Grocery Scene Sees Big Changes

For years, Steve Edwards had been scared to open a grocery store in Little Rock.

The market had been dominated by Kroger, Affiliated Food's Harvest Foods and the leader, Wal-Mart Stores Inc.'s Supercenters.  

But when Affiliated Foods Southwest Inc. of Little Rock filed for bankruptcy in May, it gave Edwards, the president of Edwards Food Giant of Marianna, the opening he needed.

Since June, Edwards Food Giant has opened three locations in Little Rock, and a fourth is scheduled to open in April.

Meanwhile, since Affiliated's $730 million bankruptcy filing, the competition for shoppers in Little Rock has intensified. Public records show at least $25 million was spent on the purchases and construction of grocery stores in Little Rock in 2009, but no doubt millions more have been spent.

Kroger, of Cincinnati, announced in June that during the next four to five years, it would pump $125 million into Arkansas to renovate stores, including four in Little Rock. In February, Kroger will temporarily close its 614 Beechwood St. store for a massive overhaul that will take about nine months. This summer, Kroger will open its 118,000-SF store at 16105 Chenal Parkway, which will feature a mix of merchandise and groceries, similar to a Wal-Mart Supercenter.  

And Wal-Mart is jockeying for customers, too. In November, the Bentonville retailer spent $9.7 million to buy a nearly 23-acre site for a Supercenter at Shackleford Crossings in west Little Rock. The 203,000-SF center could be open by the end of the year, but a Wal-Mart spokesperson didn't return a call for comment.

Other grocery stores are making changes to lure customers who have altered their eating habits and are forgoing restaurants to eat prepared foods at home. Terry's Finer Foods Inc. in the Heights, for instance, is renovating its store to include a 50-seat restaurant, which is on track to open in March.

Harps Food Stores Inc. of Springdale is in a growth mode and is considering coming to Little Rock. (See sidebar.) It had looked at two Affiliated Foods locations in Little Rock but couldn't iron out the terms of a deal, said Harps Chairman and CEO Roger Collins. Harps more recently considered yet another Little Rock site, but that didn't pan out either, he said.

The employee-owned grocery store chain hasn't ruled out coming to Little Rock, but nothing is on the drawing board currently, Collins said.

Not all grocery stores have benefited from Affiliated's bankruptcy, though. Cranford's Fresh World of White Hall, which had opened two stores in Little Rock at the end of 2008, had closed them by summer 2009. Cranford was in the process of buying the former Harvest Foods stores from Affiliated, but Affiliated's bankruptcy derailed the deal. A spokesman for Cranford's didn't return a call for comment.

An independent grocery store, The Station Grocery at 1001 Kavanaugh Blvd., which opened in February, also closed in December.

The 3,073-SF store, which featured local and organic foods, "didn't have enough support," said Casey Pierce, one of its co-owners. "Nobody came in."

She declined to comment further on the closing and referred calls to the other owner, Holly Ingebo, who didn't return a call for comment.

"What really counts in this economy is, are you delivering the best value?" said Jim Hertel, managing partner of Willard Bishop LLC, a supermarket consultant in Barrington, Ill.

He said the winners are the stores that can provide the best price.


No Battles

Edwards Food Giant started in 1959 and focused on small towns across Arkansas and Mississippi. It had 16 stores at one time, but at the beginning of 2009, it had only four.

For at least three decades, the company wanted to open in more densely populated areas, but the opportunities weren't right, said Oral Edwards, who founded the grocery store chain and is a co-owner with his son, Steve Edwards.

After Affiliated Foods began liquidating its locations, however, several of its stores became available.

"This Affiliated Foods opportunity was a huge deal for us," said Steve Edwards. "We had studied them for a long time and picked what we thought were the best stores that would work for us."

He said the stores had been neglected and Edwards spent "several million" in inventory and remodeling the stores. (Edprop Development Co. LLC, led by Steve Edwards, bought the former Harvest Foods on Main Street for $1.75 million and paid $1.25 million for the one on Stagecoach Road. BancorpSouth Bank of Tupelo, Miss., provided a five-year loan for each amount to finance the purchases. The other two Edwards locations are leased.)

Edwards' first Little Rock store opened at 1701 Main St. in June.  

To win customers, Edwards' strategy is to focus on the quality of meats and customer service, which includes carrying the groceries to a customer's vehicle.

Edwards declined to release sales figures, but he said sales had been climbing since the new stores had opened.

Edwards said he didn't want to get into a war with other competitors and would target selling groceries instead of general merchandise. "We just want to get our niche," he said. "And we definitely don't want to get into a battle with Kroger and Wal-Mart."

