116 3rd St SE
Cedar Rapids, Iowa 52401
The buzz about grocery stores this year in the Corridor has focused on niche stores like Trader Joe's coming to Coralville — mirroring national trends showing fresh format, limited-assortment and dollar stores outperforming traditional supermarkets.
But with new grocery stores popping up here and Americans' food spending remaining flat, will the stores be eating each other's lunch?
'Anytime a new store moves into a community, the existing stores look for ways to be better, both in pricing and service,' said Michelle Hurd, president of the Iowa Grocery Industry Association. 'There are only so many customers to go around.'
Linn County has 78 grocery stores and convenience stores that sell groceries with total estimated sales for 2016 of $870 million, according to 2016 Retail Marketplace Data from the Environmental Systems Research Institute, a geographic information systems company based in Redlands, Calif.
ESRI gets the information from demographic and business databases, including Infogroup, which gathers data on more than 13 million U.S. businesses from annual reports, Securities and Exchange Commission filings, federal, state and local governments and business publications, among other sources.
Johnson County has 39 grocery and convenience stores with $310.5 million in estimated total sales this year, ESRI reported.
But perhaps the most telling part of ESRI's grocery store report is an analysis that measures the balance between retail sales (supply) and household grocery spending (demand). This shows which geographic areas could use more grocery stores and which areas appear already to be saturated.
By this measure, six of eight of Iowa's most populous counties — including Linn, Polk and Scott — already have enough to meet or exceed the local demand.
Johnson and Black Hawk counties show demand is slightly higher than supply.
'Such a condition highlights an opportunity for new retailers to enter the trade area or for existing retailers to extend their marketing outreach to accommodate the excess demand,' ESRI reported.
Indeed, Johnson County has seen much of the recent grocery store development.
Hy-Vee and Aldi, chains already established in the Corridor, opened new stores in Johnson County in 2015. Lucky's Market, a Boulder, Colo., chain, also entered the local game last year with a 37,000-square-foot store on Iowa City's east side.
Natural Grocers, an organic and natural food store chain based in Denver, opened a 15,000-square-foot store on Blairs Ferry Road NE in Cedar Rapids this fall and is planning another location in Iowa City.
But the biggest hubbub came in November, when Trader Joe's, one of the nation's most-sought retailers, announced it would open a 13,000-square-foot store in Coralville's Iowa River Landing in late 2017.
Trader Joe's, considered a limited-assortment store, carries domestic and imported foods and beverages, including artisan breads, coffee and wine, international frozen entrees, deli items and vitamins, as well as milk, eggs and other standard items.
Segmentation of grocery market
Traditional supermarkets had total sales nationally of $468 billion in 2015, according to the 2016 Future of Food Retailing report by Willard Bishop, an analytics firm. But sales for these stores were up only 1.2 percent from the previous year while store counts and market share were down.
Fresh format stores, which include Whole Foods and Natural Grocers, saw their sales grow 9.8 percent in 2015 and had the largest increase in number of stores among all formats, the report states.
Stores like Dollar Tree and Dollar General, for which food makes up more than 20 percent of their sales, expanded overall sales by 6.8 percent in 2015, according to Willard Bishop.
Online food sales, through national outlets like AmazonFresh or local services like Hy-Vee Aisles, were up nearly 21 percent in 2015, the report states.
While there is an expanding variety of stores from which to choose, the amount of money Americans spend on food is as flat as a tortilla.
As inflation-adjusted incomes for many Americans have stalled in the last decade, the share of income spent on food started to flatten, according to the U.S. Department of Agriculture.
On average, Americans spent 5.5 percent of their disposable personal incomes on food at home in 2014. This amounted to just under $6,000, on average, for middle-income Americans, the USDA reported.
Kristin Wendlandt, 34, of Iowa City, likes to shop at Fareway because it's close to her house and is small enough to quickly grab essentials.
She loves how Fareway employees help load groceries in the car and return carts to the store. 'As a parent, I get it,' she said of the service.
But Wendlandt also shops at Costco and New Pioneer Co-op.
Effects of competition
As new grocery stores have taken root in the Corridor, others have pulled out.
Fresh Market, a specialty grocery store chain based in North Carolina, announced in May it would close 13 stores, including locations in northeast Cedar Rapids and West Des Moines.
Hurd, from the Iowa Grocery Industry Association, said she's seen a slow decline in the number of independent grocery stores in Iowa over the years.
'It's a very competitive market, especially here in Iowa,' she said.
Iowa grocery stores operate with a 1.3 percent average profit margin, Hurd said. This is below the 1.7 percent average profit margin for grocery stores nationwide in 2015 reported by the Food Marketing Institute.
Hy-Vee, a West Des Moines corporation with more than 240 stores in eight states and sales of more than $9.3 billion a year, has 17 grocery and drugstores in Linn and Johnson counties, but seems to be biding its time with new locations.
The company in May halted planned construction of a 96,000-square-foot store on Highway 965, between Coralville and North Liberty.
'Several months ago, we announced that we decided to suspend construction on our second store in Coralville as we continue to evaluate the best store size, format and design that will meet customers' needs in this growing area,' spokeswoman Tina Potthoff said last week. 'We remain committed to this project and the Corridor community, and we plan to move forward with construction at some point in the future; however, a timeline has not been set.'
Hy-Vee has tried new concepts, including full-service restaurants in some stores and even a 3,000-square-foot clothing boutique in one Des Moines location, the Des Moines Register reported. The chain launched Hy-Vee Aisles in early 2015, allowing customers to shop online and have groceries delivered to their houses or available for pickup in stores.
Aldi, a limited-assortment chain with five stores in the Corridor, is adding new product lines, including organic, gluten-free and baby foods, and renovating all three Linn County locations in 2017, said Heather Moore, vice president for the chain's Dwight, Ill., division.
'Competition is good for the people who live in the area,' she said.
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