GroceryWorks.com gets financing, web expertise from U.K.’s Tesco

Tesco PLC, a leading European grocery store chain, has invested $22 million in GroceryWorks.com, Safeway Inc.`s on-line grocery store. Tesco also will bring its successful U.K. web shopping model to the site. As a result of its investments, Tesco will hold a 35% stake in GroceryWorks. Safeway will own 50%. In addition, GroceryWorks has completed a round of financing led by Tesco, which includes $35 million in cash and other assets.

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"Retailing services are a key part of the Tesco strategy for growth,” said Terry Leahy, Tesco CEO. “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 U.S. We admire Safeway Inc. greatly -- they represent the best of U.S. 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."

Tesco says its U.K. operation is profitable, with almost 1 million registered customers, 70,000 orders per week and annualized sales of $420 million.

GroceryWorks will suspend operations on June 26. When it resumes, the on-line grocery business will operate under the local Safeway banner, with a new web site and deliveries coming from the stores not from warehouses. GroceryWorks has been operating in Texas since January 2000.