Rising to the Challenge

As c-stores in food deserts face scrutiny, retailers grapple with doing the healthy thing.

Samantha Oller, Senior Editor/Fuels, CSP

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A woman is piling products on the counter. “Where’s the cake mix?” she asks store owner Bassem Kablaoui.

He points her down an aisle lined with everything from cereal to hairbrushes and a few boxes of yellow cake mix. Old coolers sit dark and empty in the back, where a kaleidoscope of gallon juice jugs weighs down a weathered pallet.

Another woman comes in with her child and purchases a soda and chips while Kablaoui shoos away a bleary-eyed man, high on crack. “Get out of here; you know you can’t come in here.”

A girl enters who, Kablaoui later explains, is a prostitute. “I don’t judge,” he says.

When first lady Michelle Obama called out the c-store industry for its poor influence on food deserts—large geographic areas with little or no access to affordable, healthy food—in her launch of the Let’s Move anti-obesity campaign, she likely envisioned a retailer such as Kablaoui.

His store, Lowry Food Market, sits on an otherwise empty intersection on the north side of Minneapolis, a neighborhood that is the focus of urban revitalization efforts, but still rife with crime and barren lots. Inside the 900-square-foot store, on the bottom floor of an old, twostory brick building, you’ll find beverage coolers filled with soda and energy drinks, racks of potato chips and candy bars, a pegboard of hair accessories, batteries and packs of pens.

You will also find signs of a retailer trying to better serve his community. Front and center is a repurposed soda cooler, filled with fresh fruits and vegetables: grapes, lemons, oranges, apples, strawberries, avocados, lettuce. On tables bookending the cooler sit bananas, potatoes, onions and garlic. A display of pasta and canned tomatoes suggests a balanced dinner. The section is flanked by posters of children enjoying fruit, and reminders that “WIC is accepted here.”

And cycling through the door—along with some unsavory characters—are young professionals and mothers with small children, purchasing bags full of groceries.

Kablaoui’s store is part of a pilot program that helps Minneapolis retailers in underserved areas sell fresh produce. “Healthy corner store” programs such as this can be found around the country, in every major metropolitan area—Los Angeles, Chicago, Detroit—as well as regional pockets. They are simply one facet of a complex, at times disjointed effort to restore access to healthy food for all Americans, in areas abandoned by supermarkets.

Advocates point to a strong link between food deserts and childhood obesity, because lower-income families tend to have the most restricted access to fresh foods. Not only is solving the crisis the right thing to do, they say, but it would also ultimately curb the chronic diseases burdening the country’s health-care system.

Now, after a singling out from the first lady, the c-store industry finds itself cast in the role of villain, while challenged to transform into a hero.

Retailers in other channels, such as Walmart, Walgreens and Supervalu’s Save-A-Lot chain, are stepping up, launching prototypes and programs custom- designed for these neighborhoods. Retailers already in food deserts—typically independent c-stores such as Lowry Food Market, quick-serve restaurants (QSRs) and liquor stores—are increasingly being asked by neighborhood groups and politicians to shift their traditional mix toward more healthy food.

But of course, nothing worthwhile is ever easy.

Steve Montgomery, president of b2b Solutions LLC, Lake Forest, Ill., ran c-stores in food deserts from the mid- 1980s to mid-1990s for Dairy Mart Convenience Stores and BP’s Amoco in Cleveland, Milwaukee and Tampa, Fla. He remembers the stores’ importance to their neighborhoods, serving as a “social club” for locals. He also remembers the wear and tear, the high security costs and the challenges of providing a one-stop shop in a 1,200-square-foot gas station.

Industry outsiders may think it’s simply a matter of offering fresh food to buy, but for a convenience retailer, it is a series of gambles, according to Montgomery.

“Customers have got to want to buy it. For that, they need to know how to use it and why it’s important. They have to [be able to] afford to buy it, so the retailer has to be able to source it in an economical way. He’s got to have a place to put it. It’s very worthwhile; it’s just not easy,” he says. While leading chains are taking stabs at improving their healthy food offerings, and NACS has launched a campaign to tackle the issue, the food-desert street fight is primarily being fought by small retailers who don’t make the annual trade show or read industry magazines. Instead, like Kablaoui of Lowry Food Market, they understand their role in their communities and want to do better, but must confront decades of bad habits while attempting to turn a dime. Whether chain or corner store, all of these retailers face the same question: Can a convenience store grow in—and nourish—a food desert?

On the Fringe

Mari Gallagher receives an alert every time someone does a search on Google. com for the term “food desert.” “Everyone uses it a little differently,” though not everyone is using it accurately, she says. For Gallagher, principal of Chicago- based Mari Gallagher Research & Consulting Group, definitions are important; her research firm coined the term “food desert,” first through its research on Chicago’s urban food wastelands, and later through studies on Birmingham, Ala.; Savannah, Ga.; Boston; and Detroit.

