Michelle Obama, and Food Retailers, See Opportunity in Inner Cities
When the going gets tough, food retailers get going--to the inner city. Michelle Obama approves. 
Drug chain Walgreens (WAG) has been among the more aggressive, developing convenience food programs featuring sandwiches and salads for urban markets such as Chicago. With its recent purchase of Duane Reade, a New York City drug chain, Walgreens became a major source of basic food, beverage and snack products for the many Gothamites who don't have convenient access to supermarkets. Although Walgreens food program has been among the most comprehensive in drug retailing, the company noted that Duane Reade's edibles initiatives stood as an asset on which it could build.
Yet, Duane Reade had more going on with food than was immediately apparent in the Walgreens acquisition. Now it has launched a new store variation featuring a major fresh food and grocery expansion that includes fresh sandwiches, fresh soup, single-serve entrees, side dishes and baked goods. The store on 16th Street and Eighth Avenue in Manhattan's Chelsea section, an area that includes both multi-million-dollar condos and public housing projects--represents the latest phase in a Duane Reade brand and customer experience initiative dubbed "New York Living Made Easy." The store devotes 40 percent of its 15,000 square feet to a food assortment meant to serve a wide range of consumer needs.
In its product assortment, Duane Reade complements convenience meal items with fresh produce, including bagged salad, and packaged celery and carrots, a first for the drug store chain. The store also stocks about 500 frozen-food items ranging from boneless chicken breasts to frozen vegetables to appetizers. Also part of the mix are food and beverages under the drug chain's recently introduced DR Delish private-label food and beverages brand.
Cities provide unique opportunities and not just in terms of audience. Most municipalities actively back urban renewal with programs that can creat retail opportunities. Of course, as also noted here, Tesco (TSCO) is taking on urban markets with its Fresh & Easy Neighborhood Markets. Its new store in South Los Angeles took several years to open as it was situated in a mixed-use commercial and residential development stewarded along at municipal speeds by the City of Los Angeles. Fresh & Easy wanted to enjoy the new facilities and customer base the development brought, but it didn't take any government funding, spokesperson Brendan Wonnacott said. And that can make things easier for a store such as Fresh & Easy that has a very specific operational formula. Government money comes with government strings.
Not all retailers are against using government funding, though. Such aid can balance costs associated with urban operations if a store operation is flexible enough to accommodate bureaucratic requirements. Nothing done in a city is cheap, after all, with distribution, for example, being more difficult and expensive.
Sometimes government involvement has its perks. The Fresh Grocer is a retail operation that is building supermarkets in underserved communities across Philadelphia. The 10-store chain's inner-city growth has been partially funded by the state of Pennsylvania in a program that caught the attention of the White House, which is reviewing the state program for inclusion in First Lady Michelle Obama's Let's Move anti-child obesity program. That won The Fresh Grocer a visit from Mrs. Obama a couple of weeks ago. She wanted to visit the latest Fresh Grocer supermarket, one that, with state help, had moved into an inner city Philadelphia neighborhood long abandoned by major supermarket chains.
The attraction of the urban environment isn't limited to the United States. Longo's, a Canadian grocery store chain, has just opened its third urban-format store in uptown Toronto. The newest Market by Longo's store, located on the corner of Yonge and Bloor Streets, operates in an area populated by office workers by day and condo dwellers by night, giving it a ready, affluent and busy audience. The store features a carving station, where a chef prepares deli meats for take-out sandwiches, and a stone pizza oven. The March 2 opening gave Longo's its 20th supermarket in the Toronto area. It plans to open three more this year.
Duane Reade, The Fresh Grocer and Longo's are taking different approaches to feeding city dwellers, but all are building on an opportunity that has become more attractive in a weak economy where heavy store concentrations and less consumer spending make the usual suburban markets more problematic. Given the lack of conventional supermarkets to serve them, urban residents frequently need more food buying options, and retailers are lining up to deliver.