Grocery Glut

The expansion of supermarkets in Columbia has been exceeding the population growth for years now, and Hy-Vee is about to give local shoppers even more options when deciding where to buy their groceries.

The recession is causing more people to pick up groceries and cook meals at home rather than eating in restaurants, but store operators and industry observers say shares of the supermarket pie are bound to shrink when Hy-Vee opens its second store next month in the south and its third store next spring in the east.

“There has been some growth in Columbia over the past few years but not enough that constitutes two new grocery stores,” said Joseph Haslag, an economics professor and Kenneth Lay Chair at the University of Missouri.

Columbia’s population has reached 100,000 after growing about 12 percent since 2000. But the number of grocery stores has about doubled since then, starting with the opening of the first Hy-Vee on West Broadway in 2001. The world’s biggest discount store, Walmart, jumped in with both feet and opened “supercenters” with grocery markets in Broadway Marketplace, across the street from Hy-Vee and, more recently, a few blocks east of the Gerbes in Nifong Shopping Center.

Hy-Vee openings amplify grocery competition

This year, Moser’s opened in north Columbia along Range Line Street, and Hy-Vee will expand its presence with stores in the Rock Bridge Shopping Center at Providence Road and Nifong, which is across the parking lot from the old Nowell’s grocery store and at Broadway Marketplace, in the former Megamarket site.

“Something will have to give,” Haslag said. “The addition of new stores is good for consumers because it encourages stores to institute more innovative strategies and offer lower prices. When there’s more competition, consumers come away on top.”

Holly MacIntyre is a loyal Gerbes shopper. Stephanie Walter is a sales hunter who’s willing to shop around. As they watched their children pick out pumpkins in front of Gerbes in south Columbia, the two mothers talked about the Hy-Vee store opening next month in the same neighborhood.

“I like Gerbes because it’s smaller, and Hy-Vee is more crowded,” MacIntyre, who lives around the corner, said. “I like to get in and get out, and I like that I can always find what I’m looking for. They have really good customer service every time I go.”

Walter doesn’t stick to one store. “I shop all around,” she said. “I used to shop at Gerbes all the time, and when Walmart went in (down the street), I kind of abandoned Gerbes. If money were not an issue, and I could shop wherever I wanted, I would go to Hy-Vee. It’s very clean and bright, and the aisles are easy to move around because they’re spacious.”

Others say the decision of where to shop comes down to convenience.

“I’ll probably shop at both Hy-Vee and Gerbes,” Robin Ibdah said. “I used to shop at the original Hy-Vee all the time when I lived closer to it. Now that a new one is coming in, I might go back. I like Hy-Vee stores because they are bigger and they have more selection. If one looks really busy, and I’m in a hurry, I’ll go to the other one.”

Liz Restrepo is in MacIntyre’s camp and said she and her husband “are going to stick with Gerbes when Hy-Vee comes in. A lot of people at Gerbes are nervous about Hy-Vee, but I hope they stay open.”

Schnucks Manager Bill Chrisco said he’s optimistic about the performance of his store on Forum Boulevard, northwest of Gerbes and the new Hy-Vee. But he’s also realistic about the effect Hy-Vee’s store openings will have on sales. Chrisco estimated Schnucks’ current share of its geographical market is around 36 percent and cites the store’s variety, quality and international offerings among its strongest points.

“The Hy-Vee opening off (east) Broadway is pretty far away, so I don’t think it’s too much of a threat,” Chrisco said. “But the Rock Bridge one is within a 2 ½-mile circular area of our store, and I can see that having a definite effect. The market share in our city is only so large, and at this point the pieces of that pie are going to get pretty small if some stores don’t close.”

Chrisco, who’s managed Schnucks for seven years, foresees major problems for the Gerbes store off Nifong. Hy-Vee is a strong competitor, Chrisco explained, and will force all the city’s grocery operations to step up their game.

“We’re only at 100,000 here, and that means there is only a certain amount of money spent,” Chrisco said. “For the number of people in this city, we’re very over grocery-stored.”

Gerbes is part of the Dillon’s division of Kroger and has locations on Broadway between West and Stadium boulevards and on Paris Road in the north. In response to increasing competition across the country, Gerbes stores are placing greater focus on their in-house brand, a company spokeswoman said. They are offering generic items at low prices while attracting new customers and building long-term loyalty with current shoppers.

“We know today’s shoppers are looking for alternatives to stretch their dollars,” Dillon’s Spokeswoman Sheila Lowrie said. “That’s why our focus is on offering lower prices on everyday staples our customers purchase most, offering quality products and store brands.”