As Gallagher defines it, a food desert is “a large geographic area that has no or distant mainstream grocery store.” That term—“mainstream”—refers to a store with offerings that support a healthy diet on a regular basis, such as meat, dairy and fresh and frozen fruits and vegetables.

Contrast that with a “fringe” store. “It’s not inherently bad,” she says, “but if it’s the primary source of food, your diet and health over time will likely suffer.”

These fringe stores tend to specialize in “lottery tickets, tobacco, pop, chips, maybe some ketchup,” Gallagher says. “They’re a convenience store—you run in, run out.” The problem arises when these fringe sites—which can also include quick-serve restaurants, drug stores and liquor stores—are the only place in the neighborhood to buy food. The U.S. Department of Agriculture (USDA) conducted a study in 2009 to determine how many communities have limited access to nutritious and affordable food. By its measure, 11.5 million Americans live in low-income areas more than a mile from a supermarket.

Whether people in food deserts truly rely on the local c-store for most of their food is open to debate. For example, the same USDA study found that c-stores make up only 2% to 3% of low-income consumers’ food expenditures. Meanwhile, 86% of redemptions of food stamps in 2008—Supplemental Nutrition Assistance Program (SNAP) benefits— occurred at supermarkets or large grocery stores, suggesting these consumers were traveling for their main grocery trips.

But is it convenient? The study says that people living in low-income areas spend 19.5 minutes traveling to a grocery store, compared to the national average of 15 minutes.

Gallagher’s firm has proposed the idea of “food balance” in determining how close a mainstream grocery store should be to a community. Ideally, a mainstream retailer should be about the same distance from a community as a fringe retailer. While a fringe retailer can also become mainstream if it makes some critical changes—namely, to significantly shift its assortment toward healthy foods and staples—even small tweaks are welcome.

“We’re not saying don’t sell chips, don’t sell ready-made hot dogs; but can you also put out fresh fruit on the counter?” says Gallagher.

“There’s not one single problem, and not one single solution, and we’re not saying that the grocery store is the be-all, end-all,” she continues. “Small stores are already in existence. They’ve overcome start-up costs. You change things immediately, whereas it takes longer to develop a new store.”

The fact that some grocery retailers have already gone belly-up in fooddesert communities suggests big barriers to entry. Peter Larkin, president of the National Grocers Association, an Arlington, Va.-based group that represents independent grocers, highlights the hurdles.

 “Operating costs are generally higher in food deserts, and the margins can be lower,” he says. “Average sales typically are lower. Depending on the mix, we have lower gross profit because of the lower penetration of some of the highermargin departments that are in stores. Also, just about any store that a grocer is going to invest in and develop is going to take time to turn a profit.”

Government Intervention

Despite policy makers’ initial focus on grocery stores, the convenience channel could be better equipped—thanks to lower overhead costs—to advance Michelle Obama’s vision and serve a fill-in need for healthy meal and snack options.

“The definition of food deserts has historically all been about grocery stores, and that’s probably not going to change,” says Julie Fields, director of government relations for NACS. “But we see an opportunity to assist in filling the void where these food deserts exist because we do sell the basics.”

To support this effort, NACS has formed the Nutrition Campaign Committee, which includes more than a dozen c-store chains, several manufacturers and distributors. It has three tasks: educate the industry on the nutrition debate and develop metrics to measure progress; find a balance in the assortment of better-for-you options with the help of suppliers; and highlight the industry’s current good efforts.

An underlying goal is to head off any “far out” mandates on the federal level, says Fields, citing local zoning restrictions that prevent c-stores from locating near schools. Similarly, NACS wants to ensure that c-stores remain part of the solution.

“The government doesn’t need to come in and say, ‘We have to build a grocery store every 5 miles across the country,’ ” says Fields. “We would like to look at alternatives. What if there could be grant programs, or partnerships with the USDA where c-stores can fill that void, as opposed to trying to wrangle big grocery stores into a space that doesn’t financially make sense?”

The Obama administration has provided some financial incentives through the new Healthy Food Financing Initiative, aimed at eliminating food deserts within the next seven years. The initiative, a collaboration between the USDA and the Departments of the Treasury and Health and Human Services, would make available $400 million to community-development financial institutions, nonprofits and businesses that present strategies toward eliminating food deserts (see p. 52).

That assistance includes federal tax credits, belowmarket- rate loans, loan guarantees and grants to attract private-sector capital. Projects include consumer education initiatives, store construction and expansion, and rural cooperatives.

Ann Wright, deputy undersecretary of the USDA, believes government participation is crucial to tackling the fooddesert issue because the market has proven it cannot fix the problem on its own.

“This problem will be solved using the full range of interventions and businesses that provide healthy foods, whether you’re a farmers’ market, a community garden, a corner store or a convenience store,” Wright tells CSP. “Every sector and retailer is looking at their role differently.

