Three years after Hurricane Katrina, it's pretty much business as usual for most retailers operating across the metropolitan New Orleans marketplace. But there are patches in the Louisiana city — primarily minority areas in Orleans Parish — still in need of neighborhood supermarkets that just aren't opening up, according to local observers.
Efforts are under way, however, to encourage local entrepreneurs to open stores in some neglected parts of the city — possibly, some have suggested, as a way for minority owners from within the community to open stores to serve their own communities.
With fewer supermarkets in operation across the city and a smaller population base, most stores in the New Orleans area are enjoying significant sales increases — although the search for adequate store labor is tough and wages are climbing as retailers attempt to attract an adequate workforce, observers told SN.
According to the Prevention Research Center at Tulane University, the metropolitan area, which had approximately 38 supermarkets before Hurricane Katrina, now has 18, while the population has dropped from 456,000 to 324,000 — a loss of 132,000 residents, or almost one-third — as some residents who left have chosen not to return.
The area's 38 supermarkets averaged about 12,000 residents per store, the statistics indicate, compared with a national average of 8,800 per store; with 18 supermarkets left, the average in New Orleans has risen to about 18,000 residents per store.
But with shifting populations and fewer stores to choose from, area consumers are finding new places to shop, “and there are enough retailers to pick up the surplus,” Jay Campbell, president and chief executive officer of Associated Grocers, Baton Rouge, La., told SN.
“It's like pouring a gallon of water into a half-gallon jug — there's going to be an overflow, but the grocers are loving it because sales per square foot have gone through the roof and many retailers are doing better business than ever.
“But the area was probably over-stored before Katrina,” Campbell acknowledged.
Among local residents who left and did not return, 30% to 40% were minorities, local sources indicated. And for the minority residents who stayed behind or who moved back, the situation remains “very challenging and difficult,” Barry Breaux, chairman and CEO of Breaux Mart, Metairie, La., told SN.
“But it's an issue a lot of people are not comfortable talking about,” he added. “A lot of the neighborhoods [without grocery stores] are neighborhoods where the operators didn't want to go back after Katrina, so there are voids in a lot of areas.”
Pockets Of Opportunity
According to Campbell, there are opportunities to be had. “There are certain communities where operators can find good locations and where their stores would be well received. There are definitely pockets where new stores would be very much appreciated,” he told SN.
Among those working to help figure out how to bring operators back into the inner city are Roy Zuppardo, vice president, operations, for Metairie, La.-based Zuppardo's Supermarket. He's a member of the Food Policy Advisory Commission sponsored by Tulane's Prevention Research Center.
The commission's specific aim, Zuppardo told SN, is to find ways to make fresh fruits and vegetables and other nutritious foods available to people in underserved parts of the region, with specific emphasis on Orleans Parish. “As a grocer, it's my belief that the best, fastest and most efficient way to accomplish that goal is by adding more supermarkets,” he said.
“We're hoping for a grant of $20 million to assist entrepreneurs in meeting that goal.”
Under the recommendations Zuppardo submitted to the New Orleans City Council last month, the city would provide grants of up to $500,000 for each store opened and additional funding through low-rent loans to operators who rehabilitate old buildings or construct new ones and who purchase new equipment for the sale of fresh fruits and vegetables.
To qualify for the municipal grants under the commission's proposal, operators must have owned and run a supermarket previously and have a track record of success, he indicated.
Zuppardo said he hopes the commission can find other sources beside the city to help cover the costs of installing security measures at new stores, including cameras and parking-lot lighting, and it plans to seek federal approval to give a tax break on employee salaries to retailers who hire people from the local area, he indicated.
He said he's optimistic the commission's recommendations will be adopted by the city before the end of the year — and by state and federal authorities at a later date — and that construction of new supermarkets in Orleans Parish can begin within a year.
He doubts the city will have any problem attracting operators, he added. “If you're giving someone money for building and equipment — and hopefully for security and salaries as well — that's a pretty strong incentive for someone looking to get into business or to grow an existing business,” Zuppardo explained.
The proposal would also eliminate a lot of the red tape retailers in New Orleans have been accustomed to, he pointed out. “There will be no hoops to jump through,” he explained.
“It will be almost like having a personal shopper, with the city assigning one person to each retailer interested in opening a store in Orleans who will take him from office to office to office to get all the paperwork filled out and approved.”
Campbell said the work the commission is doing “is great, because making it easier for people to open stores in Orleans Parish will encourage more operators to take the risk. Until now there's been a lot of bureaucracy and red tape that has really complicated the process.”
Zuppardo closed one 7,000-square-foot store in Orleans Parish that was damaged by Katrina, but he continues to operate a 20,000-square-foot store 10 miles west in Metairie, in Jefferson Parish.
Many of the customers who used to shop at the Orleans store now travel the 10 miles to shop at the Jefferson store, Zuppardo said, and volume there has gone up 10% to 12% in the past year.
“A lot of the customers from the other store tell us they won't shop anywhere else,” he said.
With the shift in customers, the mix at the Metairie store has changed, he added. “About 90% of the customers at the Orleans store were African American, whereas only 5% to 10% of the base in Metairie is black,” he said.
Kirk Jones, owner of Casey Jones Supermarket, Gretna, La., said his 22,000-square-foot store — located in Jefferson Parish just a few miles past the Orleans Parish line — has seen an influx of Hispanics from Mexico, Central and South America, who came to New Orleans for construction jobs that opened up after the hurricane.
“With a Home Depot right across the street from us, a lot of them shop here, so we've increased the variety of Hispanic items we carry,” Jones told SN.
