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2018 Retailer of the Year: Hy-Vee stays ahead of the curve

When the going gets tough, the tough get going.

That could be a mantra for Hy-Vee, the 246-store supermarket chain that appears to be pulling out all the stops as it seeks to be more in touch with consumer needs in these turbulent times for mass retailers.

The West Des Moines, Iowa-based chain, which operates in eight upper Midwest states, is implementing a broad range of changes, including new store formats and an emphasis on specific categories, to entice more consumers to shop at its stores. That includes the first standalone version of the Hy-Vee HealthMarket near corporate headquarters that emphasizes beauty, wellness and produce, and is strategically attached to an Orangetheory Fitness center.

For these reasons, and much more, Drug Store News has named Hy-Vee, along with its more than 80,000 employees, as our 2018 Retailer of the Year. The award is as much for what Hy-Vee has done over the past 88 years — during which the chain has emerged as a major player in the Midwest — as it is for its future outlook and the steps executives are taking to stay ahead of the curve.

“The last year and a half have been the toughest retail environment in a long time,” said Randy Edeker, chairman, CEO and president of the company. “I am sure Amazon is a small part of that, but it’s just the diversity of retail today. You can buy the products we sell everywhere from lumber yards to convenience stores. It’s just the nature of the business.”

Yet Hy-Vee officials have no intention of standing around and letting competition eat the chain up. As Edeker said, the industry is going through a “transformational time” that has created a bit of uncertainty as far as where the customer is going for their grocery needs. “From a financial standpoint, growth has come a little harder than it has in the past, and we have had to work a little harder,” he said. “There are a lot of new, smaller fresh formats that have hit our marketplace. These formats are becoming more popular, and it has caused us to follow our customers in new directions.”

Enter the Hy-Vee HealthMarket, or at least what Edeker said is the first iteration of the freestanding format that he hopes will play a big role in the Hy-Vee evolution from a traditional grocery chain to one that offers its customers a broad array of popular products in extremely convenient settings. The first store, an 18,000-sq.-ft. unit, offers the feel of a combination grocery store/drug store. The pharmacy and OTC section, placed in the rear of the store, is balanced by a large beauty-focused department, featuring a broad array of products across many price points, and a large fresh/produce section that allows for a quick grocery shopping experience.

“The Hy-Vee HealthMarket is a great example of what we are trying to become,” Edeker said. “I believe it is what the drug store of the future is going to look like. I think you’ll see that [Hy-Vee will] evolve and change even more as we open more of these types of stores.

Hy-Vee HealthMarket“When we build another one — we have two on the budget for next year — we will build those much differently than we built our first one. We will expand perishables a little more. The places that are working really well are our take-home meals. We have meals by disease state — diabetic meals, heart-healthy meals and so forth, natural and organic — in the HealthMarket that have really worked.”

He also said, “I don’t think we would get rid of anything. I think we would expand it — we would add more perishables to it. It’s an 18,000-sq.-ft. building now, and I could see future stores being as large as 25,000 sq. ft.”

Yet that is not the only direction in which the company is moving. In September, Hy-Vee opened its second and third Wahlburgers restaurant franchise locations, one near the company’s corporate headquarters and another in Olathe, Kan. The first Wahlburgers restaurant owned by Hy-Vee opened at Mall of America in Bloomington, Minn., in May. Hy-Vee plans to open 23 more of the popular restaurant over the next several years.

“Getting into the restaurant business is part of us evolving,” Edeker said. “The Wahlburgers restaurants are just one aspect of our food service business. Food service in our stores remain a core focus for us — Hy-Vee Market Grille and Hy-Vee Market Grille Express restaurants have been a key area for our company, and our Asian foods — our Nori Sushi and Hibachi Grill — have also done very well.”

“Wahlburgers has really been an extension of that. What you will see us do in our Des Moines market, in our full-service Hy-Vee Market Grille restaurants — of which there are six here in town — we will brand those as ‘Hy-Vee Market Grille Proudly Serving Wahlburgers,’ and we will take select Wahlburgers menu items into our restaurants and sell them that way.”

Convenience stores also are a focus for the company. Right now, Hy-Vee operates about 150 c-stores, and Edeker predicted that number would increase even more over the next five years. Edeker also noted that the c-store product assortment could soon offer a larger assortment of fresh products.

“I think some of the changes you will see in the convenience store side of the business is how we approach fresh food in those stores,” he said. “I think the convenience store is evolving, just as the drug store is evolving. We see more of a 6,500-sq.-ft. format coming, with a lot of take-home meals and fresh-prepared produce. A customer can come in and take home a good-quality meal from a convenience store. It’s not just about snacks. It’s evolving, and people are sourcing meals from a lot of different places today.”

As for the Hy-Vee supermarket chain, Edeker predicted even more growth for the company over the next five years, with a big focus on the affluent yet extremely competitive Minneapolis/St. Paul, Minn., area. Hy-Vee entered the region three years ago, and already operates nine stores in the area. The newest store opened in Robbinsdale, Minn., in mid-September, and four more stores are slated to open in the area over the next year.

In existing stores, the company is placing a much larger emphasis on its fresh departments and its cosmetics and overall beauty sections — areas in which consumers demand specific products and assortments. “If you look at current lifestyles, and look at the statistics, they show that the consumer wants more choices in the cosmetics and beauty areas,” he said. “Especially the younger consumers, and they are driving real growth in this category.”

The center store will still remain a priority, though Hy-Vee executives said they want to take specific steps to maximize sales from the department. “One of the things we are focused on in this next year is how do you create ‘islands of interest’ in the center of the store — things that differentiate us from the competition,” Edeker said. “Center store is still hugely important, and still really crucial to our success. So, we are looking at how to create interest in the center store, whether that might be going a little bit more ‘boutique’ in some areas like candy and elsewhere or expanding areas like pet, and adding new categories in general merchandise.”

In the end, Edeker is confident that a combination of great strategies, an agile corporate environment and great people will keep Hy-Vee headed in the right direction for the long term. “I am very confident in the futu
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