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2012 Arizona Profile: State Still Reeling from Recession

Last updated on August 16th, 2012 at 12:08 pm

[gn_note color=”#66cc66″] The 2012 Arizona Profile originally ran in the January 2012 edition of The Shelby Report of the West. 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]

by Katie B. Davis/staff writer

The recent recession coupled with Arizona’s staunch laws regarding immigration all but wiped out a decade’s worth of progress, according to the University of Arizona. But the ­institution also is hopeful that growth will eventually return and once again rank Arizona among the fastest-growing states in the country.

“We know we are several years away from recovery,” said Tim McCabe, president of the Arizona Food Marketing Alliance (AFMA). “It’s a matter of what comes first: You can’t build without the people to live in the housing and support the construction, and the people aren’t going to come ­unless there’s established housing and jobs. We just don’t see any real turnaround in our population growth here. I think this recovery process is going to be much longer than originally anticipated.”

In McCabe’s business, the grocery industry, Arizona’s immigration law has affected the independent grocers as well as the retail sector as a whole.

The Pew Hispanic Center estimated in late April that as a result of Senate Bill 1070, the state’s undocumented population shrunk by 100,000 people, dropping from 500,000 to 400,000.

SB 1070 made it a state misdemeanor for an alien to be in Arizona without carrying the required documents; requires that state law enforcement officers attempt to determine an individual’s immigration status during a “lawful stop, detention or arrest” when there is reasonable suspicion that the individual is an illegal immigrant; bars state or local officials or agencies from restricting enforcement of federal immigration laws; and cracks down on those sheltering, hiring and transporting illegal aliens.

The state has lost sales tax and other revenue from the thousands of illegal immigrants who left due to the ­immigration crackdowns, further hurting the state’s already sagging economy.

Retail sales plummeted 9 percent in 2008 and 10 ­percent in 2009, and Clint Hickman, VP of sales and ­marketing for Hickman’s Family Farms, the largest egg ­producer in Arizona, told The Arizona Republic that its sales to supermarkets and grocery stores that cater to Latinos dropped 20 percent in the wake of SB 1070.

It should be noted, however, that retail sales gained slightly between 2009 and 2010, right at 2.7 percent, and were ­predicted to grow to 6.5 percent this year and have a double-digit gain in 2012, according to a study from the University of Arizona Economic and Business Research Center.

“Immigrants leaving greatly ­affected the grocery industry in Arizona,” said McCabe. “Not so much the big-box market seen in Phoenix or Tucson, but in the rural areas where independents are ­located and a good number of ­immigrants lived.

“Our smaller format stores are really struggling, both the independents and the convenience stores, because their target population is leaving, but hopefully ­recovery is on the way.”

Good fences make good neighbors

State lawmakers in Arizona are collecting donations from the public to put fencing along every inch of the state’s Mexican border in what The Arizona Republic deemed a first-of-its-kind effort.

According to the paper, the idea came from state Sen. Steve Smith, who also noted that people from across the nation had donated about $355,000 to the project since its inception in July, when the state launched a fundraising website that urges visitors to “show the world the resolve and the can-do spirit of the American people.”

Smith estimated that the total supplies alone will cost $34 million, or about $426,000 a mile. Much of the work is expected to be carried out by prisoners at 50 cents an hour.

The fence project is being overseen by the 15-member Joint Border Security Advisory Committee, comprised of lawmakers, state law enforcement officials and four ­sheriffs.

Despite the relatively low amount of money raised so far, Smith told the paper that work would begin sometime in 2012.

“Something will be in the ground by 2012,” he said.

Costs, thus prices, rising

Higher wholesale prices for vegetables and various ­grocery staples are expected to push food costs up as much as 6 percent this year at metro Phoenix stores.

With Phoenix being, according to Bashas’ President and CEO Darl Andersen, “a hotbed for all types of grocery ­retailers and one of the most competitive grocery markets in the U.S., keeping food prices down while the economy dictates you raise them is of the utmost importance.

“Everything is going up,” he said.

McCabe told The Shelby Report that he believes prices could increase between 5 and 6 percent this year because of a “perfect storm” that includes commodity prices rising and colder weather in the South.

He added that his grocers often ­swallow the wholesale price increases to keep their prices competitive.

“The prices are rising really fast this time, though, and it’s going to be hard not to pass that on to the consumer,” he said. “I just hope the consumer is understanding and realizes that it isn’t the individual store but food as a whole. In order for grocers to maintain their livelihood, they have to make profit, and ignoring the rising cost of food just to keep people coming in the door isn’t going to lead to profit.”

In addition, the cost increases mark the first major rise in food prices since Phoenix voters approved a 2 percent sales tax on food last year.

“When you have all these prices going up combined with the (lower) food tax, the consumer is going to take a hit,” said McCabe.

As a result of all the aforementioned, Bashas’s Family of Stores, operator of more than 120 grocery stores throughout Arizona, has developed a new relationship with KSS Retail for price modeling and optimization. The grocer will work with KSS Retail to model, measure and implement pricing strategies for the company’s Bashas’ and Food City banner stores.

“We’re here to provide our customers with a great shopping experience,” Andersen told The Shelby Report. “We’re working in and out of a very competitive market where all the big-box retailers work, too, along with favorite independents and farmers markets. We need to stand out, and understanding our customer, our customer’s wants and needs and how best to serve that customer puts us in the grocery market race.

