Tesco Wins S. Calif. Warehouse Battle

EL SEGUNDO, Calif. Tesco USA here has overcome another hurdle is its efforts to open a Southern California distribution center, despite an ongoing legal challenge by an environmental group, Simon Uwins, chief marketing officer, told SN last week. I'm glad to say we can continue with construction and are moving ahead, he said after a U.S. District Court judge rejected an effort by the environmental

EL SEGUNDO, Calif. — Tesco USA here has overcome another hurdle is its efforts to open a Southern California distribution center, despite an ongoing legal challenge by an environmental group, Simon Uwins, chief marketing officer, told SN last week.

“I'm glad to say we can continue with construction and are moving ahead,” he said after a U.S. District Court judge rejected an effort by the environmental group to obtain an injunction to halt construction while it pursues its efforts through the legal system.

A trial on the merits of the case is scheduled to begin in late June, with a verdict favoring the plantiffs, potentially forcing a permanent halt to construction of the 820,400-square-foot facility, which the company had planned to open in the third quarter of this year in Riverside, Calif.

Uwins told SN Tesco has not yet decided on where it will open its first Fresh & Easy Neighborhood Market. “We have a number of sites in the pipeline, but which one will open first is difficult to tell, given all the hoops you have to jump through,” he said.

If Tesco is ready to open stores before the distribution center is completed, “then we would consider other [supply] options,” Uwins acknowledged, though he declined to discuss what those might be.

The lawsuit against Tesco was filed late last year by Health First, which subsequently filed suits against two of Tesco's United Kingdom-based suppliers who were planning to open distribution centers in the same business park as the Tesco facility, and also against March Joint Powers Authority, the agency that oversees civilian development of the property where the facilities will be located, on the former site of March Air Force Base.

The suits claim the companies have not addressed the potential pollution and traffic impact their businesses could generate.

If the injunction had been granted, Tesco officials said halting construction until the trial begins in late June could have cost the company $39.6 million, with additional delays potentially adding between $2.13 million and $2.64 million each week.

Company officials also estimated that, if Tesco is unable to complete construction on the current site, the costs of rebidding for construction contracts, purchasing materials and reassembling the work force could run as high as $51.6 million

Besides Tesco and the March Joint Powers Authority, the other companies named in the lawsuits are Wild Rocket Foods, a processor of prepared salads, and 2 Sisters Group, a poultry supplier.

While 2 Sisters still plans to build a 283,000-square-foot processing facility in the same business park as Tesco's warehouse, Wild Rocket said in March it would relocate its facility to a different site area nearby because of higher-than-anticipated costs related to waste-water disposal.

As previously reported, Tesco plans to open a chain of 10,000-square-foot neighborhood grocery stores in Los Angeles, San Diego, Phoenix and Las Vegas, with an initial investment of $500 million a year and a goal of breaking even within the first two years of operation. The company expects to open at least 100 U.S. stores initially.