In a recent interview with the Wichita Eagle, Kroger CEO David Dillon acknowledged that Kroger is in an extreme struggle for market share and will have to become more aggressive with pricing, product offerings and customer service.

Nationally, Kroger milk and produce prices have been cut to bring customers in the door, and Gerbes has positioned itself as the upscale alternative for the customer who wants higher quality and convenience, Dillon said.

The importance of convenience is why grocery executives look at traffic counts when deciding where to open stores.

Roger Moser said of his decision to open the second Moser’s on Range Line Street, “The surveys we did told us there was a need, and it looked like the road was finally going to get done, so it was time to move.”

Moser said he thinks the two new Hy-Vee stores will increase competition, but he doesn’t know by how much.

In early September, the Walmart Supercenter in the Broadway Marketplace on Conley Avenue revealed a major renovation, with a new layout, wider aisles, low-profile shelving, a bright interior paint scheme, enhanced lighting and easy-to-read signage. Many of these elements including bright interiors and wide aisles mirror the signature Hy-Vee store layout.

“We listened to our customers and have redesigned the store to make shopping at Walmart even easier,” Mitch Theede, the store manager, said. “The new layout is easier to navigate, which will save our customers time as they shop for necessities.”

Hy-Vee: stars align for expansion

The current Hy-Vee location off Broadway near Fairview Road has done tremendously well since it opened in 2001, said Ruth Comer, the company’s assistant vice president of media relations.

“Columbia has been a very good market for Hy-Vee,” she said. “In the eight years since we opened, the store has grown in sales volume each year and consistently ranks among the company’s top stores in several categories.”

The company based in Des Moines, Iowa, is spending $26 million to build the two additional stores in Columbia in a two-year period.

Each Hy-Vee store will be around 78,000 square feet and will have about 350 employees. Each will feature a décor introduced this summer and a multi-purpose room for demonstrations, educational sessions by in-store dieticians and other programs. The new stores will also offer what they call HealthMarket departments with a wide variety of natural and organic foods and household products. The location at Nifong and Providence will include a Hy-Vee gas station, opening at the end of the year.

Opening two stores almost concurrently was due mostly to timing, Comer said, and the locations near Walmart Supercenters was merely coincidence.

“It wasn’t necessarily a plan to develop the two Columbia stores simultaneously, but the two sites became available at the same time, so work started immediately on both,” Comer said. “While competition is a factor in opening new stores, it is not the key factor guiding our decision-making. Our challenge is to get to know our customers and provide them with the right products at the right prices. If we focus our energies on fulfilling that mission, our stores are successful no matter how many competitors we have or what they choose to do.”

Employee-owned Hy-Vee operates more than 220 stores in Missouri, Illinois and Minnesota, among other Midwestern states. The company employs more than 55,000 employees and is based in Chariton, Iowa. Hy-Vee earned $6.2 billion in total sales in 2008. Columbia has one Hy-Vee store, located on West Broadway, with a second opening in Rock Bridge Shopping Center on Nifong Boulevard in November and a third opening next spring along Conley Road, in the shopping center near U.S. 63 and East Broadway.

Gerbes stores operate under the Dillon’s store division of the Kroger Company. The company employs more than 326,000 employees and has more than two dozen banners, including Gerbes, Fry’s and Hilander, which operate in many states. The Kroger Company is headquartered in Cincinnati, Ohio, and earned $76 billion in sales in the 2008 fiscal year. There are three Gerbes stores in Columbia, with locations on Broadway Street between West and Stadium boulevards, on Paris Road in north Columbia and at Nifong Boulevard and south Providence Road.

Family-owned Schnuck Markets Inc., managed by Chairman and Chief Executive Scott Schnuck and President and Chief Operating Officer Todd Schnuck, operates 106 stores and 103 pharmacies in Missouri, Illinois, Indiana, Wisconsin, Iowa, Tennessee and Mississippi. Schnucks employs more than 16,000 employees and is based in St. Louis. Schnucks reported $2.5 billion in revenue in 2008. Columbia has one Schnucks, located on Forum Boulevard.

Moser’s Discount Foods is based in Fulton and owned by Roger Moser. There are long-established Moser’s supermarkets on Paris Road in the north and on Business Loop 70. This year, Moser opened another supermarket in north Columbia at Range Line Road and Smiley Lane.

Other grocery stores in Columbia include Patricia’s on Keene Street near the Interstate 70-U.S. 63 exit, Aldi on Business Loop 70, Clovers on East Broadway and Old Highway 63, Clovers on Stadium Boulevard and the Root Cellar on Broadway downtown.