Retailers remodel rather than opening new stores

05/25/2010 01:49:00 PM
Ashley Bentley

The grocery retail scene in the Twin Cities is still dominated by national chains, although the dynamic within those chains has shifted significantly in recent years.

“Target’s a homegrown company, and they’re taking produce to a whole new level,” said Kevin Hannigan, vice president of J&J Distributing Inc., St. Paul, Minn. “We’re seeing prices come to this level we haven’t seen in a long time.”

The Minneapolis-based company continues to expand its PFresh store footprint, adding fresh produce and prepared foods to Target general merchandise stores.

The company started the new store layout with two store upgrades in the Twin Cities in 2008, and has since been taking the concept national.

“There is a pretty significant initiative to bring an expanded assortment of food, particularly fresh food,” said Joshua Thomas, Target communications. “We’re not adding on, we’re just adjusting how we allocate space.”

By the end of 2009, the company had upgraded more than 100 Target stores in the U.S. to the PFresh store layout. The layout fits in the same footprint as a Target general merchandise store, but adds an open market, tables, open refrigerator cases and casket freezers, Thomas said.

All of the produce sold in PFresh stores is UPC-coded, as the stores’ registers are not equipped with scales.

Thomas said Target continually evaluates its offerings at PFresh stores and makes changes as needed.

For example, the company realized its 3-pound bag of bananas was too large for many consumers, so it added on a 19-cent-each banana option to many stores.

By the end of 2010, there should be 17 PFresh locations in the Twin Cities, as Target continues to expand the store layout. The company is investing around $1 billion in capital to remodel these stores nationwide.

The company also is looking at expanding its deli and prepared food departments in the PFresh stores in 2010, Thomas said.

Other retailers in Minneapolis, St. Paul

Wal-Mart, Trader Joe’s and Aldi are also dominant chains in the Twin Cities market.

“Aldi’s is expanding fast. Target is putting fresh fruit in all its stores, it seems. Wal-Mart Supercenters are expanding,” Hannigan said. “The national players are really making waves.”

Inroads by these retail chains cause displacement in other retail business, Hannigan said.

“I think there’s some retailers up here that have a lost a lot of business in the last year and a half,” Hannigan said.

Adam Gamble, general manager of North Country Produce, subsidiary of Inver Grove Heights, Minn.-based Russ Davis Wholesale, said doing business in Target’s backyard has its advantages.

“We’re up here at the home of Target, so we get to see their changes,” Gamble said. “They take a piece of the market share, but it doesn’t especially hurt other retailers.”

Aldi has made significant inroads in Minnesota and Wisconsin the past few years, Gamble said.

“They sell a lot of produce, and they’re one of the most affordable places to buy food,” Gamble said. “I think their (competitive) effect is really on Wal-Mart and other discounters.”

Regional players

Regional chains Lunds & Byerly’s and Supervalu Inc.’s Cub stores are holding their own, Hannigan said.

“The strong Cubs are doing well,” Hannigan said. “They had something like a 52% market share a few years ago, and that’s extraordinary, so it’s just knocked off to a normal level.”

Supervalu operates 78 Cub Foods stores in the Twin Cities, but hasn’t specified the markets in which its capital spending will be focused this year, said Haley Marconett, corporate communications.

Eden Prairie, Minn.-based C.H. Robinson, which at its core is a national third-party logistics company but is constantly working further up the supply chain with grower-shippers on certain products, supplies many of the local retailers, said Jim Lemke, senior vice president of sourcing.

“You’ll see our products in Lunds & Byerly’s,” Lemke said. “You’ll even see our oranges in Walgreen’s.”

Lemke said he’s noticed — instead of new store openings — remodeling of existing stores to accommodate fresh produce, along with produce in convenience stores.

“I think it’s a good thing. It will help us reach out with fresh produce, as long as those stores can keep fresh product and can stomach throwing away produce that has passed its shelf life,” Lemke said.

J&J Distributing also operates its own retail store, The Produce Exchange, at the Midtown Market.

The Wedge Co-op, a one-store organic market in Minneapolis, hasn’t been hurt at all by the growth of Trader Joe’s and Whole Foods in the Twin Cities the past few years, said Tom Rodmyre, warehouse manger for the co-op’s distribution arm, Co-op Partners Warehouse.

Trader Joe’s operates a handful of stores in the Twin Cities, after entering the market three years ago with two locations. Whole Foods has two stores, Rodmyre said.

More diversified marketplace

The trend the past five to ten years has been diversification in the retail marketplace, Gamble said.

“Hispanic, Asian, African markets have popped up,” Gamble said. “Generally, they serve a very small community. They’re not necessarily new. It’s been a trend here just like anywhere else in the country.”

The diversification has opened up opportunities for some specialty produce distributors, Gamble said.

“This market has a very strong co-op presence, and we have a strong presence in those stores,” said Simcha Weinstein, marketing director for Bridgeport, N.J.-based Albert’s Organics, which has a distribution facility in Mounds View, Minn.

Albert’s Organics works with Outpost, Willy Street, Lakewinds, New Pioneer, Everybody’s Whole Foods, Seward, Selby Mississippi Market, Fresh and Natural, Open Harvest and Linden Hills. The company also works with Super Target stores for a select number of organic products.



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