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VOL. 8 | NO. 50 | Saturday, December 5, 2015

Memphis' Grocery Wars

2015 marked by influx of new stores, announcements

By Andy Meek

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After Sprouts became one of the newest grocery chains to enter the Memphis market by opening stores in Lakeland and Germantown earlier this year, company spokesman Diego Romero described the chain’s arrival as practically a no-brainer.

He told The Memphis News how it was clear to the company that Memphis-area shoppers are “really hungry” for an abundance of grocery options and a multiplicity of smaller grocery stores like Sprouts to “pop in and out of.” Indeed, that appetite also is no doubt the reason Sprouts’ openings were part of a veritable bumper crop of new groceries and markets arriving here in recent months, with more still to come.

“Right now we have two stores in the Memphis area, split across the area, but that’s not atypical,” Romero said of Sprouts’ current area footprint, which includes a 28,000-square-foot Lakeland store that opened in May and another in the former Schnucks at Poplar Avenue and Forest Hill-Irene Road that opened in July. “To date, we have 13 stores in the Southeast, and in looking to the future we’re building a distribution center in Atlanta so we kind of have a wagon-wheel expansion plan that we’ll use to expand outward.”

When deciding where to open new stores, which replicate the look and feel of an indoor farmers market and specialize in fresh, organic food, Romero said the Phoenix-based chain has a few particulars on its shopping list. Among them: a population of about 100,000 within a 10-minute driving radius and the right shopper demographics.

Sprouts customers, he said, generally have an above-average per capita income. The chain also tries to get a sense of whether there’s enough demand for natural food in the target area.

Meanwhile, analyses like Sprouts’ are playing out across the city in a similar fashion, in what’s become a never-ending grab for market share and new territory among competing grocery operations.

Welcome to a high-stakes, still-forming battle for the loyalty and dollars of shoppers in Memphis. Big grocery chains and smaller market participants alike are lining up to capitalize on a wave of change that’s swept across the retail industry and in the process has fundamentally realigned the dynamics of the grocery business.

‘Kroger just going after everybody’

Whether it’s Sprouts or City Market, which is on the hunt for neighborhoods to expand into beyond its current stores Downtown and in Cooper-Young, grocery stores like these and others are on the front lines of the new grocery wars.

“I actually don’t see a wholesale trend toward smaller specialty stores so much as I do Kroger just going after everybody,” said Jimmy Lewis, the owner of Relevant Roasters in the Broad Avenue Arts District.

He’s a coffee roaster today, but Lewis previously worked in commercial real estate and also owned and operated Squash Blossom, which was widely regarded as Memphis’ first natural food store. He still follows the goings-on of an industry that makes money based on what people stuff in their shopping carts.

He thinks Kroger still is a nearly impregnable force to be reckoned with, never mind a multiplicity of upstarts.

“If the consumer’s attitude is they want the highest quality at the lowest price, then the question is where are they going to go and what are they going to do?” Lewis said. “For its part, Kroger is working on margins that bring prices down in very conspicuous ways.

“Having said, it is clear that the specialty food market has an environmental appeal that’s difficult to match in a large-store format. I’m thinking of places like Miss Cordelia’s, which is just a delightful place to go, and Whole Foods, which spends a lot of time and attention and money making their stores feel good.”

Underscoring his point about the buzz of activity that’s surrounded Kroger of late, Kroger Delta Division officials say the chain’s new Union Avenue store will be something that’s “not anywhere near your standard Kroger.”

Unveiling some of the details at a neighborhood meeting in October, the company said the store at 1761 Union Ave. will feature amenities like a Starbucks with a patio, a growler-fill station, juice bar, bike-repair station and two electric car-charging stations, among other things.

That 54,000-square-foot store is set to open fall 2016.

Beyond that, Kroger Delta Division spokesman Teresa Dickerson said the chain has been splashing cash into its Memphis-area stores, part of a push to invest more than $100 million in the area.

“We want (our customers) to always find the products they want, plus more,” Dickerson said.

That’s part of what Lewis means when he sees Kroger making a larger play in the market. In recent days, the Cincinnati-based company filed a plan with the town of Arlington to build a 123,000-square-foot Kroger there that reflects its Marketplace concept. Per Kroger’s website, its Marketplace stores feature home fashion and decor, bed and bath, kitchen and small appliance products, as well as home office goods and toys – along with, naturally, some of the more traditional essentials.

It also is currently constructing a Marketplace store in Hernando, Miss., which will be the design’s Memphis-area prototype.

