Detroit Looks At Challenges As Opportunities

The popularity of local produce is driving new enterprises.

Originally printed in the November 2023 issue of Produce Business.

Detroit has a culture all its own, including a food culture that mixes local and ethnic traditions. And the metropolitan area is returning to form as it shakes off the aftermath of the COVID-19 pandemic.

Food retailing in the Detroit market is competitive, with many national chains in addition to the established independent and regional players, especially Grand Rapids, MI-based Meijer. In addition, Kroger is heavily penetrated as a suburban presence, as is Walmart.

On the high end, Whole Foods has several stores, and value players such as Aldi and Save-A-Lot are heavily invested in the region. All three major warehouse club chains are found in the Detroit area. BJ’s is the newcomer, only entering the market in 2022 with a store in Lansing. BJ’s now operates four clubs in the Detroit suburbs.

UBER-LOCAL FOCUS

Detroit-area residents have become more and more supportive of local agriculture. Argus is an example of that fact. Argus Farm Stop, operating in the Detroit suburb of Ann Arbor, MI, offers local food seven days a week and works on consignment, so farmers own the produce, set the price, and keep 70% of the sale. The assortment of products changes with the season, and Argus supplements what grows in the open air with produce from indoor growers.

Dani Cavagnaro, Argus produce manager, says the store tries to promote produce that is cultivated locally but can be overlooked, such as pawpaws. “We’ve been doing exponential numbers more than we did last year once fruit season kicked in,” says Cavagnaro.

Because of how it does business, Argus must remain flexible. It takes products on a consignment basis to maximize profits for growers, and it has become popular enough with them that it has had to turn some away lately. “We don’t have the space to accommodate everything,” she says.

However, some things are too exciting to turn away. A local greenhouse operation grows small lemons, so Argus carried them “as a novelty.”

NEW MEIJER CONCEPT

The Detroit region has something else fresh — a new neighborhood market store concept from Meijer. The company opened its first metro Detroit supercenter in 1974, and it now has more than 45 stores in and around Detroit.

This year, Meijer opened two new store concepts in the Detroit suburbs. Dubbed Meijer Grocery, the company described them as a convenient alternative to its supercenters for consumers only interested in food and household essentials shopping. Meijer Grocery stores are decidedly smaller than the 150,000 to 250,000 square foot supercenters the company operates. Although smaller, it’s not tiny. The Meijer Grocery format can range from 75,000 to 90,000 square feet.

Still, the Meijer Grocery produce offering is comparable to what consumers can find in the supercenters. “Produce departments in our supercenters and Meijer Grocery stores are very similar in size, although each store varies a bit depending on layout,” a company spokesperson explains. “Meijer is known for our wide array of fresh produce, and our stores can vary the selection in each location to ensure we are meeting customer needs.”

Although new, Meijer Grocery isn’t the first small format store the company established. In 2020, Meijer opened what it called the Woodward Corner Market in suburban Royal Oak, a 41,000-square-foot store that offers a wide assortment of fresh and prepared food, groceries and about 2,000 local, artisanal items as well as an international food aisle that includes Middle Eastern, Kosher, Hispanic, European and Asian foods. In 2021, Meijer opened a similar, 42,000-square-foot operation dubbed Rivertown Market in the city of Detroit.

In all, Meijer operates around 500 stores, all but about four being supercenters, in Michigan, Ohio, Kentucky, Indiana, Illinois and Wisconsin.

As is the case elsewhere, the popularity of local products is not lost on Meijer. In 2022, the company held what it called a Localization Summit, calling for suppliers of goods from communities where its stores operate to pitch their products. A Meijer spokesperson confirmed in the days leading up to it that the event covered the entire food category, produce included.

FOODSERVICE PERSPECTIVE

On the foodservice side, John Corradi, owner of restaurant Rock on 3rd in suburban Royal Oak, says the Detroit area food scene had improved with the removal of restrictions imposed at the start of the COVID-19 pandemic, but labor has become a significant challenge.

Some food costs have stabilized and even come down, in contrast to the volatility experienced in 2022. “That’s gotten a little bit better,” he says. “Still, it’s the same situation as what’s happened to the whole foodservice industry, it’s workforce.”

Corradi says he’s fortunate to have a solid core workforce, but he and his wife regularly chip in to keep things running smoothly in the family-owned restaurant. However, recruiting is tough. “We had eight people scheduled for an interview,” he says. “Six were no-shows and two postponed.”

Even with that, he says Rock on 3rd is “thriving,” as consumers have been happy to get back out and about after being stuck at home in the pandemic.

ON THE MARKETS

An important fixture of the Detroit region and a Motor City institution, Eastern Market traces back to a foundation in 1841, and it has continued in operation at the same location since 1891. Its farmers market opens at least one day every week, operating on Saturday year-round and on Sunday and Tuesday from June to September.

