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2012 Minnesota Profile: Grocers Roll Up Their Shirtsleeves for Customers

St Paul Minnesota

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

[gn_note color=”#FFCC00″]The 2012 Minnesota Profile originally ran in the January 2012 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]

by Terrie Ellerbee/associate editor

The Federal Reserve Bank of Minneapolis underestimated Minnesota’s strength in 2011 in regard to job growth, personal income growth and housing starts.

For 2012, its predictions are more upbeat. The Fed sees Minnesota’s economy continuing to grow. Employment is ­expected to increase by a faster-than-average 2.8 percent. That means the state’s jobless rate could fall further than 5.9 percent, which is where it stood in November.

“The economy in Minnesota performed better than the nation in 2011, and it looks like growth will increase in 2012,” said Toby Madden, regional economist at the Minneapolis Fed.

The Fed expects manufacturing to be upbeat and the agri­culture sector to continue to be strong. It predicts that Minnesota will reach pre-recession employment levels by the first quarter of 2013. The state’s business leaders are optimistic to boot. The forecast includes information from an annual fedgazette business outlook poll.

“The surveys and the statistical model both point to solid ­economic performance in 2012,” Madden said. “Businesses are optimistic for their own operations and expect moderate improvement in Minnesota.”

Jamie Pfuhl, president of the Minnesota Grocers Association (MGA), told The Shelby Report a lot of members of the organization aren’t exactly optimistic, but they aren’t apprehensive, either. They realize that they provide much more than groceries.

“I think it’s kind of heads down and keep to the task at hand and keep working and moving forward,” Pfuhl said. “I know our members take their responsibility to their communities so, so, so deep and strong that they’re doing everything they can to keep providing those jobs.”

They aren’t resigned and there are no defeatist attitudes among them, she said. It’s more “getting used to the new reality. It seems like it may be here for a while.”

Meanwhile, Bloomberg reports that a Boston Consulting Group Inc. study found that Minnesota is missing out on $210 million by not fully participating in SNAP or food stamps. Of the 368,000 eligible Minnesotans not enrolled, 169,000 didn’t know they were eligible and 130,000 were deterred by administrative requirements, Bloomberg reports.

“About 65 percent of eligible Minnesotans are receiving SNAP benefits, but only 41 percent of eligible seniors,” Erin Sullivan Sutton, assistant commissioner for children and family services told Bloomberg. “We’re very conscious of the importance of these resources to our state’s economy.”

The MGA has been involved in the study cited by Bloomberg, and Pfuhl believes the problem could be cultural.

“When we look at who’s not ­enrolling, it’s our elder community, and it’s folks that maybe don’t know that they would be eligible, so I think it’s cultural really where we’re seeing that. There are some misconceptions.”

MGA is working with the department of human services in Minnesota to come up with ways grocers can assist. The state plans to streamline the application process for SNAP benefits and allow people to apply online.

The 2012 session of the state ­legislature will convene at noon on Jan. 24, and with it being an ­election year for every state senator and representative, many ­believe the session will end on time on April 30.

Pfuhl said she hasn’t seen anything yet to be concerned about, politically speaking, in Minnesota in 2012.

Gov. Mark Dayton, of the Minnesota Democratic-Farmer-Labor Party (DFL), is not up for reelection. Contentious budget talks between the governor and the Republican-controlled legislature led to a state government shut down for 20 days over the summer.

So, with what potentially could be a slew of new legislators, the MGA will focus on six key areas: workforce issues, health care, taxes and the budget, sustainability, energy and competitiveness.

The year 2012 will be about educating the state’s lawmakers.

“We actively engage in getting them in and doing legislative store tours … and sometimes we’ll bring both candidates through or all three if there was a viable independent and teach them about the industry if it’s a critical area,” Pfuhl said. “We do work to pre-educate.”

Last year the MGA had 60 new legislators, and a large ­majority of them had already been on the store tours, and that helps—a little.

“Just a little bit easier, a tiny, tiny bit easier, so we work pretty aggressively on educating,” Pfuhl said. “Our PAC fund (see box) is good for that as well because we’re able to contribute to those races.”

Ready to grow, get to work

Pfuhl said a lot of grocery retailers in the state have capitalized on opportunities in the depressed commercial real estate market.

