A tale of two stores

The Indy Fresh Market opening last September saw a “tremendous turnout” from its Arlington Woods community.

Pete Yonkman, CEO of Bloomington-based Cook Medical Group, a partner in the market, said neighbors were overwhelmingly supportive at the grocery store’s debut. Before Indy Fresh Market opened, residents had been traveling 5 or 6 miles to shop at a full-service grocery; five nearby groceries had closed nearby in the past five years.

Nearly a year after opening, though, Indy Fresh Market isn’t profitable; instead it is being propped up by corporate partners Goodwill of Central & Southern Indiana and Cook Medical, which considered the grocery to be an amenity to the manufacturing facility it had opened the year before on Sheridan Avenue at East 38th Street.

Goodwill has taken over operations, which had initially been handled by two local convenience store owners brought on with the hope of eventually owning the market.

Yonkman said he spent four or five years developing the grocery store, an amenity he hoped would complement Goodwill Commercial Services, the Cook Medical facility that Cook and Goodwill partnered on. Cook Medical spent $3.6 million on the market and $7 million on the manufacturing facility. New Market tax credits from the city of Indianapolis and The Indianapolis Foundation completed funding on the $15 million project.

But the store isn’t keeping itself afloat. Despite the initial influx of community support, some customers said they have been deterred by high prices.

Arie Tunstill visited the store shortly after it opened, found that the prices were a “little high” and decided not to shop there regularly. A recent price comparison conducted by IBJ found the lowest price for a gallon of 2% milk was $4.29 at Indy Fresh Market, while the lowest-cost option at Walmart was $2.60.

But on a recent Friday afternoon, Tunstill was one of half a dozen shoppers milling through Indy Fresh Market. She said she gave it a second chance due to neighborhood concerns that the store is having financial difficulties.

“I didn’t want to let [higher prices] keep me from supporting it, because I want it to stick around,” Tunstill said. “I live in this area. This is what we need.”

Customer Levi McFadden called the prices fair but said every store has cheaper prices on some items. At Indy Fresh Market, he picked up packages of chicken breasts for $12 each, cheaper than he said he could find elsewhere.

Shooting for success

Yonkman wouldn’t disclose how much money his company has put into keeping the grocery store open.

“We’re committed to it,” he said. “We want to give it the best possible chance this thing can succeed. But ultimately, every business has to make money, and if it doesn’t, then, unfortunately, we’ll make a different decision.”

When Indy Fresh Market opened, Goodwill and Cook Medical touted that it would be run by two Black business owners with experience managing a small market. But the store endured several months of financial challenges, and Marckus Williams and Michael McFarland are no longer its leaders. They remain on the advisory board, Yonkman said.

Williams and McFarland did not respond to requests, through email and through their LinkedIn accounts, for an interview. IBJ also left messages at phone numbers listed under their names on Whitepages.com but could not reach anyone to verify that the numbers belonged to them.

For the last several months, Goodwill has taken the reins of the store. Yonkman said Kent Kramer, Goodwill of Central & Southern Indiana CEO, and Grady McGee, Goodwill Commercial Services senior director of contract manufacturing, are trying to lower prices, stabilize the store’s supply chain and grow the employee base.

Goodwill of Central & Southern Indiana is based in Indianapolis; its parent, Goodwill Industries International, is headquartered in Rockville, Maryland, a Washington, D.C., suburb.

“I’d like to prove the world wrong—that you can still have community-based, independent grocers out there be a tremendous success,” Yonkman told IBJ.

About 10 miles west of Indy Fresh market, Cleo’s Bodega, on Dr. Martin Luther King Jr. Street at West 24th Street, has functioned consistently for six years to serve another food desert—a term for an area sparse on grocery options. The small store run by not-for-profit Flanner House on the same property wouldn’t be profitable on its own, either—but that’s not the point, said Flanner House CEO Brandon Cosby.

Flanner House, whose other ventures include a mental health center, a bookstore and a day care, is focused on the community impact. The organization raises funds to keep Cleo’s Bodega running, but the store and its small organic produce operations also provide jobs for local residents.

“People just want to hear about the dollars and cents of it, as opposed to the philosophical practice that really drives and informs the rest of it,” Cosby told IBJ. “Which, if you actually do that part right and well, it makes the dollars and cents actually make sense and work.”

