Price Chopper searches for Des Moines niche

Virginia Bushong makes the six-block walk from her apartment to the Price Chopper supermarket on Ingersoll Avenue to get groceries. She pulls her bounty home in a hand cart.

The 92-year-old has been a customer at the store, formerly a Dahl’s Foods, for many years.

In April it was one of five former Dahl's locations to reopen as Price Chopper, which bills itself as a low-priced, full-service grocery chain.

“At first I wasn’t too sure about the change,” Bushong said. She pushed a grocery cart with one hand and dragged her hand cart with the other while shopping this week. “But this store is convenient for me. And this store grows on you.”

Company executives are hoping Price Chopper grows on other Des Moines customers. They are banking on lower prices, larger and more varied produce departments, expanded beer and spirits selections, and remodeled stores filled with familiar employees to grow the chain’s customer base.

Finding its niche

The challenge for Price Chopper is differentiating itself in the marketplace, said Jim Hertel, a supermarket industry analyst and managing partner of Willard Bishop, a consulting firm in Barrington, Ill.

"They need to find an important advantage they have over other stores and make sure people know about it," Hertel said.

It is difficult for grocers to compete in the middle of the store where general groceries are sold. Price Chopper will have to excel "in meat or prepared foods," Hertel said. "It would be hard to take on Hy-Vee in customer service. They have to focus on what they are better at and make sure they play it up."

The company has found success in Kansas City, where it is based. Price Chopper dominates the Kansas City market, where it has more than 50 grocery stores, but Des Moines-based Hy-Vee has made inroads since first opening there 25 years ago. Hy-Vee now has 22 stores in the Kansas City area.

Price Chopper is a subsidiary of Associated Wholesale Grocers, a retailer-owned grocery cooperative and distributor. The Kansas City stores are owned by five different families that operate their supermarkets under the Price Chopper brand.

Each store has its own unique approach due to the ownership structure, but they share the same store decor, pricing strategy and advertising. Those are things they'll share with the Des Moines stores.

The company has spent millions of dollars upgrading the former Dahl's stores, many of which were run down and needed organization, new merchandising, signage and paint, said Craig Moore, chief executive of DGS-Acquisition (Des Moines Grocery Stores), the local AWG subsidiary.

One year after Dahl's bankruptcy

It was nearly a year ago that 84-year-old Dahl’s Foods Inc. filed for bankruptcy. AWG, which was Dahl’s supplier, bought Dahl’s assets for $2.45 million and acquired seven of the 10 remaining stores. Two were sold and one closed. AWG rebranded five of the stores as Price Choppers and two others as Cash Savers, a deep discount grocery.

Des Moines Grocery Stores changed the corporate structure and added new executive officers, Moore said. "We are a combination of new leadership and some that have been with the employee base, this store and in this community for a long time," he said.

The new company does not have an employee-owned stock ownership plan. The Dahl's ESOP, which was a retirement plan for many workers, was dissolved with the bankruptcy and left hundreds of people without payment.

Reeling from months of uncertainty about store closures and bad publicity about the deteriorating condition of the stores, Des Moines Grocery Stores is working to rebuild customer confidence and boost lagging sales.

“It’s an ongoing challenge in the industry to keep customers,” Moore said. “We’ve been challenged particularly through the remodels to maintain all of our customers. We are taking what should be an eight-month construction project and trying to condense that into a four-month project in order to get the projects completed.

“We have a passion and a drive to get our brand out there because we are eager to earn the business in the community,” he said. “Sitting back and taking too much time wasn’t the position we wanted to be in.”

New look for local stores

Renovations to the Ingersoll Avenue and Merle Hay Road stores are done. The Beaver Avenue and Johnston stores “are in the throes of remodeling and will be completed by Christmas,” Moore said.

Plans for the Clive location, 15500 Hickman Road, are still being considered.

“We are working through several exciting unique options of how we might approach that location,” Moore said. “We look at each neighborhood and each market as how best can we serve that market. We are looking to create some value for that marketplace and a point of differentiation.”

