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Supermarket shuffle

Updated: May 10, 2013 - 4:32 pm

Posted: May 3, 2013

By Lydia Wheeler

lydia.wheeler@insidebiz.com

With more than seven grocery market chains in Hampton Roads, grocers are fighting for real estate as much as they are customers.

The Kroger Co. has plans to expand rapidly in the region. Its former 55,000-square-foot store in the Virginia Beach Salem Crossing Shopping Center is being converted to a training center for employees to accommodate the growth.

"We plan to do at least four to five new stores a year for the next three to five years," said Tommy Drew of S.L. Nusbaum Realty Co., who is representing the Cincinnati, Ohio-based grocer.

All new stores will be Kroger Marketplace stores.

On Holland Road, the company is transforming the former Super Kmart into the region's first 124,000-square-foot marketplace, expected to open in July.

"Typically, grocery stores in this market are 45,000 to 50,000 square feet," Drew said.

In addition to groceries, the marketplace stores carry home fashion and décor, as well as bed, bath and kitchen appliances.

The grocery component of the store will occupy 94,000 square feet and the general merchandise will take over the remaining 30,000 square feet.

Drew said Kroger has been approved to build two additional marketplace stores, on Frederick Boulevard in Portsmouth and on College Drive in Suffolk. Each store, he said, employs about 350 people.

With matching prices, Kroger's biggest competition is Walmart. The discount super center, known for rolling back prices, is tying up potential real estate.

Walmart Neighborhood Markets, introduced in 1998, have a smaller footprint than its super center stores.

In Hampton Roads, there are two - one in Norfolk and another that just opened in Newport News.

"We are expecting a third Neighborhood Market to open in Virginia Beach this summer," said Walmart spokeswoman Amanda Henneberg, "and we certainly are planning additional stores in the area."

Each store, she said, is about 38,000 square feet and employs up to 95 people, compared to the average super center, which is 182,000 square feet and employs about 300 people.

"Walmart is such a ferocious competitor from a price point," said Rick Burnell of Atlantic Commercial Real Estate who represents Harris Teeter Supermarkets Inc. "Kroger is expanding and they are such a formidable competitor as well. They will be good competition."

Harris Teeter has 13 stores in Hampton Roads, including a store in Williamsburg and Corolla, N.C.

On Feb. 13, Harris Teeter announced it retained J.P. Morgan Securities LLC to assist in sale discussions.

The company said it has been approached by two interested buyers, which Bloomberg reported in March as Publix Super Markets Inc., based in Matthews, N.C., and Royal Ahold, the Dutch owner of Stop & Shop stores.

Burnell wouldn't discuss the company's internal affairs or how it might affect the local market.

"Myself and other Harris Teeter shoppers are hoping it won't negatively impact Harris Teeter operations because they do a great job," he said.

Also reluctant to discuss any future Harris Teeter projects, Burnell said only that there are two or three new stores in the planning stages locally.

"I can't say where or give specifics," he said.

On April 10, the Virginia Beach Planning Commission approved plans for a Harris Teeter-anchored shopping center at 2101 Princess Anne Road, an 11.2-acre site at the intersection of Princess Anne, Upton Drive and Sandbridge Road across from Food Lion.

Virginia Beach-based Armada Hoffler plans to spend close to $10 million building the Sandbridge Shopping Center, made up of the 53,365-square-foot grocery store and 17,200 square feet of retail space.

The project will go before city council for final approval on May 28.

While Harris Teeter is debating whether to sell the company, the parent company of Farm Fresh has already sold some of its store concepts.

In March, Supervalu Inc. sold Albertsons, Jewel, ACME and Shaws/Star markets, as well as the Sav-on and Osco in-store pharmacies to AB Acquisition LLC.

"Farm Fresh was one of five retail banners to remain part of Supervalu," said Farm Fresh spokesman Jeff Swanson. "We have no plans to sell."

Supervalu's new CEO, Sam Duncan, he said, has already begun making significant changes by putting in place a decentralized model that will allow for more decision-making and authority at the local level.

While Farm Fresh has always supported the Hampton Roads community, Swanson said, the grocer cut back some of its outreach in recent years and is looking for ways to increase its community support.

While Norfolk's Ghent neighborhood patiently waits for Fresh Market to be built on West 21st Street and Newport News residents wait for the region's second Whole Foods Market to open on the corner of Oyster Point Road and Jefferson Avenue, another alternative type of grocery store with a vastly different concept is eyeing the market.

Local commercial real estate agents have said Aldi Inc. is looking to bring its discount markets to Hampton Roads.

Chris Read of CBRE | Hampton Roads, who is said to be working with the Batavia, Ill.-based company, did not return calls.

The store asks customers to rent grocery carts for 25 cents and bring their own bags.

Grocery is a highly competitive market across the country, and in Hampton Roads government-run commissaries further complicate the marketplace.

"Fourteen percent of all grocery sales come from commissaries," Drew said.

With companies planning further growth, the Hampton Roads MSA could become oversaturated, but those in commercial real estate believe in consumer selection.

"The retail industry is Darwinistic," Burnell said. "It's survival of the fittest. Superior operators are the ones that are going to win."nib ib