“We don’t just want our regulars—we want the un-regulars.”

Chandler-based Bashas’ will celebrate its 80th ­anniversary in 2012.

Making all sectors available to all people

Farmers markets have been steadily gaining popularity in Arizona. Today, according to several of the state’s news outlets, about 75 different markets exist across the state, with more than 20 in the Valley area alone.

“This type of format is doing well in the slowdown of the economy,” said McCabe. “I think it is a combination of selling fresh food, especially with the focus on produce at very good prices.

“That’s important for the over 1 million people using the Supplemental Nutrition Assistance Program (SNAP), and getting those people access to fresh fruits and vegetables should be a key priority for the state,” he added.

Christopher Wharton, an assistant professor in ASU’s School of Nutrition and Health Promotion, is ensuring that’s the case. He received a grant from the U.S. Department of Agriculture (USDA) in 2009 to increase accessibility to farmers markets in Arizona.

Wharton identified eight farmers markets in Arizona that did not have EBT technology, and implemented wireless terminals that could accept both EBT and regular credit and debit cards.

Additionally, supporting local farmers markets makes them more financially viable for small and mid-size farmers who may be struggling. At grocery stores, farmers receive about 20 percent of the profit made from their goods, while they can keep 50 to 100 percent of the profit at farmers markets.

Remodels, growth and a store in Phoenix ­rising from the ashes

Glendale shoppers welcomed a new Neighborhood Market by Walmart to the area on Jan. 19, 2011. The new store, located at 5125 W. Olive Ave., features a 39,866-s.f. ­layout designed, according to the company, for quick ­access to low-cost ­groceries, prescriptions and household products.

“Walmart has been a great corporate partner in Glendale, with a high level of community involvement by their store managers and associates,” said Don Rinehart, president and CEO of the Glendale Chamber of Commerce, in a press release. “We are pleased to welcome another Neighborhood Market to our community. We commend Walmart’s continued commitment to Glendale and the economic development boost their expansion provides, both in terms of job creation and the ­additional dollars to our tax base,” Rinehart said.

Also in January, Phoenix city zoning officials gave the nod to Walmart to expand its first Phoenix store near Bell Road and Tatum Boulevard. The store was built in 1989.

“We’re expanding the store to add grocery to serve our customers better and more completely,” said Elia Garcia, a spokeswoman for Walmart, to The Arizona Republic.

The changes took away Walmart’s existing ­garden ­center.

On Oct. 5, a new Walmart opened in Cave Creek, bringing 220 new jobs. The Walmart is ­located at 34399 N. Cave Creek Rd. The new store employs 220 people.

As of late July, Walmart has 71 Supercenters, four Discount Stores, 18 Neighborhood Markets, 15 Sam’s Clubs and three distribution centers in Arizona.

But Walmart also is shutting down stores in Arizona. Its four experimental Marketside by Walmart stores in the metro Phoenix area were closed as of Oct. 21, and the chain will not employ the Marketside format any longer.

The Arkansas mega-retailer launched the format in 2008 via stores in Mesa, Chandler, Gilbert and Tempe.

The 16,000-s.f. stores sold groceries, fresh food and prepared meals, ­similar to Fresh & Easy Neighborhood Markets, a concept developed by British retailer Tesco.

Azcentral.com quoted Walmart spokeswoman Delia Garcia as saying the chain would take its learnings from M M Marketside and incorporate them into its Walmart Express store concept, a general merchandise store that ranges in size from 10,000 to 15,000 s.f. that Walmart ­recently opened in the Chicago market. Others are planning for Arkansas and North Carolina (two apiece).

Walmart also has another smaller store format, the Walmart Market, which is 28,000 to 60,000 s.f. and is a scaled-down version of a traditional grocery store.

In a press release in early November, Whole Foods ­announced that it had recently signed nine new leases ­averaging 32,100 s.f. in size. Among the nine leases were locations in both Phoenix and Tucson. According to the company, these stores are scheduled to open in fiscal year 2012 and beyond.

In March 2011, the multi-million-dollar renovation of the Pro’s Ranch Market in Phoenix was ­unveiled. A kitchen fire had ­destroyed the store, which was Pro’s first Phoenix location.

Not one employee of that Phoenix store lost their job after the fire. They were transferred to other stores and bus passes were given to those who did not have ­transportation.

“We take care of our employees like family,” said Jeff Provenzano, owner of Pro’s Ranch Markets.

The store’s renovation included upgrades such as ­expanded ­bakery and kitchen offerings and brought the total square footage to 51,837, making this store a unique food specialty market in south Phoenix.

Among the new services and products featured in the renovated store are a coffee station, an expanded bakery with fresh bread and made-to-order cakes, a renovated ­tortilleria that makes more than 100,000 homemade ­tortillas per day, an ­expanded cremeria with homemade sausages, an expanded produce department with fresh fruit and vegetables delivered daily, and a fish department that carries the largest variety of any store in Phoenix, said the grocer, which operates 10 stores in Arizona, Texas and New Mexico. Seven are in Arizona.

The company opened a store in Las Cruces, N.M., in November, and a second El Paso store is “coming soon,” ­according to Pro’s Ranch Markets’ website.

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