He said he's also expanded the store's advertising area to attract more business from parts of Orleans Parish, he said. Ads for Casey Jones had been running in only two zones, “but we were getting a lot of calls from people looking for our ad, particularly in markets where [A&P's] Sav-A-Center had pulled out. We've been here nearly 35 years, so people know us by our reputation.”
The decision to add a third ad zone “has paid off,” Jones told SN, with business increasing for almost three years, “and although we've plateaued, with business about where it was a year ago, it's still very good,” he indicated.
Casey Jones also extended its Sunday hours to accommodate the increased volume, he pointed out. Rather than closing at 6 p.m. on Sundays, it's now open till 8 p.m. seven days a week, “because Sunday is as good a day as any other, and when we saw there were still crowds of people in the store at 4 or 5 on a Sunday, we decided the demand was there to justify later hours,” Jones said.
Regarding labor availability, he said his store was able to maintain close to 80% of its workforce after Katrina.
“But labor is always a problem, and getting quality people is tough, and we have to pay more now than we've ever paid before, including a lot of overtime, to get the job done.”
Jones said the store employs 85 people, compared with 58 before the hurricane, and salaries are up $1 to $2 an hour, with entry-level baggers getting $6.55 an hour, compared with $5.50 before the hurricane; cashiers earning $8 and up, with a norm of $10 an hour, compared with $7 base pay and a norm of $9 previously; and head cashiers getting $11.50 to $12 an hour, compared with $9.50 to $10 before.
Meat cutters are getting $14 to $15 an hour, he noted, “and with the market so competitive, we've had to get some people away from other retailers.”
Jones said he's also paying health benefits and year-end bonuses, “so our payroll is up quite a bit, but we're also doing more business.”
To cover the higher costs, Jones said he's raised some prices “where we can and still be competitive. But though our store is very service-oriented, and many of our customers are willing to pay a bit more for service, we can't be ridiculous, with Wal-Mart and Target out there.”
In a market heavy with independents, Rouse Enterprises, Thibodaux, La., has emerged as a major regional player following its acquisition last fall of 16 of A&P's 21 Sav-A-Center stores in the New Orleans market, boosting his store count from 15 to 31.
“Business at those [Sav-A-Center] stores is up 10% to 15% and rising every week because we're doing a better job — and because some competing stores have been down,” Don Rouse, president, told SN.
What's changed for Rouses beyond the store count is its source of supply: After nearly 50 years with Associated Grocers, the company switched to C&S Wholesale Grocers, Keene, N.H., earlier this year.
C&S had been supplying the Sav-A-Center stores, and once Rouses acquired them, “we were able to look at the cost of goods they were getting,” Rouse told SN.
After putting the supply contract out for bids, Rouse said it got the best offer from C&S. However, Rouses, which had been AG's largest customer, remains a shareholder in the cooperative, though it is not buying from the company, he noted.
Since the switch to C&S, Rouses has broadened the variety it offers, “and we've been able to deal directly with manufacturers and brokers and do our own buying, and we can take the money they offer, apply it to the cost of goods and pass it on to our customers, which is what I've been after for years,” Rouse said.
In the process, Rouses brought Sav-A-Center's promotional prices down to its own everyday-low-price levels, he added, “so our prices are better, and we're more competitive with Wal-Mart than anyone else in the market.”
Rouses has also increased the number of employees at the acquired stores by 10% to 15% “because of the way we handle perishables and how we operate the front end,” he said.
But getting labor “is a challenge, and always has been,” he acknowledged, “because New Orleans has had such a high number of people working in the service industries at the hotels and restaurants, and after Katrina, only a limited number of those people came back.”
Like Jones, he acknowledged that labor costs have gone up, “but they were low before. Now many entry-level people are considering construction jobs instead of bagging groceries, so we're competing for those people more aggressively.”
With the Sav-A-Center acquisition, Rouses has four stores in Orleans Parish and a like number in neighboring Jefferson. It's also opened a new store in Orleans, Rouse said, and it's contemplating opening another inner-city store “because business is good and continuing to grow.”
One of the challenges some food retailers have faced in attempting to reopen their stores in New Orleans has been in obtaining compensation through their insurance coverage.
Barry Breaux, chairman and chief executive officer of Breaux Mart, Metairie, La., told SN he suffered hurricane damage at four of his five stores — three from the wind and one from looters, who left that store, in Orleans, a total loss.
“We took the insurance money from that store and acquired an independent in St. Bernard Parish, and we're doing fantastic business there,” he said.
“There were some challenges getting the insurance money, but we were satisfied with what we got. We decided not to sue the insurance company — we took the quicker way, which was to settle for a realistic figure and move on. That was not as difficult for us as it was for people whose stores were underwater.”
He cited the example of one New Orleans operator whose stores did not experience flooding but were damaged by wind, which led to water damage and severe product loss. “He ended up hiring a lawyer to get everything he felt he was entitled to,” Breaux told SN.
“Because we had less damage than he had, we had access to our office and our files and were able to provide accurate financial numbers for a quicker resolution. And because we reopened fairly quickly, there was not an issue of business interruption, and we didn't have to deal with whether to pay rent or not on a property that was under water.”
But filing a claim for flood damage is different than claiming roof damage that results in product damage — the problem the other retailer encountered — Breaux pointed out. “Regular insurance doesn't pay for product losses due to flooding — that requires flood insurance. So the process is complicated.”
The 21,000-square-foot store Breaux opened in St. Bernard Parish is competing only with a Winn-Dixie in an area that once had five chain stores and a Wal-Mart and a population base of 65,000, compared with only about 30,000 now, he pointed out.
Breaux also acquired one of the Sav-A-Centers that Rouses didn't take — an 18,000-square-foot store in the Uptown area of New Orleans “that was never flooded and whose area didn't suffer a lot of damage.”