After decades of constructing sprawling cookie-cutter stores in the suburbs, grocers are turning their attention to building smaller, more focused locations carrying in-demand products. One epicenter for this movement has become Iowa — a state better known for its agricultural bounty than as a test lab for the future of grocery.
Hy-Vee, which has a reputation for experimentation across its 250 stores, is leading the charge here with a lineup of targeted store formats that seek to win customers over as exceedingly relevant and convenient places to shop.
Located just a few miles from corporate headquarters, there's Hy-Vee HealthMarket, an expanded version of its natural and organic section found in its traditional stores, and Hy-Vee Fast & Fresh, a souped-up convenience store where shoppers can purchase everything from a pizza and a prepared meal to a $75 bottle of whiskey.
In downtown Des Moines, Fourth + Court Hy-Vee is the grocer's answer to a smaller urban location that caters to young shoppers and empty nesters alike, many of whom live in the three-story apartment building above the store.
Hy-Vee just opened its fourth Fast & Fresh in August, and has one HealthMarket concept located in West Des Moines, with plans to open more locations for both banners in the future. The grocer hasn't publicly announced plans for additional Fourth + Court outlets.
Grocery Dive recently toured these three concepts and spoke with store directors to better understand how the locations are laid out, what went into designing them and how they cater to today's changing grocery shopper.
Fourth + Court Hy-Vee
Hy-Vee opened the 36,000-square-foot “grocerant" in February 2017 just a few blocks from Iowa's capitol, offering a product mix and layout catering to health-minded, on-the-go customers who make two or three times a week rather than a single stock-up trip.
After stepping inside Fourth + Court, shoppers are greeted with the usual shopping cart corral next to the sliding doors. But these gray carts are much smaller than those found at conventional stores; they are configured to hold the tiny plastic baskets many people carry. The cart's compact size enables them to navigate the tighter center aisles chock-full of displays loaded with items like Starburst candy, batteries and portable fans.
"This is who we are. We're the ones that say 'Okay guys, wipe the slate clean, think outside the box and there is nothing that we're going to laugh at or say isn't going to work,'" Jeff Mallory, who was the store director at Fourth+Court Hy-Vee until August when he was named to oversee another store within the company, told Grocery Dive. "I think that is why this store is sitting there, honestly. Change is coming and it's coming fast. It's not going to slow down."
Fourth + Court has stockpiled products geared toward convenience, health and smaller package sizes. With a dearth of children in the area, it doesn't stock diapers and only carries two baby formulas. Its juice section is small, and focuses on specialty varieties like cherry.
Fourth + Court devotes more shelf space to products such as alcohol. It has six aisles stocked with rum, bourbon, vodka, tequila; wine from France, Germany, New Zealand, Chile and Spain; and endcaps prominently displaying Tito Vodka, Woodford Reserve Whisky, Camarena Tequila and six different kinds of Iowa craft beer. A nearby growler station has 12 different beers on tap.
Throughout the store, there are numerous displays and coolers stocked with beverages like tea, flavored water, ready-to-drink coffees, kombucha, soda and energy drinks. Fourth + Court has more than a dozen coolers strategically placed throughout the store.
The store also displays a prominent selection of snack bars and other convenience foods, many of them positioned at the front of the store, and a frozen pizza selection that is nearly double what a store of its size would normally carry. It has an extensive selection of prepared grab-and-go items and food stations where consumers can order freshly made pizza, sushi and salads.
"I had to really rethink my way of doing things," Mallory said. "The way we write a schedule. The way that we set our shelves. It's just completely different."
Unlike most Hy-Vee stores where Saturday is the busiest day, Fourth + Court gets most of its foot traffic on Monday night as consumers — including many who commute to downtown Des Moines for work each day — stop in on their way home. Most of the store itself is usually quiet on Saturdays even though the downtown farmer's market attracts an estimated 25,000 to 30,000 people.
Because it caters to an on-the-go shopper, Fourth + Court doesn't stock large pails of ice cream, packages of a dozen cookies or gallons of milk. Instead, it carries pints, half-a-dozen count cookies and half gallons of milk. La Croix is its most popular "soda" whereas Coke or Pepsi would top the list in other Hy-Vee stores. Organic black beans are more popular than traditional ones, and the number one selling tortilla chip is Hy-Vee's own private label offering rather than Frito-Lay.
Avocados are the best selling produce item and sweet potatoes outsell Russet. And while meat sales trounce produce in most stores, the opposite is true at Fourth + Court. It initially had open-air seafood cases, but switched to frozen after finding that people wanted packages with conveniently wrapped single-serve Tilapia or salmon they could use immediately before placing the rest back in the freezer.
When Hy-Vee opened its first HealthMarket store in West Des Moines in 2018, it was a concept the Midwest grocer was more than familiar with. The 15,700-square-foot format was a standalone version of the healthy lifestyle section by the same name it launched in stores in 2001.
The larger size enabled HeathMarket to double-down on its health-centered product assortment with more than 11,000 items. But while the majority of the assortment skews toward better-for-you products such as cauliflower crust pizza, kombucha and gluten-free cereals, there are also conventional products like grab-and-go sandwiches, soups, pizza and a display with Hershey bars, graham crackers and marshmallows for making s'mores.
“When we opened up we thought it was going to be Healthmarket and that's the shopper that’s going to be in here, and then we found out it wasn't," Matt Pertzborn, store director of the HealthMarket in West Des Moines, told Grocery Dive. "It’s folks that want to get their beef enchiladas and their chicken enchiladas out of our Mealtime case, or maybe it's somebody that’s truly wanting that organic grass-fed beef. It is going across those sections to make sure we got a little bit of everything."
