How much artisan cheese and organic parsley does one market need?
In the span of about a year, Cedar Rapids will see an influx of fresh baked breads and olive oils, as well as organic produce and cheese, as two specialty grocery stores and a couple of smaller specialty food shops open their doors.
The Iowa City-based New Pioneer Food Co-op will expand to Cedar Rapids, opening its third location by early 2015. And just weeks before New Pi’s October announcement of its plans, national retailer the Fresh Market, a gourmet supermarket chain, said it will open its first Iowa location in late 2014 at 180 Collins Road NE, across from Lindale Mall.
The North Carolina-based retailer offers a big selection of prepared foods, a large deli section, sustainable produce, whole-bean flavored coffees, a wine department and high-quality meats and seafood.
In that same plaza is Great Harvest Bread Co., a specialty bakery that touts its use of wholesome and hearty ingredients and wheat that is freshly milled each day. It opened in October.
And Olive’s Oil, a store selling fresh infused olive oils and balsamic vinegars, will open by the end of this month in the mixed-use development the Fountains, at Edgewood Road and Blairs Ferry Road NW.
“It reflects the changing demand,” University of Iowa Marketing Professor John Murry said. “Customers want an increase in products that are tailored to specific needs.”
And because these specialized products generally cost more, a lower volume is needed to be sold. And better price margins are attractive to retailers, he said.
“If you have a substantial enough group, it can be sustainable and be profitable,” he said.
So how many of these stores can the metro area of 350,000 sustain?
The majority of these business owners and store managers concede that they wouldn’t have attempted to sell their products in Cedar Rapids 15 years ago.
New Pioneer Food Co-op tried. It opened a store in Cedar Rapids in 1988 but closed it just one year later.
Laurel Williams, co-owner of Great Harvest Bread, said that when she and her husband, Dion, moved back to the Corridor to raise their children 15 years ago, they talked about opening a bakery in Iowa City, not in Cedar Rapids, because that university town had the demographic they were looking for.
But that store didn’t pan out and Williams said the two renewed the idea of a bakery when they determined that tastes and demographics were changing in Cedar Rapids.
“Nationwide, we are more aware of health issues,” she said.
This specialty foods industry is estimated to be worth $86 billion and is growing — about 22.1 percent from 2010 to 2012.
Specialty foods — which are perceived to be worth a higher price tag because of special ingredients, specific processing or handling of ingredients — cover a wide range of products from artisan cheeses and cured meats to gluten-free foods and organic produce.
A huge chunk of the specialty foods market is organic food, where sales hit $28 billion in 2012, according to the U.S. Department of Agriculture. This is up 11 percent from 2011.
That’s because people are putting more thought into what they are eating and where it came from, said Christine Crosby, one of three partners to open Olive’s Oils.
An established market
Crosby said that she and her partners decided to open Olive’s Oils, a 1,400-square-foot store that will offer 26 types of olive oils and vinegars as well as complementary products including pastas, pesto, chocolates, jams and seasonings, to fill a gap in the market.
A University of California, Davis study found that 69 percent of olive oil imports tested failed to meet an Agriculture Department quality standard. This means the olive oils also don't have the health benefits that are often associated with the food, and the store wants to change that.
But the investors also knew there was an established market. It will try to draw its customer base, which is made up of self-proclaimed foodies and a more health-minded crowd, from the large number of Cedar Rapids residents who have traveled to Iowa City or Coralville over the years to shop at New Pioneer's two stores.
Great Harvest’s Williams agreed, adding that national retailer Fresh Market and the local co-op would not open shop in the area if market research showed the city couldn't handle it.
New Pioneer and Fresh Market "confirmed that Cedar Rapids is ready for it,” she said. “They did their homework.”
She's also not nervous about being in the same shopping plaza as Fresh Market, adding that the upscale retailer, along with Hobby Lobby, set to open in fall 2014, will attract similar customers in a way Kmart didn't.
"Our customers are those who have a car and are willing to make an extra stop," she said.
New Pioneer said it settled on a Cedar Rapids location due to its strong member base in Linn County, which is about 5,000 people. New Pioneer General Manager Matt Hartz said Fresh Market’s move did not influence or hasten the co-op's decision.
“We were aware of their interest in Cedar Rapids and their intentions for several months, and we did incorporate that into our financial analysis and planning,” Hartz said back in October. “We were able to monitor what their impact was on the market, and it did not have a significant financial impact on us.”
And because it will soon have at least three and maybe four locations in the Corridor, it is conducting a feasibility study to see how best to expand its bakery capacity, which is currently run out of the Coralville location.
In addition to its future Cedar Rapids location, it also is considering relocating its downtown Iowa City store from 22 S. Van Buren St. to either a multiple-story development built above the parking lot of Robert A. Lee Recreation Center or building another location in Iowa City.
Hartz said that Fresh Market indeed has many similarities as New Pioneer, including its large meat and seafood sections and deli.
"Success creates an incentive for imitation," the UI's Murry said. "But when new competition enters the market, it tends to force a price competition, which makes it more difficult for a specialty store to be competitive."
Representatives from Fresh Market contacted for this story had not responded to questions by press time.
“But we have a strong focus of supporting local farmers and providing natural, clean meats,” Hartz said. “That’s not something that chains typically do.”“The market will support it,” he said. “There’s room for everyone.”