Last updated on August 16th, 2012 at 12:08 pm[gn_note color=”#FFCC00″]The 2011 Iowa Profile originally ran in the August 2011 edition of The Shelby Report of the Midwest. Due to reader requests we will be posting our Profiles from each edition of The Shelby Report. The profile will be published on theshelbyreport.com one month after it has run in print.[/gn_note]
State-based chains add stores, remodel locations
by Terrie Ellerbee/associate editor
The official ballot for the Aug. 13 Ames/Iowa Straw Poll is ready. Presidential candidates hoping to win the nomination for the Republican Party have been seen all over The Hawkeye State. Des Moines, the state’s capital, has seen Herman Cain visit 15 times, Tim Pawlenty and Newt Gingrich 13 times, and Michelle Bachman a dozen times.
The state hopes to capitalize on the glare of media attention by announcing its intent to become the healthiest state in the nation.
Under the national spotlight, Iowa-based grocery chains are expanding and upgrading their stores, particularly those located in more populated areas. In addition to presidential candidates, two new retail players—Whole Foods Market and Trader Joe’s—have come to Iowa.
Home state chains continue to expand stores, grow
A study by the Iowa State University Extension’s ReCap program showed that the number of grocery stores with employees (not counting those run by sole proprietors) dropped by half—from about 1,400 in 1995 to about 700 in 2005. The number of supercenter stores offering groceries increased 175 percent during the same time frame. (The state currently has 50 Walmart Supercenter stores. Target has 22 stores in Iowa.)
But retail grocery chains that are headquartered in the state haven’t blinked. They are seeking to serve more Iowans than ever before. West Des Moines-based Hy-Vee Inc. and Boone-based Fareway have both grown over the year.
“One of the things that we’re seeing as far as for new store builds—it’s concentrated primarily with the chains,” Jerry Fleagle, president of the Iowa Grocery Industry Association (IGIA), told The Shelby Report. “I think Hy-Vee and Fareway have had the capital and are doing improvements not only in their stores, but also building new ones. We haven’t seen very many independent grocers building new stores. We are seeing some remodeling by independents. Primarily the independents in Iowa operate in your smaller communities, which have had a little bit more of a struggle to keep up than maybe the larger metropolitan areas.”
Ric Jurgens, CEO and chairman of the board of Hy-Vee, was among speakers at this year’s IGIA convention held in Okoboji in July. He told attendees about what’s going on with the chain.
Employee-owned Hy-Vee now has stores in eight states (with Wisconsin being the latest) and just opened its 233rd location. It has 58,800 employees, and just went over the 58,000 mark this year.
“Our company continues, for 81 years now, to be a private company … and those of you who are in a private company understand the advantages,” Jurgens told IGIA attendees. “If you’re one of those companies that deal in the public sector, so you’re traded—we don’t have any of our energy put into dealing with market analysts, and frankly, we really don’t care what’s going on in the rest of the market relative to pricing of stocks, because our stock is not based on any markets at all. It’s based on the value of the company. We find that that’s a great advantage and we like that and we are going to stay that way.”
Hy-Vee store directors run the company’s stores much like a storeowner would.
“That autonomy creates a lot of different perspectives and so we kind of get the outside influence from inside because we have people with all of these different ideas coming at us all the time,” Jurgens said. “It’s a healthy situation.”
Hy-Vee is known for its emphasis on health and wellness. It will be the first grocery chain to go to market in America with Nutrition Keys on the front of its private label products.
Jurgens talked about in-store pharmacies and how they have expanded into the HealthMarket arena within Hy-Vee. HealthMarket also is Hy-Vee’s private label for natural and organic and other wellness products.
“Our health journey began with the pharmacy, and pharmacy sales will be over $1 billion this year. We’ll be somewhere around $7.1 billion (total), so you get a sense of how big a part of our business pharmacy is,” Jurgens said.
He said that with every store the company opens, the HealthMarket “is a little bit bigger.”
Hy-Vee now has 175 dietitians working at store level, and 70 or 75 chefs.
“When you combine the power of a pharmacist with a dietitian and a chef, we can help people whether they’re dealing with issues in their life and their health on a proactive basis to protect good health and to avoid bad health, or someone who has some of sort of a disease state that they’re addressing and they need particular attention in any way.
“Really what I’m finding is people who are turning to Hy-Vee as one of the fist places they go when they need information about their health,” Jurgens said. “We can’t handle cancer, but if they have cancer we can help them in many regards.”
An IGIA attendee asked Jurgens about in-store clinics.
