Hy-Vee’s executives think a lot about what the future of its stores will look like.
That goes for its tried-and-true supermarket model, which is now getting a next-generation facelift. It also goes for the grocer’s stable of alternative store banners that are also adjusting to a rapidly evolving industry and consumer landscape.
Hy-Vee currently has five store concepts in various stages of scale and development, including a convenience store, dollar format and a recently announced alcohol outlet. In some cases, these scaled-down locations are a way to bring Hy-Vee into communities where a full-size grocery store doesn’t make sense. In others, they’re a way to gain more spending from existing customers — like the weekday warriors who want a quick lunch from Fast & Fresh, or the wellness-minded ones who value the extensive vitamin and supplement selection at its HealthMarket format.
Not all of the store brands are performing well, however. One of them will soon go by the wayside while another will try out a change of scenery in Hy-Vee's hometown of Des Moines, Iowa. This speaks to the perilous nature of grocers venturing beyond their core shops. But it’s also something Hy-Vee, which has embraced a willingness to fail that’s uncommon in grocery, is okay with. Asked about the failure of its first HealthMarket location, CEO Randy Edeker waved off the result, saying it was likely due to having a poor location.
“We picked wrong, so we’ll move on,” he said.
Grocers have been deploying alternative formats for years, but with the pandemic altering consumer habits and filling investment coffers, the strategy is showing signs of kicking into a higher gear. Here’s a look at how one of the country’s most active regional grocers is managing its various store formats.
Fast & Fresh
Number of locations: More than 80
Next up: Hy-Vee plans to have all of its c-stores converted to the Fast & Fresh format by early next year.
After launching standalone Fast & Fresh stores in 2018, Hy-Vee quickly decided it wanted to refresh all of its convenience stores under the more modern format. Now the company is making its final push to get the remainder of those locations converted in the next few months, a spokesperson said.
Edeker called Fast & Fresh the company’s “meal solution stop” and said the format is adding more services and menu items to deepen that focus. Select locations now have a Market Grille Express where customers can pick up store-made dishes like burgers and empanadas.
Fast & Fresh stores have also become fill-in grocery destinations and e-commerce hubs during the pandemic, with pickup orders fulfilled out of numerous locations. The stores carry an assortment that’s not usually associated with convenience stores, like fresh sushi and produce, and try to offer an elevated experience. In West Des Moines, there’s a Fast & Fresh co-located with a Smokey Row Coffee shop — a local chain — complete with seating area and see-through fireplace.
As car makers increasingly go electric, the Fast & Fresh format is becoming more than just a fuel stop for Hy-Vee.
“They’re very much becoming a little bit of a neighborhood grocery store, and we’re getting more sites that are targeting that,” Edeker said.
Dollar Fresh
Number of locations: 16
Next up: A spokesperson said the company has no set expansion plans for next year, though Edeker said 20 stores are “on our budget” for 2022.
Hy-Vee’s answer to dollar stores and discounters in rural communities throughout the Midwest is growing steadily and changing up its assortment.
Dollar Fresh stores feature a full grocery assortment along with a large section of discount buys that’s common to the dollar format. Recent openings have come in towns like Cresco, Iowa, and Lexington, Nebraska. One store that’s set to open later this year in Orange City, Iowa, is 29,000 square feet — significantly larger than a traditional dollar store.
In select stores, Dollar Fresh shoppers can now find small Joe Fresh fashion outlets and DSW shoe departments. The selections are highly curated, Edeker said, and aimed at rounding out shopping trips.
The Hy-Vee brand isn’t often associated with low prices, Edeker acknowledged, but Dollar Fresh gives the company a new look in that regard. The focus on grocery, meanwhile, effectively hits back at operators like Dollar General and Dollar Tree that have increased their fresh and frozen selections recently.
“We chose the name Dollar Fresh, and we wanted to focus more on fresh because we think that’s where they’re weakest,” Edeker said.
Fourth + Court
Number of locations: 1
Next up: After nearly five years in business, Hy-Vee’s urban concept will be replaced by its HealthMarket format at a yet-to-be-announced time.
Fourth + Court opened in downtown Des Moines in 2017 as a way for Hy-Vee to reach young shoppers living and working in urban markets. The store, which is still open for the time being, has an extensive alcohol selection, prepared foods, sushi counter and Wahlburgers restaurant.
The location was also one of the company’s first to feature pickup lockers, which still sit just outside the store entrance.
But the pandemic has been challenging for urban grocers, which have struggled with the downturn in office workers, particularly during mealtimes. A company spokesperson said shifting to the HealthMarket format will be better suited to the evolving mix of consumers living and working in downtown Des Moines.
“The Fourth + Court Hy-Vee location has served as a test location for many Hy-Vee offerings since it opened in 2017, and we have been able to take those insights and implement various components into new store formats throughout our eight-state region,” the spokesperson wrote in an email.
HealthMarket
Number of locations: None currently
Next up: The format will relaunch in downtown Des Moines at a yet-to-be-determined date.
Opened in 2018 as a larger, standalone version of its in-store health and specialty section, Hy-Vee’s HealthMarket store carried an extended variety of vitamins, supplements and natural products, along with services like a pharmacy, medical clinic and sports nutrition center.
But the store never quite caught on with shoppers and closed last month. Edeker admitted this might have been because the store was located too close to a couple Hy-Vee supermarkets in the West Des Moines area, and said he still has confidence in the brand.
“We think that concept is still the right concept,” he said. “I just don’t think we did it very well, frankly. I think we need to take another run at it.”
A Hy-Vee spokesperson didn’t give a timeframe for the concept’s downtown reopening, only noting it will come in the “near future.” She said the store will include meat, bakery, wine and spirits, and other grocery selections, along with an expanded vitamin and supplements department. The store will also be the site of Hy-Vee’s first HyChi Chinese restaurant.
Edeker said he’d eventually like to move Healthmarket into ship-to-home service, noting the widespread popularity of the grocer’s health-and-wellness assortment. He said its extensive selection of gluten-free products has gotten attention from shoppers across the U.S.
“We can easily start shipping all over the country," he said.
Wall to Wall Wine and Spirits
Number of locations: None currently
Next up: Hy-Vee plans to open four locations across Iowa and Nebraska, beginning with the West Des Moines location at the former HealthMarket site that’s slated to open by end of year.
The pandemic has boosted alcohol sales and spurred retailers across the country to open standalone outlets. Hy-Vee’s new alcohol store, which it announced this summer, will offer wine, spirits and beer at a range of price points, along with barware and accompaniments like chips and charcuterie.
The main focus, Edeker said, will be on wine.
“It is about having the wine extension that we really have never gotten into in our wine and spirits stores on the side of our [grocery] stores,” he said.
Edeker said Hy-Vee plans to operate the store as a subsidiary and not put Hy-Vee’s branding on it. He envisions one or two stores in metropolitan areas across Hy-Vee’s eight-state operating region.
