Chicago considers options for city-run grocery as stores close

Earlier this month, Asiaha Butler went to four different stores in search of fresh mint.

Butler, CEO of the Resident Association of Greater Englewood, went to the Aldi on 63rd Street in the neighborhood, a local corner store and a Walgreens without luck. She found what she was looking for at the Go Green Community Fresh Market, a grocer operated by the nonprofit Inner-City Muslim Action Network, about a mile from her home. The herb wasn’t for sale there, but employees found some for her in the back.

“That’s the reality here,” she said. “Just for mint, I have to go out of my ZIP code.”

Over the last two years, major grocers have shuttered at least six stores on the city’s South and West sides, making it harder for residents of neighborhoods like Englewood to access fresh and affordable groceries. U.S Department of Agriculture data shows 63.5% of residents in West Englewood live more than a half mile from their nearest grocery store, according to the mayor’s office. Eight miles due north, fewer than 1% of West Town residents live that far from their nearest grocery.

In September, Mayor Brandon Johnson’s administration announced it planned to explore the possibility of opening a municipally owned grocery store to help improve food access on the South and West sides. A feasibility study launched by the city is expected to be completed and released to the public early next year.

The grocery industry is a notoriously challenging business; stores operate on razor-thin margins and operators must manage a highly perishable inventory. In interviews with the Tribune, industry and economic development experts expressed skepticism that the city, which is facing a $538 million budget gap next year, could effectively operate its own traditional supermarket.

S. Mayumi “Umi” Grigsby, the mayor’s policy chief, said in an interview the city didn’t necessarily plan to operate its own store and staff it with city employees.

“I think (the criticism is) based on an assumption that we’re only talking about a brick-and-mortar store that is run by the city,” she said.

“That criticism comes from the idea that a grocery store only looks one way.”

Options could include a bricks-and-mortar store owned and operated by the city or a store owned by the city but operated by a private grocer, Grigbsy said. A public market could be on the table, as well as various combinations of public, private and philanthropic partnerships and investments in local grocers. The goal, Grigsby said, is to find a model that works that could be replicated across the city.

“This mayor’s looking at bold and innovative solutions,” Grigsby said. “So for us, it wouldn’t be a rehashing of what currently exists.”

Running a conventional supermarket is difficult, even in the best of circumstances, said Andrew Lamas, a professor in the urban studies program at the University of Pennsylvania who teaches courses on community economic development and social finance.

Margins are thin, inventory is perishable, overhead costs are high and operators must contend with supply chain challenges and theft, he said. The only way to prevent theft is by spending more on labor or using surveillance technology, both of which are expensive, he said.

“I think the fact that they’re considering so many options is really a good thing,” Lamas said.

In the past, city leaders have attempted to address the issue of store closures with city funds and tax incentives doled out to developers, grocery operators and nonprofits, to mixed effect.

The Fresh Market in Englewood, where Butler found mint, was awarded $1.75 million in neighborhood opportunity fund dollars before it opened in 2022. Neighborhood opportunity fund grants use revenue generated from downtown development to fund projects in disinvested neighborhoods.

A year ago, Whole Foods shuttered its store at 63rd and Halsted Street in Englewood, which it opened to the tune of live music and TV cameras in 2016 with the help of $10.7 million in tax increment financing that went to the store’s developer. The grocery store was a passion project of former Whole Foods CEO Walter Robb. By the time it closed, Whole Foods had been sold to Amazon and Robb no longer led the company.

This spring, Walmart closed four Chicago stores, including three on the South and West sides. Two of those stores were smaller neighborhood market grocery stores; one was a Walmart Supercenter that sold groceries.

Walmart did not directly receive any tax incentives for the Chicago stores it closed. Two of them, however, were part of developments the city subsidized with tax increment financing. In both cases, the terms of the developers’ agreements required them to maintain certain levels of occupancy in the developments. Those requirements expired in December 2022, just months before Walmart shuttered the stores.

Ameya Pawar, a senior adviser at the Economic Security Project — which is providing pro bono services to support the city’s feasibility study, according to Grigbsy — said a public option for a grocery store could allow the city to take a more active role in economic development than it is able to when handing out tax incentives.

The tools cities typically use to foster economic development, he said, are “very passive.”

“You have to pay, prod, beg, nudge, provide tax incentives to large corporate actors to fill in a resource desert,” said Pawar, a former alderman. “That’s fine, but those tools, as we see — not just in Chicago but elsewhere — they work on the margins.”