Kroger's sushi sampling at its Poplar Plaza location 

(Memphis News File/Andrew J. Breig)

Kroger’s activity also contributed to some of the grocery boom reflected in third quarter commercial real estate activity locally. Among that action, Kroger reopened its location on Farmington Road and expanded from 60,000 to 100,000 square feet.

“Our deli and bakery areas are improved,” Dickerson said about the company’s stores more generally. “Shoppers can enjoy a cup of Starbucks coffee, a fresh made to order pizza or even a Corky's BBQ sandwich at select stores during their visit to Kroger.”

She said Kroger customers also want affordable, natural foods, and Kroger has stepped up by offering choices like its Simple Truth brand.

“As far as Kroger’s natural food sections – they are definitely stout,” Lewis said. “They’re not at all insignificant. And they have staff dedicated to natural foods.

“In spite of what Kroger is doing, though, there’s always room for a specialty store especially where it can serve the neighborhood in a way that’s accessible if you’re walking or riding your bike to it.”

Said another way: “The way people shop matters.”

“And when I say the way people shop matters, that could be if they get there on foot. If they buy in $20 lots versus $50 lots. Those stores also can cultivate business based on personality. I think there’s a lot to be said for cultivating personality.”

Still room in increasingly crowded field

It’s not a completely Memphis-centric phenomenon. Retail has been upended in recent years, as behaviors change (thanks to smartphones) and ubiquitous connectivity gives consumers more insight than they’ve ever had into why things cost what they do and how they get made.

Another reason the grocery wars aren’t completely Memphis-centric – look at national retailers like Wal-Mart and Target that have attached grocery operations to their stores. And discount grocer Aldi said earlier this year it plans to invest billions in a U.S. expansion.

Those are among the many competing options for Memphians' grocery budgets. One result is shoppers who bring new and distinct ideas with them when they buy.

To some customers, says City Market owner Hamida Mandani, “local” matters.

“Big-box stores, to fill those endless lines of shelves and maintain their bottom line, they might buy from foreign countries and sell at very competitive prices,” she said. “And at the end of day the customer may be happy with the pricing but leave the store and not realize that all the money they spent is going to some distant headquarters location and not back to their own community.”

She and her husband Sunny suspected there were enough people with the opposite sensibility in Memphis that they opened their combination market and deli Downtown at Union Avenue and Main Street at the end of 2010. Earlier this year, they opened another City Market in Cooper-Young.

“My business plan I wrote for City Market had its seeds when I was in school getting my MBA,” she said. “We wanted to combine the whole concept of having a nice neighborhood deli with a market, something that’s very common in bigger cities versus smaller cities like Memphis.”

The new City Market location they opened this year was one among many new such operations to open its doors in Memphis in recent months.

Whole Foods opened a new store in Germantown this year. 

(Memphis News File/Andrew J. Breig)

In Germantown, Whole Foods Market opened a new store and Trader Joe’s announced its first Memphis-area location on Exeter Road. To open in third quarter 2016, the Trader Joe’s will be in a to-be-constructed outparcel of an old Kroger building.

Filling the former Easy-Way location at 596 S. Cooper St. is the soon-to-open Curb Market, a store for locally sourced meat and produce that’s part of Memphis businessman Peter Schutt’s plan to add to that area’s growing nexus of locally produced, healthy food businesses.

Schutt owns The Daily News Publishing Co., and his market is a few weeks away from opening its doors.

In other grocery-related news, the inaugural class of the Community Builder payment-in-lieu-of-taxes incentives program will go toward attracting grocery stores to food desert neighborhoods. Housed at the Memphis-Shelby County Economic Development Growth Engine, the tax breaks will help the Binghampton and Uptown neighborhoods secure value grocers.

The Fresh Market launched its third Memphis location at 2145 Union Ave. late last year, the result of its transformation of the former Ike’s into one of its upscale stores. That 23,400-square-foot store includes a bakery, a full-service meat counter, a wide array of ready-to-serve entrées, fresh seafood, hundreds of imported and domestic cheeses, and produce, including a large organic selection.

And Midtown could see another new store soon from Belz Investco, which has tentative plans to redevelop the blighted hotel at the southwest corner of Union Avenue and McLean Boulevard with a mixed-use project to include a “national gourmet grocery store.”

All of these developments underscore Lewis’ point that, when it comes to competition in the grocery space – customer habits and preferences are fungible, and in a world where big names are ramping up their operations and smaller outlets are multiplying, the stakes remain high.

And there’s still room for plenty of players.

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