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Shelby 2016 Market Profile: The Dakotas

Hugo’s plans to open a sixth Grand Forks area grocery store.
Hugo’s plans to open a sixth Grand Forks area grocery store.

by Terrie Ellerbee/associate editor

North Dakota Sees A Bit Of A Slowdown In The Oil Fields

In Texas they’re used to oil boom, oil bust, repeat.

Folks in North Dakota’s Bakken shale region are getting used to it, too.

“It’s not the first time we’ve been through this,” Tom Woodmansee, president of the North Dakota Grocers Association (NDGA), told The Shelby Report. “It comes real fast and leaves fast. That’s the problem.”

Mary Klein, administrative assistant, and Tom Woodmansee, president, North Dakota Grocers Association.
Mary Klein, administrative assistant, and Tom Woodmansee, president, North Dakota Grocers Association.

Take Williston, for example. It has gone from the center of the horizontal drilling universe to an uncertain future in five years’ time. At one point, more than 200 drilling rigs were pumping in North Dakota. By November 2015, that number had fallen to 65.

Housing quarters and hotels were thrown up during the boom to meet demand. According to reporting by the International Business Times, hotels were at 50 to 60 percent capacity in November. Reuters found more than 400 properties listed for sale in the area last fall, the most in nearly 40 years.

“It’s changing a lot,” Woodmansee said. “I think it’s still too early to tell (what the impact will be) yet. It’s going to be probably another three, four, five months before they see what kind of effect it has.”

One positive from the ups and downs in the Bakken region is the employment situation for the state’s grocery retailers. It has improved for them because of the layoffs and cutbacks in the oil fields.

“But the downside of that is a lot of folks have returned to their states until it recovers,” said Woodmansee.

All of this makes it tough to plan long term, but for some it feels like a return to normal—the normal before the boom, that is.

Still, the draw of billions of barrels of oil continues to birth new ventures and bring about changes:

• Last summer, SpartanNash acquired six stores from Dan’s Supermarket, which brought its total roster in North Dakota to 13.

• Independent operator Rob Bruggeman purchased the Super One in Thief River Falls and has converted it to a Bruggeman’s Supervalu.

• Jenna and Joe Gullickson purchased the Korner Grocery in Hoople and renamed it Hoople Grocery. Dale and Barb Brubakken had owned the store for 32 years.

• Norm Meland, 81, closed Norm’s Grocery on Driscoll’s Main Street after 57 years. Everything in the building was sold at auction in October.

• The ribbon was cut Sept. 1 on the expansion of Marketplace Foods, a Johanneson’s Inc. banner, in Valley City. Changes include a larger liquor store, convenience store and gas station. It is one of the few stores in the Midwest that is 100 percent “green.”

• Jason Tracy of Jason’s Super Foods in Mohall purchased Opdahl’s Grocery in Westhope. Carroll and Barb Opdahl retired. The store now has new checkout stations and an entire wall of new coolers and freezers. In addition to the Mohall store, the company also owns a store in Leeds and two in New Town.

• In June, Cash Wise Foods, owned by Coborn’s, cut the ribbon on a new 62,500-s.f. store in Dickinson at 1761 3 Avenue South. The store features a large natural foods selection; a deli with a fresh sushi bar, soup and salad bar; bulk foods; an onsite bakery; and a full-service meat department. A Cash Wise Liquor is located right next door.

• Also in June, a new 61,000-s.f. Hornbacher’s opened in Moorhead. The new store houses the first Hornbacher’s-owned pharmacy as well as a branch of Gate City Bank. Hornbacher’s also purchased the Super One Foods in Grand Forks last summer.

• Josh and Dawn Rossow purchased Zeeland Supervalu last summer from Frank and Vicki Meier, who had owned it since 1988.

• Cash Wise Foods opened a new 65,000-s.f. store at 755 33 Avenue East in West Fargo in May. It features a Caribou Coffee, Little Dukes convenience store and a Cash Wise Liquor next door.