That strategy might prove successful, said Hertel, the supermarket consultant.

"Price is always important," he said. "But the departments where you establish your quality credentials ... is produce and meat.

"A container of Tide is a container of Tide, no matter where you buy it," Hertel said. "But the meat and the produce will vary from retailer to retailer."

Edwards said that when the store at 2510 Cantrell Road opens in April, the chain would have 250 employees in Little Rock.

He said the company would catch its breath before considering launching other stores.

"There might be some more opportunities that come along," Edwards said. "It's been a pretty good stretch. We basically doubled the size of our company in six months."


Kroger Moves

For years, Kroger had been planning a major investment in Arkansas, said Joe Bell, manager of marketing and consumer affairs for the Kroger Delta division, which covers Arkansas' 36 stores.

"Frankly, we needed to spend some money in that market to upgrade our facilities," he said.

Bell said that every year Kroger earmarks money for capital improvements and new stores. "We just used part of our monies over the years to go toward [the renovations]," he said.

Bell said the investment wasn't tied to the Affiliated bankruptcy and the arrival of Food Giant in the central Arkansas market.

"As much as I sympathize with Affiliated, Harvest and all that - and that does change the landscape - but the No. 1 player on the block is still there," Bell said, referring to Wal-Mart.

Wal-Mart Supercenters has a 49.5 percent market share in central Arkansas, while Kroger has 32.5 percent, according to the January issue of the grocery store trade journal, Shelby Report of the Southwest. But the trade journal does not give any estimate of the total value of the grocery market in central Arkansas.

Stores typically need to be remodeled every seven years, said Lorrie Griffith, the editor of the Shelby Report.

Building permits show Kroger spent $2 million upgrading its store at 8451 W. Markham St., $2 million at its 10300 N. Rodney Parham Road store and $7.8 million on its 16105 Chenal Parkway location. The renovation on Markham is complete and the work on Rodney Parham should be finished by summer, Bell said.

A building permit hasn't yet been filed for the Beechwood location, and Bell declined to release the renovation figures.

The new, 118,000-SF store on Chenal Parkway will be a concept called Marketplace Kroger, Bell said. (The Kroger currently at the site will close once the Marketplace opens.) Inside the new store will be a Fred Meyer Jewelry store, a bistro with a chef on site, a sushi bar, a variety of international cheeses, toys, and bed and bath merchandise.

Bell said the redesigns allow Kroger to offer the latest merchandise to appeal to as many customers as possible.

He said customers now want additional perishable offerings, such as expanded delis, bakeries and seafood, and the renovated stores would respond to that customer demand.

"Quite frankly, [the stores] haven't had the best of what we've had to offer," Bell said.

After a redesign, most stores expect to see an increase of 5 to 10 percent of sales, said Hertel, the consultant. But if a competitor has opened in the meantime, "that's going to make things more difficult," Hertel said. In most instances, though, customers come back after a remodel, he said.


Finer Foods

Terry's Finer Food hopes to see more customers when Kroger's Beechwood location closes for renovations.

Terry's started renovating its store this month, and the renovation will be completed in March, manager Jim Justice said.

He said the renovation wasn't in response to Kroger, though. He said the demand for Terry's prepared foods had been growing. Justice declined to release sales totals, but he said sales increased about 5 percent in 2009 compared with 2008.

With the demand for Terry's cooking, owner Lex Golden decided to add a restaurant to the back of the store.

"Most people don't want to come home and prepare a meal," Justice said. And now customers who previously picked up dinner to take home will have the option of dining in the store, he said.

The store's and the menu's specialties will be French food, seafood and pastries.

"We're just going to go all out and see what happens," Justice said.

Harps Has Little Rock Market on the Radar

Harps Food Stores Inc. of Springdale is getting close to the Little Rock market. It opened a 31,500-SF store in Benton in March.

It also has a store in Searcy and is building a store just south of Batesville and one in Conway that will open later this year, said Harps Chairman and CEO Roger Collins.

"We've been putting in new stores that are 32,000 SF that focus on perishables, meats, produce, bakery and deli," Collins said. The stores also have a pharmacy and a gas station.

"It's really convenient for people to come in and get everything they need," Collins said.

For the year ending Aug. 31, Harp's saw a 10 percent increase in sales over its $440 million revenue for 2008. He said most of the growth was tied to 10 stores the company added in the fiscal year, bringing the total to 64. Same-store sales, which are Harps stores open at least a year, reported a 1 to 2 percent increase in sales.

"We don't have a site right now in Little Rock that we're working on," Collins said. "But we're always looking for locations that might be good for us."