Cornering the Market
A bold new concept brings fresh food back to an underserved area.
At the Sept. 28 grand opening of Fare & Square, in Chester, Pa., a celebratory street fair was accompanied by some daunting expectations.
Would the underserved area’s first grocery store since 2001 be a success? Adding to the uncertainty was the revolutionary business model adopted by the enterprise: A fully owned subsidiary of Delaware Valley hunger relief organization Philabundance, Fare & Square bills itself as the first nonprofit supermarket of its kind in the United States.
Why a nonprofit? According to Bill Clark, Philabundance’s president and executive director, the model was “chosen specifically because the nonprofit system gives us certain characteristics and advantages that allow us to make this work in the area that a commercial operation can’t.”
First and foremost, Clark says, it’s the access to capital. “One of the problems in these inner-city locations is investors are hard to come by,” he points out. “The second thing is that co-ops, which have been seen as an alternative, require the capital to come from their members, and, in an inner city like this, members … typically don’t have the capital available that they could put into a venture like this. So the nonprofit allowed us to access capital from charity and government, and it allowed us to, in essence, acquire a building and own it, so I don’t have real estate costs, I don’t have rent or mortgage payments to make … I’ll probably even get a tax deferral on it, so I won’t have to pay real estate taxes on the building, so that lowers my operating costs in the way a commercial operator can’t.”
In fact, Clark continues, “the economics of running a food bank are such that it may cost me 50 cents a pound on average to acquire and distribute free food. But if I can provide a broad array of product, and can do this at less than a loss of 50 cents a pound, in a way it’s a better food delivery system than a food bank. To break even is my target. Without investors, I don’t have to return on investment. Not only do I have a lower operating cost, but for me, break-even is a high bar. If I actually lose any money, I have fundraising to help subsidize that, so that nonprofit gives me a lot of flexibility that I couldn’t have if I was a commercial enterprise.”
What’s more, notes Clark, “A lot of the distributors and suppliers recognize … the fact that we’re a separate class of trade, and I’m able to acquire a lot of products at less than prevailing wholesale price, so that I can acquire my margin while lowering the price down to meet the need of the community. And that’s when I can invest a lot more in produce, in fresh meats and things like that.”
Leading With Produce
Indeed, a visit to the store in early October, just 11 days after the grand opening, reveals a selection of fresh produce, fresh meat and deli items rivaling that of any suburban supermarket, despite Fare & Square’s diminutive footprint (the store shares site space with an 8,000-square-foot Family Dollar). Shoppers pass through a discreet entrance on Trainer Street, lured by cheerful purple-and-green signage on 9th Street promising “good food right around the corner” — a statement that turns out to be literally true.
The produce section is to the immediate left of the entrance, while the member services desk is at left. “We wanted to really feature the department,” says Noah Langnas, store team leader (“store manager” in Fare & Square-speak) and self-described “old Acme guy.” Continues Langnas: “You can see when you look at it, it’s full, it’s fresh, it’s priced right, so I think the way this store is laid out is one of the reasons” produce has performed even better than expected.
In contrast to the idea many local residents have that produce is prohibitively expensive, Langnas draws attention to the department’s hot prices, at the core of one of the store’s main goals: making healthy food affordable: “When you’ve got collard greens at 79 cents, and cabbage at 39 cents a pound, and a 5-pound bag of potatoes for $1.99, you can’t really say you can’t afford it then,” he says.
Supporting nearby fruit and vegetable growers is also a big consideration. “We’re dealing with local farms for our produce,” observes Paul Messina, Fare & Square managing director. “The apples that we have on sale right now are all from Delaware. We have a lot of New England product as well — not exactly local, but regional — and [we also offer] some Jersey produce.”