(Many thanks to the North Dakota Grocers Association for its help in compiling this list.)

NDGA honors retailer, salesperson of the year

The North Dakota Grocers Association (NDGA) gave out several awards during its 54th annual convention, which was held in Fargo in September. As previously reported by The Shelby Report, Kristi Magnuson Nelson, president of Hugo’s Family Marketplace, received the North Dakota Grocers of the Year Award. Her father, Curt, and grandfather, Hugo, both received the award before her.

Hugo’s made news in 2015 and continues to do so this year. On Jan. 12, a Caribou Coffee opened at the 32nd Avenue Hugo’s in Grand Forks.

Last year, Hugo’s added Caribou Coffee shops in Grafton, Crookston, Thief River Falls and Jamestown, as well as its Park Rapids, Minnesota, location. Some of the new coffee shops were added during remodels. The Hugo’s on 32nd Avenue South in Grand Forks also got an expanded bakery and deli and larger produce and organic sections in addition to the new Caribou Coffee.

Hugo’s also continues plans for a development called Meadow Ridge on 47th Avenue South in Grand Forks.

Randy Jaeger, Johanneson’s, with his wife Jeanne Jaeger.
Randy Jaeger, Johanneson’s, with his wife Jeanne Jaeger.

At the annual convention, several other awards were given, including the National Grocers Association (NGA) Spirit of America Award, which went to Randy Jaeger, Johanneson’s Inc.

Jaeger has been involved in the grocery business over the past 39 years at both the retail and wholesale level. As VP of retail operations, he is responsible for the training and execution of company goals and standards set by Johanneson’s Inc., as well as expanding the retail reach of the company into new markets and formats.

Jaeger began his carrier at age 14 bagging groceries at a neighborhood Supervalu store and then progressing through high school and college with Nash Finch Co. He worked his way through the retail ranks of Nash Finch from retail carryout to VP of wholesale operations for the company. Positions along the way included night manager, assistant manager, store manager, area supervisor, manager of retail marketing and merchandising for the then-120 retail outlets Nash Finch owned.

Jaeger was named director of corporate retail marketing and merchandising, responsible for store execution of company goals. He moved to the wholesale side when he became distribution center manager for Nash Finch Co., then was promoted to VP of all Nash Finch wholesale operations nationwide.

At every position, Jaeger excelled at execution and focus of goals and profitability for the company. While on the wholesale side of the business, he knew he wanted to work with the independent retailers on operations and execution within their stores. For the past five years, Jaeger was president/full partner with Food Industry Safeguards, which works with retailers on policies and procedures that help them become more profitable.

In his role as VP of retail operations for Johanneson’s Inc., Jaeger uses his knowledge and experience to work with stores to produce budgets for sales and profits so Johanneson’s can continue to expand and reinvest in its retail markets.

The Johanneson’s Co. operates supermarkets, convenience stores, liquor stores and real estate development companies in Minnesota, North Dakota and Wisconsin. The Johanneson’s Group of Cos. primary business entities include Johanneson’s Inc., Johanneson’s of North Dakota, Pace Development, and Icelandic Properties, as well as other related entities.

The National Grocers Association (NGA) initiated the Spirit of America award in 1982 to honor distinguished individuals for their active involvement and participation in community service and public affairs. It has been presented to more than 500 persons, including former presidents, George Bush and Gerald Ford, former vice president Dan Quayle and numerous U.S. senators and representatives.

The NDGA honored Scott Boll, sales manager, Kemps, as Salesperson of the Year. Boll grew up in Fergus Falls, Minnesota, and graduated from Moorhead High School in 1976.

Scott Boll, Kemps, and his wife, DeeAnne Boll.
Scott Boll, Kemps, and his wife, DeeAnne Boll.

Upon his graduation from high school, he attended Moorhead State University and received his business degree in 1980.

