BUOYED BY its strong military presence and active seaport industry, Virginia Beach, Va., has weathered the economic downturn with relatively calm seas.
“We're insulated to some extent in this market,” said Kent Little, president and chief executive officer, The Breeden Co., a shopping center developer based here. “Virginia Beach has fared better than many markets around the country.”
While real estate prices were driven up in recent years, causing a bit of a residential real estate bubble, employment has remained fairly stable, compared with many regions in the Midwest, for example.
However, stability doesn't mean the market is growing for food retailers. In fact it appears that traditional retailers are fighting to hold onto their share against an increasing incursion by nontraditional operators like Wal-Mart Stores and Costco Wholesale Corp. at the high-volume end and various convenience-store and drug-store chains that are adding grab-and-go food options at prime locations in the market.
“Before we see food retailing expansion, we are either going to see significant population growth or significant employment growth,” Little told SN. “If we don't have those, it's difficult to grow sales. What we've got now is a whole bunch of food retailing chains fighting over a stabilized market share.”
Food Lion, together with its Bloom and Bottom Dollar banners, operating 89 locations, collectively hold the Virgina Beach market's No. 1 food-retailing share with about 26.5%, according to Metro Market Studies, Tucson, Ariz. That's down slightly from 27% in 2008.
The area includes the Norfolk and Newport News markets as well, for a total population of about 1.7 million and retail food sales that index slightly below the national average, according to Metro Market Studies.
Close behind Food Lion is Minneapolis-based Supervalu's Farm Fresh chain with 45 stores and a 21.4% share, and Wal-Mart Stores, whose 16 supercenters and Neighborhood Markets in the Virginia Beach market account for 18% of the food-retailing dollars. Farm Fresh recently named a new president — Food Lion and Harris Teeter veteran Gaelo de la Fuente, who succeeded Ron Dennis following his retirement.
“We operate in an area that is very diverse, and Farm Fresh's success depends on catering to that broad audience,” he recently said in an interview with the Daily Press, a local newspaper. “We have to offer a compelling shopping experience for everybody, and within that is certainly a price- and promotion-focused group.”
There has been some new-store activity in the market — including locations from Trader Joe's, which saw its market share rise slightly to 1.1% with the addition of a new location, and from convenience-store operators like 7-Eleven, which captures 4.4% of the retail food dollars in the market, up from 4.2% a year ago.
Little noted that one new project his company is working on includes a 15,000-square-foot CVS drug store with “an enormous amount of space for food.”
Likewise, the Wawa convenience-store chain, based in Wawa, Pa., captures about 2% of the food-retail market in the region with 21 locations.
“They are basically a huge, 8,000-square-foot food store that sells gasoline,” Little said. “All these non-traditional stores are seeking to use food to drive more sales against their fixed costs.
“It's not Food Lion vs. Kroger vs. Farm Fresh so much as it is traditional supermarkets battling all these nontraditional food retailers,” he added.
Traditional retailers in the market are largely seeking to grow sales volume through remodels and other initiatives “within their own envelopes,” Little explained, noting that natural and organic sales seem to be one segment of the market that appears to be growing, whether it's through Trader Joe's or through more offerings from traditional operators.
Most of the new-store openings in the market have been from new-store development that has been in the pipeline for years.