Food Desert Front Lines

Retail channels tackle food deserts with a focus on format, assortment

[The first in a three-part series examining the battle against food deserts.]CHICAGO -- The South Side of Chicago is becoming the testing grounds for a retail experiment: how to revitalize a food desert--an area with little or no access to healthy foods--and still turn a profit. It is being conducted by giants in three retail channels: supermarket, drug and mass merchandiser, each with a different approach.

Save-A-Lot, a no-frills value brand owned by Minneapolis-based Supervalu, has a clear focus on low overhead, seeking to avoid one of the main tripwires for [image-nocss] traditional grocery concepts in these challenged areas. During a recent visit by CSP to a new Save-A-Lot in Chicago (See related video on CSPTV), customers were bagging their own groceries in either reusable bags or those purchased at the store for 10 cents each. The 15,000-square-foot site (compared to 47,000 square feet for a typical Supervalu supermarket) features about 2,000 SKUs, with about 70% of them private-label products.

Instead of fixtures, most items are displayed in their cardboard shipping containers. Signs boast of dollar deals and low prices. While the stores do not have an in-house bakery or deli to save costs, they do offer baked goods, packaged meats and a modest but well-stocked produce section, serviced by Save-A-Lot's local distribution centers. Don't expect to buy lottery tickets here; there is no traditional service desk. In addition, all of the site's 25 employees have multiple responsibilities; when they are not ringing up customers, they are facing or stocking shelves.

It's an experiment that already shows signs of success. In April 2010, a Save-A-Lot store was opened in the economically challenged St. Louis suburb of Pagedale, Mo. The community hadn't had a grocery store that was accessible on foot in 40 years.

Through a community development initiative and with government incentives, the store was opened with a community welcome. "It was such a well received [project] by the community," said Michael Stout, director of licensed business development for Save-A-Lot. "Folks have had to take buses into metro [areas] to get to grocery stores. [This store was] able to provide top-quality products at affordable pricing and was a welcomed site." He noted that about 50% of Save-A-Lot customers are on government aid.

Save-A-Lot has plans to open 160 sites in 2011. As part of its 2011 ownership program, the chain is offering new or converted licensed stores a $200,000 incentive and assistance navigating government incentives for retailers who target food deserts.

Walmart is taking a similar midsized, low-overhead approach. As part of its five-year Chicago Community Investment Partnership program, the Bentonville, Ark.-based chain recently announced plans for two Walmart Express stores in the West Chatham and West Englewood neighborhoods. The stores will be less than 30,000 square feet and will focus on grocery, pharmacy and limited general merchandise. The stores came after a plea from then-mayor Richard M. Daley to build in underserved neighborhoods to trigger both healthy lifestyles and job growth. The company expects to open 30 to 40 small-format stores across the country this year, a spokesperson told CSP Daily News.

Read more about the new Wal-Mart concept in the July issue of CSP magazine.

Drug chain Walgreen Co. is focusing more on assortment than format in its food-desert effort. The Deerfield, Ill.-based company has expanded the food sections in Walgreens stores in 10 Chicago locations, mainly on the city's South and West sides. Stores are stocked with more than 750 new food items, including prepackaged sandwiches, fresh produce, frozen meats and fish, rice, beans, pasta, eggs and whole-grain cereals

A recent visit by CSP to one such site revealed three fixtures of produce--apples and oranges--in wicker baskets, a small frozen-foods section with frozen dinners, pizzas, ice cream and other groceries, and a cooler with sandwiches, cut fruit and salads. Signage on the shelving highlighted that electronic benefits transfer (EBT) cards were accepted at the store.

Vivika Vergara, Walgreen media relations specialist, told CSP Daily News that "customer response has been very positive," and noted that Walgreens is "looking at opportunities to bring expanded food selection to other food deserts across the country."

According to a research note by retail analyst Mark Miller with William Blair & Co., Walgreen management has suggested that the format could ultimately roll out to at least 400 of its more than 7,700 drugstores in the United States.

For more on the battle against food deserts, see the June issues of CSP and Fare magazines.

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