Get 
fresh


Obesity, food deserts, 
incremental trips and bigger baskets 
have more drug stores looking at fresh food

Overdrive.


Increasingly, chains that traditionally have not been major forces in food retailing are making bigger commitments than ever to fresh — including meat, produce and dairy — in an effort not only to help solve the nation’s growing health crisis and expand Americans’ access to nutritious food options, but also to create new reasons for customers to shop their stores.


Walgreens late last month — as part of its Chicago Hometown Investment Initiative, which in all will add 600 new jobs around the city — announced that it would grow its base of food desert stores from 11 to nearly 50 over the next couple of years.


“Fresh” is the freshest idea on the front-end of the store, and it’s another example of how the corner drug store can do good, while doing good business.


According to the U.S. Department of Agriculture, nearly 6 million Americans live at least half a mile from a supermarket and lack access to a vehicle. And more than 20 million Americans live in low-income areas more than one mile from a grocery store, making them residents of what are called “food deserts” — areas with limited access to wholesome and fresh food. In such areas, consumers often must resort to small stores that sell only packaged food or mediocre — if any at all — produce, contributing in a big way to the bad diets that are to blame for the country’s growing problems with obesity and diabetes.


In June, Chicago Mayor Rahm Emanuel hosted a summit with CEOs from Walgreens, Walmart, Aldi, Roundy’s and the companies that operate the Jewel and Dominick’s chains, offering incentives for the companies to build stores in the city’s numerous food deserts. According to press reports, the retail chiefs talked openly about the obstacles companies face in opening new stores, including transportation, security and real estate issues and bureaucratic red tape. Emanuel has promised the city would fast-track store openings in areas it has designated as food deserts.


While the food desert problem faces communities — urban and rural alike — all across America, it appears that Chicago has emerged as a key learning lab for how government can partner with the private sector to address the nation’s obesity crisis. Emanuel has stated publicly that his city would be working with the White House to set up a national model for healthy eating and living programs.


For Walgreens, it is no small commitment — in one of its Chicago “food oasis” stores, 40% of the retail space is devoted to food. President and CEO Greg Wasson said at a shareholders meeting earlier this year that the company may expand its fresh food centers to 400 or more stores over the next several years. Walgreens also announced in May that it would test-market stores with healthy food options at 30 locations in San Francisco.


Walmart also has built Walmart Express stores in Chicago’s food desert neighborhoods, including West Englewood, and recently signed a lease for a 14,000-sq.-ft. property at 3636 N. Broadway, which likely will be another Walmart Express location.


The world’s biggest retailer recently promised Wall Street that it would accelerate growth of its Walmart Market stores — another smaller format it could look to add in food desert communities.


In New York, many Duane Reade stores have dramatically expanded fresh food departments; however, these efforts have targeted stores in more affluent areas. Still, wealthy or poor, Manhattan’s neighborhoods from Battery Park to the Bronx are under-represented by supermarkets in the city.


For its part, CVS is investing in more of what it calls “Urban Cluster” stores, which feature vastly expanded food sections. CVS rolled out the Urban concept to 200 stores in 2010, and plans to add another 220 this year.


And since Target developed its PFresh store concept in 2009, the company has introduced the format in 462 stores through 2010, and plans to roll it into 350 more units this year.


Rite Aid’s approach to fresh has been an apples-to-oranges departure from what other chains are doing through its partnership with Supervalu on 10 Rite Aid/Save-A-Lot stores located in the Carolinas. Rite Aid president and CEO John Standley told analysts during a June 24 conference call that the stores “continue to show solid sales gains” and the two companies continue to look at opportunities to expand the program to more stores.


But it’s not all about philanthropy. Expanding fresh grocery offerings also represents another reason to shop drug stores and another opportunity to grow the market basket, Bill Renz, Rite Aid VP consumables, said late last month at a special panel discussion hosted by the Grocery Manufacturers Association and the National Association of Chain Drug Stores at NACDS Marketplace in Boston.


“Dairy is a great example of that, if you can grab that extra dairy trip,” Renz said, because there are a lot of items that can go into that basket with the dairy trip.


This summer could be a litmus test of the consumers’ willingness to trade trips to drug from other channels to buy food. According to a recent report by SymphonyIRI Group, 4-out-of-10 shoppers said they have been forced to reduce or completely eliminate trips to their preferred retailers due to the price of gas.

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