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New Players Test the Food-Retailing Waters in Madison

New Players Test the Food-Retailing Waters in Madison

A COLLEGE TOWN, Madison, Wis., appears to have a pretty ambitious freshman class. New retailers opening in the shadow of the University of Wisconsin in recent months include West Des Moines-based Hy-Vee, which made its Wisconsin debut with the store late last year, and Fresh Madison Market, a smaller location that is the entrepreneurial venture of Jeff Maurer, a longtime veteran of local independent

A COLLEGE TOWN, Madison, Wis., appears to have a pretty ambitious freshman class.

New retailers opening in the shadow of the University of Wisconsin in recent months include West Des Moines-based Hy-Vee, which made its Wisconsin debut with the store late last year, and Fresh Madison Market, a smaller location that is the entrepreneurial venture of Jeff Maurer, a longtime veteran of local independent Pierce's Markets.

The Madison area has income that is about 11% above the national average, according to Tucson, Ariz.-based Metro Market Studies, and is somewhat insulated from the blue-collar manufacturing woes of much of the Upper Midwest.

Roundy's Copps banner is far and away the market share leader, according to Metro Market Studies, with 11 stores and a 25.2% share, more than double the share of No. 2 Wal-Mart Stores, with three supercenters in the market. The market includes a region of about 565,900 population.

Roundy's also has the Pick 'n Save banner in the market, with four stores and a market share of 8.7%.

“The university is growing, but the surrounding area is suffering blue collar layoffs, and food stores are battling for fewer customer dollars,” said Burt P. Flickinger III, managing director, Strategic Retail Group, New York. “We are predicting a lot more supermarket closings in 2011 and 2012.”

Hy-Vee, however, is planning at least one more opening, with its second store in the market breaking ground this year.

“We are very excited to be opening there,” Ric Jurgens, president and chief executive officer, Hy-Vee, told SN last year before the debut of the company's first location. “We have done very well in college towns and in capital cities, and Madison qualifies as both.”

The store was also its first LEED (Leadership in Energy and Environmental Design) certified supermarket. “We hope that it can become the model for our future growth,” Jurgens said.

Hy-Vee has enjoyed strong success in its expansion efforts, Flickinger noted, even when it breaks into new markets such as Madison.

“They can do battle with Wal-Mart and can also compete with Woodman's,” Flickinger said, referring to Janesville, Wis.-based Woodman's Markets, whose two massive stores in the Madison market capture 6.2% of the food-retailing dollars.

In addition to Hy-Vee, Flickinger singled out retailer-owned wholesaling cooperative Affiliated Foods Midwest, based in Norfolk, Neb., as another operator that stands to reap increasing market share in Madison.

That company last year opened a new, 700,000-square-foot distribution center in Kenosha, Wis., that is expected to facilitate further growth in the in the state.

“Affiliated Foods Midwest is probably going to be, along with Wal-Mart, the fastest growing in terms of sales and market share in next few years,” Flickinger predicted, citing AFM's new warehouse.

The Kenosha center, along Interstate 94 between Milwaukee and Chicago, was expected to serve Affiliated stores in Wisconsin, Illinois, Indiana, Minnesota, Michigan and Ohio. “Rising transportation costs and logistical concerns make it impractical to serve our northern region from our existing distribution centers,” Martin Arter, president of Affiliated, said in a release when the center was announced..

In addition, Affiliated Food Midwest has rolled out a more aggressive pricing strategy for its members that is gaining traction, Flickinger said.

Target Corp., based in Minneapolis, has one supercenter in the market and 2.7% share, but could see that volume grow as it converts more traditional discount stores to the P-fresh format emphasizing grocery offerings, Flickinger said.

Meanwhile, Maurer's 18,000-square-foot Fresh Madison Market, located on the ground floor of a residential housing complex for the university, competes at the other end of the spectrum, emphasizing “healthy and environmentally sound shopping choices” and a “full-service grocery shopping experience with fair prices on a good selection of fresh foods,” according the store's website.