2014: The year Minnesota's grocery store landscape was turned upside down


This is the second in a series of five posts discussing 2014's most impactful stories in Minnesota. It's a look at where we were, what we went through, and where we find ourselves now – with a glimpse at what to expect in 2015. Check back for the remaining three as the week goes on. 

For the first time in decades, the Minnesota grocery scene doesn't have clear leaders.

A longtime staple pulled out of the Twin Cities market, national chains have made plans to move in, and rural businesses are fighting rising costs – forcing our well-known local grocers to adapt if they want to survive.

The recession was hard on middle-market grocery stores (such as Cub Foods and Rainbow Foods), as shoppers flocked to low-cost retailers or high-end markets.

Roundy's Rainbow stores had historically been No. 2 in the Twin Cities behind Cub, but slipped to fourth as Target, Wal-Mart and other low-cost supercenters gained a foothold. In the spring, Roundy's announced it would be leaving the Twin Cities grocery scene.

Local grocery giants bought 18 of the closing Rainbow stores, jumping at the chance to prevent another competitor from taking the business turf. The Minneapolis-St. Paul Business Journal called it a "largely defensive move."

Discount stores and niche markets

Discount stores such as Aldi continue to grow, aiming to snag customers looking for a new grocery store after Rainbow's exit. Warehouse-style buying clubs such as Costco and Sam's Club are also doing well.

In the high-end market, food co-ops and national chains such as Hy-Vee and Fresh Thyme Farmers Market are both eying metro locations, and established chains (Whole Foods and Trader Joes, for example) are expanding.

That's putting pressure on local companies, forcing them to recalibrate.

Lund Food Holdings opened Lunds and Byerlys Kitchen in Wayzata this year. It's focused on prepared foods and specialty offerings, and claims to be the first of its kind in the Twin Cities. Woodbury-based Kowalski's is expanding the chain's reach with an Excelsior store, expected to open in spring 2015. It will be the city's first grocery store in about three decades.

Rural grocers struggle

The Twin Cities grocery market isn't the only unstable cart.

Mom and pop grocery stores in rural Minnesota have struggled in recent years, as operating costs rise and less customers walk through the doors.

Experts say rural shops will have to adapt to stay competitive while holding off expanding superstores, conventional grocery stores and e-retailers.

Some towns, after losing their local markets, have turned to food cooperatives to provide more options and eliminate food deserts.

Many independent stores, especially in towns with 700 people or fewer, are often on the verge of bankruptcy or have had to close. The Rural Grocery Initiative is fighting to keep them open, saying they are a necessity to provide healthy food options.

A 2012 study found more than 360,000 Minnesotans have limited access to food.

What's to come

As grocery stores continue to fight for customers, traditional stores are projected to lose 2.5 percent of the market share next year, while wholesale clubs, supercenters and dollar stores continue their rise to the top, the Progressive Grocer notes.

Stores that are an "enjoyable place to shop" are expected to succeed more than those that just try to help shoppers get the most for their buck, the publication notes.

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