Tesco has told City analysts its Fresh & Easy operation will be taking a "brutal" approach to cost control as it seeks to compete with traditional grocers in the US.

The business has been designed to be low cost to support Fresh & Easy's price position, chief executive Tim Mason told more than 100 analysts from the UK, Europe and the States, who visited stores earlier this week.

"Mason talked of a brutal approach to cost control and building in a low-cost culture from the start," said Shore Capital analyst Clive Black, who was on the trip.

"Everything has been considered - from reusable trays, shelf-ready merchandising, self-scanning and central support from the Bangalore administration centre.

"We expect Fresh & Easy to be keen on prices. This is a discount operator and comparisons with Trader Joe's and Whole Foods Market may be wide of the mark. The range is limited - about 3,500 SKUs - which helps cost control and allows suppliers to gain scale benefits."

The Fresh & Easy management also spoke candidly to analysts about availability problems after pictures of empty shelves were circulated, said a Citigate report.

"Mason admitted that Fresh & Easy was 'desperately chasing stock'," he said. Quite fairly, he blamed the fact that ordering systems need a period of stability to build up a history. Only three weeks in, these issues can be managed out."

Tesco also revealed that it was planning to open stores in San Francisco. It currently has 13 stores up and running in California and Nevada, and is due to open its first four Fresh & Easy stores in Arizona on 5 December.

It was also "pursuing" a second distribution centre in Stockton, California, it said.

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