His work in the grocery industry began at Piggly Wiggly. He enjoyed the work and pursued further career advancement by enrolling in the Nash Finch Management Training Program. Upon completion of this program, Boll was promoted to assistant manager of the Valley North Piggly Wiggly store.

In 1982, he began a career with Tucker Sales, a subsidiary of Kemps. While working with Tucker, he built a strong standing with Kemps, and the company pursued him to come to work in sales. In 2012, Kemps purchased Cass-Clay, and Boll has assisted in building the brand.

South Dakota Retailers Playing Defense As Legislature Reconvenes

This is an election year, and those seeking office could go fishing for votes by bringing up a host of topics in state governments that will be of concern to grocers and other retailers.

In South Dakota, one of the more contentious issues is a minimum wage tied to inflation. More specifically, one battle this year is likely to be about a youth wage passed by the legislature in 2015.

The minimum wage issue was on the ballot in November 2014. South Dakota’s voters decided by a 55-45 margin to increase the state’s minimum wage from $7.25 to $8.50 and include an increase each year thereafter to account for inflation. The state department of labor and regulation compares the U.S. Consumer Price Index (CPI) from August of the current year to August the previous year to measure the cost of living increase to be applied to the wage.

On Jan. 1, South Dakota’s minimum pay rate rose again by a nickel to $8.55 an hour.

Shawn Lyons
Shawn Lyons

The CPI didn’t rise by a significant amount this year, but that, of course, can change based on what happens in the national economy, Lyons said. It is doubtful, to understate the case, that the state’s economy will mirror what happens on “the two coasts,” Shawn Lyons, executive director of the South Dakota Retailers Association, told The Shelby Report.

With a state jobless rate of just 3 percent, workers likely won’t be laid off because of the potential for dramatic increases in CPI. On the other side of the coin, in an environment with such full employment, it would make more sense, and possibly be better for employees, to let the marketplace dictate what wages should be.

“You can’t compare those economies and that labor force in those different markets, and if you do that based off of a government mandate, then it gets to be problematic for a lot of small business,” Lyons said. “That’s going to have far-reaching consequences in the future—maybe when that CPI could be quite significant and just that bottom of the scale goes beyond what the marketplace dictates. It really gets more into political hyperbole than it does the real practice of what wages need to be in a local community.”PRO SDRALogSiouth

Last year, the legislature took it upon itself to pass a separate youth wage law. It would change the minimum wage for workers younger than 18 years old to $7.50 an hour with no tether to inflation. The change would allow for the inexperience of younger workers looking to get a foot in the door.

It is correct to use “would,” because this November, voters will decide whether that law will stand. The 2014 vote did not include the youth wage stipulation.

“I think our retailers are watching their hiring patterns,” Lyons said. “But there are certain hires that a lot of our employers are going to be a little bit more mindful of based off of experience for new employees, particularly younger employees.”

State, local governments looking for revenue

In South Dakota, as elsewhere in the Midwest, there will be needs, like more police or improvements to infrastructure that will have lawmakers eyeballing sales taxes. In South Dakota, that need is teacher pay.

“That may be the biggest issue that our legislature is going to be considering this year,” Lyons said. “The governor created a blue ribbon task force to study teacher pay in our state and to make recommendations to him. We know one of those that could be considered is an increase in our state sales tax, and so we’re going to be involved in those discussions, what the impact will be on the retail sector.”

He said that while retailers appreciate that the discussions must take place on the state level, they are likely to run into the same issue on city and county levels.

“That’s going to be on our radar screen,” Lyons said.

Employment practices also will be under the SDRA’s scrutiny. There may be movement on unemployment insurance, workers compensation and “ban the box” legislation this year, Lyons said.

Federal aid for the state’s unemployment insurance program has been lessening, and the department has laid off six employees in an effort to make ends meet, the Black Hills Pioneer reports. While there are no changes expected in employers’ regular payments into South Dakota’s unemployment insurance trust fund, there are calls for a rise in penalties and for shifting monies from the fund to administration expenses.

