Pa. Program Helps Keep Small-Town Stores Alive

MICHAEL GARRY

The term “food deserts” usually brings to mind images of a gritty inner-city urban landscape punctuated by gas stations and liquor stores with little in the way of fresh-food-bearing supermarkets.

There are, in fact, many neighborhoods in large cities like Detroit, Chicago, New York and Baltimore that fall into the food desert category, separated by more than one mile from a supermarket or large grocery store, as defined by the U.S. Department of Agriculture. But these are not the only areas lacking access to fresh foods. While facing different challenges than urban neighborhoods, many rural communities and small towns across the U.S. are also finding themselves without a mainstream supermarket — or perhaps with one grocery store on the edge of extinction.

Pennsylvania has addressed the food desert issue in many small rural towns as well as in populous urban centers through its six-year-old Fresh Food Financing Initiative (FFFI), a public-private initiative (see SN, March 15, 2010, Page 1). Among the 83 mostly independent stores that have been built or renovated with help from the FFFI, about two-thirds are located in rural areas and small towns, according to Judith Bell, president of PolicyLink, Oakland, Calif., a nonprofit institute that helped orchestrate the FFFI along with the Food Trust and The Reinvestment Fund.

“Food deserts are seen as an urban problem but they're very much a rural problem,” Bell said. “There are communities across this country growing our food that have no access to healthy food themselves.”

With growing concerns about the health issues associated of food deserts — including obesity, diabetes and other ailments — the FFFI is being viewed as a model for how small-town communities can hold onto their supermarkets and continue to give local residents easy access to nutritious foods beyond the limited fare offered by convenience stores and the like.

STAY OR LEAVE?

Kennie's Markets, a four-store family-owned retailer based in Littlestown, Pa., is an example of a small-town operator that benefited from the FFFI. Its 62-year-old store in historic Gettysburg, Pa., population 7,500, was in dire need of an upgrade, without which it may have been shuttered and relocated elsewhere, leaving food desert conditions behind.

But with the help of Associated Wholesalers Inc., Robesonia, Pa., Kennie's owner, P.K. Hoover, secured a $500,000 grant through the FFFI, which enabled him to rebuild the Gettysburg store in 2007 and stay in town. He also received a low-interest loan from the state that was not associated with the initiative, as well as a private bank loan. The cost of the new 32,000-square-foot store: $6 million.

Since opening in 1948, the Gettysburg store (purchased by Hoover's uncle and father in 1959) has been expanded many times, turning into “an antique” 12,000-square-foot unit that needed to be replaced in order to remain competitive, said Hoover. “But we were faced with the same situation supermarkets all around us are facing. Do you replace a supermarket in a small town environment or buy cheaper land outside the borough that has fewer restrictions? We wrestled with that.”

According to Hoover, chain operators have abandoned Gettysburg over the years, including an Acme and an A&P in the 1960s, and a Giant Food store, which left in 1998 for a much larger new site at a mall 1.5 miles outside the borough. The nearest other supermarket is a Weis store on the outskirts of town. These stores are not accessible to the many Gettysburg residents who don't drive, he noted.

“This is happening all over the U.S.,” said Hoover. “As stores need to upgrade, they are abandoning boroughs and towns for outside sites. They are saying, ‘I'm sorry about those customers [left behind], but this makes economic sense to me.’”

Without his grant from the FFFI, the economics might have compelled him to relocate as well. “The program makes it attractive to stay in town where the needs are,” he said.

The obstacles facing retailers operating in a town like Gettysburg include the cost of lots, the need for setbacks, requirements to enclose Dumpsters and special provisions for noisy refrigeration compressors.

“It's more difficult to build in a town than in a shopping center,” Hoover said.

In his case, Hoover purchased six lots to build his new store, tearing down the old store to create parking lot space. He needed to get variances from the town, allowing the new store to border the street on three sides, with fences along the boundary.

Low population density is another factor impacting small towns. For one thing, it limits the number of stores that can be supported. And it keeps a store's footprint well under the size many chains are accustomed to building. Hoover pointed out that his 32,000-square-foot Gettysburg store is about half the size of suburban stores run by chains like Giant Food. In addition, larger chain stores prefer to locate within a road network “that attracts people from 20 miles away,” he said.

Hoover acknowledged that small towns like Gettysburg don't deal with the same level of social distress — such as crime — affecting cities like Philadelphia. “This is a small community and I know most people here,” he said. “We have turnover, but at a much lower level than the inner city.”

Since opening his new Gettysburg store in September 2007, Hoover has seen an expected improvement in volume and profit over the original store. On the other hand, the new store carries debt while the old one was debt-free.

“We didn't do this to make more money,” he said, “but to service customers.”

Almost three years later, those customers still praise the new store and thank Hoover for staying in Gettysburg. “It's really gratifying,” he said.

Hoover was part of a delegation that spoke to a White House group studying the food deserts issue last year; he also spoke at a Senate hearing with PolicyLink. Those efforts helped support the creation of first lady Michelle Obama's “Let's Move” program addressing childhood obesity as well as the Obama administration's Healthy Food Financing Initiative, which is based on the FFFI and earmarks more than $400 million for food deserts nationwide.

“I applaud the Obama administration for at least looking at [the food desert issue],” he said.

DOWN PAYMENT SUPPORT

Randy Sprankle is another independent retailer who received a grant from the FFFI program — in his case, $250,000 — to preserve a supermarket presence in small Pennsylvania towns. In October 2008, he used the funds to make a down payment (mostly for inventory) on the purchase of two existing western Pennsylvania stores, one (7,000 square feet) in Apollo and the other (9,500 square feet) in Vandergrift, each with populations of about 3,500. The grant “made it feasible to purchase the stores,” which together cost about $1.4 million, he said.

Sprankle has also operated three other Sprankle's Neighborhood Market stores in small nearby communities for the past 12 years, having previously worked as a retail counselor for the now defunct wholesaler Fleming Cos. He is based in Leechburg, Pa.

The FFFI grant was based on low fresh-food availability in Vandergrift, but in that town and Apollo the stores purchased by Sprankle were the only remaining supermarkets and their previous owners were on their way out. “In smaller towns, small stores are slowly drifting away,” said Sprankle, who, like Hoover, spoke to federal officials about food deserts last year. “In the last eight months, four stores in my area closed because they couldn't make enough volume.”

In some cases, the children of current owners have no interest in remaining in the grocery business and “working 70 to 80 hours per week,” said Sprankle, whose own children do plan to remain in the business.

As with Hoover, economic viability is the key consideration for Sprankle. He cited the presence of chain competitors like Wal-Mart Stores, Giant Eagle and Shop ‘n Save operating in surrounding strip malls as limiting the sales that can be generated by small-town independent supermarkets. His Apollo and Vandergrift stores both face competition from a nearby Giant Eagle, Save-A-Lot and Shop ‘n Save stores, with a Wal-Mart about 14 miles away.

In the Apollo and Vandergrift stores, with a weekly volume of about $42,000 each and a net combined annual profit of about $100,000, Sprankle estimates that it will take five to seven years for him to pay off his loan and start making “real money.” Higher deli volumes support the profitability of one of the stores, he added.

Sprankle continues to be approached about buying additional small-town stores. “There are probably six I could buy tomorrow,” he said. More than a year ago, he was approached by the town of Carnegie, Pa., where a chain store had moved away and left the town without any supermarkets, with a grant of $350,000 to take on an existing store, but he had to decline.