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2012 Arkansas Profile: Retailers Expand Fresh Offerings to Please Customers

Sunrise in Little Rock, Arkansas
[gn_note color=”#ff3333″] The 2012 Arkansas Market Profile originally ran in the August 2012 edition of The Shelby Report of the Southwest.[/gn_note]

by Terrie Ellerbee/associate editor

Add one more element to the economic uncertainty that already has a grip on the country: the worst drought in 50 years.

“At the store level, I think everybody is concerned,” said Polly Martin, president of the Arkansas Grocers & Retail Merchants Association (AGRMA). “We haven’t had rain in so long, that if a fire starts, the whole state may blow up.”

It has been so hot and dry that soil is crumbling beneath homes, causing foundations to crack, OzarksFirst.com reports.

Because of the extended heat and lack of rain, entire herds of cattle are being sold off. Some ranchers may lose their family ­businesses. Martin said that not only is there not enough hay to feed the cattle—grass is long gone—but ponds around the state are going dry, too, so producers can’t even water them.

Beef prices in the short run will decrease as herds of cattle are slaughtered, but in the long term, it is hard to say what exactly the impact of the drought will be. It adds one more issue to the litany of ­challenges the food industry faces.

In Arkansas, grocery retailers, just like the families they serve, seek out ways to stay afloat in uncertain times. They do that by ­zeroing in on what customers want and need most. Lately, shoppers have demanded low prices, but they also want quality produce and meat. These are areas where independent grocers continue to excel.

Rehkopf’s Family Foods has been focusing on expanding its ­offerings in those departments.

Ron Rehkopf opened his first store on Jefferson Avenue in Texarkana in 1980, but the Rehkopf family has been operating super­markets since 1925. Today, Rehkopf’s Family Foods, owned by Ron and Terry Rehkopf, operates 14 super­markets. Most of the company’s stores are ­located in Texas and one is in Oklahoma. Three of the stores are in Arkansas—in Murfreesboro, Prescott and Texarkana.

The company’s 15th store will open around Labor Day in Diana, Texas, and it will be modeled on the company’s Texarkana store. It features expanded meat, produce, frozen and dairy sections.

Michael Walker, general manager of Rehkopf Enterprises, said the expansion is necessary to “meet the growing need in these categories.

“I do see opportunities today to expand product lines that we offer,” Walker said. “As our customers continue to demand more healthy and fresh products, we have an ­opportunity to fulfill that need.”

Most of the stores operate under the Rehkopf’s Family Foods banner, but three operate under the Cash Saver Cost Plus Food Outlet banner. The stores range in size from 12,000 to 20,000 s.f.

Rehkopf’s has grown significantly in the last five years, Walker told The Shelby Report. He sees the local economies in markets where Rehkopf operates picking up, but “I believe we are no different than anyone else in business,” Walker said. “Our challenge today is to find ways to continue increasing our sales while also controlling the increasing cost of doing business. We face new ­challenges for doing business every day.”

Rehkopf’s shoppers also are looking for ways to meet the challenge of rising costs.

“Private label sales have boomed for us the last two years or so,” Walker said. “I feel you can attribute this directly to the economy. People are looking for ways to save in their budgets and have realized that private label offers an opportunity to meet that need.”

He said the continued improvement in the quality of private label products also has contributed to their ­increasing popularity.

Large chains add to Arkansas presence

Larger chains have grown in Arkansas in the past year.

The Fresh Market, a Greensboro, N.C.-based ­retailer with 119 stores in 24 states, opened its second Arkansas store in Rogers July 25 in the Pinnacle Hills Promenade. At 20,700 s.f., the store features a bakery that ­produces 30 freshly baked breads and 14 different pie varieties daily; a full-service meat counter with freshly ground beef, a wide selection of ready-to-serve entrées and fresh seafood delivered to the store ­several times per week; more than 200 imported and ­domestic cheeses; and a bountiful produce department with more than 400 items and a large organic selection.

Save-A-Lot, a wholly owned subsidiary of Supervalu, opened a new store in February in North Little Rock at 2630 Pike Ave., the 20th in the state.

