Why few grocery stores come to Richmond
on November 17, 2011
When Safeway closed its Macdonald Avenue store and opened a new branch in El Cerrito in August, it brought the number of full-service grocers in Richmond down to three — three supermarkets in a city of more than 100,000 people. Those full-service grocers include Foods Co., a discount grocer, 99 Ranch, a grocery chain specializing in Asian food products, and El Cerrito Natural Grocery Company, which sits on the border of El Cerrito.
And with 99 Ranch and El Cerrito Natural Grocery Company surrounded by El Cerrito residents, said Christine Firstenberg of the Bay Area-based Metrovation Brokerage firm, “Really, you’re talking about one grocery store in Richmond.”
The shortage of grocery stores in Richmond is one of the reasons that the U.S. Department of Agriculture has categorized parts of the city as ‘food deserts,’ low-income communities that reside more than a mile from a supermarket or large grocery store. A separate study prepared by the nonprofit Social Compact found that even when you factored in supermarkets in nearby cities like San Pablo and El Cerrito, a third of Richmond residents still had to travel about a mile or more to get to a grocery store.
Recent federal initiatives like First Lady Michelle Obama’s Let’s Move! campaign have cast a national spotlight on food access issues, particularly the way limited access to supermarkets or other outlets for fresh, healthy foods affects public health. It’s one of the reasons why organizations like the California Endowment are funding healthy food initiatives in places like Richmond.
But like many stories about stubborn disparity, weeding through the roots of this grocery store gap starts with economics — in this case the business of grocery stores and the supply and demand for retail space in Richmond.
In his five years as the head of Richmond’s Office of Economic Development, Thomas Mills has been grappling with the issue of how to bring more supermarkets to the city. He keeps a Rolodex with the contact information for supermarket chains and real estate brokers. When new sites open up he picks up the telephone.
“Periodically, we’ll go back and say, ‘Have you reconsidered?” Mills said.
This is when the matchmaking process starts again.
“If Fresh and Easy says ‘What do you have,’ we’ll go out and try to find sites,” Mills said.
If only it were that easy.
It turns out matching a grocery store to a retail location has many of the complexities and frustrations of matchmaking blind dates: picky parties with very specific checklists of what they want. For grocery stores that have spent years fine-tuning their business models, it means holding out for a building with just the right square footage, visibility and parking, as well as a neighborhood with the right number of households and mix of demographics.
Grocery stores treat their business models like “a science that is highly perfected,” said Dick Outcalt from the Seattle-based Outcalt & Johnson: Retail Strategists, LLC.
Even when grocers see demand in a city, they are unlikely to stray from their formula. The reason they are so particular, he says, comes down to the margins.
“Year after year, the percentage of pre-tax profits in the grocery industry are miniscule, the lowest 10 percent of all retail markets,” he said.
Mills says the specificity with which grocers make decisions about where to locate has been problematic for Richmond in a few ways, the first being an issue of demographics and perception.
“There’s a certain identity that the stores have, an identity about who they are trying to serve,” he said. “That doesn’t always mesh well with Richmond.”
Whole Foods, for example, has told the city that its checklist begins with the number of college educated people that live within a certain radius, Mills said.
When Safeway left town and opened a new store in the more affluent El Cerrito, Janet Johnson couldn’t help feeling burned.
“I’m coming from the perspective of a resident that is feeling frustrated, disrespected,” said Johnson, who works with Mills in the Office of Economic Development. “I’m watching our grocery stores go across the interstate.”
There are grocery stores, however, that see Richmond as a potential opportunity. Fresh and Easy, Mi Pueblo and the Grocery Outlet are some of the grocers that have expressed interest in coming to town, according to Mills and Firstenberg. But in these cases, the biggest problem has been finding a physical location that meets their model.
Firstenberg showed Fresh and Easy sites in Marina Bay, but she said the population density wasn’t high enough for its model. Mi Pueblo looked at the empty lot near Macdonald Avenue and 12th Street, but Mills said the grocer wanted to be closer to 23rd Street where there is a dense Hispanic community. He said a large enough building with adequate parking does not currently exist on that strip.
Grocery Outlet came the closest in recent years, when the company made an offer to lease the vacant building at San Pablo and Macdonald Avenue that once housed a Lucky’s grocery store.
“Richmond has a renaissance going on,” said Melissa Porter, vice president of marketing for Grocery Outlet. “We definitely think we could serve that community well.”
But only at the right cost. When the property owner decided to pursue another offer–property owners can be picky, too–Grocery Outlet said it couldn’t bid up its asking price.
“We run very tight margins,” Porter said. “Our business model only works at a certain rent.”
Chances are another supermarket chain won’t be moving in across the street to the old Safeway site on San Pablo and Macdonald either. That’s because Safeway still has a lease on the building and it’s unlikely that it would let a competitor move in when they have a store one mile down the same road. New Evolution Ventures, which owns Crunch and UFC gyms, is considering sub-leasing the site for a new fitness center.
The process for developing new sites to house large-scale grocery stores has barriers, too.
Firstenberg said many Bay Area cities, including Richmond and Alameda, run into development problems in built-up neighborhoods where the city blocks are shallow. Assembling enough land to locate a full-service grocery store would require buying up smaller properties and closing off streets. The cost and complexities of such a project, she said, would be impossible for most grocers to take on.
As for the less developed parcels in town, they are often on the outskirts of the city–where there are fewer potential customers–and have a history of heavy industry that can mean the land may not meet certain environmental standards.
With California’s redevelopment agencies facing elimination, and many private sector developers still tentative about investing in new projects, Mills said, he’s not sure how soon new retail developments will materialize.
Some Richmond residents are tired of waiting. Earlier this month, city leaders, community organizers and food justice activists met at city hall in hopes of laying a framework for a new food policy council. During their discussion they listed out alternative sources for healthy foods, like farmer’s markets, community gardens or smaller independent grocery and produce stores.
Mills, who is president of the Mandela Foods Co-Op in Oakland, said bringing grocery stores to town will continue to be a priority for the city. After all, it’s not just about food–grocery stores also bring in sales tax revenue. But he’s glad people in the city are coming together to find ways to keep the community healthy.
“We need to stop waiting for the great grandfather grocery store in the sky to save us,” Mills said.
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