MINNEAPOLIS — Ric Jurgens, chairman and chief executive officer of West Des Moines, Iowa-based Hy-Vee, had many more questions than answers in his keynote address last week at the Food Marketing Institute's Energy & Store Development Conference here.
Jurgens, who is also FMI's chairman, urged his audience to join him in questioning everything they are accustomed to doing in food retailing - “to look reality in the eye and deny it.” He held up his cell phone and declared that the food industry can't assume that its tried-and-true practices won't be marginalized the way corded phones, slide rules, dictionaries and encyclopedias have been overtaken by mobile technology.
Take store size. Jurgens observed that in his career in food retailing he has seen store size expand from 18,000 square feet to 85,000 square feet, which is the ideal size of Hy-Vee's current prototype. “But what about tomorrow?” he said. “Will stores be 20,000 square feet or 100,000 square feet?” Hy-Vee, he noted, is experimenting with a smaller footprint store. “Over the next five years, our stores will range from 12,000 to 85,000 square feet.”
The fact that the U.S. has an aging population is not necessarily a guide to the right store size, Jurgens said. “Intuitively, you might say they will need smaller stores. But will they want to go to three different places or just one bigger store? I don't know.”
Jurgens wondered how restrictions imposed by some communities would impact supermarkets. He pointed out that Mission, Kan., a community in the Kansas City area, will impose a “driveway tax” on homes and businesses, based on the projected number of car trips to and from a location. “How will things like that affect how we design stores and parking lots?” he said.
He also asked how environmental factors will affect store design, pointing out that “lighting restrictions” as well as lighting innovations are coming. Will supermarkets need as much refrigeration as they do today? Will the government mandate a different kind of refrigerated cases or doors on cases? Will the cost of energy - which could rise because of government regulations on carbon — force stores to put doors on cases? “We may not be able to afford open cases,” he said.
Some stores have cases that control lighting based on the presence of customers, but what if retailers are required to have cases that illuminate only when someone touches the door? “It could happen,” said Jurgens.
He also raised a question about the kinds of materials retailers will need to use in building stores. Will they all need to be recycled materials? “Recyclability could be a big issue for us,” he said.
One area that Jurgens was more certain about was the importance of environmental considerations, regardless of one's position on global warming. “Intuitively, saving natural resources makes sense to me, especially if the resources are not easily replenished,” he said. “And using resources that are easily replenished - like solar and wind - seems like a good thing, particularly as they become more affordable.”
Moreover, the environment is highly important to young people in their 20s and 30s, retailers' customers of the future. “We have to respond to our customer base,” he said.
Among the environmental steps Hy-Vee has thus far taken:
It opened its first LEED (Leadership in Energy and Environmental Design) store in Madison, Wis., and has a list of other stores targeted for LEED certification.
Stores have their own “energy champions.”
Hy-Vee joined the GreenChill Advanced Refrigeration Partnership this year.
The chain is partnering with utilities to test new lighting and refrigeration cases and “develop a better carbon footprint,” said Jurgens.
Hy-Vee is exploring solar and wind energy, the latter at warehouses.
When an unexpected but important environmental expenditure emerges for Hy-Vee, the chain has the wherewithal and flexibility to absorb that cost, said Jurgens. Hy-Vee projects five years ahead in its annual budget, which includes between $200 million and $250 million per year in capital expenditures
Environmental initiatives are “costly but the right thing to do,” he said. “If everybody has to do it, we'll survive.”