Kroger’s Delta Division, which operates 115 stores and 70 fuel centers in five states, announced two years ago that it would invest $125 million in new stores and remodeling. It continues to make good on that promise. The first Kroger Marketplace store opened in Little Rock in 2010. In Conway, where Martin lives, the state’s ­second Kroger Marketplace opened June 27 at 855 Salem Rd. The 123,000-s.f. store features an indoor/outdoor café with free WiFi, a Baby World, a Kitchen Place offering appliances, a Sushi Bar and Grilling Station. There also is a Fred Meyer Jewelers and a fuel station.

Meanwhile, five blocks away from the new Marketplace store, a Walmart Neighborhood Market will soon open.

In other words, near where Kroger opened a supercenter-type store, Walmart will open a convenience mart concept store.

Harps Food Stores grows with NW Arkansas

Springdale-based Harps Food Stores, the employee-owned chain that probably knows best how to compete with mega-retailer Wal-Mart Stores Inc., continues to expand in its home state despite having the world’s largest retailer in its backyard.

J. Max Van Hoose, Harps VP of store planning, said in a recent Arkansas Business story that the company continues to look for areas to grow, and Northwest Arkansas is growing.

In May, Harps received local governmental approval for a new 32,000-s.f. store on Highway 176, east of I-540 in West Fork. Ground was broken in July, with the store set to open next February. In addition, a new store in Elkins will replace an existing location.

Harps also recently closed on a hotel in Bentonville. Arkansas Business reports that Harps Food Stores paid $1.86 million for a hotel and 4.2 acres at 1209 N. Walton Blvd. The Bentonville planning commission has approved a 37,460-s.f. store, which is expected to open on the site in the spring of 2013. Demolition of the two-story Economy Lodge is set to begin in August.

Van Hoose said in Arkansas Business that Walton’s Five & Dime is the landlord for a different Bentonville store where the lease will expire right around the time the new Harps opens on the old hotel site.

There also is the possibility of a new Harps store in Haskell in ­central Arkansas.

There are some pluses to go along with the minuses of being in such close proximity to Walmart’s hometown, said Kim Eskew, ­president and CEO of Harps Food Stores.

“We’ve got this 800-pound gorilla standing behind us, and ­anybody who’s thinking about making an incursion into northwest Arkansas, that gives them pause,” he said as a featured panelist on Valentine’s Day at the National Grocers Association (N.G.A.) Show. The session was called “Compete With Non-Traditional Formats—And Win!”

In northwest Arkansas, which Martin said sometimes seems “like a another state,” Walmart rolled out its own newest non-traditional ­formats—Walmart Express and Walmart Neighborhood Markets.

Walmart Express stores are something of a hybrid between a food, pharmacy and convenience store, David Tovar, a Walmart spokesman, told ABC News.

Walmart Express stores are about 15,000 s.f. They offer ­groceries and general merchandise, and many have pharmacies. Meanwhile, Walmart Neighborhood Market stores average 42,000 s.f., and also have drive-through pharmacies and carry a full line of groceries as well as general merchandise.

Walmart announced plans in early 2011 to open 40 Express stores in one year. The company website lists just two, but Bill Simon, Walmart U.S. president and CEO, said at a Morgan Stanley Retail conference in May that the first 10 Walmart Express stores, which served as testers, turned profitable in their first year, though no hard numbers or details were offered. The question remains whether or not Express stores will do enough volume to get a solid return on ­investment.

Eskew said talk of the projected rollout of the new Express ­concept sounds a lot like déjà vu. The Neighborhood Market format, for example, goes back 14 years. At the time, Walmart said it would be opening 200 Neighborhood Market stores a year.

“We were worried,” Eskew said. “We truly were.”

But in 14 years, less than 200 Neighborhood Market stores had opened across the country. With a recent flurry of openings—­including Little Rock’s first on July 18—there are indeed more than 200 Neighborhood Market stores today, approximately 210.

“You have to ask yourself, ‘Why did that (rollout) not happen?’” Eskew said. “The reason that it didn’t happen is because they’re not getting a return on investment.”

