Downtown Hy-Vee a possibility, CEO says; grocer plans to open 2 more full-service stores in area soon

Randy Edeker, Hy-Vee’s chief executive, says the employee-owned company, free of outside influences, can “stick to what made us good.”

By Barbara Soderlin / World-Herald staff writer

Hy-Vee expects to open two more full-service stores in the Omaha metro area in three to four years as the city’s population grows and expands westward.

The supermarket operator also has explored building a smaller-format store in downtown Omaha, company Chief Executive Randy Edeker said in an interview with The World-Herald.

While downtown site-selection efforts haven’t panned out so far, Edeker said, Hy-Vee still is interested.

“We think the downtown Omaha area has been incredible, the way it’s grown,” he said. If the right development opportunity came along, he said, “we definitely would look at it.”

A downtown Omaha store could be similar to what Hy-Vee has under construction in downtown Des Moines: a four-story structure housing a 35,000-square-foot supermarket, 81 apartments and a two-level parking garage. That store is expected to open this winter.

Hy-Vee, which is based in West Des Moines, toured stores in New York City to get a feel for what an upscale urban grocery could offer. The Des Moines version will focus on fresh, convenient foods and helping customers pull together a meal.

“Someone who decides they want to live downtown really is expecting that type of experience,” Edeker said. In other markets where it operates, Hy-Vee is also scouting locations for its midsized store concept, like the 55,000-square-foot location that opened in Plattsmouth, Nebraska, in 2013. The grocer has no plans for more of those in the Omaha area, but Edeker said, “there is still room for growth here.”

Omahans also should expect to see additional Market Grille or smaller Market Cafe restaurants at Hy-Vee stores. The spots are in about 80 of Hy-Vee’s 240 stores, including three in Nebraska: at 9707 Q St. in Omaha, 5020 N. 27th St. in Lincoln and in Plattsmouth.

All Hy-Vee stores with ready-to-eat food service will see a Market Grille or Market Cafe restaurant within about the next three years, Edeker said.

Edeker sat down with The World-Herald recently to discuss expansion and changes at Hy-Vee. The Omaha area is the grocer’s third-biggest market, behind Kansas City and Des Moines, where it has 20 stores each to the Omaha area’s 15.

The grocer doesn’t report detailed financial information, but it ranked 40th on Forbes’ 2015 list of the largest privately held companies, with $8.7 billion in revenue in the fiscal year ending Sept. 30, 2014. Hy-Vee said revenue grew to $9.3 billion in its 2015 year and projects it to surpass $10 billion in 2016, thanks to sales growth at established stores, plus contributions from new stores.

Edeker said comparable store sales are growing faster than at the company’s peers, and the four or five new stores that opened will further boost total sales.

“I’ll be very disappointed if we don’t surpass $10 billion this year,” Edeker said.

The employee-owned company has no plans to consider going public, he said. Without outside influence, “we have the ability to stick to what made us good,” he said.

Edeker said employee ownership means Hy-Vee tries to empower employees, from store managers down to cart collectors, to make their own decisions about what it takes to keep customers happy. Full- and part-time employees get bonuses when a store meets expectations, he said.

Executives, officers and store directors own stock directly; other employees can own stock through participation in the company 401(k) plan.

In other comments, Edeker said Hy-Vee, which also is remodeling three west Omaha stores, is making changes and investments based on changing customer lifestyles.

Shoppers today are savvy about food trends and expect to see their tastes reflected at the supermarket. Older-style deli counters with food like fried chicken and meatloaf aren’t as hip as the charcuterie stands and artisan bread bakeries going into stores today.

“You think about how food tastes have changed. We need to stay up with that,” Edeker said.

A new store opening in Iowa this year won’t be open to the public. Rather, the Urbandale location will be Hy-Vee’s first separate fulfillment center for its Aisles Online e-commerce program. Today, Des Moines area stores fill online orders from individual stores; a central “dark store” location is expected to make home delivery more efficient.

Hy-Vee expanded Aisles Online in 2015. Sales have been greater than expected, but the program is not profitable yet.

“It has to reach a critical mass,” Edeker said.

One area where Hy-Vee is not making a quick change is in following competitors on the issue of cage-free eggs.

Retailers including Walmart, SpartanNash and Kroger have announced that by 2025 they will start selling only cage-free eggs, under pressure from groups including the Humane Society of the United States.

Edeker said he gets frequent emails from activists, many of whom are not Hy-Vee shoppers, urging action on the topic.

“It’s hard to disagree the chickens would be better off if they weren’t in cages, but the challenge is, there’s a downside to it,” Edeker said. “I can come out with some arbitrary date out in the future, and I probably will announce one at some point, but we have to make sure we actually have a product and that the people that depend on us for food can afford it. Right now the industry is not prepared for it.”