The 25,000 residents of the West Oakland urban neighborhood spend $58 million on groceries per year. Yet for most residents the nearest fresh grocery store is as far as 10 miles away, qualifying the neighborhood as a food desert. As a result, the community sees over 70% of their grocery spending leave the neighborhood. With such a large business opportunity, why is there a lack of local grocery stores?
The answer lies in history. In this interview, Brahm Ahmadi, CEO of People’s Community Market, discusses why food deserts exist. Since the 1950s, affluent urbanites started moving to suburbs. Grocery stores followed this rise in suburb spending. Then, the industry started evolving to meet the needs of these suburb stores. Grocery stores evolved into large supermarkets. Larger scales allowed companies to streamline the supply chain and operations to enable lower prices. “Big-box” discount stores such as Costco sprung up to take market share. Availability of cheap and undeveloped land means lower building costs.
Indeed, it costs 30% more and two times as long to build in dense urban areas than undeveloped suburban areas. Developers also prefer the larger 60-70,000 sq. ft. store formats because . This evolution, combined with the employee turnover and theft issues associated with urban grocery store operations, made it un-attractive for today’s supermarket chains to serve low-income urban areas.
Ahmadi believes the solution to serving food deserts lies in community. By building social capital in the community, there is an opportunity to serve the $58 million grocery market opportunity in West Oakland and beyond while helping these neighborhoods eat better.
So it seems Costco is not the cause but a child of grocery store evolution. And the future of sustainable grocery formats remains to be unveiled.
Connie Kwan is a SocialEntrepreneur based in Silicon Valley, CA. She holds an MBA in Sustainable Management from Presidio Graduate School, and covers stories about triple bottom line businesses and projects.
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