Grocery stores in distressed neighborhoods

From IEDC Now

Many Americans take their neighborhood grocery store for granted, but the promise of fresh, healthy food eludes millions of low-income individuals throughout the country. Even though the demand is there, getting grocers to open in food deserts is no easy task.

One of the largest challenges is simple economics. Investors may spend between $8 and $25 million on a supermarket before they see any profits. And those profits are small – the average grocery store delivers a 1.3 percent annual return.

Retail development can be jump-started with incentives, through abatements or tax increment financing, but critics of this strategy say it favors large, national franchises at the expense of small businesses (Governing).

Pennsylvania’s Fresh Food Financing Initiative (FFFI) has become a national model for what effective public-private cooperation can accomplish for neighborhood development. The program combined a state grant of $30 million with an additional $145 million in private donations to cover development and start-up costs for 88 grocery stores in impoverished neighborhoods throughout Pennsylvania. FFFI estimates it created 5,023 jobs and developed 1.67 million square feet of commercial space. An in-house evaluation showed that the program improved access to healthy food for more than 50 percent of Philadelphia (Next City). The program has been replicated nationally by First Lady Michelle Obama.

In Chester, Pa., 15 miles outside Philadelphia, 31 percent of residents live below the poverty line. For 12 years, Chester lacked a local grocery store until the nation’s first nonprofit supermarket opened in 2013 (Next City). A continuing experiment, Fare and Square operates in a smaller-than-average space for a grocer and aims to double its sales to make the model sustainable (a Philadelphia food bank continues to cover losses). Additionally, finding the appropriate balance between healthy options and cheaper comfort food remains a struggle.

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