The market for grocery stores continues to grow and diversify as the region's population grows and changes demographics, experts said.
"Both employment and population are growing in Northwest Arkansas," said Kathy Deck, director of the Center for Business and Economic Research at the University of Arkansas. "So, it's not surprising that you are going to see basic services, like grocery stores, expanding to serve new people and people with new incomes."
Government Concerns
Grocers are concerned about federal issues like increasing the minimum wage and cutting funding for food stamps, said Polly Martin, president of the Arkansas Grocers and Retail Merchants Association. Grocery stores operate with less than a 1 percent net profit, she said.
Source: Staff Reports
Northwest Arkansas ranked fourth in the nation for its percentage growth of non-farm jobs in 2013, according to preliminary data from the U.S. Bureau of Labor Statistics released in January. The population of Benton and Washington counties is 443,679, according to a 2012 U.S. Census Bureau estimate and should pass 500,000 sometime later this year.
The region is home to the nation's largest grocer, Walmart Stores Inc., but several other markets flourish here.
Grocery store experts Kim Eskew, president of Harps Food Stores, Inc., and Polly Martin, president of the Arkansas Grocers and Retail Merchants Association, said the Northwest Arkansas market is among the most dynamic and profitable, and companies are racing to open new stores.
Harps Food Stores, Inc., is among those competing with Walmart, Martin said. The company has opened more than 70 stores, according to its website. The Springdale-based, employee-owned company opened five stores in 2013, including stores in West Fork, Bentonville and Elkins.
"We have got to keep growing," Eskew said. "If we sit still, and they keep building stores, then we lose sales," he said of Walmart.
In 2010, Harps Food was listed as among the top 50 fastest growing supermarket chains based on a five-year unit-growth percentage by Chain Store Guide, a division of Lebhar-Friedman, Inc., a media and marketing company for the retail industry and others.
Harps tries to open three to five stores a year, Eskew said. The stores are comparable in size to Walmart's Neighborhood Market stores. The Harps store that opened last year at 1209 N. Walton Blvd., in Bentonville is about 37,000 square feet and is larger than most Harps stores.
Harps revenue was about $515 million as of 2010, according to Supermarket News, the leading trade magazine for the food distribution industry. The outlet also named Harps to its top 50 picks of small chains and independents in 2011, according to its website.
Harps has a model that works, Eskew said. A lot of Walmart stores were built across the street from Harps stores, but the company has been able to withstand the competition, he said.
Grocery stores are seeing competition across many sectors, including from dollar stores that offer some food items, and restaurants, said Michael R. Thomsen, an associate professor in the Agricultural Economics and Agribusiness department at the University of Arkansas at Fayetteville.
Independent grocery stores have been the hardest hit by competition from large chains, Thomsen said. Yet, those stores continue to exist.
Six Marvin's Food Stores stores operate in Northwest Arkansas, according to the company's website. Through CMV, Inc., in Van Buren, Charles Van Combs purchased 21 Marvin's Food Stores in Oklahoma, Kansas and Arkansas in 2004, when Marvin's was going through bankruptcy. The company owns 34 stores total.
As competition heats up, grocery stores are carving out niches, Martin said. Stores know what they do best, what customers they should target and where to place themselves to be most effective, she said.
Harps, for example, prides itself on the stores' individualized customer service, fresh-cut meats and award-winning bakeries and delis, Eskew said.
"To some extent, you can say Walmart is cheaper, but does everybody in the world want just the cheapest stuff they can find? I think there are plenty of examples where that isn't true," Eskew said.
Other stores are focusing on quality and customer care on a "fresh" food format.
The Fresh Market, which opened at Pinnacle Hills Promenade in Rogers in 2012, focuses on high-end, locally grown and organic foods.
"We are always on the lookout for markets where people appreciate great food, and Northwest Arkansas is just the place," said Drewry Sackett, public and community relations director, in email.
Ozark Natural Foods, a 42-year-old cooperative grocery store that is owned and controlled by its customers, is ready to compete and may expand in the next year, said Alexa McGriff, marketing director. The coop sells organic and locally grown produce in the state, she said.
For 2013, Ozark Natural Foods had a little more than $14 million in sales, despite competition from Fresh Market, McGriff said. This year, the coop expects to grow another 7 to 8 percent, she said.
"Things are going really well for us," McGriff said.
Ozark Natural Foods is considering whether to open a second location, expand its current location or go into a different, but related, coop business, McGriff said. For example, the group could open a brewery cooperative for organic beer.
Ozark Natural Foods has already made some changes to compete. The group switched warehouses with the store's main distributor to a closer warehouse. The move means items are restocked more quickly and special orders arrive faster, according to a January news release. The change will also allow the store to "freshen up our product selection."
Smaller grocery stores in the area are jumping into niche markets. Asian Amigo Supermarket and Tang's Asian Market opened in Springdale last year. Both cater to people looking for hard-to-find Asian or Latino ingredients.
The trend in the grocery store industry is to build smaller, according to the Agricultural Marketing Resource Center. The center, located at Iowa State University, is an electronic, national resource for producers interested in value-added agriculture, according to the group's website.
Walmart announced plans last month to open twice as many Neighborhood Markets nationally as previously planned -- between 270 and 300 during its fiscal year. Walmart plans to open Neighborhood Markets in Centerton, Farmington and Siloam Springs this fall.
The retailer will also open Springdale's second Supercenter this fall. A Walmart Supercenter is up to about 187,000 square feet on average, according to the company's website. Neighborhood Markets average about 42,000 square feet by comparison. The new Neighborhood Market that opened at the corner of I Street and Arkansas 12 in Bentonville last year is about 41,000 square feet.
The grocery store market is strong in Arkansas, Martin said. She and Deck said they expect companies will continue to build and strive to separate themselves from each other.
"We all have to eat," Deck said. "It's a matter of making sure that you are serving the community and the needs of the community as they exist."
NW News on 03/23/2014