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VOL. 129 | NO. 4 | Tuesday, January 7, 2014

Grocery Growth

Memphis-area grocers angle for bigger slices of customer pie

By Andy Meek

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By the end of this year, Kroger will have spent between $150 million and $200 million on upgrades, fixes and renovations at its Memphis-area stores.

Upgrades, fixes and renovations are stacking up at Memphis-area Kroger stores, including the Poplar Plaza location. By the end of the year, Kroger will have spent up to $200 million on local work.

(Daily News/Andrew J. Breig)

That investment is one example among many in the Memphis area of how the stiff competition among grocers and similar retailers is playing out as they make grabs for bigger slices of the customer pie.

The city’s dominant grocery store finished up 2013 with nine Memphis-area stores under remodel, including expansions and even gutting some facilities. Some Kroger stores, such as locations in Bartlett and Whitehaven, were former Schnucks stores that are in the process of being “Kroger-ized.” That’s in the words of Joe Bell, manager of marketing and public affairs for Kroger Delta Division. He said the Wolfchase-area Kroger on U.S. 64 will be the first of the renovated stores to be finished, with the rest being completed in quick succession, all within a matter of weeks.

“The first of this year is looking pretty exciting,” Bell said.

Other Kroger activity in the works includes an expansion of Kroger’s Farmington location in Germantown. That store will grow to 97,000 square feet from its current 58,000 square feet.

Kroger announced Monday, Jan. 6, the store at 3226 Thomas St. will close on Feb. 18. The closings coincide with the completion of two multi-million dollar Kroger renovations close by, at 1366 Poplar Ave. and 1212 E. Shelby Drive, and all store employees at the shuttered Kroger will be transferred to other locations in the area.

Meanwhile, the Belvedere Apartments in Midtown should be coming down in a month or so as Kroger prepares to develop a store on the site.

Kroger Delta Division bought the Belvedere Apartments for $2.6 million. It then purchased the Kroger store on Union Avenue that it was leasing from Art Seessel’s family, as well as two adjacent parcels, for a combined $4.6 million.

“We put a stop to some of the stuff we were about to do prior to Thanksgiving,” Bell said. “Here’s the way the dominos have to fall there. First thing we have to do is get the city to move a major electrical conduit behind the Belvedere itself. After that, we’ll tear down the old buildings behind the Kroger store – not the Belvedere itself. Once we get temporary parking finished, then the Belvedere will come down.”

He anticipated the older buildings coming down this month, then movement on Belvedere demolition happening in February or March at the earliest.

Clerk Bertha Chambers works a seafood counter at Kroger, which is growing in the Memphis area with store upgrades.

(Daily News/Andrew J. Breig)

Danny Buring, managing partner with The Shopping Center Group LLC, said that Kroger scooping up Schnucks’ Memphis-area stores coupled with its recent investment into its local footprint has taken the company from being “the 800-pound gorilla to the 1,200-pound gorilla.”

At the same time, Kroger’s competition also has been busy.

Whole Foods Market is opening its new store at 5014 Poplar in East Memphis next week. That store opens Tuesday, Jan. 14, at 9 a.m. next to the current location, which closes for good Sunday, Jan. 12, at 6 p.m.

Jeff Turngren, store team leader for Whole Foods Market Memphis, said the store is expanding its offering in all departments and bringing in new products and experiences. The new store features things such as an organic salad bar, in-store smoked barbecue, fresh-made gelato, a scratch bakery and a growler station with five beers on tap.

Memphis-based general merchandise retailer Fred’s Inc., meanwhile, has been making similar moves of its own.

At the end of December, the company opened a new 16,000-square-foot store at 1290 Lamar Ave. that features a new prototype design.

That store’s food selection is bigger, and it has more breakfast foods, quick meals, beverages and other options, with the expanded selection doubling the traditionally available mix of products.

There’s also a state-of-the-art pharmacy with a drive-thru window at the front of the store. And its pharmacies are key features of the company’s development and growth plans.

During the most recent quarter, Fred’s pharmacy department turned in more prescription counts and higher gross margins, according to the company. And the department’s sales were more than 40 percent of total sales during the quarter for the first time in the company’s history.

“The pharmacy business is very important to Fred’s overall success,” Fred’s chief financial officer Jerry Shore told The Daily News. “We currently have 360 pharmacies in our 700 stores. Pharmacy department sales comprise 37 percent of total sales and are a strong customer traffic driver.”

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