In a follow-up to a May report on the possible closure of the Walnut Hills Kroger, Cincinnati City Manager Milton Dohoney Jr. says that he does not support City subsidies for an unprofitable grocery, but does endorse the study of how Cincinnati can combat the 'food deserts' issue that is plaguing many inner-city neighborhoods.

'Food deserts' are large geographic areas where healthy choices for groceries are either unavailable or are at a great distance.

Often, these communities have an abundance of fast food outlets, convenience stores or liquor stores - largely blamed for higher incidents of obesity and other diet-related illnesses.

Earlier this year, Kroger announced plans to close its store at (BIRD'S EYE) unless it can negotiate a more favorable lease with the property's owner.

Kroger, which both leases the building and pays rent on the land, has reported operating losses at the Walnut Hills location for the last several years.

The company has stated publicly its desire to keep the store open beyond their February 2009 lease expiration and has been meeting with the building owner to reduce the rent cost and to shorten the lease term.

Kroger has not asked for any City subsidy.

To improve the aesthetics of the surrounding neighborhood, the City has targeted expenditures of over $1,000,000 by fall 2009, including:

* Streetscape improvements
* Business district acquisition and redevelopment
* Façade improvements
* Parking lot enhancements
* Community park improvements
* Historic building renovation


Neighborhoods matter

Since Dohoney's last report, staff from the City's Department of Community Development have been meeting with Local Initiatives Support Corporation and Brookside Advisors, a national consulting firm specializing in urban grocery stores.

During their meetings, they have discussed the shift in the grocery industry from the neighborhood-based model to the market area or regional model.

Even though neighborhood boundaries are largely unimportant to grocery operators, the neighborhood's physical condition can drive down sales.

"Investment in neighborhood infrastructure is a necessary first-step to attract and retain anchor businesses within the business districts," Dohoney writes.

Often, a physically deteriorated environment leads to a perception of crime, meaning that store managers need to hire additional security.

"The business is required to absorb the higher operating costs even though crime and safety data do not support the perception," Dohoney writes.

This phenomenon, when coupled with the higher rents often charged in urban areas, means that the 'sales-per-cart' for urban grocery stores is often much lower than operators can make in a larger, more economically-diverse market area.


Where Walnut Hills stands

The current Walnut Hills Kroger store is 31,000 square feet, roughly 10,000-15,000 square feet smaller than what is considered to be profitable in today's market.

This is largely because the profit margins on perishable items are small, requiring additional space for higher-margin non-grocery items.

According to Social Compact's recent Cincinnati DrillDown Study (PDF), Walnut Hills only has a 29,093 square foot store potential based solely on its population.

Dohoney recommends that the issue of 'food deserts' be addressed in the context of the City's comprehensive plan.

"The issue of food deserts in the City of Cincinnati does need to be addressed whether it is improved transportation, cooperative grocery stores, or better market-driven locations," Dohoney writes. "This issue needs to be thoroughly researched and a plan developed for implementing these changes."

The average distance to a grocery store in Walnut Hills is just under half a mile.

Previous reading on BC:
Cincinnati, Kroger working to keep Walnut Hills store (5/9/08)
Cole: Walnut Hills residents need access to quality food, too (3/31/08)