How Did Richmond Become the Epicenter of Grocery Wars?

Posted on by John W. Anderson in Commercial Real Estate, RVA Grocery and Delivery Wars

It seems as if every week there is an announcement of the opening or expansion of yet another grocery store in the Richmond metropolitan area. Jeff Cooke with Thalhimer recently stated in a Richmond Times Dispatch article that the grocery sector of retail is "driving development" in the Richmond area because there is not "much else in the retail sector being constructed." Some, but not all, of the "players" and their recent "plays" are:

  • Kroger has opened several new Marketplace concept mega-stores, averaging 125,000 square feet, in recent years and has expanded several other stores as well. This trend started with the opening of the Stonebridge store on the site of the former Cloverleaf Mall in Chesterfield County. Since that time, Kroger has opened Marketplace stores on Staples Mill Road and on Ironbridge Road and has expanded a store to feature that concept off of Route 301 in Hanover.
  • Martin's has opened a new store in Midlothian, but in an about-face of the local industry trend, has announced the closing of three other under-performing locations. Food Lion, with 45 Richmond area stores, also continues to have a significant market share, and the recent shareholder approval of the merger of the parent companies of Martin's (Royals Ahold) and Food Lion (Delhaize) may, because of overlapping locations and Federal Trade Commission requirements, result in additional store closings from both brands, allowing each to unload low and under-performing locations. The latest reports are that the combined companies will sell all 19 Martin's stores in the Richmond metropolitan area, leaving the Food Lion stores intact.
  • Wegmans, a family-owned 88 store chain out of Rochester, New York, announced plans to open two Richmond area stores and one in Charlottesville. The Stonehenge Village store in Midlothian opens on May 22 and the West Broad Marketplace store in Short Pump opens August 7. Wegmans consistently ranks at the top of "customer service" categories in grocery trade publications.
  • German-based "no frills" Aldi has opened five new stores in the Richmond market with three more on the way. Its European competition, Lidl, has placed its U. S. headquarters in Northern Virginia (a $25 million investment), plans a distribution center in Stafford (a $70 million investment) and has announced plans to open several stores in the Richmond market, as well as in Hampton Roads.
  • Wal-Mart has opened several Neighborhood Market stores (which are typically in the range of 45,000 square feet and are limited to groceries with one or two ancillary services, but not with the "typical retail offerings" found in a Supercenter) in recent years. Many of these locations are in "food deserts" or other under-served portions of the Richmond area market. The company announced on March 16 that it would open a fifth location on Mechanicsville Turnpike near Laburnum Avenue.
  • Whole Foods has announced that it will build a store in the space most recently occupied on West Broad Street by Pleasant's Hardware's flagship store (now closed).
  • Publix, a chain based in Florida, will open at least two stores in the Richmond market in 2016 and 2017, with the first being in the Nuckols Place Shopping Center. The chain has stated that it is looking to aggressively grow in the Richmond market and elsewhere. Publix typically ranks a close second behind Wegmans in the "customer service" categories in grocery trade publications.
  • The Fresh Market, a Greensboro, North Carolina grocery chain that has four Richmond area stores, recently put itself "on the market" via an auction process, but with the right to reject any bid without reason. Interestingly, Kroger led the bidding in the second round of the process, according to a Reuters report from February 11, 2016. However, current reports are that the chain has been purchased by Apollo Global Management, LLC, a New York private equity firm, for $1.36 billion.

At a recent commercial real estate group event, one of the speakers noted that there are at least two other grocers "eyeing the Richmond market," but was not in a position to release the names. Speculation is that the potential candidates are Stew Leonard's andEarth Fare.

To add to the intensity of the competition in this market, Kroger recently started filling online grocery orders at its Ironbridge Road location. Customers can place orders for over 40,000 items online have the orders brought to their vehicles without having to park and enter the store. Kroger plans to expand this service to most of its other locations by the end of the year.

So, what is driving all of this activity? A recent blurb in the International Council of Shopping Centers' weekly e-newsletter noted that grocery stores are seeking to create convenience for their customers by locating near other services that shoppers need and frequent, including dry cleaning, optometry, physician, veterinarian, and similar service-oriented businesses. Many grocery stores even offer coffee bars and community meeting areas and are becoming the social gathering spots for friends and neighbors.

The Pew Research Group provides additional insight. Its studies reveal that in 2015 Millennials outnumbered Baby Boomers for the first time. Millennials are a busy generation and are known for seeking service and lifestyle conveniences. The grocery industry is catering to the needs of this new generation of shoppers by conveniently locating their stores and also by placing a significant focus on prepared foods.

It seems that the Richmond metropolitan area, with its thriving restaurant, craft beer and apartment scene, as well as its established areas in the City and in the surrounding suburbs, has just the right demographic mix to satisfy the requirements of many of the "players" in the grocery market. At least, that's my take, and I am sticking to it!

Stay tuned for updates! Richmond's grocery industry is hot and new developments appear almost weekly!

About the Author

John W. Anderson is a commercial real estate attorney who represents Virginia businesses and individuals. He assists his clients with a variety of commercial real estate matters and transactions (lender counsel, purchases, sales, leasing, tax-deferred exchanges, and development, as well as providing counsel regarding compliance with access provisions of the Americans with Disabilities Act), tax-deferred exchanges, and general corporate and business advice, including entity formation.

Spotts Fain publications are provided as an educational service and are not meant to be and should not be construed as legal advice. Readers with particular needs on specific issues should retain the services of competent counsel.