Noting that it’s a “top priority” of Fare & Square to provide fresh food to the local populace, Messina says: “The first two pages of the first circular we put out were 100 percent produce. We felt that that was necessary to send a message about part of what we’re supporting here. When you come into the store, the produce is dominant, it really hits you hard when you come right in the front door, and we’ve priced ourselves with lower margins than normal on the majority of our products to try and encourage shoppers to buy fresh produce. So far, it’s going very, very well.”
Fare & Square’s full-throttle approach to produce is also apparent in the department’s focus on big, splashy displays, among them a waterfall of apples (at 69 cents a pound) to greet incoming customers. Notes Langnas: “We’re all about trying to catch [customers’] purse-strings with our price points, but catch their eye to get them to take a second look at things” they might otherwise miss.
Additionally, future store efforts will involve produce. Langnas describes a partnership with Hillside Farm, just a few miles away, which offers a “Seed to Snack” program that gets elementary school children to try different fruits and vegetables. “What we’re going to offer them is a coupon to bring home to their parents for $2 of their next produce purchase,” he says. “So once you get the kids, obviously, you get the parents. We want to get the kids and parents eating healthier foods, and it all starts with produce.”
Best of the Rest
Other big attractions at Fare & Square are a deli counter featuring low-sodium and gluten-free offerings, located at the far right of the store behind a small bakery section, and a back wall taken up with fresh juices and dairy products, fresh meats and frozen products. According to Langnas, fresh meat and deli are also trending higher than anticipated among customers. In fact, along with produce, they were key community requirements for any store opening in the area.
“Originally, when the project first started, we weren’t going to have a fresh meat and fresh deli; we were going to have all pre-packaged,” he recounts. “But we listened to the community, and we knew that having a meat cutter on board and having fresh sliced deli meats was important. So there’s an example of us radically changing the blueprint based on the community feedback that we got.”
Rounding out the store’s selection is a well-edited six-aisle center store section and a far-left wall of baby food and nonfoods, above which is one of the store’s signature design features: a vibrant mural encapsulating the spirit of Chester, the first city in Pennsylvania.
“We gathered a team of people who’d lived in Chester for a long time — one was a schoolteacher for 30 years; another was on the mayor’s community liaison team — it was a team of eight to 10 folks, and we went to them and we said, ‘If we were going to do a community wall, what should be on it?’” explains Langnas. “And they talked about things like church and family, the Mother’s Day Parade, the Chester Clippers, which is the [high school] basketball team, and this is what marketing basically subcontracted out, and this is what they came back with.”
He continues: “It is, by far, my favorite part of the store. It just really makes it feel warm, and makes people feel at home.”
When asked about the store’s format, Langnas replies: “It’s a cross between everything. What we tried to do is offer one name brand and one IGA brand. That was really what we tried to do, because three miles away, we have a Save-A-Lot, which has no name brands, of course; their focus is on price. We have a ShopRite three miles away, which is 70,000 square feet, so it’s tough to compete with all those SKUs. Then there is Sam & Sam Meats, which is three miles — everything is three miles away from us. So when people ask us who our competition is, I say, ‘It’s everyone and no one.’ We have like five stores within three miles, but nothing in the city.”
As Clark explains the assortment: “We had to squeeze a lot of stuff into this 16,000 square feet, and we put a priority on the foods that are not generally available, and it meant that we had to discount some of the shelving for products that you would normally find in a store, so we’re less dense with grocery products and we’re heavier on fresh meat, produce, dairy, frozen foods, because those are the products that a community like this doesn’t have access to, those are the healthy, nutritional core that we’ve been pledging to bring to the community. That was key, so while we’re 16,000 square feet, the footprint for the produce, the dairy, the meat is appropriate for a much larger-footprint store, because we’ve cut out a lot of the center of the store in terms of the soda aisle, the snack aisle, paper goods — a lot of that we just don’t have. … A lot of the things that we cut out are things that are available at corner stores, and we’re providing what’s not.”