Chicago would be the first major U.S. city to open a municipally owned grocery store if it does so. A handful of such grocery stores exist elsewhere; members of the governor’s office visited municipally owned stores in Kansas last fall before legislators passed a $20 million grocery initiative aimed at opening new grocery stores in underserved areas and supporting existing ones, said Deputy Gov. Andy Manar. The city has said it may attempt to tap into that pot of money for its own municipally owned store.

One of the stores visited by Manar’s team is located in Erie, Kansas, population 1,000. The Wall Street Journal reported last month that the store was losing money most months amid competition from a local Dollar General and a Walmart, though city leaders remain committed to the project. Another store the governor’s team visited is in nearby St. Paul, Kansas; operator James Voorhies told the Journal that the supermarket’s business supported itself.

Officials hope the pilot program, which has been funded for just one year, can help address food insecurity in both rural and urban Illinois. Manar said he’s had conversations with officials in Shawneetown, Illinois — a town in Gallatin County about the size of Erie — that echo the ones he’s had with Chicago officials.

“We tend to separate urban and rural needs as if they’re different. But food is food,” he said. “Having access to fruits and vegetables is the same for a family in Shawneetown as it is on the West Side.”

Supporters of municipally owned stores say they should be looked at as public goods akin to a city water department or post office and shouldn’t be expected to be profitable.

Hartford, Connecticut, is exploring the possibility of a municipally owned grocery store in the city, which has a population of 120,000 people.

“My thinking is, a supermarket is a public good,” said Joshua Michtom, a member of Hartford’s City Council who has pushed for a municipally owned store there. “And we don’t think about profit when we think about public goods. We don’t want our fire department to make money; we want it to put out fires.”

Butler used to shop at the Englewood Whole Foods for fresh meat and vegetables; now, she often leaves the neighborhood for her groceries, shopping at stores like a Pete’s Fresh Market in suburban Evergreen Park or a Mariano’s in the Bronzeville neighborhood.

The former Whole Foods has been replaced by a Save-A-Lot operated by the grocery company Yellow Banana, which is owned by Cleveland-based investment firm 127 Wall Holdings. Yellow Banana operates Save-A-Lot grocery stores in a handful of cities across the country.

Residents of Englewood, including Butler, have voiced strong opposition to the brand, which they say is known for rotten produce and low-quality food. Yellow Banana executives have acknowledged Save-A-Lot’s poor reputation and have said they are working to fix it.

“I wouldn’t step foot in Save-A-Lot, and many residents here would not step foot in Save-A-Lot because of how terribly their stores are run,” Butler said.

In summer 2022, the city said it would give Yellow Banana $13.5 million to help it open an Auburn Gresham Save-A-Lot that shuttered in 2020 and acquire and remodel five other Save-A-Lots the company operates on the South and West sides, which do not include the Englewood store.

In February, the city awarded another $4.87 million to the company to open a Save-A-Lot in Altgeld Gardens. In March, the company was awarded another $5.5 million in new market tax credits — federal funds administered by Chicago’s development fund — to help open two of the stores, including the Auburn Gresham location.

Yellow Banana initially said the closed Auburn Gresham Save-A-Lot could be open as soon as late 2022. This May, the company said it hoped to complete the renovations at all stores by the end of October 2023.

This week, Yellow Banana said the Auburn Gresham store would open in the first quarter of 2024, more than a year after the company’s initial projection. A West Garfield Park Save-A-Lot is slated to open after renovations in the first quarter, too. The company said all construction would be completed by the end of the second quarter of next year.

Yellow Banana said construction and equipment installations had caused the delays.

Grigsby said the city’s plan to explore a municipally owned grocery store was not a response to the Yellow Banana delays. “I can honestly say that this had nothing to do with that,” she said.

Butler doesn’t think the city should operate its own grocery store. Residents of Englewood can’t count on city services as it is, she said.

“I think about the way our parks are run, I think about the way our schools are run,” she said. Residents can wait for days or weeks for responses to 311 calls, she said.

She said she’d be receptive to ideas like grants or other supports given out to local grocers or grassroots organizations. The city could also help expedite permitting for grocery stores, Butler said.

“The deals that they cut with developers and corporations are not reflective of the communities in which they do these projects,” Butler said. “Similar deals need to be offered to community groups, to community organizations, to community institutions.”

