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Natural Foods Merchandiser

Rural grocery stores disappear in 'food deserts,' but new opportunities emerge

According to a new report from the Center for Rural Affairs, rural grocery stores are disappearing throughout the nation, but perhaps more so in the Midwest. Despite the stagnation, government funding opportunities, such as the "Healthy Food Financing Initiative," are emerging for natural products store entrepreneurs.

If you live in a rural midwest community, your local grocery store may soon become a thing of the past. According to a new report from the Lyons, Nebraska-based Center for Rural Affairs, rural grocery stores are slowly disappearing throughout the nation, but perhaps especially in the Midwest.

In its October 2010 report "Rural Grocery Stores: Importance and Challenges," the Center for Rural Affairs revealed that Iowa had lost almost half of its grocery stores from 1995 to 2005, dropping from 1,400 stores to slightly more than 700. Rural Iowa was particularly hard hit, suffering the loss of 43 percent of groceries in towns with populations less than 1,000. Likewise, one in five rural grocery stores in Kansas shuttered their doors.

And how are natural products stores faring in the region? Natural Foods Merchandiser's 2010 Market Overview reported that the Midwest was the only region to experience no growth in natural products store sales from 2008 to 2009. All other regions expanded store sales during the same period. The Southwest and South experienced the second lowest store sales growth at 2.1 percent each, and the Mountain region had the highest growth at 7.8 percent.

The Center for Rural Affairs attributes the rural grocery store decline to several factors: a bigger customer base is needed today to make a local store viable; the percentage of rural residents who out-commute to—and shop in—other communities has increased 72 percent; 60 percent of consumers are looking for value over proximity; and the lack of small-business capital in rural communities prevents young entrepreneurs from becoming a new grocery retailer.

These communities that lost their grocers could be defined as "food deserts" with low-access to food. According to Philadelphia-based The Food Trust, a nationwide analysis found that 20 percent of rural counties are "food deserts," where all residents live more than 10 miles from a supermarket or supercenter.

The health implications are real. Those living in "food deserts" do not consume enough fruits, vegetables, dairy and protein, according to a survey of Iowa communities referred to in the Center for Rural Affairs report. Yet, the survey also found that local groceries charge less than superstores for basic, healthy food, and when local residents have the option, they do take advantage of the offerings of small, local groceries.

Emerging opportunities for new natural products stores located in "food deserts"

Although the Center for Rural Affairs focused mainly on the Midwest in its report, the region is hardly alone in its problem. A 2009 study by the U.S. Department of Agriculture found that 23.5 million people live in low-income areas with no supermarket within a mile of their homes.

The good news: Opportunities are beginning to emerge, especially for natural products store entrepreneurs. You just have to know where to look. Money may be available to build new stores, and experts say that money can be made from running stores in "food deserts."

Take the example of Philadelphia. In 2000, Philly had the second-lowest number of supermarkets per capita of major U.S. cities. But thanks to a Pennsylvania program that combined state money ($30 million during three years) and private financing ($90 million) to create an initiative called Fresh Food Financing Initiative, 83 grocery stores were built in 34 Pennsylvania counties. Harvard University named the initiative one of the nation's most innovative government programs. Since then, only six of the stores have failed. (Look for more details on this program and other opportunities within "food deserts" in NFM's February 2011 story by writer Joysa Winter.)

Your state or town could be next in line for funding to build new grocery stores. This year, President Obama announced that his administration would put $400 million toward a "Healthy Food Financing Initiative" to bring groceries to the underserved in rural and urban communities. And as a boon to wannabe natural products retailers, the money will go only to those serving up nutritious food.

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