Corner store struggles to sell fresh produce

Doug Kariker, owner of a new venture selling fresh vegetables and seafood in Central City, plopped a package of moldy okra on top of his office desk.

“I throw half of my produce away,” he said with a sigh on a recent afternoon, bemoaning the piles of wilted lettuce heads and overripe vegetables that he routinely dispatches to a nearby compost project.

The 67-year-old native New Orleanian was the first recipient of a loan from the city’s Fresh Food Retailers Incentive, which provides direct financial assistance to stores with dedicated shelf space for fruits and vegetables.

Kariker opened DaFresh Seafood and Produce in January with much public fanfare, including a visit from Mayor Mitch Landrieu. Since then, he’s developed a small group of loyal neighborhood customers for his seafood, but has consistently lost money on produce.

It’s a public policy conundrum as advocates and government agencies try to find ways to get more healthful food into neighborhoods whose residents lack easy access to larger supermarkets. In New Orleans, where so many people struggle with health problems like obesity and diabetes, city officials are trying to improve that availability. But Kariker’s experience — and a recent study published by the Tulane School of Public Health and Tropical Medicine — raise questions about the role corner stores and small markets can feasibly play.

The Tulane study found that although more than 90 percent of New Orleans convenience store patrons interviewed said they would be inclined to buy fresh food or vegetables, store owners were reluctant to stock produce.

Keelia O’Malley, the lead researcher on the project, said factors such as cost, infrastructure and uncertain consumer demand are barriers that prevent corner store owners from investing in produce.

“It is too costly for them to make the investment when they don’t know if it will sell,” she said.

O’Malley said that due to the low volume of their produce purchases, corner store owners are often unable to get bulk price points or deal with wholesalers.

Out of the 11 corner store owners interviewed for the study who sold produce, six had wholesalers and five purchased food from other retail locations. Only three reported making a profit on that portion of their business.

Kariker said that he typically buys vegetables from Sam’s Club or Restaurant Depot at prices that leave him with razor thin margins.

According to John Burns, CEO of the local food hub Jack and Jake’s, making money on produce is always difficult.

“Fresh produce is considered a loss leader. It’s difficult to make a significant margin on these products,” he said. “They are short-lived and the distribution costs are significant, but there are ways to tackle that.”

Burns, whose company connects farmers with stores and restaurants, said that linking local growers with small businesses can cut down on costs, but corner stores also have to find creative ways to market the goods.

He points to what he calls “value-added products,” where vegetables aren’t sold on the shelf, but are included in meals.

“I think it’s difficult to sell corn on the cob out of a seafood market,” Burns said. “I don’t think it’s difficult to sell corn on the cob out of a crawfish boil.”

Jack and Jake’s, which was founded in 2010 with help from the Idea Village, closed on a $225,000 round of investment funding in July and is in the process of constructing a 27,000-square-foot market and distribution center on Oretha Castle Haley Boulevard.

Burns said that securing funding for his project was difficult and that he’s hoping the business community takes a bigger role in supporting projects like the food hub, which he believes can help benefit fresh food access across the city.

In addition to projects like DaFresh, the pot of incentive money is also being used to get larger grocery stores into underserved markets. Launched in March of 2011, the program will award $14 million worth of loans to qualified applicants, who must have either 15 percent or 24 linear feet of their shelf space dedicated to fresh fruit and produce.

City officials in January announced that a $1 million loan will be used to renovate and reopen the Circle Foods store in the Seventh Ward that’s remained shuttered since Hurricane Katrina. A month later, they revealed that another $1 million was loaned to the ReFresh Project, a 60,000 square-foot development on North Broad Street that will feature a Whole Foods Market. The program could end up forgiving $500,000 from each loan.

Jeff Schwartz, executive director of Broad Community Connections, which spearheaded the ReFresh project, said funding from the Fresh Food Retailers Incentive was key.

“The FFRI was a pot of money that we had pegged even before it was up and running,” he said. Having an experienced partner like Whole Foods likely fast tracked the application process, which took about a year, Schwartz said.

Ultimately, these larger stores could end up being a better fit for the program than smaller markets trying to fill a neighborhood niche, Burns said.

“You can’t just go into a corner store with a small amount of capital and expect to be successful. It takes a much larger support system and infrastructure for that sort of development to have a role in a neighborhood,” he said.

In the Tulane study, over 80% of the participants who lived in three neighborhoods without supermarkets said they did their primary shopping at supermarkets or superstores in other areas, while only 11% shopped at corner stores.

Such figures don’t bode well for small operators like DaFresh, which doesn’t sell alcohol, cigarettes or pre-packaged or prepared meals, typically the most profitable products for conveniences stores.

“I probably get asked if I sell po-boys ten times a day,” Kariker said.