Because Harps competes head-on with Walmart, the smaller company has a good idea how much volume a new Walmart location draws. He said that Walmart’s newer formats actually pulled two-thirds of their volume from its own Supercenter stores, not from a competitor. Walmart continues to cannibalize itself in what Simon has called an effort to control the markets where it operates.

“Will they figure it out at some point? Perhaps,” Eskew said.

“Or will we be left with a few—like in Phoenix with the Fresh & Easy stores—of these Express stores that were once the greatest idea ever, but then they decided it isn’t working and abandon it? I don’t know. It’s hard to tell.”

Walmart at 50: A very brief history

Born on the 2nd of July, Walmart celebrates its 50th birthday this year.

Its revered founder, Samuel Moore Walton, was born in 1918 in Oklahoma and graduated from the University of Missouri in 1940 with a B.A. in economics. He then served as a captain in the U.S. Army Intelligence Corps.

Following military service, his early retail experience was with

J.C. Penney in Iowa as well as a variety store he ran in Newport, Ark. With wife Helen encouraging him, he opened Walton’s Five and Dime in Bentonville in 1951. Then on July 2, 1962, in nearby Rogers, the first Walmart store opened.

In Bentonville in 1970, the company’s corporate headquarters opened, as did Walmart’s first distribution center.

On Oct. 1, 1970, Walmart offered 300,000 shares priced at $16.50 each in a small initial public offering. Walmart’s stock has since split 11 times. Arkansas Business reports that 100 of the ­original shares purchased for $1,650 in 1970 would have grown to 204,800 shares worth more than $9 million today.

Walmart grew 2,000 percent in the decade of the 1970s, ­according to Arkansas Business. In 1979, Walmart became the first ­company to reach $1 billion in sales in such a short time.

As the 1980s dawned, the company had 276 stores, employed 21,000 people and had opened in its 11th state, Alabama.

As the discount store chain grew, Walton experimented with the Sam’s Club membership warehouse and Walmart Supercenter ­concepts. The first Sam’s Club store opened in Midwest City, Okla., in 1983.

In 1987, Walmart opened Hypermarket USA stores, which ­combined groceries with general merchandise.

In 1988, the company opened the first Walmart Supercenter store in Washington, Mo. This concept would replace the Hypermart format. Walmart opened hundreds of Supercenter stores in the 1990s.

On March 17, 1992, President George H.W. Bush presented Sam Walton with the Medal of Freedom award. It is the highest ­civilian award in the United States. It is given to individuals who have made “an especially meritorious contribution to the security or national interests of the United States, world peace, cultural or other significant public or private endeavors,” according to an executive order signed in 1945.

A few weeks later, on April 5, 1992, Walton died at the age of 74 following a battle with bone cancer.

In 1993, Walmart introduced its private label line Great Value, which today is the largest food brand in the U.S. in sales and volume. Walmart also celebrated its first $1 billion sales week that year.

In 1997, Walmart opened its first fuel station in Rogers. That also was the year that Walmart surpassed $100 billion in sales for the first time.

As mentioned above, in 1998, the first Walmart Neighborhood Market store opened, and in 2011, the first Walmart Express stores made their debut.

In 2010, for the first time, Walmart sold more groceries than anything else. Groceries and other consumables accounted for 51 percent of the company’s sales. Walmart abandoned the discount store model.

Walmart’s net sales for the fiscal year ended January 2012 ­totaled $443.9 billion.

Employee treatment controversy began early

Walmart had a knack for courting controversy about employee pay almost from the start. Two years before the company known as Wal-Mart Stores Inc. was incorporated (on Halloween day in 1969), a federal court in Arkansas ruled that Sam Walton was ­operating three stores as separate corporations—Walmart Inc., Walmart of Springdale and Walmart of Harrison—for the sole ­purpose of avoiding paying workers minimum wage. The court ruled that revenues from the three locations taken together made Walmart subject to the Fair Labor Standards Act of 1938.

A famous story tells of how Walmart disposed of meat cutting at 180 stores after butchers sought to unionize at a Jacksonville, Texas, store in 2000.