Steps have been taken to make the store as affordable as possible.

Flanner owns the building, so Cleo’s doesn’t pay rent. The store is small and operates on limited hours, which means just 11 employees operate both the store and the adjacent cafe. All produce is sourced from Flanner’s 2-acre farm and two commercial greenhouses, providing organic produce at low cost.

Community challenges

Even grocery giants such as Walmart, Kroger and Target have razor-thin margins.

“The mark-up on milk is not, ‘Double the price and sell it to customers,’” John Talbott, a senior lecturer at Indiana University focused on retailing, told IBJ. Stores often pay just slightly more than the wholesale cost for food and get a few cents back in profit, because they have to keep prices low enough to compete, Talbott said.

Cincinnati-based Kroger Co. closed its location at 6108 E. 46th St. in 2018 after concluding it was unrealistic for the store to return to profitability, while Arkansas-based Walmart closed a grocery-focused Neighborhood Market at 8010 E. 38th St. in 2019, citing poor financial performance.

Talbott pointed to a recent comment by Minneapolis-based Target CEO Brian Cornell, who called grocery store operations a “penny business” in response to allegations of price gouging.

In that same vein, Cosby said stores like Target thrive in wealthier areas because they are able to profit from impulse purchases. They don’t see that consumer behavior in areas where residents have far less disposable income.

Cleo’s Bodega receives supplies from Winkler Wholesale Grocers, a Dale-based distributor focused on independent grocery stores. It’s the same distribution company that services a Cairo, Illinois-based grocery store recently featured in a report from investigative-journalism not-for-profit ProPublica. That store, like many across the country aimed at serving food deserts, is struggling to stay open without financial support, according to New York City-based ProPublica.

Odus Tucker, a retail counselor with Winkler, said he’s probably seen half of these independent grocers fail in his 45 years in the business. The situation has improved due to some government intervention, like the funding of the store in Cairo, but he said many owners—often pastors, farmers and community leaders—just don’t know what they’re getting into.

That seems to be partially the case for Cook Medical’s foray into the grocery business, which was slated to include McFarland and Williams.

“We underestimated the complexity of running a retail grocery store and just how difficult of a proposition that is,” Yonkman said.

Williams and McFarland closed their 2,000-square-foot store, Wall Street Convenience and Grocery, to join Indy Fresh Market with hopes of eventually owning the store.

“My time spent with both Michael and Marckus, I’ll always really look back on that with fondness, because they worked really hard to get us up and running when nobody else would,” Yonkman said.

Indy Fresh Market had other help, as well. According to publicly available city contracts, Indianapolis has paid Joseph Welsh, a grocery consultant known as “Joe the Grocer,” over $1 million over the last five years to advise on multiple food-access efforts, including Indy Fresh Market.

Welsh helped set up the grocery and said it still can compete with big-box stores. He said the challenges these smaller stores face are normal market troubles, like weak supply chains.

“Most of my stores that are launched are profitable from day one, but sometimes it takes a while for customers to be aware that there’s a new location,” Welsh said.

Still, he recognized that name-brand suppliers will skip these low-volume groceries, a practice he called “unfair.” Goodwill’s McGee also said that’s part of the challenge.

“If you’re a small, independent grocery store, you don’t have the ability to deal with the manufacturer, so you have to use a food distributor,” he said. “So that’s what makes the pricing challenging.”

Lessons learned

The area around Flanner House became a food desert just before Cosby came on board in early 2016 as the organization’s executive director, thanks to the closure of the last Double 8 stores the summer before.

A developer approached the community asking for $1 million from the neighborhood tax-increment-financing district to open a grocery store. But ultimately Cosby told residents that Flanner House would figure out how to open a store to fill the gap.

Then he said he went home and had a panic attack.

“That is not the career path that I chose or I came to,” Cosby acknowledged. But he said he was driven by a desire to provide the neighborhood with access to healthy food.

Today, he credits the perseverance of Cleo’s Bodega to its authenticity and work with the community. Where others go wrong, he said, is by trying to replicate suburban big-box stores and doing so at a fast pace.

“My job and my goal is to create something that belongs to and is connected to the residents who have held this neighborhood and this community together, and for it to be beneficial and it to be functional and beautiful, and all of those things at the same time.”•