Hy-Vee has opened its first store in two years in Spring Lake Park. It's the chain's 12th full-line supermarket in the Twin Cities — and it's full of the latest features Hy-Vee has rolled out to stay competitive as the country pulls out of the pandemic.
The 77,000-square-foot store, opening Tuesday, includes a large assortment of grab and go meals and an expansive casual dining area and bar. The companion wine and liquor store has a wine tasting area and cigar humidor.
Also, just as Hy-Vee has pushed its place in the food marketplace — amid growing competition from retailers such as Target and Walmart — it also continues to expand in a distinctive nonfood direction as well. It has added Joe Fresh apparel, DSW discount shoes and a cosmetics and fragrance department modeled on Ulta.
Its newest flagship store will open in early fall in Grimes, Iowa, and will include Hy-Vee's first nail salon.
After an aggressive entry into the Twin Cities, the Spring Lake Park location is the Des Moines-based retailer's first large-format store to open in the market since Maple Grove in 2019. But on June 8, Hy-Vee opens in Maplewood in a former Rainbow. A location in a former Shopko opens in New Prague this summer.
Hy-Vee Chief Executive Randy Edeker said the pause was necessary, but by 2025, the Twin Cities will be the chain's largest market.
"We slowed things down while we studied the customers changing habits," he said. "The shift we have coming will bring several stores in the areas we've already identified and then some."
Edeker sat down for an interview last week at the new Spring Lake store. The following is edited for length and clarity.
Q: Do you still plan on the Twin Cities being Hy-Vee's largest market by 2025 as you said in 2015?
A: Yes. Why don't we build big stores like we've always built? Because customers are shopping dramatically different, and the pandemic has exacerbated that like none other. We've made some adjustments in strategy for size and design that will be coming in the next wave up here that we think will be really important for the Twin Cities. We have new competitors building a 35,000- to 40,000-square-foot stores that are focused on fresh and focused on e-commerce. It stands to reason that we will evaluate and shift also.
Q: After nearly six years in the Twin Cities with 12 full-line stores, Hy-Vee sits at a 3% to 5% market share, according to several market analysis studies. Is that where you expected to be at this point?
A: No. We're in eight states, and we've pulled back from the Twin Cities and built in some other areas faster. We've recently opened two stores in rural Minnesota, in Glencoe and Kasson; one in northern Iowa. In other markets, we've opened 10 Dollar Fresh stores [a smaller store concept in rural areas similar to Aldi], and a dozen Fast & Fresh convenience stores like the one in Lakeville.
Q: Will future stores you build be downsized as more shoppers buy packaged goods online and shop the stores for fresh produce, meat and baked goods?
A: Yes, we are looking at several smaller scale options such as a 40,000- to 50,000-square-foot store focused on ultra-fresh, some finer upscale touches and specialty foods. We have a Market Grille Express in all our Fast & Fresh stores, and they're doing as much or more business than our in-store food service. We sell an enormous amount of sushi out of our convenience stores. But we still think there's a place for larger stores like Spring Lake Park, too.
Q: Proposed stores in Blaine, Chaska, Farmington, West St. Paul and a second location in Maple Grove are not yet under construction but have been on the list for several years. What's happening there?
A: We're a little slower than we were almost six years ago when we opened our first stores in the Twin Cities, but we still have a lot of growth to come up here. You'll see several more in 2022 and 2023.
Q: Another competitor with deep pockets, Walmart, is currently running TV ads saying its prices are significantly lower than Hy-Vee. How much of a concern is that?
A: We've competed with Walmart as much as anyone. The growth of Walmart Supercenters happened in Hy-Vee territory. They are low-priced. We don't come out and say we are the drop dead lowest price you'll ever find. Neither does Target or Lunds & Byerlys. When you're a price operator, and that's all you have to offer, then you're going to have to hang your hat on price. It's flattery in a way. They obviously know we exist and think we're doing OK or they wouldn't pick on us.
Q: Will temporary wage hikes and incentive pay instituted during COVID become permanent at Hy-Vee?
A: In metro areas, a lot of people are already at $15 an hour. But it's regional. It's different in a metro area than in a town of 1,500 people. Right now, we're hiring flex workers at $16 an hour to do online shopping. Beyond wages, we launched other benefits like life and health insurance for some part-time workers, tuition assistance and enhanced employer contributions for the 401(k). For the first time in our history, we enacted a 10% discount for all employees and flexed it up to 20% for holidays.