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LONDON -- The health of Tesco's fledgeling business in the U.S. -- Fresh & Easy Neighborhood Markets -- is being questioned amid claims that suppliers are "disenchanted" and had no idea that the supermarket giant was going to call a three-month halt to its expansion drive, reported the UK's TimesOnline.
Jim Prevor, a supermarket analyst in the U.S., reportedly told the TimesOnline that Tesco's Fresh & Easy chain needed a major strategic overhaul if it was ever going to be a hit with American shoppers.
"They are doing horribly," he said. "There's no question they have made some mistakes and they are still making them."
Tesco revealed last week that, after opening 59 Fresh & Easy stores across Southern California and Arizona in five months, it was going to "pause for breath" until July, the report stated.
The move followed claims from analysts that stores were missing targets by up to 70 percent. Tesco insists that its review of the format, based on the Tesco Express convenience chain, was planned, but Prevor said he had spoken to suppliers who had no idea the decision was coming, according to the report.
"This pause was a wise decision," he stated. "The more stores Tesco opens here, the more money the company loses. But it was certainly not pre-meditated, or planned. We have spoken to several dozen suppliers who have been working hand-in hand with Tesco for over a year since the project began.
"Every one of them has told us that at no point in time did Tesco ever say 'Hey, don't forget, we're going to open 60 stores then take a time-out for three months,'" Prevor continued. "The whole supplier community is dumbfounded. Many are becoming disenchanted and some are deciding to walk away. They don't want to talk about it as they don't want to upset Tesco."
A spokesman for Tesco refused to comment on the group's relationship with U.S. suppliers, but he did say that "in all parts of our business, it is always part of our plan to take the opportunity to step back and review progress. We have been getting lots of positive feedback from customers."
Tesco spent three years researching the U.S. market before launching Fresh & Easy and plans to invest $2 billion over five years, the report stated.
Jeff Adams, the chief executive of Tesco's business in Thailand, joined the Fresh & Easy management team last month in a move that fuelled speculation that the chain was struggling, the TimesOnline reported.
Analysts believe Tesco will also go back on a pledge to break out separate trading figures for Fresh & Easy in its annual results on April 15, the report stated.
Prevor told the TimesOnline that Fresh & Easy needed to give far more space to popular American brands rather than use its own brand on most products. He added that packaging had to be cut back and more staff should be American.
"Americans are different from Brits and the stores will be more successful if Americans make the decisions," he said. "Besides, Tesco could use the British team back in the UK."