Fast forward to July 2012 to Los Angeles, Chinatown, where, ­according to the Los Angeles Times, thousands of protesters backed by labor groups marched against the first Walmart to be centrally located in the city—a 33,000-s.f. Neighborhood Market. They were protesting what they said are Walmart’s low wages and anti-union stance.

Marking the 50th anniversary of Walmart, two labor groups—Making Change at Walmart and Our Walmart—have launched Walmartat50.org, a site that invites users to air their grievances.

No Walmart store in the U.S. has ever been unionized. But then, neither has any American Target store. Target also opened its first store in 1962. Kmart made its debut, too, in 1962, but it has had union employees in its distribution centers.

Interestingly, also in 1962, Kmart introduced Kmart Food Stores, a supermarket chain located with Kmart discount stores and ­operated by a local grocery chain, according to Wikipedia. It was discontinued in the 1970s.

Walmart goes international

Today, Walmart has stores in 26 countries outside the U.S., from Argentina to Zambia. It employs 2.2 ­million worldwide.

Walmart first went international in 1991 when it partnered with a company called Cifra to open the first Sam’s Club in Mexico City. In 2000, Walmart ­acquired a majority of Cifra and changed the name to Walmart de Mexico.

Walmart grew exponentially in Mexico from 2005 to 2011, when it opened more than 900 stores, ­according to analysis by The New York Times. In April this year, The Times reported that Walmart had not only paid Mexican officials bribes to rush to get ­permits to build stores, but that top executives knew about it and tried to cover it up.

But at Walmart’s 2012 shareholders meeting, none of that stopped current president and CEO Mike Duke from listing “integrity” first among the company’s five “enduring values.”

“If you work for Walmart, there is no gray area ­between right and wrong,” he said. “It’s either the right thing to do or it shouldn’t be done at all.”

A company press release includes a statement from Duke, who is just the fourth president and CEO of Walmart, regarding the “recent allegations.”

“We’re working to continually strengthen our compliance efforts around the world. And I want to ­personally assure you we’re doing everything we can to get to the bottom of this matter. We will take appropriate action when the investigation is complete.”

The other four enduring values Duke listed were ­opportunity, family and community, purpose and ­responsibility.

The future: a ‘consumer company’

Neil Ashe, Walmart’s president and CEO of Global eCommerce, said during a June 1 management update for the investment community that Walmart’s goal is “to be the entity that’s closest to the consumer and to provide anytime/anywhere access to that consumer, so that they can be a Walmart customer however and whenever they like—whether that’s via their mobile device, their computer or walking through the door of our store.”

In May, Walmart launched iPhone and iPad applications that feature an in-store mode that makes a smartphone “your personal GPS and your personal ­remote control in the store,” Ashe said. “We’ve mapped every store in the United States, so you can find any product in the store.”

Later this year, Walmart will pilot mobile checkout to take advantage of the ubiquitous smartphones used by customers.

Endless Aisle allows customers to scan a QR code to gain access to Walmart’s full Web inventory. When they find a product they want in a store but desire something different than what is on display (a different color of a bicycle, for example, Ashe said), they can use the Web to find ­exactly the product they want. Once they find it, customers can order the item for pickup in the store the next day.

Another program called Store Connect is being tested in California. Customers may use it to communicate directly with a store with a smart device.

The next 50 years

At Walmart’s 2012 shareholders meeting on June 1, Duke said, “We should take the opportunity at this historic moment to think deeply about Walmart—not just what we do day in and day out, but how we do it, why we do it and what it all adds up to in our world.

“Sam Walton thought about these things when he started Walmart 50 years ago,” Duke continued. “He cared about ­giving his best, motivating people, valuing every dollar and swimming upstream.”

Duke closed his remarks by reflecting on the founder’s ­contributions.

“I believe Sam Walton’s greatest legacy was the foundation he built—the culture, the beliefs and the enduring values,” Duke said. “We can’t possibly envision what the world, what retailing, what Walmart will look like in another 50 years. But if we stay true to the foundation that Sam Walton built, we’ll continue to be a better ­company, a stronger company and a prouder company. And over the next 50 years, there will be no limit to the good we can do around the world.”

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