Dive Brief:

• Schnuck Markets is launching a new small format store with fresh departments as the focal point. The first location is set to debut in Jasper, Indiana, this summer, the grocer announced on Thursday.

• Schnucks Fresh will be located in a former Cash Saver building in the Germantown Shopping Center at the corner of North Newton Street and West 36th Street in Jasper. It will be the grocer's seventh Indiana store — all of which are located in the Evansville area. 

• At 18,000 square feet, the upcoming Schnucks Fresh location continues the Midwest grocery chain’s focus on testing smaller stores and alternative formats. The grocery chain did not indicate if it is planning additional Schnucks Fresh locations.

Dive Insight:

Schnucks offered few details on its new "Fresh" store, noting only that the location "will include a heavy focus on fresh departments such as produce, meat, seafood and bakery." This leverages the higher demand and profit margins perishables offer, and serves as the latest alternative format the grocer is testing as it seeks to reach additional shoppers and capitalize on new real estate opportunities.

Last year, Schnucks opened its first EatWell natural foods store in Columbia, Missouri. That store includes natural food items, organic and locally sourced products, along with a natural living department. Schnucks also recently rebranded and revamped its store in downtown St. Louis. The location, which opened in 2009 as Culinaria, is now Schnucks Downtown and includes expanded service departments as well as new grocery and perishable items.

In 2018, Schnucks opened a 37,000-square-foot store in Warrenton, Missouri, that emphasizes fresh products.

Grocers have turned to smaller store footprints as a way to adapt to limited space in urban and suburban environments, and to appeal to shoppers who are making shorter trips and want to find items more easily. The Giant Company has rolled out several Heirloom Market locations in Philadelphia, while Amazon Fresh has 11 stores in California and Illinois and at least 28 more are planned, Bloomberg reported. Hy-Vee, another Midwestern grocer, has numerous small-store formats, including a dollar store, health market and convenience-grocery hybrid.

Smaller formats are also a way for traditional retailers like Target, Meijer and Stop & Shop to compete with discounters like Lidl and Aldi, which tend to have their average store sizes in the U.S. around 20,000 square feet or less and are ramping up their store counts across the country. 

However, small stores haven’t worked for every grocer. Whole Foods, for example, decided in 2019 to end its 365 small-store concept and convert all stores under the brand into legacy format locations by the end of that year.

Schnucks' store tests come as the grocer struggles to expand its footprint amid mounting online and brick-and-mortar competition. It acquired 19 Shop N' Save stores from Supervalu in 2018 but has since closed four of those locations. Last summer, Schnucks closed its only location in Iowa due to poor sales.

The grocer, which operates 111 stores in four states, has recently focused on improving its sourcing from diverse and local suppliers. In November, it launched an initiative to identify local suppliers that are at least 51%-owned, operated and managed by individuals that are "disabled, LGBT, military veterans, minorities and/or women," according to an announcement. The company also began sourcing meals from restaurant suppliers during the pandemic, and on Friday announced it had partnered with online platform RangeMe to boost its local sourcing, with a goal of procuring more than $5 million worth of products from local suppliers.