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Innovation key to Columbia's grocery wars

Tuesday, December 15, 2009 | 12:01 a.m. CST; updated 11:09 a.m. CST, Tuesday, December 15, 2009
With Walmart and Aldi providing low-cost options and Hy-Vee aggressively expanding, Columbia's grocers are in a fierce feud to stay in the market.

COLUMBIA — There wasn't a day that went by for 127 years that either a Nowell's retail or wholesale grocery store wasn’t doing business in Columbia. In 2003, however, the Nowell's stores on Keene Street and Nifong Boulevard closed their doors to customers, ending a Columbia tradition that dated to 1876.

John Nowell III, who managed the Nowell's on Keene Street, likes to tell story about "going the extra mile" that could help explain what went wrong with the Columbia staple.

In the early 1960s, a young boy was visiting his German grandmother who lived near the Nowell's on Worley Street . He went to the store, brought some milk and eggs to the clerk and, not knowing any better, tried to pay with German marks. Nowell’s father, John Nowell Jr., was the owner at the time, and he called Exchange National Bank to find out what the exchange rate was. After learning the boy had more than enough for the groceries, he gave the boy his change, in U.S. dollars.

Nowell said little moments like that are what made the grocery chain successful in Columbia, but failing to live up to its motto — "Variety and Service" — is what led to the grocer's downfall.

"It wasn't the fact that big, old Walmart came to town,” Nowell said. “It was the fact we got away from what made Nowell's successful in the first place. We pretty much shot ourselves in the foot. We basically weren't offering the consumer a better choice. We were trying to keep our customer with nothing but marketing and without substance in the store. The competition pretty much beat us at our own game."

Six years later, competition within the Columbia grocery market remains fierce. With Walmart providing a low-cost option and Hy-Vee aggressively expanding, grocers of all kinds have to find ways to gain an edge. Whether its adding new stores or improving old ones by adding new services, grocers that fail to innovate could find themselves outmatched.

Although Walmart might not have specifically caused the Nowell's stores to close, it certainly has had an impact on the grocery industry.

"One of the things going on now is the sort of low-cost, lower-service offerings like Walmart and Aldi on the low end," said Gene Gerke, president of Columbia-based Gerke and Associates Inc, which has been consulting in the grocery industry for more than 30 years.

"The typical supermarket of the past tried to serve the masses, but that is tough to do given that Walmart, Target and Aldis are appearing all over the place," Gerke said.

That’s an understatement.

According to the October 2009 issue of the Shelby Report, a grocery industry trade publication, Walmart and Aldi have a significant presence in the state. The publication lists Walmart as having the most stores (93) and the biggest grocery market share (39.41 percent) in Missouri. Both figures are much higher than the retailer with the second-biggest market share, St. Louis-based Schnuck Markets, which has 56 Schnucks stores, including one in Columbia, and an 11.94 percent share.

The publication also lists Aldi as having the ninth-highest market share in the state at 1.89 percent, but the second-most stores with 66.

Columbia grocers are feeling the presence of low-cost stores. The city of Columbia's business license directory includes 25 active grocery stores, including an Aldi and a Walmart-owned Sam’s Wholesale Club. In addition, there also are three Walmarts and one Target in town.

Based on the sheer number of stores, however, the amount of competition today is far less than it was 77 years ago. The 1932-33 Columbia Business Directory contained 40 listings under "Groceries & Meats" and four listings under "Groceries Wholesale." Boone County Historical Society historian Liz Kennedy said that so many corner stores dotted the Columbia landscape because walking was many people's only means of transportation.

She also said the challenge back then for corner stores such as the Zero House on Tenth Street and the West End Grocery on Garth Avenue was to compete with the more-sophisticated refrigeration systems and greater selection of the larger chains like Piggly-Wiggly and Kroger Grocery and Baking Company.

Seventy-seven years later there is a new challenge facing Columbia grocers, which range from locally owned stores such as Clover's Natural Market and Moser's Discount Foods to the larger Midwest-based chains Hy-Vee and Schnuck Markets.

Gerke said that today, Columbia grocers must find out where they fit in the marketplace and figure out unique ways to separate themselves because it is difficult to compete with stores such as Walmart on cost alone.

Gerke said strategies can include providing new services such as prepared and ready-to-eat foods, new vendor partners, unique or broader inventory and outstanding customer service. Long story short: Innovation is key to survival.

"You've got to keep changing and growing and trying new stuff," Gerke said.

Hy-Vee is banking on innovation and expansion to increase its share of the Columbia market. The Des Moines, Iowa-based company opened its second Columbia location in November at Nifong Boulevard and Providence Road, and it plans to open a third in the spring in the Broadway Marketplace at 25 Conley Road, the former home of MegaMarket. The Nifong location is directly across Providence Road from one of three Gerbes Supermarkets in Columbia. The others are on Paris Road and on Ash Street. Attempts to interview representatives of Kroger, Gerbes’ parent company, were unsuccessful, as were attempts to interview staff at the stores themselves.

Hy-Vee spokeswoman Ruth Comer said the nature of the grocery business necessitates growth and innovation.

"We really believe we have to continue to expand and upgrade our stores," Comer said. "The supermarket business is very fast-moving, and if you are not trying to innovate, you can very quickly be left behind by customers."

Comer also said that the first Columbia Hy-Vee store, which opened on West Broadway in 2001, consistently ranks among the top 10 stores in the company. Building new stores is one thing, but what features will ensure Columbia  shoppers keep coming back?