It also has a wholesale component open to the public from April to November, although that’s separate from the commercial wholesale operations at the Detroit Produce Terminal, which is to the southeast.
At the Detroit Produce Terminal, wholesalers say the market for produce in the region continues to be complex and serves a wide range of demographics and lifestyles.

Dominic Russo, president of Rocky Produce, Detroit, says besides occasional weather-related difficulties getting certain commodities, business is strong and steady, in contrast to the years when the pandemic and its effects roiled the market.

“Generally speaking, we don’t have trouble getting product,” he says. “We have a pretty good network.”

Of course, Detroit is the Motor City and sensitive to developments in the automotive industry, particularly recent labor actions taken by the United Auto Workers Union against the Big Three car makers.

“It affects our economy and all business, but we’re dealing with it,” says Russo. “We won’t feel the effects for awhile, but individuals on strike aren’t going to spend more money at the grocery store.”

The foundation of the produce business in the Detroit region is the wide range of people living in it and keeping them happy is the basic premise of business. “Detroit is a very unique market servicing a diverse customer base,” says Dominic Riggio, president, Riggio Distribution in Detroit. “The demand for quality and value is as high as any market in the country. Geographically, Detroit benefits from local sources in-season, in conjunction with shipped-in product year-round.”

The local independent grocery stores that shop the Detroit produce market are important to the character of the region.

“Michigan has a strong presence of independent grocery stores that are supported by the communities,” says Jordan Grainger, vice president of sales and business development, at Ben B. Schwartz & Sons, Detroit. “These stores pride themselves on quality, which aligns perfectly with Ben B.’s values. Also, Detroit is a major crossing point between the USA and Canada.”

Independent supermarkets and grocery stores still serve a variety of Detroit-area consumers and remain an important element in the retail food mix. “Independent retailers are an important part of our diverse portfolio of customers,” says Riggio. “Moving forward, we will continue to partner with quality suppliers and customers alike.”

Grainger adds, “Detroit’s independent retailers are very important to the Detroit terminal. The independent retailers have built a reputation of having the best quality.”

Although the market continues to evolve, consumers in the Detroit area are most concerned about standards, says Riggio. “Sometimes trends in packaging or varieties can drive consumer behavior,” he says. “However, the trend that stands the test of time is quality and value.”

On the retail side, he adds, consumer convenience has become a bigger issue. “We see our retailers on the cutting edge of meal kits and prepared foods, as well as services like in-store shopping and delivery services,” says Riggio. “The shopping experience has many options today.”

MARKET ECONOMICS

At the same time, the larger trends that are evident in foodservice are having an impact on retail. Grainger says, “Labor and inflation are impacting both supply and demand. Household consumers are looking for lower cost items, and restaurants are looking for items that involve less labor in the back of the kitchen.”

Still, he adds, retail’s evolution provides opportunity. “I think meal kits, delivery options and new cuisines have a positive impact on the produce industry, as it could give access to fresh produce or a new application of a fresh produce item,” says Grainger.

“Meal kits, delivery options and new cuisines have a positive impact on the produce industry, as it could give access to fresh produce or a new application of a fresh produce item.”

– Jordan Grainger, Ben B. Schwartz & Sons

As noted, the foodservice business in Detroit is, in some ways, on a better footing today than two or three years ago, so the labor issues stand out even more.

“The foodservice industry has been faced with so many challenges in the past three years. Service wholesalers, restaurants, banquet halls, catering companies, etc. have adapted their operations considerably,” Riggio says.

With all the turmoil, including restrictions on operations as the COVID-19 pandemic peaked, change in the foodservice sector was inevitable. “Unfortunately, many of the restaurants did not recover from the regulations during COVID,” says Riggio. “A lot of the restaurants that did survive have modified their operations, hours and offerings.”

Of course, labor is an issue that affects wholesalers as well. Russo says, “We’ve had some labor shortage in the warehouse, but that began before COVID. We’re dealing with it. We have more oversight and salesmen help out with the warehouse and management of overseas trucks being unloaded more.”

The wholesale sector is coping with the impact of inflation as well. “There is no doubt that inflation has affected costs,” says Riggio. “We sell commodities, and with commodities, the prices always change, both up and down, so the cost of goods is always changing.”

Still, he says, Riggio Distribution is ready to handle it. “As a wholesaler of perishable products, we are built for challenges and obstacles,” says Riggio. “We will continue to look at challenges as opportunities and position our company to capitalize on those opportunities.”

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Detroit is Home to 5.4 Million

Today, the Detroit metropolitan region is an 11-county area that encompasses more than 300 municipalities that are home to 5.4 million people, according to the city’s Chamber of Commerce.

It is home to more than 387,000 businesses, including 10 Fortune 500 companies. According to the U.S. Census Bureau, the city of Detroit itself has a population of just over 620,000, as of July 2022. It generated foodservice and hospitality sales of $2.73 billion and retail sales of $3.56 billion.