“I believe specifically that clinics in stores are going to be expected of us someday and I think that it’s because they’re more cost effective and they’re more convenient for the consumers,” Jurgens said. “The problem that we’ve had is the clinics are managed by people in the healthcare world, and they’re not their highest priority. They don’t have nearly the traffic at this point because it’s a fairly new innovation, but I do believe in time that they will be.”
As for capital projects, Hy-Vee has been very busy with new stores, expansions and remodels in its home state over the past year.
Hy-Vee recently opened a store in Sycamore, and opened its seventh Sioux Falls location. Jurgens said it is the chain’s custom to open four or five new store every year, and to complete 10 or 12 major remodeling projects.
Most of the stores are 80,000-90,000 s.f. with an attached wine and spirits store, as state laws allow, and many have a Hy-Vee gas station in the parking lot or very nearby. Hy-Vee typically has a Caribou Coffee kiosk in its stores as well, and this year is trying something new with it.
“We just opened up a remodeled store in Minnesota that has a Caribou attached to the gas station, so that’s kind of a new idea we’re experimenting with. It’s actually like a freestanding Caribou store attached to a gas station,” he said.” So we’re always creating something new and different and trying different things—and proud of that.”
Hy-Vee’s Fairfield store, which opened April 12 at 1300 West Burlington Ave., is the company’s second LEED-certified store, and one of fewer than 15 supermarkets in the country that has achieved U.S. Environmental Protection Agency (EPA) GoldChill Gold-Level certification.
Hy-Vee decided to grow the size of a new store in Waterloo before it was even constructed. Plans are for a store 50 percent larger than the grocery chain originally proposed. The project is a former Hometown Foods site that somewhat constrained the size of the new Hy-Vee. But the employee-owned grocer purchased a neighboring lot and that made room to expand the store from approximately 21,200 s.f. to 31,000 s.f. The larger floor plan allows for a drive-through pharmacy as well as a deli, salad bar, a larger meat department, a HealthMarket and frozen food section.
In Cedar Rapids, the planning commission will allow Hy-Vee to expand its Oakland Road NE store by almost 50 percent. Plans there include a convenience store with gasoline pumps as well as a pharmacy. The 47,206-s.f. store will gain 22,712 s.f. and remain open during the project.
Hy-Vee has expanded stores in Johnston and Pleasant Hill, too. Each store gained about 5,000 s.f. to expand their wine and spirits departments.
The chain got the blessing of the city council in Waukee for a new store at the northwest corner of East Hickman and Northeast Alice’s roads. The 87,240-s.f. grocery store will house a pharmacy, cafeteria and a second Caribou Coffee shop, as well as a gas station and car wash.
Earlier this year, Hy-Vee told the Des Moines Register that three new Hy-Vee stores planned for the metro area likely would be delayed until at least 2012. Beaverdale, Urbandale and Prairie Trail in Ankeny are scheduled to get new stores, but start dates haven’t been set yet.
Hy-Vee is expanding more than stores. In May, it announced plans to expand its perishables distribution facility in Chariton by 108,000 s.f. It also will relocate a truck fueling station on Osceola Avenue to a site at the southeast corner of Osceola Avenue and Hy-Vee Road.
The perishables facility expansion reportedly will cost $18.4 million. Tod Hockenson, VP, distribution for Hy-Vee, said the warehouse addition will provide much-needed space to handle more products in the fast-growing areas of produce and frozen foods. Once the expansion project is completed, Hy-Vee will be able to realign its product mix between the Chariton facility and the company’s Perishable Distributors of Iowa facility in Ankeny.
Fareway opened a new supermarket at First Avenue South and 12th Street in Fort Dodge to replace an older location early this year. The whole staff from the former 615 Second Ave. S. site was transferred to the new store. The new, 33,000-s.f. store features a bakery and expanded meat and produce departments. It is expected to be “the anchor of what will be our downtown realignment program,” said Fort Dodge Mayor Matt Bemrich.
Dubuque got its first Fareway this past April, and the store marked the chain’s 99th location. The supermarket opened in a former Big Lots location at 2050 Kennedy Rd.
Fred Greiner, president and COO, said Fareway officials had been looking for locations in Dubuque for some time.
On April 28 in Sioux City, Select Food Market opened at 1730 Nebraska St., in an area of the city had gone without a grocery store for two years. The new grocery store is located in a former Fareway store building and is part of the Nash Finch distribution chain.
Save-A-Lot, a Supervalu banner, has a new outlet in East Moline at the Ridgewood Shopping Center on Avenue of the Cities. The Save-A-Lot store will take over a space that had been occupied by an Aldi. Aldi consolidated that location and a Moline store into a new one nearby. It is the third store for Laura and Jeff Boemecke, who have operated two Save-A-Lot stores for many years.
