It was just over a year ago that we ran a piece titled, Tesco Uses Poor Economy As Excuse For Fresh & Easy Pullback. This was followed up with a piece titled, What Will Be The Fate of Fresh & Easy, which included some validation in the form of a note from one the trade’s highly experienced retailers:
Your piece, Tesco Uses Poor Economy As Excuse For Fresh & Easy Pullback, was right on.
I’m mindful of both Lee Scott’s comments, which you point out, and Jack Welch’s comments at PMA: “…in these economic times, you either BUY your competition or BURY them.”
Tesco is a remarkable company with a strong financial position.
If Fresh and Easy was performing for Tesco, they would, as you said, “… push the peddle down…” to accelerate the program, ESPECIALLY in the current environment in the U.S.
NOW is the time for strong companies to take market share, and it’s interesting that Tesco backs off. Your analysis of that was right on.
Not everyone agreed though. We have been holding onto a note sent us following those two pieces:
Now wait a minute. You’re a businessman, Jim, would YOU seriously expand ANY business in this economic climate? Europe is in a recession, and we are too, although the government is failing to admit it. Consumers know and are behaving accordingly…
— Bill Gerlach
Research and Development Director
Melissa’s/World Variety Poduce, Inc.
Los Angeles, California
We never disagreed with Bill that the economy was in a recession. This was all post-Lehman Bros. collapse, and we had written extensively regarding the meaning and significance of the financial crisis.
The disagreement was concerning the response to a recession by financially strong organizations. We didn’t accept Tesco’s explanations that it was slowing its rollout of Fresh & Easy in America due to the economy. Tesco is very solid financially and we stated that if Tesco were convinced the concept was working, the company would have used the recession as a time to accelerate expansion, claim market share and decimate competitors.
We’ve dealt quite a bit with the recession here on the Pundit and conducted a nice talk on the subject with industry consultant Kevin O’Connor and Steve Lutz, Executive Vice President of the Perishables Group, at PMA’s Produce Solutions conference. Some of the ideas we expressed there we summarized in a column in Pundit sister publication, PRODUCE BUSINESS, titled Good Decisions In Bad Times.
Still the point Bill Gerlach makes is true: The Pundit is an editor, an analyst, a writer, a lecturer and… a businessman. So as this year comes to an end, we thought it appropriate to use this issue to share precisely how the Pundit elected to conduct business this recession year. After all, the real world experience of trading produce and of building a business is no small part of what has added value to our commentary.
Now we are not Tesco. We don’t have its asset base or its access to equity and credit markets so we must be more cautious. Still, when Bill Gerlach asked, way back a year ago — “Jim, would YOU seriously expand ANY business in this economic climate?” — our answer was not only yes, but, enthusiastically yes.
Part of this was a matter of practicality: Recessions free up assets — great employees, prime locations, etc. It is very hard to expand during boom times because the raw materials are not available.
More completely though, whatever we may think of the policies of particular politicians, we have an abiding faith in the long-term prospects for the United States of America. We are reminded of a story J.P. Morgan used to tell:
“My father told me,” Mr. Morgan was quoted as saying, “to follow my own bent in business, but whatever that business, to work hard. One thing he said I shall always remember. . . not to discount the future of America. ‘Remember, my son,’ he said, ‘that any man who is a bear on the future of this country will go broke. There may be times when things are dark and cloudy in America, when uncertainty will cause some to distrust and others to think there is too much production, too much building of railroads, and too much development in other enterprises. In such times, and at all times, remember that the great growth of that vast country will take care of all.’”
So we’ve used the recession as an opportunity both to reinvest in our traditional businesses and to launch some new ones while also trying to make our industry and our country a better place. Today’s Pundit will include several pieces that tell you what we did with this recession.
Despite all the bad press that capitalism gets — no less a personage than President Barack Obama was just out attacking “fat-cat bankers” — we think that fundamentally, capitalism is about giving. One creates or produces something of value and offers it to the world, and the world reciprocates. The pieces below detail what we are giving. The years to come will tell us if the gifts were of sufficient merit to be worthy of reciprocation. That is what capitalism is all about.