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Growth and groceries
[June 13, 2008]

Growth and groceries

(The Eagle Via Acquire Media NewsEdge) Jun. 12--Bryan-College Station's growth patterns continue to shape the area's supermarket sector, with developers embracing grocery-anchored retail centers.

"Grocery stores follow rooftops," said Jack Culpepper, president of Stalworth Corp. in College Station. "And as neighborhoods expand and new neighborhoods come online, there's a better likelihood that you're going to need more grocers."

In recent years, Kroger has been among the most aggressive chains in the area, scouting locations on the cities' fringes to capitalize on pockets of residential development.

Within the past 10 years, Kroger has traded older, smaller stores for larger Signature concept stores on the northern and southern edges of the local market. Kroger Signature, a concept the Cincinnati-based retailer rolled out in 1998, is at least 10,000 square feet larger than its older stores. They offer wider product selections in areas such as organic and all-natural foods, video rentals, fully cooked entrees and health and beauty care, according to Kroger's corporate Web site.

"Kroger wanted to be sure it attacked trade areas that weren't being properly served," said Steve Chandler, a development partner for Dallas-based Cencor Realty. Cencor developed the Kroger-anchored Colony Park center that opened in mid-2006 at Boonville Road and Texas 6.

"They're actually doing better at that center than they projected," Chandler said.

In 2000, Kroger's location of a Signature store near the intersection of Rock Prairie Road and Texas 6 helped spur development on the southern end of College Station.

Dallas-based Corinth Property, the developer of the center, is spearheading a retail project on the next intersection to the south, William D. Fitch and Texas 6.

Mark Scarmardo, an owner of regional food distributor Scarmardo Foods, said local residents would see H-E-B and Kroger "play Monopoly" on the south side.

"Kroger is already out there. So soon, H-E-B will make a jump out there to take the Kroger business," Scarmardo said. The Scarmardos also operate The Farm Patch, a produce market on South College Avenue in Bryan.

While H-E-B hasn't yet announced plans to build a new store, the grocer has boosted the footprint of its stores in the local market.

"Twenty years ago, stores in this area may have been 20,000 or 30,000 square feet," said Culpepper, who owns and manages several grocery store-anchored properties in the area. "Nowadays, to be competitive, you have to be well over 50,000 square feet."

Three years ago, H-E-B opened a 95,000-square-foot store in the Tejas Center. The grocer's newer store in College Station, which also replaced an older H-E-B Pantry store, stands at 78,000 square feet.

The expanded H-E-B stores -- while not quite the 109,000-square-foot H-E-B Plus! megastores that the San Antonio-based company has opened in other areas -- include bulk sections and an expanded array of Central Market-branded products.

Wal-Mart, which has a general merchandise location in College Station and a SuperCenter in Bryan, is in negotiations to acquire the Albertson's site on Longmire Drive, according to an Albertson's spokeswoman.

The move comes on the heels of Wal-Mart's failed attempt to locate a SuperCenter at the intersection of Rock Prairie and Texas 6.

Since the 1980s, the area has seen more than a few grocery stores come and go.

The Bryan-College Station area seemed to come onto the radar for several grocers in the early 1990s, when Sam's Club, Randall's Food Store and Albertson's all announced plans to build.

Piggly Wiggly had exited the market, closing three stores in College Station and Bryan due to soft sales. And Bryan's and College Station's Safeway stores had become AppleTree Markets after Safeway sold off its Houston division in 1988.

The Randall's store on University Drive was the company's first location outside the Houston area. The new-generation store, which Culpepper said was the largest grocery store in the county, featured a variety of services new to Bryan-College Station residents -- a coffee department with a bar and stools, fresh-made juices, pizza from scratch, a full-line floral department, a full-service bank and a one-hour photo shop.

The new store also offered an in-house smokehouse, cosmeticians and a video department with 4,000 titles.

"That store took a lot of business both from Bryan and College Station," Culpepper said.

Randall's closed the store in 1997 after selling the building to Albertson's. The site will soon be the last Albertson's location in the local market.

Albertson's once operated four stores in the area. The vacancies it has already left behind -- in Bryan's Townshire center in 2006 and the shopping center at College Avenue and University Drive in the late 1990s -- are still in play, the cities' economic development directors say.

"There are very few retail users that can occupy those spaces," said David Gwin, economic development director for College Station. "Most of the time, grocers will go into a new development, where they will build new space."

Dennis Goehring, economic development director for Bryan, said he was having similar difficulties finding a tenant for the Townshire site.

Apple Tree, which is now based in Bryan, began closing stores in 1992 after seeking Chapter 11 bankruptcy protection. In 1994, AppleTree Chief Executive R.T. "Tony" Kubicek bought the last six AppleTree stores from Long-Term Credit Bank of Japan for an undisclosed price.

The sale included three AppleTree stores in the Bryan-College Station area and one in Huntsville.

Only the two Bryan locations remain. AppleTree closed its College Station location in 2002, citing intense competition. Houston-based Spec's Liquor later filled the space.

