Supermarket blackout.

The lack of major food retailers is devastating African American communities.

It's time to use your dollars to fill the gap.

LIKE SOME AFRICAN AMERICANS, ZELDA OWENS turned to buses, subways, taxis or car pooling to get to a quality supermarket in New York City. "The Associateds or C-Town Supermarkets in this area don't offer variety. So, I often shopped at D'Agostino's in downtown Manhattan to get the products I wanted," admits the 32-year-old Harlem native. According to Owens, the lack of quality grocery stores introduces a much bigger issue: Harlem residents lack healthy food choices as well other basic services, such as print shops, dry cleaners, newspaper stands, florists and banks with ATMs. "It seems like corporations feel that it's not glamorous or sexy to have a business in a predominantly black neighborhood. I wanted to change that," says Owens. So, she called her associates at the New York State Black Republican Council to announce her plans to run for the state Senate. Although she didn't win, she got over 1,800 votes. "And that was with no picture, name recognition or television commercials," she states.

Pressure from residents like Owens and others was responsible for a new Pathmark supermarket being built on the east side of Harlem between Lexington and Third avenues. While the supermarket took more than 10 years to complete due to political conflicts, financing issues and some local opposition, the superstore has a good selection of products and fair prices. But Owens thinks there is room for more chains, since the store only has one location in the Harlem area. "In this neighborhood, you don't have access to the variety you get in Midtown and other residential areas," she insists. "We also deserve options."

Generally, major supermarket chains steer clear of African American communities because they underestimate the community's potential spending power and overestimate the risks. This deficiency in black neighborhoods results in fewer employment opportunities, fewer competitively priced product choices and little access to philanthropic contributions. And the problem isn't just restricted to poor inner-city communities. Even some African Americans in the more affluent neighborhoods have to take a hike when it's time to go food shopping. But you can secure more quality grocers with better products and services in your neighborhood by taking an active stance. Here's how you can fill the gap.

FERRETING OUT THE FALLACIES

The majority of supermarkets are located in suburban areas that are still predominantly white. Urban Supermarkets, a report issued by the Food Marketing Institute (FMI), cites numerous reasons why the majority of the major chains refuse to put facilities in African American communities. One claim is that developers have difficulty acquiring land in urban areas. Another is that development costs, such as building demolition, ground leveling and cleanup, can be higher in urban areas than in suburban locations.

"The land issue is somewhat realistic," admits Jonathan "Johnny" Johnson, president and CEO of Community Pride Food Stores (No. 55 on the BE INDUSTRIAL/SERVICE 100 list) in Richmond, Virginia. But he also says the major supermarket chains need to be a little more creative when they look at urban areas. "You can't expect to have a suburban store in an urban area," he insists. "Instead of having a long, flat store, for example, some of the larger chains should consider having a store with two or three floors and an elevator."

The FMI report also highlighted other issues--local politics, negative reactions to commercial development, environmental concerns and the need for specialized marketing strategies--in response to why the major supermarket chains avoid African American communities.

But some aren't convinced that these reasons are valid. "These concerns will affect any supermarket owner, regardless of whether [the store is in] an urban or a suburban neighborhood," says Roderick Mitchell, president of Restoration Supermarket Corp. (No. 89 on the BE INDUSTRIAL/SERVICE 100 list), a Pathmark franchise in Brooklyn, New York. Mitchell also says the "high crime rate" that is often associated with urban stores is the product of misinformation: "There is still the perception that black neighborhoods are high risk because people associate color with high crime." He says that contrary to popular belief, crime is not an issue for his supermarket, located in Brooklyn's Bedford Stuyvesant neighborhood. In fact, the Boston Consulting Group study reports that this Pathmark is one of the highest sales generators in the 144-store chain. "High crime in this neighborhood is a perception that's not based on reality. People are very comfortable shopping at Restoration Plaza. Other merchants use the misperception as justification for charging higher prices or not entering the neighborhood at all."

The lack of supermarkets in inner cities, where the majority of African Americans live, is largely based on the same stereotypes that affect other aspects of black life. Aside from the assumptions about excessively high crime rates, the owners of many mainstream supermarkets assume the residents of African American neighborhoods are less educated, disproportionately dependent on government assistance programs and too poor to afford their products and services. Nothing could be further from the truth.

"The mistake retailers make when examining inner cities is in thinking that these are communities of poorer people," says Anne S. Habiby, director of research and communication for Initiative for a Competitive Inner City (ICIC), a Boston-based nonprofit corporation aimed at encouraging private-sector development in inner cities. According to the organization's 1998 study, The Business Case for Pursuing Retail Opportunities in the Inner City, inner-city areas can have up to six times as much buying power as surrounding communities. While inner-city residents may report lower-than-average incomes, that doesn't necessarily mean they are poor. In 1995, nearly three in 10 inner-city households had incomes of $50,000 or more, and another 12% reported incomes of $75,000 or more. In fact, the estimated 7.7 million households in America's inner cities represent more than $85 billion in retail spending power. That's 7% of total retail spending in the country. Market Segment Research & Consulting Inc. in Coral Gables, Florida, reported that in 1996, African Americans spent approximately $23 more than other ethnic groups during each trip to the grocery store. If the major food chains chose their locations based on the facts, supermarkets would be popping up all over black neighborhoods.

