Dive Brief:

• Kroger will begin construction on a 45,000-square-foot downtown Cincinnati store this summer, according to the Cincinnati Business Courier. The store, which will cost $21.5 million and is part of a $90.6 million mixed-use development, will open in summer 2019.
• The multilevel store will focus on fresh and prepared foods. It will also feature a second-floor food hall with several vendors, ready-to-eat meals and a terrace dining area.
• Kroger and the city of Cincinnati have sought a new downtown store for more than a decade, and finally secured through good timing, generous perks, and a good location opening up. “Getting a downtown grocery store has been like chasing Moby Dick for 20 years,” Cincinnati Mayor John Cranley told the Courier.

Dive Insight:

As the country’s largest grocery chain, Kroger has accomplished a lot in recent years. But a marquee store located in the heart of Cincinnati, where it is based, will be the feather in its cap that has long eluded the company.

Now that Kroger finally has its store, look for the retailer to use the location as a test lab for selling fresh and prepared foods, and coming up with ways to appeal to coveted millennial shoppers.

According to the Courier, Kroger, which currently operates a smaller downtown location that will close before the new one opens, has sought this prized store for at least 15 years. Numerous factors have worked against the company, as is often the case in urban food retailing, given the high costs, civic red tape and lack of space in dense city centers.

Recent years have seen a convergence of favorable conditions for the project, including more young, affluent shoppers moving into downtown Cincinnati — particularly in the Over-the-Rhine neighborhood where the new store will be based. The right location also became available, and developers secured an apartment complex and ample parking space along with Kroger’s buy-in.

A few extra perks helped sweeten the deal for Kroger, including grant money from the city that will cover a portion of the $21.5 million store, and an agreement that 140 of the complex’s 550 parking spaces will be dedicated for the retailer’s use.

The company has dabbled in urban locations of late, including its Main & Vine store in downtown Seattle. Officials have said they want to increase their presence in metropolitan markets, which are seeing a large migration of affluent young professionals. Last year, Kroger announced it would build a 60,000-square-foot store in Atlanta as part of an office development that will also include underground parking.

Running an urban grocery store is a challenge for retailers used to operating in suburban markets, but Kroger already operates a variety of stores in different markets, and can leverage brands across its retail portfolio for expertise. In an interview with the Courier, CEO Rodney McMullen said he wants the downtown Cincinnati location to borrow from Mariano’s playbook in offering made-to-order meals, and use Harris Teeter’s capabilities in fresh foods and produce.

The new store hits on some promising growth metrics, but it may not be a home run — at least not initially. The 45202 zip code where the store will be located has a population just of 17,717, which is shy of the 20,000 many urban planners agree grocers need to succeed. However, Kroger is banking on 4.5% projected population growth over the next two years to boost its prospects.

The store’s real value, though, will be its ability to test out new products and merchandising moves that it could potentially roll out across its new class of urban stores and beyond.