fresh & Easy in the US. Despite some obvious errors in merchandising and strategy from the outset (too much private label, not enough loose produce, no loyalty card, some genuinely random store locations), the store concept was innovative and shopper-centric and, with scale, could have become a sizeable success. Some of the early errors had been corrected but the one big elusive element was scale. 

Like Tesco, and everyone else on earth, I could not have foreseen the sub-prime crisis and the havoc it wrought on California and Arizona – the launch pads for F&E. This destabilisation put a lid on the rampant growth that Tesco was planning and therefore meant that the F&E food facility/distribution centre has been running hideously below optimum ever since. With an expensive infrastructure running at around a third of capacity, the venture was looking increasingly doomed.

In around 2009, I visited several stores in and around Tempe, Arizona, and met with F&E shoppers, management and suppliers. All of them were incredibly positive about the prospects for the chain and I came away convinced that the chain could become a rare example of a UK retailer successfully nailing the American market.

Subsequent years saw efficiencies and sales densities improve and operating losses narrow, but those economies of scale never arrived. With impatient shareholders on the sidelines, yesterday’s confirmation of a withdrawal had become inevitable. One wonders if the approach and time horizons would have been different if Tesco were a private business rather than an over-scrutinised public company.

Regardless, F&E now finds itself under the stewardship of Ron Burkle’s Yucaipa investment vehicle. There are worse places to be. He’s successfully acquired, improved and sold on chains like Ralphs, Food 4 Less and Dominick’s to the likes of Safeway and Kroger. His pedigree in the sector is fairly decent and he also currently has stewardship of grocery chains A&P and Pathmark in the north-east.

Interestingly, he also owns the Wild Oats brand, with feverish speculation suggesting that this brand (the chain was acquired and eponymously converted by Whole Foods) might be revived at the 150 F&E stores that Burkle will now be running.

For Tesco, the deal concludes what has become the retailer’s biggest misadventure since Catteau in France. Shareholders will breathe a sigh of relief at the cessation of a distracting money-pit. Resources and attention will be refocused on more pressing issues and we can chalk up another corpse in the cemetery of ‘not very good market entries’.

One last massive issue remains: will we still be able to buy Fresh & Easy brand sprouts in the UK?