THE FALLOUT: HOW ECONOMICS AND EMPLOYMENT ARE AFFECTED

The scarcity of supermarkets in inner-city communities has serious consequences. After shelter, food is the second highest consumer expenditure. And because 25% of retail demand in inner cities is unmet, according to a 1998 study by the Boston Consulting Group, black neighborhoods lose billions of dollars at a faster rate than other communities. In addition, residents who choose to shop within the community spend their dollars inefficiently. A 1998 poll conducted by Supermarket Business magazine found that African Americans are more likely to shop at convenience stores, which means their purchases are significantly more costly than if they were to shop at mainstream supermarkets. The Boston Consulting Group also found that inner-city shoppers can pay as much as 40% more for basic groceries than their suburban counterparts. As a result, African American consumers are often forced to live without certain products or services, pay higher prices for goods within the community or shop outside their neighborhoods. In an ICIC focus group, Harlem residents discussed going elsewhere to find quality goods. "Sometimes six or eight of us share a van to New Jersey to go to BJ's," one participant commented of their excursion to one of the new warehouse super retail stores.

Although prices are typically higher in African American neighborhoods than other areas, some argue it isn't a "black thing," but an economic issue. "The single-store owners that predominate in black areas have a problem because they can't buy the large volume that I buy," argues Johnson. The owner of 10 high-volume supermarkets, Johnson says, "It doesn't just depend on the neighborhood, it depends on the size of the stores in that neighborhood."

Mitchell agrees, "The only way to truly assess pricing differences is to compare a supermarket in an African American community to the same type of supermarket in a suburban community or a white community. But the analysis gets screwed up because the national chains aren't located in African American communities. What people do is compare the prices of a small one- or two-store business with prices at national chains. The smaller store's prices are automatically going to be higher. It's like comparing apples to oranges." Nevertheless, even if it's not a "black thing," the expenses are real.

Lack of accessible, competitively priced quality goods isn't the only downside to the missing supermarkets. Their absence from black communities also means that blacks are absent as supermarket owners and employees. According to the trade publication Progressive Grocer's latest figures, there are 126,000 grocery chains in America. Of these, only a handful are owned by African Americans (see sidebar "Selected African American-Owned Supermarkets," next page). On the employment side, African Americans make up 12.2% of supermarket employees, with fewer than 5% of them in managerial positions. Not surprisingly, an overwhelming majority of African Americans work as cashiers. And this means the employees with the real decision-making power--those who determine pay rates, implement hiring practices, choose vendors, disperse shelf space and select reinvestment activities--are not African American.

And what impact do the missing supermarkets have on the overall development of African American communities? A substantial one. Supermarkets participate in communities out of altruism as well as to build business. According to FMI, participating in community relations projects enables stores to win recognition and customer loyalty. For residents, supermarket involvement means a wide array of community programs will receive the critical funding they need to survive. The top recipients of supermarket contributions--food banks, local community group partnerships, special events, educational programs and youth groups--help to strengthen the most vital aspects of the community. Since major supermarket chains continue to shun African American communities, these pivotal programs don't receive their fair share of contributions--and the amount of money lost is sizable. According to FMI's 1998 Community Relations Activities & the Supermarket Industry report, supermarkets typically earmark $25,000 annually for community-related projects. And financial support varies with size. For example, single-supermarket owners typically set aside $9,000 per year for community investment activities, while companies with at least 50 stores allocate more than $769,000. Most African American community-based organizations don't have access to these large sums simply because most major supermarket chains fail to serve their communities.

Although the FMI study indicates that supermarkets are generally increasing their support of community projects, it also says these establishments feel they are receiving too many requests--as many as 200 annually. Many have started implementing guidelines restricting the types of community programs that qualify for support. These specific changes surrounding philanthropic contributions are expected to further adversely impact African American communities, since more retailers are allocating funds and decision-making power to local store managers.

"If the managers in your local supermarkets aren't African American, they don't share the same interests as the community," explains Greg Calhoun, president of Calhoun Enterprises (No. 28 on the BE INDUSTRIAL/SERVICE 100 list) in Montgomery, Alabama. Calhoun says the lack of African American managers has a lot to do with the lack of support black communities receive from supermarkets. "[White managers] don't understand the importance of certain community efforts and they don't care," he adds.

