DES MOINES, Iowa (AP) - Hy-Vee Inc.’s downtown Des Moines grocery store celebrated its first anniversary on Feb. 28, leaving a mix of happy customers and disgruntled nearby restaurant owners who say the store’s prepared food options are siphoning away business.
“It has hurt us pretty good,” said Mike Rink, owner of the Pita Pit across the street from the Fourth + Court Hy-Vee. He expects to close the restaurant in the coming weeks because of a drop in business.
“We didn’t realize the Hy-Vee would be half food court and one-fourth groceries,” he said.
Other restaurant owners said they too are struggling.
An increase in the number of downtown restaurants may account for part of the downturn in sales, but they said Hy-Vee’s quick-serve food stations and full-service restaurant have eaten into lunch sales since the store opened a year ago.
Meanwhile, Hy-Vee is “exceeding original expectations” in all areas, from the food court to grocery sales, said Jen Kopriva, Hy-Vee district vice president.
The company’s pilot project was a much-awaited addition to Des Moines’ growing downtown. An increasing number of residential units as well as a substantial employee base fueled the need for a downtown grocery store.
With its concrete floors, exposed ceilings, juice bar, beer growler filling station and custom soda station, Hy-Vee was looking to create a hip, urban vibe. But the star of the show proved to be the prepared food offerings, which include Nori Sushi, The Hibachi Asian Grill, Dia Pida Italian Street Food, Cocina Mexicana, the made-to-order salad bar and Long Island Deli.
When it launched, the 36,000-square-foot “grocerant” included seating for about 110 on tall community tables. Several months in, Kopriva said 60 more seats were added because of the high demand. To accommodate the expansion, Hy-Vee moved the international foods to other aisles and shifted bulk items.
But the popularity of the store’s prepared food offerings among downtown workers and dwellers has taken a toll on nearby restaurants.
Jeff Bruning, co-owner of Full Court Press, said that while there are other factors contributing to the struggles of downtown restaurants, “Hy-Vee coming downtown didn’t help.”
“The facts are the facts. There are places that are teetering on the edge of going out of business,” he said.
Profits at his downtown restaurants - Fong’s, Hessen Haus and Royal Mile - are down significantly, the Des Moines Register reported . He’s looking at making some changes at Hessen Haus, which is struggling the most, to draw more business and make it more of a destination spot. But there’s always the possibility of closing it.
“We didn’t have a bad year there until Hy-Vee came,” he said.
Hy-Vee is downtown’s third food court, said Bruning, referring to Local Bites in the Partnership Building and the food court at Kaleidoscope at the Hub.
“They have no regards for their neighbors,” he said, adding that the situation would be workable if Hy-Vee only sold groceries or closed at 7 p.m.
Full Court Press is looking to remodel Fong’s and parts of Royal Mile, both within a block of the downtown Hy-Vee, to keep them competitive. “But it’s foolish to spend money if you’re not making it,” he said.
Bruning isn’t the only restaurateur struggling. Several downtown restaurants closed in the last year, including Legend’s American Grill, Goldfinch, +39, and Guru BBQ.
Rink, the Pita Pit owner, said he saw a drop in sales immediately after Hy-Vee opened. He tried pumping up his delivery and catering business but without success. He plans to move that store to Ames soon.
Paul Rottenberg, president of Orchestrate Hospitality, said his downtown restaurants Centro, Malo and Zombie Burger haven’t had a stellar year, but he doesn’t land total blame with Hy-Vee’s entry into the market.
“The market really softened over the course of 2017 and that is when Hy-Vee opened. Things are very dynamic in our industry with a lot of seats added over the past few years,” said Rottenberg. “Dining patterns have also been changing with the addition of a lot of high quality quick service options and delivery home meal solutions like Blue Apron.”
Hy-Vee did affect business at Orchestrate’s Gateway Market, the specialty grocery store not far from downtown. But Rottenberg is optimistic things will improve.
“The market should absorb any impact of Hy-Vee and these other factors over time and get back on a growth track,” he said.
Along with competition for the lunch crowd, Hy-Vee, which was built on a surface parking lot, has gobbled up parking spaces that were already at a premium, Bruning said.
Hy-Vee wants to see all downtown businesses be successful, Kopriva said. “The grocery store is filling a need” and is bringing customers to the area, she said. “People are embracing the downtown urban lifestyle” including a downtown grocery store.
Hy-Vee celebrated its first year in downtown by offering free parking at meters all day March 2 along Court Avenue from Fifth to Water streets and on Fourth Street from Walnut to Vine streets. Store workers also were handing out two-hour free parking passes to the first 100 customers in the store on March 2 that can be used at surrounding city-owned garages until the end of April.
And going a step further, Hy-Vee gave free parking passes to other local businesses to hand out to their customers.
Hy-Vee will continue to refine its downtown store to meet customer demands, Kopriva said.
The company has reduced store hours, closing at 9 p.m. daily instead of 11 p.m. “After a full year in business, foot traffic after 9 didn’t warrant staying open until 11,” she said.
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Information from: The Des Moines Register, http://www.desmoinesregister.com
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