Minnesota's small-town grocery stores face uncertain future

Marcia Dahleen
Kiester Market manager Marcia Dahleen walks the isles taking inventory as she prepares one of her twice-weekly orders for her distributor. Dahleen often places special orders for customers along with her standard orders to help keep the items her customers want in the store.
Pat Christman | AP

The first year was tough.

Running a grocery store with nothing but pluck and civic pride was not easy.

"Well, we were really all greenhorns," said Judy Meyer of Kiester, who chairs the grocery co-op's board. "We didn't know anything about running a grocery store. We didn't know what to expect."

Kiester, a Faribault County town of about 500 a few miles north of the Iowa border, had lost its grocery store in 2012, The Free Press reported. Its customers, naturally, had adjusted to buying groceries elsewhere. And getting them to come back to Kiester was proving to be difficult.

The store lost about $100,000 that first year, in 2014.

"And that was not good," said Marcia Dahleen, the manager since early 2015. Loans were taken out, some personal and some from the city. Luckily for the store, the city owned the building and agreed not to charge for utilities or rent, saving the store more than $20,000 a year.

"I'll be honest, I came in and am managing this store at half of what they were paying a previous manager, mainly because I am retired," said Dahleen, 68. "I'm doing this because I want to have a grocery store in Kiester, so I'll do whatever I can to help."

Dahleen cut down on waste, too, partially by changing to vacuum-packed meats, a move she had been dead set against as a board member. But as a store manager, she learned meat cutters don't work cheap, and a store with low volume can produce a lot of waste.

With the town's support, the Kiester Market eked out a profit of $10,000 last year. It took some of the immediate pressure off, allowing the market to look toward the future for a change.

But for small-town grocery stores across the state, thinking long term can be daunting. Already low profit margins have been pinched even tighter by big-box competition, and a new survey showed most small-town grocery owners don't plan to be in the business much longer. It's a concern of communities across Minnesota, many of which are not content to simply watch as their grocery stores falter.

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The lack of a long-term plan to manage the Kiester Market isn't unusual; in fact, it's typical. The University of Minnesota recently surveyed the state's small-town grocery stores and found two-thirds of their owners planned to leave the business in the next decade.

Kathryn Draeger, who directs the U's Regional Sustainable Development Partnerships, said small-town grocery stores are private businesses that provide a public good. But unlike a school or a road, a grocery store needs to turn a profit. And when one closes, everybody — not just the business' owner — feels the pain.

"I'm doing this because I want to have a grocery store in Kiester, so I'll do whatever I can to help."

"We need those small-town grocery stores to ensure that all the people in Greater Minnesota have access to healthy food," Draeger said.

There are general small-town pressures — Kiester's population, for example, has fallen by almost a quarter since 1990 — as well as ones specific to grocery stores.

The survey, which had a healthy 69 percent response rate, showed that 97 percent of respondents believed competition with large chains was a major or minor challenge. The problem appears to be worse in southeast Minnesota, where regional centers such as Austin and Winona capture so much of the market. Ironically, small-town grocery stores perform best in the state's most rural areas, where there's no competition nearby.

Then there is the aging issue.

"Everyone's aware that farmers are getting older," Draeger said. "We suspected it might be the same for rural grocers."

This question led indirectly to the most eye-catching statistic from the survey: 62 percent of respondents intend to own their grocery store for 10 years or fewer. And few owners — about 15 percent to 30 percent, depending on business type — have a transition plan to assure the store will operate after they retire.

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Along with an appeal to residents' civic-mindedness, small-town grocery stores have coped with competition with a personal touch.

As Draeger put it: "If you tell them what you want and need, (small-town grocery stores) are more than willing to bring in the organic carrots or the special kinds of cheese. They're really responsive to what customers want."

As far as cost, Draeger said sale items are often no more expensive at a small-town grocery stores than at a big-box store.

Mike Tatage
Mike Tatage, who has owned The Market in Madison Lake, Minn., for more than 30 years, poses outside the store. Like many owners of small-town grocery stores, he's looking to hand the store off to the next generation.
Darren Gibbins | AP

That said, it's difficult for small-town shops to compete on many items.

Longtime rural Kiester resident Mary Meyer (a distant relation of Judy Meyer) said the convenience factor helps to make up for the price difference. Plus, she says, residents who want a local grocery store should do more than just buy a gallon of milk occasionally.

"I just kind of close my eyes and buy what I need," she said.

Dahleen, the Kiester Market's manager, says they make free deliveries, sometimes to the elderly or people recovering from surgery. Except there really is no "they." It's pretty much her.

"I do it or I rope my husband into it," she said.

She also instituted a loyalty program whereby once the customers spend a certain amount in the store they get 10 percent off their next bill.

Mike Tatage, owner of The Market in Madison Lake, said he's kept changing to meet customer demand. In the 1980s, that meant selling gasoline. More recently, it's meant selling bulk tobacco as rising cigarette taxes lead some smokers to roll their own smokes.

"Businesses like ours have to constantly change to survive," he said. "There's new things popping up all the time."

Like many owners, he's getting closer to retirement age and is thinking about selling the store at some point. As with farming, getting young people interested in running a small grocery store can be difficult.

"All these industries, I think, are having that problem," he said.

"We didn't know anything about running a grocery store."

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Mayer Meyer, 70, remembers when there were three grocery stores in Kiester alone. She saw the 2012 grocery store closure as one event in a series that demonstrates how Kiester's newer residents may not have the same devotion to community.

This is in part an understandable consequence of a loss of jobs in the city as well as the closure of its school. Plus, farms have consolidated so there are fewer young families needed to run them, she said. In other words, as the ties that binded Kiester's residents to the town weakened, so did their sense of duty to help that town thrive.

It's often the older residents who seem to put in the time and effort to improve Kiester, she said. Some of those older residents are the same ones who gripe about grocery store prices, she acknowledged.

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When it comes to re-opening, Kiester's experience may be the exception to the rule.

Take Truman, a Martin County city of about 1,000, more than double Kiester's population.

Chris Hiller, a former Chamber of Commerce president in Truman, said a few business people have tried to put projects together since the grocery store closed in 2012. Finding a suitable building has been a problem, though he thinks residents have a "co-op mindset."

"For most of the people I've talked to, there's still quite a bit of loyalty," Hiller said. "I feel that a lot of people would support it, they may even go out of their way to support it."

In Truman as elsewhere, residents may not have fully grasped the value of a local grocery store until it was gone. That value extends beyond having an anchor tenant in a downtown.

"One of the added benefits of having a grocery store downtown is it just increases traffic flow," Hiller said. Once residents get in the habit of shopping elsewhere, perhaps in a regional center, "it takes away opportunities for a small town."

As Kiester Mayor Doug Trytten put it, "If people aren't (grocery) shopping in town, they aren't going to the hardware store or buying gas or going to the cafe."

Plus, other businesses in town rely on the grocery stores for fresh food. According to the 'U' survey, 55 percent of respondents sell to local restaurants.

This is an AP Exchange feature by Dan Linehan for The Free Press.

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