GETTING SUPERMARKETS TO FACE FACTS

The irony of this scenario is that mainstream supermarkets only stand to benefit by entering African American communities. The New America Marketbasket: Window on the Multicultural Growth Market, a 1998 study by New American Strategies Group with DemoGraph Corp., found multicultural spending increased by 17.8% in only three years. The Census Bureau projects that America's nonwhite population will grow from 27% in 1996 to 47% by 2050. African Americans, along with other minorities, are expected to make up 80% of the work force over the next decade.

A large chunk of African American dollars go to grocery items. During 1997, blacks spent $44.6 billion on food, according to Ken Smikle, president of Chicago-based Target Market News Inc. They also index higher in specific food categories. "Black households spend more money per capita than white households on virtually all food that requires preparation, as well as the seasonings, condiments and other items used with cooked foods. They spend as much as 200% more on these products than other ethnic groups," Smikle contends. Another study, No Place to Shop by Public Voice for Food & Health Policy, reported that urban African American consumers purchase a higher percentage of perishable items, including meat, than their suburban counterparts. The sales from perishable products represent nearly half of the total dollar amount of total supermarket sales. Clearly the data describing African American consumers indicates how significantly they impact the bottom line. But Johnson says even though the major chains claim to base their decisions on marketing data, they aren't examining the data surveying minorities. "The assumption is that blacks purchase the same products that whites do," Johnson insists. "And that's why the African American community remains untapped. What the major chains should do is take advantage of the experience of the black chains and work on joint ventures."

ARE NEIGHBORHOOD STORES IN THE FUTURE?

Even if the major chains don't want to recognize the African American community as an area of opportunity, they may not have a choice. "The suburbs are flooded with grocery stores, so the urban communities are the only places the big guys can experience true growth," Johnson contends. "We've learned to work in the African American community and make money doing it. They [major chains] keep saying it's too hard to do business in the inner when they haven't even tried."

Andy Erickson, researcher at Chain Store Guide in Tampa, Florida, also says there are other reasons the major chains are looking to inner cities, particularly African American communities, as a new frontier. "Although the movement is slow, the growing interest by minorities to purchase ethnic and regional foods has encouraged some of the major grocery chains to return to inner cities," he contends. He says supermarkets also want to reap the benefits from the success some cities have achieved in revitalizing their down-town areas. "Since most ethnic groups are in inner cities, supermarkets are moving into these areas to capture this market and capitalize on a new trend."

This "back home" effort is good consumers, but it could spell trouble for small local merchants. "Many major chains are now going head to head with some of the African American grocers who profited when those supermarkets left black neighborhoods," comments Smikle. Baltimore-based Stop, Shop and Save Food Markets (No. 36 on the BE INDUSTRIAL/SERVICE 100 example (see "Dawn of the Black Millennium," June 1998). Last year, the chain was forced to consolidate its operations due to lost revenue. The Clinton Administration's cuts in the food stamp program reduced sales for the grocer that primarily serves low-income communities. The company's CEO, Henry T. Baines Sr., admits that the supermarket is also experiencing competitive pressures from the big chains returning to the inner city.

Local opposition in Harlem kept the Pathmark project on hold for years. Small merchants argued that the heavy-weight food retailer would put them out of business. "Our consultants conducted studies that proved otherwise," explains Rich Savner, director of public affairs for Pathmark stores. "Although there is natural attrition of stores that dose and open around our supermarkets, that's not to say we're directly responsible." G. Lamont Blackstone, vice president of The Retail Initiative Inc. (TRI), agrees. As one of the three partnering

organizations--the Community Association of the East Harlem Triangle and the Abyssinian Development Corp. are the other two--TRI claimed the fear expressed by local merchants was unwarranted. "There is a tremendous amount of purchasing power that was not captured by this market and a number of Harlem consumers are going outside the area for goods."

In support of the project, residents signed petitions and lobbied local community leaders. Their efforts bore fruit: the new Pathmark created more than 275 jobs. Two members of the supermarket's three-person management team are black. "We've agreed that at least 75% of the store's work force will come from local residents," says Savner. The store also set up a matching donation program for various community groups, including The Boy's Choir of Harlem, The Girl's Choir of Harlem, The Horizon Youth Center and The Harlem Dowling Center for Children and Families. "We are involved in the community beyond operating a supermarket," adds Savner. The 24-hour full-service Pathmark will serve as an anchor for a 55,000-square-foot retail development with rooftop parking for 130 cars. The store itself has a branch of Chase Manhattan Bank and a pharmacy.

More success stories should emerge as other chains follow Pathmark's lead. Lucky/Sav-On is a prime example. The combination supermarket/drug store will serve as the anchor of a 110,000-square-foot shopping center in inner-city San Diego.

