Both HyVee and Giant Eagle are expanding into major new markets mdash HyVee in the Twin Cities and Giant Eagle in Indianapolis

Both Hy-Vee and Giant Eagle are expanding into major new markets — Hy-Vee in the Twin Cities and Giant Eagle in Indianapolis.

Regional chains tackle new markets

“Hy-Vee has been successful as it’s moved out of Iowa into Kansas City and parts of Illinois, and there’s no reason to doubt it will do well in Minneapolis.” —NEIL STERN, McMillanDoolittle

A spate of expansion announcements from some regional supermarket operators reflects fresh opportunities for growth among some of the nation’s strongest traditional chains — and promises to shake up some markets for years to come.

So far in 2014 at least two significant announcements of expansion into new markets have been made, including the planned entry by Giant Eagle [4] into Indianapolis and, more recently, Hy-Vee [5]’s planned foray into the Minneapolis market.

“Hy-Vee has been successful as it’s moved out of Iowa into Kansas City and parts of Illinois, and there’s no reason to doubt it will do well in Minneapolis,” Neil Stern, senior partner at McMillanDoolittle, Chicago, told SN

The West Des Moines, Iowa-based chain said it has plans to open “several” stores during the coming years in the Twin Cities area, including one location that is under contract and several more “in various stages of research and development.”

Pittsburgh-based Giant Eagle, meanwhile, recently confirmed plans to enter Indianapolis in 2015 with one of its upscale Giant Eagle Marketplace stores and a GetGo convenience store.

Read more: Giant Eagle confirmed Indianapolis plans [6]

The expansion plans of Hy-Vee and Giant Eagle follow the recent entry by Publix Super Markets [7] into the Charlotte, N.C., area, where the Lakeland, Fla.-based company made its North Carolina debut in February.

The expansion plans outlined by these retailers — three of the most highly respected regional operators in the country — marks a resurgence in the strength and confidence of the industry following the recession, some observers said.

In Charlotte, Publix will be battling head-to-head against Harris Teeter, which has the No. 1 market share and is now backed by parent Kroger Co. [8]

“At the end of the day, the Publix and Kroger consumer are not that much different,” noted Stern. “While Harris Teeter goes after a slightly higher income demographic, in a market like Charlotte, where they have [such strong] market share, they are reaching a pretty broad swath of the population as well.

“I expect that ultimately both chains will end up prospering in the market,” he said.

In Indianapolis, Giant Eagle will also find itself battling Kroger for market share. Kroger is the No. 1 food retailer in that market as well, with 45 stores and 26.1% of the grocery sales, according to Tucson, Ariz.-based Metro Market Studies. Walmart [9] is right behind at 22.1%, followed by Marsh Supermarkets [10] at 13.1% and Meijer Inc. [11] at 10%.

Fragmented Twin Cities

In the Twin Cities, Hy-Vee will be tackling a much more fragmented landscape. Supervalu [12]’s Cub Foods banner is the dominant operator with 38 stores and an 18.7% share, according to Metro Market Studies, and several other regional banners have significant share, including Rainbow — owned by Milwaukee-based Roundy’s [13]Jerry’s Foods [14], Lund Food Holdings [15], Coborn’s [16] and Kowalski’s [17]. It is also the home market of Target Corp. [18], which has the No. 2 grocery share at 13.9%.


Follow @SN_News [19] for updates throughout the day.

While it may be awhile before Hy-Vee affects the overall marketplace, it is likely to have a powerful impact on a store-by-store basis, industry observers told SN.

“It is operating stores as good as anybody in the industry, so I suspect it will do well in any market it sets its sights on, including Minneapolis,” said Stern. “But it will require critical mass to have a real impact on the market overall. So the big question is, how many stores will it open in Minneapolis, and how soon? No one really knows the answers to those questions.

“But there’s no doubt the Rainbow stores Roundy’s operates there, which are struggling, will be affected, and that could force Roundy’s to put more focus on its Mariano’s stores in Chicago.”

Stern said he doubts Hy-Vee will seek to acquire stores as it expands in Minneapolis “because its pattern is to grow organically. And because it will be opening up large stores there, it’s not likely to find a lot of boxes to acquire that would fit its needs.”

Read more: Hy-Vee opens new Iowa store [20]

John Dean, principal at John Dean & Associates, Minneapolis, said he expects Hy-Vee to operate at least six stores in the Minneapolis area within the next 2½ years, “mostly in the suburbs ringing the city, and from there it will probably look for fill-in locations. But with stores of 90,000 square feet, it will be difficult to get that much land in the larger cities, and I would guess the fill-in locations would be smaller.”

Hy-Vee is likely to put the most pressure on conventional operators, more so than the discounters or upscale operators, Dean said, “and I would suspect it would choose locations where Rainbow would be the primary target.”

Asked how many stores it would need to open to have a significant impact on the market as a whole, Dean said he isn’t sure. “They have about 20 stores in the Des Moines market, and if Des Moines can accommodate that many, I’m sure Minneapolis can too. But even with 20 stores, Hy-Vee’s impact would be somewhat diluted in Minneapolis because there’s more competition here than in Des Moines.”

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