National Grocers May Not Solve the East Raleigh Food Desert

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A decision by Kroger Co. to close two urban Raleigh supermarkets has left thousands of residents without easy access to healthy food, and pushed the Southeast Raleigh neighborhood further into a federally recognized health danger zone called a food desert.

Neighborhood groups, City Council members and faith-based organizations reacted to the January closures by brainstorming new options for fresh food in their neighborhood, including the creation of a co-op grocery store. Researchers at N.C. State University are on the case too, with a United States Department of Agriculture grant to improve healthy food and fitness options in the neighborhood. It will host community workshops at Martin Street Baptist Church Feb. 22 and 23.

Brainstorming Grocery Needs in SE Raleigh

A public workshop will take place from 8:30 a.m. to 3 p.m. Feb. 23 at the Johnson Building of Martin St. Baptist Church, 1001 East Martin St. All community members interested in helping make sure that families have access to healthy food and safe places to be active are invited to RSVP at the Voices Into Action website.

There is an additional workshop for representatives of community organizations or agencies from 8:30 a.m. to noon Feb. 22, also at the Martin St. Baptist Church.

The community effort has seen some success already. A Dunn, N.C.-based chain called Carlie C’s IGA has agreed to open a store in Kroger’s shuttered New Bern Avenue location. Conversations are underway with other operators for the Martin Luther King Boulevard Kroger, according to neighborhood activists.

But the question remains: how grocery stores can be successful in neighborhoods with high rates of poverty and declining populations.

It might help to first understand what traditional grocers like Kroger are up against. A 2011 study by the Food Marketing Institute found that the average profit margin for grocery stores is 1.3 percent, the smallest margin of almost any industry. That leaves very little room for fluctuations in food prices, the impact of high unemployment, rising health care costs for its staff, union demands and theft, all of which grocers face regularly.

In low-income areas, grocers also must account for the high percentage of shoppers using food assistance benefits, such as the Supplemental Nutrition Assistance Program (SNAP), which are distributed near the first of each month. Cash flow, inventory and staffing change radically from month’s beginning to end, presenting additional challenges for a grocer, reported the Food Marketing Institute in a July 2011 paper, “Access to Healthier Foods: Opportunities and Challenges for Food Retailers in Underserved Areas.”

Because most major chains are also public companies, they must make decisions that continue to bring the business profits and please shareholders, despite the challenges. In many cases, that means cutting costs, acquiring competitors, raising prices or closing stores.

And then there’s the increasingly competitive environment, with groceries now sold in pharmacies and dollar stores like Dollar Tree, Walgreens and Rite Aid, and at major chains like Target. Specialty grocers like Whole Foods Market, Fresh Market and Trader Joe’s have also taken market share from traditional grocers.

“In many cases, the supermarkets are just saying, ‘We’d rather not compete in this area. We’re just not making enough money,’” said John Stanton, a food marketing professor at St. Joseph’s University in Philadelphia.

Many chains have reacted by changing their business model altogether, often doubling the size of the traditional store and adding more selection, such as organics, natural foods and sushi, as well as household goods, coffee shops, health clinics, prepared food counters and catering. FMI data shows that the median store size has grown from 18,000 square feet in the 1980s to 46,000 square feet in 2010. The organization suggests the most profitable store today to be about 60,000 square feet.

Smaller, lower-end stores like those in Southeast Raleigh are increasingly difficult to operate, because their shoppers may not be able to afford organic fruits and vegetables, sushi and expensive cheeses, and they certainly won’t pay $4 for a coffee drink at an in-store Starbucks.

Those in the neighborhood who have the means to buy those items will forgo their local store altogether to shop at a higher-end grocery within driving distance.

In Southeast Raleigh, the problem is exacerbated by declines in population. 2010 U.S. Census data shows that population dropped by about 10 percent in the area around the Martin Luther King Jr. Boulevard store.

Kroger officials did not respond to requests for comment on this story, but said in a news release that both Southeast Raleigh stores were unprofitable despite store upgrades and attempts to lure in shoppers. Those challenges certainly aren’t limited to low-income areas. Kroger also closed a store in North Raleigh last year, citing the same poor results.

Though the situation might sound more bleak for a neighborhood like Southeast Raleigh, there is evidence nationwide of profitable independently owned stores in urban areas. Often, they are subsidized with government incentives or other community support, Stanton said.

In Philadelphia, ShopRite stores have opened in low-income areas with help from a Pennsylvania grant and a revolving-loan program created to address food deserts.

In urban Detroit, where many major grocery chains have closed stores, Spartan Stores of Grand Rapids is opening three Valu Land stores (similar to Aldi and Sav-A-Lot). Chaldean-Americans (Iraqi-Americans) in the city have also formed a Detroit Independent Grocers Association to promote and support more than 80 independent stores.

Carlie C’s is betting that it can turn a profit in Southeast Raleigh too. The 14-store chain benefits from its affiliation with Independent Grocers Alliance, which provides food distribution, private-label brands, marketing materials and other resources to 5,000 independent stores around the world.

Independent stores tend to carry fewer items and lack bells and whistles. They also operate with smaller profit, Stanton said.

“Not enough money for a global giant like Kroger is plenty of money for an independent operator like IGA,” he said.

Carlie C’s president Mack McLamb Jr. could not be reached for comment about his plans for the store. The News & Observer has reported that the store could open by Feb. 6.

Meanwhile, a neighborhood group called NC Co-operators is pulling together partners to create a co-op grocery store in Southeast Raleigh. It’s still unclear who would operate the co-op and how it would be funded, said Kia Baker, a resident and director of food recovery and distribution at Inter-Faith Food Shuttle, who is helping to organize the group.

The N.C. State team plans to use the outcome of its workshops to map out places in the community that provide access to healthy food and fitness options. Researchers will take that data to determine how to improve access, or to leverage existing options.

There may not be a large effort to recruit new stores, said Sheree Vodicka, director of Advocates for Health in Action, a partner in both projects. Instead, the groups may focus on educational efforts, and non-traditional approaches to providing food like better equipping corner stores, in addition to the co-op.

“Clearly, grocery stores closing means that they weren’t making any money, which means people weren’t shopping there. That begs the question, why weren’t people shopping there?” Vodicka said. “We don’t really have an answer to that.”

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