Nevertheless, Johnson says the major chains should do more. "Big corporations haven't looked at minorities as viable consumers until recently," he explains. "They say they are trying to service them, but we still aren't fairly represented on corporate boards and in employment. They need to change more quickly."

If you're ready to take action, try these suggestions to attract more quality grocers to your neighborhood:

* Identify opportunities. Make a list of the products and services that are missing in your community and present it to local merchants. Or, if you've always wanted to start your own business, discover ways you can fill the void.

* Join community organizations. "In many cases, these efforts are spearheaded by local groups," says Blackstone. Residents can direct their concerns to their local Community Development Corp. chamber of commerce or Better Business Bureau. "These associations make things happen," Blackstone adds.

* Support the stores in your community. If you are happy with a grocer in your neighborhood, spread the word. Your financial support enables local entrepreneurs to acquire more stores, and increased volume drives prices down. "Plus, additional stores bring in more jobs and more community investment," Johnson contends.

* Make companies accountable. Don't accept substandard goods or services from local merchants--even if they're the only game in town. Complain to the store's owner, your state's Department of Health or the Better Business Bureau. If a major chain does enter your community, make sure they offer quality service at reasonable prices. They should also invest in your community through hiring activities and philanthropic contributions. "Companies have to remember that they are servicing the area where they exist," Owens advises. "If there are companies in our neighborhoods that don't endorse what we need, we should definitely take our money elsewhere. They deserve [the consequences]."

African American consumers annually outspend white households in certain food categories

Average Annual Expenditures Per Household

                                              % of How
                      White        Much      Much More
                    Households    Blacks    Blacks Spend

Ground beef          $84.84       $93.61         10
Fish and Seafood      84.69       111.89         32
Eggs                  33.55        37.36         11
Oranges               17.52        18.47          5
Salt, spices,         19.47        21.78         12
 other seasonings
Baby food             19.68        39.68        102
Rice                  16.17        19.18         19
Flour                  8.51        11.16         31

Source: Target Market News, Chicago, and the U.S. Department of Commerce

Demand in Selected Cities

Supermarkets miss $714 million in potential sales by shunning these inner cities

                     Atlanta(*)         Boston

Available          $373([dagger])   $313([dagger])
Consumer
Dollars
for Food

Value of                505              236
Available
Food Supply(***)

Missed                 (132)              77
Opportunity

                       Chicago           New York

Available          $1,330([dagger])   $398([dagger])
Consumer
Dollars
for Food

Value of                 821               216
Available
Food Supply(***)

Missed                   509               182
Opportunity

                     Miami(**)         Oakland

Available          $288([dagger])   $294([dagger])
Consumer
Dollars
for Food

Value of                336              168
Available
Food Supply(***)

Missed                  (48)             126
Opportunity

                        Total

Available          $2,996([dagger])
Consumer
Dollars
for Food

Value of                2,282
Available
Food Supply(***)

Missed                   714
Opportunity

(*) Atlanta may show excess due to the impact from the 1996 Olympics.

(**) Miami may show excess due to high influx of tourists. In this case, there are more food suppliers than available food dollars, since tourists aren't high consumers of groceries.

(***) Based on total revenue of all the food suppliers in the specified inner-city area.

([dagger]) In millions.

Source: Initiative for a Competitive Inner City

RELATED ARTICLE: SELECTED AFRICAN AMERICAN-OWNED SUPERMARKETS(*)

Calhoun Enterprises
334-272-7799 * Montgomery, AL

H&J Family Foods
334-727-3943 * Tuskegee, AL

Chatham Food Center
773-783-2643 * Chicago, IL

The Food Basket Inc.
773-487-5700 * Chicago, IL

Community Foods Inc.
410-235-9800 * Baltimore, MD

Stop, Shop and Save Food Markets
410-783-8180 * Baltimore, MD

Super Pride Markets
410-235-9800 * Baltimore, MD

Waverly Foods Inc.
410-467-4414 * Baltimore, MD

Ferndale Foods Inc.
248-543-4826 * Ferndale, MI

Madison Food Center Inc.
616-245-8679 * Grand Rapids, MI

Leon's Piggly Wiggly
816-861-7900 * Kansas City, MO

CitiMarkets L.L.C.
201-435-1177 * Jersey City, NJ

A&E Mini Markets Corp.
718-659-1155 * Jamaica, NY

Restoration Supermarket Corp.
718-636-6930 * Brooklyn, NY

Carl L. Brown Inc.
614-252-6497 * Columbus, OH

Chism Trail Superfood Mart
901-398-6848 * Memphis, TN

Williams Piggly Wiggly
901-362-5660 * Memphis, TN

Community Pride Food Stores
804-353-1201 * Richmond, VA

Lena's Food Market
414-372-1860 * Milwaukee, Wi

(*) Data arranged by state

Sources: B.E. Research and the Food Marketing Institute, 1999.3