Winn-Dixie has also come and gone.

The grocer shuttered its store at East 29th Street and Carter Creek Parkway in 2002, at the same time it closed 76 locations across the country. The company blamed continual losses and a reduction of market share.

The Brazos Council of Governments and the Bryan-College Station Chamber of Commerce occupy the former Winn-Dixie center.

The Farm Patch started out as a small produce market in the mid-1970s, when the Scarmardos launched their regional food-distribution business.

"We had a little spot when we first started, and we kept adding on -- just as we kept adding on to our food distribution," Scarmardo said.

The produce stand, which Scarmardo said has continued to grow over the years, offers all types of food products, flowers and bedding plants. In the late 1990s, the Scarmardos added a meat market, offering fresh meats and seafood.

Scarmardo said the small store has remained competitive by learning to adapt to a changing market.

"Nothing stays the same," Scarmardo said. "Whatever people want, we try to get it for them."

And customers' tastes have changed considerably over the years, Scarmardo said.

Now the store carries European and South American items, couscous, dried vanilla beans and other items not as easily found in traditional grocery stores. Scarmardo said the store's "old world" market atmosphere is a big attraction for customers.

Scarmardo said his family might consider moving the market to a new location and bringing back the meat market that it closed in late 2007. The business was duplicating utility and other building costs by housing the produce and meat markets in separate buildings, Scarmardo said.

Over the years the Scarmardos, who are also involved in real estate development, have eyed locations at the corner of Rock Prairie Road and Texas 6 and in the University Towne Center.

"If we find some properties, we may build a new store," Scarmardo said. "We're working with the city right now."

Brazos Natural Foods has been filling a specialty niche in the market for 20 years at its sole location in Bryan.

The health food store came in as a local community food co-op went under, offering limited locally grown produce, vitamins and supplements, dry groceries, frozen foods, dairy foods from local farms and other items.

Gwin said upscale grocers are a big push for his department these days, as the city works to sell its unconventional demographics -- a large student population and resulting lower median household incomes.

"Grocers are purely driven by the margin -- and they often operate on a fine margin," Gwin said. "If any part of the demographics equation doesn't work, you can run into trouble. In fact, that's what happened to our Albertson's."

Gwin said the grocer did not select locations in high-traffic areas.

Most retailers consider Bryan-College Station a secondary, or tertiary, market, meaning it doesn't have the average household income, population and other qualities that would otherwise make it a primary retail target.

"The product that's currently out there that works in a suburban market is too big for the demographic that we currently have," Gwin said. "That's why we have to take a creative approach and look at those specialty grocers that have a smaller product in their business line portfolio."

Gwin didn't name specific grocers, but several new specialty grocers have entered the Texas market in recent years.

Sprouts Farmers Market, an Arizona-based farmers market-style grocer, has revamped several former Winn-Dixie stores and built new locations in the Dallas-Fort Worth area.

The retailer, sometimes referred to as "Whole Foods Lite" because of its smaller organic produce selection and lower price point, operates stores in Dallas and in Flower Mound, Plano, Frisco and other suburban cities around the Dallas metroplex.

Seth Brown, vice president of store development, said that Bryan-College Station wasn't on its immediate radar but that a store could be a possibility in the future.

"We want to see enough folks with a four-year degree or usually 100,000 population; 40 percent or better with noted education is primary [for Sprouts' consideration]."

And Austin-based Whole Foods last year bought out rival Wild Oats Market, a specialty chain that had been eyeing the Texas market.

Since Wild Oats' store formats prior to the acquisition were generally on the smaller side -- from 15,000 to 35,000 square feet -- Gwin said it will be interesting to see whether Whole Foods pursues smaller markets.

Scott Huska, vice president for German discount grocer Aldi, said his company had no plans to build in Bryan-College Station.

The grocer, which entered the Texas market with a Denton distribution center last year, plans to open 25 to 35 stores in North Texas by next year. The chain's United States component operates more than 850 small, steep-discount grocery stores across the country.

Meanwhile Target, which is building a new store in Bryan, has opted not to bring a full grocery line to its store, which will open July 27.

"It will be our current prototype, which does feature an expanded food assortment of dry grocery, refrigerated dairy and frozen items," said company spokeswoman Katie Benscoter. "The College Station store is a bit older and doesn't carry all of the items this one will."

The store has also recently applied for a liquor store license.

Benscoter said based on the size of the market, Target determined that a general merchandise store made the most sense. She said Target had no plans for additional stores in the area.

"Bryan-College Station is a very good community from a consumer standpoint," said Chandler, the Dallas-based developer. "The income's great, and there's a good bit of stability in the market. There are a lot of positives."

Goehring said he wasn't pushing for more grocers to come to the area because the market was full.

"As of now, we have not really had anyone interested in bringing in another grocery store in Bryan," he said.

However, Goehring did say the city is striving to bring a small specialty grocer to the north downtown area. Discussions are ongoing.

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