Local grocery market lines up for a scrimmage

  • Article by: WILLIAM CORY LABOVITCH
  • Updated: August 4, 2014 - 6:15 PM

Who will fill the empty stores left behind by Rainbow — and will unions be part of the equation?

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There should be an ad placed in locations across the Twin Cities area:

Wanted: Grocery stores to fill large, vacant spaces. Willing to help with tax subsidies and tax credits. Sincerely, the suburbs of the Twin Cities. P.S. Union or nonunion is fine.

 

Perhaps it is the postscript that should get attention. For decades, the Twin Cities-area market was controlled by grocery stores with unions (most notably with the United Food and Commercial Workers union). That changed about 10 years ago when locally based Target brought its nonunion superstores, which have both a discount center and grocery store, into the metro area. Little could be done about that, because it was Target, after all — a locally based company with deep Twin Cities roots. That allowed Wal-Mart to expand its supercenters, a format now found all over the Twin Cities.

The result gave nonunion grocers a foothold and made an impact on the market. While union grocer Cub Foods was able to compete in the Twin Cities through expansion and neighborhood ties (since parent company Supervalu is also locally based) and kept its No. 1 ranking, Rainbow Foods could not compete.

Rainbow started out local, founded by Twin Cities grocer Sid Applebaum, and later was bought by Oklahoma-based Fleming Cos. Fleming (suffering from supercenter fatigue in other parts of the country) sold the chain to Roundy’s, which could not match Cub on supercenter expansion and essentially had to leave the market.

Cub and its franchisers, along with Lunds/Byerly’s corporation, bought as many of the Rainbow stores as they could. In some cases, this proved that Rainbow did hold its own in some suburbs. As an example, the Rainbow Foods in West St. Paul is literally sandwiched between a SuperTarget and a Wal-Mart, with a Cub Foods down the street, but it will be one of the six stores that will remain open under the Rainbow banner.

However, there are now nine recently vacated grocery store buildings, joining five others that were closed earlier in the year, meaning there are about 14 vacant sites in the Twin Cities — and there is a strong possibility that those vacancies could be filled by two nonunion grocers.

The more vocal has been Iowa-based Hy-Vee, which has said it will expand into the Twin Cities market and is making plans to open a store in New Hope. The other is St. Cloud-based Coborn’s, which operates under its eponymous and Cash Wise labels.

Both operate very close to the Twin Cities market. Hy-Vee for decades has had a presences as close as Faribault and is a southern Minnesota staple. Coborn’s is even closer, with stores on the fringe of the Twin Cities, including in Delano, Hastings, Elk River and Belle Plaine, and it owns the CobornsDelivers service, which operates in the metro area.

With desperate suburbs looking to fill empty stores, both could be lured in. The Coborn’s in Hastings, after all, is a former Wal-Mart, and in Cottage Grove and Maple Grove, there’s enough land nearby for a large Hy-Vee store to occupy open locations.

A third nonunion chain owned by SpartanNash (formerly Edina-based Nash Finch) also operates on the edge of the Twin Cities but has suffered in the past few years so is unlikely to look to expand.

For the UFCW and other unions, it does not look good. Unions have been hurting all over America, and losing the grocery market in the Twin Cities will only make things worse.

This actually comes at a very bad time for the union. It can’t fully focus on those stores because of upcoming elections and the likelihood that the Republican gubernatorial candidate will be staunchly nonunion and that Mike McFadden will likely be the Republican U.S. Senate candidate over two more union-friendly candidates in Chris Dahlberg (who lost to McFadden at the state Republican Convention) and Jim Abeler.

One area in the United States that has been able to keep the grocery business more unionized is the Pacific Northwest, because the unions there have a retail partner. Fred Meyer is a unionized superstore chain that is a rival to Wal-Mart and Target. The old Holiday Plus supercenters located in four Minneapolis suburbs were very similar to Fred Meyer but closed about 20 years ago and were sold to Cub.

The best hope for the unions lies with two unionized chains that the unions must convince or beg to go into these vacant stores. The first is the Knowlan company, which owns local stores under the Festival Foods and Knowlan’s Fresh Foods labels. The other is Miner’s Inc., which is based in Hermantown, Minn., and owns the Super One Foods chain in the northeastern part of the state; it also tried to buy the Rainbow stores that eventually went to Roundy’s 10 years ago. The grocery market in northeastern Minnesota is still strongly union-based, although Coborn’s has liquor stores in the Brainerd and Duluth areas.

However, will these chains go into stores that were essentially passed over by Cub?

This is another turning point in the Twin Cities-area grocery market, with desperate suburbs looking to fill the voids and desperate unions looking to keep their hold on the market. How it plays out should make for very exciting drama.

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