Grocery Wars certain to flare up on north side

Nancy Aylesworth pushed a grocery cart filled with bananas, fancy cheeses, trail mix, asparagus, and red potatoes down an aisle at Fresh Thyme Farmers Market on East 82nd Street.

"There's an amazing bulk-food section over here, and a huge meat counter," she said. "I could spend all morning in here."

It was her third time to the upscale, specialty grocer since it opened in September — three times she hasn't gone to her normal food outlet, the local supermarket.

The Fresh Thyme store, filled with a wide assortment of natural, organic foods, is the latest player in a burgeoning grocery corridor that runs about 3.5 miles between Castleton Point Shopping Center and Nora Plaza.

Some analysts and grocery consultants call this stretch of road Ground Zero in the Indianapolis grocery wars.

Three supermarkets (one Kroger and two Marsh supermarkets) and three specialty grocers (Whole Foods, Trader Joe's and Fresh Thyme) are battling for the loyalty of thousands of shoppers in neighborhoods along East 82nd and East 86th street.

If some low-income parts of the city are notorious for few grocery options — sometimes called " grocery deserts" — then this stretch of road could be called a "food oasis," a hugely fertile stretch with an abundance of options.

The stores serve a mix of high- and medium-density neighborhoods, with higher-than-average household incomes. Industry experts say shoppers there are unlikely to support six grocery stores indefinitely, as many of the surrounding neighborhoods are 40 or 50 years old and growth has slowed. A shakeout could happen in a few years with one or two weak players dropping out.

"And it will probably be dramatic when it happens," said Joe Lackey, president of the Indiana Grocery and Convenience Store Association. "It's a real fight up there."

Shoppers are certain to see a flurry of price promotions and aggressive loyalty programs to reward people who do much of their shopping at one location. That could put a short-term crunch on grocers, who do business with razor-slim profit margins, and are constantly fighting to hang onto fickle shoppers.

It may be the most crowded, intense slice of the market, but it's far from the only one. All around Central Indiana, grocers are opening new stores, expanding or remodeling existing old stores and spending hundreds of millions of dollars to try to get an edge on the business.

At least 18 stores are under construction or planned, plus numerous store remodeling, at a tab likely to top $200 million.

Some grocers are opening new stores, while others are closing struggling locations. And some are doing both. Marsh Supermarkets last year opened a new store Downtown in the posh, $85 million Axis apartment-retail complex at Michigan Street and Senate Avenue.

It was the first new store for Fishers-based Marsh since Sun Capital of Florida bought the chain in 2006.

But Marsh closed eight other locations last year, blaming declining customer bases and the need to invest in more promising locations.

Some grocery experts look at Marsh's scorecard and wonder if it is strong enough to win in the super-competitive market along East 82nd and East 86th streets.

David J. Livingston, an independent consultant in Waukesha, Wisc., who does supermarket research, says Marsh's sales per square foot are 20 percent to 30 percent lower than the industry average.

"They appear vulnerable," Livingston said. "Competitors see them closing stores. They see them getting weaker."

Marsh spokeswoman Connie Gardner declined to respond to that. Nor would she say whether the company has any plans to do anything significant with either of its two stores located at Ground Zero, such as remodeling, expanding or closing. One Marsh store is in Nora Plaza, directly across from a Kroger that opened six years ago. The other is a few miles east, in the Clearwater Springs Shopping Center, near Allisonville Road.

"Marsh has chosen not to comment in your article," Gardner wrote in an email.

Full-service supermarkets have been fighting for more than a decade to hang onto market share in the face of specialty start-ups and competition.

The supermarket share of U.S. packaged foods has slipped from 53 percent to 37 percent between 1998 and 2012, according to the Hartman Group, a food and retail consultant based in Bellevue, Wash.

Supermarkets control even less of the retail produce business. Their share is now down to 37 percent.

The competition is coming from two directions: the big box superstore, such as Walmart and Target, usually with lower prices; and the smaller, specialty stores with a wide assortment of exotic merchandise, more intimate retail settings and often higher prices.

And increasingly, they are all fighting over a pool of shoppers that has remained steady in size for decades.

"The grocery business is not a high-growth category," said Britt Beemer, a retail consultant at America's Research Group in Summerville, S.C.

Along the 3.5-mile stretch on Ground Zero are three specialty stores that vary in size and offerings, but have a common appeal: grocery shopping doesn't have to be work. It can be an adventure.

•Trader Joe's. The chain, which describes itself as "your neighborhood grocery store," sells gourmet, organic and vegetarian foods. It offers about one-tenth as many items as a typical supermarket, but most of its products are unique, sold under the Trader Joe's house label.

•Whole Foods Market. The chain's stores are typically larger than Trader Joe's (approaching the size of small supermarkets) but also offers a wide selection of organic and natural foods.

•Fresh Thyme. The stores are meant to resemble a farmer's market, with organic and natural foods, a huge selection of bulk good, and a size somewhere between Trader Joe's and Whole Foods that is intimate and not exhausting.

Some national supermarkets, such as Kroger, are trying to stay competitive by rethinking their store layout, size and appeal.

Kroger opened its store in Nora in 2009, with a footprint of about 50,000 square feet, or about two-thirds the size of a standard Kroger supermarket.

To respond to the high-end shoppers in this neighborhood, it has stocked its shelves with organic bananas, specialty cheeses, high-end wines and other upscale merchandise.

To make room for an expanded deli and pharmacy, it shrunk the size of the frozen foods and the "box-and-can" packaged grogery area in the middle of the store, said John Elliott, a Kroger spokesman.

He said the store has been a strong performer in the six years it has been open, and doesn't expect it to struggle, even as the strip becomes more competitive.

"That store started out with pretty strong sales and maintained them," he said.

So who might left standing five years from now? And will more stores head in and provide even more competition to an area that already seems saturated.

Even some grocery experts say it's a tough call to make.

"How can you tell when someone is about to implode?" Beemer said. "It's a really hard thing to analyze. It's an interesting question. But there is no easy answer."

Call Star reporter John Russell at (317) 444-6283 and follow him on Twitter @johnrussell99.

The six grocery stores at Ground Zero at a glance:

* Marsh Supermarket, 5151 East 82nd St., near Allisonville Road.

* Marsh Supermarket, 1440 E 86th St., near Westfield Boulevard.

* Kroger Supermarket, 1365 E 86th St., near Westfield Boulevard.

* Trader Joe's, 5473 East 82nd St., near Allisonville Road.

* Whole Foods Market, 1300 East 86th St., near Westfield Boulevard.

* Fresh Thyme Farmers Market, 4225 East 82nd St., near Dean Road.