Tesco.com moves into US

Tesco PLC 25 June 2001 GROCERYWORKS TO IMPLEMENT TESCO.COM'S STORE BASED GROCERY HOME SHOPPING SERVICE IN THE US THROUGH SAFEWAY INC'S STORES LONDON, ENGLAND, DALLAS, TX and PLEASANTON, CA - June 25, 2001 - Tesco PLC, the number 1 food retailer in the UK and the largest e-grocer in the world, announced today that they will be working with Safeway Inc., a leading US supermarket retailer through GroceryWorks (Safeway Inc.'s exclusive on-line grocery channel) to bring Tesco's home shopping model to the United States. In addition, GroceryWorks has completed a round of financing led by Tesco, which includes $35m cash (£24.9m) and other assets. Tesco.com (Tesco PLC's on-line grocery channel) is contributing $22 million (£15.7m) in cash, as well as intellectual property and technical resources, for 35% of the GroceryWorks voting equity. Safeway Inc. holds approximately 50% of the voting equity and the remainder of the voting equity is held by other current preferred shareholders. Tesco PLC's Chief Executive Terry Leahy said, 'Retailing services are a key part of the Tesco strategy for growth. We have developed the best on-line grocery home shopping system in the world which we know can be of use to other retailers. Last year we outlined our desire to take Tesco.com into different markets including the US. We admire Safeway Inc. greatly - they represent the best of US retail. With Tesco's know-how and the Safeway Inc. brand we have the perfect combination to bring grocery home shopping to the world's largest market.' The deal combines Tesco's experience in developing internet sites and the system to run a store-based grocery home shopping service with Safeway Inc.'s quality operations, procurement strength, its well-recognised brand, 1500 stores in the US and knowledge of the US market. Tesco.com is the largest and most successful Internet-based grocery home shopping service in the world. In the UK this service is profitable, has almost 1 million registered customers, 70,000 orders per week and annualised sales running at a rate of £300m ($420m). Vasant Prabhu, Executive Vice President, Chief Financial Officer and President of e-Commerce Businesses, Safeway Inc. said, 'We believe that on-line grocery is a service that meets the needs of busy consumers. We have great respect for what Tesco.com has achieved in the United Kingdom. Through our mutual relationship with GroceryWorks, our goal is to create the biggest and best on-line grocer in the United States.' Gary Fernandes, Chairman of GroceryWorks said, 'I am extremely gratified that GroceryWorks is now part of a strategic relationship with two of the world's leading retailers. These relationships, along with the new capital, will enable GroceryWorks to achieve its objective of becoming the leading grocery e-tailer in the United States.' GroceryWorks will suspend operations on Tuesday, June 26th. When resumed, the on-line grocery business will operate under the local Safeway Inc. banner, with a new website and deliveries coming from stores not from warehouses. About Tesco PLC Tesco has four parts to its strategy: to maintain a strong core UK business, to be as strong in non-food as food, to grow internationally and to move into retailing services such as on-line shopping. This strategy is delivering the fastest organic growth of any major retailer in the world, with group sales of £22.8bn ($32 billion) and group profit before tax of £1.07bn ($1.5 billion). The company operates over 900 stores in the United Kingdom, Republic of Ireland, Hungary, Poland, Czech Republic, Slovakia, Thailand, South Korea and Taiwan. It has 240,000 staff worldwide and 25million sq. ft. of sales space, of which nearly 40% is outside of the UK. About Safeway Inc. Safeway Inc. is a Fortune 50 company and one of the largest food and drug retailers in North America based on sales. The company operates 1,747 stores in the Western, Southwestern, Rocky Mountain, Midwestern and Mid-Atlantic regions of the United States and in Western Canada, and employs almost 200,000 people. The company had sales of £22.8bn ($32 billion) in the year 2000. The company's common stock is traded on the New York Stock Exchange under the symbol SWY. About GroceryWorks GroceryWorks is an internet-based grocery home shopping service that has been operating in Texas since January of 2000. It is the exclusive on-line grocery channel for Safeway Inc. and is the vehicle by which Tesco and Safeway Inc. will be developing grocery home shopping in the United States. About the US Internet market The US internet market offers huge opportunities. It is the largest market for e.commerce in the world, with 60% of households having Internet access compared to 30% in the UK. However, the market for grocery home shopping is currently smaller than in the U.K. Exchange rate £1=$1.40 $1=£0.71 Contacts: GroceryWorks: Gary Fernandes: 972-813-4065 Tesco: Lucy Neville-Rolfe: 01992-646-654 Steve Butler: 01992-644-800 Safeway: Julie Hong: 925-467-3832 (analysts) Debra Lambert: 925-467-3267 (media) -0o0-

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