The Pioneer reports that there currently is a $5 penalty for late filing or payment of unemployment insurance that could rise to $25. It would be the difference between generating $130,000 and $500,000 per year for the South Dakota Department of Labor and Regulation, the news­paper reports.

Another change would shift $3 per covered employee from the unemployment insurance trust accounts to administration expenses, which would provide more than $800,000 annually for the department.

As for workers compensation, there is the issue of “aggregation of wages.” It is based on the case Patricia Wheeler vs. Cinnabon. Wheeler also worked at the Westside Casino and a Get ‘N’ Go convenience store in Sioux Falls. The South Dakota Supreme Court ruled in 2015 because Wheeler was injured on the job at Cinnabon, she should be compensated based on the total wages for all three of her jobs, because the injury prevented her from working at any of them, the Rapid City Journal reports.

“It has far-reaching impact, and we’ve been involved in a number of stakeholder meetings with the administration, other business groups as well as the insurance industry just trying to understand if—again, in a state with very low unemployment, if I’m to hire somebody for my place of business and they get injured either here or at their other job, how that aggregation of wages gets calculated for a work comp claim,” Lyons said. “Not only in terms of the impact on insurance, but the impact on employment practices—I think there’s going to be a lot of cause for concern from a lot of small businesses.”

Another issue is so-called “ban the box” legislation, which would prohibit employers from asking about criminal convictions on a job application. Seventeen states have adopted such laws, but South Dakota is not one of them. A report released last summer by The Pew Charitable Trusts’ Stateline project showed that South Dakota had 445 laws that restrict the rights of ex-offenders, so “ban the box” legislation could come up this year.

“Those are a few of the issues that we’re going to be looking at,” Lyons said. “There were approximately 500 bills that were introduced during our legislative session (last year), and our association tracked about 177 of those. Some of them you get more involved in than others, but frankly when you’re an organization our size and representing so many different types of retailers, it’s our responsibility to know how those issues impact businesses and whether it’s a positive or a negative and frankly just our role in trying to educate legislature on those consequences as well.”

‘This is Retail’ campaign a success

Nationwide and in South Dakota, one in four jobs is supported by retail. The retail industry employs nearly 96,000 directly, and supports more than 127,000 total jobs in the state. Retail accounts for 17 percent of South Dakota’s gross domestic product and generates 16 percent of wages.

The “This is Retail: South Dakota” campaign launched in 2014. It is a series of videos produced by National Retail Federation (NRF) that feature documentary-style interviews with South Dakota retailers and merchants. Each video highlights a different aspect of retail.

Fourth-generation grocer RF Buche takes part in the National Retail Federation's "This is Retail" initiative, which was comprised of six videos made across the state.
Fourth-generation grocer RF Buche takes part in the National Retail Federation’s “This is Retail” initiative, which was comprised of six videos made across the state.

In South Dakota, there were six different television spots, and Lyons said they made quite an impact. One of the videos features RF Buche, a fourth-generation groceryman who serves on the boards of both the SDRA and the National Grocers Association. His great-grandfather, August Frances Buche, started the family business in 1905 in Andes.

“The impact from the retail community, from public policy makers, from the general public, has really been a positive,” Lyons said. “It’s something that we were glad to be able to highlight last year, and we’re hoping that at some point in 2016 we might be able to run those ads again or maybe a different set of ads.

“The response both here in South Dakota, as well as from some of our peers around the country that were aware of what we were doing here, has certainly been a positive, and I think it just helps us showcase the impact of retailers in their local communities—what they give back, what they get involved with both from a civic standpoint as well as just giving, and then just being the economic stimulus for a lot of communities.”

South Dakota was one of six states chosen by NRF to initiate the “This is Retail” campaign at the state level in 2014. Another eight states were featured in 2015, and eight more will be featured this year.

*Editor’s note: More about North and South Dakota can be found in the market profile story that appears in the February print edition of The Shelby Report of the Midwest.

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