Dive Brief:

• Kowalski's Markets, which operates 11 stores in the Twin Cities area, plans to open locations inside two local malls, the Star Tribune reported.
• The grocer, which operates popular European-style market, recently signed a lease for a 30,000 square-foot space inside Rosedale Center, located in Roseville, Minnesota. Construction will begin next year and the store will open in early 2022. Kowalski's also expects to sign a lease on a space in the nearby Southdale Center, located in Edina, Minnesota. Construction is expected to be complete by 2022.
• Kowalski's Rosedale location will be slightly larger than its existing 28,000-square-foot stores and will have a separate wine and spirits shop. Both the Rosedale and Southdale stores were previously leased by Herberger’s department stores, which shut down operations in 2018.

Dive Insight:

Both Rosedale and Southdale Centers are undergoing major renovations, and like many mall operators they want to bring in retailers that will drive regular traffic. Increasingly, grocers like Kowalski's fit the bill.

The family-owned retailer is on its 37th year operating in the area and is well known to customers. Its stores offer a full-assortment of specialty grocery, prepared foods and fresh products, including many locally sourced selections. Unlike recently failed specialty grocers, Kowalski’s has focused on slow and steady regional expansion. The retailer told Star Tribune it doesn’t have a target number of stores but does see growth opportunities in the northwest and west suburbs of the Twin Cities.

Kowalski's has been steadily expanding its in-store services. In 2017, it expanded its Hennepin Avenue store by taking over the Walgreens next door. Last fall, it added a full-service restaurant called Pizzeria Pezzo to its Woodbury, Minnesota store. 

For Kowalski’s and other grocers, a store in a mall means high visibility, a destination location and often enticements from landlords. Many other food retailers including Whole Foods, Lidl, Wegmans and The Fresh Market have made their way into malls as anchor developments like JC Penney and Macy's have exited. In September, Stew Leonard's opened its first New Jersey store inside an 80,000-square-foot space formerly occupied by Sears.

Mall operators are struggling to keep tenants due to high rent prices and department stores closings. In addition to bringing in grocery stores, these operators are getting more experimental to fill open spaces, in some cases leasing space for online order fulfillment.