Dive Brief:

• The availability of prepared food options at a one-year-old Hy-Vee store in downtown Des Moines, Iowa, has been irritating local restaurateurs who don't like the competition, according to The Des Moines Register.

• The owner of a restaurant across the street told the newspaper he would soon have to close his doors because business had fallen ever since the Hy-Vee arrived. “We didn’t realize the Hy-Vee would be half food court and one-fourth groceries,” sais Mike Rink, owner of the Pita Pit.

• Jen Kopriva, Hy-Vee's district vice president, said the Des Moines store was "exceeding original expectations" in both the food court and in grocery receipts, the paper reported. The location has concrete floors, exposed ceilings, a juice bar, beer growler filling station, custom soda station and a variety of ethnic foods.

Dive Insight:

The grocerant trend is going strong, as shown by the success of this downtown Des Moines Hy-Vee, which offers both a sit-down, full-service restaurant and a food court with several ethnic and other options. The company spent $10 million on the 36,000-square-foot store, which is located near the grocery company's headquarters in West Des Moines.

Hy-Vee said it designed the pilot project store to be smaller than its other supermarkets in order to fit in with the downtown urban vibe in Des Moines. With people living and working in the area, a hybrid outlet featuring both a restaurant and grocery store makes a lot of sense — Hy-Vee can attract the daytime lunch crowd, the individual wanting to sit down and eat dinner or grab an item on their way home, or the nearby resident who visits the location to do their grocery shopping. Restaurants also have the advantage of building brand loyalty, and there can be profitable cross-pollination between the restaurant and the supermarket, both in terms of foot traffic and food offerings.

Retailers know they can attract more customers if they have ready-to-eat and prepared food items on hand, either at take-out stands or in food courts. Hy-Vee has been successful with its Market Grille restaurants at a number of outlets and its investment in grab-and-go prepared foods. As grocers compete with online players such as Amazon and retail giants such as Walmart, giving people more reasons to come to the store is paramount for supermarket chains.

According to USA Today, in-store dining is one of the fastest-growing parts of the grocery industry. Prepared foods sales, including in-store and takeout, have increased 30% since 2008. 

Wegmans and H-E-B have been in the grocerant space for some time, while Kroger, Albertsons, Whole Foods and Big Y stores have been entering the space more recently. 

Despite some local opposition from established eateries, Hy-Vee seems to be doing things right with this downtown Des Moines store so far. Other retailers are no doubt watching the company and hoping to make similar inroads in other cities. Being nimble, innovative and responsive to customers' wishes is a winning combination for any retailer.