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Hy-Vee expands to Twin Cities

ST. PAUL — Iowa grocer Hy-Vee announced plans Monday to enter the Twin Cities market, now that it has successfully planted supermarkets across southern Minnesota.

Hy-Vee said each year it intends to add a handful of its sprawling 90,000-square-foot stores in the Twin Cities, both in the east and west metro, with the goal of becoming a sizable player in the region.

“We plan to build several stores a year, over the next several years,” Chris Friesleben, Hy-Vee’s assistant vice president of communications, said Monday. “Eventually with your population base, you have the potential to be one of our largest markets, if not our largest market.”

Hy-Vee already has 16 stores in the southern third of Minnesota, including in Faribault, Rochester, Mankato and Worthington. The Des Moines-based grocer was long rumored to be interested in expanding into the Twin Cities, which is one of the nation’s most intensely competitive grocery markets.

Already, hometown giants Cub Foods and Target are battling strong regional players, including Lunds/Byerly’s and Rainbow Foods, as well as national powers from Walmart to Aldi, and from Costco to Whole Foods.

“I think competition makes everyone (raise) up their game,” Friesleben said. “We’re certainly not afraid of competition. I think the people of Minneapolis and St. Paul are going to like what they see inside our stores.”

Hy-Vee is an employee-owned company that currently has 236 stores in eight Midwestern states, with $8 billion in annual sales. Many of its newer stores contain Market Grill restaurants, offer dry cleaning services and sell wine and liquor where that’s allowed.

Friesleben said Hy-Vee puts an emphasis on customer service, including in-store dietitians who can help shoppers who seek healthier options or face specific dietary restrictions.

“They’re very focused on customer service, and they do a very nice job with that,” said Twin Cities grocery analyst John Dean. “It varies a little from store to store, but the level is high, regardless. With the employee ownership, maybe that’s just ingrained in everyone from day one.”

Dean added: “They have convenient stores, with gas stations in the parking lots generally. … They run somewhat aggressive ads, they have natural food departments, pharmacies, large produce departments, service meat departments.”

Hy-Vee didn’t announce store locations or opening dates. One likely location is the Minneapolis suburb of New Hope, where the city council discussed Hy-Vee Monday night. A second metro site is under contract, but the company would not disclose where.

Hy-Vee said each new Twin Cities store will involve an investment of approximately $14 million to $16 million, and create 400 to 550 new jobs.

Given the large size of Hy-Vee’s stores, Dean suspects that “they’d have to be suburban stores, they can’t wedge those into the cities.”

The Twin Cities is already in the midst of a fierce grocery war that has saturated many suburbs with new stores, and reshuffled the longtime lineup.

Walmart is in the midst of a massive push into the Twin Cities, on the heels of Target’s expansion into the grocery business. National players like Aldi, Trader Joe’s and Whole Foods have all expanded significantly in this market, as have home-delivery entrants including Coborn’s and Amazon.

None of those new entrants has a unionized workforce, nor does Hy-Vee. That has put pressure on legacy grocers with unionized workers, including Cub and Rainbow, which once dominated the market, but have been losing market share to the newcomers. Rainbow, owned by Wisconsin-based Roundy’s, has already closed five Twin Cities stores in the past 16 months.

Dean said industry observers “kind of expected them (Hy-Vee) to come to the Twin Cities for a long time, but for whatever reason, they chose not to. One of the issues was, it’s a non-union shop, and they didn’t want the (labor) issues.

“But Walmart, Target, Trader Joe’s, Aldi, Whole Foods — none of those is a union shop, so it removed that stumbling block,” Dean added.

Many Hy-Vee supermarkets are located in smaller communities, where competition is not as intense. But Hy-Vee also has successfully grown beyond Des Moines into urban markets in Omaha, Neb.; Sioux Falls, S.D.; and Kansas City, Mo. It has high hopes for the Twin Cities, as well.

“When you go into a new market, it takes a while for people to know who you are,” Friesleben said. “We are bringing something that we think people will want.

“It’s not going to happen overnight, but we have every expectation we will be successful in Minneapolis and St. Paul, and it will be as large of a market for us as our Des Moines market is,” she added.

Hy-Vee has about 20 stores in the Des Moines metro area.

The Pioneer Press is a media partner with Forum News Service.