UPDATE: Feb. 23, 2022: Hy-Vee plans to open a store in Louisville, Kentucky, tentatively in 2023, as part of its debut into the state and expansion outside of the Midwest, the grocer said in an emailed press release on Tuesday. 

In the announcement, the Midwest grocery chain confirmed plans to arrive in “several new states,” including Indiana, Kentucky, Tennessee and Alabama.

“As Hy-Vee continues to grow and evolve, we have so much to offer consumers across the U.S. that we knew it was time to expand our footprint even further,” Randy Edeker, chairman and CEO of Hy-Vee, said in a statement.

In Louisville, the grocery chain said it has secured approximately 12 acres at the SouthPointe Commons retail and lifestyle center at 7405 Bardstown Road, where it plans to have a roughly 150,000-square-foot store.

Hy-Vee said the store will be one of its first locations to debut in the Southeast. 

Dive Brief:

• Hy-Vee is expanding outside the Midwest, with plans to build more than 20 stores in Indiana, Kentucky, Tennessee and Alabama over the next few years, according to a report from the Des Moines Register, citing a video presentation by CEO Randy Edeker posted to the company’s intranet.
• By 2023, the company plans to operate a distribution center in the Nashville, Tennessee, area along with seven stores, including two in Nashville, and one store each in Knoxville and Memphis, Tennessee; Louisville, Kentucky; Huntsville, Alabama; and Indianapolis, Edeker said. A Hy-Vee spokesperson declined to comment.
• “This is the growth for the next 25 years for Hy-Vee in this territory,” Edeker said on the video, according to the report. “If we can build out 50 stores in this market, we estimate that is $6 billion [in sales]. But overnight we’re going to go from a regional company to a national company.”

Dive Insight:

Hy-Vee, a grocer that’s operated in the Midwest for more than a century and identifies itself as proudly rooted in that region, is betting its “helpful smiles” approach is ready to drop in and conquer new markets.

The company has seen sales increase dramatically during the pandemic, Edeker told Grocery Dive in a recent interview, and now it’s pressing its advantage and moving rapidly into new territories in a plan that’s as potentially rewarding as it is risky. Hy-Vee, which has pushed slowly into new states surrounding its Iowa home base over the years, will now establish beachheads across four new states by 2023. 

The campaign opens with the new distribution facility and seven stores targeting major cities in Indiana and the Southeast, according to the Register’s report. Hy-Vee will then look to build store density in these markets, with a roadmap for 21 stores by 2025 and more beyond that, Edeker said in the video, which was posted on Dec. 8.  

The Nashville distribution facility would be Hy-Vee’s third and the first one outside of Iowa. The facility would also service Hy-Vee stores in southern Missouri, according to the Register’s report.

“You take a look at this map and you see this massive hub of over 50 cities of over 150,000 that are within five hours of Nashville, Tennessee, and that is the strategy that we are starting to think about,” Edeker said in the video, referring to the Southeast region. “We could open a new distribution facility in Nashville, Tennessee, or that vicinity, and then launch a dozen or so stores over the next two years in that market.”

Hy-Vee is well regarded in the industry for its execution and innovative spirit. It’s operated its own online service, Aisles Online, for several years, and has a stable of store formats, including a fresh-focused convenience-store concept, that complement its legacy supermarket fleet. It has held its own against the expansion of Walmart, Aldi and Dollar General across its operating region and rolled out new messaging around low prices to compete with those players.

The company recently named a new president and chief operating officer, and has been busy rolling out new store formats, including a wine-and-spirits outlet and next-generation stores that combine digital and physical shopping.

But the east-bound expansion promises to challenge Hy-Vee in new ways. It will open in markets where shoppers are unfamiliar with the brand, and where strong competitors like Publix are moving in and established names like Kroger hold court. While Hy-Vee is dominant in many Midwestern markets and small towns throughout Iowa, it has struggled to break into the Twin Cities over the past few years, the Register reported.

Still, the company is following a game plan that other strong regional operators have set down in recent years. Wegmans, a longtime shopper favorite in the Northeast, has been moving steadily down the East Coast, while Publix has been moving northward from its Florida stronghold. Publix just announced plans to build a second store in Kentucky.

These supermarket operators have benefited from one-stop shopping during the pandemic, and the favorable winds seem likely to continue with more people set to work from home long-term. Companies with strong stores and online platforms are set to benefit, though the investment pressures around expanding digital infrastructure are significant.

Hy-Vee’s plans are ambitious, but they do have their limits. Edeker said the company doesn’t plan on venturing down to Texas, where H-E-B has a leading position. 

"There are lots of weak competitors out there that we just don’t need to go poke that bear, so we won’t," Edeker said in the video, according to the Register.