Hy-Vee CEO Ric Jurgens said the company is trying to emphasize health to better serve its shoppers. The new store on Nifong joins 135 of the company's 228 locations in having an in-store dietitian who offers classes, works with the pharmacy and is available for customer questions.

Paula Vandelicht, the dietitian at the new Hy-Vee, said that so far anywhere between three and 10 people have been attending her classes, a number she called "pretty good." She also plans to begin a weight-loss class that she said has been popular in other stores.

Another unique aspect of the new Hy-Vee is a "club room," which can be used to teach cooking classes and as a public meeting space. During a recent news conference in the new Hy-Vee's club room, Jurgens referred to it as "kind of a community center" and discussed its possible uses.

"It was originally designed and thought of to create a cooking school," he said. "But we've found that it has far more opportunities than that. So you will see within this room our wine and spirits clubs, groups like Rotary or Kiwanis might have luncheons here, and anyone can have a meeting here."

The new Hy-Vee also contains an expansive "health market" section at the front of the store that focuses on natural and organic products. Jurgens said that section has seen constant growth across the whole company in recent years.

New grocery wars ignite as stores innovate and look for different ways to create a competitive advantage.

Could Hy-Vee's health market take business away from Columbia stores that specialize in natural and organic foods?

Bruce Topping, manager of Clover's Natural Market on Chapel Plaza Court, said the opposite could happen.

"I'm sure it'll hurt us a little bit in some ways," he said. "But sometimes it serves to help legitimize us because I think that as natural foods sort of go into the market more and more, there becomes a bigger discussion for the mass market."

Topping's family bought Clover's in 1991, when it was known as Columbia Specialty Foods, from Richard Catlett, whom Topping described as "a dissenter before it was cool." The Chapel Plaza Court store opened in 1999, and the original location on Business Loop 70 moved to 2012 E. Broadway in 2006. Topping said experience in the natural foods market is important.

"Though (Hy-Vee is) going to have their little store within a store, it's all we do. People can come in and ask about nagari, and we're going to know a lot about it. They can ask us how you make tofu or what are the steps in kombucha, and we'll know all about it," Topping said. "You're dealing with a family business that has dealt with these products for over 10 years and knows about the history. You get a connection and an accountability that you just don't find in the mass market."

In addition to hard-to-find natural products, shoppers can consult with Topping and other Clover's employees about, among other things, herbal remedies and dietary strategies. Topping said expertise in these areas and an all-hands-on-deck approach is important for a store such as Clover's.

"With a Ma and Pa small health-food store, you're kind of cultivating the people who are there to really know their stuff and be passionate about natural medicine," Topping said. "I think that is a big part of our industry and huge component of what we do here."

Like Clover's, Moser's Discount Foods is another locally owned grocer that has expanded recently. Owner Roger Moser has two supermarkets in Columbia, one in Fulton and another in Ashland. Last year, it opened a new store on Range Line Street. Moser said that although Columbia is a tough market because of the high number of stores, his stand out for a few reasons.

"We're good people," Moser said. "We run decent stores, we're competitive, and a lot of people shop because of location."

He also said Moser's is unique because it still cuts meat fresh in the store every day, which he said some chains don't do.

Moser's Discount Foods, Clover's Natural Market and Hy-Vee are three Columbia grocers that have grown by adding new locations. Expansion, however, can come without new brick and mortar.

Schnuck Markets has only one Columbia store, despite the fact the Shelby Report lists the company as having the second-biggest market share in Missouri. Schnuck Markets spokesman Paul Simon said that he couldn't discuss whether the company plans to expand in Columbia but that it  is always looking to grow.

"We grow in many ways,” Simon said. “We grow not only by building new stores but expanding and remodeling as well."

He said that the Schnucks in Columbia, which opened in 1970 in the building now occupied by Office Depot and moved to its Forum Boulevard location in 1993, will look to innovate by adding a Kaldi's Coffee soon. Simon said Kaldi's will be a good fit because, like Schnucks, it is a family-owned, St. Louis-based company.

"As we remodel, we want to become a one-stop shop for our customers," Simon said. "Grocery shopping is a chore, there is no doubt, but we want to bring a little extra experience and make it not as much of a chore."

Is expanding, in any sense, a good move in a down economy?

MU economics professor Joseph Haslag said that he wouldn't "dare to presume" the answer to that question but that expanding now could have benefits.

"We're going through a business cycle, and if I'm going to go out on any limb, we will return to a pattern of growth, this economy will grow, and so the idea of expanding now may be that some of the other costs of expansion are lower now and people are trying to take advantage of that," he said. "It doesn't seem crazy to me at all."

Haslag also said that, like any industry, grocers who don't innovate could be driven out of business by those that innovate faster. He also said, however, that the grocery business has been around long enough that veterans of the industry know what they’re doing.

"The nice thing about the grocery industry is that it is a pretty mature industry. We've been practicing grocery behavior for several generations, so you wouldn't expect to see the Columbia market ever get down to just one supplier," Haslag said. "We can look forward to and enjoy as customers the benefit of an industry that is mature and that is continually trying to innovate."


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Comments

Courtney Shove December 15, 2009 | 8:40 a.m.

Interesting that the majority of the stores have red signs/logos. Never noticed that.

(Report Comment)
David Ta January 6, 2010 | 10:17 p.m.

That's because the color red has the longest wavelength, and our eyes can see that type of color from a longer distance than any other color.

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