New players have come to Iowa, too. Whole Foods Market won approval in May for an 8,000-s.f. expansion of its plans at Water Town Place, where it will open its first store in the state. The Whole Foods Market will total 30,000 s.f., and take over part of a current Best Buy location in the process of downsizing.
Whole Foods’ requirements for a store include 200,000 people or more within a 20-minute drive time, 25,000 to 50,000 s.f. of space, a large number of college-educated residents, abundant parking, easy access and excellent visibility in a high-traffic area.
IGIA’s Fleagle told The Shelby Report that Whole Foods may have two stores in the Des Moines area within the next year.
The Des Moines metro area has been on Whole Foods’ expansion list as a potential store site for a store for nearly three years.
Trader Joe’s opened its first Iowa store in West Des Moines last November at 6305 Mills Civic Pkwy.
C-stores benefit from Minnesota shutdown
Mary Neubauer, VP of external communications for the Iowa State Lottery, talked to The Shelby Report about an “interesting phenomenon” in the state: lottery sales have improved because of the recent state shutdown that lasted July 1-20 in Minnesota.
“We are seeing individual reports from stores up in northern Iowa along the Minnesota border where lots of folks from Minnesota, it appears, are coming down from Minnesota to Iowa to buy their tickets,” Neubauer said. “It’s just been interesting to us to see because so many states have lotteries now that we haven’t had to talk about this cross-border phenomenon for awhile.”
Lottery sales are up in Iowa, and consumers are buying up higher price-point tickets, Neubauer said. But when gas prices rise, “you see almost an immediate impact on lottery sales because people just don’t feel like they have that extra buck or two in their pocket,” she said.
But she cited recent studies that show that Americans are getting used to higher gas prices, and that the level at which they consider prices “high” keeps going up, so lottery ticket sales have been holding their own.
Fareway, Dahl’s Foods and Hy-Vee are “big players for the lottery,” Neubauer said.
“We try to have our products where we know folks like to go, and the gas stations, c-stores and grocery stores are obviously regular stops for us all.”
Neubauer sees Iowa independent retailers having some advantages over larger chains.
“They are able to make more of the decision themselves as far as what types of lottery games they want to sell. Some of our chain retail locations have a specific number of games that they are going to carry or a specific lineup of games … whereas the independent retailers can maybe make their own decisions … or maybe they have a little more freedom to try some of the new things that we would come out with.”
Neubauer said approximately 65 to 75 percent of lottery products in Iowa are sold in convenience and gas stations. But, she said, “there is such a mix now between the convenience store and grocery store market. I think they have become a little bit of both. Here in Iowa, convenience stores belong to the grocery industry group and grocery stores belong to the convenience store group.”
Ankeny-based Casey’s General Stores Inc. is a convenience store chain that made news over the past year as it fended off a hostile offer by Alimentation Couche-Tard Inc. Casey’s has continued to grow in spite of the takeover bid.
Most recently, Casey’s signed a purchase agreement to acquire 22 convenience stores from Kum & Go. All 22 stores are located in Iowa. They were operating under the Kum & Go banner and were to be immediately rebranded to the Casey’s General Store banner.
The stores sold to Casey’s are located in Armstrong, Atlantic, Britt, Brooklyn, Carroll, Cedar Falls, Centerville (2), Chariton, Cherokee (2), Elk Run Heights, Estherville (2), Garner, Iowa Falls, Mediapolis, Sheldon (2), St. Charles, Storm Lake and Washington.
Iowa’s unemployment rate hovers at 6 percent
“I think Iowa is in better shape than the economy is nationally,” Fleagle said. “Our unemployment rate is hovering at 6 percent compared to nationally at 9 percent. Obviously the farm economy has been very strong and that ripples through a lot, although not as much in small towns as maybe it used to because farms are so large that there aren’t as many people out there doing farming. But particularly in the metro areas, it’s held up very well.”
Iowa’s unemployment rate for June held steady at 6.0 percent for the third consecutive month. A year ago in June, it was 6.1 percent.
“Iowa’s economic recovery remains on track as we move into the second half of 2011,” said Teresa Wahlert, director of Iowa Workforce Development.
Iowa’s Business Conditions Index, as tracked by Creighton University, remained above “growth neutral” (above 50, indicating growth in the coming months) for the 18th straight month in June, with a reading of 61.4. That was a drop, however, from 65.6 in May and 69.7 in April.
“Since bottoming out in December 2009, the Iowa economy has added more than 22,000 jobs for a 1.5 percent gain,” said Creighton University economist Ernie Goss. “Based on our surveys, I expect the state to continue to add jobs with an employment increase of more than 23,000, or 1.6 percent, for the rest of 2011.”