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Rural Minnesota grocery stores facing intense competition, other survival challenges

Study finds increasing number of dollar stores, supply chain issues and waning customer loyalty among largest concerns

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Worker restocking shelves with supplies from the warehouse in the back and their near daily shipment of stock at Family Market in Pine River.
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Grocery stores are anchors in rural Minnesota, contributing to food access, community life and overall health. But in dozens of communities across the state, residents could face losing their local grocery in the next five years if store owners’ concerns are realized.

Those concerns are among the findings of a new study by University of Minnesota Extension , examining groceries in towns with less than 2,500 residents. Key findings also pinpointed the impact of dollar stores in towns where they cut into grocers’ bottom lines, heightening worries about reliable access to fresh produce.

“Rural grocers are front line workers and they’re dedicated to their communities. But they’re also reporting sleepless nights over obstacles, including supply chain problems and intense competition,” said Ren Olive, of Extension’s Regional Sustainable Development Partnerships (RSDP) and a co-author of study.

RSDP’s research is among the first to detail the impact of dollar stores in Minnesota. Eighty percent of the 129 grocers responding to the survey reported a dollar store within 15 miles of their business. Said one local retailer: “Some (dollar stores are) located 10 miles away. Any closer -- I’d close my doors.” Said another:

"Competition is fierce. Current and future customers aren't as loyal. Customers make weekly trips to Costco/WalMart. Two dollar stores in town and a third coming 12 miles north in lake country so we'll lose a lot of lake customers. With this competition, we don't have plans to allow our children to take over ownership."

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A couple wearing face masks shops at Pine River Family Market.

Grocery store owners and community trust

Grocers in small Minnesota towns almost unanimously view themselves as having a significant responsibility to the communities where they do business.

In Roseau County, Corey Christianson and his wife, Ket, have owned the local grocery store in Badger for nearly nine years. Two years ago, they added the grocery in Greenbush, about 12 miles away, to their portfolio, purchasing it from a retiring owner.

Badger and Greenbush have respective populations of about 400 and 800. Because of its distance from a larger town, and lower average income, the U.S. Department of Agriculture classifies Greenbush as a food desert.

“I can’t imagine many small towns functioning without the cornerstone store like grocery stores. They’re food hubs,” Christianson said. “When we bought the Greenbush store, we focused a lot on building up the produce section. It grew and it’s still growing. We turned heads. Customers would travel up to an hour to stock up on produce from us.”

Local food attracts interest

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Nearly half of Minnesota’s rural grocers already sell some products that are locally grown or produced and would like to make greater inroads into providing food grown nearby.

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Among the study’s findings:

Grocery store owners say they’re most likely to offer local produce if wholesalers include items grown nearby in their catalogs. They also cite regulatory concerns and insufficient supply chains as obstacles to offering local food and products.

80 percent of those surveyed reported a dollar store within their community, with 54 percent saying the business had located in their town within the last five years.

Large chain stores in nearby locations remain a significant challenge for small town grocery stores.

The average survey respondent is about 56 years old. 40 percent indicated they don’t intend to be in business in five years. 45 percent said they do not plan to pass their store on to the next generation in their family.

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Impact of COVID-19

The survey was conducted before COVID-19 hit in March. The pandemic had unexpected effects on many rural grocery stores, as customers from other places drove longer distances to purchase hard-to-locate items from small town stores. Researchers have heard reports that sales increased by as much as 50 percent early in the pandemic; sales are still about 10 percent above the same time a year ago.

“Rural grocery stores have always been important to healthy food access in Greater Minnesota. The COVID-19 pandemic made people very appreciative of these Main Street businesses, and we can see that they added resilience to food supply for many Minnesotans,” said Kathy Draeger, executive director of RSDP and lead researcher on the study.

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Help for rural grocery stores

Since the pandemic, RSDP (Extension’s Regional Sustainable Development Partnerships) has responded with several measures to help smalltown grocery stores, including:

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