“Convenience stores are often the closest or only retail outlet offering food to high-need areas,” she continues. “Now is the opportunity for c-store retailers to expand their healthy-food offerings and to encourage consumption of healthy foods through marketing and promotion of those foods.”

But the Healthy Food Financing Initiative did not avoid this year’s fiscal crisis, and the agencies are now waiting to hear how much financing they can expect this year and next.

“We still don’t know where the rest of this year’s money is going to come from, and how much,” says Wright. “We have to assume that those programs will stay in place and, if they do, grants will go out the door.” In addition to the uncertain funding situation, the three agencies’ many incentive programs can be confusing for retailers to navigate—an “alphabet soup,” as NGA’s Larkin calls it. Some trade associations have called for a government liaison to help direct retailers to the right agency and program. (Michelle Obama and Let’s Move executive director Robin Schepper declined to be interviewed for this feature. See Mitch Morrison’s editorial on p. 12.)

Urban Revival

While the federal government provides the road map and financial incentives, state and community-based entities— including retailers, community nonprof- its, city government agencies and private donors—are doing much of the grunt work in tackling food deserts.

One of the most promising models is the healthy corner store initiative. Dozens of such programs exist throughout the country, all aimed at enabling retailers in food deserts to improve their healthy food offering, providing procurement, marketing and merchandising guidance and sometimes community outreach.

In Minneapolis, the Healthy Corner Store Program is in a six-month pilot stage. Along with Lowry Corner Store’s Kablaoui, nine other retailers are part of the program. Each worked with a store operations manager at a local co-op to develop a merchandising plan and received help with pricing and margins. Existing coolers were retrofitted to emphasize the low-cost investment. Bix Produce Co. LLC, a produce distributor in the Twin Cities market, supplies producehandling training, and project partners conduct regular food-prep demos for customers in the stores.

Aliyah Ali, project specialist for the Statewide Health Improvement Program at the Minneapolis Department of Health and Family Support, says the participating retailers’ sales are picking up, “but it’s a spectrum; some stores are breaking even, some are starting to see a sales increase. One of the stores has seen sales increase by 50%.”

The most successful retailers have been consistent and sought out what the neighborhood wanted.

“The investment in the community is a huge piece. All the components at some point have to work,” Ali says. “But if the owner is not invested in it, there’s no way it’s going to work.”

For Kablaoui, produce handling and waste represent his biggest challenges. While he might make more money on a banana than a bag of chips, “we sell many, many more chips than bananas,” he says, estimating he moves $400 in chips per week, vs. $60 in produce.

Regardless, he’ll keep selling it—in part because he’ll try anything to make a sale, but also to meet state requirements on WIC certification, which requires stores to carry a variety of seven perishable produce items.

“So far we’re doing fine. Better than fine, to be honest,” he says. “Even before the program I always had seven, eight fruits and vegetables. So this enhanced it. Now I have about 14 kinds.”

In Hartford, Conn., the Healthy Food Retailer Initiative has been giving retailers incentives to sell fresh produce since 2006. The program currently has 25 participants, from a high of 40. Martha Page, executive direct of Hartford Food System, understands that not every store can be a part of the solution.

“I am struggling with the idea that every store is worth working with,” she says. “Some of these very little stores, you can be a marketing genius and you’re not going to ever get them to give up selling snack foods, so you very quickly run out of space to do almost anything else.”

Most of the programs’ participants have served their communities for 10 to 20 years. The other successful traits they have in common: WIC certification and a larger footprint.

Detroit Fresh has 18 stores in its network. The program equips sites with marketing material, baskets, shelves and basic produce-handling information, and connects them to one of two local produce distributors. Community outreach educates neighbors who otherwise might not enter these stores—often seen as just liquor stores—that fresh foods are available.

Kami Pothukuchi, associate professor of urban planning for Wayne State University and director of Detroit Fresh, says the project has no illusions about replacing grocery stores: “Our strategy is to get people to snack healthy because people are spontaneous in their choice to go down to the corner to get a snack.”

The program is trying to build capacity, “and some stores are there, and some stores are still getting there,” Pothukuchi says.

“This is hard work—and it’s harder because there’s no backstop,” she continues. “We can come in and provide the incentives and the carrots, but there’s no stick.” Instead, programs such as Detroit Fresh rely on retailers’ goodwill and their desire to be valued by their communities.

“They’re not going to make money off of it—at best it’s a break-even deal for fruits and vegetables,” she acknowledges.

“But they’re seeing the positive attention, and they feel that’s worth it.” “It’s not going to be the most lucrative endeavor, especially with respect to other things that they’re carrying in the store,” says Ali of the Minneapolis initiative. “It takes time to start orienting the community and letting them know you sell it, and for them to start buying it, too.” But ultimately, good intentions will not dry up food deserts if the healthy corner store initiatives don’t bear fruit for retailers. “They value the idea of being perceived as a healthy asset in their community,” says Page of Hartford Food System. “But you won’t be much of a healthy asset if you’re not making money.”


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