Moore declined to say whether the Hickman store would be rebranded or remodeled. A decision on the store will be made in the next few months, he said.

The Cash Saver stores at 4121 Fleur Drive and 1320 E. Euclid Ave. will not be revamped, Moore said. Cash Saver’s business model uses “cost plus” pricing in which customers pay a 10 percent upcharge at check-out. If a can of beans is marked $1 on the store shelf, the customer pays $1.10 at checkout. The shelf price represents what it costs the store to get the item, Moore said.

Sales at the no-frills, low-overhead Cash Saver stores are “off to a strong start,” he said.

Moore declined to release sales figures for any of the stores.

More stores in Des Moines?

Customer Mellinda Ziegenfuss said she likes the clean updated look inside the Ingersoll Price Chopper, where she shops regularly. The prices aren’t necessarily lower than the old store, she said, but she really likes the meat department. “The beef is better quality.”

Ziegenfuss — like other customers have remarked — isn’t sold on the store’s name. “It sounds juvenile,” she said.

Price Chopper is hoping to win over more customers who have found other places to shop during the ownership transition and remodeling process.

Shoppers Jermaine Jackson and Christina Fisher agreed they liked the brighter lighting and new paint color in the Ingersoll store. “There’s also more space in the aisles and the same employees who worked at Dahl’s are here,” Jackson said.

Des Moines Grocery Stores will look for growth opportunities in the metro and in Iowa, Moore said.

"Our focus right now — and we are only seven months old — is building and getting our base sound before we spend time worrying about how many stores we will have in five years. We know as those opportunities become available, if it’s the right thing then we’ll be able to capitalize on those."

Moore said there are no plans to expand into other states.

"We think there are plenty of opportunities for growth in the future in the greater Des Moines area and in Iowa. We are a local company that has aspirations to continue to serve this marketplace for a long time," he said.

Brighter stores, more variety

The remodeled Price Choppers feature a mint green decor with bold signage, new flooring, larger beer and liquor departments and expanded produce departments with a wide assortment of organic fruits and vegetables. They are well lit and offer wide, clutter-free aisles.

“What people will see with the remodels is as the stores get pulled together there is vibrant fresh foods and great value as well as the continued high service,” CEO Craig Moore said.

Customers entering the stores are hit with themes of fresh and value. At the Ingersoll Avenue store, there is a display of the week’s deals set up in what looks like the back of a semi-truck adjacent to the well-stocked produce department.

Other changes

• The meat departments feature meat cut fresh daily, Moore said. “Our meat cutters are here to cut meat fresh any way a customer wants it. It’s cut fresh — not cut and set in the case.” The stores also offer precut packaged meat, he said.
• The liquor, wine and beer departments have quadrupled in size and moved to new locations in the stores. “Customer feedback was that they wanted to see more,” he said. The variety of wines and craft beers is a growing piece of the beverage market and we were under-served in the past.” New selections include local and national craft beers and a wider variety of wine. The Beaver Avenue store doesn’t have an expanded beverage department because of space restraints, Moore said.
• The prepared food and deli counters have been revamped to include prepackaged, fresh hot and cold entrees with two sides for $5. “It’s convenient and high quality but yet at an affordable price,” Moore said.
• General groceries in the center of the store have been reorganized and the variety expanded.
• Prices on 10,000 items are reduced temporarily each week, Moore said. “We always pass along the (discount) that the manufacturer gives us as well. If there are products that don’t have the allowance, we discount those 10 percent whether that’s a potato chip or a snack cake, bread,” he said. “That is part of the power of being part of a large co-op that has nine distribution centers over 36 states. They get lots of promotions and deals from manufacturers. There is no doubt prices are significantly lower than when the stores were Dahl’s. It's over double digits.”

Price Chopper locations

• 3425 to the Ingersoll Ave. 
• 4343 Merle Hay Road
• 1819 Beaver Ave. 
• 5440 N.W. 86th St., Johnston 
• 15500 Hickman Road, Clive

Cash Saver locations

• 4121 Fleur Drive
• 1320 E. Euclid Ave.