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VOL. 131 | NO. 32 | Monday, February 15, 2016

Real Estate Vet: Kroger Looking to Spread its Wings

By Andy Meek

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Jimmy Lewis isn’t surprised by word that emerged in recent days about Kroger, the nation’s largest grocery chain, eyeing an acquisition of specialty grocer Fresh Market.

Kroger, the nation's largest grocery chain, is reportedly eyeing an acquisition of Fresh Market, along with a variety of other companies and private equity firms. 

(Daily News File/Andrew J. Breig)

The acquisition chatter comes via Reuters, which first reported that Kroger is exploring the acquisition along with other companies and private equity firms. It’s a smart move if true, says Lewis, the owner of Relevant Roasters in Memphis whose previous career in commercial real estate – and as owner and operator of Squash Blossom, widely regarded as Memphis’ first natural food store – gave him plenty of experience and insight in the grocery business.

Kroger is “definitely” looking to spread beyond the previous boundaries of their business, Lewis says. For proof, he points to the company’s Germantown store that opened in August, in a format that’s modern, feature-packed and something of a departure from a traditional format.

Among other things, it includes a Starbucks, a juice bar, growler bar – “and other things you haven’t seen in a Kroger before.”

About the Fresh Market rumor: “Kroger has been working to cultivate a specialty side to their business and is continuing to do so within the context of bigger stores. They’re also looking beyond their own brick and mortar sets,” Lewis said.

“The Kroger concept had been to get bigger and bigger. That doesn’t always work, and this may also permit them to go into smaller markets. If the sales volume is already there, like it is with a Fresh Market, then you don’t have to work to create that from scratch.”

For those and other reasons, he described the company as forward-looking, the opposite of a hidebound industry incumbent afraid to mess with a proven formula.

Similarly, Kroger also is in the process of bringing something new to the Memphis market: online ordering capability.

Memphis customers will soon be able to use the chain’s online ordering system here, most likely in a limited sense. The service will allow customers to order from a subset of products; it includes pre-bagging the orders and bringing it to the waiting customer.

The grocery chain’s ClickList ordering system lets customers shop online for more than 40,000 items, including meat and produce. The order confirmation process includes the customer specifying a date and time they’d like to pick up their purchase.

Kroger Delta Division spokeswoman Teresa Dickerson confirmed online ordering would be available locally “soon” but as of this week said no other details are yet available about things like a launch date or locations.

Supermarkets, meanwhile, are arguably the ultimate commodity business, selling the same or similar products as competitors and constrained by expectations of how much they can charge for them. Specialty grocery environments, though, can represent a point of differentiation, with a focus on an intimate experience – the opposite of a cavernous big box – and a highly curated selection.

Fresh Market launched its third Memphis location at 2145 Union Ave. in late 2014 after transforming the former Ike’s into one of its upscale stores. That 23,400-square-foot store includes a bakery, a full-service meat counter, ready-to-serve entrees, fresh seafood, hundreds of imported and domestic cheeses and produce, including a large organic selection.

“No one model is better than the other, bigger versus small,” Lewis said. “But the experience of going into a Fresh Market does offer some things that Kroger can't by virtue of its size.

“There’s the intimacy. It's a not brightly lit store. They try to romance the customer with lighting. The produce is beautiful. It’s a limited offering, more select. It's not huge, overblown displays. The perishables are very well handled, and it’s an easy store to make your way around in.”

PROPERTY SALES 70 70 16,267
MORTGAGES 30 30 10,117
BUILDING PERMITS 297 297 38,841
BANKRUPTCIES 44 44 7,641