Still, despite the relative lack of space devoted to it, the center store section manages to provide shoppers with a range of products, including some new and unusual items, for less money. Doretha Brown, a produce team member encountered helping out in center store (all Fare & Square associates are empowered to pitch in whenever and wherever necessary), marvels at “stuff that I’ve never seen before,” including Jack Daniel’s marinade in a bag and Wickles Pickles. She also characterizes the five cans of select IGA vegetables offered for $2 as a “great bargain ” while other team members put out “Sizzling Low Prices” tags throughout the store to help shoppers save even more.
Adds Brown who like many of Fare & Square’s team members is a Chester resident hired after completing a five-week job-training program: “I helped build this store when it was empty. It’s a great feeling to me to work here.”
Membership Has its Privileges
Also unique to Fare & Square is its free membership program. Although membership isn’t mandatory to buy things at the store (that may change in the future as it attracts more customers), shoppers are encouraged to join the Carrot Club to be eligible to gain such rewards as store credit given through in-store promotions, program incentives and special values. Additionally, members who earn 200 percent of the poverty line or less can receive Carrot Cash, a 7 percent credit toward future purchases. At the time of PG’s visit, the store boasted nearly 6,000 members, and since memberships are based on households rather than individuals, and, according to Philabundance, the area has a population of about 35,000, that represents a sizable chunk of the community.
As Membership Manager Denina Hood tells it, the membership drive began in July, well before opening day. “We would go to them,” she says of community residents. “We were going to weekend fairs, festivals, food cupboards — you name it, we were there. We went out to Ethel Waters Park when they had a dance night. … Any place the people were, we were there.” This outreach resulted in 4,700 members in advance of the store’s official debut.
Once Fare & Square opened its doors, the enrollments continued. On the Saturday before PG’s visit, Hood asserts, the store signed up “three hundred-and-something members. We were over 5,000 within two hours of the store being officially open.” Aiding the effort is the streamlined nature of the process, which she estimates takes “two, three minutes, tops” on the computer.
The Carrot Club “requires the customer to register, give us their name and address, and they have to provide their card at the beginning of any cash transaction,” says Clark. “One of the primary reasons for that is, as a nonprofit, I’m not going to be evaluated on my profitability or my return on investment. I’m going to be evaluated on who is shopping and how. … The membership gives me, in essence, longitudinal purchase data on households that are in an area that is of extreme interest to people who are dealing with health care, hunger relief, food security. So that data is my coin of the realm, and so having longitudinal transaction data is extremely important. We have some relationships with the University of Pennsylvania and Swarthmore, that once we stabilize, we’re going to be doing almost laboratory-type testing of merchandising to see if we can move the needle, and have people who are purchasing in one way improve the quality of their purchasing, and that membership system allows us to track that data.”
The Measure of Success
So what does a successful nonprofit supermarket look like? It was still early days at the time of PG’s visit to check out what Clark terms “an evolving adventure,” but he has a clear vision of the future. “One of the ways we’ll judge this is how effectively we can work with other elements of the community — educators, school system, the health community — to utilize the access and the venue that we have to bring other services and education to the population.”
Conceding that “we have a lot to learn yet,” with about “six to nine months of calibration of our business model in this environment,” Clark has nevertheless already received inquiries from at least a half-dozen municipalities, from as close to home as Pittsburgh and as far afield as Texas.
In regard to Chester itself, though, as everyone at Fare & Square attests, the community is undoubtedly buoyed by the venture. “The excitement here on opening day was almost like a city that just got a baseball or football franchise,” affirms Clark. “You know, you’re a city without a professional sports team, you’re second-class. You’re a city with a professional sports team, you are part of the Ateam. And a supermarket for a community like this serves that purpose.”
“Nonprofit gives me a lot of flexibility that I couldn’t have if I was a commercial enterprise.”
—Bill Clark, Philabundance
“We want to get the kids and parents eating healthier foods, and it all starts with produce.”
—Noah Langnas, Store Team Leader