Hungry to Expand, Fresh-Format Grocers Boldly Enter St. Louis Market

by Jeff Shaw
Kyle Pershing, DTZ Retail Services

Kyle Pershing, DTZ Retail Services

David Wirth, DTZ Retail Services

David Wirth, DTZ Retail Services

Family-owned grocers Schnucks and Dierbergs solidified their position as the primary grocers across the St. Louis metro area when Schnucks acquired 57 stores from National Supermarkets in 1995. But after several years of these two chains dominating the grocery sector, an influx of fresh-format grocery stores is shaking up the market by offering shoppers fresh, local, organic — and in some cases more affordable — whole food choices.

These new chains — typically half the size of traditional grocers — appeal to a younger customer, as well as those looking to supplement their grocery shopping or find items for special occasions. Consumers interested in the offerings of fresh-format grocers are willing to drive farther to shop at their stores.

New Entrants Abound

Fields Foods, a “homegrown” fresh-format grocer, opened its first location in the Lafayette Square neighborhood in January 2014. The newly constructed 37,000-square-foot, stand-alone building is just south of downtown’s central business district.

The grocer markets produce provided by farmers within 100 miles of the store, and also features a wine bar and personal shoppers. This unique, full-service grocer is locally owned and was the first fresh-format store to enter the metro area. Fields Foods has plans to expand beyond the St. Louis retail market in the near future.

In July 2014, Lucky’s Market, a smaller, socially conscious chain from Boulder, Colo., opened a 45,000-square-foot store in Ellisville, Mo., a high-income community in west St. Louis County.  The chain backfilled a grocery store space that had gone dark in the Fountain Plaza shopping center. Another 26,000-square-foot Lucky’s Market is under construction within the Market at McKnight shopping center in Rock Hill, Mo., located in central St. Louis County, and is expected to open this fall.

Lucky’s Market focuses on organic, local foods, and is quickly opening stores across the country.

As a means of differentiating itself from other fresh-format grocers, the Lucky’s Market philosophy focuses on “doing good” through giving programs, volunteering and education. The chain promotes “responsible social practices, supports youth education, offers second chances to area neighbors and provides sustainable environmental initiatives,” according to its website.

Residents of Fairview Heights, Ill., located in the St. Louis Metro East submarket, are the first to experience Fresh Thyme Market locally.

The full-service grocery chain opened its first store in the St. Louis area in January of this year, backfilling a 28,000-square-foot portion of a former Kmart in the redeveloped shopping center across from St. Clair Square mall.

Fresh Thyme focuses on fresh produce, natural and organic foods. As with other fresh-format grocers, the center of its stores features more fresh produce and meat than a traditional grocer, which tends to stock more dry goods, canned goods, snack items and beverages.

Fresh Thyme plans to open additional stores in the St. Louis metro area by late 2016. The chain received final approval in June for a 27,977-square-foot store to be built at the intersection of Kirkwood Road (Lindbergh Boulevard) and Manchester Road in Mid St. Louis County. This busy intersection has been underutilized in the retail market for years.

The store will be part of a larger infill development that includes stand-alone buildings for CVS and Midwest Regional Bank. Fresh Thyme recently announced that a new store will be located in the O’Fallon Walk shopping center in O’Fallon, Mo. The grocer expects to announce the location of a store in Ballwin, Mo., later this year.

Shoppers looking for grab-and-go or made-to-order foods will find them at the new Fresh Market within the City Place mixed-use development, located in Creve Coeur. Fresh Market is known for personal service and offering a large variety in a small space. The chain opened its first St. Louis store in late February of this year.

The 25,000-square-foot, stand-alone building, which was recently constructed, was sold as an investment property in May of this year at a capitalization rate of 5.28 percent. Fresh Market is the largest chain of the specialty grocers entering the market with over 170 stores in 25 states.

Traditional Grocers Evolve

History shows that traditional grocers have weathered everything the competition has thrown at them. Recent examples include the emergence of super centers such as Walmart and Target. During the recession, we also saw the expansion of value stores like Shop ‘n Save, Aldi and Save-A-Lot.

Traditional grocers have considerable market share compared to other formats. Data from retail consulting firm Willard Bishop indicates that although the fresh format is experiencing the greatest growth year-over-year compared to other grocery segments, that growth is still insignificant when looking at each segment’s respective total market share.

The entrenched grocery chains in metro St. Louis, Schnucks and Dierbergs, both privately held companies, have been retooling their offerings and marketing strategy to more effectively compete against all of these newcomers. Both grocers are showcasing local produce options and are carrying more grab-and-go and made-to-order items at their newest stores.

On the other end of the grocery shopping spectrum, Aldi and Save-A-Lot have been aggressively expanding throughout the region. Aldi, in particular, has revised its store formats and entered traditionally higher-end areas of St. Louis.

Developers, Consumers Win

Growth in the value and fresh/organic retail grocer sectors is expected to continue in both the city of St. Louis and St. Louis County. Alternative big-box retailer options, such as Target and Walmart, also are expected to expand their grocery inventory to compete with the ever-growing retail grocer market in St. Louis.

This flurry of activity is creating opportunities for new retail development in the St. Louis area. Developers of grocery-anchored strip centers and some smaller neighborhood strips will benefit from the emergence of these fresh-format chains.

St. Louis consumers of all ages and budgets will benefit as well through expanded grocer options, better value and additional product choices.

— By Kyle Pershing, Vice President, and David Wirth, Associate, DTZ Retail Services. This article first appeared in the August 2015 issue of Heartland Real Estate Business magazine.

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