Hy-Vee expands growth options with small format

WEST DES MOINES, Iowa —Hy-Vee, one of the nation’s most well-entrenched regional supermarket and pharmacy chains, is on something of a tear.

The 224-store retailer is growing both its supermarket and pharmacy networks via a nimble strategy of new store design concepts, remodeling efforts, a new focus on wellness and nutrition in its food-drug stores, an expanding $4 generic drug discount promotion and the aggressive buyout of local independent drug stores. The 78-year-old company also has launched a new durable medical equipment division under the logo Hy-Vee Home Medical.

Another recent advance: the development of a new, much smaller store design to replace some older and outdated Hy-Vee stores. Ranging in size from 20,000 square feet to 25,000 square feet, the new format will debut in Des Moines next year, following the relocation of an older store there to nearby Beaverdale, Iowa, and in Lincoln, Neb., later this year.

Another breakthrough is occurring this year with the grand opening of the chain’s first supermarket and in-store pharmacy in Madison, Wis. The opening marks Hy-Vee’s first expansion into a new state since 1988, when it opened a store in Kansas.

Hy-Vee’s focus on health and wellness made headlines last year when the Midwest supermarket chain became the first non-governmental entity to sponsor a World Cup triathlon, offering the largest prize purse—totaling $700,000—in the history of the sport. But the chain’s everyday focus on health and nutrition may be more far-reaching. In 2008, Hy-Vee unveiled a new educational tool for customers to help them make smarter nutritional choices through the use of the Overall Nutritional Quality Index. Ratings on the nutritional value of some 50,000 food items in the company’s stores will be available to customers this fall.

A focus of Hy-Vee’s pharmacy expansion effort is its purchase of local independent drug stores—usually followed by the merger of those stores’ prescription files and staff to its nearby pharmacies.

“Pharmacy is a big part of our business,” Bob Egeland, the company’s assistant vice president of pharmacy, told Drug Store News in April.

Hy-Vee operates some 200 pharmacies, most of them within its supermarkets but also including a 26-store stand-alone drug store division. Together, they generate roughly $850 million in prescription sales, according to Egeland. That makes Hy-Vee the nation’s 22nd largest pharmacy retailer, according to Drug Store News estimates, and the largest locally-based food and drug store operator in Iowa.