The city could help acquire the land needed for a grocery store or help leverage capital including philanthropic investment, said Stacey Sutton, a professor in the department of urban planning and public policy at the University of Illinois at Chicago. Government involvement could also help more efficiently shepherd a grocery store through necessary approvals required by various city agencies.

“The city has certain roles that it can play and play well,” Sutton said.

Land acquisition is a tact Chicago has taken in the past. After Aldi shuttered a store in the West Garfield Park neighborhood in 2021, the City Council authorized purchasing the property for $700,000 in city funds. Two development teams have entered proposals for mixed-use developments at the site, which will include a grocery store. Strazzabosco said selection of the project could take place by early next year; the selection of the grocery operator will take place separately, he said.

In summer 2022, Aldi shuttered a store in Auburn Gresham without notice, leading one state senator to accuse the company of having “absconded in the middle of the night.” The closure came months after Whole Foods announced it was closing its Englewood store.

Tim Thomas, 61, a lifelong Auburn Gresham resident and a former city and county employee, used to shop at the Aldi. He now mostly buys groceries on his way home from consulting work downtown.

Thomas has a car, but some of his neighbors don’t. “I see neighbors getting off the 79th Street bus carrying two or three bags trying to make their way because they’ve had to go somewhere else,” said Thomas, an empty-nester who lives with his wife. His parents live two doors down.

Thomas isn’t hopeful about the delayed former Save-A-Lot slated to open in Auburn Gresham with the help of city funds. The quality of food and the store was poor before, he said, and Yellow Banana has said it will source 60% of its food from Save-A-Lot.

But Thomas said he would be open to a city-operated store. “The city provides water,” he said. “The city provides a number of things that cannot or are not being handled by the private sector.”

“I see this as another arrow in the quiver of city services that would serve an ultimate good,” he said.

Former Whole Foods CEO Robb said it was hard to imagine the city running the day-to-day operations of its own store, though he said he wouldn’t rule it out if such a store helped address food access.

One option that could work, Robb said, would be for the city to identify would-be local entrepreneurs or grocery operators and offer them training classes or subsidies to help them get on their feet.

Both Robb and Sutton said true community engagement would be critical to the success of any project.

Yellow Banana “really got off on the wrong foot with the community,” Robb said. “Even if you have the right person and they have the money,” he said, “if they’re not lined up with the community, what’s the point of doing it if you can’t serve the community?”

A critical issue for the project will be labor, Lamas said. The pro-labor Johnson administration will need to thread the needle between offering healthy food at affordable prices and creating high-quality jobs.

“That’s very difficult to do in the retail food industry,” Lamas said.

Even when grocery workforces are unionized, he said, more than 80% of workers are typically part-timers, a structure he said would be difficult to avoid if the store is expected to be profitable.

The easiest way for the city to try to address the issue would be to partner with a grocery operator that has a unionized workforce, he said. A hybrid co-op model owned jointly by both consumers and workers would be another solution, he said.

“It would give the community a chance to help affect the operations of the supermarket on an ongoing basis,” he said.

Earlier this month, Liz Abunaw broke ground on the bricks-and-mortar location for Forty Acres Fresh Market in the Austin neighborhood, a grocery business she’d previously operated via pop-ups and a delivery service. The project received $3 million in neighborhood opportunity funds.

When planning Forty Acres, Abunaw chose a smaller-format store to lower her overhead costs — the store will be less than 10,000 square feet. She decided she would try to capture smaller, more frequent grocery trips, rather than trips where shoppers might spend hundreds of dollars at a time to fill their pantries.

The city could explore support for alternative models too, she said, such as smaller-format stores or pop-ups. The success of any project will depend on the city’s willingness to sufficiently fund it, she said. A market that is only open five months out of the year would need at least nine months of funding to pull off, if not 12, she said.

“A farmer’s market is nothing more than a pop-up,” said Abunaw, who emphasized that pop-ups need to be consistent and well-advertised to work. “And we see what Logan Square does with their pop-up.”

Abunaw, who worked in consumer food sales at General Mills for a decade, said she understood why the city was looking into municipally owned stores but was skeptical of its ability to jump into the grocery business. Abunaw said she doesn’t believe communities like Austin or Englewood can’t support self-sustaining businesses.

“We act as though there isn’t economic viability in certain communities,” she said. “Just because the model of the 40,000-square-foot grocery doesn’t work, or the 50,000-square-foot grocery doesn’t work, or just because Whole Foods didn’t work in Englewood — for a variety of reasons, so many reasons — doesn’t mean that there’s not a model that can work.”