What's the story behind Tesco's rising interest in forecourt stores? Camilla Palmer reports The race to capture consumers while they fill up their cars with fuel, or snap up a paper, chocolate bar and a pork pie, has suddenly got faster with the news Tesco and Esso are finally gearing up to launch 150 Tesco Express forecourt stores. It's not a new partnership. The companies announced they were getting together back in September 1998. The first eight Express stores opened on forecourts nine months ago as a pilot, and Tesco stated publicly it was keen to open 100 stores on Esso sites. So it seems odd that it has taken the two companies so long to get this far ­ particularly as Tesco has been trying to roll out its Express formula nationally since April 1998. Why the apparent delay? Sure, Tesco and Esso needed to spend time making sure the format worked before giving the green light to a major investment programme. But one analyst said he was confused as to why the multiple was dragging its heels. "When you consider Tesco is aiming to open 200 hypermarkets in central Europe and the Far East within the next five years ­ that's a business as big as Sainsbury's UK operation ­ then it seems it is holding back on a relatively small investment in the UK." The multiple maintains, however, that its forecourt retailing strategy is running to schedule. A spokesman said: "Nine months to hammer out a strategy, with another nine months to observe a trial in action, is not moving slowly." He said the move into forecourts was a direct result of consumer demand, and a roll-out of 150 stores was an "appropriate" number. Tesco chief executive Terry Leahy this week described the Express format as an "outstanding" success. But he hasn't always thought so. The multiple made its first foray into this sector in 1994 when it opened a roadside c-store on a Tesco branded petrol station. It opened 15 sites in and around London and then looked at how to make the format profitable. A fierce petrol price war ­ spearheaded, ironically, by Esso's Pricewatch blitz ­ severely undermined the economics of the trial stores. As did the fact Tesco had to get to grips with the problems of supplying small stores. But by April 1998 the price war had eased and Tesco had fine-tuned its distribution system by making the Express stores satellite operations of nearby Tesco superstores, from where they could be supplied. Express was ready to roll and was being described as Tesco's c-store format. Leahy said: "We are comfortable with Express. It has always been popular with customers and now it makes good profits." And then it all went quiet. That may have been because Tesco had trouble finding sites on its own. Meanwhile, rivals such as Safeway were overcoming any such problems by setting up shop with petrol companies. As one retail commentator observed last year: "No one is really sure whether the Tesco alliance with Esso is an innovative strategic alliance to claim market share or just a simple property deal." Clearly, both are important for Tesco. But there is no doubt it wants to cherrypick the best sites from Esso's 1,270-strong estate of forecourt shops. And Tesco's spokesman said: "We are working closely with Esso to get the sites right." The first will be developed in the south ­ as it is densely populated and there's high car ownership ­ with 25 due to be up and running within four months and 150 operating around the country within three years. "We are taking high quality groceries to wherever our customers want to buy them," said the spokesman. As planners continue to make it difficult to open new 30,000 sq ft stores, analysts say it makes sense to grab market share through smaller format stores, even though they do not have the same impact on the bottom line as a superstore. The biggest selling point for supermarket chains moving into the forecourt arena is the strength of their brands. One analyst said: "It's all about perception ­ retailers such as Tesco, Safeway and Somerfield give much needed integrity to forecourt stores. By giving consumers the chance to shop for reasonably priced, fresh convenience food with its brand on the box, Tesco has a headstart on plain c-store retailers." That's what worries independents. Tesco may have taken its time deciding to launch the Express idea, but now it has, the multiple will soon be making huge inroads into the c-store sector. {{NEWS }}

Topics