A Lesson from Grocers
What c-stores can learn about building a business in a food desert
[Last in a three-part series examining the battle against food deserts.] OAK BROOK, Ill. -- Walmart, Walgreens, Supervalu... many of the retail big wigs have begun to address the United States' food desert crisis, areas both rural and urban with little to no access to healthy foods. They've created strategies for entering these areas with expanded shelf space for fresh produce and other perishables.
But the retailers with the most experience with food deserts are grocers, the primary source of fresh and healthy foods that, for multiple reasons, have over time abandoned [image-nocss] these neighborhoods.
Like convenience stores, grocers have found themselves at a crossroads: continue to be blamed as part of the problem, or change their merchandising and marketing to become part of the solution. For the grocery industry, success has been found among independent retailers putting their stake in the ground in an underserved neighborhood.
CSP Daily News spoke with Peter Larkin, president of the National Grocers Association (NGA), Arlington, Va., about what his industry has learned in its battle to build a business in a food desert.
CSP Daily News: What are the barriers to running a business in a food desert?
Peter Larkin (pictured): "Operating costs are generally higher in food deserts, and the margins can be lower. Average sales typically are lower. Depending on the mix, we have lower gross profit because of the lower penetration of some of the higher-margin departments that are in stores."
CSP Daily News: You've been in talks with federal agencies and the White House on what these retailers need to build a business in a food desert. What are some successful government incentives?
Larkin: "Initial financing that might come in terms of a tax credit or a grant that would help reduce the retailer's initial operating costs but over time can be either phased out or eliminated. It's really there just to get them over the initial hump and start up costs."
CSP Daily News: So what about the long-term?
Larkin: "It's also just not about getting the financing; it's about making a connection with the community.... Once you establish the store, your employee base, the fact that you're there for the long term in the community, our successful operators have found that the sales will take care of themselves, and after an initial period of time the stores will be begin to turn a profit.
"I am a firm believer that the independent grocers--the entrepreneurs in our industry, the family-owned businesses that operate in and around those communities--understand the problem, understand the opportunity, want to be able to invest in those areas and markets. And if they do, they're the most likely to succeed because they have their ear to the ground and their heart in the community."
CSP Daily News: How do you navigate all the government incentives available?
Larkin: "It's the alphabet soup of programs. Navigating them all is so daunting, that in and of itself may be one of the biggest obstacles to moving forward.
"None of these programs should be considered some kind of a handout to our industry or the convenience-store industry. These programs are proven job creators, and that is also a very, very high priority for our government at this point. Also, grocery stores are often the anchor for other stores to spring up around it."
For more on the battle against food deserts, see the June issue of CSP magazine.