“We’ve had some that have purchased a store, maybe ­another operator has closed their stores and they’ve taken the opportunity to open it,” Pfuhl said. “I’ve seen some expansion with Hy-Vee and what they’re doing in remodeling. Folks in the state are just pushing up their shirtsleeves and getting in and ­getting ready to keep serving the communities.

“I think one of the things that does make the independents as they were throughout the state unique is that they are looking for those offerings that make them different than some of their big box competition.”

Titans to battle in The North Star State

Walmart moved its ­regional office to the Northland Center in Bloomington, where it leases 7,000 s.f.—double the space it previously use. Currently Walmart is pursuing at least six stores in the Minneapolis metro area to add to the 20 already there.The Arkansas-based mega-­retailer intends to build 50 stores in the metro area around Minneapolis-based Target Corp.’s home city.

The Minneapolis-St. Paul Star Tribune reports that Walmart will spend $1 billion to build the stores in the next five to eight years. The new stores will include mini-supercenters of up to 99,000 s.f. and at least two dozen small, urban format stores of up to 55,000 s.f., with about half to be located in the Twin Cities.

Pfuhl said the news that Walmart would be taking on Target on its home turf in such a head-on way surprised her a bit.

“They have stepped back from getting really into our metro area for some time, but we are seeing them having some struggles here as well,” she said. “There are a couple of areas where they’re going head-to-head in the cities … I don’t know that they were anticipating the challenge that they’ve had.”

She said Target will take on the challenge from Walmart—and MGA’s member retailers could be caught in the middle between the big boxers.

“I think that will pose a challenge for our grocers in those communities where they are fighting both,” Pfuhl said. “I think our Minnesota grocers do a great job of finding unique offerings and reasons for the customers to come into their stores, but when you start getting into those price wars, you know it’s going to get to be a challenge.

“The other thing that plays into that, especially in our metro area, is when you start adding the union/nonunion piece into it. The playing field is not level,” Pfuhl said. “The disparity there … that’s a great challenge. It’s concerning.”

Minnesota’s independents, like St. Cloud-based Coborn’s and Edina-based Lund Food Holdings Inc., are expanding, ­winning national awards, continuing to strive for excellence.

“I think a lot of it has to do, honestly, with the culture and with where the vision is of their leadership, and I think that they do an outstanding job of bringing that back all the way through their business models and I think they are able to attract and retain their customer base,” Pfuhl said. “They see opportunity and are in a position in this economy to be able to make some moves and do some growth strategy, which is outstanding for the state.”

On Nov. 17, Coborn’s cut the ribbon on a new 38,000-s.f. supermarket in Belle Plaine. The new store features a pharmacy and a Coborn’s Express Gas-On-The-Go convenience store, as well as a liquor store and dry cleaning service.

Lund Food Holdings Inc. broke ground on a 20,000-s.f. market in the Loring Park ­neighborhood of Minneapolis at 12th & Hennepin on Sept. 1. It will be the smallest store in the Lunds & Byerly’s chain, but it will be a full-service store and will be “merchandised exquisitely,” Tres Lund, CEO, told The Journal.

Eden Prairie-based Supervalu Inc. has been consolidating 2,400 corporate employees into two of its three properties in Eden Prairie. It will no longer use a 30,000-s.f. office at 6533 Flying Cloud Dr. in Eden Prairie, and will exit its 19011 Lake Drive E. office in Chanhassen by this spring, reports the Eden Prairie News.

Edina-based Nash Finch introduced the Savers Choice format this year in Farmington. Eighty percent of the offerings in the new store are private label. It also offers “Savers Red Hot” deals on general merchandise items like blue jeans for $2.98 a pair, for example.

Iowa-based Hy-Vee Inc. will build a fourth supermarket in Rochester. The company plans a 95,000-s.f. supermarket and adjacent convenience store with car wash at West Circle Drive north of 41st Street Northwest. Work is to begin in 2012.

Texas-based Whole Foods Market opened in Minnetonka on Oct. 12. The 32,000-s.f. store is located at Plymouth Road and Interstate 394.

On April 20, Whole Foods Market broke ground on a new 32,340-s.f. store at Centennial Lakes Plaza at 7401 France Ave. in Edina. The store should open in early 2012. It will be the third Whole Foods Market store in the Twin Cities.

Trader Joe’s is coming to the Lyn-Lake area of Minneapolis, and is finalizing plans for a Bloomington store along I-494, reports the Minneapolis/St. Paul Business Journal.

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