In designing the new healthy lifestyle format, Hy-Vee had to make its amenities unique enough so as not to cannibalize nearby stores — there are three Hy-Vees within a two mile radius of the HealthMarket — but not so niche that it would only attract a narrow slice of customers. Pertzborn said the goal was to design a format that would attract consumers who shop multiple stores each week.
The store is packed with health-related draws like a full-service pharmacy, an Orangetheory Fitness, a hearing center and an on-site dietitian. One Friday night this summer focused on sports nutrition and highlighted gluten-free, paleo and keto products. HealthMarket also frequently hosts in-store events. Last month, the store provided free biometric screenings and each week it organizes diabetes nutrition walks where shoppers can discover diabetes-friendly foods in the store.
Just outside the doors from the Orangetheory Fitness that spills into HealthMarket, consumers are met with Bevi infused water, nitro coffee, bottles of wine, energy drinks and even chocolate, as well as a kombucha station with eight different locally made varieties on tap. Around the corner is an entire wall lined with more than 200 different bars covering 50-plus brands and 16 feet of coolers stocked with chilled kombucha and probiotics.
“When we started out and opened up we thought it was going to be Healthmarket and that's the shopper that’s going to be in here, and then we found out it wasn't."
Store director, Hy-Vee's HealthMarket
The novelty section is loaded with Halo Top — the ice cream that touts fewer calories, less sugar and higher protein — as well as light versions of Ben & Jerry's and So Delicious made with cashew milk. Plant-based ice cream Wink, a low-carb version from Rebel and Outshine Fruit Bars were added to the mix after consumers asked for them. But with some consumers preferring to indulge, Hy-Vee asked a local ice cream manufacturer in Des Moines to produce a special line of ice cream sandwiches, which are stocked in a small cooler near the checkout.
Jennie Hiyani, who lives a few miles away in West Des Moines, said she prefers HealthMarket over traditional Hy-Vee because there's less junk food. It's also convinced her to try new foods like kale for the first time.
"I try to eat healthier and I like the fact that I can get everything I like almost in one store and not have to pay (a lot) and look like crazy to find it," said Hiyani, who on this particular day purchased Angie's Boomchickapop popcorn and Blue Diamond nut-thin cookies. "Everything is just right here."
Hy-Vee Fast & Fresh
Convenience stores have long had a reputation as pit stops for gas and greasy food. That's starting to change, however, as operators realize the profits to be had from foodservice and an upgraded store experience.
Fast & Fresh in Altoona, located just 19 miles from the company's West Des Moines headquarters, is Hy-Vee's attempt to further elevate the concept. Its diverse product offering ranges from salty snacks to top-shelf liquor. Four aisles of wine and spirits, a walk-in beer cave and 12 local craft beers on tap provide an alcohol offering that Hy-Vee said can rival any big grocery store, including many of its own locations that are nine times larger.
While most c-stores are busiest during the week, Antonio Romeo, the store’s director, told Grocery Dive his busiest days are Friday night, Saturday and Sunday.
"We have everything. It's just on a much smaller scale," said Romeo, who has been with Hy-Vee for two decades. "(Fast & Fresh) just takes convenience and multiplies it. It's maybe the number one thing on a person's mind throughout the day and we try to solve a lot of that and just have a coolness factor, a modern factor to it."
Upon entering the company's brightly lit 10,000-square-foot Fast & Fresh concept, consumers are met with donuts, coffee, lemonade and the captivating aroma of hotdogs, jalapeno and cheddar sausages, cheesy buffalo ranch chicken and ranchero steak and cheese taquitos spinning on rollers.
But its product offerings also include fresh corn on the cob, tomatoes, pineapples and nut and trail mixes neatly placed in pre-packaged containers. Some produce even comes diced and chopped. After initially carrying meat offerings tailored toward cooking in an oven or Crock-Pot during winter, the meat offerings were overhauled to include more grill-friendly summer items like stuffed pork chops, stuffed chicken and ground turkey.
A wall of prepared meals ranging from lasagna and shredded pork tacos to meatloaf and sweet potato and kale chicken bowls are ready-made to grab and go. The popular wood-fired Mia Pizza station does more in sales than the same concept housed in 14 other traditional Hy-Vee stores, including a 95,000-square-foot flagship 26 miles away.
"We have everything. It's just on a much smaller scale. (Fast & Fresh) just takes convenience and multiplies it. It's maybe the No. 1 thing on a person's mind throughout the day and we try to solve a lot of that and just have a coolness factor, a modern factor to it."
Store’s director, Hy-Vee's Fast & Fresh
The Altoona Fast & Fresh is a largely isolated development for now, but empty fields just outside its front door are expected to eventually house a strip mall, a hotel, condos and restaurants. To get people in the door and keep them coming back, Romeo posts on Facebook when they store gets new craft beers, offers ten cents off gas on Friday and occasionally runs buy-one, get-one pizza promotions.
He recalled one family that came in once to purchase six individual build your-own-pizzas that were marked down from $8 to $5, and then got a half-off deal on top of that because they had season passes to a nearby amusement park. The family paid only about $15 for their entire meal, a money-losing deal for the store — but to Romero the deal misses the point.
“It’s basically like giving it away and my people are like, 'Do you think we really want to do this?' and I’m like, honestly I just want to get people in the habit to start coming here,” he said. “Not only am I planning long term for this store, but I’m planning long term for the Fast & Fresh brand.”